Wheaton River flows into the Big League

Vancouver-based Wheaton River Minerals (Amex: WHT) expects its latest acquisitions in Mexico to increase the company's production by 35%, reserves by 50%, earnings by 20% and cashflow by 25%, company CEO Ian Telfer told analysts Thursday. "These accretive acquisitions are very in line with the company's strategy of fast-growth," said Telfer at a conference call to discuss the acquisitions, worth a total US$87mn in cash. The deals struck with Canada's Teck Cominco (TSX: TEKa&b) and Miranda Mining (TSX-V: MRM) essentially give Wheaton River a 100% interest in the advanced Los Filos gold project and a 21.2% stake in the El Limon gold deposit, both in Mexico's Guerrero state. The agreements involve paying US$48.4mn to Teck Cominco for its 70% interest in Mexican company Nuteck, which owns the Los Filos gold deposit, and US$38.6mn to acquire Miranda, which owns the other 30% of Nuteck. The Miranda takeover also gives Wheaton River the 21.2% interest in El Limon, the rest of which is held by Teck Cominco, and the Nukay gold mine, also in Guerrero state. The acquisitions are expected to be finalized within 60 days, Wheaton said. The new Mexican development projects will take Wheaton River's production to 700,000oz/y at cash costs of less than US$140/oz, the company said in a statement. Wheaton currently produces 500,000/oz at US$100/oz gold, net of copper credits. LOS FILOS The increase in production will be driven by rapid development of Los Filos, worth roughly US$60mn of the total US$87mn, said Telfer. Wheaton expects to spend US$80mn on building the open-pit, heap leach operation with start-up seen late-2005 or early-2006, he said. Capex is broken down into US$10mn for a feasibility study, to be completed next year, and US$70mn in construction, expected to kick off in 2005. The mine is forecast to produce 175,000oz/y for 10 years at operating costs of US$155/oz, said Telfer. Teck Cominco has drilled over 400 holes for 90,000m at Los Filos providing an estimated measured and indicated resource of 38.4Mt grading 1.44g/t, to give 1.77Moz contained gold, and an inferred resource of 11.9Mt grading 1.35g/t, using a 0.5g/t cutoff. Column testwork has indicated heap leach recoveries of about 72% and Wheaton River will be investigating the potential benefits of fine-grinding a higher-grade portion of the ore feed, according to Telfer. "We are confident that we can do better than the plus-70% recoveries by drawing on our experience from operating the [now closed] Golden Bear heap leach mine [in Canada]," said Telfer. EL LIMON Wheaton expects the less advanced El Limon deposit, located 15km north of Los Filos, to be larger, Telfer told analysts, indicating the company could be interested in acquiring a 100% interest in the project at some future date. The deposit currently has an inferred resource of 15.9Mt grading 3.35g/t gold, using a cutoff grade of 0.8%, based on 35 reverse circulation and 25 diamond drill holes for about 10,000m. Based on exploration results not included in the resource and knowledge of the "geographical potential" of the region, Wheaton River guesses that exploration will up the current inferred resource of 1.7Moz gold to 4Moz, said Telfer. Drill results since posting the last resource estimate include 23m grading 5.0g/t gold, 52.2m at 7.2g/t and 18.2m grading 10.9g/t gold, according to Wheaton River's statement. Teck Cominco will give an update on exploration at El Limon by year-end, said Telfer. NUKAY GOLD MINE The Nukay gold mine has been in operation for almost 20 years and produced approximately 90,000oz gold over the last five years at an average cash cost of US$164/oz, said Wheaton River. This small group of three mines is currently operating at a rate of about 12,000-20,000oz/y gold and is not significant in terms of Wheaton River's overall annual output, according to Telfer. The low production is offset by an experienced workforce and efficient operation and Wheaton River will weigh up the alternatives for Nukay's future once the acquisition is completed, he said. Nukay has a measured and indicated resource of 1.9Mt grading 5.04g/t gold for 310,000oz contained gold and an inferred resource of 3.2g/t grading 3.37g/t gold. Wheaton River posted a net profit of US$11.1mn in the second quarter of 2003 compared to US$1.8mn in the year-ago period. This year's second-quarter figure was boosted by the acquisition of the Luismin gold mines in Mexico in June last year, and Australia's Peak gold mine and a 25% stake in the Alumbrera gold-copper mine Argentina in March this year, and an additional 12.5% in June. The company's shares closed up 6.96% at Cdn$2.46 on Thursday on the TSX (WRM), on very heavy trading, and 8.43% higher on the Amex at US$1.80.