Yauliyacu (Peru)

Project Overview

The Yauliyacu mine (“Yauliyacu”) is a low-cost underground zinc/lead/silver mine located near Lima, Peru.  The mine, which has been in continuous production for over 100 years, is owned and operated by Glencore International AG (“Glencore”), one of the world’s leading integrated producers and marketers of commodities. Despite Yauliyacu’s long mining history, the mine has successfully replaced production and expanded resources and reserves, a testament to the richness of the deposit and the dedication of both management and the technical staff.

Glencore purchased the Yauliyacu mine from the Peruvian state-owned mining company, Centromin, in 1996. In 1998, Glencore implemented an improvement action plan which significantly increased production levels from 64,000 tonnes per month to 90,000 tonnes per month. The mine has well-developed infrastructure and operates year-round. Yauliyacu has significant remaining mine life and considerable exploration upside.

Mineralization occurs in hydrothermal polymetallic veins and disseminated orebodies. The veins are up to 5.0 km along strike on surface of which 4 km have been exposed underground. The veins have a known vertical range over 2 km, and average 0.3 to 1.2 m in width. At points where the veins converge, mineralization widths can exceed 5 metres, contributing significant tonnage capacity to the mining operations. Disseminated mineralization was discovered in the late 1980’s and has proven to be an important part of the Yauliyacu reserve. 

The Yauliyacu mill has a capacity of 3,600 tpd. Processing consists of conventional crushing, grinding and flotation, producing a copper (copper, silver), lead (lead, silver) and a zinc (zinc, silver) concentrate that is shipped for smelting. 

Silver Purchase Agreement

On March 23, 2006, Silver Wheaton entered into a silver purchase agreement with Glencore purchase up to 4.75 million ounces of silver produced per year for a period of 20 years, based on production from Yauliyacu’s mining operation in Peru, for an upfront cash payment of US$285 million plus a payment equal to US$3.90 per ounce of silver delivered (subject to an inflationary price adjustment). In the event that silver produced at the Yauliyacu mine in any year totals less than 4.75 million ounces, the amount sold to Silver Wheaton in subsequent years will be increased to make up for the shortfall, so long as production allows.

During the term of the contract, Silver Wheaton has a right of first refusal on any future sales of silver streams from the Yauliyacu mine and a right of first offer on future sales of silver streams from any other mine owned by Glencore at the time of the initial transaction. In addition, Silver Wheaton also has an option to extend the 20 year term of the Yauliyacu Silver Purchase Contract in five year increments, on substantially the same terms as the existing contract, subject primarily to an adjustment related to silver price expectations at the time.

Reserves and Resources