Canada-based gold-focused royalty and stream compan
y Franco-Nevada Corporation
) and another Canadian gold company Teranga Gold Corporation have
agreed to enter into a $135 million stream transaction.
The transaction has enabled Teranga to enter into definitive
share purchase agreements with Bendon International Ltd. and Badr
Investment & Finance Company to acquire the remaining shares
of Oromin Joint Venture Group Ltd. (OJVG) and repay $30 million
of its $60 million Macquarie Bank Limited bank loan with minimal
dilution to shareholders. By purchasing the stakes of Bendon and
Badr, Teranga will hold 100% interest in OJVG.
Franco-Nevada will offer a $135 million deposit of which $105
million will be used to buy Bendon's stake in the OJVG and $30
million to repay half of the currently outstanding Macquarie bank
Once these transactions are complete, the combination of
Sabodala and the OJVG satellite deposits are expected to enable
Teranga to reach its phase 1 growth target of 250,000 to 350,000
ounces of gold production leveraging off of its existing mill and
infrastructure in Senegal.
As per the stream agreement, Teranga will deliver 22,500
ounces of gold annually over the first six years followed by 6%
of production thereafter. Franco-Nevada's purchase price
per ounce is marked at 20% of the spot gold price. The stream
agreement will initially cover a 40 year term.
The combination is expected to offer guaranteed ounce delivery
to Franco-Nevada with opportunities to share in Teranga's
exploration success. On the other hand, it will provide greater
growth, flexibility and higher free cash flow to Teranga.
Franco-Nevada will benefit from this transaction as an
attractive stream asset will be one of its top contributors. Also
it will deliver stable, immediate cash flows and increase gold
contribution in its portfolio.
This is a mutually beneficial transaction for both the
parties. Investment by Franco-Nevada in a well-run operation with
an established track record and a favorable cost structure will
provide greater exploration opportunity on land, covering a 70km
strike extent on an emerging mineral belt.
On the other hand, Teranga with a 100% interest in OJVG will
move a step forward in developing a pipeline that will aid near,
medium and long-term production growth on an emerging gold belt
and will be able to retain its focus on protecting the balance
sheet. It will also prove to be beneficial for shareholders when
gold prices increase.
Franco-Nevada currently maintains a Zacks Rank #3 (Hold).
Better-ranked stocks in the gold mining industry include
Golden Star Resources, Ltd.
Pretium Resources Inc.
AngloGold Ashanti Ltd.
). While Golden Star Resources carries a Zacks Rank #1 (Strong
Buy), Pretium Resources and AngloGold Ashanti hold a Zacks Rank
ANGLOGOLD LTD (AU): Free Stock Analysis
FRANCO NV CP (FNV): Free Stock Analysis
GOLDEN STAR RES (GSS): Free Stock Analysis
PRETIUM RES INC (PVG): Free Stock Analysis
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