Marathon Gold Corporation (TSX: MOZ) sold a 1.5 per cent net smelter returns royalty (NSR) on its Valentine Gold Project in central Newfoundland to Franco-Nevada Corporation (TSX: FNV) for US$45 million.
Announced on Thursday, the deal raises Franco-Nevada’s aggregate NSR to 3.0 per cent on the project.
In addition, Franco-Nevada offered to buy $6.9 million in common shares of Marathon in a non-brokered charity flow-through offering, with price commitments of $1.04 per share. Marathon intends to use these proceeds for discovery-oriented exploration in 2023 and 2024, including the underexplored Eastern Arm Prospect.
“With this transaction, we have strengthened our balance sheet for the Valentine build in a substantial fashion, while maintaining a disciplined overall approach to our capital structure,” said Matt Manson, president and CEO of Marathon Gold.
The offering is being conducted as a private placement in Canada. The flow-through shares will have a hold period of four months in compliance with Canadian securities laws. The company anticipates the offering to close around July 6, 2023. However, this is contingent upon obtaining regulatory approvals, including an endorsement of the offering from the Toronto Stock Exchange.
RBC Capital Markets is serving as a financial consultant for Marathon for the related royalty transaction.
Feasibility study proposed 14.3 year lifespan for project
The Valentine project consists of a sequence of mineralized deposits spread across a 20-kilometer stretch. A feasibility study conducted in December 2022 proposed a lifespan of 14.3 years for an open pit mining and conventional milling operation.
It promises a 22 per cent rate of return after taxes, producing an average of 195,000 ounces of gold each year for the first 12 years. The project holds proven and probable mineral reserves estimated at 2.7 million ounces (51.6 million tons at 1.62 grams per ton of gold). In addition, the total measured and indicated mineral resources including mineral reserves, are 3.96 million ounces (64.62 million tons at 1.90 grams per ton of gold).
Marathon plans to employ an average of 405 workers during the project’s construction phase and 522 workers during its operational phase. It is estimated that the project will contribute $598 million in federal and provincial income taxes and mining duties, based on a gold price of US$1700 per ounce.
Marathon shares rose 4 per cent to $0.78 on Thursday on the Toronto Stock Exchange.
Additionally, shares of Franco-Nevada rose 0.4 per cent to $195.76 on Thursday on the Toronto Stock Exchange.