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Franco-Nevada

Hemlo (Au)

LOCATION: Ontario, Canada
OPERATOR: Barrick Gold Corporation
ROYALTY: NSR: 3% / NPI: 50%

The Hemlo gold mine has been producing gold for over 30 years and is located just off the Trans-Canada highway near Marathon, Ontario. Barrick is the operator and manages both the open-pit and underground operations. Franco-Nevada has both a 3% NSR royalty and a 50% NPI royalty on a portion of the western down-dip underground extension of the Hemlo ore-body as shown in the longitudinal schematic.

Initial mining on the royalty property began in late 2008, but revenues were limited to the 3% NSR royalty. The 50% NPI portion of the royalty began paying in the third quarter of 2012 after the upfront capital costs had been recovered by Barrick.

In 2018, Hemlo produced 171,000 ounces of gold compared with 196,000 ounces in 2017. All-in sustaining costs, which is important to take into consideration with respect to the NPI royalty, increased to $1,318 per ounce in 2018 versus $1,092 per ounce in 2017. Barrick is forecasting improved operating performance in 2019 with estimated production of 200,000-220,000 ounces at an all-in sustaining cost of $1,100-1,200 per ounce.

Hemlo’s operational plan assumes that underground production will ramp-up to 1.9 million tonnes per annum from the current 1.2 million tonnes per annum over the next four years as well as expansion of the current tailings impoundment to enable production to continue past 2021. Exploration results continue to be encouraging and year end Mineral Reserves and M&I mineral resources saw year-over-year increases.

ASSET HIGHLIGHTS:

  • Established mine operation in Ontario - Barrick’s only Canadian operation
  • Underground production rate expected to increase over next 4 years
  • Profit royalties are more levered to gold prices

2018 2017 2016
Revenue to Franco-Nevada ($ million) $ 7.1 $ 4.4 $ 12.7