Wheaton River cashes-up

Looking to continue its recent shopping spree, Wheaton River Minerals (WRM-T) has arranged its second $100-million equity financing in a month by lining up a group of underwriters led by Griffiths McBurney & Partners.

The group has agreed to buy 31.75 million units from Wheaton at $3.15 apiece. Another 6.35 million like-priced units are available to the underwriters up to the filing of the final short-form prospectus. Each unit comprises one share and half a warrant, with a full warrant allowing the holder to buy one Series B share at $3.10 each until Aug. 25, 2008.

Wheaton River plans to use part of the proceeds to advance its existing mineral properties. The offering requires regulatory approval, and is expected to close by mid-October.

On Wheaton’s shopping list is the remaining 79% stake in the El Limon gold project in Mexico, as well as the nearby Bermejal property owned by Industrias Peoles (IPOAF-O)and Newmont Mining (NEM-N).

Wheaton recently picked up a 21% stake in El Limon and 30% in the nearby Los Filos project via its takeover of Miranda Mining (MRM-V). At the same time, Wheaton inked a deal to consolidate ownership in Los Filos by acquiring Teck Cominco‘s (TEK-T) 70% interest. That deal is expected to close by the end of October.

“We expect, at some point, to control the whole district,” said Wheaton River CEO Ian Telfer. “We now own the first bit, we have 21% of the second bit, and the other bit we think will come to us.”

Speaking at the annual Denver Gold Forum, Telfer said the three properties contain 7-8 million oz. gold and that ultimately there will be two distinct operations — one heap-leach, the other conventional — producing a total of around 400,000 oz. gold annually.

The Los Filos project is home to about 2.2 million oz. gold, and Telfer expects that to rise slightly. Based on heap-leach tests, gold recovery is pegged at 70-75%.

A US$10-million feasibility study at Los Filos will begin next year, with construction due to follow a year later. The heap-leach project is expected to produce 175,000 oz. gold per year at US$175 per oz. over 10 years, beginning in 2005.

At last count, Los Filos was home to a measured and indicated resource of 38.4 million tonnes grading 1.44 grams gold, based on a cutoff grade of 0.5 gram per tonne. Another 11 million tonnes grading 1.35 grams are classified as inferred (T.N.M., Sept. 15-21/03).

Telfer said an impending announcement from Teck should boost resources at El Limon, 15 km away, to around 3 million oz. from the current 1.6 million oz. With continued drilling, Telfer sees resources there hitting 4 million oz. Annual production from a conventional operation of about 200,000 oz. is expected to begin in roughly three years. “It’s going to be a barn-burner for us,” Telfer said.

He added that Teck appears to be selling off most of its gold assets, and that he expects to pick up the balance of El Limon eventually.

In all, Telfer figures his company will be producing more than 700,000 oz. gold per year by 2006. So far in 2003, cash costs are running at around US$80 per oz., down from US$187 per oz. in 2002. By 2005, Telfer expects costs to be US$125-130 per oz.

Wheaton River’s buying binge began last summer with the acquisition of Mexican-based Minas Luismin. In March, the company acquired a 25% stake in the Bajo de la Alumbrera copper-gold mine in Argentina from Rio Tinto (RTP-N). The acquisition brought with it 150,000 oz. of gold production per year. At the same time, Wheaton acquired the 120,000-oz.-per-year Peak gold mine in New South Wales, Australia, and in June it gained an additional 12.5% of Alumbrera from BHP Billiton (BHP-N). Telfer says his company would be interested if the remaining half of Alumbrera were to come up for sale.

“As we’ve made these acquisitions, they’ve been accretive based on production ounces, reserve ounces, cash flow and earnings,” he remarked.

The financing news knocked shares in Wheaton River from their multi-year high of $2.89 on Sept. 23, falling 24 to $2.65 in early trading in Toronto on Sept. 24. Since its acquisition of Luismin in late April 2002, the shares have gained some 170% of value.