Wheaton Precious Metals Acquires Cobalt Stream from Vale’S Voisey’S BAY MINE
FOR IMMEDIATE RELEASE TSX: WPM
June 11, 2018 NYSE: WPM
WHEATON PRECIOUS METALS ACQUIRES COBALT STREAM
FROM VALE’S VOISEY’S BAY MINE
Vancouver, British Columbia – Wheaton Precious Metals™ Corp. (“Wheaton” or the
“Company”) is pleased to announce that it has agreed to acquire from a subsidiary of Vale
S.A. ("Vale") (NYSE:VALE) an amount of finished cobalt equal to a fixed percentage of cobalt
production from the Voisey’s Bay mine (the “Cobalt Stream”). Wheaton will pay Vale upfront
cash consideration of US$390 million upon closing of the Cobalt Stream. In addition,
Wheaton will make ongoing payments of 18% of the Metal Bulletin market price (“cobalt spot
price”) per cobalt pound delivered 1. Also on June 11, 2018, Vale entered into a separate
streaming agreement with Cobalt 27 Capital Corp. ("Cobalt 27”). In total, Wheaton and Cobalt
27 will provide Vale an aggregate of US$690 million in funding for the combined purchase of
cobalt equal to 75% of Voisey's Bay cobalt production effective January 1, 2021.
TRANSACTION HIGHLIGHTS
• Adds to Wheaton’s existing high-quality portfolio
▪ Effective January 1, 2021, Wheaton will be entitled to receive from Vale an amount
of cobalt equal to 42.4% of the Voisey’s Bay mine cobalt production until the
delivery of 31 million pounds of cobalt and an amount of cobalt equal to 21.2% of
cobalt production thereafter for the life of mine.
▪ Voisey’s Bay is one of the lowest -cost, highest -margin nickel mines globally,
ranking in the bottom half of the nickel cost curve.2
▪ Further strengthens Wheaton’s partnership with Vale, one of the largest
diversified mining companies in the world.
• Increases Wheaton’s growth profile and cash flow
▪ Wheaton will be entitled to production starting in 2021, coincident with the
anticipated ramp up in underground production from Voisey’s Bay.
▪ Attributable cobalt production is forecast to average 2. 6 million pounds per year
for the first 10 years and 2.4 million pounds for the life of mine. For context, on a
gold equivalent ounce ( “GEO”) basis, that is the equivalent to approximately 80
thousand GEOs and 75 thousand GEOs per year, respectively.3
▪ Operating cash flow to Wheaton at current cobalt price s is forecast to average
over US$75 million per year for the first 10 years4.
• Diversifies Wheaton’s portfolio with an integral metal for clean energy
▪ Cobalt is primarily used in battery technology, especially in the rapidly expanding
electric vehicles (“EV”) market.
▪ Similar to silver, cobalt is primarily produced as a by-product.
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▪ While most cobalt supply comes from high political risk jurisdictions, Voisey’s Bay
is located in Newfoundland and Labrador, Canada.
"While our focus has been, and always will be on precious metal streaming, we welcomed
the opportunity to invest in another low -cost, long-life asset with a partner of Vale’s calibre.
Wheaton has built a portfolio of streams on high -quality mines, and Voisey’s Bay has both
the quality and the scale to make it an accretive addition to this portfolio,” said Randy
Smallwood, Wheaton’s President and Chief Executive Officer. "We see numerous similarities
between cobalt and silver, as both are primarily produced as by -products and both are
integral to sustainable clean energy and electronics. In addition, given cobalt supply is
concentrated in high political risk jurisdictions, Voisey’s Bay is particularly attractive for cobalt
production as it is located in Canada.”
TRANSACTION TERMS
• Effective January 1, 2021, Wheaton will be entitled to receive from Vale an amount of
cobalt equal to 42.4% of the Voisey’s Bay mine cobalt production until the delivery of
31 million pounds of cobalt.
• Once Wheaton has received 31 million pounds of cobalt, Wheaton will be entitled to
21.2% of cobalt production for the life of mine.
• Wheaton will pay Vale cash consideration of US$390 million upon closing of the
Cobalt Stream.
• Wheaton will make ongoing payments of 18% of the cobalt spot price to Vale per
cobalt pound delivered until the balance of the upfront cash consideration is reduced
to zero.
• When the balance of the upfront cash consideration is reduced to zero, Wheaton will
make ongoing payments of 22% of the cobalt spot price per cobalt pound delivered.
• Payable rates for cobalt in concentrate have generally been fixed at 93.3%
• Wheaton will take physical deliveries of high-quality, finished cobalt by way of
warehouse certificates.
• Cobalt deliveries will be the obligation of Vale but will be guaranteed by Vale
Newfoundland & Labrador Ltd. , the project owner, and Vale S.A. will provide a
financial guarantee.
• The Cobalt Stream includes a completion test on underground operations measured
by the throughput rate.
• The stream area of interest is defined as the area including Voisey's Bay mining lease
plus a 2 kilometre surrounding area of interest so long as any such cobalt is extracted
using the same underground infrastructure as th e planned Reid Brook and Eastern
Deeps deposits.
• Closing of the transaction is expected to occur shortly following announcement and is
subject to the completion of certain corporate matters and customary conditions.
• On June 11, 2018, Vale entered into separate streaming agreements with each of
Wheaton and Cobalt 27 Capital Corp. for an aggregate total upfront consideration of
US$690 million, of which Wheaton will contribute US$390 million for its stream. The
terms of each streaming agreement are substantially similar other than in respect of
the upfront consideration and cobalt stream percentages.
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FINANCING THE TRANSACTION
The initial upfront cash payment of US$390 million will be paid by using amounts drawn from
the Company’s US$2 billion revolving credit facility. At March 31, 2018, the Company had
approximately US$116 million of cash on hand and US$663 million outstanding under the
revolving credit facility . With trailing four -quarter operating cash flow of just under $ 550
million5, the Company believes it has ample capacity to service the additional debt resulting
from this transaction, especially given the low interest rate and flexible nature of the
covenants under the revolving credit facility (minimum net debt to total net worth and
minimum interest coverage tests).
ABOUT THE VOISEY’S BAY MINE
The Voisey’s Bay mine and concentrator is located on the north coast of Labrador,
approximately 1,200 kilometres north of St. John’s, Newfoundland. Production began in 2005
and open pit mining is expected to continue until 2022. There will be a gradual transition from
open pit to underground mining beginning in 2021.
In July 2015 Vale’s Board of Directors sanctioned the development of the underground
deposits at Voisey’s Bay. The mine expansion project will focus on the development of two
separate deposits, Reid Brook and Eastern Deeps. Once in operation, underground m ining
is expected to extend the life of the Voisey’s Bay operation until at least 203 4. At peak
production, the underground mines are expected to produce about 45,000 tonnes per year
of nickel-in-concentrate which will be shipped to Vale’s processing facility in Long Harbour,
Newfoundland for further processing into finished nickel. The mine also produces a copper
concentrate which is shipped to third party smelters but does not contain payable cobalt.
The construction phase of the mine expansion began in 2016 and is expected to be
completed in 2022. This will include the expansion of existing surface infrastructure at
Voisey’s Bay for increased power generation capacity, additional permanent
accommodations, offices, warehousing and maintenance shops. The water and sewage
treatment facilities will also be upgraded.
The development of the underground mines, which is the largest segment of the construction
program, requires the development of declines from surface to access the ore bodies, and
the construction and installation of supporting infrastructure including underground crushing
and conveying, paste / backfill plant, maintenance facilities and underground mine ventilation
systems.
Vale has entered into a development agreement with the Government of Newfoundland and
Labrador in respect of the development and construction of the underground mines, including
commitments as to the timing of completion of those underground mines. In addition, as
Voisey’s Bay is located in an area subject to land claims by both the Innu Nation and the
Nunatsiavut Government, Vale has also entered into impacts and benefits agreements with
both groups.
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Below are Wheaton’s attributable Mineral Reserves and Resources in respect of the Voisey’s
Bay mine.6
Attributable Mineral Reserves and Mineral Resources – Voisey’s Bay, effective as of
December 31, 2017
Tonnage Grade Contained
Category Mt Co % Co Mlbs
Proven 4.6 0.14 13.9
Probable 6.5 0.13 18.7
P&P 11.1 0.13 32.6
Measured - - -
Indicated 2.2 0.04 2.0
M&I 2.2 0.04 2.0
Inferred 3.9 0.10 8.6
ABOUT COBALT
Cobalt derives its name from the Germanic word for goblin, kobold , a reference to cobalt’s
propensity to turn to black powder on smelting . Despite that early name, t oday, cobalt is
known as the hard, lustrous metal whose high energy density, low thermal conductivity, ability
to alloy, and ferromagnetism results in diverse commercial, industrial and military
applications.
The leading use of cobalt is in rechargeable batteries as cobalt significantly improves lithium
ion batteries’ (“LIB”) perform ance by providing stability and prolonging battery life. Battery
chemicals already consume just under half of the world’s cobalt and that percentage is
expected to grow by 57% in 2020 and 73% in 2025 with the broader adoption of electric
vehicles. The EV industry is expected to lead the demand for cobalt-containing LIB as relative
to the traditional lead-acid battery, LIB have higher charge density, power-to-weight ratio and
a longer lifespan.7
The two main global supply risks for cobalt relate to its geographic concentration and its by-
product nature. The top three producing countries account for two-thirds of supply, with
most of the world’s production coming from the African Copper Belt, mainly the Democratic
Republic of Congo (“DRC”). The DRC is the world’s largest producer of mined cobalt with a
55% global share, and the US Geological Survey estimates that half of global in situ
reserves are in the DRC. Similar to silver, the vast majority of cobalt is produced as a by-
product of other base metals. In cobalt’s case, from copper and nickel, and as such, cobalt
production is more tied to the economics of those two metals rather than any tightness in
the cobalt market.
CONFERENCE CALL
A conference call will be held on June 12, 2018 , starting at 11:00 am (Eastern Time) to
discuss this transaction. A presentation on the transaction will be available on the Company’s
website shortly before the conference call. To participate in the live call please use one of the
following methods:
Dial toll free from Canada or the US: 888-231-8191
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Dial from outside Canada or the US: 647-427-7450
Pass code: 7861228
Live audio webcast: www.wheatonpm.com
Participants should dial in ten to fifteen minutes before the call.
The conference call will be recorded and available until June 19, 2018 at 11:59 pm ET. The
webcast will be available for one year. You can listen to an archive of the call by one of the
following methods:
Dial toll free from Canada or the US: 855-859-2056
Dial from outside Canada or the US: 416-849-0833
Pass code: 7861228
Archived audio webcast: www.wheatonpm.com
Mr. Neil Burns, Vice President of Technical Services for Wheaton, is a "qualified person" as
such term is defined under National Instrument 43 -101 and has reviewed and approved the
technical disclosure in this news release including information on Mineral Reserves and
Mineral Resources.
ADVISORS AND COUNSEL
Scotiabank acted as financial advisor and Cassels Brock & Blackwell LLP acted as legal counsel to
Wheaton.
For further information, please contact:
Patrick Drouin
Senior Vice President, Investor Relations
Wheaton Precious Metals Corp.
Tel: 1-844-288-9878
Email: [email protected]
Website: www.wheatonpm.com
End Notes
1) Production payment is set at 18% of cobalt spot prices, increasing to 22% upon the balance of upfront
consideration being reduced to zero.
2) Based on Wood Mackenzie est. of 2nd quarter of 2018 by-product cost curve for nickel mines.
3) Production is defined as metal contained in concentrate and is based on mine plans provided by Vale and a
gold to cobalt ratio based on $1,300 per ounce of gold and $40 per pound of cobalt.
4) Operating cash flow is based on current market cobalt prices of approximately $40 per pound of cobalt, 2.6
million pounds of cobalt produced annually, a payable cobalt rate of 93.3%, production payment of 18%, and an
assumed cobalt marketing fee. Statements as to estimated operating cash flow and EBITDA contain forward
looking information and readers are cautioned that actual outcomes may vary. Please see the “Cautionary Note
Regarding Forward Looking-Statements” at the end of this news release for material risks, assumptions, and
important disclosure associated with this information.
5) Operating cash flow based on Q2, Q3, and Q4 of 2017, and Q1 2018
6) Please refer to the Mineral Reserves & Mineral Resources table at the end of this news release for full
disclosure of reserves and resources associated with Voisey’s Bay including accompanying footnotes.
7) Spender, Reg, Larry Hill, Eric Zaunscherb, Thomas Gallo and John Kratochwil. "Cobalt: Out of the shadows
and into the spotlight" Specialty Minerals and Metals, Global Equity Research, Canaccord Genuity. 25-May-17.
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ATTRIBUTABLE MINERAL RESERVES AND MINERAL RESOURCES FOR VOISEY’S
BAY
Deposit Category Tonnage Grade Contained
Mt Co % Co Mlbs
Main & Mini Ovoid Proven 0.3 0.18 1.3
SE Extension Proven 0.8 0.04 0.7
Reid Brook Proven 1.7 0.15 5.6
Probable 0.9 0.13 2.6
Eastern Deeps Proven 1.8 0.16 6.3
Probable 5.6 0.13 16.2
Total Reserves Proven 4.6 0.14 13.9
Probable 6.5 0.13 18.7
P&P 11.1 0.13 32.6
Discovery Hill Indicated 1.4 0.05 1.5
Inferred 1.4 0.05 1.6
SE Extension Indicated 0.8 0.03 0.5
Reid Brook Inferred 2.5 0.13 7.0
Total Resources Measured - - -
Indicated 2.2 0.04 2.0
M&I 2.2 0.04 2.0
Inferred 3.9 0.10 8.6
Notes on Mineral Reserves and Mineral Resources
• All Mineral Reserves and Mineral Resources have been estimated in accordance with the 2014 Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Standards for Mineral Resources and Mineral Reserves
and National Instrument 43 -101 – Standards for Disclosure for Mineral Projects (“NI 43 -101”), or the 2012
Australasian Joint Ore Reserves Committee (JORC) Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves.
• Mineral Reserves and Mineral Resources are reported above in millions of metric tonnes ("Mt"), percent ("%")
and millions of pounds ("Mlbs").
• Qualified persons (“QPs”), as defined by the NI 43 -101, for the Mineral Reserve and Mineral Resou rce
estimates are:
o Neil Burns, M.Sc., P.Geo. (Vice President, Technical Services); and
o Ryan Ulansky, M.A.Sc., P.Eng. (Senior Director, Engineering),
• The Mineral Resources reported in the above tables are exclusive of Mineral Reserves.
• Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
• Mineral Reserves and Mineral Resources are reported as of December 31, 2017 based on information
available to the Company as of the date of this document, and therefore will not reflect updates, if any, after
such date.
• Process recovery of cobalt to a nickel concentrate averages 84%.
• Mineral Reserves and Resources are estimated using appropriate process recovery rates and the following
NSR cut-offs and commodity prices:
o Ovoid, Mini Ovoid and SE Extension Mineral Reserves – Cdn $24.04 per tonne assuming $9.07 per
pound nickel, $2.86 per pound copper and $12.25 per pound cobalt;
o Reid Brook Mineral Reserves and Mineral Resources - $275.00 per tonne assuming $9.72 per pound
nickel, $3.40 per pound copper and $11.50 per pound cobalt;
o Eastern Deeps Mineral Reserves - $225.00 per tonne assuming $6.35 per pound nickel, $2.81 per
pound copper and $18.13 per pound cobalt;
o SE Extension Mineral Resources - $24.00 per tonne assuming $10.43 per p ound nickel, $3.45 per
pound copper and $13.00 per pound cobalt; and
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o Discovery Hill Mineral Resources - $24.81 per tonne assuming $9.53 per pound nickel, $3.13 per
pound copper and $12.50 per pound cobalt.
• The Company's attributable Resources and Reserves for Voisey’s Bay have been constrained to the
production expected from January 1, 2021 onwards.
• The Voisey’s Bay cobalt purchase and sale agreement provides that Vale will deliver an amount of finished
cobalt equal to 42.4% of the cobalt production until 3 1 million pounds are delivered and 21.2% of cobalt
production thereafter, for the life of the mine. Attributable reserves and resources have been calculated on
the 42.4% / 21.2% basis.
• Cobalt is produced as a by -product metal; therefore, the economic cut -off applied to the reporting of cobalt
Resources and Reserves will be influenced by changes in the commodity prices of other metals at the time.
• Full Reserve and Resource tables are available on the Company's website, www.wheatonpm.com.
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
The information contained herein contains “forward -looking statements” within the meaning of the United States
Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable
Canadian securities legislation. Forward -looking statements, which are all statements other than statements of
historical fact, include, but are not limited to, statements with respect to:
• the payment of the upfront cash consideration of US$390 million to Vale in connection with the Cobalt
Stream;
• the construction timeline, including completion, of the mine expansion, including the underground mines,
at Voisey’s Bay by Vale;
• the commencement and timing of delivery of cobalt by Vale under the Cobalt Stream;
• the receipt of cobalt by Wheaton of cobalt production in respect of Voisey’s Bay;
• Vale’s obligations under the development agreement with the Government of Newfoundland and
Labrador and the impacts and benefits agreements with the Innu Nation a nd the Nunatsiavut
government;
• the demand, uses and supply of cobalt;
• future payments by the Company in accordance with precious metal purchase agreements, including
any acceleration of payments, estimated throughput and exploration potential;
• projected increases to Wheaton’s production and cash flow profile;
• the expansion and exploration potential at the Salobo and Peñasquito mines;
• projected changes to Wheaton’s production mix;
• anticipated increases in total throughput;
• the estimated future production;
• the future price of commodities;
• the estimation of mineral reserves and mineral resources;
• the realization of mineral reserve estimates;
• the timing and amount of estimated future production (including 2018 and average attributable annual
production over the next five years);
• the costs of future production;
• reserve determination;
• estimated reserve conversion rates and produced but not yet delivered ounces;
• any statements as to future dividends, the ability to fund outstanding commitments and the ability to
continue to acquire accretive precious metal stream interests;
• confidence in the Company’s business structure;
• the Company’s position relating to any dispute with the CRA and the Company’s intention to defend
reassessments issued by the CRA; the impact of potential taxes, penalties and interest payable to the
CRA; possible audits for taxation years subsequent to 2015; estimates as to amounts that may be
reassessed by the CRA in respect of taxation years subsequent to 2010; amounts that may be payable
in res pect of penalties and interest; the Company’s intention to file future tax returns in a manner
consistent with previous filings; that the CRA will continue to accept the Company posting security for
amounts sought by the CRA under notices of reassessment f or the 2005 -2010 taxation years or will
accept posting security for any other amounts that may be sought by the CRA under other notices of
reassessment; the length of time it would take to resolve any dispute with the CRA or an objection to a
reassessment; and assessments of the impact and resolution of various tax matters, including
outstanding audits, proceedings with the CRA and proceedings before the courts; and
• assessments of the impact and resolution of various legal and tax matters, including but not limited to
outstanding class actions.
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Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as
“plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “projects”,
“intends”, “anticipates” or “does not anticipate”, or “believes”, “potential”, or variations of such words and phrases
or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or
“be ac hieved”. Forward -looking statements are subject to known and unknown risks, uncertainties and other
factors that may cause the actual results, level of activity, performance or achievements of Wheaton to be
materially different from those expressed or implied by such forward-looking statements, including but not limited
to:
• that each party does not satisfy its obligations in accordance with the terms of the Cobalt Stream;
• Vale does not meet the construction timeline, including anticipated completion, of the mine expansion,
including the underground mines, at Voisey’s Bay;
• Vale is unable to commence, or the timing of delivery of cobalt by Vale is delayed or deferred under the
Cobalt Stream or Wheaton is unable to sell its cobalt production delivered under the Cobalt Stream at
acceptable prices or at all;
• Vale does not meet its obligations under the development agreement with the Government of
Newfoundland and Labrador or the impacts and benefits agreements with the Innu Nation and the
Nunatsiavut government;
• the decrease in demand for cobalt , the decrease in uses for cobalt or the discovery of new supplies of
cobalt, any or all of which could result in a decrease to the price of cobalt or a decrease in the ability to
sell cobalt;
• risks related to the satisfa ction of each party's obligations in accordance with the terms of Wheaton’s
precious metal purchase agreements, including any acceleration of payments, estimated throughput and
exploration potential;
• fluctuations in the price of commodities;
• risks related to the Mining Operations including risks related to fluctuations in the price of the primary
commodities mined at such operations, actual results of mining and exploration activities, environmental,
economic and political risks of the jurisdictions in which the Mining Operations are located, and changes
in project parameters as plans continue to be refined;
• absence of control over the Mining Operations and having to rely on the accuracy of the public disclosure
and other information Wheaton receives from the owners and operators of the Mining Operations as the
basis for its analyses, forecasts and assessments relating to its own business;
• differences in the interpretation or application of tax laws and regulations or accounting policies and
rules;
• Wheaton’s interpretation of, or compliance with, tax laws and regulations or accounting policies and
rules, being found to be incorrect or the tax impact to the Company’s business operations being
materially different than currently contemplated;
• any challenge by the CRA of the Company’s tax filings being successful and the potential negative impact
to the Company’s previous and future tax filings;
• the Company’s business or ability to enter into precious metal purchase agreements being materially
impacted as a result of any CRA reassessment;
• any reassessment of the Company’s tax filings and the continuation or timing of any such process is
outside the Company’s control;
• any requirement to pay reassessed tax, and the amount of any tax, interest and penalties that may be
payable changing due to currency fluctuations;
• the Company not being assessed taxes on its foreign subsidiary’s income on the same basis that the
Company pays taxes on its Canadian income, if taxable in Canada;
• interest and penalties associated with a CRA reassessment having an adverse impact on the Company’s
financial position;
• litigation risk associated with a challenge to the Company’s tax filings;
• credit and liquidity risks;
• indebtedness and guarantees risks;
• mine operator concentration risks;
• hedging risk;
• competition in the mining industry;
• risks related to Wheaton’s acquisition strategy;
• risks related to the market price of the common shares of Wheaton;
• equity price risks related to Wheaton’s holding of long-term investments in other exploration and mining
companies;
• risks related to interest rates;
• risks related to the declaration, timing and payment of dividends;
• the ability of Wheaton and the Mining Operations to retain key management employees or procure the
services of skilled and experienced personnel;