10:55 AM EDT, 10/24/2024 (MT Newswires) -- Wheaton Precious Metals ( WPM ) late on Wednesday said its subsidiary, Wheaton Precious Metals International, signed a precious metals purchase deal with Montage Gold ( MAUTF ) for the Kone gold project in Cote d'Ivoire.

Under the agreement, Wheaton will pay Montage US$625 million in cash in four equal installments during construction, subject to customary conditions.

Wheaton will purchase 19.5% of the payable gold until a total of 400,000 ounces of gold has been delivered. Afterwards, Wheaton will purchase 10.8% of the payable gold until an additional 130,000 ounces has been delivered, at which point Wheaton will buy 5.4% of payable gold for the life of the mine. The project is forecast to have a 16-year mine life, with first production expected in early 2027.

Wheaton will make ongoing payments for the gold ounces delivered equal to 20% of the spot price of gold. A price adjustment mechanism will be in place for the first five years of the agreement if spot prices are less than US$2,100/ounce or greater than US$2,700/ounce.

Wheaton has also provided Montage with a secured debt facility of up to US$75 million for project costs.

The addition of the Kone project will increase Wheaton's total estimated proven and probable mineral gold reserves by 0.62 million ounces, measured and indicated mineral gold resources by 0.05 million ounces and inferred gold resources by 0.02 million ounces.

Separately, Zijin Mining agreed to provide Montage with US$125 million of funding for the Kone project. The package is composed of a US$50 million loan facility and a US$75 million fully redeemable subordinated gold stream.

The first and second buyback option dates for the Zijin gold stream is expected to occur at the end of 2029 and 2030, respectively.

Meanwhile, Wheaton has maintained its Outperform rating and C$105 price target at National Bank of Canada following the news.

The bank said the transaction fits with messaging from the company's latest investor day, while noting its "slightly non-traditional structure." It added: "The transaction is comparatively priced to other recent transactions throughout the streaming sector in recent months reflecting a somewhat competitive deal landscape given elevated commodity prices and improving access to capital for producers."

National estimates an after-tax IRR at spot gold prices of 10%, assuming a 16-year mine life with first production expected in mid-2027. Recall, the bank said, that the project has all essential permits in place, has strong shareholder base including Lundin Group and Zijin Mining and is set to commence construction in near future.

National's Outperform rating is predicated on WPM's "stable financial position and high-quality, low-cost long-life asset portfolio". It said the company's valuation "remains compelling relative to peers" and in a "challenging" deal environment within the royalty/streaming sector, Wheaton's embedded organic growth supports an improved outlook with completion of Salobo Phase 3 expansion as well as Blackwater, Goose, Platreef and Mineral Park reaching production throughout 2024-2025.

Wheaton's share price was down 2% at last look to near $91.40 on the TSX.

Price: 91.79, Change: -1.54, Percent Change: -1.65