Operator: Coeur Mining, Inc.
Stream: 50% Gold Stream
Since January 2009, Franco-Nevada has received 50% of the gold produced from the Palmarejo operation located in Chihuahua Province, Mexico which is owned and operated by Coeur Mining, Inc. (“Coeur”). Palmarejo is a silver project with a considerable gold by-product. In June 2014, Franco-Nevada agreed to terminate the existing stream agreement once Coeur has delivered the minimum 400,000 ounce obligation under that agreement. The minimum obligation was met in the third quarter of 2016.
In June 2014, Franco-Nevada also entered into a new 50% gold stream with Coeur on the Palmarejo project with ongoing payments equal to the lesser of $800 per ounce (no inflation provision) and the then prevailing spot price for gold for each ounce delivered under the new gold stream agreement. The restructured agreement improves mine economics for Coeur and extends the mine life of the entire Palmarejo operation. This agreement continues to apply to the extensive land position totaling over 1,200 km2. Franco-Nevada provided an upfront $22 million deposit to be used to partially fund the development of the Guadalupe underground mine on the Palmarejo property. In 2016, Franco-Nevada received 29,328 ounces under the original Palmarejo agreement and 7,058 ounces under the revised agreement.
With the acquisition of the Independencia deposit in 2014, of which only a portion is subject to the stream agreement, Coeur is processing both Independencia and Guadalupe ore through the Palmarejo mill. In 2016, open pit and underground operations at Palmarejo were completed while underground operations at Guadalupe and Independencia steadily accelerated, reaching a mining rate of approximately 2,400 and 1,000 tons per day, respectively, as of year-end. Coeur is targeting a combined mining rate of 4,500 tons per day by year-end 2017. For 2017, Coeur expects to produce between 110,000-120,000 ounces of gold but does not provide a breakdown of what is expected from Guadalupe/Independencia West (stream ground) and Independencia East (non-stream ground). The two deposits, Guadalupe and Independencia, remain open at depth and along strike with $14 million in exploration planned for 2017 versus a total of $11.2 million spent in 2016.
|Total Revenue to FNV ($ million)