Canadian multinational Wheaton Precious Metals’ (WPM's) wholly-owned subsidiary Wheaton Precious Metals International (WPMI) has entered into a definitive precious metals purchase agreement with international gold mining company Allied Gold and its wholly owned subsidiary Allied Gold Services for the Kurmuk project, in Ethiopia.

WPMI will pay Allied a total upfront cash consideration of $175-million in four equal installments during project construction, subject to certain customary conditions.

WPMI will buy 6.7% of the payable gold until a total of 220 000 oz of gold has been delivered, at which point WPMI will buy 4.8% of the payable gold for the remainder of the project’s life-of-mine.

During any period in which debt exceeding $150-million ranks ahead of the gold stream, the stream percentage increases to 7.15% and decreases to 5.25% once the dropdown threshold is reached.

Payable gold is calculated using a fixed payable factor of 99.95%.

Attributable gold stream production is forecast to average over 16 000 oz/y of gold for the first ten years of production.

The project is forecast to have an 11-year mine life based on reserves alone, with additional upside from resources and significant exploration potential.

First production is anticipated in mid-2026.

WPMI will make ongoing payments for the gold ounces delivered equal to 15% of the spot price of gold.

The addition of the Kurmuk project will increase Wheaton’s total estimated proven and probable mineral gold reserves by 180 000 oz, measured and indicated mineral gold resources by 30 000 oz and inferred gold resources by 20 000 oz.

The gold stream will include a customary completion test based on expected gold production and expected mining rates.

WPMI has obtained a right of first refusal on any future precious metal streams, royalties, prepays or similar transactions relative to the Kurmuk project.

In the event of a change of control prior to the earlier of completion and January 1, 2027, Allied will have an option to buy back one-third of the stream.

The gold stream will cover the existing mining licence for the Kurmuk project and until 255 000 oz of payable gold are delivered to WPMI.

As at September 30, the company had about $694-million of cash on hand and believes that, when combined with the liquidity provided by the available credit under the $2-billion revolving term loan and ongoing operating cash flows, WPMI is well positioned to fund the acquisition of the gold stream.

“Wheaton is pleased to announce a streaming agreement with Allied to advance the construction of the Kurmuk project, which is set to be the first commercial gold mine in Ethiopia.

“This fully permitted, high-quality development project offers significant exploration potential, supported by a team at Allied with a proven operating record. We are excited to partner with Allied to unlock opportunities that empower the local communities and help drive the growth of Ethiopia’s emerging metals and mining sector,” says WPM CEO and president Randy Smallwood.

“We are delighted to partner with Wheaton on this streaming financing. This began as a multi-party process, although it soon became apparent to us that Wheaton would be our partner of choice.  

“They conducted detailed and extensive diligence, were supportive of our efforts, worked with us in evaluating and considering optimisation opportunities and recognised the inherent value of our Kurmuk project, a value that we believe significantly exceeds the value implied in our share price,” Allied Gold CEO and chairperson Peter Marrone says.

“We take our sustainability programmes seriously and it was a delight to see Wheaton not only support these programmes but provide suggested improvements,” he adds.

Marrone also welcomed Wheaton as a shareholder, with the company having participated in Allied’s equity financing in October.

“The stream financing now allows us to complete the gold prepay which is the final component of our planned comprehensive financing package for the development of the Kurmuk project. The gold prepay is expected to be led by the lending syndicate for Allied’s revolving credit facility, with proceeds available to Allied following the completion of the stream financing.

“We expect the Kurmuk mine will become one of the more significant precious metal mines in the world delivering significant production and cash flow following its construction,” Marrone highlights.