Royal Gold buying royalties from Kennecott

Vancouver – Royal Gold (RGL-T, RGLD-Q) is expanding its portfolio by purchasing a pair of royalties from Rio Tinto (RTP-N) subsidiary Kennecott for a total of US$25 million.

The royalties consist of a 3% net smelter return (NSR) on the Robinson mine in eastern Nevada and a sliding-scale NSR on the soon-to-be-producing Mulatos mine in Sonora State, Mexico.

The open pit Robinson copper-gold mine, owned by Quadra Mining (QUA-T), is expected to produce about 145 million pounds (over 65,000 tonnes) of copper and 65,000 oz. of gold in 2005 from ore averaging 0.55% copper and 0.35 gram gold per tonne. Construction of a molybdenum circuit is scheduled for completion by year end and is expected to recover up to 1.6 million pounds of the metal in 2006 (at an operating cost of about US$2.50 per pound), contributing significantly to revenues.

Quadra acquired the Robinson mine in early-2004 from BHP Billiton (BHP-N) for US$14.9 million and recommenced production. BHP initially constructed the operation in 1994 at a reported cost of US$480 million. The mine operated from 1996-99, when it was placed on care and maintenance due to depressed metal prices.

The latest reported proven and probable reserves at Robinson are 129.4 million tonnes grading 0.69% copper and 0.29 gram gold.

Royal Gold expects to realize revenue from its Robinson NSR once a US$20 million reclamation trust account is fully funded by Quadra in 2006.

At the Mulatos project in Mexico, owned by Alamos Gold (AGI-T, AGIGF-Q), the Estrella open pit, heap leach gold operation is currently under construction and expected to commence production in early-2006. With proven and probable reserves of 36.4 million tonnes averaging 1.6 gram gold (1.9 million oz. of contained gold), the mine has anticipated annual output of about 150,000 oz. of gold.

The Mulatos royalty is sliding scale, with the NSR capped at 1.5% with gold prices at US$400 per oz. or higher.

Royal Gold holds precious metal royalty interests in several producing mines in the western U.S. (principally Nevada) and Argentina, and NSR’s on a number of advanced stage projects. With its 23.3 million shares outstanding, the company posts a $915 million market capitalization at its recent trading level of $39.30 per share, an almost 3-year high.