(MENAFN - ProactiveInvestors - Australia) Aphrodite Gold (ASX: AQQ) has struck an innovative deal that has landed 2,500,000 from 8B capped Canadian Franco Nevada Corporation (TSX: FNV) (NYSE: FNV).
The agreement involves Franco Nevada providing the funding for a future royalty of 2.5% over production from the Aphrodite Gold Project near Kalgoorlie, Western Australia.
Franco may also provide a portion of capital expenditure upon completion of a positive Definitive Feasibility Study in addition to the royalty financing.
Franco Nevada is one of the the world's largest buyers of gold royalties.
The advance bears no interest, requires no repayments for 5 years and which, provided production at the Project commences within that time, automatically converts to a 2.5% Royalty.
Should production not commence within 5 years, then Aphrodite will make annual payments of 250,000 per annum to Franco Nevada, with such payments to be fully offset against Royalties when the Project does commence production.
Franco Nevada's Australian managing director, Kevin McGellicott: "We are very pleased to partner with Aphrodite with this investment which will contribute towards the Pre-Feasibility Study on the Aphrodite Gold Project.
We will continue monitoring progress as Aphrodite works towards production. As the provision of stream financing for development stage projects is a growth area for our company, we would in future consider stream financing a portion of capital expenditure
upon completion of a positive Definitive Feasibility Study."
Aphrodite chairman Peter Buttigieg: "We are delighted at the involvement of Franco Nevada, which we see as a positive endorsement of the Project.
Our management will keep them apprised of progress, and we will be pleased to offer them the opportunity to provide the required capital expenditure for production."
Franco Nevada's 2,500,000 advance, along with the Company's recent share placement that raised 1,692,000 after costs, will be employed to advance the Project Pre-Feasibilty Study currently in progress.
This transaction and Franco Nevada's ongoing involvement forms a major part of Aphrodite's development program through to production, further details of which will be announced shortly.
Analysis
In a difficult capital raising environment, Aphrodite Gold has been innovative obtaining funding from 8B capped Franco Nevada via a royalty agreement. This sends a strong message of the upside potential of the Aphrodite Gold project.
Although perhaps not as well kown to many Australian investors, Franco Nevada is the leading gold royalty and stream company by both gold revenues and number of gold assets.
It earned revenue of 105.2 million, 91% from precious metals and net Income of 52.0 million for the third quarter. It has been successful in both acquiring existing royalties and streams and creating new royalties and streams to help finance mines into production.
The funding will assist Aphrodite Gold to move to the current PFS to completion.
