TSX:FNV 102.22 +0.81 +0.8%
Volume 367,024
May 17, 2019
NYSE:FNV 75.92 +0.61 +0.81%
Volume 447,074
May 17, 2019
Gold 1,278.30 -9.10 -0.71%
Volume
May 17, 2019
Contact Share

Franco-Nevada

Guadalupe-Palmarejo (Au)

Palmarejo

Location: Mexico, Latin America
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 original stream agreement once Coeur delivered the minimum 400,000 ounce obligation under that agreement. The minimum obligation was met in the third quarter of 2016.

In June 2014, a subsidiary of Franco-Nevada 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 new agreement improves mine economics for Coeur and extends the mine life of the entire Palmarejo operation. The agreement applies to the extensive land position totaling over 1,200 km2. Franco-Nevada provided an upfront $22 million deposit which was used to partially fund the development of the Guadalupe underground mine on the Palmarejo property.

Franco-Nevada received 35,807 ounces of gold in 2018 versus 52,124 ounces of gold in 2017. For 2019, Coeur expects to produce between 95,000-105,000 ounces of gold but does not publicly provide a breakdown of what is expected from Guadalupe/Independencia West (stream ground) and Independencia East (non-stream ground). Franco-Nevada estimates that over 70% of the existing Mineral Reserve is covered by stream agreement and over 80% of the Mineral Resource. Underground development at the La Nación deposit, which straddles the stream ground border and is located between the Independencia and Guadalupe underground mines, remains on-schedule with production expected in the second half of 2019.

Coeur drilled over 74,500 meters at the Palmarejo property in 2018, representing Coeur’s largest exploration investment. Coeur targeted several areas including Mineral Resource expansion at La Nación and areas around Guadalupe and Independencia. In addition, Coeur conducted infill drilling at Guadalupe and Independencia. For 2019, priorities will shift to new Mineral Resource development as well as continued infill drilling. Mineral Reserves for the year decreased marginally due to depletion but M&I gold Mineral Resources increased by 25% primarily driven by growth at La Nación.

ASSET HIGHLIGHTS:

  • Restructured agreement following completion of minimum stream payments
  • Significant exploration investment could lead to continued Mineral Resource growth and increased mine life

2018 2017 2016
Revenue to Franco-Nevada ($ million) $ 45.3 $ 65.5 $ 44.6

Guadalupe-Palmarejo