Wheaton Precious Metals acquires gold stream from Montage Gold for $625M

Wheaton Precious Metals (WPM) announced that its wholly-owned subsidiary, Wheaton Precious Metals International, or WPMI, has entered into a definitive Precious Metals purchase agreement with Montage Gold (MAUTF) in respect to its Kone Gold Project located in Cote d’Ivoire. WPMI will pay Montage total upfront cash consideration of $625M in four equal installment payments during construction, subject to certain customary conditions. WPMI will purchase 19.5% of the payable gold until a total of 400,000 ounces of gold has been delivered, subject to adjustment if there are delays in deliveries relative to an agreed schedule, at which point WPMI will purchase 10.8% of the payable gold until an additional 130 Koz of gold has been delivered, at which point WPMI will purchase 5.4% of payable gold for the life of the mine. Payable gold is calculated using a fixed payable factor of 99.9%. Attributable gold stream production is forecast to average over 60 Koz of gold per year for the first five years of production, over 47 Koz of gold per year for the first 10 years of production, and over 34 Koz for the life of mine. The project is forecast to have a 16-year mine life based on reserves, with first production anticipated in early 2027. WPMI will make ongoing payments for the gold ounces delivered equal to 20% of the spot price of gold. For the first five years after the Precious Metals Purchase Agreement (“PMPA”) is signed, there will be a price adjustment mechanism in place if the spot price of gold is less than $2,100/oz or greater than $2,700/oz. For example, if spot gold is $3,200 per ounce, Wheaton’s production payment would be $675 per ounce, equating to 21% of the spot price. This price adjustment mechanism expires on the fifth anniversary of the PMPA, after which the production payment will be equal to 20% of the spot price going forward. WPMI has also provided Montage with a secured debt facility of up to $75 million to be allocated to project costs, including cost overruns. The addition of the Kone Project will increase Wheaton’s total estimated Proven and Probable Mineral gold reserves by 0.62M ounces, Measured and Indicated Mineral gold resources by 0.05 Moz and Inferred gold resources by 0.02 Moz. The Gold Stream will include a customary completion test based on expected gold production and expected mining rates. WPMI has also obtained a right of first refusal on any future precious metal streams, royalties, prepays or similar transactions. The Gold Stream will apply to a Core Area of Interest inclusive of the Kone and Gbongogo deposits, with exploration upside beyond the currently defined deposits. Ore from within a 100km Expanded Area of Interest will be subject to the stream if that ore is processed at the Kone mineral processing facility, until such time following the Second Dropdown Threshold that ounces received under the stream from the Expanded Area of Interest is equal to the remaining ounces from the Core Area of Interest, at which point the stream percentage will be reduced to nil. If at any point after that the remaining ounces from the Core Area of Interest exceed the ounces received from the Expanded Area of Interest, the company will continue receiving 5.4% of payable gold from the Core Area of Interest, for the remaining life of mine. In the event of a change of control prior to the earlier of completion and December 31, 2026, Montage will have an option to buyback one third of the stream. Montage will provide WPMI with corporate guarantees and certain other security over their assets. Montage is expected to comply in all material respects with the International Finance Corporation’s Performance Standards on Environmental and Social Sustainability, the Global Industry Standard on Tailings Management, and WPMI’s Partner/Supplier Code of Conduct, which outlines Wheaton’s expectations in regard to environmental, social and governance matters. As at June 30, the company had approximately $540M of cash on hand and believes that when combined with the liquidity provided by the available credit under the $2B revolving term loan and ongoing operating cash flows, WPMI is well positioned to fund the acquisition of the Gold Stream as well as all outstanding commitments and known contingencies and provides flexibility to acquire additional accretive mineral stream interests.