Precious Metals

Wheaton buying silver and palladium from Sibanye

Wheaton Precious Metals Corp. has made a big move, purchasing significant precious metal production from Sibanye-Stillwater.

Images courtesy of Antamina.

Wheaton Precious Metals Corp. in Vancouver, British Columbia, Canada, the world’s largest silver streaming company, has agreed to purchase specific quantities of precious metals from Sibanye Gold Limited (“Sibanye-Stillwater”) for a reported advance payment of $500 million.

“Silver streaming” is a reference to a business deal in which a company makes an agreement with a mining company to purchase all or part of their silver production at a low, fixed, predetermined, agreed-upon rate or price. The silver in the deal is usually a by-product of mining a different mineral that is the real target of the mining company’s business.

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Most silver is produced as a by-product of the larger business of mining base metals.

Sibanye, a South African mining conglomerate, purchased the Stillwater and East Boulder Mines in Montana in May 2017. The Stillwater mine is the only producer of palladium in the United States and is one of the lowest cost platinum group metals mines globally.

Sibanye’s Montana acquisitions position Sibanye to become the third largest producer of palladium and the third largest producer of platinum in the world, while remaining also among the top 10 global gold-producing companies.

Under the precious metals streaming agreement between Wheaton and Sibanye-Stillwater, Wheaton will make ongoing payments equal to 18 percent of the spot gold price and spot palladium price until the advanced payment reaches zero, and 22 percent of the spot gold price and spot palladium price thereafter.

The acquisition, according to Wheaton and Sibanye officials, increases Wheaton’s production profile with attributable sales starting July 1, 2018, with expected production in the second half of 2018 forecast to be approximately 5,400 ounces of gold and 10,400 ounces of palladium, under the Sibanye-Stillwater agreement.

According to the streaming agreement:

??For the 10 years starting in 2019, production is forecast to average approximately 14,500 ounces of gold and 29,000 ounces of palladium per year, or approximately 37,000 ounces of gold equivalent per year.

??For the 20 years starting in 2019, production is forecast to average approximately 14,7000 ounces of gold and 24,000 ounces of palladium per year, or approximately 33,000 ounces of gold equivalent per year.

??Declared current reserves are sufficient to support mining activities at Stillwater until 2041, but this could be significantly extended should inferred resources be upgraded.

??Significant exploration potential exists both regionally and at depth below current mineral reserves and resources. Of significance is the 12.2-kilometer undeveloped mineralized section between the currently producing Stillwater and East Boulder mines. 

? Wheaton International will receive an amount of gold equal to 100 percent of the Stillwater gold production for the life of the mine. 

??Wheaton International will initially receive an amount of palladium equal to 4.5 percent of Stillwater palladium production, decreasing to 2.25 percent and then 1 percent based on defined delivery thresholds, for the life of the mine. 

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Subsequent to the closing of this acquisition, Wheaton’s estimated proven and probable gold reserves increased by 410,000 ounces and inferred gold resources increased by 920,000 ounces. And, for the first time, Wheaton will have estimated proven and probable palladium reserves of 610,000 ounces and inferred palladium resources of 430,000 ounces.

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