RGLD Gold has signed a $175m agreement with New Gold to acquire a percentage of the gold and silver production from the Rainy River project in Canada.
Located 65km north-west of Fort Frances in western Ontario, the Rainy River project is scheduled to produce an average of 325,000oz of gold a year over its first nine years of production.
The combined open-pit underground operation has a capacity to produce 21,000t per day.
RGLD has received permits to begin major earthworks at the operation.
As of mid-2015, detailed engineering is 95% complete and the company spent 14% of the total development capital estimate of $877m.
Royal Gold president and chief executive officer Tony Jensen said: "The Rainy River Project fits well into our high-quality portfolio and met all our criteria for new investments with nearly four million ounces of gold reserves, continued exploration upside and projected cash costs below $600 per ounce.
"We are particularly pleased to add another piece of business in Canada and partner with New Gold, a company that is well-known for its development track record and operational expertise."
As part of the deal, Royal Gold will pay $100m to New Gold at closing and $75m once capital spending on the project is 60% complete.
New Gold will deliver 6.5% of the gold produced at Rainy River to Royal Gold until 230,000oz have been delivered, and later on deliver 3.25%.
Under the purchase and sale agreement, New Gold will deliver gold and silver to Royal Gold on a monthly basis, which in turn plans to sell the gold within a few weeks of receiving each delivery.