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.
In July 2015, Lundin announced an updated mine plan for Candelaria. The plan forecasts a 26% increase in precious metal production over the next four years compared with the original estimate when the agreement was signed. Franco-Nevada expects to receive between 70,000-78,000 ounces during the next four years (2016-2019) based on the revised mine plan. 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 $4.00 per ounce of silver or the then prevailing spot price for gold and silver for each ounce delivered under the stream. This price will escalate by 1% per annum following the third anniversary of the closing.
The stream covers the current property position of approximately 150 km2. An additional defined area of interest effectively doubles the property position. Should Lundin acquire properties located within the area of interest, Franco-Nevada has the option to purchase a gold and silver stream which will apply to the additional ore from such properties. The Candelaria mine was discovered in 1987 and the open-pit has been in operation since 1993. The operation also includes the Candelaria Norte, Santos and Alcaparrosa underground mines. Mineral Resource additions based on recent exploration may extend the life of the asset beyond its current mine life.
|Total Revenue to FNV ($ million)