Royal Gold ups royalty on Cortez gold complex in Nevada in US$525M deal

Royal Gold (NASDAQ: RGLD; LSE: 0KXS) announced on Tuesday a US$525-million acquisition of a sliding-scale gross royalty on an area including the Cortez mine and Fourmile project in Nevada from Rio Tinto’s (NYSE: RIO; ASX: RIO) subsidiary Kennecott Royalty company.

The transaction gives the Denver, Colo.-based royalty firm an effective 1.2% gross royalty in an area within the Cortez complex, which is owned or controlled by Nevada Gold Mines. This is a joint venture between Barrick Gold (TSX: ABX: NYSE: GOLD), 61.5% owner and operator, and Newmont (TSX: NGT; NYSE: NEM), 38.5% owner. The Fourmile development asset, also included in the deal, is 100% owned and operated by Barrick.

Rio Tinto obtained the royalty as partial consideration for the sale of its 40% interest in the Cortez complex to Barrick in 2008. Payments will begin once the complex has produced a total of 15 million oz. of gold, which Rio said it was expected to happen “imminently,” potentially in the third or fourth quarter of this year.

“This transaction unlocks hidden value from our portfolio and releases cash immediately,” chief financial officer Peter Cunningham said in a separate statement.

Royal Gold said the royalty acquisition increases its exposure to the Cortez complex.

“Royal Gold’s first royalty interest was created at Cortez, and it will always be considered as the cornerstone asset for the company we are today,” president and CEO Bill Heissenbuttel said in a release.

The Cortez complex, in production since 1969, has yielded more than 26 million oz. of gold to date, consistently replacing resources in excess of depletion.

The royalty covers an area including the Crossroads, Pipeline and Cortez Hills operating mines, as well as the Goldrush and Fourmile development projects and several exploration targets.

Barrick expects the Cortez open pit operation to continue until 2026 and the underground mine until 2042.

The gold giant has also said that the planned conversion of existing resources to reserves at the Cortez Complex has the potential to extend open pit and underground mining operations by at least seven and 15 years, respectively.

Royal Gold has been involved in the complex since 1987 and was a founding partner in the original Cortez JV. The property has provided the company total royalty revenue of about US$412 million over a 27-year period from the first royalty payment in 1995 through June 30, 2022.