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Wheaton Precious Metals Announces Acquisition of Gold Stream from Capstone’s Santo Domingo Project

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Wheaton Precious Metals™ Corp. is pleased to announce that its wholly-owned subsidiary, Wheaton Precious Metals International Ltd. has entered into a definitive Precious Metal Purchase Agreement with Capstone Mining Corp. (TSX: CS) in respect to the Santo Domingo project located in the Atacama Region, Chile. Upon closing, Wheaton International will purchase 100% of the payable gold production until 285 thousand ounces have been delivered, thereafter dropping to 67% of payable gold production for the life of the mine. Wheaton International will pay Capstone a total upfront cash consideration of US$290 million, $30 million of which is payable upon closing and the remainder of which is payable during construction of the Santo Domingo project, subject to customary conditions being satisfied, including Capstone attaining sufficient financing to cover total expected capital expenditures. In addition, Wheaton will make ongoing payments for gold ounces delivered equal to 18% of the spot gold price1.

 

“Santo Domingo is an exceptional project that provides Wheaton with an additional near-term growth opportunity. The project is forecast to be a first-quartile copper producer with a long mine life, making it an ideal fit for Wheaton’s existing high-quality portfolio,” said Randy Smallwood, Wheaton’s President and Chief Executive Officer. “We are very excited to further build our partnership with Capstone and look forward to seeing Santo Domingo developed into a top-tier copper mine.”

 

TRANSACTION HIGHLIGHTS

 

  • The Santo Domingo project is forecast to be a first quartile copper mine2 with an 18 year mine life3.
  • Attributable gold production is forecast to average 35 to 40 koz per year for the first five full years of production and 25 to 30 koz for the first ten full years3.
  • Capstone expects major construction to commence in late 2021 with the first full year of production forecast for 2024.
  • Subsequent to the closing of this acquisition, the addition of the Santo Domingo project will increase Wheaton’s estimated Proven and Probable gold reserves by 0.51 Moz, Measured and Indicated gold resources by 0.12 Moz and Inferred gold resources by 0.03 Moz.4
  • Exploration upside potential exists as no exploration drilling has been completed since Capstone acquired the Santo Domingo project in 2011.
  • Provides Capstone with an early deposit of $30 million, which will be used to repay the funds paid by Capstone to acquire the remaining 30% of the Santo Domingo project.

 

TRANSACTION TERMS

 

  • Wheaton International will be entitled to receive 100% of the payable gold production until 285 koz have been delivered, thereafter dropping to 67% of payable gold production for the life of the mine.
  • Wheaton International will pay Capstone the Upfront Payment of US$290 million as follows:
    • once certain conditions have been met, Wheaton International will advance US$30 million to Capstone; and
    • the remainder of the Upfront Payment will be paid on a pro rata basis during construction (estimated to be approximately two to three years), subject to customary conditions being satisfied, including Capstone attaining sufficient financing to complete construction.
  • Wheaton International will make ongoing payments for gold ounces delivered equal to 18% of the spot gold price until the value of gold delivered less the cumulative Production Payments is equal to the upfront consideration of US$290 million, at which point the Production Payment will increase to 22% of the spot gold price.
  • Gold deliveries are guaranteed by Capstone and by the Santo Domingo project owner.   Security over the assets of the Santo Domingo project has also been provided by the Santo Domingo project owner.
  • 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 early deposit portion of the Upfront Payment will be made on closing, with the balance of the Upfront Payment to be paid over the construction of the Santo Domingo project. At December 31, 2020, the Company had approximately US$193 million of cash on hand and approximately US$1.8 billion of remaining capacity under the Company’s US$2 billion revolving credit facility. With operating cash flow in 2020 of approximately US$765 million, the Company has ample capacity to service any additional debt resulting from this transaction, especially given the low interest rate and flexible nature of the covenants under the Company’s revolving credit facility.

 

ABOUT CAPSTONE AND THE SANTO DOMINGO PROJECT

 

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 the Santo Domingo project, 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.  

 

Santo Domingo is a first quartile copper-iron-gold project2 and Chile’s only fully-permitted greenfield project. The proposed open-pit mine is located 50 kilometres southwest of Codelco’s El Salvador copper mine and 130 kilometres north-northeast of Copiapó, near the town of Diego de Almagro in Region III, Chile. Elevation at the site ranges from 1,000 to 1,280 metres above sea level, with relatively gentle topographic relief.

 

Attributable Mineral Reserves and Mineral Resources – Santo Domingo, effective as of April 30, 2020

 

Category Tonnage Grade Contained
Mt Au g/t Au Moz
Proven 65.4 0.08 0.17
Probable 326.9 0.03 0.34
P&P 392.3 0.04 0.51
Measured 1.4 0.05 0.002
Indicated 120.1 0.03 0.11
M&I 121.5 0.03 0.12
Inferred 31.8 0.02 0.03

 

Notes on Mineral Reserves & Mineral Resources:
1. All Mineral Reserves and Mineral Resources have been estimated in accordance with the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards for Mineral Resources and Mineral Reserves and National Instrument 43-101 – Standards for Disclosure for Mineral Projects (“NI 43-101”).
2. Mineral Reserves and Mineral Resources are reported above in millions of metric tonnes (“Mt”), grams per metric tonne (“g/t”) and millions of ounces (“Moz”).
3. Qualified persons (“QPs”), as defined by the NI 43-101, for the technical information contained in this document (including the Mineral Reserve and Mineral Resource estimates) are:
a. Neil Burns, M.Sc., P.Geo. (Vice President, Technical Services); and
b. Ryan Ulansky, M.A.Sc., P.Eng. (Senior Director, Engineering),
both employees of the Company (the “Company’s QPs”).
4. The Mineral Resources reported in the above tables are exclusive of Mineral Reserves.  Capstone report Mineral Resources inclusive of Mineral Reserves.  The Company’s QPs have made the exclusive Mineral Resource estimates for the mine based on average mine recoveries and dilution.
5. Mineral Resources, which are not Mineral Reserves, do not have demonstrated economic viability.
6. Santo Domingo project Mineral Reserves are reported as of November 14, 2018 and Mineral Resources as of February 13, 2020.
7. Santo Domingo project Mineral Reserves are reported above variable throughput rates and cut-offs  assuming $3.00 per pound copper,$1,290 per ounce gold and $100 per tonne iron.
8. Santo Domingo project Mineral Resources are reported above a copper equivalent cut-off of 0.125% assuming $3.50 per pound copper, $1,300 per ounce gold and $99 per tonne iron.
9. The Santo Domingo gold purchase agreement provides that Capstone will deliver 100% of the gold production until 285,000 ounces are delivered and 67% thereafter for the life of the mine.  Attributable reserves and resources have been calculated on the 100% / 67% basis.

 

Neil Burns, P.Geo., Vice President, Technical Services for Wheaton Precious Metals and Ryan Ulansky, P.Eng., Vice President, Engineering, are a “qualified person” as such term is defined under National Instrument 43-101, and have reviewed and approved the technical information disclosed in this news release (specifically Mr. Burns has reviewed mineral resource estimates and Mr. Ulansky has reviewed the mineral reserve estimates).

 

Posted March 25, 2021

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