Royal Gold locks in 34% of International Royalty shareholders

There’s been no word from hostile bidder Franco-Nevada (FNV-T) since International Royalty (IRC-T, ROY-X) and surprise white knight Royal Gold (RGL-T, RGLD-Q) announced a friendly $749-million cash and share deal on Dec. 18.

And Royal Gold isn’t sitting around waiting for International Royalty shareholders to agree to the offer.

Royal Gold said today that it had locked up 7.16% more of International Royalty shares through voting agreements bringing the total to 34%, which includes all of IRC’s directors and senior officers.

Franco-Nevada offered $640 million in cash – or $6.75 per share – for International Royalty earlier this month, a 43% premium over the company’s 20-day volume-weighted average trading price before the offer was made.

Royal Gold has offered $7.45 in cash or 0.1285 Royal Gold shares for each International Royalty share, a 70% premium.

Royal Gold will pay a maximum of US$350 million in cash and a maximum of 7.75 million Royal Gold shares.

The cash and share deal is  thought could entice International Royalty shareholders from Canada who are interested in holding onto shares in a royalty company for tax reasons, among others.

The deal requires the approval of 66.7% of International Royalty shareholders.

Franco-Nevada is free to make a competing offer; however, the Royal Gold deal includes a $32-million break fee. Even before the Royal Gold offer, many analysts were expecting that Franco-Nevada would have to sweeten its offer even without another bidder. The deep-pocketed Franco has been quiet since the Royal Gold offer but there’s still time.

Together, Royal Gold and International Royalty would have a total of 200 royalty interests and 11 producing assets. About 70% of total revenue would come from precious metals, the rest from base metals.

Right now, much of International Royalty’s revenue comes from nickel royalties – it’s main source of income is a 2.7% NSR on Vale’s Voisey’s Bay mine in Labrador.

That will change come 2013 when Barrick Gold’s (ABX-T, ABX-N) 18-million oz. Pascua Lama gold project comes online. The deposit is located right on the border between Argentina and Chile. International Royalty has a 0.473%-3.15% sliding scale royalty on the Chilean portion of the deposit. The royalty will add US$20 million in annual revenue.

Royal Gold holds a smaller Pascua Lama royalty about one-third the size of International Royalties’.

Franco-Nevada, based in Toronto, has about 3000 royalties on projects in the United States, Canada and Australia. It has interests in gold, platinum and oil and gas.

Royal Gold and International Royalty are both based in the Denver area.