Royal Gold, Inc.’s (NASDAQ: RGLD) is set to acquire and add two Brazilian mines to its portfolio that include royalties on gold, platinum, palladium, copper and nickel.
The company’s wholly-owned subsidiary RG Royalties, LLC announced Monday it has committed to acquiring new royalty interests in the producing Serrote and Santa Rita mines in Brazil for a total price of $250 million.
Royal Gold has entered into a binding commitment letter with ACG Acquisition Company Ltd. to acquire the new royalty interests and the deal is expected to close by the end of July 2023.
The Serrote and Santa Rita mines are currently owned by funds advised by Appian Capital Advisory LLP. ACG has agreed to acquire these mines and Royal Gold will pay the cash consideration for the royalty interests upon the closing of the transaction between ACG and Appian. Following the acquisition, ACG will be renamed ACG Electric Metals, reflecting its focus on the production of critical metals.
“Royal Gold’s financing is expected to play a significant role in the creation of ACG Electric Metals, and our role demonstrates the flexibility and attractiveness of our financing product,” President and CEO of Royal Gold Bill Heissenbuttel said.
He further added that the royalties would provide predominantly precious metals revenue on producing mines that have excellent long-term potential.
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Royalty contributions to Royal Gold are expected to be approximately 8,000 gold equivalent ounces for the period May 1 through December 31 and to average approximately 14,000 GEOs annually in the five years from 2024 through 2028.
The royalties are expected to provide a revenue mix weighted towards precious metals, with an approximate mix of 60 per cent gold, 25 per cent platinum and palladium, 10 per cent nickel and 5 per cent copper for the first five years at current spot prices. This diversified metal revenue will enhance Royal Gold’s financial stability and growth prospects.
Both the Serrote and Santa Rita operations are forecasted to have low first-quartile carbon emissions intensity over the mine lives. Royal Gold will also make a financial commitment of 0.25 per cent of the annual royalty payments received to support programs benefiting the communities within the area.
The acquisition also opens up new growth opportunities for Royal Gold. The commitment letter with ACG includes terms that provide Royal Gold with the ability to participate in the future growth of ACG Electric Metals.
This includes a right of first refusal on the sale of any streams or additional royalties on the Serrote and Santa Rita mines and a right of first offer on royalty and stream financing for any future projects acquired by ACG Electric Metals.
Royal Gold stock went up slightly by 0.87 per cent on Monday to $120.22 on the Nasdaq stock exchange.
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Royal Gold’s core business involves procuring and managing interests in precious metal streams, royalties, and other similar production-oriented assets.
As of March 31, Royal Gold’s portfolio included stakes in 182 properties spread across five continents. This includes interests in 40 active mines and 19 projects in the development phase.
It has stakes in Mount Milligan operated by Centerra Gold Inc. (TSX: CG) (NYSE: CGAU) where it owns the right to purchase 35 per cent of the payable gold and 18.8 per cent of the payable copper produced from the Mount Milligan copper-gold mine.
Royal Gold also owns a 2.0 per cent net smelter return royalty on all metals at Newmont Corporation’s (NYSE: NEM) (TSX: NGT)’s Peñasquito mine.
It holds a 3.0 per cent net smelter return royalty on gold produced from the El Limon mine in Nicaragua owned by Calibre Mining (TSX: CXB) (OTCQX: CXBMF). Royal Gold acquired its royalty interest in 2007 as part of the acquisition of Battle Mountain Gold Exploration Corporation.
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