File photo of a Teck Resources mining operation in Peru.
Teck Resources Ltd., Canada's largest diversified miner, sold future silver output from a mine in Peru to Franco-Nevada Corp. for an upfront payment of $610-million.
The so-called stream on Teck's share of silver in the Antamina mine also includes 5 per cent of the spot price at the time of delivery, Toronto-based Franco-Nevada said in a statement Wednesday. It expects to receive 900,000 to 1.1 million ounces this quarter and average annual contributions of 2.8 million to 3.2 million ounces.
Streaming, which provides financing in exchange for a portion of discounted metal from a mine, were once considered primarily of use for high-risk, early stage projects. But as large miners have come under pressure to shore up their balance sheets, it has become a favoured option for them as well. Barrick Gold Corp. and Brazil's Vale SA are among majors to have sought the sales to increase cash.
Teck was stripped of its investment-grade rating by Moody's Investors Service last month as falling prices of everything from coal to zinc overshadow cost-cutting efforts.
Silver has held up better than most commodities in the past year, losing 7 per cent compared with copper's 21 per cent decline. Antamina will increase Franco-Nevada's operating cash flow by an estimated 18 per cent, it said.
Teck owns 22.5 per cent of Antamina, which last year produced 344,900 tons of copper, 211,000 tons of zinc, 3.1 million pounds of molybdenum and 12 million ounces of silver, according to Teck. The other shareholders are BHP Billiton Ltd. and Glencore Plc, with 33.75 per cent each, and Mitsubishi Corp. with 10 per cent.
Bank of Nova Scotia is acting as financial adviser to Teck.