Pipeline benefits Royal Gold

The Cortez joint venture has increased it reserves for the Pipeline complex in central Nevada to the benefit of junior Royal Gold (RGLD-Q), which holds royalty interest on production.

Placer Dome (PDG-N), which operates and has a 60% stake in the joint venture, estimates Pipeline contains 8.2 million oz. gold in 159 million tons grading 0.052 oz. per ton. London-based Rio Tinto (rtp-n), through its wholly owned subsidiary, Kennecott Exploration, owns the remaining 40%.

Royal Gold holds several sliding-scale gross smelter royalties, as well as a fixed gross royalty, on the operation.

Since July 1999, when Royal completed its royalty agreements, the operation has produced 675,857 oz. gold at a cash operating cost of US$48 per oz. In 2000, output is expected to drop to 860,000 oz., with cash costs increasing to about US$67 per oz. At current gold prices, Royal’s royalty on production stands at 2.25%.

The property contains a resource for another 830,000 oz. in 22.2 million tons grading 0.0375 oz. per ton. Cortez expects to spend US$3.3 million on exploration and development drilling in 2000.

Elsewhere in Nevada, Royal has witnessed a decrease in the value of its 1.75% net smelter royalty at the Bald Mountain mine, operated by Placer.

Reserves fell to 704,000 oz. gold in 10.2 million tons averaging 0.069 oz. per ton, down from 811,000 oz. in 10.8 million tons grading 0.075 oz. per ton. Mineralized material also decreased, to 8.6 million tons grading 0.04 oz. per ton, down from 10.9 million tons at 0.037 oz.