Wheaton RevisitedShown below are the first two paragraphs of the News Release from June 12 where ML announced the
sale of its silver for US$ 42 million, stating that it represented less then 2% of its payable revenue at
Mineral Park. (or, approximately 1/50 of total payable revenues).
If 1/50 of payable revenues is equal to $42 million in monetized value, then a simple mathematical
extrapolation implies that the remaining 49/50 of payable revenues has a value of $42 million X 49,
or $2,058,000,000.00, or $25.75 per ML share. (Interestingly, this number is nearly exactly the same
number that the company’s Management had mentioned that they would have to consider if they were
approached on a takeover.
Granted, ML made this deal with Wheaton at the recent peak of market values for silver, and if ML
were cutting that deal today, it would probably see their upfront payment shrink something on the order
of 20%, or 34 million, instead of 43 million. Being fair minded about the corresponding adjustments
that might take place at that time, a fair market offer for the whole of Mercator Minerals at this time
might also be adjusted down by a similar percentage, which would be equal $20.60 per share.
These numbers, obviously, underscore the sheer madness that is currently taking place in the equity
markets. Ironically, when Wheaton procured their end of the deal, they were undoubtedly confident
that the price of silver would hold steady, or appreciate. But, it has been MOLYBDENUM, and not
silver, that has been the Rock of Gibraltar.
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VANCOUVER, June 12 /PRNewswire-FirstCall/ - Mercator Minerals Ltd.
("Mercator") is pleased to announce today that its wholly-owned affiliate hasclosed the previously announced agreement with an affiliate ("Silver Wheaton")of Silver Wheaton Corp. for the sale of the life-of-mine silver production
from Mercator's Mineral Park copper/molybdenum mine in Arizona. Under the
agreement, Silver Wheaton's affiliate has made an up-front payment of US$42
million in cash to Mercator's affiliate. Upon delivery of the silver, Silver
Wheaton's affiliate will then also pay Mercator's affiliate in cash the lesser
of the silver spot price or US$3.90 per ounce of silver (escalated by 1% per
annum starting in the fourth year of silver production).
Commenting on the closing, Michael L. Surratt, President and Chief
Executive Officer of Mercator, said: "We are delighted to have completed this
important transaction with Silver Wheaton. Silver at Mineral Park is a
by-product of the copper and molybdenum operation, and represents less than 2%
of our payable revenue at Mineral Park. By monetizing most of our silver
revenue now, we will obtain funds that can be used to pay for the second stage
of the construction of the Mineral Park milling facilities, expected to
increase the operation to 50,000 tons per day. By having the funds now rather
than waiting on phase one cash flow, we can save money completing many
construction activities now while we have construction workers on site, rather
than needing to remobilize after phase one. In addition, we will have the
opportunity to accelerate phase two equipment deliveries. Every day we can
speed up Phase Two is very important to our bottom line."