Franco-Nevada Acquires Silver from Teck's Antamina Mine

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.

Write to Ezequiel Minaya at [e-mail] and Judy McKinnon at [e-mail]

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October 07, 2015 13:15 ET (17:15 GMT)

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