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Gold Wheaton in CAD 100m bought deal

Bypassing the banking system, mining companies have announced USD 30bn in capital issues in the past few months.

Author: Barry Sergeant
Posted: Thursday , 19 Feb 2009

JOHANNESBURG -

Gold Wheaton, which has a similar structure to Silver Wheaton, but instead buys gold mined as a byproduct at mines where other metals are primary targets, went live on a CAD 100m bought deal on Thursday, for fresh capital aimed mainly at strengthening its balance sheet, given upcoming commitments. The deal takes the total raised by mining companies to a fraction under USD 30bn in the past couple of months (see table below). Miners have effectively bypassed the troubled banking system by raising capital directly from investors or each other.

Gold miners, supported by gold bullion prices which are within throwing distance of all time records set in March 2008, have featured heavily in the list of capital issues. In essence, Gold Wheaton, a relatively new listing, has gold "production" at a fixed USD 400 an ounce cost coming in, or to come in, from three mines. These comprise 50% of all FNX Mining's gold, platinum and palladium output in Canada's Sudbury basin, expected to contribute about 70,000 ounces in 2010, set to rise to 100,000 ounces a year; 100% of the gold from the Redcorp Ventures planned Tusequah mine in British Colombia, for an attributable 50,000 ounces a year, and 25,000 ounces, at least initially, from First Uranium.

For FNX Mining, the deal with Gold Wheaton comprised CAD 400m upfront, in a mix of cash and Gold Wheaton shares. For Redcorp Ventures, the deal was USD 90m, with an upfront payment of USD 10m payable after final permitting is received, with USD 80m made towards the end of construction. For First Uranium, the deal was a USD 125m payment, with USD 50m paid upon signing of a definitive agreement (securing the first 10% of annual gold production), with the remaining USD 75m to be paid on or before 27 February 2009, subject to financing, with offtake increasing to 25%.

A good chunk of the cash raised by Gold Wheaton in Thursday's transactions will go to paying the second instalment of Gold Wheaton's agreement to buy 25% of the gold stream from First Uranium's Mine Waste Solutions South African uranium/gold tailings retreatment operation, which is on line to produce 100,000 ounces of gold this year.

The net effect is likely to boost Gold Wheaton's cashflow for 2009 from about CAD 25m to CAD 35m. Gold Wheaton's immediate peer group includes Franco-Nevada, Royal Gold, and Tanzanian Royalty.