LOCATION: Ontario, Canada
OPERATOR: Kirkland Lake Gold Inc.
ROYALTY: NSR: 0.25-15%
Franco-Nevada has multiple NSR royalties ranging from 0.25 to 15% over the Destor-Porcupine mineral trend just east of Timmins, Ontario spread over more than 120 km and estimated to cover over 340 km2. Kirkland Lake Gold Inc. (“KLG”) acquired St Andrew Goldfields (“St Andrew”) in January 2016 which previously owned and operated most of the properties along the trend on which Franco-Nevada has royalties. The key properties include:
Holt: The Holt mine is the main producing asset that KLG acquired as part of the St Andrew transaction and includes the Holt mill complex. Franco-Nevada has a sliding scale NSR royalty beginning at 2% when the gold price is less than or equal to $500/ounce and increasing in 1% increments for each $100/ounce increase in the gold price, to a maximum of 10%. The operation re-started in 2011. The Holt mine produced 57,086 ounces in 2016 and is expected to produce between 65,000-70,000 ounces in 2017.
Holloway: The Holloway mine, restarted in 2009, is located immediately north of the Holt property with ore processed at the Holt mill. Franco-Nevada has a sliding scale NSR royalty of 2% if the price of gold is less than $800/ounce, increasing by 1% for every $100/ounce increase in the price of gold, up to a maximum of 15%. The Holloway mine was placed on care and maintenance at the end of 2016 due to limited economic viability. KLG continues to conduct surface exploration at Holloway west of the Holloway shaft which has historically been under explored.
Taylor: The Taylor mine (1% NSR) achieved commercial production in November 2015. The operation produced 42,639 ounces in 2016 with production expected to increase to 55,000-60,000 ounces in 2017. Recent exploration results targeting new mineralized extensions situated both at depth and along strike to the east of the Shaft Deposit and west of the West Porphyry Deposit have been encouraging.
Hislop: Franco-Nevada has a 4% NSR on the Hislop mine which is located approximately 50 km to the west of the Holt mill. The open-pit Mineral Reserve for the Hislop open-pit was fully depleted in 2014.
Other exploration: KLG has planned production for the Zone 7 (formerly referred to as the Ghost Zone) in 2018 which could provide over 25,000 ounces to the Holt Mine production profile. Zone 7 is covered by a reduced royalty rate if developed by the end of 2018, but will revert back to the Holt or Holloway sliding scale NSRs if not developed by such time. KLG is also actively exploring its full 120 km property along the Destor-Porcupine mineral trend including the potential to redevelop the Hislop Mine and the Aquarius deposit west of Taylor.