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Vale operations at Voisey's Bay, Labrador

Canada's Franco-Nevada Corp. , a gold-focused resource royalty company, said on Sunday it will offer $6.75 a share to buy smaller rival International Royalty Corp. .

The all-cash offer represents a 43-per-cent premium to Englewood, Colo.-based International Royalty's Friday closing price, and values the company at about $640-million based on its 94.7 million shares outstanding, according to Thomson Reuters data.

International Royalty currently draws most of its revenue from nickel royalties, but has been expecting to shift that focus to gold due to its royalty on Barrick Gold's 18-million-ounce Pascua Lama gold project in South America, which went into construction this year.

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That royalty alone would be expected to produce $20-million in annual revenue after it begins commercial production in 2013.

Its other key royalties - it holds 84 in total - are on the Voisey's Bay nickel mine in eastern Canada, which is owned by Vale SA, and on Inmet Mining's Las Cruces copper mine in Spain, which is expected to hit full production early next year.

Toronto-based Franco-Nevada holds more than 300 royalties focused mainly in the gold sector, but also in base metals, oil and gas, and other precious metals.

Franco-Nevada said it will mail a formal takeover offer as soon as is practicable, with the goal of taking up shares tendered to the offer as early as mid-January 2010, assuming all conditions of the offer are satisfied.

The company has retained BMO Nesbitt Burns to act as financial adviser and Goodmans LLP to act as legal adviser.

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