RE: RE: RE: Production GainsJust agreeing with what ZZ said regarding the amount of La Negra's production that is tied to SLW. An interesting question is whether SLW gets 50% of AUN's 80% share of the silver production (as the case was when originally arranged) or whether that gets bumped up due to AUN now owning 92% of the mine? i.e. if silver production this quarter is 1M oz, are sales to SLW 400K oz or 460K oz?
Anyways, for information, this was written by Jay Taylor last year:
Silver Wheaton as Financier
To purchase the Shafter Mine, the company turned to Silver Wheaton, which advanced Aurcana $25
million for the purchase. Silver Wheaton did that on the strength of its confidence in the future of the La
Negra mine. In exchange for the $25 million up front, Aurcana will have to sell 50% of its future silver
production at La Negara to Silver Wheaton for $3.90 per ounce. With silver prices now even at their
depressed level at over $10 that may at first blush appear like too much to pay. But remember, using our
example above, at current metals prices, only 28.73% of the value from La Negra comes from silver. So,
under its agreement with Silver Wheaton, at current metals prices, Aurcana gives up all but $3.90 per
ounce on 50% of the silver production. But with only 28.73% of the value coming from silver, at current
metals prices it gives up what amounts to less than 15% of the value of production at La Negra in
exchange for $25 million up front so the company could buy the Shafter Mine which has significantly
more annual silver production potential than the La Negra has. Keep in mind too that on a present value
basis, “it’s what’s up front that counts” to use an old Lucky Strike ad line.
Cheers,
J$