Franco-Nevada Corporation (TSX:FNV) has entered into a deal to acquire a significant royalty interest in the Côté Gold mine located in northeastern Ontario. The transaction, valued at $1.05 billion in cash, will see the Toronto-based royalty and streaming company take ownership of a 7.5% gross margin royalty covering gold production from key mineral claims at the site.

The agreement involves the Chester 1, 2, and 3 claims, which include all of the mine’s current proven and probable mineral reserves, as well as over 99.9% of its measured and indicated resources. These claims are core to the ongoing operations and long-term output of the Côté project. The royalty package is being acquired from a private third party, whose identity has not been disclosed. Franco-Nevada anticipates closing the transaction by the end of June.

Côté Gold is jointly owned by Iamgold Corporation, which holds a 70% stake, and Sumitomo Metal Mining, which controls the remaining 30%. The project marks one of the largest new gold mine developments in Canada in recent years. The deposit contains more than 16 million ounces of gold classified in the measured and indicated categories.

The mine began producing gold in April of last year when it poured its first doré bar. It officially achieved commercial production in August and is still in the ramp-up phase. Once running at full capacity, the mine is expected to become the third-largest gold-producing site in Canada.

Forecasts for the mine’s performance estimate an average annual production of 495,000 ounces of gold during its first six years of full operation. Over the life of the mine, annual output is expected to average around 365,000 ounces.

This royalty acquisition fits into Franco-Nevada’s strategy of expanding its portfolio of assets that generate long-term revenue from mining operations without taking on the risks or responsibilities of direct ownership or operation. The company already holds a wide array of royalty and streaming interests across multiple commodities and jurisdictions.

The Côté Gold mine represents a significant development not just for Franco-Nevada but for the broader Canadian mining sector. It signals continued investment in large-scale resource projects in Ontario and adds to the region’s growing reputation as a major hub for gold production.

Franco-Nevada has not disclosed any details regarding how it intends to fund the acquisition beyond confirming the all-cash nature of the deal. The company has historically maintained a strong balance sheet and access to capital, which allows it to pursue large-scale royalty purchases when opportunities arise.

The structure of the 7.5% gross margin royalty means that Franco-Nevada will receive payments based on a percentage of the gold mine’s revenue, minus certain costs. This differs from a net smelter return or net profit interest, in that it provides a more direct and less volatile income stream tied to gross operating performance rather than profits, which can fluctuate due to cost variables.

This deal further cements Franco-Nevada’s presence in Canadian gold mining and enhances its long-term revenue base at a time when the gold price remains relatively strong and demand for stable cash-flowing assets is high. The move comes amid increasing activity in the global royalty and streaming sector, as companies seek to secure exposure to mineral production without directly engaging in extraction. Once completed, the transaction will rank among the largest single-asset royalty acquisitions in Canadian mining history, underscoring the scale and strategic importance of the Côté project.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

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