Silver Wheaton Acquires Life of Mine Precious Metals Streams from Hudbay's 777 Mine and Constancia Project

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VANCOUVER, Aug. 8, 2012 /CNW/ - Silver Wheaton Corp. ("Silver Wheaton" or the "Company") (TSX:SLW) (NYSE:SLW) is pleased to announce that it has agreed to acquire from HudBay Minerals Inc. ("Hudbay") (TSX:HBM) (NYSE:HBM) 100% of the life of mine silver production from its currently producing 777 Mine ("777"), located in Canada, and 100% of the life of mine silver production from its Constancia Project ("Constancia"), located in southern Peru. In addition, Silver Wheaton has agreed to acquire 100% of the life of mine gold production from Hudbay's 777 Mine until Constancia satisfies a completion test, or the end of 2016, whichever is later.  At that point, Silver Wheaton's share of gold production from 777 will be reduced to 50% for the remainder of the mine life.

Silver Wheaton will pay Hudbay total cash consideration of US$750 million, of which US$500 million is payable upon closing, with two further payments of US$125 million each to be made upon the satisfaction of minimum capital expenditures having been incurred at Constancia. In addition, Silver Wheaton will make ongoing payments of the lesser of US$5.90 per ounce of silver and US$400 per ounce of gold (both subject to an inflationary adjustment) or the prevailing market price per ounce of silver and gold delivered.

TRANSACTION HIGHLIGHTS

• Provides Immediate Cash Flow
• Silver Wheaton will receive 100% of the silver production from Hudbay's currently producing flagship mine, 777, and will also receive 100% of the gold production until the later of the completion of Constancia or the end of 2016, at which point Silver Wheaton will receive 50% of the gold production from 777 for the remainder of the mine life;
• Average annual attributable production from 777 is anticipated to be approximately 4.2 million silver equivalent ounces, including 0.82 million ounces of silver and 68,000 ounces of gold¹, until the end of 2016;
• Silver Wheaton's total forecast 2012 silver equivalent production increases from 27 million ounces to approximately 28 million ounces, including 42,000 ounces of gold¹.
  
  
• Significantly Increases Long Term Growth Profile
• Combined, 777 and Constancia will increase Silver Wheaton's average annual silver equivalent production by approximately 4.9 million ounces¹;
• Silver Wheaton's total forecast 2016 silver equivalent production increases from 43 million ounces to approximately 48 million ounces (including 100,000 ounces of gold²), an increase of 90% from 2011.
  
  
• Further diversifies Silver Wheaton's portfolio of low-cost and long-life mines with exciting exploration upside
  
  
• Staged upfront payments relating to the construction of Constancia aligns Silver Wheaton with Hudbay's capital spending schedule
• Initial payment of US$500 million to come from Silver Wheaton's existing cash balance of US$997 million at the end of the first quarter of 2012.

"We are extremely pleased to add two new precious metals streams, on high-quality base metal mines, to our diversified portfolio which now includes 17 operating mines and four development stage assets," said Randy Smallwood, Silver Wheaton's President and Chief Executive Officer. "This transaction provides immediate cash flow, is accretive on all short- and long-term metrics, and maintains our policy of investing in low-cost, high quality assets. It also solidifies one of the strongest growth profiles in the precious metals industry. Hudbay has a history of mining success spanning decades, and as flagships in their asset portfolio, we are confident that 777 and Constancia will deliver significant long-term value to both groups of shareholders."

"We have reviewed numerous streaming opportunities since our last transaction, and have been steady in our focus on quality. First and foremost, the mines underlying our precious metals streams must be lower-cost operations, ensuring they continue to produce through all phases of the commodity price cycle. Secondly, they must possess exciting exploration upside potential, with the possibility of delivering organic reserve growth and, as a result, long mine lives. With the 777 and Constancia streams, we continue to adhere to these principals, while at the same time executing the type of high-quality and accretive acquisition on which we've built our reputation."

"Silver Wheaton's balance sheet remains very strong. After the initial upfront payment of US$500 million, we still have over US$500 million in cash on hand, a fully undrawn US$400 million revolving credit facility and strong forecast operating cash flows, including immediate cash flows from 777. As a result, we remain exceptionally well-positioned to continue our growth via new precious metal streams, and are pursuing numerous additional growth opportunities."

TRANSACTION TERMS

Silver Wheaton has agreed to acquire 100% of the life of mine silver and gold production from Hudbay's 777 mine, as well as 100% of the silver production from its Constancia Project. Silver Wheaton's share of gold production at 777 will remain at 100% until the later of the end of 2016 or the satisfaction of a completion test relating to the Constancia Project, after which it will be reduced to 50% for the remainder of the mine life. Silver Wheaton will pay Hudbay total cash consideration of US$750 million, of which US$500 million is payable upon closing, with a further payment of US$125 million to be made once US$500 million in capital expenditures has been incurred at Constancia, and a final payment of US$125 million to be made once US$1 billion in capital expenditures has been incurred. In addition, Silver Wheaton will make ongoing payments of the lesser of US$5.90 per ounce of silver and US$400 per ounce of gold (both subject to an inflationary adjustment of 1% beginning in the fourth year) or the prevailing market price per ounce of silver and gold delivered. Silver Wheaton will not share in any ongoing capital or exploration expenditures at the mines.

The Constancia Project completion test requires Hudbay to complete the Constancia processing plant to at least 90% of expected throughput and recovery by December 31, 2020. If Hudbay fails to satisfy the requirements of the completion test, Silver Wheaton would be entitled to a proportionate return of the upfront cash consideration relating to Constancia.

Hudbay has granted Silver Wheaton a right of first refusal on any future streaming agreement, royalty agreement, or similar transaction related to the production of silver or gold from Constancia or 777.

Silver Wheaton's financial advisor is Minvisory Corp. and its legal counsel is Cassels Brock & Blackwell LLP.

FINANCING THE ACQUISITION

To pay the initial upfront cash payment of US$500 million, Silver Wheaton intends to use cash on hand, which was approximately US$997 million at the end of the first quarter of 2012. Remaining upfront cash payments totaling US$250 million are also expected to be financed with remaining cash on hand, supplemented by continued strong operating cash flows.

ABOUT 777 MINE

Hudbay's flagship 777 mine is located in the prolific Flin Flon Greenstone Belt, Manitoba, Canada, where Hudbay has been mining for nearly 85 years. A low-cost producer of zinc, copper, gold and silver, 777 is an underground mining operation, with an ore concentrator and zinc production facility located immediately adjacent to the mine. 777 commenced commercial production in 2004 and has a reserve mine life until 2020. The mine has very good exploration upside with drilling in recent years shifting from reserve definition to exploration. Over 21,000 metres of exploration drilling in 2011 will be followed up with a similar sized program in 2012, with a focus on targeting additional resources. In addition, completion of the 777 North expansion, which is well underway, will provide access to mineral resources in the north and east zones, and will also provide an underground exploration platform to enable the evaluation of additional exploration opportunities near the 777 mine.

ABOUT CONSTANCIA PROJECT

Constancia is located in an established mining district in the province of Chumbivilcas in southern Peru. It is forecast to be a large, lower-cost and long-life open pit mine, producing copper, molybdenum, silver and gold. With key environmental permits in place, strong community support, and engineering and design work essentially complete, first production is anticipated in 2014 with full production in 2015. Capital expenditures are estimated at US$1.5 billion and the mine plan currently contemplates an annual production rate of 90,000 tonnes of contained copper in concentrate with molybdenum, silver and gold by-products. Constancia has more than a 16 year mine life and will become Hudbay's largest mine, once in production. Considerable exploration potential exists, as was evidenced by an initial resource at the higher-grade Pampacancha satellite deposit, which was announced by Hudbay in April of 2012. Significant exploration drilling at Constancia is ongoing, and Hudbay believes that there is the potential to yield additional higher grade mineralization in satellite deposits.

UPDATED PRODUCTION GUIDANCE

With the addition of two new precious metal streams, Silver Wheaton is revising its one and five year production guidance. In 2012, attributable silver equivalent production is forecast to increase from 27 million silver equivalent ounces to 28 million silver equivalent ounces, including 42,000 ounces of gold³. In 2016, annual attributable production is anticipated to increase 90% compared to 2011 levels, growing to approximately 48 million silver equivalent ounces, including 100,000 ounces of gold¹.

As per Goldcorp Inc.'s ("Goldcorp") July 10, 2012 disclosure, second quarter mill throughput at its Peñasquito mine was impacted by lower than anticipated water supplies, due to prolonged drought conditions in the region. This resulted in a reduction of 2012 forecast silver production attributable to Silver Wheaton. However, this reduction is expected to be more than offset by attributable silver and gold production from the 777 mine, resulting in a net increase in Silver Wheaton's 2012 production forecast.

CONFERENCE CALL

A conference call, along with an interactive presentation, will be held on Wednesday August 8, 2012, starting at 3:00pm (Eastern Time) to discuss this transaction. To participate in the live call please use one of the following methods:

Participants should dial in five to ten minutes before the call.

A copy of the presentation can be found on Silver Wheaton's homepage at www.silverwheaton.com or accessed via the live webcast.

The conference call will be recorded and you can listen to an archive of the call by one of the following methods:

ABOUT SILVER WHEATON

Silver Wheaton is the largest silver streaming company in the world. Based upon its current agreements, forecast 2012 attributable production is approximately 28 million silver equivalent ounces, including 42,000 thousand ounces of gold⁴. By 2016, annual attributable production is anticipated to increase significantly to approximately 48 million silver equivalent ounces, including 100,000 thousand ounces of gold¹. This growth is driven by the Company's portfolio of low-cost and long-life assets, including silver and precious metal streams on Barrick's Pascua-Lama project and Hudbay's flagship 777 mine and Constancia project. 

¹ Silver equivalent production forecast assumes a gold/silver ratio of 50:1

Silver Wheaton's updated silver reserves and resources are as follows:

ATTRIBUTABLE PROVEN AND PROBABLE RESERVES ^{(1,2,3,8,16,17)}
AS OF DECEMBER 31, 2011 UNLESS OTHERWISE NOTED ⁽⁶⁾

ATTRIBUTABLE MEASURED & INDICATED RESOURCES ^{(1,2,3,4,5,9,16,17)}
AS OF DECEMBER 31, 2011 UNLESS OTHERWISE NOTED ⁽⁶⁾

ATTRIBUTABLE INFERRED RESOURCES ^{(1,2,3,4,5,9,16,17)}
AS OF DECEMBER 31, 2011 UNLESS OTHERWISE NOTED ⁽⁶⁾

In reliance upon Section 9.2 of National Instrument 43-101, all scientific and technical information in this document regarding 777 was sourced by the Company from the Annual Information Form of Hudbay Minerals Inc. filed by Hudbay Minerals on March 13, 2012 on SEDAR at www.sedar.com. Mr. Neil Burns, Vice President of Technical Services, is a "qualified person" as such term is defined under National Instrument 43-101, and has reviewed and approved the information on mineral reserves and mineral resources disclosed in this news release.

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 future price of silver and gold, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, reserve determination, reserve conversion rates and statements as to any future dividends. 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", "intends", "anticipates" or "does not anticipate", or "believes", 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 achieved". 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 Silver Wheaton to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: fluctuations in the price of silver and gold; the absence of control over mining operations from which Silver Wheaton purchases silver or gold and risks related to these 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, 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; and differences in the interpretation or application of tax laws and regulations; as well as those factors discussed in the section entitled "Description of the Business - Risk Factors" in Silver Wheaton's Annual Information Form available on SEDAR at www.sedar.com and in Silver Wheaton's Form 40-F on file with the U.S. Securities and Exchange Commission in Washington, D.C. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the mining operations from which Silver Wheaton purchases silver or gold, no material adverse change in the market price of commodities, that the mining operations will operate and the mining projects will be completed in accordance with their public statements and achieve their stated production outcomes, and such other assumptions and factors as set out herein. Although Silver Wheaton has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Silver Wheaton does not undertake to update any forward-looking statements that are included or incorporated by reference herein, except in accordance with applicable securities laws.

CAUTIONARY LANGUAGE REGARDING RESERVES AND RESOURCES

For further information on Mineral Reserves and Mineral Resources and on Silver Wheaton more generally, readers should refer to Silver Wheaton's Annual Information Form for the year ended December 31, 2011, and other continuous disclosure documents filed by Silver Wheaton since January 1, 2012, available on SEDAR at www.sedar.com. Silver Wheaton's Mineral Reserves and Mineral Resources are subject to the qualifications and notes set forth therein. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Mineral Resources: The information contained herein uses the terms "Measured", "Indicated" and "Inferred" Mineral Resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them and expressly prohibits U.S. registered companies from including such terms in their filings with the SEC. "Inferred Mineral Resources" have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves or that any exploration potential will ever be converted to any category of Mineral Reserves or Mineral Resources. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.  United States investors are urged to consider closely the disclosure in Silver Wheaton's Form 40-F, a copy of which may be obtained from Silver Wheaton or from http://www.sec.gov/edgar.shtml.

SOURCE Silver Wheaton Corp.