Franco-Nevada to acquire Palmarejo project

2009-01-21 08:18 ET - News Release

Mr. David Harquail reports

FRANCO-NEVADA TO ACQUIRE A 50% GOLD ROYALTY STREAM ON THE PALMAREJO PROJECT FOR US$80 MILLION

Franco-Nevada Corp. has agreed to acquire from Coeur d'Alene Mines Corp. a 50-per-cent gold royalty stream in the Palmarejo silver and gold project in Mexico for $80-million. Franco-Nevada has over $400-million in cash and other facilities to finance this and additional investments.

Franco-Nevada will receive an interest in 50 per cent of the gold produced from the Palmarejo property paid on the difference between the spot gold price and $400 per ounce (increasing by 1 per cent per year after the fourth anniversary of closing). The attributable gold ounces will be the greater of actual production and a minimum amount. The minimum amount will be 50,000 ounces per year until payments have been made on 400,000 ounces. The $80-million purchase price consists of a $75-million cash payment plus special warrants, which are exercisable into 316,436 Franco-Nevada common shares without additional consideration when the project achieves certain time-based completion tests.

Coeur, in its news release on Jan. 21, 2009, announcing the transaction and providing details of a substantially expanded mine plan, said: "The current 11-year mine plan expands the June, 2008, feasibility study production schedule by including the extraction of material that is currently classified as mineral resources. With this updated mine plan, Palmarejo will have the capacity to produce an average of approximately 120,000 ounces of gold and 9.0 million ounces of silver annually. Production this initial, start-up year is expected to total 5.3 million ounces of silver and 72,000 ounces of gold. Coeur is conducting engineering work to upgrade the current mineral resources to mineral reserves beyond those reserves reported in the feasibility study completed last June. Currently, drilling is focused on infill work at the Palmarejo deposit as well as expanding the mineral resources at the nearby Guadalupe deposit."

"Franco-Nevada is very pleased to partner with Coeur, one of the world's leading silver companies, and to bring to fruition a new growth asset for both companies," commented David Harquail, chief executive officer and president of Franco-Nevada.

The Palmarejo gold stream is expected to contribute significant growth to Franco-Nevada's gold revenues beginning in the second half of this year. The transaction increases the gold price leverage of its royalty portfolio, provides exploration exposure in a prolific mining district and is expected to be highly accretive to Franco-Nevada on all measures.

The addition of the Palmarejo gold royalty stream just three weeks after Franco-Nevada invested $103.5-million in the gold quarry royalty in Nevada is expected to further cement Franco-Nevada's position as the leading gold royalty company by gold revenues, gold earnings before interest, taxes, depreciation and amortization (EBITDA), and number of gold royalty interests. Management believes the two transactions are complementary. Gold quarry provides stable and secure gold revenue while Palmarejo provides additional gold leverage and gold growth prospects. Franco-Nevada expects to make additional gold royalty acquisitions this year.

Management will host a conference call on Wednesday, Jan. 21, 2009, at 10 a.m. Eastern Time to review the transaction. A presentation to accompany the conference call will be made available on the company's website prior to the call. Analysts and interested investors are invited to participate.

Hg