Wheaton Precious Metals Acquires Gold Stream From Lumina Gold’s Cangrejos Project in Ecuador for $300M

Wheaton Precious Metals, a Canadian-based multinational precious metals streaming company, announced on May 16 that its wholly-owned subsidiary officially entered an agreement with Lumina Gold to purchase its 100% owned Cangrejos project in Ecuador yielding both gold and copper. Wheaton Precious Metals will pay $300 million for the acquisition, including an upfront payment of $48 million for pre-construction costs. Over the course of broken-up installments, Wheaton Precious Metals will fulfill the remaining $252 million during the construction period.

The company currently produces over 26 million ounces of silver and sells over 29 million from other companies, though this deal should greatly increase production rates. Cangrejos provides an ideal opportunity for Wheaton Precious Metals to expand its gold portfolio.

Through this agreement, Wheaton Precious Metals explained that it will purchase 6.6% of the project’s payable gold until it delivers 700,000 ounces. At that point, the stream will reduce to 4.4% of the payable gold production for the mine’s lifespan.

Cangrejos is Ecuador’s largest gold mining deposit. The company forecasts the project to reach high-margin production rates at the lower half of the cost curve. Wheaton Precious Metals currently predicts a 26-year mine life, offering attributable production of 24,000 ounces of gold per year for the first decade, then 24,500 ounces per year for the remaining 16 years.

“This transaction validates the extensive technical work that the Lumina Group has completed on Cangrejos since 2014,” Ross Beaty, Lumina Gold’s founder and largest shareholder explained.

“It will de-risk the execution of the Cangrejos project and form a significant part of the US$1 billion of required construction capital. Cangrejos will represent one of the largest gold producers in the world once built and Wheaton will benefit from its three decades of mine life,” Beaty concluded.

Along with the upfront payment, Wheaton Precious Metals will also pay the production costs equal to 18% of gold’s spot price for the first 100,000 ounces, then 22% moving forward.

“The Cangrejos Project is an excellent addition to Wheaton’s existing portfolio of high-quality, low-cost assets as it should provide accretive, long-term growth as well as significant exploration potential,” Randy Smallwood, the president and CEO of Wheaton Precious Metals, explained in the release.

The Cangrejos gold-copper project sits just 40 kilometers from the Puerto Bolivar port. Wheaton Precious Metals estimates the mine’s average annual payable production of gold to be 371,000 ounces with the copper by-product production to be 42 million pounds.

A preliminary feasibility study from April 2023 showed 11.6 million ounces of probable gold reserves at the project with an indicated gold mineral resource of 16.8 million ounces.

“We welcome the opportunity to work with the team at Lumina who have done an outstanding job at working to de-risk the project and advancing it towards construction. As with any transaction Wheaton enters into, responsible and sustainable mining practices are paramount, and Wheaton looks forward to supporting Lumina both financially as they construct Cangrejos and with their ongoing comprehensive community engagement efforts,” Smallwood concluded.

With streaming agreements across 21 mines and 13 active developmental projects, Wheaton Precious Metals currently remains one of the most prominent precious metals streaming companies in the world. The Cangrejos project acquisitions will only add to Wheaton’s strength.

Wheaton Precious Metals isn’t the only company focusing on expansion right now, though. Numerous precious metals corporations continue making major moves to hike up production and capitalize on the growing demand rates.

Sandstorm Gold, Equinox Gold, Karora Resources, Newcrest Mining, Lundin Gold, and Victoria Gold all recently released their Q1 2023 output reports with staggering results. Every corporation experienced major revenue and production increases compared to Q1 2022. Many of these companies reported figures showing twice as much gold produced this quarter compared to the same period last year.

At the same time, other major corporations, like Osisko Mining, Hummingbird Resources, and Newmont Corporation have all entered or finalized agreements to join partnerships or acquire competing companies in an effort to expand further. Newmont Corporation has been working through a deal with Newcrest since the beginning of 2023 to acquire its assets and the agreement finally went through, allowing Newmont to definitively become the largest gold producer in the world.

With gold demand skyrocketing at record levels, it only makes sense for precious metal companies to take advantage of rising prices. As we continue to see more signs of a nearing recession and rising gold prices, we can expect to see more news releases like Wheaton’s acquisition of the Cangrejos project.

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