Yauliyacu (Peru)

Operator: Glencore
Location: Peru
Term of Stream: Life of Mine
Stream Parameters: 100% of silver production up to 1.5 Moz and 50% of excess
Upfront Consideration: US$285M
Cost Quartile: 1st
Primary Metal: Zinc

Project Overview

The Yauliyacu mine is an underground zinc-lead-silver mine owned and operated by Glencore. The mine has been in continuous production for over 100 years. The Yauliyacu mill has a capacity of 3,600 tonnes per day. Processing consists of conventional crushing, grinding and flotation, and is capable of producing separate copper (copper, silver), lead (lead, silver) and zinc (zinc, silver) concentrates that are shipped for smelting.

Mineralization occurs in hydrothermal polymetallic veins (“Vetas”) and disseminated orebodies (“Cuerpos”). The Vetas are up to 5.0 kilometres along strike on surface of which 4 kilometres have been exposed underground and have a known vertical range over 2 kilometres, and average 0.3 to 1.2 metres in width. At points where the veins converge, mineralization widths can exceed 5 metres, contributing significant tonnage capacity to the mining operations. Cuerpos were discovered in the late 1980s and have proven to be an important part of the Yauliyacu reserve. Mineralization at Yauliyacu is zoned vertically and laterally. Vertical zoning occurs with high grade silver near surface and high grade zinc in the lowest levels of the mine. Despite this long mining history, the mine has successfully replaced production and expanded reserves.

Precious Metal Purchase Agreement

On March 23, 2006, Silver Wheaton entered into a silver purchase agreement with Glencore to 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). On November 30, 2015, Silver Wheaton amended the silver purchase agreement to extend the term to life of mine and effective January 1, 2016, Glencore will deliver to Silver Wheaton a per annum equal to the first 1.5 million ounces of payable silver produced at the Yauliyacu mine and 50% of any excess. The price paid for each ounce of silver delivered under the agreement has been increased by an additional US$4.50 per ounce plus, if the market price of silver exceeds US$20 per ounce, 50% of the excess, to a maximum of US$40 per ounce.

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.

More Information

To view the March 2011 Yauliyacu Technical Report please click here or visit www.sedar.com. For more information about the Yauliyacu mine, please visit Glencore’s website at www.glencore.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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