TORONTO (miningweekly.com) – Vancouver-based Silver Wheaton remains well-positioned to pursue further acquisitions, even after announcing its biggest-ever deal to buy a quarter of the silver produced at Barrick Gold's giant Pascua-Lama gold/silver project, CEO Peter Barnes assured on Tuesday.

The company has agreed to pay Barrick $625-million over three years, plus $3,90/oz on delivery, for 25% of the life-of-mine silver output at Pascua-Lama, as well as 100% of silver produced at three other Barrick mines until the end of 2013, while Pascua-Lama is being built.

Barnes described the deal as “transformational”, but added that the company will still have the financial resources look at more deals as they present themselves.

Silver Wheaton will fund the initial $212,5-million payment to Barrick from cash on hand, which stands at about $70-million, and a $250-million bought-deal offering that it also announced on Tuesday.

At the closing of the equity offering, which is expected by September, the firm should have $95-million to $130-million in available cash, depending on whether an overallotment option is exercised.

These funds, together with the firm's unused $400-million revolving debt facility, will remain available to take advantage of further growth opportunities, Barnes said.

“In essence, what this means is that we still have $500-million of firepower to make the next acquisition without issuing any further equity.”

The remaining payments to Barrick over the next three years will be made out of future operating cash flows and Silver Wheaton expects to have zero net bank debt by the end of this year, Barnes said.

He said that the company will continue to consider acquisitions of all sizes, despite the growing scale of its own portfolio, but that the first prize would be to add another “cornerstone” asset, and preferably one that is already producing.

“In production would be fantastic, as it would provide immediate cash flow, but we also certainly wouldn't shy away from another top-quality development asset with top quality developers.”

Barnes said he would look to repeat the structure of the Barrick deal in future transactions.

“I love the way we've structured this – it means we are getting immediate cash flow on this deal.”

PLAYING IN THE BIG LEAGUES

The Barrick agreement will add an annualised average of 2,4-million ounces of silver to Silver Wheaton's books from 2009 to 2013, and this will jump to around nine-million ounces once Pascua-Lama starts up.

Pascua-Lama is the third-biggest silver deposit in the world, with 718-million ounces of silver reserves.

In fact, Silver Wheaton already has a silver-streaming agreement in place for the biggest known silver asset, Goldcorp's Penasquito mine, in Mexico.

Together, Pascua Lama and Penasquito, owned respectively by the world's two biggest gold-miners, are expected to account for more than 40% of Silver Wheaton's long-term future revenue stream, Barnes said.

“And both mines are very low cost, very long life and have excellent exploration potential. One couldn't have better cornerstone assets in any company.”

Overall, the company has now a significant stake in three of the top five silver deposits in the world, and in nine of the top 35, he said.

The company's silver output is expected to rise above 40 000 oz by 2013, which represents an increase of 250% compared with the 11-million ounces produced last year.

Silver Wheaton bought smaller rival Silverstone Resources earlier in 2009.

The company's shares rose 0,63% on Tuesday, to C$12,73 apiece by 15:46 in Toronto.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.