Franco-Nevada (TSX: FNV) has acquired a new precious metals stream following a transaction with Sibanye-Stillwater. The arrangement will see Franco-Nevada obtain both gold and platinum from certain operations in South Africa.
The stream specifically applies to the Marikana, Rustenburg and Kroondal operations of Sibanye, which are part of the Western Limb of the Bushveld Complex. The complex notably is responsible for 15% of global platinum supply.
Under the terms of the arrangement, Franco-Nevada will pay US$500 million up front, in exchange for an immediately cash flowing stream. Under the gold portion of the stream, Franco is to receive gold equal to 1.1% of the gold, rhodium, palladium and platinum (4E PGM) production until 87,500 ounces of gold is delivered. The stream then steps down to gold equal to 0.75% of 4E PGM production until 237,000 ounces of gold have been delivered.
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After this, Franco-Nevada is entitled to 80% of gold contained in concentrate for the remaining life of mine, which is currently estimated to run through to 2070. Gold deliveries are expected to be linked to PGM production for the first 25 years of the arrangement.
For the platinum portion of the stream, Franco is entitled to 1.0% of platinum contained in concentrate until the delivery of 48,000 ounces, after which it steps up to 2.1%, until 294,000 ounces have been delivered. No further deliveries of platinum will occur once this threshold has been met.
In terms of payment, Franco is to pay 5% of spot for both gold and platinum initially. Once the link of gold deliveries to PGM production is complete, the price paid for gold ounces will increase to 10% of spot.
Franco-Nevada last traded at $166.70 on the TSX.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
