Glencore has agreed to a streamlined deal from the Antamina copper mine in a move to share rights from the mine with BHP Billiton in Peru.
Steaming company Silver Wheaton will receive the rights as part of the deal, since Glencore owns 33.75 per cent of the copper mine.
US$900 million will be paid upfront by Glencore as 20 per cent of the spot price for silver is received for each delivery, translating into a $US1 billion return over a long term period for the company.
Randy Smallwood, Silver Wheaton’s President and Chief Executive Officer said “Antamina has both the quality and the scale to make it an ideal addition to this portfolio, as it is not only the eighth largest copper mine in the world, but is also one of the lowest cost.”
“We are pleased to partner with Glencore, a company with a long history of mining success. This transaction not only further strengthens the relationship with Glencore, but also provides almost immediate production and operating cash flow from a well-established asset,” Smallwood added.
Despite being the eighth largest copper mine in the world, Antamina has operated as one of the lowest cost copper mines –facilitated by wholly owned mining infrastructure and high grade resources and reserves.
The acquisition is expected to increase Silver Wheaton’s production and cash flow through the addition of 5.1 million ounces of silver over the next two years in the short term and approximately 4.7 million ounces over a two decade period.
Smallwood suggests that although current reserves could be sufficient to support mining activities at Antamina for a long term period, resources could be converted and upgraded based on historical trends at the mine.
The silver streaming deal is not expected to have a significant impact on BHP’s interests in Antamina.