Franco-Nevada Corp.
said Wednesday it had agreed to buy a portion of silver production from Teck Resources Ltd.
’s Antamina copper and zinc mine in Peru for $610 million.
The
arrangement comes as mining companies grapple with low metal prices and
fears of a slowdown in China, leading many to implement cost-cutting
measures and work to strengthen their balance sheets, including by way
of streaming deals.
Vancouver-based Teck’s deal with Franco-Nevada follows a similar arrangement in July in which Teck sold a gold stream on the Carmen de Andacollo mine in Chile to Royal Gold Inc.
for $525 million. In August, gold-mining giant Barrick Gold Corp.
also reached a deal to supply Royal Gold with gold and silver from a Dominican Republic mine.
Teck
had said last month it would consider possible streaming options for
the silver byproduct at some of its mines to raise additional funds.
Toronto-based
Franco-Nevada, which invests in mines, will pay Teck a one-time,
advance payment of $610 million on closing of the deal and an additional
5% of the spot silver price for each ounce of delivered silver. The
first delivery is expected in the final quarter of 2015.
Antamina is a joint venture between Teck, BHP Billiton
PLC, Glencore
PLC and Mitsubishi Corp.
Franco-Nevada’s silver will come from Teck’s 22.5% stake in the operation.
The
stream will reduce by one-third after 86 million ounces have been
delivered, estimated at current throughput to be about 30 years. The
mine has reserves of 647 million metric tons—including copper, zinc and
silver––and is located about 170 miles northeast of Lima.
Last
year, Antamina produced about 345,000 metric tons of copper, 211,000
metric tons of zinc, 3.1 million pounds of molybdenum and 12 million
ounces of silver.
On Tuesday, Franco-Nevada finalized a separate $1 billion precious-metal stream agreement with First Quantum Minerals Ltd.
for the Cobre Panama mining project in Panama.
Following the
funding of the Antamina transaction and the Cobre Panama agreement,
Franco-Nevada said it would have liquidity of about $800 million between
cash and its expanded credit line.
Source : THE WALL STREET JOURNAL
