First Quantum scores $1B streaming deal with Royal Gold
Canadian miner First Quantum Minerals (TSX: FM) has secured a $1 billion gold streaming deal with a subsidiary of Royal Gold (NASDAQ: RGLD), the companies announced Tuesday.
The agreement provides First Quantum with the full sum upfront in exchange for future gold produced as a by-product at its Kansanshi copper mine in Zambia. In a gold streaming arrangement, the buyer pays upfront for the right to purchase a portion of future gold production, usually at a predetermined, discounted rate.
First Quantum will deliver gold to Royal Gold based on copper output: 75 ounces per million pounds of recovered copper until 425,000 ounces are reached, then 55 ounces per million until a further 225,000 ounces, and finally 45 ounces per million pounds thereafter.
In addition to the upfront payment, First Quantum will receive 20% of the spot gold price per ounce delivered, which may increase to 35% if specific credit or leverage targets are met.
Royal Gold expects to receive around 12,500 ounces from the stream in 2025 and projects an average annual delivery of 35,000 to 40,000 ounces over the next decade. The company said the deal offers immediate cash flow from a long-life, large-scale asset.
For First Quantum, the deal allows it to increase gold exposure over time and boosts its financial flexibility as it advances the $1.3 billion S3 expansion at Kansanshi. The mine’s combined copper and gold output makes it especially well-suited to streaming deals, enabling the company to monetize gold by-product production without diluting its copper focus.
The transaction is set to close Wednesday.
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6 Comments
Obed Mbuzi
What will be the benefit of this deal to an ordinary Zambia
John
There will be none. Any tax paid will be siphoned away by corruption. Africa loses and the white man wins, as per usual
Jack Shansonga
The Zambian government should have sat with the mines and go through all key terms in this forward pay contract between FQM and Royal gold. By virtue of jurisdiction, the Zambian government is a key stakeholder and a full understanding of the full terms in this contract is what should make the basis or platform on which it should design a specific approach to tax collection tailored to suitably to this arrangement. Failure of doing so may raise issues in the future where the government may feel they have under collected the tax revenues or govrnmnt may feel the deal is being used to externalise further quantities of gold not covered in the deal for other mine gold customers.
Most African governments and civil movements are pushing so much in efforts to have transparency in activities to do with their diminishing natural resources. Hence a well structured tax collection system fairly beneficial to the country may save the future of this contract even after change of governments.
MATSON BANDA
IT’S SUCH A SHAME THAT ZAMBIA CAN’T HAVE ITS OWN GOLD RESERVE TO MAKE ITS CURRENCY STRONG BUT INSTEAD IT’S BUSY MAKING OTHER CURRENCIES STRONG ! ZAMBIA MUST RESTORE BACK MATELO DECLARATION OF 1969.ZAMBIA MUST HOLD 51% SHARE IN EVERY MINE UNDER ITS SOIL AND 49% FOR GIVEN TO FOREIGNER. PRESIDENT HAKAINDE HICHILEMA CAN’T PUSH FOR THIS BECAUSE HE IS A PAPERT TO THE WESTERN WORLD. I WISH IN ZAMBIA WE HAVE A LEADER LIKE MY BROTHER IBRAHIM TRAOLE !
Mark Michael Tupa
Transaction done in Canada, money for our gold already externalised, and we should be celebrating?
Kapula Chifunda
There is something seriously wrong with us as a nation