Canadian miner First Quantum Minerals (TSE: FM) (OTCMKTS: FQVLF) has secured a USD$1 billion gold streaming agreement with a subsidiary of Royal Gold (NASDAQ: RGLD), in a deal that significantly boosts its financial flexibility.
Announced Tuesday, the deal gives First Quantum immediate access to non-debt capital in exchange for a portion of future gold by-product from the company’s Kansanshi copper mine in Zambia.
Under the terms, Royal Gold will provide the full $1 billion upfront on August 6, 2025.
In return, it will receive gold deliveries tied to copper production at the mine. First Quantum will initially deliver 75 ounces of gold per million pounds of recovered copper until 425,000 ounces have been supplied. Thereafter, it will deliver 55 ounces per million pounds for the next 225,000 ounces, and then 45 ounces per million pounds beyond that threshold.
Royal Gold will also pay First Quantum 20 per cent of the spot gold price for each ounce delivered.
If First Quantum achieves specific credit upgrades or lowers its net leverage ratio to 2.25x over any three consecutive quarters after March 31, 2026, the payment rate increases to 35 per cent. This tiered structure rewards the company’s financial progress and allows for improved revenue over time.
Royal Gold anticipates receiving about 12,500 ounces from the stream in 2025. Over the following decade, it expects annual deliveries to average between 35,000 and 40,000 ounces. The company emphasized the strength of Kansanshi’s long-life, large-scale asset base, which supports stable and predictable output.
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First Quantum expects deal to reduce its net debt
First Quantum benefits from the deal in several key ways.
It secures long-term liquidity without adding debt and maintains full exposure to its core copper production. Furthermore, the company retains 84 per cent exposure to spot gold pricing in 2026 and 2027, according to current guidance. It also continues to benefit from newly identified near-surface gold zones at Kansanshi, enhancing its longer-term gold potential.
The proceeds from the transaction will be used to support capital expenditures, repay loans, and manage general working capital requirements. Importantly, First Quantum expects the deal to substantially reduce its net debt to EBITDA ratio upon closing. This positions the company more favourably in future debt markets while advancing the USD$1.3 billion S3 expansion project at Kansanshi.
In addition, First Quantum retains acceleration options that may reduce its gold delivery obligations by up to 30 per cent. If the company hits a BB credit rating or meets the 2.25x net leverage ratio for three quarters, it can pay $200 million to reduce stream rates and thresholds by 20 per cent. A second option allows it to pay $100 million for a further 10 per cent reduction upon reaching operational goals and either a BBB- rating or a 1.25x leverage ratio sustained over four quarters.
The stream is unsecured but guaranteed by First Quantum and several subsidiaries in the Kansanshi ownership chain. This structure preserves the company’s borrowing flexibility while giving Royal Gold security over future gold production.
Royal Gold gains access to a reliable gold stream at favourable terms. Meanwhile, First Quantum strengthens its balance sheet without diluting its copper focus. Additionally, the structure allows the company to scale back its commitments as its financial profile improves.
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joseph@mugglehead.com
