Sudbury (Canada)

Operator: Vale
Location: Canada
Term of Stream: 20 years
Stream Parameters: 70% of gold production
Upfront Consideration: US$624M (US$570M cash and 10 million warrants with US$65 strike and 10 year term)
Cost Quartile: 2nd
Primary Metal: Nickel

Project Overview

Vale’s Sudbury mines, located in Ontario, Canada, have an operating history dating back to 1885. Sudbury is one of the largest nickel producing areas globally and Vale's operations in Sudbury are among the largest in the world. The Sudbury gold stream covers six producing mines, the Coleman, Copper Cliff, Creighton, Garson, Stobie, and Totten mines, and one development stage project, the Victor Mine Project (“Sudbury mines”). All ore bodies contain a mix of nickel, copper, platinum group metals, cobalt, gold, and silver.

In Sudbury, Vale also has a central concentrator, and a smelter and refinery complex, making this one of the largest integrated mining operations in the world. Vale is currently pursuing two key infrastructure initiatives in Sudbury, the Clean Atmospheric Emissions Reduction (“Clean AER”) project and Copper Cliff’s single furnace strategy. While the Clean AER project will not directly impact Silver Wheaton’s stream, we applaud Vale’s efforts to significantly cut emissions from their operations in Sudbury. The Copper Cliff’s single furnace strategy could have a marginally positive impact on Silver Wheaton’s attributable production as Vale notes that the initiative will improve production yields of copper and nickel.

Precious Metal Purchase Agreement

On February 28, 2013, Silver Wheaton entered into an agreement to acquire from Vale an amount of gold equal to 70% of the payable gold production from the Sudbury mines for a period of 20 years.

Silver Wheaton paid Vale total cash consideration of US$570 million, plus 10 million Silver Wheaton warrants with a strike price of US$65 and a term of 10 years (subsequently the strike price was reduced to US$43.75 as part of consideration for the third tranche of the 75% Salobo gold stream announced August 2, 2016). Silver Wheaton will make ongoing payments of the lesser of US$400 (subject to a 1% annual inflation adjustment beginning in the fourth year) and the prevailing market price, for each ounce of gold delivered under the agreement.

More Information

For further information about the Sudbury mine, please visit Vale S.A.'s website at www.vale.com. Cost quartile information is sourced from Wood Mackenzie byproduct cost curves for gold, zinc/lead, copper, nickel, and silver mines.

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