Teck could raise $1 billion from silver stream sales to Silver Wheaton

Donald Lindsay, president and chief executive officer of Teck Resources Ltd.

Teck Resources Ltd. has stated that it could sell silver streams from the mines to increase liquidity. The company has been looking for copper acquisitions, which means this would be one method to help finance a deal.

TD Securities analyst Greg Barnes estimated that Vancouver-based Teck could raise around $1 billion from streaming sales, if it so desired. He assumed the company would sell about 75 per cent of its payable silver production from the Antamina, Red Dog and Highland Valley mines.

“Selling silver streams to add copper production could make sense and would cut back debt or equity issuance, in our opinion,” Barnes said in a note.

“However, the market for copper assets is highly competitive, and to date, Teck is not able to find value.”

If Teck decides to sell silver streams, the most obvious buyer is Silver Wheaton Corp. TD analyst Daniel Earle said Silver Wheaton could “easily” fund the purchase of the three Teck streams with its existing credit facility, and would not have to issue equity. If Silver Wheaton paid US$792 million (plus an ongoing payment of US$4 for every ounce of silver), he calculated that the deal would be accretive to the company’s income by 20 cents U.S. a share annually.

“Buying would provide immediate growth, adding approximately 6.2 (million ounces) of silver production in year one,” Earle said.