Franco-Nevada Corp has announced it will invest $50m to become a shareholder of Lake Shore Gold Corp.
Under the terms of the agreement, Franco-Nevada will pay the company $35m for a 2.25% net smelter return (NSR) royalty on the sale of minerals at Lake Shore's Timmins West Complex in Ontario, Canada.
The Timmins West Complex includes the Timmins and Thunder Creek deposits which are collectively the Timmins West Mine, the 144 property, the Thorne property (Gold River Trend) as well as a number of wholly owned and joint venture claims on the west side of Timmins.
Franco-Nevada will also pay C$15m ($15m) to acquire 10,050,591 common shares of the company on a private placement basis, representing a 5% premium.
Lake Shore Gold President and CEO, Tony Makuch, said: "We are happy that, following an assessment of our Timmins West Complex, Franco-Nevada has decided to join us as a new shareholder and to invest in the future of this complex."
Mr Makuch continued: "The $50 million we will receive provides valuable capital to support the ongoing development of our mines and projects as we progress towards rapid production growth later this year, including the completion of our mill expansion to 3,000t per day. We have been diligent in pursuing capital alternatives that do not significantly dilute existing shareholders, and believe our arrangement with Franco-Nevada accomplishes that objective."
David Harquail, President and CEO of Franco-Nevada, commented: "We are very pleased to acquire an interest in the currently operating Timmins West complex, which has a significant production expansion underway and has excellent resource growth potential in the prolific Timmins Gold camp."
The agreement is subject to standard regulatory approvals and is anticipated to close by this month end.
Image: The Timmins West complex includes the Timmins and Thunder Creek deposits. Photo: Courtesy of Patrick Huber