Franco-Nevada (TSX: FNV) is the new owner of an existing royalty package that exists at IAMGOLD’s (TSX: IMG) Cote Gold Mine. The company has acquired the package from a third party in a private transaction.
The arrangement has seen Franco-Nevada pay total cash consideration of $1.05 billion for a 7.5% gross margin royalty on the mine. The royalty applies to mineral production from the Chester 1, 2 and 3 claims, with those claims featuring all the mineral reserves at the project, alongside 99.9% of current mineral resources.
Deductions from the gross margin royalty include cash operating costs and excludes capital, exploration, depreciation and other non-cash costs.
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Concurrent with the closing of the transaction, the royalty arrangements are to be replaced with a new royalty agreement with IAMGOLD and their joint venture partner at Cote, Sumitomo, which have the same terms but provide for clarified audit and information rights. As part of this effort, IAMGOLD and Sumitomo have been granted an option to buy down up to 50% of the royalty at Franco-Nevada’s attributable costs in two equal tranches.
Notably, the royalty is currently cash flowing. At $3,200 gold, the royalty is said to have implied costs attributable to it of $770 to $930 an ounce, which based on annual guidance, suggests implied revenue of $67 million annually from the royalty.
The purchase is expected to be financed from available capital, with the effective closing date of the transaction being the earlier of closing and July 1, 2025.
Franco-Nevada last traded at $232.61 on the TSX.
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