Lumina Gold’s $300 Million Metals Streaming Agreement with Wheaton Precious Metals

Tobar ZVS advised Lumina Gold.

Headquartered in Vancouver, Lumina Gold is a precious and base metals exploration and development company primarily concerned with southwest Ecuador’s Cangrejos gold-copper project. The Gold Stream initially represents 6.6% of the payable gold produced from the project in exchange for $48 million of pre-construction funding and $252 million of construction funding.

Wheaton Precious Metals International Ltd is a wholly-owned subsidiary of Wheaton Precious Metals Corp, and is one of the largest precious metals streaming companies in the world. The company’s offering to investors encompasses cost predictability, a high-quality asset base and direct leverage to increasing precious metals prices.

FBPH advised Wheaton Precious Metals with a team including partner Roque Bustamante and associate Claudia Bustamante.

Roque Bustamante, Flor Bustamante Pizarro & Hurtado:

Please give us some background into this project and its significance for the precious metals industry.

During the past few years, mining activities have been impacted by positive results in Ecuador and also by important opposition to the activity by extreme environmentalists and politicians. There are currently only two large-scale mines in production in Ecuador, Mirador and Fruta del Norte. These mines only started production in 2021 and there is not prior record of large-scale production in Ecuador. Both projects have demonstrated a success for the government, the investors and local people, especially for the job generation factor and the taxes being paid.

Ecuador has an enormous mining potential, including projects like Cangrejos that could be developed into a producing mine. Cangejos has an important discovery and hopefully it will become, in the next few years, a producing mine. Wheaton’s participation opens a door for Cangrejos and other mining projects to move forward in order to increase mining production in Ecuador.

What were the key considerations when it came to advising on the agreement? Did you have to overcome any significant challenges during the process?

Advising on mining transactions in Ecuador have two critical components:

1. a) Due diligence in verifying all the legal aspects of the project, validity of the mining rights, date of expiration of said rights, third party rights, environmental licenses and social licenses, among others. The only way of conducting these searches in a short period of time is by being fully involved in the industry. Substantial information is obtained by years of experience and practice in the area. There are always some grey areas due to political aspects involved in mining activities and only prior experience can help advise clients to continue with the transactions in a safe way.
2. b) Structuring the project in accordance with the client’s needs. Leading lawyers, usually Canadian and in this case McCarthy Tetrault, play a substantial role in the transaction and it is the role of the local firms to find a way to structure the transaction on its local aspects in such a way that it suits the client’s needs, understanding the other parties’ concerns. Local security documents are key on any transaction.

How did your team apply their skills to ensure that the agreement proceeded to the satisfaction of all involved?

The basic factor is understanding your client and understanding the other parties’ needs. In our opinion, the starting point is informing the client about potential risks and opportunities in the transaction, including the risks that the industry in general faces in Ecuador and in the specific region of the project.

The other key factor is experience in what has happened in prior cases. We have been involved on many equivalent transactions in the natural resources sector, not only in mining, but also in oil exploration and production and electricity, including renewables. It is important to share the experiences with the different partners of the firm. In our case, there is usually someone that has already faced a similar situation and we believe the strength of the firm relies on sharing related experiences.