TORONTO (miningweekly.com) – Precious metals streaming firm Silver Wheaton on Tuesday said it had struck an early deposit gold stream accord with exploration and project development firm Sandspring Resources for the Toroparu project, located in Guyana.
Under the agreement, Silver Wheaton, through its subsidiary Silver Wheaton (Caymans), has the right to buy 10% of the life-of-mine gold production from the Toroparu project for $148.5-million in cash, including an ongoing production payment of the lesser of $400/oz (subject to a 1% yearly inflation adjustment starting in the fourth year after the completion test was satisfied) and the prevailing market price.
Silver Wheaton said it would advance $13.5-million to Sandspring once customary conditions had been met and at the closing of the agreement. The company could then choose to proceed with buying the gold stream, after Sandspring had delivered a bankable definitive feasibility study, environmental study and impact assessment, and other related documents, or after December 31, 2015, if the feasibility documentation had not been delivered.
If Silver Wheaton chose not to proceed with the gold stream, it would be entitled to either a return of $11.5-million payable by Sandspring (on the basis that $2-million of the advanced $13.5-million was nonrefundable) or a reduction in the stream percentage from 10% to 0.774%, at Sandspring’s option.
“Silver Wheaton continues to push the streaming model forward. The early deposit agreement model allows us to get our foot in the door on high-quality, earlier stage projects such as Toroparu for relatively little upfront capital.
“From Sandspring’s perspective, these funds will allow them to complete the bankable feasibility study without subjecting their shareholders to excessive dilution that today’s challenging equity markets would deliver,” Silver Wheaton president and CEO Randy Smallwood said.
He added that in today’s market environment, he expected the streaming model to be “very attractive” to junior exploration and development companies looking for funding.
The Toroparu gold/copper deposit was discovered in 2007, and has a compliant proven and probable mineral reserve of 4.1-million ounces of gold contained in 127-million tonnes of ore at a grade of 1 g/t gold. The yearly output was slated to total 246 000 oz of gold at a mill head grade of 1.32 g/t, produced at a cash cost of $504/oz of gold, on average over the first four years, and 228 000 oz/y at a cash cost of $700/oz on average over the 16-year mine life.
Sandspring is aiming for potential large-scale production in 2015.
President and COO Yani Roditis in October told the Renewable Energy and Mining Conference, in Toronto, that while the company was pushing ahead with development of its flagship project, it had signed a memorandum of understanding with the Guyana government to construct the Kurupung river hydroelectric project, which would provide the mining operation with all of its electricity needs.
He said the 60 MW private generator, located 60 km from Toroparu, would support development of the Cuyuni-Mazaruni mining district.
“The hydropower project will make our mining project more financeable, while Sandspring will leave a positive legacy in place long after the mine had closed,” he said at the time.