Resource World Magazine

8 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 8 Citigroup Global Markets Inc., a provider of investment banking and financial advi- sory services, and recently said cobalt prices are set to rise by a further 20% over the next two years on the back of a sus- tained deficit market and anticipated stock building on the back of high levels of sup- ply risk. The bullish outlook resulted in a recent agreement with Brazilian mining giant Vale SA [VALE-NYSE] that will see Wheaton receiving a fixed percentage of cobalt production from its Voisey's Bay nickel mine in Labrador in return for an up-front payment of US $390 million as well as ongoing payments of 18% of the Metal Bulletin market price per cobalt pound delivered. As of January 1, 2021, Wheaton will be entitled to receive 42.4% of Voisey's Bay cobalt production until such times as 31 million pounds has been delivered and 21.2% of the cobalt production thereafter during the life of the mine. Smallwood said he only agreed to the deal following an approach by the Brazilian firm. "The Chief Financial Officer of Vale called me and said, 'hey we are thinking about doing a stream on cobalt. Are you interested?' I said I have never looked at cobalt. Can we study it for a bit?" Based on his research, the Wheaton CEO concluded that investors can anticipate a hot market for battery technology and electric vehicle technology. He believes cobalt will benefit due to its role as a sta- bilizing force inside the battery chemistry. "What we are seeing is a phase shift in demand [for cobalt]," said Smallwood, adding that he is "very comfortable" with the price that Wheaton has agreed to pay for Voisey's Bay cobalt. Still, to put this in context, he is quick to point out that if all things remain equal, Voisey's Bay cobalt will only account for about 10% of Wheaton's annual cash flow. "Gold is the dominant metal in our portfolio, accounting for over 50% of total revenue," he said. Smallwood spoke to Resource World on July 16, 2018, just hours after Wheaton announced a deal that will see the com- pany buying a fixed percentage of gold and palladium production from Sibanye- Stillwater's [SBGL-NYSE, SGL-JSE] East Boulder and Stillwater mines in Montana. Wheaton said it will make ongoing pay- ments equal to 18% of the prices of spot gold and palladium until it reaches a US $500 million advanced payment tar- get. After the target has been reached, Wheaton will boost the payment to 22% for the delivery of precious metals. Under the agreement, Wheaton said it will buy all of Stillwater's gold production for the life of the mine and initially receive 4.5% of the total palladium production until 375,000 ounces has been delivered to Wheaton. That amount will decrease to 2.25% until 550,000 ounces has been delivered and then 1% thereafter for the life of the mine. PROFILE

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