(Reuters) -Canadian miner First Quantum Minerals ( FQVLF ) signed a $1 billion gold streaming agreement with a subsidiary of its peer Royal Gold ( RGLD ), the two companies said in a statement on Tuesday.

Gold streaming is a financing mechanism in which a buyer makes an upfront payment to a miner in exchange for purchasing future production from the miner, usually at a predetermined price.

Under the deal, First Quantum will receive $1 billion upfront from Royal Gold AG in exchange for gold deliveries referenced to copper production from First Quantum's Kansanshi mine in Zambia. The agreement is expected to close on Wednesday.

First Quantum will initially receive 20% of the spot gold price for each ounce delivered, rising to 35% if certain credit or leverage targets are met.

Royal Gold ( RGLD ) said the agreement gives it immediate cash flow from a long-life, large-scale asset. The company expects to receive about 12,500 ounces of gold from the stream this year and an average of 35,000 to 40,000 ounces annually over the next ten years.