Repadre Capital acquires NSR royalty on B.C.’s Golden Bear

Toronto-based Repadre Capital (VSE) has signed a letter of intent with Wheaton River Minerals (TSE) giving the former a net smelter return (NSR) royalty on all mineral production from North American Metals’ (VSE) Golden Bear mine at Muddy Lake, B.C.

Last year, the mine produced 58,224 oz. gold at $352 per oz. Although mining was suspended earlier this year, stockpiled ore is still being processed. Reserves at year-end stood at 216,405 tons grading 0.52 oz. gold per ton.

Under the agreement, Repadre will pay Wheaton $1 million for the royalty which will be payable at a rate of 7.5% until Repadre has received $1 million, plus interest at 7%, after which time the royalty will be reduced to 2%. Repadre President Gerry McCarvill told The Northern Miner that payback of the $1 million should take 6-7 months. In the event of the mine’s closing, Repadre’s royalty will be guaranteed against the inventory of mine vehicles. Completion of the royalty deal is subject to regulatory approvals and the acquisition by Wheaton River of a wholly owned subsidiary of Homestake Mining (TSE), which holds an 85% interest in North American.

At presstime, terms of the deal between Wheaton and Homestake were not available.

The Wheaton agreement is the third royalty deal concluded by Repadre this year. Unlike other Canadian royalty companies, Repadre is mainly interested in creating royalties on mineral properties as opposed to buying royalties which already exist, McCarvill said. In return for a royalty, Repadre is willing to supply financing so that a company can carry out exploration or mine development.

“We see a royalty as an alternative financing option,” said Repadre Chairman Jonathan Goodman.

In March, the company announced it had paid $3 million for a graduated NSR royalty on production at Campbell Resources’ Joe Mann mine in Chibougamau, Que. Campbell is planning to use its share of the sale to fund further development at the mine.

Under the royalty, which came into effect at the beginning of May, Repadre will receive 1.8% at gold prices up to $500 per oz., increasing to 3.6% at $625 per oz. The agreement also provides Repadre with a 2% NSR on the sale of copper in excess of five million lb. per year and silver in excess of one million oz. per year, recoverable from the property.

In the Lac de Gras area of the Northwest Territories, the company also holds a 1% NSR on more than one million acres. Several of the properties adjoin the diamond discovery made by BHP Minerals Canada and Dia Met Minerals (TSE) at Point Lake. The royalty even includes properties that are subject to joint-venture agreements with Kennecott Canada.

Noting that the Lac de Gras area is a hot but costly play, Goodman said the royalty gives Repadre exposure to the area and allows it to “get the sizzle without the downside risk.”

Until now, Repadre has focused mostly on gold royalties, but Goodman says the company will consider any mining royalty, including industrial minerals. The company is also evaluating properties in other countries.

Repadre was originally incorporated in 1981 as Padre Resources and was involved in a variety of exploration programs throughout Canada. In 1990, it changed its name to Repadre Capital and entered into a joint venture with Corona to explore several diamond properties in Botswana. When Corona was reorganized in late 1991 to form International Corona, its 49% interest in Repadre was transferred to the newly formed Dundee Bancorp (TSE). Following completion of a recent Repadre financing agreement, Dundee Bancorp’s interest was reduced to 34%.

Goodman and McCarvill believe that to succeed in the royalty business, a company needs exposure to a large number of properties and deals. Being able to call on the resources and expertise of Dundee Bancorp Chairman Ned Goodman (Jonathan’s father) has aided the company in its quest for royalty acquisitions.

As to the future, Repadre is planning to raise $10-15 million in additional funding this fall, to buy more royalties. At present, it has 7.1 million shares outstanding and a cash flow in excess of $1 million.