TORONTO (miningweekly.com) – Vancouver-based Silver Wheaton will acquire its only competitor in the business of buying and reselling by-product silver from mines, through an all-share transaction worth about C$190-million, the firm announced on Thursday.

Silver Wheaton buys silver (and now gold) at precontracted prices from miners and sells the metal at the current spot price.

The company will pay 0,185 of one of its own shares for every share in Silverstone Resources, in a friendly buyout that has the backing of both boards, as well as Silverstone's biggest shareholder, Capstone Mining.

The deal will add 2,3-million ounces of silver and 31 000 oz of gold this year to Silver Wheaton's production, said president and CEO Peter Barnes.

“What this deal really does is add immediate and current production and cash flow for Silver Wheaton shareholders,” he told analysts and investors on a conference call.

On a silver-equivalent basis, the additional production represents about 25% of Silver Wheaton's 2009 output forecast before the transaction was announced.

Just last month, the company raised C$287,5-million to repay debt and fund growth opportunities.

At the time, Barnes said that the prevailing market conditions provided the firm with the best growth prospects he had ever seen, and promised that Silver Wheaton was determined to take advantage of acquisition opportunities.

Silverstone has sales agreements with three producing mines: Minto, in Canada's Yukon territory, and Cozamin, in Mexico, both of which are owned by Capstone, as well as Lundin Mining's Neves Corvo copper-zinc mine, in Portugal, where zinc output was halted last year, but which continues to produce copper and silver.

The firm also has a sales agreement on silver mined at the mothballed Aljustrel mine, which Lundin recently sold, as well as a debenture convertible into an agreement to buy 12,5% of the life-of-mine silver production from a portion of the Navidad project in Argentina.

“This transaction is accretive in all key metrics: it consolidates the silver streaming industry, solidifies Silver Wheaton's status as the largest silver streaming company and is fully aligned with our stated business strategy,” Barnes commented.

“As the only other silver streaming company we obviously know them well...and I think it makes a lot of sense to add these two companies together,” he added.

“In the end, we decided if we are going to do something, now is the time to do it.”

Barnes said that the company would likely hold on to the gold stream from Minto, although it remained focused on silver, and did not expect this to change.

Silver prices touched an all-time high above $21/oz this month a year ago, but slumped to around $9/oz in the fourth quarter. Prices have since rebounded, and the metal was trading at around $12,90 on Thursday afternoon.

The transaction requires the approval of two-thirds of Silverstone shareholders and is expected to close after a vote is held in May.

Shares in Silver Wheaton rose 0,25% on Thursday, to C$7,96 apiece by 14:14 in Toronto.

Silverstone Resources gained 16%, to C$1,45 a share.

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