Royal Gold, Inc. has recently announced the acquisition of a gold stream on the Kansanshi copper-gold mine in Zambia, operated by First Quantum Minerals Ltd. The company's wholly-owned subsidiary, RG AG, has entered into a precious metals purchase agreement for gold deliveries referenced to copper production from the Kansanshi mine in the northwestern province of Zambia. The acquisition highlights immediate gold revenue and cash flow from a producing copper-gold mine, with Royal Gold expecting to receive approximately 12,500 ounces of gold in 2025, and gold deliveries are expected to average approximately 35,000-40,000 ounces per year over the next 10 years.
The funding sources for the acquisition consisted of available cash resources and a draw on Royal Gold's revolving credit facility, without issuing new shares. The Kansanshi mine is an established operation with a world-class resource, long-life, and large-scale production. First Quantum, as the operator, has a long and established operating history in Zambia, with the Kansanshi mine being its flagship operation since 2005. The government of Zambia has shown strong support for the mining sector, and the country is the 10th largest global copper producer, with mining being the second-largest contributor to Zambia's GDP.
The stream agreement's deliveries will be indexed to the production of recovered copper, and the stream rate will vary based on gold delivery thresholds. Royal Gold will initially pay 20% of the spot gold price for each ounce delivered. Additionally, First Quantum will have two options to accelerate stream deliveries and reduce the outstanding advance, potentially impacting the percentage of spot gold price paid for each ounce delivered.
Royal Gold is funding the advance using cash on hand and a draw of $825 million on its $1 billion revolving credit facility. The company has also exercised a $400 million accordion feature and received commitments for the full increased capacity, with $1.4 billion expected to be available under the revolving credit facility. The available cash, undrawn capacity on the revolving credit facility, and anticipated cash flow from Royal Gold's portfolio are expected to be sufficient to fund all remaining outstanding financial commitments, including the repayment of outstanding debt assumed with the acquisition of Sandstorm Gold Ltd. and the cash acquisition of Horizon Copper Corp.
The Kansanshi mine, owned and operated by Kansanshi Mining PLC, is 80% owned indirectly by First Quantum and 20% by ZCCM Investments Holdings PLC. The mine is a sediment-hosted, stratabound deposit with economic copper and gold mineralization occurring in three ore types: primary sulfide, mixed supergene, and oxide. The mine has proven and probable reserves of 1.070 billion tonnes grading 0.52% copper and 0.10 grams per tonne gold, with a mine life of more than 20 years expected.
First Quantum Minerals Ltd. is an international mining company listed on the Toronto Stock Exchange, with a market capitalization of approximately C$20 billion. The company has mines and projects in various countries, including Zambia, Panama, Spain, Mauritania, Turkey, Australia, Finland, Argentina, and Peru.
The acquisition of the gold stream on the Kansanshi mine is a significant development for Royal Gold, providing immediate gold revenue and cash flow from a world-class mining operation in a mining-friendly jurisdiction. Today the company's shares have moved 2.48% to a price of $156.43. For the full picture, make sure to review ROYAL GOLD INC's 8-K report.
