First Quantum’s $1B Gold Streaming Deal: A Strategic Win with a Hidden Bonus?

Article by Eng. N. Kazembe, DBA student and guest contributor to Financial Insight Zambia

August 2025 – First Quantum Minerals (FQM) has secured a $1.0 billion gold streaming deal with Royal Gold, strengthening its balance sheet while maintaining significant exposure to copper and gold production at its Kansanshi Mine in Zambia. While the immediate financial benefits are clear, a closer look reveals why this deal is particularly favorable for FQM—especially if gold is discovered in unexpected places.

Understanding the True Cost of the Deal

Gold streaming agreements involve an upfront payment in exchange for future metal deliveries at predetermined rates. In this case, Royal Gold pays $1.0 billion upfront but only receives gold linked to Kansanshi’s copper production, not a fixed quantity. This structure is a key differentiator from a typical royalty or forward sale.

Key Terms of the Agreement:

• - First 425,000 oz: 75 oz of gold per million lbs of copper.

• - Next 225,000 oz (total 650,000 oz): 55 oz per million lbs of copper.

• - Beyond 650,000 oz: 45 oz per million lbs of copper.

Additionally, Royal Gold pays FQM 20% of the spot gold price per ounce delivered (rising to 35% if FQM achieves certain financial targets).

Royal Gold’s True Cost Per Ounce

To determine the effective price Royal Gold is paying, we must account for:

1. 1. The $1.0 billion upfront payment, and

2. 2. The ongoing 20% spot price payments per ounce.

The current spot price of gold is approximately $3,373.54 per ounce. Using this price, we can calculate the effective cost to Royal Gold.

Calculating the Net Cost:

1. 1. Upfront Allocation per Ounce (for first 650,000 oz): $1,538/oz

2. 2. + Ongoing Payment (20% of spot price):With a spot gold price of $3,373.54/oz, Royal Gold pays an additional $674.71/oz($3,373.54 * 0.20).

3. 3. Total Net Cost to Royal Gold: $1,538 + $674.71 = $2,212.71/oz

Why This Still Benefits Royal Gold:

• At a $3,373.54/oz gold price, Royal Gold effectively pays $2,212.71/oz—a significant discount of $1,160.83/oz (34.4%) to the market (gold price as at 6 Aug 25).

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• If gold prices rise, the upfront cost remains fixed, making the deal even more profitable for Royal Gold. For example, if gold rises to $4,000/oz, the total net cost would be $1,538 + ($4,000 * 0.20) = $2,338/oz, still a massive discount.

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• Royal Gold secures a long-term supply of gold from a world-class asset without the operational risks associated with mining.

The Hidden Advantage: Overburden Gold Could Accelerate Deliveries

One underappreciated aspect of this deal is the potential for early gold deliveries from waste rock (overburden) in the S3 Expansion pit. FQM recently reported promising results from a newly identified gold zone at Kansanshi. If stripping reveals near-surface gold not originally planned for extraction, FQM could:

1. 1. Fulfill Deliveries Faster – Since the stream is tied to copper production, gold from overburden could allow FQM to meet its obligations sooner without affecting the mine’s core copper output.

2. 2. Reduce Future Delivery Rates – Once the initial 650,000 oz threshold is met, the delivery rate drops, meaning FQM retains more gold later when the asset is mature and more valuable.

3. 3. Benefit from Rising Gold Prices – FQM keeps 80% of the gold upside (at the initial payment rate), while Royal Gold’s payments remain fixed at 20% of the spot price.

This scenario makes the deal even more valuable for FQM, as it could monetize gold that wasn’t part of its core mine plan while preserving copper revenues.

Why This Deal is a Strategic Win for First Quantum

1. 1. Immediate Cash Without Debt – The $1.0 billion upfront strengthens liquidity without adding leverage, providing capital for the S3 Expansion and other operational needs.

2. 2. Retains Copper & Gold Upside – FQM keeps full copper exposure and 84% of gold price upside (per company guidance), allowing it to benefit from future commodity price increases.

3. 3. Hidden Optionality – The potential for overburden gold could accelerate deliveries, reducing future obligations and unlocking value from previously un-planned resources.

4. Royal Gold’s Endorsement – The deal signals confidence in Kansanshi’s long-term potential and Zambia’s mining sector, which is a powerful message to other investors.

Key Takeaway:

While Royal Gold secures a substantial discount to current spot prices, FQM gains financial flexibility and optionality at a critical time. If the S3 Expansion’s waste rock contains unexpected gold, this deal could prove even more advantageous—turning a strong financial move into a potential windfall.

What to Watch Next:

• - Early gold deliveries from overburden stripping.

• - Progress on Kansanshi’s S3 Expansion, which is on track for commissioning in the second half of 2025.

• - Gold price trends impacting retained earnings.

For further details, visit First Quantum’s website.

End Note: This is an academic article written by a student currently enrolled in a DBA program. The views and analysis presented here are the author's opinion and should not be used as the basis for any financial determination. Forward-looking statements depend on operational execution, commodity prices, and regulatory conditions.