CIBCHave a $260.00 target. GLTA
EQUITY RESEARCH
July 18, 2022 Flash Research
FRANCO-NEVADA CORPORATION
Tocantinzinho Gold Project Stream And Financing Package
Announced
Our Conclusion
This morning Franco-Nevada announced the acquisition of a gold stream on
the Tocantinzinho gold project, located in Par State Brazil, for $250M as
part of a $352.5M financing package, including a $75M secured loan to
G Mining Ventures and a subscription for $27.5M in G Mining Venture
common shares. The Tocantinzinho project is construction-ready and will be
fully financed after FNV’s $352.5M contribution to a total $481M
full-committed financing package. Production is expected in the second half
of 2024 and to average 24,500 GEOs to FNV over the first five full years of
production. At spot prices, we calculate an acquisition multiple of <1.0x for
the gold stream. Overall, this is a small transaction for Franco-Nevada that
adds growth to the longer-term production profile and provides for potential
further upside from exploration and expansion potential.
Key Points
Stream Terms: Franco-Nevada will receive 12.5% of gold produced until
300koz of gold have been delivered, thereafter dropping to 7.5% of gold
produced for the remaining life of mine, with G Mining receiving 20% of the
spot gold price for each ounce of gold delivered in exchange for a $250M
deposit. The $250M will be available for drawdown after G Mining has spent
$95M on the project from January 1, 2022. The stream provides FNV with a
right-of-first-refusal on any future stream and royalty transactions on the
Tocantinzinho project, and as long as FNV’s equity ownership in G Mining
remains at or above 5% a right-of-first-refusal over streams and royalties on
other future G Mining projects. Production is expected in the second half of
2024 and to average 24,500 GEOs to FNV over the first five full years of
production.
Term Loan: FNV will provide a $75M, six-year term loan with an availability
period of 3.5 years, drawable quarterly at G Mining’s option following full
funding of the stream. Interest will be earned based on the three-month term
secured overnight financing rate (SOFR) +5.75% per annum, falling to a
three-month SOFR +4.75% after completion tests have been achieved at the
project. Amortization will begin in December 2025 with equal repayments
followed by a final 25% repayment upon maturity in June 2028.
Equity Private Placement: Franco-Nevada has subscribed for ~45M
common shares for gross proceeds of $27.5M as part of G Mining Venture’s
$116.4M equity financing at a price of C$0.80 per share. Upon closing, La
Mancha, Eldorado Gold and Franco-Nevada will own 25%, 17.8% and 9.9%
of G Mining Ventures’ issued and outstanding common shares, respectively.
Financing: Franco-Nevada intends to finance the transactions with cash on
hand, with >$700M in cash and cash equivalents and $1.7B in available
capital as of March 31, 2022.