First Quantum scores $1B streaming deal with Royal Gold

[Ben Graham]

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.