#Canada #Timmins #Franco-Nevada #Discovery Silver #Porcupine Complex

Franco-Nevada Partners with Discovery Silver for Porcupine Complex Acquisition

Franco-Nevada Corporation, a leading entity in gold-focused royalties and streaming, recently revealed a major financing agreement with Discovery Silver Corporation. This deal aims to aid Discovery in acquiring the renowned Porcupine Complex situated near Timmins, Ontario, from Newmont Corporation. The financing package is both comprehensive and multi-faceted, encompassing a net smelter return royalty, a senior secured term loan, and an equity participation scheme.

Breakdown of the Financing Package

1. Royalty Agreement: Franco-Nevada will receive a 4.25% net smelter return royalty for a total of $300 million. This amount is structured in two tranches and is expected to generate immediate cash flow from gold production at the Porcupine Complex, which boasts a rich history of over a century in gold extraction.

2. Senior Secured Term Loan: An additional $100 million senior secured loan is available. This loan can be drawn by Discovery within two years of the acquisition closing date, providing valuable working capital to support ongoing operations and capital expenditures at the complex.

3. Equity Participation: Franco-Nevada will also participate with approximately $49 million in equity, contributing to a concurrent public offering that Discovery is launching. This participation translates to acquiring nearly 9.9% of Discovery’s common shares upon the transaction's closing.

Strategic Impacts for Both Entities

Paul Brink, CEO of Franco-Nevada, expressed enthusiasm regarding this transformative transaction. The acquisition of the Porcupine Complex not only adds a cash-flowing gold asset to Franco-Nevada's portfolio but also seeks to rejuvenate the asset under Discovery's adept management team.

Discovery's CEO, Tony Makuch, emphasized the importance of this partnership, noting that their local expertise in Northern Ontario will facilitate the project’s revitalization. The Porcupine Complex is known for its considerable mineral resources, including an extensive output potential outlined in a detailed technical report. With a projected production life of over two decades and the capability of producing 285,000 ounces of gold annually, the complex is indeed a significant asset.

Production and Expansion Potential

The Porcupine Complex operates several mines, including the mature Hoyle Pond and Borden, which will soon see added activity from the new Pamour open pit mine expected to commence production in 2025. The Royalty agreement enhances Franco-Nevada's already robust royalty profile within Ontario's gold mining sector. Furthermore, Discovery is poised to explore ways to increase production beyond current estimations laid out in the technical report.

Key opportunities identified by Discovery include:

• - Pamour Expansion: Potential to enlarge the Pamour open pit and continue exploration at depth.
• - Increasing Mine Throughput: Optimizing operations at Hoyle Pond and Borden to enhance production longevity.
• - Developing Dome Open Pit: The Dome project harbors approximately 11 million ounces of inferred resources.

In keeping with their commitment to responsible mining, both parties will collaborate on environmental and social initiatives related to the project, ensuring community engagement and sustainable practices.

Conclusion

The financial backing provided by Franco-Nevada is a strategic step in reshaping the future of the Porcupine Complex and reinforces both companies’ positions in the gold mining industry. Anticipated to close in early 2025, this partnership between Franco-Nevada and Discovery Silver heralds a promising new chapter for a historically significant mining asset, aiming to sustain profitability while adhering to high environmental standards.