Franco-Nevada to acquire royalty package on Cote Gold Mine in Ontario for $1.05B

Franco-Nevada (FNV) announced that it has entered into an agreement to acquire an existing royalty package on the Cote Gold Mine in Ontario from a private third party for total cash consideration of $1.05B. The royalty package consists of a 7.5% gross margin royalty on the Cote 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 Cote Gold Mine. Royalty deductions include cash operating costs and exclude all capital, exploration, depreciation and other non-cash costs. The Cote Gold Mine is operated through an unincorporated joint venture by IAMGold (IAG) and is owned by IAMGold and Sumitomo. The Cote 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 16M 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, 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 our 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: the initial 25% buydown option for an IRR equal to SOFR plus 1.10%, exercisable within two years of closing, and 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.