Franco-Nevada Corporation is pleased to announce that its wholly-owned subsidiary, Franco-Nevada (Barbados) Corporation (“FNB“), has acquired a gold stream with reference to production from the Tocantinzinho project located in Pará State, Brazil for $250 million (the “Stream“). Additionally, Franco-Nevada, through one of its wholly-owned subsidiaries, has agreed to provide G Mining Ventures Corp. (“G Mining Ventures“) with a $75 million secured term loan (the “Term Loan“) and to subscribe for $27.5 million of G Mining Ventures’ common shares (“Common Shares“).
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“We are delighted to support G Mining Ventures with this construction financing package,” said Paul Brink, President & CEO of Franco-Nevada. “Tocantinzinho is an attractive project in a prolific district and located in a good jurisdiction. The G Mining Ventures team has a track-record as one of the most capable mine building teams in the industry. As a stream financing partner we seek, through our financing and our involvement in projects, to help mine developers raise their full financial package on attractive terms. We are pleased to provide stream and debt financing to G Mining Ventures and along with two other strong strategic investors, La Mancha and Eldorado, to provide an equity component to fully finance the planned mine build.”
Transaction Highlights
- Near-term gold contribution:Â Tocantinzinho is expected to be a low cost, conventional open pit mining and milling operation. The project is construction-ready and first production is expected in the second half of 2024. Based on expected mine performance, full year contributions to FNB from the project are expected to average approximately 24,500 GEOs per year over the first 5 years of full production.
- Experienced team with track record of project delivery: The G Mining Ventures team has a proven history of project development on time and on budget (including their role in constructing Newmont’s Merian Mine in Suriname and Lundin Gold’s Fruta del Norte Mine in Ecuador).
- Fully financed project: Franco-Nevada is providing $352.5 million of a total $481 million fully committed financing package. The balance of the package is being provided by equity private placements to two strategic investors, $68.8 million to La Mancha Investments S.à .r.l. (“La Mancha“) and $20 million to Eldorado Gold Corporation (“Eldorado“), and by up to $40 million in equipment financing with Caterpillar Financial Services. As a result of this financing package and G Mining Ventures’ cash on hand of $54 million as at June 30, 2022, G Mining Ventures will have total committed capital of $535 million. The available capital exceeds the expected Tocantinzinho remaining development capital of $455 million, establishing a pathway to production.
- Exploration and expansion potential:Â The Stream is referenced to production from the entire Tocantinzinho land package currently covering approximately 996 km2. In addition to the planned project, the land position includes a number of regional targets and prospects.
Key Financing Terms
$250 Million Gold Stream
- Stream deliveries to FNB are based on gold production from the Tocantinzinho property, according to the following schedule:
- 12.5% of gold produced until 300,000 ounces of gold have been delivered.
- Thereafter, 7.5% of gold produced for the remaining life of mine.
- The $250 million deposit will be available for draw-down after G Mining Ventures has spent at least $95 million on the Tocantinzinho project from January 1, 2022 and subject to certain other conditions.
- G Mining Ventures will receive 20% of the spot gold price for each ounce of gold delivered.
- Should G Mining Ventures acquire new properties with mining production processed through the Tocantinzinho facilities, FNB will have the option to purchase a gold stream relating to the additional ore from such properties. The Stream agreement also provides FNB with a right of first refusal on any future stream and royalty transactions on the Tocantinzinho project and, as long as Franco-Nevada’s equity ownership in G Mining Ventures remains at or above 5%, a right of first refusal over streams and royalties on future G Mining Ventures projects.
- FNB has agreed to partner with G Mining Ventures on environmental and social initiatives in the vicinity of the project, with FNB funding up to $1 million over 4 years.
$75 Million Term Loan
- $75 million, six-year Term Loan with an availability period of 3.5 years, drawable quarterly at G Mining Ventures’ option following full funding of the Stream.
- Interest rate of 3-Month Term Secured Overnight Financing Rate (“3-Month SOFR“) +5.75% per annum, reducing to 3-Month SOFR+4.75% after completion tests have been achieved at the project.
- Amortization to begin in December 2025 with equal quarterly repayments followed by a final 25% repayment upon maturity in June 2028.
- Fees payable to Franco-Nevada’s subsidiary include a standby fee on undrawn amounts of 1.0% per annum and a 2.0% original issue discount payable on principal amounts drawn. Franco-Nevada will also be granted warrants to purchase up to 11.5 million Common Shares with a 5-year term and an exercise price per Common Share of C$1.90.
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$27.5 Million Equity Private Placement
- Franco-Nevada has subscribed for 44,687,500 Common Shares for gross proceeds of $27.5 million as part of G Mining Ventures’ $116.4 million equity financing via a non-brokered private placement at a share price of C$0.80 per Common Share.
- Franco-Nevada has been granted customary anti-dilution rights, and has agreed to a standstill and restrictions on dispositions, both for a period of 24 months and subject to certain exceptions.
- After closing of the private placement, La Mancha, a new strategic investor, Eldorado Gold and Franco-Nevada will each own 25%, 17.8% and 9.9% of G Mining Ventures’ issued and outstanding Common Shares, respectively. Franco-Nevada does not currently own any Common Shares.
- The private placement will be completed in two tranches, with the first tranche, including the Common Shares to be issued to Franco-Nevada, Eldorado and the majority of the Common Shares to La Mancha is expected to close in July 2022. The second tranche consisting of the remaining shares to be acquired by La Mancha is expected to close by September 2022, following shareholder approval pursuant to the policies of the TSX Venture Exchange. Upon the closing of the first tranche, Franco-Nevada will hold approximately 10.7% of the outstanding Common Shares, which will reduce to 9.9% upon the closing of the second tranche. Franco-Nevada is acquiring the Common Shares for investment purposes. Franco-Nevada may, from time to time, depending on market conditions, its investment strategy and subject to the restrictions described above, acquire additional Common Shares, dispose of such securities or continue to hold the securities of G Mining Ventures.
Financing the Transactions
Franco-Nevada intends to finance the transactions from cash on hand, with approximately $723 million in cash and cash equivalents and $1.7 billion in available capital as at March 31, 2022.
Funding of the Stream is expected to commence in or around Q1 2023, with the Term Loan to be advanced only after the Stream has been fully funded, in each case subject to the satisfaction of applicable conditions.
Franco-Nevada Corporate Summary
Franco-Nevada Corporation is the leading gold-focused royalty and streaming company with the largest and most diversified portfolio of cash-flow producing assets. Its business model provides investors with gold price and exploration optionality while limiting exposure to cost inflation. Franco-Nevada uses its free cash flow to expand its portfolio and pay dividends. It trades under the symbol FNV on both the Toronto and New York stock exchanges. Franco-Nevada is the gold investment that works.
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