Franco-Nevada unveils purchase of earnings-generating royalty on Cote Gold Mine located in Ontario.
In a significant move, Franco-Nevada Corporation has agreed to acquire a 7.5% gross margin royalty on the Côté Gold Mine in Ontario for a sum of $1.05 billion in cash. This acquisition grants Franco-Nevada access to one of Canada's largest new gold mines, boasting over 16 million ounces of measured and indicated gold resources.
The Côté Gold Mine, operated through an unincorporated joint venture by IAMGOLD Corporation (70%) and Sumitomo Metal Mining Co. Ltd. (30%), commenced commercial production in August 2024. The mine is expected to be in the lower half of the cost curve, benefiting from low-cost, clean hydroelectric power.
The financial impact for IAMGOLD, the mine operator, is the introduction of a royalty buyback structure. This structure allows IAMGOLD to reduce its royalty burden by up to 50% in two tranches. The first 25% buyback tranche is exercisable at an interest rate tied to SOFR +1.10%, and the second 25% tranche is exercisable at a fixed 10% internal rate of return (IRR). This provision offers IAMGOLD flexibility to protect its margins, particularly amid gold price volatility, and improves near-term free cash flow visibility.
The buyback price floor is set at 25% of Franco-Nevada’s original $525 million cost for the royalty portion, ensuring downside protection for Franco-Nevada while giving IAMGOLD strategic optionality. If the buyback is exercised, IAMGOLD could potentially save $100–$150 million annually by 2026.
IAMGOLD, an intermediate gold producer and developer based in Canada, operates mines in North America and West Africa, including Côté Gold (Canada), Westwood (Canada), and Essakane (Burkina Faso). The company is committed to maintaining its culture of accountable mining through high standards of Environmental, Social, and Governance practices.
As part of the arrangements, Franco-Nevada will grant IAMGOLD and Sumitomo an option to buy down up to 50% of the Royalty at Franco-Nevada's attributable cost in two equal tranches of 25%. The royalty deductions include cash operating costs and exclude all capital, exploration, depreciation, and other non-cash costs.
IAMGOLD has provided 2025 guidance for the Côté Gold Mine of 360 to 400 koz Au at cash costs of $950/oz to $1,100/oz inclusive of the Royalty costs. For additional information on risks, uncertainties, and assumptions, please refer to IAMGOLD's most recent Annual Information Form and Management’s Discussion and Analysis.
Franco-Nevada Corporation currently has approximately $2 billion in available capital and continues to generate $275-$300 million in free cash flow each quarter. The corporation's scientific and technical information in this news release has been reviewed by Darrol van Deventer, Vice President, Mining of Franco-Nevada.
IAMGOLD is listed on the New York Stock Exchange (NYSE: IAG) and the Toronto Stock Exchange (TSX: IMG). The royalty applies to mineral production from the Chester 1, 2 & 3 claims, which cover all of the Mineral Reserves and over 99.9% of current Mineral Resources on the Côté Gold Mine. IAMGOLD employs approximately 3,700 people.
[1] Source: Franco-Nevada Corporation press release, dated May 2, 2023 [2] Source: IAMGOLD Corporation press release, dated May 2, 2023
- The acquisition by Franco-Nevada Corporation of a royalty on the Côté Gold Mine will provide flexibility for IAMGOLD, the mine operator, to protect its margins, particularly in the face of gold price volatility.
- The Côté Gold Mine, a significant new gold mine with over 16 million ounces of gold resources, will benefit from low-cost, clean hydroelectric power and has the potential to be in the lower half of the cost curve.
- As part of the agreement, Franco-Nevada will grant IAMGOLD and Sumitomo the option to buy down up to 50% of the royalty at Franco-Nevada's attributable cost.
- IAMGOLD, an intermediate gold producer and developer, has provided guidance for the Côté Gold Mine of 360 to 400 thousand ounces of gold at cash costs of $950 to $1,100 per ounce, inclusive of the royalty costs.
