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Energy

Silver Wheaton interested in streaming deals on other Glencore assets

(Reuters) - Silver Wheaton Corp SLW.TO, which struck a financing deal with Glencore GLEN.L on Tuesday, is interested in doing similar "streaming" deals on two other assets owned by the Swiss-based miner and trader, Silver Wheaton's chief executive said.

The company’s CEO, Randy Smallwood, said on Wednesday that Vancouver-based Silver Wheaton is keen to bid on deals on Glencore’s Collahausi and Antapaccay copper mines in Chile if Glencore decides to do streaming transactions on them.

Streaming transactions are a type of alternative financing in the mining industry in which funds are provided upfront to a miner in exchange for the sale of a fixed amount of future, usually by-product, production at a discounted price.

These transactions have emerged as the main type of funding for miners bowed by debt as weak share prices, due to a four-year commodities downturn, make raising equity and other types of finance expensive and difficult.

“We’re definitely interested in both of them. They are good quality assets. They generate good margins,” Smallwood said in an interview.

Glencore agreed late on Tuesday to sell future silver output from its Antamina mine in Peru to Silver Wheaton for $900 million in cash.

It said on Sept. 7 that it could raise as much as $2 billion from streaming transactions or asset sales, and sources have fingered the Chile mines as the other likely candidates.

“Glencore is going through a process looking at its assets to determine whether to sell them or do a stream. It is a bit of a fluid market,” Smallwood said.

Smallwood estimated there is still $3 billion to $4 billion worth of potential streaming opportunities left in the market.

As streaming companies have done a flurry of deals this year, their capacity to fund new transactions has diminished. “There is not a lot of capacity among ourselves or our peers immediately,” Smallwood said.

Silver Wheaton's competitors include Toronto-based Franco-Nevada FNV.TO and Denver-based Royal Gold RGLD.O.

At the same time, investors are becoming increasingly concerned with the use of debt to fund future stream acquisitions, BMO Capital Markets analyst Andrew Kaip said in a recent note to clients.

Following the Antamina deal, Silver Wheaton has enough financial muscle to do a $400 million to $500 million transaction without having to extend its credit facility or raise funds in other ways, Smallwood said.

One way for a streaming company to increase its financial heft without increasing its debt would be to partner with a deep-pocketed pension fund or private equity group on a deal, Smallwood said.

Reporting by Nicole Mordant in Vancouver; Editing by Leslie Adler

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