TORONTO, Oct. 7, 2015 /PRNewswire/ - Franco-Nevada
Corporation (TSX: FNV; NYSE: FNV) has agreed to acquire a silver
stream on production from the Antamina mine ("Antamina") in
Peru from Teck Resources Limited
("Teck"). Teck owns a 22.50% interest in Compania Miñera Antamina
S.A. ("CMA"), the Antamina joint venture company, along with
partners BHP Billiton Plc (33.75%), Glencore Plc (33.75%) and
Mitsubishi Corporation (10.00%).
"Franco-Nevada is pleased to
partner with Teck on the Antamina mine to create our first pure
silver stream," said David Harquail,
President and CEO of Franco-Nevada. "This further strengthens and
diversifies our portfolio with a proven, long-life, high-margin
asset that will be immediately accretive. This investment
provides our shareholders with metal price optionality over
multiple cycles and potential further exploration and expansion
upside."
Transaction Highlights
- A cornerstone investment : Antamina is an
established mine that commenced operations in 2001. The mine is
owned and operated by some of the largest and best regarded mining
companies in the industry. The partners at Antamina have invested
over US$6.5 billion to date in
constructing and expanding the mine and its infrastructure.
- A low-cost operation : Antamina is the 8th largest
copper mine in the world and is one of the lowest cost copper
operations globally. The low-costs are facilitated by the high
grade reserves and resources as well as the wholly owned mining
infrastructure including a concentrate pipeline and port
facilities.
- First silver delivery expected in fourth quarter :
The effective date for the transaction is July 1, 2015 and Franco-Nevada is expected to
receive 900,000 – 1,100,000 ounces of silver (12,300 – 15,000 GEOs
[1]) in the fourth quarter 2015. Annual silver stream
contributions are expected to average 2.8 - 3.2 million ounces
going forward (38,200 – 43,600 GEOs [1]), with 2016 and
2017 silver deliveries expected to be above average. Based on
current expectations, and assuming spot commodity prices, Antamina
would increase Franco-Nevada's GEOs and operating cash flow by
approximately 13% and 18% respectively.
- Antamina mine plan : The mine contains total Measured
and Indicated resources ("M&I resources") of 1.1 billion tonnes
of ore and Inferred resources of 1.3 billion tonnes of ore
[2]. Within the resource envelope, total reserves are
647 million tonnes of ore [2], which are currently
constrained by tailings disposal capacity. CMA is currently
considering options for storing additional tailings and alternative
mine plans that could result in significant mine life
extensions. Current M&I resources are sufficient to
support over 20 years of open pit mining. Historically, a high
level of Inferred resources have converted to M&I resources and
ultimately to reserves. With continued conversion and upgrading of
resources, the project could support mining for 30 – 40 years.
- Exploration and expansion potential : Beyond the
alternative mine plans currently being studied, there is resource
expansion potential at depth which may be amenable to bulk
underground mining. Additionally, Franco-Nevada remains exposed to
any future throughput expansions as well as regional exploration
potential (on existing CMA concessions) without further capital or
funding commitments.
- Deal structured in Canada
: All the parties to the agreement will be residents of
Canada.
Terms of the Agreement
- Franco-Nevada will make a
one-time US$610 million advance
payment to Teck upon closing of the transaction. Funding is
expected to occur in early-October with first silver delivery to
Franco-Nevada in fourth quarter 2015.
- The stream will be based on all recovered silver from Teck's
attributable 22.50% interest in the Antamina mine, subject to a
fixed silver payability of 90%.
- Silver deliveries are scheduled for the 45th day
after each calendar quarter end based on the previous quarter's
concentrate shipments.
- Franco-Nevada will pay 5% of
the spot silver price for each ounce of silver delivered under the
stream.
- The stream will reduce by one-third after 86 million ounces
have been delivered under the stream agreement, estimated at
current throughput to be approximately 30 years.
- The stream will be funded by a wholly-owned, Canadian
subsidiary of Franco-Nevada.
- The obligation to deliver silver will be a joint and several
obligation between Teck as well as a single-purpose, debt-free
entity holding Teck's direct interest in CMA.
- Silver deliveries under the stream will be an absolute
obligation of the joint sellers and are not contingent on the
availability of cash flow from the project.
Antamina
Antamina is a well-established producing copper mine that has
been in production since 2001 and is one of the lowest cost copper
mines in the world. The deposit is a polymetallic skarn with
associated regional porphyry mineralization. The mine has reserves
of 647 million tonnes grading 0.94% copper, 0.98% zinc and 10.7 g/t
silver and M&I resources (inclusive of reserves) of 1,136
million tonnes grading 0.89% copper, 0.82% zinc and 10.6 g/t
silver. Inferred resources at the project are 1,280 million tonnes
grading 0.84% copper, 0.66% zinc and 11.4 g/t
silver.[2]
Beyond the known reserves and resources, Antamina hosts
additional potential open-pit and bulk/selective underground
targets. There is also regional exploration potential over a large,
prospective land package of greater than 700km2.
The mine is an open pit operation processing approximately
150,000 tonnes per day using conventional flotation, located in the
Peruvian Andes 270 km north-east of Lima, at an elevation of approximately 4,000
meters. It employs over 3,000 people and is owned and operated by
CMA. In 2014, Antamina produced approximately 345,000 tonnes
of copper, 211,000 tonnes of zinc, 3.1 million pounds of molybdenum
and 12.0 million ounces of silver (with associated bismuth and
lead).
Concentrates are pumped via a 302 km pipeline to the Huarmey
Port on the Pacific Coastline (300 km north of Lima) for shipping through port facilities
which are wholly owned and operated by CMA. Antamina produces
separate copper, zinc, molybdenum and lead/bismuth concentrates,
with silver predominantly contained within the copper concentrates,
with additional silver contained with the lead-bismuth
concentrate.
Cobre Panama Commitment and Available Capital
Franco-Nevada has finalized the
terms of a replacement precious metals stream agreement for First
Quantum's Cobre Panama project. Under the terms of the revised
agreement, Franco-Nevada's subsidiary, Franco-Nevada (Barbados) Corporation will provide a
US$1 billion deposit against future
deliveries of the gold and silver from Cobre Panama. This deposit
will be funded on a pro-rata basis of 1:3 with First Quantum's 80%
share of the capital costs in excess of US$1
billion. Execution of the revised documentation is expected
shortly and initial funding is expected to be completed during
October. Based on this timing, initial funding by Franco-Nevada
(Barbados) is expected to be
US$330 million to US$340 million. The
changes from the original agreement have largely addressed
standardizing reporting arrangements and providing a mechanism for
First Quantum to utilize Cobre Panama as collateral while still
maintaining the Franco-Nevada (Barbados) security.
As of June 30, 2015, Franco-Nevada
held over US$760 million of working
capital and marketable securities including over US$610 million in cash and short-term investments
and US$80 million of
available-for-sale investments. Franco-Nevada plans to fund the transactions using a
combination of cash on hand and partially drawing upon its
US$750 million credit facility.
Franco-Nevada does intend to
exercise the US$250 million accordion
available with its credit facility increasing it to US$1 billion. Following the funding of the
Antamina transaction and the initial funding of the revised Cobre
Panama transaction, Franco-Nevada will have liquidity of
approximately US$800 million between
remaining cash on hand and its expanded credit facility.
Conference Call Information
Management will host a conference call this morning,
October 7, 2015 at 8:00 a.m. Eastern Time to discuss the
transaction.
Interested investors are invited to participate as follows:
- Via Conference Call: Toll-Free: (888) 231-8191;
International: (647) 427-7450
- Conference Call Replay: A recording will be available until
October 14, 2015 at the following
numbers: Toll-Free (855) 859-2056; International (416) 849-0833;
Pass code 54886947.
- Webcast: A live audio webcast will be accessible at
www.franco-nevada.com.
Corporate Summary
Franco-Nevada Corporation is the leading gold-focused royalty
and stream company with the largest and most diversified portfolio
of cash-flow producing assets. Its business model provides
investors with gold price and exploration optionality while
limiting exposure to many of the risks of operating companies.
Franco-Nevada uses its free cash
flow to expand its portfolio and pay dividends. It trades under the
symbol FNV on both the Toronto and
New York stock exchanges.
Franco-Nevada is the gold investment that works.
[1] – Gold Equivalent Ounces
(GEOs) : GEOs include our gold, platinum, palladium,
silver and other mineral assets. GEOs are estimated on a gross
basis for NSR royalties and, in the case of stream ounces, before
the payment of the per ounce contractual price paid by
Franco-Nevada. For net profit interest ("NPI") royalties, GEOs are
calculated taking into account the NPI economics. Platinum,
palladium, silver and other minerals were converted to GEOs by
dividing the associated revenue, which includes settlement
adjustments, by the average gold price for the period. For the
remainder of 2015, platinum, palladium and silver metals have been
converted to GEOs using commodity prices of US$1,100/oz Au, US$1,000/oz Pt, US$600/oz Pd and US$15.00/oz Ag.
[2] - Antamina Mineral Reserves
and Resources
Mineral Reserves as at December 31,
2014 (100% basis)
Classification
|
Ore,
Mtonnes
|
Cu%
|
Zn%
|
Ag
(g/t)
|
Contained
Cu, '000t
|
Contained
Zn, '000t
|
Contained
Ag, Moz
|
Proven Sulphide
Copper Ores
|
145
|
1.00
|
0.15
|
8.6
|
1,450
|
218
|
40.1
|
Proven Sulphide
Copper Zinc Ores
|
65
|
1.07
|
2.24
|
17.1
|
696
|
1,456
|
35.7
|
Probable Sulphide
Copper Ores
|
231
|
0.97
|
0.18
|
8.0
|
2,241
|
416
|
59.4
|
Probable Sulphide
Copper Zinc Ores
|
206
|
0.83
|
2.06
|
13.1
|
1,710
|
4,244
|
86.8
|
Total Proven &
Probable Sulphide Reserves
|
647
|
0.94
|
0.98
|
10.7
|
6,082
|
6,341
|
222.6
|
Mineral Resources (Inclusive of Mineral Reserves) as at
December 31, 2014 (100% basis)
Classification
|
Ore,
Mtonnes
|
Cu%
|
Zn%
|
Ag
(g/t)
|
Contained
Cu, '000t
|
Contained
Zn, '000t
|
Contained
Ag, Moz
|
Measured Sulphide
Copper Ores
|
188
|
0.88
|
0.14
|
7.9
|
1,654
|
263
|
47.8
|
Measured Sulphide
Copper Zinc Ores
|
86
|
0.95
|
1.95
|
16.0
|
817
|
1,677
|
44.2
|
Indicated Sulphide
Copper Ores
|
514
|
0.89
|
0.16
|
8.3
|
4,575
|
822
|
137.2
|
Indicated Sulphide
Copper Zinc Ores
|
348
|
0.87
|
1.89
|
14.3
|
3,028
|
6,577
|
160.0
|
Total Meas. &
Indicated Sulphide Resources
|
1,136
|
0.89
|
0.82
|
10.6
|
10,110
|
9,315
|
387.2
|
Inferred Sulphide
Copper Ores
|
770
|
0.80
|
0.10
|
9.0
|
6,160
|
770
|
222.8
|
Inferred Sulphide
Copper Zinc Ores
|
510
|
0.90
|
1.50
|
15.0
|
4,590
|
7,650
|
246.0
|
Total Inferred
Sulphide Resources
|
1,280
|
0.84
|
0.66
|
11.4
|
10,752
|
8,448
|
469.2
|
Notes:
|
|
(1)
|
Source: Glencore
Statement of Resources & Reserves as at December 31,
2014. Mineral Resources and Reserves are estimated in
accordance with the JORC Code.
|
(2)
|
Contained metals were
calculated by Phil Wilson, CEng, Vice President, Technical of
Franco-Nevada and a qualified person under National Instrument NI
43-101.
|
(3)
|
Columns and rows may
not add up due to rounding.
|
(4)
|
Mineral Resources
that are not Mineral Reserves do not have demonstrated economic
viability.
|
(5)
|
Zinc is not recovered
from Copper Ores and molybdenum is not usually recovered from
Copper-Zinc Ores or from Copper Ores with high bismuth.
|
(6)
|
Mineral Reserve
cut-off grades are based on the following metal price assumptions
(as disclosed in Teck's Annual Information Form dated March 2,
2015):
|
Metal
|
Price
Assumption
|
Copper
(US$/lb)
|
2.77
|
Zinc
(US$/lb)
|
0.88
|
Molybdenum
(US$/lb)
|
11.81
|
Silver
(US$/oz)
|
22.59
|
Phil Wilson, CEng, Vice
President, Technical of Franco-Nevada and a qualified person under
National Instrument NI 43-101 has approved the written disclosure
in this press release on behalf of Franco-Nevada.
Forward Looking Statements
This press release contains "forward looking information" and
"forward looking statements" within the meaning of applicable
Canadian securities laws and the U.S. Private Securities Litigation
Reform Act of 1995, respectively, which may include, but are not
limited to, statements with respect to future events or future
performance, management's expectations regarding Franco-Nevada's
growth, results of operations, estimated future revenues,
requirements for additional capital, mineral reserve and mineral
resource estimates, production estimates, production costs and
revenue, future demand for and prices of commodities, expected
mining sequences, business prospects and opportunities and the
Antamina silver stream and its expected benefits. In addition,
statements (including data in tables) relating to reserves and
resources and gold equivalent ounces are forward looking
statements, as they involve implied assessment, based on certain
estimates and assumptions, and no assurance can be given that the
estimates will be realized. Such forward looking statements reflect
management's current beliefs and are based on information currently
available to management. Often, but not always, forward looking
statements can be identified by the use of words such as "plans",
"expects", "is expected", "budgets", "scheduled", "estimates",
"forecasts", "predicts", "projects", "intends", "targets", "aims",
"anticipates" or "believes" or variations (including negative
variations) of such words and phrases or may be identified by
statements to the effect that certain actions "may", "could",
"should", "would", "might" or "will" be taken, occur or be
achieved. Forward looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual
results, performance or achievements of Franco-Nevada to be
materially different from any future results, performance or
achievements expressed or implied by the forward looking
statements. A number of factors could cause actual events or
results to differ materially from any forward looking statement,
including, without limitation: fluctuations in the prices of the
primary commodities that drive royalty and stream revenue (gold,
platinum group metals, copper, nickel, uranium, silver, iron-ore
and oil and gas); fluctuations in the value of the Canadian and
Australian dollar, Mexican peso and any other currency in which
revenue is generated, relative to the U.S. dollar; changes in
national and local government legislation, including permitting and
licensing regimes and taxation policies; regulations and political
or economic developments in any of the countries where properties
in which Franco-Nevada holds a royalty, stream or other interest
are located or through which they are held; risks related to the
operators of the properties in which Franco-Nevada holds a royalty,
stream or other interest, including changes in the ownership and
control of such operators; influence of macroeconomic developments;
business opportunities that become available to, or are pursued by
Franco-Nevada; reduced access to debt and equity capital;
litigation; title, permit or license disputes related to interests
on any of the properties in which Franco-Nevada holds a royalty,
stream or other interest; whether or not Franco-Nevada is
determined to have PFIC status; potential changes in Canadian tax
treatment of offshore streams; excessive cost escalation as well as
development, permitting, infrastructure, operating or technical
difficulties on any of the properties in which Franco-Nevada holds
a royalty, stream or other interest; actual mineral content may
differ from the reserves and resources contained in technical
reports; rate and timing of production differences from resource
estimates, other technical reports and mine plans; risks and
hazards associated with the business of development and mining on
any of the properties in which Franco-Nevada holds a royalty,
stream or other interest, including, but not limited to unusual or
unexpected geological and metallurgical conditions, slope failures
or cave-ins, flooding and other natural disasters, terrorism, civil
unrest or an outbreak of contagious disease; and the integration of
acquired assets and risks relating to the Antamina silver stream
acquisition and its completion. The forward looking
statements contained in this press release are based upon
assumptions management believes to be reasonable, including,
without limitation: the ongoing operation of the properties in
which Franco-Nevada holds a royalty, stream or other interest by
the owners or operators of such properties in a manner consistent
with past practice; the accuracy of public statements and
disclosures made by the owners or operators of such underlying
properties; no material adverse change in the market price of the
commodities that underlie the asset portfolio; Franco-Nevada's
ongoing income and assets relating to determination of its PFIC
status; no material change to existing tax treatment; no adverse
development in respect of any significant property in which
Franco-Nevada holds a royalty, stream or other interest; the
accuracy of publicly disclosed expectations for the development of
underlying properties that are not yet in production; integration
of acquired assets; and the absence of any other factors that could
cause actions, events or results to differ from those anticipated,
estimated or intended. However, there can be no assurance that
forward looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements and investors are cautioned that
forward looking statements are not guarantees of future
performance. Franco-Nevada cannot
assure investors that actual results will be consistent with these
forward looking statements. Accordingly, investors should not place
undue reliance on forward looking statements due to the inherent
uncertainty therein. For additional information with respect
to risks, uncertainties and assumptions, please refer to the "Risk
Factors" section of Franco-Nevada's most recent Annual Information
Form as well as Franco-Nevada's most recent annual Management's
Discussion and Analysis filed with the Canadian securities
regulatory authorities on www.sedar.com and Franco-Nevada's most
recent Annual Report filed on Form 40-F filed with the SEC on
www.sec.gov. The forward looking statements herein are made
as of the date of this press release only and Franco-Nevada does
not assume any obligation to update or revise them to reflect new
information, estimates or opinions, future events or results or
otherwise, except as required by applicable law.
CAUTIONARY NOTE TO US INVESTORS REGARDING RESERVE AND RESOURCE
REPORTING STANDARDS
The disclosure in this press release has been prepared in
accordance with the requirements of Canadian securities laws, which
differ from the requirements of United
States securities laws. Disclosure, including
scientific or technical information, has been made in accordance
with Canadian National Instrument 43-101 - Standards of Disclosure
for Mineral Projects ("NI 43-101"). For example, the terms
"resources," "measured resources", "indicated resources" and
"inferred resources" are used in this press release to comply with
the reporting standards in Canada.
While those terms are recognized and required by Canadian
regulations, the United States Securities and Exchange Commission
(the "SEC") does not recognize them. In addition, the definitions
of proven and probable mineral reserves used in NI 43-101 differ
from the definitions in the SEC Industry Guide 7. Under
United States standards,
mineralization may not be classified as a "reserve" unless the
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve determination is made. In accordance with Canadian rules,
estimates of inferred mineral resources cannot form the basis of
feasibility or other economic studies. Investors are cautioned not
to assume that any part of the reported measured resources,
indicated resources or inferred resources in this press release is
economically or legally mineable and will ever be classified as a
reserve. Accordingly, information contained in this press release
containing descriptions of the Antamina project may not be
comparable to similar information made public by U.S. companies
subject to the reporting and disclosure requirements under
the United States federal
securities laws and the rules and regulations thereunder.
SOURCE Franco-Nevada Corporation