Franco-Nevada Corporation announced that it has entered into an agreement to acquire an existing royalty package on the Côté Gold Mine in Ontario from a private third party for total cash consideration of $1,050 million (the "Transaction"). The royalty package consists of a 7.5% gross margin royalty (the "Royalty") on the Côté Gold Mine. The Royalty applies, on a 100% basis, to mineral production from the Chester 1, 2 & 3 claims which cover all of the Mineral Reserves and over 99.9% of current Mineral Resources on the Côté Gold Mine.
Royalty deductions include cash operating costs and exclude all capital, exploration, depreciation and other non-cash costs. The Côté Gold Mine is operated through an unincorporated joint venture by IAMGOLD Corporation ("IAMGOLD") and is owned by IAMGOLD (70%) and Sumitomo Metal Mining Co. Ltd. ("Sumitomo") (30%).
The Côté Gold Mine is one of the newest, large scale, and most modern gold mines to be built in Canada with an already extensive gold Mineral Resource base of more than 16 million ounces of Measured and Indicated Mineral Resources and 4 million ounces of Inferred Mineral Resources. Franco-Nevada partnered with IAMGOLD and Sumitomo for the acquisition of the Royalty, which exclusively allowed Franco-Nevada access to conduct detailed due diligence. As part of these arrangements, concurrently with closing of the Transaction (anticipated at the end of Second Quarter 2025), the Royalty arrangements will be replaced with a new Royalty agreement with IAMGOLD and Sumitomo, which will be registered on title and, among other things, provide for clarified audit and information rights.
The payment calculation methodology of the replacement Royalty is economically unchanged from the acquired Royalty. Further, as part of partnering with IAMGOLD and Sumitomo, they will be granted an option, exercisable at their discretion, to buy down up to 50% of the Royalty at Franco-Nevada's attributable cost in two equal tranches of 25%. The cost to repurchase the tranches are as follows: (i) the initial 25% buydown option for an IRR equal to SOFR plus 1.10% (i.e. Franco-Nevada's cost of borrowing), exercisable within two years of closing, and (ii) the additional 25% buydown option cost for an IRR equal to 10%, following exercise of the initial option, exercisable within three years of closing.
The calculation of the IRR for both options takes into account the attributable Royalty payments received up to the repurchase date.
Franco-Nevada Corporation is a Canada-based gold-focused royalty and streaming company. The Company’s segments include precious metals, other mining and energy. The Company’s portfolio is diversified by commodity, geography and asset. Its assets include Candelaria, Antapaccay, Antamina, Condestable, Tocantinzinho, Cerro Moro, Salares Norte, Cascabel (Alpala), Posse (Mara Rosa), CentroGold (Gurupi), Calcatreu, and San Jorge. Its other mining assets include NuevaUnion, Taca Taca, Caserones, Copper World Project, Ring of Fire, Mt Keith, Crawford, Robinson, EaglePicher, Copper World Project, and Milpillas. Its United States assets include Stillwater, Goldstrike, Gold Quarry, Marigold, Bald Mountain, South Arturo, Mesquite, Castle Mountain, Stibnite Gold, Sterling, Granite Creek (Pinson) and Arthur Gold Project. Its Canadian assets include Detour Lake, Sudbury, Hemlo, Brucejack, Macassa (Kirkland Lake), Dublin Gulch (Eagle), Musselwhite, and Timmins West.
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