Wheaton River Minerals (Toronto:WRM/Amex:WHT)
Home page: www.wheatonriver.com
Wheaton River Minerals is a leading gold and precious metals producer with significant assets and operations in Mexico, Australia and Argentina. Based in Vancouver, British Columbia, Wheaton is the 8th largest gold producer in Canada, with a production of over 450,000 gold equivalent ounces per year at cash costs below US$130 per ounce. As of June 30, 2003, proven and probable reserves totaled 4.2 million gold equivalent ounces and inferred resources exceeded 3.8 million gold equivalent ounces.
In Australia, the company operates the Peak mine, which is located 600 kilometers west of Sydney. This operation consists of several underground and open-pit ore bodies, and is expected to produce 110,000 ounces at a cash cost of less than US$190. This mine has in excess of 700,000 ounces of gold in proven and probable reserves and successful exploration could increase this number. Wheaton acquired 100% of the Peak mine in March 2003.
In Argentina, the company acquired a 25% interest in Bajo de la Alumbrera, a large open-pit gold and copper mine, in March 2003. Bajo de la Alumbrera is located in the northwest of Argentina, in the province of Catamarca. At the end of 2002, Wheaton's share of proven and probable reserves stood at 1.8 million ounces of gold and 1 billion pounds of copper. Wheaton's share of gold production in 2003 is expected to exceed 140,000 ounces, at a cash cost of negative US$18 net of copper credits. This mine is expected to last in excess of 10 years.
In Mexico, the company produces 195,000 gold equivalent ounces (100,000 oz gold and 5.8 million oz silver) at total cash costs of US$187 per ounce. The largest operation, San Dimas, is a world-class epithermal vein system accounting for 70% of the production and the majority of Wheaton's inferred resources. These operations have consistently converted 90% of resources into reserves over the last 12 years. Wheaton acquired a 100% interest in the Mexican operations and its extensive exploration portfolio in June 2002.
Extensive Exploration potential in Mexico
Recent News: WHEATON TO ACQUIRE GOLD DEVELOPMENT PROJECTS IN MEXICO
Wheaton River Minerals Ltd. has announced that it has entered into agreements with Teck Cominco Limited ("Teck Cominco") and Miranda Mining Corporation ("Miranda") to acquire a 100% interest in the Los Filos Gold Deposit, together with a 21.2% interest (of which 14% is a carried interest) in the El Limón Gold Deposits, both located in Guerrero State, Mexico, for US$87 million in cash.
Ian Telfer, Chairman & CEO said, "Wheaton River is very excited about the growth potential of the projects and our ability to utilize the existing Luismin infrastructure we have in Mexico. Los Filos and El Limón will be another step forward in the growth of Wheaton River as a dynamic global gold producer. We are confident we can bring Los Filos into production by 2006, which should increase our projected annual production to over 700,000 ounces at cash costs of less than US$140 per ounce. Wheaton currently produces over 500,000 gold equivalent ounces at a cash cost of approximately US$100 per ounce and has over 4 million ounces of in proven and probable reserves. This acquisition will add significantly to both production and reserves going forward."
Los Filos Gold Deposit
Wheaton River is acquiring a 100% interest in the open pittable heap leach Los Filos Gold Deposit. Teck Cominco has explored Los Filos with over 400 drillholes totaling 90,000 metres of drilling and using a cutoff of 0.5 grams of gold per tonne ("g Au/t"), estimated a measured and indicated resource of 38.4 million tonnes grading 1.44 g Au/t (1.77 million ounces) and inferred resources of 11.0 million tonnes grading 1.35 g Au/t. Column testwork to date on Los Filos samples has indicated heap leach recoveries in excess of 70%, and Wheaton River will be investigating the potential benefits of fine-grinding a higher grade portion of the ore feed.
On several satellite zones within one kilometre of Los Filos, early stage exploration indicates potential to expand the resource base.
Wheaton River plans to complete a feasibility study on the Los Filos deposit during 2004, and commence construction immediately thereafter. Capital costs are expected to be in the order of US$80 million, which Wheaton intends to fund through a combination of project debt and internally generated cash. This mine will start production in late 2005.
El Limón Gold Deposits
Wheaton River is also acquiring a 21.2% interest in the El Limón Gold Deposits, (of which 14% is a carried interest) with Teck Cominco owning the remaining 78.8%. The El Limón Gold Deposits are a series of skarn related deposits located 15 kilometres north of Los Filos. In September 2002, Teck Cominco completed a resource estimate based on 35 reverse circulation drill holes and 25 diamond drill holes totalling approximately 10,000 metres of drilling. Using a cut off grade of 0.8 g Au/t, inferred resources totalled 15.9 million tonnes grading 3.35 g Au/t.
Subsequent drilling by Teck Cominco has focused on expanding the resources of the El Limón Gold Deposits, and several new zones have been identified. Teck Cominco has only recently completed the latest drilling campaign, and is currently updating the resource estimate for El Limón. The updated resource estimate is expected by the end of September 2003. Wheaton River is excited to partner with Teck Cominco in advancing the El Limón deposits towards production.
Wheaton River is also acquiring the Nukay Mine situated in Guerrero State, Mexico, which has been in operation for almost 20 years. The Nukay operation has produced approximately 90,000 ounces of gold over the last five years at an average cash cost of US$164 per ounce. Wheaton River intends to conduct a thorough review of mining operations upon completion of the acquisition.
Summary of the Acquisition
The Los Filos Gold Deposit is owned by Minera Nuteck S.A. de C.V. ("Nuteck") which is owned 70% by Teck Cominco and 30% by Miranda. Miranda is also the indirect owner of 21.2% of Minera Media Luna S.A. de C.V. ("MML") which owns 100% of the El Limón Gold Deposit. The remaining 78.8% of MML is indirectly owned by Teck Cominco. Miranda is also the indirect owner of a small producing gold mine known as the Nukay Mine.
Wheaton River has entered into a letter agreement with Teck Cominco pursuant to which Wheaton River will acquire all of the shares of Nuteck indirectly held by Teck Cominco for US$48.4 million payable in cash. The purchase of the Nuteck shares by Wheaton River is subject to a number of conditions, including entering into a definitive agreement of purchase and sale and Wheaton River completing the acquisition of Miranda as detailed below.
Wheaton River has also entered into an agreement with Miranda pursuant to which Wheaton River has agreed to make an all cash take-over bid to acquire all of Miranda's common shares for a total cash consideration of US$38.6 million.
Shareholders of Miranda, including Enrique R. Miranda-Paz, Miranda's Chairman, President and Chief Executive Officer, owning or controlling 61.5% of the outstanding Miranda shares, have entered into Lock-Up and Support Agreements with Wheaton River pursuant to which they have irrevocably committed to tendering their Miranda shares to Wheaton River's offer and to otherwise support the transaction.
The board of directors of Miranda has unanimously recommended that Miranda shareholders accept Wheaton River's offer. Wheaton River's offer will be made by way of an all cash take-over bid to be governed by applicable securities laws. The take-over bid will be subject to customary terms and conditions, including the condition that at least 90% of the Miranda shares are tendered to the bid. The bid will also be subject to Wheaton River completing the acquisition of Teck Cominco's 70% interest in Nuteck.
Closing of the acquisition of the Nuteck shares from Teck Cominco and completion of the take-over bid for the Miranda shares will likely occur within the next 60 days. Completion of the transactions is also subject to, among other things, receipt of all requisite regulatory approvals and third party consents by Wheaton River.
Proven & Probable mineral reserves are at 4.2 million gold equivalent. The company will be on a par with Goldcorp, IAMgold and Meridian, and surpasses, in annual production, Glamis and Agnico's yields. Cash costs should be comparable to low-cost intermediates.
Moreover, Wheaton River Minerals has excellent exploration potential.
We believe that this well-run company has the capacity to add significantly to Proven & Probable reserves over the coming years while at the same time increasing production and reducing cash cost.
Alone in Mexico, the company has more than thirty exploration properties.
The president of Wheaton River believes that gold could hit $450 in 2004, an opinion we like to share.
The share price of Wheaton River had a spectacular rise since we recommended the company on April 30 at CAD1.20.
The break out of the year-long consolidation was induced by massive buying volume.
While we see higher prices in the future, we would not chase the shares at present and a short-term oriented trader may well wish to cash in the quick profit.
A long-term oriented investor should hold on and those who have no positions should wait for a pull-back.
Our recommendation: Hold, Buy on pull-backs.!
October 3, 2003