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Franco-Nevada

Kirkland Lake (Au)

LOCATION: Ontario, Canada
OPERATOR: Kirkland Lake Gold Inc. / Agnico Eagle
ROYALTY: NSR: 1.5-5.5%; NPI: 20%

Franco-Nevada has various royalties covering approximately 170 km2 of the Larder Lake and Main Breaks in the historic Kirkland Lake gold camp of Ontario. KLG has the main interests in the area and operates the Macassa mine which includes production from the Main Break, ’04 Break and the high-grade South Mine Complex (“SMC”).

Franco-Nevada’s royalty interests with KLG include:

  • An overlying 1.5% NSR on all of KLG’s properties (including the Macassa mine) which was acquired in 2013 for $50 million. In 2016, KLG exercised its option to buyback 1% of the overlying 2.5% for aggregate cash consideration of approximately $30.3 million ($36 million less royalty proceeds attributable to the buyback)
  • An underlying 20% profit-based royalty immediately to the south-west of the SMC as shown in the inset of the schematic
  • An underlying 2-3% NSR on claims to the west of current operations
  • An underlying 2% NSR royalty on claims that KLG purchased from Queenston Mining Inc. in July 2012

Macassa produced a record 240,126 ounces of gold in 2018 which was higher than the original guidance range of 220,000-225,000 ounces and surpassing the previous record of 194,237 ounces in 2017. For 2019, KLG expects to increase production of 230,000-240,000 ounces from Macassa, increasing marginally to 245,000-255,000 ounces by 2021 prior to the impact of the #4 Shaft project discussed below.

KLG has started construction of a new shaft at the Macassa mine. The new, 21.5-foot diameter, concrete-lined shaft will support higher levels of production while also de-risking the operation, offer more effective underground exploration to the east of the SMC and improve ventilation and general working conditions. The two phase project is expected be completed by the end of 2023 at a total cost of $320 million with a total hoisting capacity of 4,000 tonnes per day and reach an ultimate depth of approximately 7,000 feet. The shaft is a key component of achieving KLG’s goal of increasing production at Macassa to over 400,000 ounces per year over the next five to seven years.

Franco-Nevada also has a 2% NSR royalty covering the majority of claims held in the Kirkland Lake gold camp by Agnico Eagle Mines Limited (“Agnico Eagle”) from its acquisition of Osisko Mining Corporation (“Osisko”) in April 2014. Agnico Eagle bought out its JV partner Yamana at the end of 2017 and now owns 100% of the claims. Franco-Nevada’s royalties cover the Upper Canada, Anoki-McBean and Canadian Kirkland deposits.

ASSET HIGHLIGHTS:

  • Overlying 1.5% royalty purchased in 2013 covers all of KLG’s properties
  • #4 Shaft could increase production to over 400,000 gold ounces per year
  • Large land position in historical mining area covering multiple known deposits

2018 2017 2016
Revenue to Franco-Nevada ($ million) $ 4.6 $ 4.1 $ 5.2