Wheaton Precious Metals™ Corp. (“Wheaton” or the “Company”) is pleased to announce that its wholly-owned subsidiary, Wheaton Precious Metals International Ltd. (“Wheaton International”) has entered into a definitive Precious Metal Purchase Agreement (the “Precious Metal Stream”) with Capstone Mining Corp. (“Capstone”) (TSX: CS) in respect to the Cozamin Mine located in Zacatecas, Mexico. Wheaton International will pay Capstone upfront cash consideration of US$150 million upon closing for 50% of the silver production until 10 million ounces (“Moz”) have been delivered, thereafter dropping to 33% of silver production for the life of the mine. In addition, Wheaton will make ongoing payments for silver ounces delivered equal to 10% of the spot silver price. The Precious Metal Stream is effective December 1, 2020.

“Wheaton has a long history with Capstone and Cozamin and welcomes the opportunity to bring back this first quartile mine into our portfolio of low-cost, long-life assets. Over the past few years, Capstone has conducted an extensive and successful exploration and drill program, which has significantly increased Cozamin’s mine life. We believe, as does Capstone, that the best is yet to come for Cozamin,” said Randy Smallwood, Wheaton’s President and Chief Executive Officer. “In addition, Wheaton is in advanced discussions with Capstone regarding a potential gold stream on their Santo Domingo project, which would provide additional near-term growth for the Company.”

TRANSACTION HIGHLIGHTS

• Adds to Wheaton’s existing high-quality portfolio
  • Cozamin is a first quartile copper mine[1] that has been operated by Capstone since 2006.
  • Subsequent to the closing of this acquisition, the addition of Cozamin will increase Wheaton’s estimated Proven and Probable silver reserves by 6.8 Moz, Measured and Indicated silver resources by 10.5 Moz and Inferred silver resources by 9.5 Moz.[2]
• Adds near-term production
  • For the five years starting in 2021, attributable silver production is forecast to average approximately 820 thousand ounces per year.[3]
• Significant exploration upside potential

As previously announced during 2020 by Capstone:

• Proven and Probable silver reserves for Cozamin as of April 30, 2020, increased by over 100% from the prior year, and Measured and Indicated silver resources increased by over 70%.
• Current drill program targeting down dip extension of key producing veins and Capstone is currently considering a one kilometer exploration drift to target continuation of mineralization along strike.
• Capstone is in the process of completing a pre-feasibility study of an underground paste backfill system for Cozamin that could potentially increase the extraction ratio as mining pillars are currently excluded in the existing mine plan.
• Significant exploration potential exists regionally.

TRANSACTION TERMS

• The Precious Metal Stream is effective December 1, 2020.
• Wheaton International will be entitled to receive 50% of the silver production until 10 Moz have been delivered, thereafter dropping to 33% of silver production for the life of the mine.
• Wheaton International will pay Capstone cash consideration of US$150 million upon closing of the Precious Metal Stream.
• Wheaton International will make ongoing payments for silver ounces delivered equal to 10% of the spot silver price.
• Silver deliveries are guaranteed by Capstone.
• Closing of the transaction is expected to occur shortly following announcement and is subject to the completion of certain corporate matters and customary conditions.

FINANCING THE TRANSACTION

The initial upfront cash payment of US$150 million will be paid by using amounts drawn from the Company’s US$2 billion revolving credit facility. At September 30, 2020, the Company had approximately US$210 million of cash on hand and approximately US$1.5 billion of remaining capacity under the revolving credit facility. With trailing four-quarter operating cash flow of approximately $690 million[4], the Company has ample capacity to service the additional debt resulting from this transaction, especially given the low interest rate and flexible nature of the covenants under the revolving credit facility.

ABOUT CAPSTONE AND THE COZAMIN MINE

Capstone is a Canadian base metals mining company, focused on copper with two producing mines, the Cozamin copper-silver mine in Zacatecas State, Mexico and the Pinto Valley copper mine located in Arizona, US. In addition, Capstone owns 70% of Santo Domingo, a large scale, fully-permitted, copper-iron-gold project in Region III, Chile, as well as a portfolio of exploration properties. Capstone’s strategy is to focus on the optimization of operations and assets in politically stable, mining friendly regions, centered in the Americas.

The underground Cozamin copper-silver-lead-zinc mine was commissioned in 2006 and has undergone two successful expansions since that time. The mill produces copper, zinc, and lead concentrates that are shipped to the port of Manzanillo for export to world markets. Exploration success has led to significant resource increases and excellent potential exists to continue this expansion. As part of the Silverstone Resources acquisition in 2009, Wheaton acquired a precious metals stream on Cozamin, which subsequently expired in 2017.

News in full

In the TV Clip below, CEO Randy Smallwood provides more info on the company’s mining streaming model