OPERATOR: BARRICK GOLD CORPORATION
ROYALTY: NSR: 2-4% / NPI: 2.4-6%
Franco-Nevada holds royalties covering the majority of the Goldstrike complex operated by Barrick Gold Corporation (“Barrick”). The Goldstrike complex is located on the Carlin Trend, about 60 km northwest of the town of Elko, Nevada. The Goldstrike complex includes the open-pit Betze-Post mine, as well as the underground operations of Meikle and Rodeo immediately to the north. Mining activity commenced on the property in 1976 and, since 1987, has been operated by Barrick. Franco-Nevada holds NSR (2-4%) and NPI (2.4-6%) royalties at Goldstrike covering the majority of the reported Mineral Reserves and Mineral Resources. Included is low grade ore that has been stockpiled for later processing. The royalties vary depending on the claim blocks, as shown in the figure. As a result, royalty payments can vary substantially on a quarterly basis, depending on mine sequencing and waste stripping. The timing of capital investments can also impact the timing of the payment of profit royalties.
Goldstrike is a mature mining operation but remains one of Barrick’s five core mines. Franco-Nevada’s NPI and NSR royalty payments both increased in 2015 versus 2014. The royalty payments benefitted in 2015 from a 17% increase to gold production to 1,053,000 ounces while the NPI payments were aided by reduced all-in sustaining costs primarily the result of lower cash costs combined with a decrease in mine-site sustaining capital expenditures. Barrick expects Goldstrike to produce between 975,000-1,075,000 ounces in 2016 at an all-in sustaining cost of $780-850 per ounce. Production forecast is essentially unchanged from 2015 while expected all-in sustaining costs is higher due to increased sustaining capital expenditures.
The new thiosulfate processing method (“TCM”), which does not use cyanide, achieved commercial production in July 2015 and will enable Goldstrike to accelerate production from about 4 million stockpiled ounces. Throughput and recoveries continue to improve with ongoing adjustments. The TCM circuit is expected to achieve throughput of approximately 11,000 tonnes per day by the third quarter of 2016, in line with its design capacity.
|Total Revenue to FNV ($ million)