TSX: WPM
NYSE: WPM
VANCOUVER, Jan. 12, 2018 /CNW/ - Wheaton Precious
Metals™ Corp. ("Wheaton" or the "Company") announces that its
wholly owned subsidiary Wheaton Precious Metals International Ltd.
("Wheaton International") has agreed to a new precious metals
purchase agreement (the "First Majestic PMPA") relating to the
San Dimas mine, in conjunction
with the proposed transaction announced today under which
First Majestic Silver Corp. ("First Majestic") will acquire Primero
Mining Corp. ("Primero") pursuant to a plan of arrangement (the
"Arrangement").
Wheaton International has agreed to terminate the existing
San Dimas silver purchase
agreement with Primero (the "Existing SPA") and enter into the
First Majestic PMPA, which includes the following terms:
- 25% of gold production plus an additional amount of gold equal
to 25% of silver production converted to gold at a fixed gold to
silver exchange ratio of 70:11 from San Dimas
- For each ounce of gold delivered, Wheaton International will
pay to First Majestic a production payment equal to the lesser of
US$600/oz, subject to a 1% annual
inflationary adjustment, and the prevailing market price
- First Majestic to provide a corporate guarantee; security to be
limited to San Dimas assets
- Area of interest that is subject to the First Majestic PMPA
remains unchanged from the Existing SPA2
As part of the transaction, in addition to the new stream
Wheaton International will receive 20,914,590 First Majestic
common shares reflecting an aggregate value of US$151 million3 (the "First Majestic
Shares").
"San Dimas has operated for
over 130 years and is the mine Wheaton was founded on in 2004. With
the new streaming arrangement being linked to a combination of gold
and silver production, we believe San
Dimas will continue to deliver significant value to Wheaton
for many years to come while also providing economic and social
opportunities to the community of Tayoltita," said Randy
Smallwood, President and Chief Executive Officer of Wheaton.
"First Majestic has a long history of operating in Mexico and an expertise in mining narrow vein
underground deposits similar to San
Dimas. Given their experience and a renewed focus on mining
the entire deposit, including the silver rich areas, we are excited
to welcome First Majestic as a partner."
The termination of the Existing SPA and the effectiveness of the
First Majestic PMPA remain subject to a number of conditions,
including completion of the Arrangement. The First Majestic Shares
will represent approximately 11% of First Majestic's current issued
and outstanding shares and will be subject to a six month hold
period (subject to certain exceptions) with volume selling
restrictions thereafter.
In addition, at the time of closing of the Arrangement, Wheaton
International has agreed to release the guarantee previously
provided by Goldcorp Inc. ("Goldcorp") under the Existing SPA in
consideration for a payment of US$10
million from Goldcorp to Wheaton International. Furthermore,
the US$0.50 per ounce penalty for
each ounce less than 215 million ounces delivered by 2031 will be
extinguished.
In order to facilitate the closing of the Arrangement, Wheaton
also announces that it has agreed to extend the guarantee
previously provided by Wheaton and certain of its subsidiaries
under Primero's existing revolving credit facility to the earlier
of April 30, 2018, and the completion
or termination of the Arrangement.
Impact to Wheaton Precious Metals
The silver stream on
San Dimas represented on average
approximately 10% of Wheaton's total historical production over the
past three years at approximately 5.4 million silver ounces per
year. Under the First Majestic PMPA, San
Dimas is expected to contribute on average approximately
40,000 to 45,000 ounces of gold production4 annually to
Wheaton's total production over the next five years. The Company
will update its five-year average annual guidance for both silver
and gold when it releases its fourth quarter and full year results
for 2017.
Mineral Reserves and Resources will be updated under due course
in the first half of 2018 and include any changes due to the
amendments to the stream subject to the successful closing of the
Arrangement.
Advisors and Counsel
BMO Capital Markets acted as
financial advisor and Cassels Brock
& Blackwell LLP and Goodmans LLP acted as legal counsel to
Wheaton.
End
Notes 1 If the average gold to silver price ratio
decreases to less than 50:1 or increases to more than 90:1 for a
period of 6 months or more, then the "70" shall be revised to "50"
or "90", as the case may be, until such time as the average gold to
silver price ratio is between 50:1 to 90:1 for a period of 6 months
or more in which event the "70" shall be reinstated.
|
2 Wheaton
has a right of first refusal on certain areas outside of the
current area of interest. In addition, to the extent ore from
certain areas outside of the current area of interest is processed
through the San Dimas' mill, such ore will be subject to the
stream.
|
3 Number
of First Majestic Shares is based on the 20-day volume weighted
average price of the First Majestic common shares ending as of
January 10, 2018, which common shares will be issuable upon
termination of the Existing SPA.
|
4 Gold
production is based on a silver / gold ratio of 70:1.
|
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
The information contained herein contains "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and "forward-looking
information" within the meaning of applicable Canadian securities
legislation. Forward-looking statements, which are all statements
other than statements of historical fact, include, but are not
limited to, statements with respect to:
- statements with respect to the completion of the
Arrangement;
- statements with respect to the termination of the Existing SPA
and the payments to be made to Wheaton International, including the
delivery of the US$151 million in
First Majestic Shares;
- statements with respect to the termination of the Goldcorp
guarantee and the payment to be made to Wheaton International;
- statements with respect to the satisfaction of the conditions
relating to the First Majestic PMPA, payment by Wheaton
International of US$220 million and
the satisfaction of each party's obligations in accordance with the
First Majestic PMPA;
- the receipt by the Company of gold and gold equivalent
production in respect of the San
Dimas mine;
- the ability to sell the First Majestic Shares after the expiry
of hold periods and the value that may be realized for such First
Majestic Shares;
- future payments by the Company in accordance with precious
metal purchase agreements, including any acceleration of payments,
estimated throughput and exploration potential;
- projected increases to Wheaton Precious Metals' production and
cash flow profile;
- the expansion and exploration potential at the Salobo and
San Dimas mines;
- projected changes to Wheaton Precious Metals' production
mix;
- anticipated increases in total throughput;
- the effect of the SAT legal claim on Primero's business,
financial condition, results of operations and cash flows for
2010-2014 and 2015-2019;
- the impact on Primero of the unionized employee strike at the
San Dimas mine which concluded in
April 2017 and any other labour
disruptions;
- the ability of Primero to continue as a going concern;
- the ability of Primero to determine that it is uneconomic to
continue mining operations at the San
Dimas mine;
- the ability of Primero to achieve expected production
levels;
- the Guarantee of the Primero Facility;
- possible amendments to the San
Dimas silver purchase agreement as a result of any strategic
process or discussions with Primero;
- the estimated future production;
- the future price of commodities;
- the estimation of mineral reserves and mineral resources;
- the realization of mineral reserve estimates;
- the timing and amount of estimated future production (including
2017 and average attributable annual production over the next five
years);
- the costs of future production;
- reserve determination;
- estimated reserve conversion rates and produced but not yet
delivered ounces;
- any statements as to future dividends, the ability to fund
outstanding commitments and the ability to continue to acquire
accretive precious metal stream interests;
- confidence in the Company's business structure;
- the Company's position relating to any dispute with the CRA and
the Company's intention to defend reassessments issued by the CRA;
the impact of potential taxes, penalties and interest payable to
the CRA; possible audits for taxation years subsequent to 2015;
estimates as to amounts that may be reassessed by the CRA in
respect of taxation years subsequent to 2010; amounts that may be
payable in respect of penalties and interest; the Company's
intention to file future tax returns in a manner consistent with
previous filings; that the CRA will continue to accept the Company
posting security for amounts sought by the CRA under notices of
reassessment for the 2005-2010 taxation years or will accept
posting security for any other amounts that may be sought by the
CRA under other notices of reassessment; the length of time it
would take to resolve any dispute with the CRA or an objection to a
reassessment; and assessments of the impact and resolution of
various tax matters, including outstanding audits, proceedings with
the CRA and proceedings before the courts; and
- assessments of the impact and resolution of various legal and
tax matters, including but not limited to outstanding class action
litigation.
Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as "plans", "expects"
or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "projects", "intends", "anticipates" or
"does not anticipate", or "believes", "potential", or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "would", "might" or "will be taken",
"occur" or "be achieved". Forward-looking statements are subject to
known and unknown risks, uncertainties and other factors that may
cause the actual results, level of activity, performance or
achievements of Wheaton Precious Metals to be materially different
from those expressed or implied by such forward-looking statements,
including but not limited to:
- specific risks relating to the completion of the
Arrangement;
- any specific risks related to the termination of the Existing
SPA, including termination before the implementation of the First
Majestic PMPA, and the receipt of all payments, including the First
Majestic shares;
- any specific risks relating to the satisfaction of the
conditions relating to the First Majestic PMPA;
- the satisfaction of each party's obligations in accordance with
the terms of the First Majestic PMPA;
- risks related to the sale of the First Majestic Shares,
including the value that may be realized;
- risks related to the satisfaction of each party's obligations
in accordance with the terms of the precious metal purchase
agreements, including any acceleration of payments, estimated
throughput and exploration potential;
- fluctuations in the price of commodities;
- risks related to the mining operations from which Wheaton
Precious Metals purchases silver or gold (the "Mining Operations")
including risks related to fluctuations in the price of the primary
commodities mined at such operations, actual results of mining and
exploration activities, environmental, economic and political risks
of the jurisdictions in which the Mining Operations are located,
and changes in project parameters as plans continue to be
refined;
- the absence of control over Mining Operations and having to
rely on the accuracy of the public disclosure and other information
Wheaton Precious Metals receives from the owners and operators of
the Mining Operations as the basis for its analyses, forecasts and
assessments relating to its own business;
- Primero is not able to defend the validity of the 2012 APA, is
unable to pay taxes in Mexico
based on realized silver prices or the SAT proceedings or actions
otherwise have an adverse impact on the business, financial
condition or results of operation of Primero;
- Primero not being able to profitably operate the San Dimas mine due to the impact of the strike
or other labour disruptions;
- Primero not being able to continue as a going concern;
- Primero determining that it is uneconomic to continue mining
operations at the San Dimas mine
and ceasing such mining operations;
- Primero not being able to achieve expected production
levels;
- Primero not being able to secure additional funding, resume
San Dimas mine operations to
normal operating capacity, reduce cash outflows or have a
successful outcome to a strategic review process;
- Primero failing to make required payments or otherwise
defaulting under its credit facility and the Company having to meet
its guarantee obligations under the Guarantee;
- amendments to the San Dimas
silver purchase agreement have a material adverse effect on the
Company's business, financial condition, results of operation or
cash flows;
- differences in the interpretation or application of tax laws
and regulations or accounting policies and rules; and Wheaton
Precious Metals' interpretation of, or compliance with, tax laws
and regulations or accounting policies and rules, is found to be
incorrect or the tax impact to the Company's business operations is
materially different than currently contemplated;
- any challenge by the CRA of the Company's tax filings is
successful and the potential negative impact to the Company's
previous and future tax filings;
- the Company's business or ability to enter into precious metal
purchase agreements is materially impacted as a result of any CRA
reassessment;
- any reassessment of the Company's tax filings and the
continuation or timing of any such process is outside the Company's
control;
- any requirement to pay reassessed tax, and the amount of any
tax, interest and penalties that may be payable changing due to
currency fluctuations;
- the Company is not assessed taxes on its foreign subsidiary's
income on the same basis that the Company pays taxes on its
Canadian income, if taxable in Canada;
- interest and penalties associated with a CRA reassessment
having an adverse impact on the Company's financial position;
- litigation risk associated with a challenge to the Company's
tax filings;
- credit and liquidity risks;
- hedging risk;
- competition in the mining industry;
- risks related to Wheaton Precious Metals' acquisition
strategy;
- risks related to the market price of the common shares of
Wheaton Precious Metals;
- equity price risks related to Wheaton Precious Metals' holding
of long‑term investments in other exploration and mining
companies;
- risks related to the declaration, timing and payment of
dividends;
- the ability of Wheaton Precious Metals and the Mining
Operations to retain key management employees or procure the
services of skilled and experienced personnel;
- litigation risk associated with outstanding legal matters;
- risks related to claims and legal proceedings against Wheaton
Precious Metals or the Mining Operations;
- risks relating to unknown defects and impairments;
- risks relating to security over underlying assets;
- risks related to ensuring the security and safety of
information systems, including cyber security risks;
- risks related to the adequacy of internal control over
financial reporting;
- risks related to governmental regulations;
- risks related to international operations of Wheaton Precious
Metals and the Mining Operations;
- risks relating to exploration, development and operations at
the Mining Operations;
- risks related to the ability of the companies with which the
Company has precious metal purchase agreements to perform their
obligations under those precious metal purchase agreements in the
event of a material adverse effect on the results of operations,
financial condition, cash flows or business of such companies;
- risks related to environmental regulations and climate
change;
- the ability of Wheaton Precious Metals and the Mining
Operations to obtain and maintain necessary licenses, permits,
approvals and rulings;
- the ability of Wheaton Precious Metals and the Mining
Operations to comply with applicable laws, regulations and
permitting requirements;
- lack of suitable infrastructure and employees to support the
Mining Operations;
- uncertainty in the accuracy of mineral reserve and mineral
resource estimates;
- inability to replace and expand mineral reserves;
- risks relating to production estimates from Mining Operations,
including anticipated timing of the commencement of production by
certain Mining Operations;
- uncertainties related to title and indigenous rights with
respect to the mineral properties of the Mining Operations;
- fluctuation in the commodity prices other than silver or
gold;
- the ability of Wheaton Precious Metals and the Mining
Operations to obtain adequate financing;
- the ability of Mining Operations to complete permitting,
construction, development and expansion;
- challenges related to global financial conditions;
- risks relating to future sales or the issuance of equity
securities; and
- other risks discussed in the section entitled "Description of
the Business – Risk Factors" in Wheaton Precious Metals' Annual
Information Form available on SEDAR at www.sedar.com, and in
Wheaton Precious Metals' Form 40-F filed March 31, 2017 and Form 6-K filed March 21, 2017 both on file with the U.S.
Securities and Exchange Commission in Washington, D.C., together with Wheaton
Precious Metal's financial statements, managements' discussion and
analysis for the periods ended March 31,
2017, June 30, 2017 and
September 30, 2017 available on SEDAR
and respective Form 6-Ks on file with the U.S Securities and
Exchange Commission, all as filed May 9,
2017, August 10, 2017 and
November 9, 2017 (the
"Disclosure").
Forward-looking statements are based on assumptions management
currently believes to be reasonable, including but not limited
to:
- that the Arrangement will be completed;
- the payments to be made to Wheaton International for
termination of the Existing SPA will be made;
- the payment to be made to Wheaton International for termination
of the Goldcorp guarantee will be made;
- the conditions related to the First Majestic PMPA will be
satisfied;
- the payment of US$220 million to
First Majestic and the satisfaction of each party's obligations in
accordance with the terms of the First Majestic PMPA will be
completed;
- that the value realized for the First Majestic Shares will be
equivalent to at least US$151
million;
- the satisfaction of each party's obligations in accordance with
the precious metal purchase agreements;
- no material adverse change in the market price of
commodities;
- that the Mining Operations will continue to operate and the
mining projects will be completed in accordance with public
statements and achieve their stated production estimates;
- the continuing ability to fund or obtain funding for
outstanding commitments;
- that the impact on Primero of the unionized employee strike or
other labour disruptions at the San
Dimas mine will not be significant;
- that Primero is able to continue as a going concern;
- that Primero will not determine that it is uneconomic to
continue mining operations at the San
Dimas mine;
- that Primero is able to achieve expected production
levels;
- that Primero will make all required payments and not be in
default under the Primero Facility;
- that any amendments to the San
Dimas silver purchase agreement will not have a material
adverse effect on the Company's business, financial condition,
results of operation or cash flows;
- Wheaton Precious Metals' ability to source and obtain accretive
precious metal stream interests;
- expectations regarding the resolution of legal and tax matters,
including the ongoing class action litigation and CRA audit
involving the Company;
- Wheaton Precious Metals will be successful in challenging any
reassessment by the CRA;
- Wheaton Precious Metals has properly considered the application
of Canadian tax law to its structure and operations;
- Wheaton Precious Metals will continue to be permitted to post
security for amounts sought by the CRA under notices of
reassessment;
- Wheaton Precious Metals has filed its tax returns and paid
applicable taxes in compliance with Canadian tax law;
- Wheaton Precious Metals will not change its business as a
result of any CRA reassessment;
- Wheaton Precious Metals' ability to enter into new precious
metal purchase agreements will not be impacted by any CRA
reassessment;
- expectations and assumptions concerning prevailing tax laws and
the potential amount that could be reassessed as additional tax,
penalties and interest by the CRA;
- any foreign subsidiary income, if taxable in Canada, would be subject to the same or
similar tax calculations as Wheaton Precious Metals' Canadian
income, including the Company's position, in respect of precious
metal purchase agreements with upfront payments paid in the form of
a deposit, that the estimates of income subject to tax is based on
the cost of precious metal acquired under such precious metal
purchase agreements being equal to the market value of such
precious metal.
- the estimate of the recoverable amount for any precious metal
purchase agreement with an indicator of impairment; and
- such other assumptions and factors as set out in the
Disclosure.
Although Wheaton Precious Metals has attempted to identify
important factors that could cause actual results, level of
activity, performance or achievements to differ materially from
those contained in forward-looking statements, there may be other
factors that cause results, level of activity, performance or
achievements not to be as anticipated, estimated or intended. There
can be no assurance that forward-looking statements will prove to
be accurate and even if events or results described in the
forward-looking statements are realized or substantially realized,
there can be no assurance that they will have the expected
consequences to, or effects on, Wheaton Precious Metals.
Accordingly, readers should not place undue reliance on
forward-looking statements and are cautioned that actual outcomes
may vary. The forward-looking statements included herein are for
the purpose of providing investors with information to assist them
in understanding Wheaton Precious Metals' expected financial and
operational performance and may not be appropriate for other
purposes. Any forward looking statement speaks only as of the date
on which it is made. Wheaton Precious Metals does not undertake to
update any forward-looking statements that are included or
incorporated by reference herein, except in accordance with
applicable securities laws.
SOURCE Wheaton Precious Metals Corp.