Royal Gold (RGL-T, RGLD-Q) is expanding its royalty portfolio with the acquisition of three royalties from AngloGold Ashanti‘s (AU-N) North American exploration division for US$13.75 million.
The first royalty is a 2% net smelter return (NSR) royalty from Goldcorp‘s (G-T, GG-N) Marigold mine in the Battle Mountain-Eureka trend of Nevada.
The other two are from Capital Gold‘s (CGC-T, CGLD-O) El Chanate mine in Sonora Mexico. One is a sliding scale NSR ranging between 2 and 4% and the other is a 10% net profits interest royalty.
If, as expected, the deal goes through, Royal Gold will have a portfolio made up of 19 royalties 13 of those are attached to operating mines while the remaining six are in the development state.
Marigold mine is a large scale, open pit, heap leach operation. At the end of 2006 it had proven and probable reserves of 92.7 million tonnes of ore grading 0.71 grams per tonne for 2.1 million oz. of gold.
The NSR that Royal Gold is getting covers roughly 38% of current reserves, but does not cover the current mining in the Basalt and Antler area. Royal Gold estimates that it will start to receive the royalty 2010.
As for El Chanate, the recently producing mine (it only went into production last year) has a proven and probable reserves of 39.5 million tonnes grading 0.66 grams per tonne for 832,000 ounces of gold.
Capital Gold says production should come in at 60,000 oz. for 2008, with possible expansion to 100,000 oz. per year in calendar 2009.
The sliding-scale royalty pays 2% when the gold price is below $300 per oz., 3% when it’s between $300 and $350, and 4% when it’s above $350 per ounce and it’s capped once payments reach roughly $17 million and the 10% net profits interest royalty is capped at $1 million.
Royal Gold creates all of its revenue from acquiring gold royalties and doesn’t engage in mining itself. It says it is the only publicly listed company to do so, and the impetus behind its business plan is to give lower-risk exposure to gold.
It shares have traded between $25.15 and $41.40 over the last 52-weeks and it has roughly 27.5 million shares outstanding. In Toronto on Jan. 28 its shares were up $4.73 to $31.66.
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