Franco-Nevada has announced the acquisition of a 1.8% net smelter return (NSR) royalty on Newmont's Yanacocha operations in Peru, touted as one of South America's largest gold mines.
This transaction includes a cash consideration of $210m (C$287.96m) at closing and a contingent payment of $15m in shares, based on the fulfilment of various conditions.
The company now also holds a right of first refusal on further sales of Buenaventura's royalty interests.
Additionally, the deal enhances Franco-Nevada's portfolio with immediate gold equivalent ounces and long-term growth potential.
Yanacocha's current production from open-pit oxides is set to contribute immediate gold equivalent ounces to Franco-Nevada's portfolio.
Newmont's 2024 production guidance estimates 290,000oz of gold from the site, indicating a substantial boost to Franco-Nevada's asset base.
The acquired royalty encompasses the Yanacocha Sulphides Project, which holds considerable copper and gold reserves.
With an expected annual output of more than 500,000oz of gold equivalent in its first five years, the project promises to extend the mine's life well beyond 2040, although Newmont has postponed the development decision until at least 2025.
In 2022, Newmont had signed a $300m deal with Compañia de Minas Buenaventura to buy stake in Yanacocha gold mine.
Beyond the sulphides project, the royalty acquisition includes the Conga project and other resources on the property, providing Franco-Nevada with long-term growth options.
Conga, with significant indicated and inferred resources, lies adjacent to Yanacocha and enhances the royalty's value.
The royalty covers an extensive land area of more than 750km², a region historically rich in gold production with more than 40 million ounces (moz) extracted.
This vast territory holds numerous exploration targets and potential for further mine life extensions, representing a strategic addition to Franco-Nevada's portfolio.
Franco-Nevada president and CEO Paul Brink said: “We are pleased to partner with Buenaventura to acquire this existing royalty, which adds immediately cash flowing gold production and growth from a leading gold operator.
“Yanacocha has been one of the largest gold mines globally and the district covered by the royalty remains highly prospective with over 47moz AuEq [gold equivalent] in total reserves and resources.
“The royalty covers current oxide production, the planned sulphide project and high-quality growth projects, including Conga, which together have the potential to add decades of contributions to Franco-Nevada.”
