Franco-Nevada invests $352 million in Tocantinzinho gold project in Brazil

The project’s positive economics was confirmed by its recent feasibility study, showing total gold production of 1.8 million oz. over a mine life of 10.5 years, resulting in an average annual gold production of 174,700 oz. with an all-in-sustaining cost of $681/oz. and initial capital cost of $458 million.

As shown in the FS, the Tocantinzinho project has an after-tax net present value (5% discount rate) of $622 million with an after-tax internal rate of return of 24% at a gold price of $1,600/oz. The project mine plan is based on proven and probable mineral reserves of 48.7 million tonnes at an average gold grade of 1.31 g/t for 2.04 million contained ounces of gold.

To support the project’s construction, Franco-Nevada has agreed to spend $250 million to acquire a gold stream on the Tocantinzinho project, based on following schedule: 12.5% of gold produced until 300,000 oz. of gold have been delivered, and 7.5% of gold produced for the remaining life of mine thereafter. G Mining will receive 20% of the spot gold price for each ounce of gold delivered. Franco-Nevada will also have the option to purchase gold stream on additional properties with mining production processed through the Tocantinzinho facilities.

In addition to the gold stream, Franco-Nevada has agreed to provide a $75 million, six-year term loan to G Mining and subscribe for $27.5 million worth of G Mining’s shares. Proceeds from the share purchase would fall under G Mining’s $116.4 million equity financing package arranged with various strategic investors. At closing, Franco-Nevada would own 9.9% of G Mining’s outstanding shares.

The entire funding package to G Mining will be drawn from Franco-Nevada’s cash on hand. As of March 31, 2022, the company had approximately $723 million in cash and cash equivalents and $1.7 billion in available capital.

“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,” Franco-Nevada CEO Paul Brink said in a media statement.

As for other financial commitments to the project, G Mining has arranged equity private placements with two other strategic investors ($68.8 million to La Mancha Investments and $20 million to Eldorado Gold), and up to $40 million in equipment financing with Caterpillar Financial Services.

Eldorado Gold is the previous owner of the Tocantinzinho project; G Mining acquired the property in October 2021 for $115 million.