TORONTO (miningweekly.com) – Canadian miner Hudbay Minerals late on Monday announced that it had entered into an amended and restated precious metals stream agreement with Silver Wheaton, that would inject $135-million more into Hudbay’s coffers in exchange for half of the payable gold from the Constancia project, in Peru.

Hudbay would also receive $400/oz or the lower market price for gold delivered to Silver Wheaton, subject to 1% yearly escalation after three years.

Hudbay would be entitled to the $135-million, once capital expenditures at the Constancia project had reached $1.35-billion and Hudbay had satisfied certain other customary conditions precedent.

Under terms of the agreement, Silver Wheaton could pay in cash or shares, and the number of shares would be calculated at the time the payment is made. Gold recovery for calculating the payable gold would be fixed at 55% for gold mined from Constancia and 70% for gold mined from Pampacancha, also located in Peru.

"This stream transaction provides us with additional, nondilutive capital as we continue development of the Constancia and Lalor [in Manitoba] projects.

“Silver Wheaton's participation in this second precious metals stream at Constancia speaks to the significant progress our team has made at the project and we value them as a strategic partner,” Hudbay president and CEO David Garofalo said.

In August 2012, Hudbay entered into the first precious metals stream transaction with Silver Wheaton for $750-million for all of the payable gold and silver from Hudbay's 777 mine, in Manitoba, until December 31, 2016, and until Hudbay had satisfied a completion test at Constancia, following which the obligation to deliver gold will be reduced to half of the payable gold output, and all of the payable silver output from Constancia.

To date, Hudbay had received $625-million of the first transaction and the remaining $125-million payment for silver output at Constancia would become payable once the company has incurred and paid $1-billion in capital expenditures at the project.

Hudbay's financial advisers in the precious metals stream transaction were CIBC World Markets and Scotiabank.

Hudbay also announced it had closed an equipment financing facility with Caterpillar Financial Services, under which Cat Financial would provide Hudbay with financing to buy about $130-million of the mobile fleet at Constancia.

Hudbay said it expected to draw down on the facility in stages, beginning in the fourth quarter, as the equipment was delivered to site and assembled for use according to the project schedule. Loans made under the facility would have a term of six years and were secured by the Constancia mobile fleet.

The Constancia copper/molybdenum/silver/gold mine is expected to start production in the second half of 2014 and full production in 2015. Silver Wheaton expects to receive 35 000 oz/y of gold over the mine’s first five years, and 18 000 oz/y over the 16-year life of the mine.

Meanwhile, Silver Wheaton had revised downwards its five-year production guidance by 13%.

The company now expects 2017 attributable production to rise 45% compared with 2012 levels, growing to about 42.5-million silver-equivalent ounces, including 210 000 oz of gold. The decrease in output was mainly blamed on Barrick Gold’s Pascua Lama project being shelved, but was partially offset by the added gold from Constancia.

Silver Wheaton’s 2013 silver-equivalent production was still expected to top 33.5-million ounces.