| TORONTO, March 6
TORONTO, March 6 Silver Wheaton would
consider changing its financing deal with Primero Mining
on the troubled San Dimas mine in Mexico if that would improve
the "health of the asset," the mining financier's chief
executive said on Monday.
Silver Wheaton, a Vancouver-based company that provides
miners with upfront payments, or "streams," in exchange for
future production at a discounted, fixed price, counts San Dimas
as a key asset.
Operations at the mine were suspended in mid-February after
workers went on strike over contract changes proposed by the
company to return it to profitability.
"If there's a way that we can change the agreement to
improve the health of the asset, and we get compensated for fair
value, then we'll explore that," Silver Wheaton CEO Randy
Smallwood said in an interview at the Prospectors and Developers
Association of Canada conference.
He declined to say specifically how the agreement could be
Toronto-based Primero has an agreement to sell Silver
Wheaton the first 6 million ounces of silver produced from San
Dimas each year, plus half of any excess, at $4.20 per ounce,
and an additional 1 percent for inflation. The deal continues to
the end of the mine's life.
Bank of Montreal analyst Andrew Kaip said in a recent note
that the San Dimas represented some 15 percent of his 2017
revenue forecast for Silver Wheaton.
Primero announced a cost-cutting program and strategic
review to consider options such as asset sales after it said on
Feb. 23 that its chief executive was stepping down.
"There's no doubt that they've got some challenges in front
of them, but we're confident that if they sharpen their pencils,
they can return to profitability," Smallwood said.
"This is an asset that's profitable, it's just had some
burdens put onto it - some poorly timed investment decisions by
Primero and a pretty heavy head office expense."
Primero is also engaged in a tax dispute with the Mexican
government, arguing that the country's tax authority is trying
to retroactively change an agreement that the company had.
Silver Wheaton is also focused on new deals, Smallwood said,
as the mining sector transitions back into a growth phase.
There are streaming transactions worth some $3 billion to $4
billion up for grabs, Smallwood said, but Silver Wheaton will
pursue the more profitable deals worth about $1.5 billion to $2
(Reporting by Susan Taylor; Editing by Paul Simao)