Franco buys Stillwater royalty from Johns Manville

In the biggest acquisition in company history, Franco-Nevada Mining (FN-T) purchased Johns Manville’s last remaining royalty interest in the Stillwater platinum-palladium mine in Montana.

The Toronto-based royalty company purchased the net smelter return royalty for US$36 million.

Franco Chairman Seymour Schulich said the company is bullish about platinum and palladium, and “it was time to put its money where its mouth was.” He said it was also the company’s biggest acquisition, and the best since acquiring the royalty on Barrick Gold’s Goldstrike mine in Nevada.

“We’ve been after this one for eight years,” he said.

Johns Manville disposed of its last stake in the mine to concentrate on its business of building materials. It had a hand in the early development of the Stillwater mine, and divested itself of the majority of its holding in 1995.

The royalty covers 95% of the 28-mile strike length of the known platinum and palladium mineralization at Stillwater, and covers 82% of the proven and probable reserves, which currently stand at 23.4 million oz. combined platinum and palladium as of the end of 1997.

Schulich said the royalty won’t kick in for a few years. “Only 40% of what is being mined today is covered by the royalty. In other words, the 18% of the reserves not covered by it should be mined out in the next few years,” Schulich said.

The royalty also covers 95% of the resources and the downdip potential at the Stillwater complex, and includes 100% of the mineralization from the East Boulder project.

Stillwater Mining (SWG-X), which operates the underground mine, expects to produce 500,000 oz. combined platinum and palladium during 1998. With the development of the East Boulder project, it plans to boost production to 1 million oz. palladium and 300,000 oz. platinum per year by 2003.

The value of the royalty paid to Franco will be determined by the spot prices of the metals and is not linked to Stillwater’s hedging strategy.

Franco determined that the royalty, based on current metal prices, has an in-situ value of over $1 billion.

The royalty at Stillwater isn’t Franco’s first exposure to platinum-group metals (PGM); the company owns a 5% net profits interest on 31 million oz.

of PGM at the Pandora property in South Africa.