TSX:FNV 117.86 +1.10 +0.94%
Volume 739,207
July 19, 2019
NYSE:FNV 90.22 +0.64 +0.71%
Volume 724,583
July 19, 2019
Gold 1,425.99 -20.23 -1.4%
Volume
July 19, 2019
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Franco-Nevada

Golden Highway (Au)

LOCATION: Ontario, Canada
OPERATOR: Kirkland Lake Gold Inc.
ROYALTY: NSR: 0.25-15%

Franco-Nevada has multiple NSR royalties ranging from 0.25 to 10% 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”) (see page 52 for additional asset operated by 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 67,770 ounces of gold in 2018, slightly higher than the guidance range of 65,000-75,000 ounces. For 2019, gold production is expected to be within a range of 70,000-75,000 ounces.

Taylor: The Taylor mine (1% NSR) achieved commercial production in November 2015. The operation produced 58,633 ounces of gold in 2018, also slightly better than the guidance range for 50,000-55,000 ounces. For 2019, gold production is expected to between 50,000-55,000 ounces. Of KLG’s Golden Highway assets, Taylor is expected to receive the majority of the exploration budget as work continues on extending the existing Mineral Resource.

Holloway: The Holloway mine is located immediately north of the Holt property with ore processed at the Holt mill. The Holloway mine was placed on care and maintenance at the end of 2016 due to limited economic viability. In an effort to improve the economics of the operation, in 2019 Franco-Nevada agreed to reduce the royalty at Holloway to a flat 3% NSR from the previous sliding scale royalty. KLG is forecasting production of 20,000 ounces in 2019. Production is expected to increase to 30,000 ounces in 2020 and 50,000 ounces in 2021.

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.

ASSET HIGHLIGHTS:

  • Steady production at Holt and Taylor
  • Reduced royalty rate at Holloway to encourage production and exploration
  • Large land position offers additional potential at higher gold prices
Golden Highway (Au) 2018 2017 2016
Revenue to Franco-Nevada ($ million) $ 8.0 $ 8.7 $ 10.7