Hudbay will use the money to help fund construction of its Constancia copper mine in Peru that is expected to cost $1.5 billion.
Under the deal, Silver Wheaton will receive 100 per cent of the silver produced at Hudbay's 777 Mine in Manitoba and 100 per cent of the silver production at Constancia.
In addition, the company will also receive 100 per cent of the gold production at 777 until Constancia satisfies a completion test, or the end of 2016, whichever is later, when Silver Wheaton's share of 777's gold production will be reduced to 50 per cent.
Silver Wheaton will pay the lesser of US$5.90 per ounce of silver and US$400 per ounce of gold or the prevailing market price for the silver and gold delivered.
With the deal, Silver Wheaton raised its 2012 production guidance to 28 million silver equivalent ounces, including 42,000 ounces of gold, up from 27 million silver equivalent ounces.
The increase comes despite lower than expected production at Goldcorp Inc.'s (TSX:G) Penasquito mine, from which Silver Wheaton receives silver.
In 2016, the company expects production to grow to 48 million silver equivalent ounces, including 100,000 ounces of gold.
Shares in Silver Wheaton were up $1.79 or about 6.24 per cent at $30.47 on the Toronto Stock Exchange at midday Wednesday. Hudbay stock was up eight cents at $9.10.
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