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Southern Peaks Mining Announces US$165 Million Streaming Agreement with Franco-Nevada at the Condestable Mine

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Southern Peaks Mining LP is pleased to announce that it has, through a wholly-owned subsidiary, entered into a definitive Purchase and Sale Agreement with Franco-Nevada (Barbados) Corporation, in relation to gold and silver production from the Condestable polymetallic copper mine in Peru. Franco-Nevada will pay upfront cash consideration of US$165 million and will pay an ongoing payment of 20% of the spot gold and silver price for each ounce of gold and silver delivered under the Stream Agreement.

 

“The consummation of this transaction gives SPM a valuable validation by one of the top, and highly selective, mining investors in the world. The expectation of future growth of Condestable speaks to the serious and effective work SPM’s team has endeavored to for the period since we acquired the asset,” commented Adolfo Vera, CEO of the Company.

 

“We see excellent potential in the Condestable mine based on its greater than 50-year history of reserve replacement and expanding throughput. Our team sees many similarities between this IOCG deposit and underground extensions of the Candelaria deposit in Chile, where the resource expansion has exceeded our expectations. We expect Condestable will be a long-term contributor to our precious metals business,” said Paul Brink, CEO of Franco-Nevada Corporation.

 

Transaction Summary

 

  • The Stream Agreement is based on gold and silver production from the mining areas at Condestable, according to the following schedule:
    • Phase 1: Between January 1, 2021 and December 31, 2025, SPM will deliver 8,760 ounces of gold per year and 291,000 ounces of silver per year;
    • Phase 2: After Phase 1, SPM will deliver 63% of contained gold and silver production until 87,600 ounces of gold and 2,910,000 ounces of silver have been delivered (inclusive of Phase 1 deliveries);
    • Phase 3: After Phase 2, SPM will deliver 25% of contained gold and silver production for the remaining life of mine.
  • SPM will receive 20% of the spot gold and silver price for each ounce of gold and silver delivered under the Stream Agreement.
  • In addition, Franco-Nevada has provided SPM with an early delivery option on the Phase 1 and Phase 2 deliveries, and SPM has granted to Franco-Nevada a right of first refusal for a period of five years and a right of first offer on subsequent years on future stream and royalty transactions on the Condestable land package.
  • Franco-Nevada has agreed to participate in any future IPO of SPM, subject to certain conditions, and will also be partnering with SPM to provide additional funding on certain Environmental, Social and Governance initiatives.

 

Key Highlights

 

  • Upfront Payment to Eliminate Financial Liabilities – The upfront proceeds will be directed toward eliminating the current debt balance, pay down tax liabilities related to the time period prior to SPM’s ownership, to fund expansion at Condestable, and for general corporate purposes.
  • Attractive Cost of Capital – The Stream Agreement provides capital to SPM at an attractive cost while eliminating financial leverage.
  • Free Cash Flow Generation at Condestable Remains Robust – Condestable will remain a highly profitable and free cash flow generating mine. Condestable will retain full exposure to strong copper market fundamentals and substantial exposure to the gold and silver market. With expansion plans that are planned and currently underway, Condestable is expected to grow its annual production and free cash flow generation meaningfully in the near future.
  • Franco-Nevada is a Supportive, Long-Term Partner – Franco-Nevada has a strong track record of partnering with successful operators on attractive, long-life polymetallic mines and projects for mutually beneficial transactions.

 

Scotiabank is acting as financial advisor to SPM, and Stikeman Elliott LLP is acting as legal counsel to SPM.

 

About SPM

 

SPM is a Peruvian copper company that operates Condestable, the 2nd largest underground mine in Peru, and is developing Ariana, a low-cost Peruvian copper project. SPM recently undertook a significant drilling programme and is currently updating the NI 43-101 proven and probable reserves at Condestable which is expected to support meaningful mine life extension. The Company is currently expanding processing capacity at Condestable from 7 ktpd to 8.4 ktpd and is advancing a Feasibility Study on additional plant capacity expansion to 10 ktpd.

 

 

Posted March 11, 2021

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