TORONTO (miningweekly.com) – Lake Shore Gold and Franco-Nevada on Wednesday struck a deal whereby the royalty firm will pay the miner $35-million for a net smelter royalty (NSR) and a further $15-million for 10-million shares in the company.
Lake Shore CEO Tony Makuch said his company had been hunting for “capital alternatives that do not significantly dilute existing shareholders, and believe our arrangement with Franco-Nevada accomplishes that objective”.
The gold producer, which owns the Timmins mine and Bell Creek mill, in Ontario, saw its share price plunge in July last year after it cut its production forecast for 2011, and the stock has struggled to gain traction since.
The 2.25% NSR Franco-Nevada agreed to buy is for the sale of minerals from the Timmins West complex, which includes the Timmins mine and Thunder Creek asset.
Makuch said the cash Lake Shore will receive from Franco-Nevada “provides valuable capital to support the ongoing development of our mines and projects”.
The C$1.49-a-share price Franco-Nevada is buying Lake Shore’s stock at represents a 5% discount to the volume-weighted average trading price in the ten days preceding the deals announcement.
Both companies are quoted in New York and Toronto.