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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (25670)	1/15/2003 6:44:24 PM
From: Frank Pembleton	Read Replies (1) \| Respond to of 36161

Here's another story in a series of stories on Wheaton River's acquisition-- a much more detailed account than the one I posted this morning. I also highlighted some of the text that I thought important. Regards, Frank P. Wheaton buys Rio Tinto assets forbes.com (In U.S. dollars unless noted) By Lesley Wroughton TORONTO, (Reuters) - Little-known Wheaton River Minerals Ltd. said Wednesday it would buy gold and copper mines in Australia and Argentina from industry giant Rio Tinto Plc, catapulting its stock into the headlines as Toronto's third most-actively traded share. Analysts said Wheaton's $210 million purchase of Rio Tinto Peak gold mine in Australia and its 25 percent stake in the Bajo de la Alumbrera gold-copper mine in Argentina will transform Vancouver, British Columbia-based Wheaton from a gold and silver producer to Canada's eighth-largest gold miner. It also introduces the firm to copper through the Alumbrera mine, a big cash generator that had attracted several bidders. Peak and Alumbrera were non-core Rio assets which it inherited in its takeover of Australia's North Ltd in 2000. The transaction is the second in a year by Wheaton's deal-making new management headed by Ian Telfer, a former chief executive of TVX Gold and technology company Itemus. Last year Wheaton bought Minas Luismin, one of Mexico's largest gold and silver producers. Wheaton said the Rio Tinto deal will more than double its gold production to 458,500 equivalent ounces of gold and quadruple its proven and probable reserves to more than 3.3 million ounces from 800,000 ounces. "Our focus is to become a gold mining company," Telfer told Reuters in an interview, adding, "We get some copper through this deal but the gold really did it for us." Shares in Wheaton were down 6 Canadian cents at C$1.50 on the Toronto Stock Exchange, but Telfer said he expected the price to rise as investors become better acquainted with the deal. The stock was the third most actively traded share on the Toronto stock exchange, with more than 6 million shares changing hands. Telfer said negotiations with Rio Tinto began in October when the gold price was below $300 an ounce and the company was anxious to complete the deal as gold ticked higher. He said he expects gold, currently at around $350 an ounce, to move to $400 an ounce this year. He said the acquisitions will increase the company's cash flow per share to an estimated 25 cents from 8 cents. Based on current metal prices, the company believes cash flow from existing Mexican operations and the acquired assets will put it in a positive net cash position by Dec. 31, 2004. Between 2003 and 2005, the newly acquired mines are expected to produce an average of 269,500 ounces of gold annually at a cash cost of $74 an ounce, Wheaton said. Wheaton said the deal, which it expects to close by the end of February, will reduce its estimated cash cost to $124 per gold equivalent ounce in 2003 from $187 in 2002. The transaction is subject to Wheaton River and Rio Tinto reaching a definitive agreement. Under the terms Wheaton can defer payment for 24 months on $70 million of the total price. The company will raise the rest through financing, Telfer said. "It means that if we are raising cash by selling shares, we need to sell less shares at this point in time, and we believe that over the next two years as the market understands the transaction the stock will have appreciated and we can sell shares at a higher price if we need to," he added. The Bajo de la Alumbrera gold-copper mine in Argentina began commercial production in February 1998, and has a remaining life of at least 10 years. Output is expected to average 540,000 ounces of gold and 180,000 tonnes of copper annually over the next five years, of which Wheaton's average share would be 135,000 ounces of gold and 45,000 tonnes of copper per year. "This deal makes Wheaton quite a large copper producer," said George Albino, an analyst who has followed Wheaton for Yorkton Securities in Toronto. "Alumbrera is a very good copper mine after an initial rough start...but it is a project which is now in harvest mode with very little capex going in and a lot of cash coming out." The Peak gold mine saw 2001 production of 100,800 ounces of gold at a cash cost of $189 per ounce. Production is expected to average 110,000 ounces of gold annually at a cash cost of $189 per ounce until the end of the current mine life at 2007. Wheaton believes the mine's life could be extended through further exploration. The company's other gold-silver assets include San Dimas, San Martin and La Guitarra mines, all in Mexico. ($1=$1.54 Canadian) Copyright 2003, Reuters News Service