TORONTO, Aug. 20, 2012 /CNW/ – Franco-Nevada Corporation (TSX: FNV, NYSE: FNV) and Inmet Mining Corporation (TSX: IMN) today announced that their subsidiaries have agreed to terms for a precious metals stream on the Cobre Panama copper project in Panama, one of the world’s largest copper-gold-silver-molybdenum porphyry deposits currently being constructed …
Transaction Highlights
- Fully funded project: Franco-Nevada will commit $1 billion to Inmet’s share of the development costs of Cobre Panama. Inmet now has funding in place for $4.2 billion of its $4.8 billion required capital with the balance expected either from other sources of debt or from future operating cash flow.
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David Harquail, President and CEO of Franco-Nevada commented, “Inmet is an experienced and proven mine operator and developer. Franco-Nevada is proud to partner with Inmet to provide the financing needed to develop one of the world’s largest mining projects. We expect the Cobre Panama precious metals stream will be a long-term cornerstone asset for Franco-Nevada that fits well within our overall portfolio. Franco-Nevada’s funding commitment to the Cobre Panama project can largely be financed from its ongoing free cash flow. Franco-Nevada has the capacity to do approximately another $1 billion of new investments to further grow its portfolio in this opportunity rich environment.“
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Franco-Nevada (Barbados) Corporation, a wholly-owned subsidiary of Franco-Nevada, will provide a $1 billion deposit, secured by a pledge of Inmet’s interests in MPSA, which will be used to fund a portion of the Cobre Panama project capital costs. The deposit will become available after Inmet’s funding since the Full Notice to Proceed which was issued on May 18, 2012 reaches $1 billion (expected by Q1 2013). Upon certain funding conditions under the agreement being met, Franco-Nevada (Barbados) funding of the deposit will be pro-rata on a 1:3 ratio with Inmet’s subsequent funding contributions, up to a maximum of $1 billion.
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Delivery period 1
(~years 1-11)Delivery period 2
(~years 12-31)Delivery period 3
(production beyond
current mine plan)Gold Stream Au oz delivered 0 to 808,000 808,001 to 1,716,188 > 1,716,188 Delivery terms 120 oz Au per 1 mm lbs Cu 81 oz Au per 1 mm lbs Cu 63.4% of Au in concentrate Avg annual Au delivery 73,500 oz 45,400 oz Silver Stream Ag oz delivered 0 to 9,842,000 9,842,001 to 29,731,000 > 29,731,000 Delivery terms 1,376 oz Ag per 1 mm lbs Cu 1,776 oz Ag per 1 mm lbs Cu 62.1% of Ag in concentrate Avg annual Ag delivery 870,000 oz 995,000 oz Gold Equivalent Stream* Avg annual AuEq delivery 87,500 oz 61,500 oz Inmet’s annual production Avg annual additional Au to IMN 10,000 oz 8,200 oz Avg annual additional Ag to IMN 153,000 oz 166,600 oz Profile based on Inmet’s Basic Engineering Summary Report for the Cobre Panama Project dated May 6, 2012
*Gold equivalent ounces approximated using $1,250/oz Au and $20/oz AgPayment terms: Franco-Nevada (Barbados) will pay to MPSA an amount for each ounce of precious metals delivered equal to $400 per ounce for gold and $6 per ounce for silver (subject to an annual adjustment for inflation) for the first 1,341,000 ounces of gold and 21,510,000 ounces of silver (approximately the first 20 years of expected deliveries) and thereafter the greater of $400 per ounce for gold and $6 per ounce for silver (subject to an adjustment for inflation) or one half of the then prevailing market price. In all cases the amount paid is not to exceed the prevailing market price per ounce of gold and silver.
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The Cobre Panama project will use conventional truck and shovel mining, has a low strip ratio (0.58:1), and will use conventional flotation technology which is expected by Inmet to produce a clean copper concentrate. The project is situated close to tidewater, will have an owner-operated power plant and is expected by Inmet to have robust economics and cash costs of $0.94/lb of copper (attributable to Inmet’s share after reduction of metal credits due to the precious metals stream of $0.12/lb of copper and using consensus metal prices) over the life of the mine. The project received approval of its Environmental and Social Impact Assessment by the Government of Panama in December 2011, construction began in May 2012, and first production is expected in Q4 of 2015.
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[emphasis ours]
