Thank you. I will now turn the conference over to Emma Murray . Please go ahead.
Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I'm joined today by Randy Smallwood, Wheaton Precious Metals President and Chief Executive Officer, Haytham Hodeib, Senior Vice President, Corporate Development, Gary Brown, Senior Vice President and Chief Financial Officer, and Curt Bernardi , Senior Vice President, Legal and Strategic Development. Please note, for those not currently on the webcast, a slide presentation accompanying this conference call is available in PDF format on the presentations page of our website. Some of the commentary in today's call may contain forward-looking statements, and I would direct everyone to review slide two of the presentation, which contains important cautionary notes. It should be noted that all figures referred to on today's call are in U.S. dollars, unless otherwise noted. With that, I'd like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.
Thank you, Emma, and good morning, ladies and gentlemen. Thank you, everyone, for dialing in to today's conference call on short notice to discuss our latest acquisition. As announced this morning, we have acquired a new gold stream on Montage Gold's Koné Project, located in Côte d'Ivoire, for upfront consideration of $625 million. Additionally, we will provide a $75 million secured debt facility to Montage, making this a full financing package. With essential permits in place, coupled with its impressive scale, we believe the Koné Project stands out as one of the premier gold assets in Africa. Supported by strong shareholder backing from the Lundin Group and Zijin Mining, the Koné Project is expected to significantly boost Wheaton's near-term annual gold production and further strengthen our peer-leading growth trajectory.
In fact, once fully ramped up, Montage is forecast to become our second-largest gold-producing asset for its first five years of production and the third-largest producing asset overall. A key focus of our due diligence process is on sustainability initiatives, and we observed firsthand Montage's efforts in fostering strong relationships with the communities around the project. In addition to being the largest employer in the area, Montage is committed to community development, including investments into medical facilities, schools, and infrastructure to strengthen the local community. So we look forward to collaborating with Montage's outstanding team, whose extensive experience in West Africa has driven remarkable progress in de-risking this project and advancing it towards production.
In addition to this new gold stream on the Koné Project, we also announced an expanded relationship with Rio2 Limited, whereby Wheaton will provide a full financing package for the construction of the Fenix Gold Project over and above our current gold stream, which was announced in 2021. I will now turn the call over to Haytham to discuss the details of our latest acquisitions. Haytham?
Thank you, Randy, and good morning, everyone. By now, you've all had a chance to go through the specifics of this transaction, so I'll just point out some of the highlights so we can leave time for questions at the end. As Randy described, we've entered into a new stream relative to the Koné Project for cash consideration of $625 million, in addition to a $75 million secured debt facility. The project is situated near existing infrastructure, has year-round road access and ample water resources.
Based on the feasibility study published in 2024, Koné ranks as one of the highest quality gold projects in Africa, with a long 16-year mine life, low all-in sustaining costs of under $1,000 an ounce over its life of mine, and sizable total annual production of over 300,000 ounces of gold over the first 8 years.
Under the Koné stream agreement, Wheaton will receive 19.5% of the payable gold until a total of 400,000 ounces of gold has been delivered, subject to adjustment if there are delays in deliveries relative to an agreed schedule, at which point Wheaton will purchase 10.8% of the payable gold until an additional 130,000 ounces of gold have been delivered, at which point Wheaton will then purchase 5.4% of the payable gold for the life of the mine. In return, Wheaton will make ongoing payments for the ounces delivered, equal to 20% of the spot gold price. For five years after signing, the production payment will be subject to a price adjustment mechanism if gold is less than $2,100 per ounce or over $2,700 per ounce.
For example, if spot gold is $3,200 per ounce, Wheaton's production payment would be $675 per ounce, equating to only 21% of the spot price. The price adjustment mechanism expires on the fifth anniversary of the Precious Metals Purchase Agreement signing, after which the production payment will be equal to 20% of the spot price going forward. Attributable gold production is forecast to average over 60,000 ounces of gold per year for the first five years of production, over 47,000 ounces of gold per year for the first 10 years of production, and over 34,000 ounces for the life of the mine. And Wheaton anticipates receiving ounces beginning in early 2027. As outlined in the Precious Metals Purchase Agreement, Montage will provide Wheaton with corporate guarantees and certain other security over their assets.
In addition, Wheaton has obtained a right of first refusal on any future precious metal streams, royalties, prepaids, or similar transactions. As stated by Randy, we're very pleased to partner with Montage, who, with long-standing relationships in West Africa, has done an immense amount of work to de-risk the asset and are rapidly advancing the Koné Project towards production. Closing of this acquisition is subject to typical terms and conditions and is anticipated to occur within the fourth quarter of 2024 or early first quarter of 2025 . Turning over to slide five. Wheaton is focused on high-quality mine projects that can support streaming transactions in the long term, maintain social license by operating in a responsible manner, and support the communities around their operations.
During our site visit to Koné, we visited various investment projects in and around the mine site that are providing basic necessities to community members, including potable water, through newly constructed water wells. The Koné Project has all essential permits in place, including its environmental permit, received in May 2024, followed by its mining permits in July 2024. Under the stream agreement, the Koné Project will implement the 2012 International Finance Corporation Performance Standards on environmental and social sustainability and the Global Industry Standard on Tailings Management. As the largest precious metal streaming agreement announced by a single streamer in nearly a decade, the new Koné stream is expected to contribute meaningfully to Wheaton's portfolio. As Randy stated earlier, by 2028, we expect Koné to become our third-largest producing asset, accounting for over 7% of Wheaton's total gold equivalent production. Turning over to slide 7, the Fenix Project.
In addition to this new stream on the Koné Project, we've expanded our relationship with Rio2 Limited, relative to our existing gold stream on the Fenix Project located in Chile. Wheaton will pay Rio2 additional upfront cash consideration of $100 million over and above the remaining $25 million payable under the existing stream with Rio2, in exchange for which we will receive 95,000 ounces of gold from the Fenix project. Once Rio2 delivers an additional 95,000 ounces, the stream will revert to the percentages and thresholds under the original Fenix Precious Metals Purchase Agreement . In addition, Wheaton has agreed to adjust the production payment for all gold ounces delivered to 20% of the spot gold price. Wheaton will also provide a $20 million contingent cost overrun facility in the form of a standby loan facility.
Lastly, Wheaton has committed to participate in a private placement of Rio2 common shares for CAD 5 million, at a price per share equal to and concurrent with a public offering by Rio2. This expanded relationship is a testament to our continued support of Rio2 and its development of one of the largest gold oxide resources in the world. With EIA approval in hand, permitting activities well underway, and a full financing package now in place, Rio2 is projecting first gold production will be achieved in the third quarter of 2025. That concludes the project overview, and I will now turn the call over to Gary.
Thanks, Haytham. Of the $625 million total cash consideration relative to the Koné Project, we expect to make our first of four equal installments in early 2025, and the remaining balance by the end of 2026, with first production expected in early 2027. The $100 million upfront payment relative to the Fenix stream amendment will be made in two equal installments, the first of which is anticipated to be paid in mid-2025, with the remainder expected to be paid in 2026. With these two new funding commitments, when these two new funding commitments are added to our existing contractual obligations, we anticipate disbursing an aggregate of approximately $1.9 billion in upfront payments by the end of 2026.
With a cash balance as of June 30 , 2024, of $540 million, combined with annual operating cash flows that are estimated to average $1.4 billion over the next five years, we anticipate funding these commitments without having to rely at all on the fully undrawn $2 billion revolving credit facility. As such, we believe the company is very well positioned to satisfy its funding commitments while maintaining the financial flexibility to acquire additional accretive mineral stream interests. With that, I will turn the call back over to Randy.
Thank you, Gary. Despite this being the first corporate development announcement that we have made in 2024, it has been an exceptionally busy year, with no signs of slowing down. We continue to stay laser-focused on identifying only the highest quality opportunities to strengthen our asset base and elevate our portfolio, and I am proud of the efforts by both the Wheaton and the Montage teams in finding a win-win solution for the development of this asset. We have a very strong growth pipeline, both in our scheduled production and the optionality upside from some very attractive projects that we believe will move forward in the near term, including the acquisition of the diverse, high-quality streams described here today. So finally, on slide nine, I will summarize the key deal attributes before opening the floor to questions.
First and foremost, with essential permits in place and its impressive scale, we believe the Koné Project will be one of the premier gold assets in Africa, providing forecasted near-term meaningful production and adding to our already robust growth profile. Secondly, the Koné Project offers Wheaton the opportunity to further diversify our global asset base across geographies and partnerships, with our new partners at Montage bringing extensive experience in West Africa. Thirdly, we are able to fund both acquisitions using cash on hand while maintaining the financial flexibility for future accretive growth. And lastly, the concerted efforts and progress made by Montage in working with the community and other stakeholders as they advance the Koné Project towards production. So with that, I would like to open up the call for questions. Operator?
Thank you, Randy. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number one on your touchtone phone, and you will hear a prompt that your hand has been raised.... Should you wish to decline from the polling process, please press the star followed by the number two. And if you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Josh Wolfson from RBC Capital Markets.
Yeah, thanks very much. When I look at this deal relative to some of the other transactions the company's done, you know, this looks to be a very high proportion of the total funding required for the build. And then when I look at the production percentage, you know, 19.5% is also fairly high. You know, how should we be thinking about, you know, risks, and sort of just understanding the goalposts, you know, for typical construction challenges or ramp-up challenges and, you know, how the company's managing that risk?
Josh, you know, I would actually compare it to Salobo. Salobo, we supplied about 80% of the capital in terms of that build to date, a little bit over 80% of the capital, and we're pulling out pretty close to 20% of the revenue from Salobo itself. So it's not unheard of. The ratios are similar to, you know, obviously, our flagship asset at Salobo. It's done very well for us. This is a high-margin asset, and because it's a full financing package, combined with the funding from Zijin, we're very comfortable with, you know, taking this 19.5%.
It's no different than having, you know, if you had project debt on it, the bulk of the cash flows at the front end will go to paying off that debt. This is very similar in that sense, but it is a fully financed package, and so, you know, we feel, we're very comfortable with it. It's a high-margin project. It's a very low cost per ounce. Good, qualified, experienced team that has built in the past in this region, knows West Africa very well, and so, we're very comfortable with all those ratios, and we just think that the project itself is one of the most promising projects that we've seen in a long time.
Thank you, and then just one other question. In terms of the area of interest, just so I can wrap my head around this, is there a way to sort of simplify how we should think about this? The way I sort of read it, if there's a discovery made after, you know, whatever it is, maybe year 12 or 14 or so in the mine plan, it wouldn't be captured if the delivery schedule's been sort of achieved. Is that correct?
Yeah, I mean, it's a challenge because you've got a property package there that does have really good exploration potential, and you know, this is not something that's unusual. We constantly run into this challenge where companies don't want to give up that exploration potential, but you know, it's tough for us to assign a value to it because it's exploration potential, and that's all it is. So the approach that we took here, I think, is truly a win-win, because in the event that they do have, you know, just as a refresher, the area of interest is a 500-meter ring around the, I think it's the $2,500 gold pit design pit.
You know, first off, that is a pretty healthy expansion area. If we do see higher prices, there may be opportunities for those pits to actually go bigger. We're already seeing a gold price higher than $2,500. That does give us some exploration potential internally, but there is outside potential there that just hasn't been fully tested because Montage is moving forward towards generating cash flow before they start throwing it at that. The way we structured this is that we didn't want to limit their ability to process that, but we do get, you know...
The advantage is if they do have exploration success outside of that 500-meter ring, and they process that material, you know, they develop and process that material through the infrastructure, that's part of what we're funding right now, we get the benefit of moving ounces forward. So there is a slight benefit to us. We don't actually gain the extra ounces, but we do get our share of ounces from there, and it gets credited against the ultimate drop-down levels. So, you know, at the end of the current stream, we still get you know, the 5-plus% of whatever comes from that core area of interest for life of mine.
And then, you know, depending on how they fund their expansions and stuff like that, you know, hopefully they're making enough money, they can fund that internally, but we do have also a right of first refusal on any potential funding required to fund any other developments on the project itself. So, you know, we're comfortable with that. We think it's a win-win because even with exploration success outside, if it does come into additional production, we would see a bit of a benefit in terms of moving ounces forward in the production profile that comes from that area versus from within our area of interest.
You know, we think that was an excellent way to sort of balance the risk and opportunity on that side and make it a win-win agreement.
Great. Thank you very much.
Thank you. The next question comes from Ralph Profiti from Eight Capital. Please go ahead.
Good morning, all. Thanks for taking my questions. Haytham mentioned road, and water, on, and sort of the project parameters. Just wondering what the project, how the project is shaping up for power?
Haytham, I'll let you take that one.
Sure. And from a power perspective, they are going to be connected to the grid, so power will come from that. There has been some instances of unreliable power in the past, but it seems like they've all resolved that, and national grid seems to be operating quite well at this point.
Okay, and then maybe just, you know, following up on the last question, I'm wondering about the potential when you think about exploration upside, coming in at the front of the end of the mine plan versus the back end of the mine plan, and outside of exploration, is there a chance for process improvements or even satellite deposits within the core area that could be brought on at the front end and enhance that sort of first five years production profile as opposed to exploration?
So, maybe I'll just add... Sorry, Randy, should I take this one?
Yeah, go ahead.
So maybe I'll just add something to, to what Randy said earlier. So what we want is our partner to mine the best economic ore they always have available to them. So whether that comes from outside the area of interest or inside the area of interest, it, it doesn't matter to us, 'cause if they're mining the best economic ore, they're mining the highest grade ore based on our percentage, we're gonna get more ounces faster. So that's the first thing to remember. As Randy said earlier, you know, they've built the pit shells at much lower than the current commodity price. I think it was sub-$1,800, and we're sitting at $2,700 right now, and we've modeled it based on a $2,500-dollar pit shell with a 500-meter area of interest around that.
We would expect to see significant exploration upside in and around those existing pits based on higher commodity pricing and bringing some of the lower grade material that didn't make it into the existing mine plans back into the mine plan. That would probably be the fastest and easiest way for them to put more material through towards the tail end. So as we see that expanded resource, you know, that will also be subject to the stream. Now, if they come back and they actually find additional material outside of the area of interest that's higher grade, well, they're gonna put that through sooner. If they put it through sooner, those ounces get credited towards the tail end of the stream. So either way, we're actually doing much better because we're receiving better ounces faster if that actually happens.
Gotcha. That's helpful. Thank you.
Thank you, Rob.
Thanks, Rob.
The next question comes from Cosmos Chiu from CIBC. Please go ahead.
Thanks, Randy, Haytham and Gary. You kind of touched on it, but maybe can we confirm some of the timing in terms of, timing of the start of construction, and, you know, timing of first production and first contribution to Wheaton Precious Metals? And on that front, you kind of mentioned this too, it's gonna be four installments for the total payment, but what's that based on in terms of milestones? Is that based on CapEx spent? And how should we model that, payment in 2025, I believe, 2026 and 2027?
Haytham, I'll let you go over the construction timing, and then Gary can talk about the timing of the payments.
Sure.
Thank you.
Thank you for the question, Cosmos. From a construction timing perspective, they already have all their permits in place. They've already started their clearing of land, earthworks, et cetera. We would expect that they would begin full construction in the first quarter of next year, at which point in time they will ask for the first drawdown. From a drawdown perspective, the way we do it is we usually put in 25% of the upfront capital, and I'll have either Gary or Curt, if they would like to chime in as well, 25% of the upfront capital. At the end of every 25%, there's an analysis to ensure that the CapEx has not increased over and above what the original number is.
If it is, we're not required to actually submit unless they have that increased capital amount available to them. So, you know, there's a check every 25% to make sure that they're still on track. As we're actually funding the majority of the overall capital costs, and they actually have another stream as well that they can draw upon, and they have a cost overrun facility, we don't expect that to be a problem, Cosmos.
Great. And maybe, you know, as we look at this, this is your first large foray into Côte d'Ivoire. Côte d'Ivoire has had positive momentum in the past 10 years, you know, in terms of stability. But overall, are you? This is a big investment, as you mentioned, Randy and Haytham and Gary. You know, should we view any kind of risk coming out of Côte d'Ivoire? Or, you know, during your due diligence, what kind of risk have you considered? And then on top of that, you know, as you mentioned, during your due diligence process, beyond the country risk, were there any other key risks that you identify in terms of Koné, in terms of technical risk, in terms of operational risk? Anything that you can share with us?
So I'll start off just by some comments on Côte d'Ivoire. You know, first off, the country as a whole has had a long history of stability. In fact, I would say it's comparable to Ghana in terms of operating success and there's never been any type of nationalization issues, never you know never any serious problems with respect to government there. And we don't see any reason that that's going to change over the next while. There is elections coming up next year, but it looks like the ruling party does have you know strong support still, so we'll see obviously how that goes. But you know, I don't see any serious issues there.
You know, West Africa as a whole has jurisdictions that have shown longer term stability than in other challenged areas. We don't see any reason that Côte d'Ivoire is gonna change from being a good long-term, stable jurisdiction. This isn't, you know, the first time that we've looked in West Africa. We have been, you know, active there in the past. You know, we always, whenever we do any type of project evaluation, political risk always is factored into how we, you know, what kind of expected return that we, you know, that we get. And, you know, it's not always easy to get that accurate, but, you know, I would say that to date, we've had a pretty good track record in terms of...
You know, staying in relatively good, stable jurisdictions, and you know, sort of identifying and capturing those risks. So we're pretty comfortable. You know, I think the other comment that I'd make, Cosmos, is that you know, we're now... Like, in today's world, it's not so much all about country, it's also about the local communities and the local regions. That's the one thing that... Maybe Haytham can add some strength to this, because you know, he actually was on the site visit there. You know, the communities around the site itself, you know, strong support and a very stable region.
Again, you know, you know, I think that on multiple factors, it just stands out as being a good, strong place to invest. The other thing that, you know, probably the third factor that I think comes into play is looking at the management team and their own experiences in terms of working in regions like this. You know, there's no doubt that the group behind Montage with, you know, with their past experiences in that area, that also provides us comfort. The shareholder base that we're working with, too.
The Lundins, they've got a long track record of working in countries like Côte d'Ivoire, you know, and other countries that are, you know, that people would argue are pretty similar in terms of potential risk and opportunity. And then having Zijin in there as also a shareholder and a co-stream owner and supplying some project debt. You know, I think all the way across the board, it all lines up to being a very good, strong package in a jurisdiction that's got a lot of stability. And so, I don't know, Haytham, you've got anything you want to add to that?
Yeah, absolutely. From an operating risk perspective, we, you know, we've done a pretty deep dive on the actual assets and have made minor adjustments. The company has actually done a very good job from an overall perspective. We stress tested their costs and, you know, and the commodity price based all the way down to $1,400-$1,500, and they were still quite robust, so there wasn't really an issue there. From a country risk perspective, you know, we typically have our own internal analyst that does our country risk analysis for us, but we also, in this situation, went out and actually hired an external consultant to do their analysis for us.
What we found that, despite the fact that over the last three decades, sometimes you have some political uncertainty, changing in parties, changing in presidents, there has never been an instance where the mining industry has actually been disrupted. So throughout all that, it actually, everything has operated quite well, which gave us a lot of confidence moving forward.
Great. And maybe just one last question, following up on Josh's question. This is a fairly large, you know, stream, but you compared it to Salobo. It is a 20% stream, and it is on a primary metal versus Salobo, which is more of a byproduct. You know, any concerns there? Again, just given that it's 20%, it goes down to, like, closer to 5% later on, but it is still a big chunk that could impact the disclosure, say, of their own sustaining costs. Or should we just really look at revenue contribution, as you mentioned? And then to confirm, I guess there's an opportunity for them to potentially buy back one third of the royalty of the stream, but that's only in the case where there's a change in control.
Is that correct?
Yeah, Cosmos, that's exactly correct. It's only in event of a change of control that they can buy back a portion of the stream. You know, from a core product versus byproduct perspective, you know, most of our transactions in the last while, we just haven't seen a lot of investing into the copper space. But what we have seen is a lot of gold projects out there. But it really is a signal of how undervalued a lot of these single asset development companies are, and so streaming becomes a very attractive source of capital for them to move forward. From our perspective, you know, we're happy to... I mean, we can understand. I've always said, you know, the logic to me in terms of getting gold from a copper company, you know, makes sense because it's a non-core byproduct.
This is a core product that they're producing, but it comes down to the cost of economics, and that's. So it's easy to understand why this is attractive for Montage to move forward is because the cost of capital for doing this versus having to use equity to finance this, you know, extremely expensive, just because the, you know, they're trading at a significant discount to net asset value from an equity perspective. So it's extremely dilutive to their current shareholders. So the logic behind why Montage is selling off some of their gold is clear and sound and makes sense as to why. And that's why we are comfortable with doing this. You know, and so.
And then from a percentage basis, you know, I would argue that the 19.5% is for the first portion of it, but it's, you know, I tend to think we then drop down to the 10, 10+% , a little bit over 10%, after that first 400,000 ounces is delivered. That's no different than if they were to take down a major project debt package and then have to fund and pay back that debt over the first few years. You know, the bulk of the free cash flow is going to go towards paying down debt on a go-forward basis. And then afterwards, we've got a very sustainable 10% stream that then drops to 5% plus stream going forward.
So, you know, this is a full financing package combined with the, you know, with the Zijin piece and, and with the debt, the small debt that we do have there, and the cost overrun facility. You know, I think we're very comfortable with it. It's a high-margin project to begin with. And so the fact that it's 19.5% of the gold production to start with, we get the benefit of that. And what we do is deliver back to our shareholders the additional optionality of that 19.5% in terms of whatever commodity price we see for that first period of that.
We think it's again a win-win situation where the cost of capital to Montage is very attractive. Yes, they give up some of the gold at the start end, but they'd be using that gold to pay off project debt if they'd have gone another path. We're comfortable with what we see here, and we see plenty of operating margin capacity there to make sure that it's still very profitable for the Montage shareholders. Because if it doesn't work for Montage, it doesn't work for us. It has to be a win-win agreement. You know, I think both parties here are very happy with the way this is shaped up.
I think you're right, Randy. That's actually a very good way to look at it. Sorry, Haytham, you were saying?
No, no, I was gonna add just one thing. So, so the way, and Randy put it very well, you know, this effectively replaces the need for them to do debt. And the way we've structured our stream, if you look at the early years, the first five years, that's when the highest grades are there, and that's when the highest stream is there. And so it's a very thoughtful process. As the actual grades drop off, so does the stream going forward.
So we're trying to ensure that our partner stays as strong as possible for as long as possible. And on the change of control, every one of these junior companies wants to be able to be bought out at some point. We've given them a limited time at which if they're bought out, there's an ability for them, the acquirer, to buy back one-third on the event of a change of control. You know, we don't wanna be a deterrent to that. The industry has to continue to move forward, but we also want to be able to participate long term, which is why we don't do more than one-third buy back in a change of control clause.
Great. Thanks again, Randy, Haytham, and Gary. Those are all the questions I have. Thank you.
Thanks, Cosmos.
Thank you, Cosmos. The next question comes from Lawson Winder from Bank of America. Please go ahead.
Thank you very much, operator. Hello, Randy and team. It's nice to see you guys getting an asset with relatively near-term production here. You know, when I think about Wheaton, there was a time when Wheaton was strategically Americas focused, and with this acquisition, plus the Platreef deal that you guys did at the end of last year, Africa is now a relatively material component of the overall portfolio. I mean, can we look at this as a pivot to other jurisdictions or maybe a pivot to Africa or certain jurisdictions in Africa? And then, how do you think about other potential jurisdictions outside of Africa and the Americas at this point?
Yeah, Lawson, you know, one has to keep in mind that we spent the first ten years of our company's existence focused on silver. And that really ruled out Africa because there's just no silver in Africa, right? That meant we were focused on the Americas, 'cause that's where most of the free world silver comes from, from Mexico and Peru specifically, right? And so, you know, the company inherently has an Americas bias just because the first ten years of its existence was focused on the Americas. Africa produces more gold than any other continent in the world. As we are focused on precious metals, there's no doubt that Africa is gonna become a part of our portfolio.
We've been looking in Africa for ten years now. Ten plus years, we've been looking at projects in Africa, and we've put bids in. We just haven't seen anything of the tenor and the quality of Montage's Koné Project. So I just, you know, we stepped into Africa, into South Africa last year with Platreef. That's a project that, you know, we had a crack at the first go around, but we were uncomfortable with some of the risks. Now, you know, Ivanhoe has definitely de-risked that project to the point where we felt it was good enough for our shareholders to, you know, to bring it into our portfolio.
You know, again, the real core focus for us is first and second quartile production assets, high margin assets, good, strong assets that deliver not only, you know, profitable production for us and our shareholders, but also for the operating partners, you know, the company and its shareholders and its stakeholders. And so this project just sort of lined up beautifully for us. It's a team that we're relatively familiar with. We've obviously had a long history with the Lundin Group, and Lundin being a pretty significant shareholder in Montage, you know, definitely helped us get more comfortable. And getting to know the Zijin group in terms of their interest and what they're doing on a go-forward basis and the support on this project.
And so, you know, I don't. I wouldn't call it a pivot. I would say that it's probably a recognition of the fact that we are a precious metals company, and so it's really tough for us to not have exposure in Africa, considering that's where the bulk of gold production comes from in the world. It's the largest continent. You know, more gold production from that continent than any other continent in the world. And so, you know, I think it's inevitable. The challenge that we've always had in the past is, I think, you know, some of the assets with the operating margins, combined with the jurisdiction, just didn't line up for us in terms of. And that's not to say we didn't put proposals in there.
It just meant that other companies were more competitive than us. But this is a jurisdiction and a company and an asset that we think are definitely worth investing into. If we see other assets like Koné, you know, we will follow up with that. But you know, we're looking. The current asset, you know, the portfolio that we're looking at from the corporate development perspective, it's all the way around the world, so.
Yeah. Okay. That's fantastic context. Thanks very much. I'll leave it there. I appreciate the answer.
Thanks, Lawson.
Thank you, Lawson. The next question comes from Derek Ma from TD Cowen. Please go ahead.
Thank you. Zijin's stream is quite different from Wheaton. Could you speak to how the transaction came together and Zijin's involvement? Is it a reflection of Wheaton's assessment of risk and sizing of the deal, or, or is there something else to it?
Yeah, I'm probably pass that one over to Curt and Haytham, I think, combined. It was, they were sort of leading those discussions, so, you guys can deal with that.
Sure. Yeah, you bet. So Zijin was previously a shareholder and participated in Montage's original financing with the intent of doing a small stream. They've been trying to get into the streaming space for quite some time. Their overall structure is a lot different than when we've come together. They have a 100% buyback on their stream. That's not something we would ever do from our perspective. They also have various different security, I would say, than we have. Curt, anything you want to add to the differences between our stream and their stream?
On the stream front, I mean, Haytham's pointed out, the key difference really is the 100% buyback. We considered whether we increased our stream size to be bigger, but we were not prepared to provide that buyback. As Haytham noted earlier, we're very resistant to having buybacks in place and only do them on a change of control and only for one third. So it wasn't something we wanted to pursue, and Zijin was interested in pursuing it. So I think it was an option that Montage just felt that they had to take up at a lower cost of capital.
And the buyback.
Absolutely, and in addition, having Zijin as a partner in that part of the world actually is a huge benefit. If you've seen, you know, they've been very aggressive, looking at opportunities and acquiring assets. I think Montage wanted to keep that optionality on the road, especially in a country like Côte d'Ivoire, where there's some very strong relationships with Chinese companies.
Thank you.
Thank you, Derek. The next question comes from Carey MacRury from Canaccord Genuity. Please go ahead.
Hello, Kerry.
Sorry, I was on mute there. Good morning, guys.
Hey. Morning.
Just wanted to clarify one thing. It looks like there's a scenario with accelerated deliveries from outside the area of interest, that the stream could actually go to zero, rather than 5.4. Just trying to understand what would trigger that scenario.
Yeah. If, if we get a bunch of ounces delivered from outside of our immediate area of interest, then that counts as a credit towards the long-term stream. And then, you know, what happens is, it gets offset by an inside production, and if we're down to the 5.2% or whatever it is, the final stream percentage there, there's a period in time where that credit gets chewed up with production. And so we could see zero production for a while. It depends how... You know, the stream is still life of mine, so once that credit gets consumed, we'd jump back up to the 5.2% of production.
And so, it would only happen if the gold was delivered ahead of schedule, which to me is a net positive. Then you'd wind up having this. It'd be well telegraphed beforehand because we'd have the benefit of all that additional gold production in front. And so, it could go to nil. It wouldn't be nil life of mine. It all depends how much they produce from that, you know, area of interest that we've got. But it would still be... There's an effective stream there. It would just be offset with the credits of the previous gold that we got in advance. So you'd have a good feel for that, you know, long ahead of time, just because we'd have the benefit of that earlier production.
I should highlight, you know, it's important to note that can really only happen after a minimum of 530,000 ounces of gold have been delivered. I say minimum, because the first 400,000 ounces of that, there is an adjustment mechanism that comes into play that could increase that number if there are delays in an agreed delivery schedule. Minimum of 530,000 ounces.
After that date, if they have delivered ounces from outside the area of interest, that core area of interest, the Koné-Gbongogo core area, then those are credited at the end of the mine life that would have been Koné-Gbongogo , because, as Randy noted, we've already gotten those ounces on an accelerated basis, earlier than we would have otherwise gotten, so we credit them at the tail end of the mine life.
Kerry, they're only gonna do this if the grade that they find on these deposits outside of the area of interest is higher than the actual grade that they would be mining inside. Think of it this way, if we're getting 60,000 ounces a year for the first five years, and as I said in my original opening remarks, that drops to 47,000 ounces of gold per year for the first 10 years. That means, you know, the gold magnitude of the gold is actually coming down after five years. We would love to see that continue at 60,000 ounces a year and get those ounces in much faster and continue receiving that higher grade at a higher level up to the 530,000 ounces. That's something we'd love to see happen.
Great. Got it. Thanks, guys.
Thanks, Kerry.
Thank you, Kerry.
One, one more question, please, operator.
Okay. All right, the next question comes from Richard Hatch from Berenberg. Please go ahead.
Thanks. Yeah, thanks, Randy and team. Congrats, and yeah, thanks for the last question. Look, basically, it's just a quick one, just to ask you-
Yeah, how hard is it to get good returns at this gold price? Because, you know, previously, when we've talked, you, you've really had to use, you know, effectively spot gold when you printed the deals, right? So printing a deal at $2,750 gold must be quite challenging to get an attractive IRR. Can you just give us your thoughts on that?
It's you know, I can tell you that this was a very challenging negotiation just because, you know, these things don't. They take time. And of course, we've seen the price of gold shoot up drastically from, I think, when we first started sort of serious discussions, it was down around $2,300 an ounce. So it is a challenge to sort of, you know, make sure that you wrap your way around that. And I can tell you that we put all effort in. I don't see any weakness in the price momentum that gold has right now. And so, you know, we really, you know, hats off to the team in terms of let's get this done and papered and behind us.
And so, you know, happy to get this one locked in, so to speak. You know, the spot price always has an impact in terms of how much we're paying for these opportunities. And so, you know, it does factor in. These are probably some of the most expensive gold ounces we've ever bought, but we think it's because there's a lot more upside in the price of gold going forward on a relative basis. And so we think we'll still do very well on this on a go-forward basis. And so you just have to factor that in, and it really comes down to making sure that, you know, this can't be a transaction, that it needs to be win-win.
As we've seen, and we've been in the business long enough now, the importance of making sure that this deal works not only for us, but for Montage. If it doesn't work for Montage, we can't go into this, right? It needs to be something that's fair all the way across the board. And you know, I think that's what it comes down to, is just maintaining good, strong communication with the potential partner on the other side, to make sure that everyone's comfortable with the way it's been priced to reflect, you know, price trends and such. But you know, it really is a game.
Hats off to the lead team in terms of working with Montage to make sure that it is truly a win-win acquisition. Pricing is always gonna come into play on this, but we're still we still feel there's really good strength in gold. We think that the Western world is really only just waking up to what gold delivers. And I think that all of that sort of spells towards a good, strong price environment for quite a while, I think. And that makes this project attractive for us. But it's also still a very attractive financing package for Montage to go forward that doesn't. They don't suffer the dilution.
Their existing shareholders were very keen on not having excessive dilution in going through this financing package, and I think this is an excellent way for them to achieve that. So it really comes down to balance and just making sure it's a win-win agreement. I don't know, Haytham, you got anything to add to that?
Absolutely, Richard. We don't pay spot. Just so you know, for a development project that's not producing for another three years, we do not pay spot. You know the consensus is around $2,000 long term, and it tends to probably go up every three months. I imagine that'll probably end up being around $2,100, and you know that spot's at $2,700. We're somewhere in the middle there, is where we look at our analysis as one of the primary scenarios. We will look at the analysis at spot, we'll look at the analysis of consensus, and it has to actually meet our criteria on all of those commodity price sensitivities.
I would just-
Appreciate that
finish off, Richard, by saying that we haven't changed the way that we go about valuing these transactions. And, you know, we build in premiums for the differences in the risks associated with the opportunities that we're looking at. And in this case, you know, we're very comfortable with the return profile, where we're getting a double digit IRR going into this. And, you know, as Randy's outlined, you know, we're still very bullish on the underlying price of the commodity.
Yeah. Great stuff. All right, good. Good. Thanks, guys. Have a good one.
Well, thank you, Richard, and thank you, operator, and everyone for dialing in. We do, of course, look forward to talking with you all again quite pretty shortly. Actually, our third quarter results conference call, which is scheduled on Friday, November the eighth. So, look forward to talking to you again, and thanks for the call.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.