Operator: Lundin Mining Corporation
Stream: Gold and Silver Stream
In November 2014, Franco-Nevada acquired a gold and silver stream on production from the Candelaria operation in Chile. Lundin Mining Corporation (“Lundin”) is the operator of the project and owns 80% of the asset with the balance owned by Sumitomo Corporation and its affiliates. Franco-Nevada provided an up-front deposit of $648 million to acquire the gold and silver stream from what is primarily a copper mine. Candelaria is an established mining operation and the transaction is the first material instance of a royalty/streaming company partnering with an operating company to purchase a producing asset.
The stream covers 68% of the payable gold and silver from 100% of the mine and reduces to 40% after 720,000 ounces of gold and 12 million ounces of silver have been delivered to Franco-Nevada. Franco-Nevada will pay an ongoing price equal to the lesser of $400 per ounce of gold and $4.00 per ounce of silver or the then prevailing spot price for gold and silver for each ounce delivered under the stream. This price will escalate by 1% per annum following the third anniversary of the closing. Candelaria is one of Franco-Nevada’s largest revenue generators and has had solid results since acquisition. Lundin has successfully increased near term precious metal production since acquisition and has more than replaced Mineral Reserves (net of depletion). Based on the revised Candelaria Technical Report released in January 2017, Franco-Nevada expects to receive over 85,000 gold equivalent ounces in 2017 and approximately 75,000 gold equivalent ounces over 2018-2020.
The stream covers the current property position of approximately 150 km2. An additional defined area of interest effectively doubles the property position. Should Lundin acquire properties located within the area of interest, Franco-Nevada has the option to purchase a gold and silver stream which will apply to the additional ore from such properties. The Candelaria mine was discovered in 1987 and the open-pit has been in operation since 1993. The operation also includes the Candelaria Norte, Santos and Alcaparrosa underground mines.
|Total Revenue to FNV ($ million)