Wheaton River cashes up for shopping

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.

Under the latest bought deal, 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 accompanied by half a warrant; a full warrant is good for one Series B common share at $3.10 per share until Aug. 25, 2008.

In addition to funding potential acquisitions, Wheaton plans to use the proceeds to advance its existing mineral properties and for general corporate purposes. The offering requires regulatory approvals, and is expected to close by Oct. 14.

On Wheaton’s shopping list are the remaining 79% stake in the El Limon gold project in Mexico, and the nearby Bermejal property owned by Penoles and Newmont Mining (NEM-N).

Wheaton recently picked up a 21% stake in El Limon and a 30% interest in the nearby Los Filos project, both in Mexico, 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.

Says Telfer: “We expect at some point in the future to control the whole district. We now own the first bit, we have 21% of the second bit, and the other bit we think will come to us,” says Telfer.

Speaking at the annual Denver gold show, Wheaton chief executive Ian Telfer said that he believes that the three properties contain between 7-8 million oz. of gold. Ultimately, he sees two distinct operations (one heap leach, the other conventional) producing around 400,000 oz. of gold annually.

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

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

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

Telfer expects an impending announcement from Teck to 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 hitting 4 million oz., Annual production from a conventional operation of about 200,000 oz. is expected to crank up in about three years. It’s going to be a barn-burner for us,” he said.

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

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

Wheaton’s buying binge began last summer with the acquisition of Mexican-based Minas Luismin. In March, Wheaton acquired a 25% stake in the Bajo de la Alumbrera copper-gold-copper 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. In June, the company grabbed another 12.5% at 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 acquisition they’ve been accretive based on production ounces, reserve ounces, cash flow and earnings,” says Telfer.

The financing news knocked shares in Wheaton from their all-time 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 of 2002, the shares have rocketed some 170% of value.