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Franco-Nevada to acquire Lumina Royalty in $66m deal

Published: 19:42 22 Sep 2011 BST

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Franco-Nevada (TSELFNV) (NYSE:FNV) announced Thursday it will acquire Lumina Royalty Corp, a spin-off of Lumina Copper (CVE:LCC), in an all-equity deal valued at $66 million.

Under the terms of the agreement, Franco-Nevada will acquire Lumina Royalty in exchange for $60 million of its own common shares, and $6 million in warrants.

Shareholders of Lumina Royalty will receive 0.03487 of a Franco-Nevada common share, and 0.01917 of a Franco-Nevada warrant for each Lumina share held.

Each warrant is exercisable for C$75.00, and expires June 16, 2017.

Lumina Royalty was spun off of Lumina Copper in June, and owns royalty interests in four development-level properties in South America.

"These royalties provide exposure to very large resources in established mining countries and are expected to add to Franco-Nevada's long-term growth profile," commented Franco-Nevada president and CEO, David Harquail.

Among these royalties are a 1.5% net smelter return (NSR) on Teck Resources’ (TSE:TCK.B) Relincho copper-molybdenum development project in Chile. Teck has indicated the potential for about 190,000 tonnes of copper and 7,000 tonnes of molybdenum, each in concentrate, in annual production over the 20 year mine life. A prefeasibility study for the project is expected to be completed in the third quarter.

Lumina also owns a 1.08% NSR on Lumina Copper's Taca Taca copper-gold-molybdenum property in Argentina, which has an NI 43-101 compliant inferred resource of 841 million tonnes grading 0.64% copper equivalent, containing 8.71 billion pounds of copper, 2.97 million ounces of gold, and 333.7 million pounds of molybdenum.

It also owns a 2% NSR on open pit mining, and a 1% NSR on underground mining on a portion of the Vizcachitas copper-molybdenum project in Chile, owned by Los Andes Copper (CVE:LA). The property has indicated resources of 515 million tonnes grading 0.39% copper and 0.011% molybdenum, for 4.4 billion pounds of copper and 125 million pounds of molybdenum.

Franco-Nevada is also set to acquire a fixed rate copper royalty and a 1.5% NSR on the San Jorge copper-gold-molybdenum project in Argentina, owned by Coro Mining (TSE:COP). Under the terms of that agreement, Coro will make $16.5 million in advance payments for the copper royalty, $6.5 million of which has been paid to date.

Coro's preliminary economic assessment expects 629,000 ounces of gold production, and 1.4 billion pounds of copper over the total life of the mine.

The deal between Franco-Nevada and Lumina Royalty, which is subject to customary regulations and approvals, also provides for a non-solicitation covenant by Lumina Royalty, and a termination fee of $3.0 million to be paid by Lumina to Franco-Nevada.

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