First Quantum Minerals Ltd. has made a major strategic move to strengthen its financial position by signing a new gold streaming agreement. The Company has entered into a deal with RGLD Gold AG, a subsidiary owned by Royal Gold, Inc. that includes a $1.0 billion up-front cash payment from Royal Gold in exchange for gold deliveries linked to copper production from the Kansanshi Mine (“Kansanshi”) in Zambia.
“Following a thorough evaluation of several deleveraging options, I am pleased to announce this milestone transaction which preserves exposure to all of the copper production at Kansanshi while still maintaining exposure to the majority of the Company’s gold production. Today’s announcement further enhances the Company’s financial resilience, while the ramp-up of the S3 Expansion at Kansanshi and a resolution in Panama will continue to strengthen our financial position,” Tristan Pascall, CEO of First Quantum, commented. “It is pleasing to form a new partnership with Royal Gold which is a strong endorsement of the operations at Kansanshi and its multi-generational ore body as well as Zambia as a leading African mining jurisdiction.”
Favorable and Flexible Terms for Growth
- Strengthens Balance Sheet: The agreement offers a long-term, non-debt, unsecured capital which will considerably strengthen the liquidity. The proceeds will be utilized towards payment of capital expenditure, general working capital requirements, and repayment of bank loans while the company will continue to keep an eye on debt capital markets for opportunities to manage its maturities. At the closing of the Transaction, the Company’s net debt to EBITDA ratio is expected to reduce markedly.
- Maintains Majority of Gold Production: The transaction will allow the company to maintain full exposure to the copper production at Kansanshi. Based on the company’s copper and gold production guidance for 2026 and 2027, on average, 84% of the Company’s total gold production will continue to have exposure to spot gold prices. The Company retains full exposure to the recently identified near-surface gold zone occurrences at Kansanshi.
- Competitive Terms: The deal gives the company the ability to increase gold exposure over time, depending on financial performance, with provisions for higher ongoing production payments and acceleration options upon achieving certain leverage thresholds for the gold stream deal.
Key Terms and Conditions of the Gold Streaming Agreement
1. Upfront Payment: First Quantum will receive a total upfront cash consideration of $1.0 billion on August 6, 2025.
2. Gold Deliveries with Stepdown Terms: First Quantum shall deliver to Royal Gold, gold commensurate in proportion to copper production during Kansanshi on the following stepdown terms:
(i) 75 ounces of gold for each million pounds of recovered copper produced up to 425,000 ounces of gold are delivered; and
(ii) 55 ounces of gold for each million pounds of recovered copper produced up to a further 225,000 ounces of gold delivered; and
(iii) 45 ounces of gold per million pounds of recovered copper produced.
3. Production Payments: First Quantum will be entitled to continuous production payments from Royal Gold equal to 20% of the prevailing spot gold price for each ounce of delivered gold under the Agreement, rising to 35% of the spot price of gold when First Quantum achieves:
(i) BB senior unsecured debt rating from Fitch Ratings Inc. (“Fitch”) or S&P Global Ratings (“S&P Global”); or
(ii) Net leverage ratio of less than or equal to 2.25x over any 3 consecutive quarters commencing with the quarter ended March 31, 2026.
4. Acceleration Options: First Quantum retains two options that will allow the Company to accelerate deliveries and reduce ongoing gold delivered to Royal Gold by up to 30% as follows:
- Option to reduce the stream rate and delivery thresholds by up to 20% at a value of up to $200 million at such time when First Quantum achieves the earlier of:
(i) BB senior unsecured debt rating from Fitch or S&P Global; or
(ii) Net leverage ratio of less than or equal to 2.25x over any 3 consecutive quarters commencing with the quarter ended March 31, 2026.
Option to reduce the stream rate and delivery thresholds by up to a further 10% at a value of $100 million at such time when First Quantum achieves certain operational conditions and the earlier of:
(i) BBB- senior unsecured debt rating from Fitch or S&P Global; or
(ii) Net leverage ratio of less than or equal to 1.25x over any 4 consecutive quarters.
5. Unsecured and Guaranteed: The gold stream deal is not secured. The stream benefits from guarantees by the Company and some subsidiaries of the Company in the Kansanshi ownership chain.