Franco-Nevada Corp (TSE: FNV) (NYSE: FNV) (FRA: 3FO) is taking advantage of AngloGold Ashanti PLC‘s (NYSE: AU) (FRA: HT3) newly expanded foothold in Nevada by purchasing a 1 per cent net smelter royalty on a key state project.
The company announced its US$250-million-dollar acquisition of the Arthur project’s royalty last week. Franco-Nevada bought it from Altius Minerals Corporation (TSE: ALS) (OTCMKTS: ATUSF) (FRA: VTM). Altius will retain the remaining 0.5 per cent of the original 1.5 per cent NSR.
The two companies are currently in an arbitration dispute over the royalty’s extent of coverage at the mine site. If Altius wins the dispute, Franco-Nevada will be required to pay an additional US$25 million on top of the quarter-billion sum.
The return royalty will add to pre-existing package of Nevada royalties Franco-Nevada has on operations such as Orla Mining Ltd‘s (TSE: OLA) (NYSEAMERICAN: ORLA) South Railroad site; the Marigold mine held by SSR Mining Inc (TSE: SSRM) (NASDAQ: SSRM) (FRA: ZSV); and AngloGold’s Sterling project, also in the Beatty district.
The news follows AngloGold obtaining the Reward and Bullfrog assets through this month’s acquisition of Augusta Gold Corp (TSE: G) (OTCMKTS: AUGG) (FRA: 7RZ). These two projects reside within close proximity to Arthur and the international operator’s North Bullfrog operation, thereby providing operational synergies.
Franco-Nevada says that Arthur is one of the most promising gold projects in the entire country and highlighted that its mineral resources have been expanded by 20 per cent this year through the ongoing drill campaign.
“AngloGold, a tier-1 operator, has been rapidly growing the resource base at Arthur since its initial discovery in 2018,” said Franco-Nevada chief executive, Paul Brink, in a press release on Jul. 23.
Once a pre-feasibility study has been completed and the site enters the production phase within the next few years, the royalty should become much more valuable because of “decades of stable gold cash flow,” as boasted by Franco-Nevada. The site’s deposits, Merlin and Silicon, hold 3.4 million ounces of indicated gold resources.
Read more: Antimony recovery results from NevGold’s Limo Butte project exceed expectations
Franco-Nevada & AngloGold well-positioned in gold sector
AngloGold Ashanti currently has admirable liquidity of approximately US$3 billion and a cash balance of about US$1.5 billion. The company’s stock has risen by over 114 per cent year-to-date, significantly driven by the ascending price of precious metals.
Analysts have viewed the company’s recent decision to expand its Nevada presence favourably. The state has been pulling an increasing amount of investor intrigue in recent months due to its rich gold and antimony resources, in particular.
These two commodities have been steadily appreciating, thereby making development stage assets like Arthur or NevGold Corp‘s (CVE: NAU) (OTCMKTS: NAUFF) (FRA: 5E50) Limousine Butte project highly appealing to mining enthusiasts.
Meanwhile, Franco-Nevada benefits from a low-risk business model with a focus on royalties and streaming. Its margins are in excess of 90 per cent and the company’s share price has been on an upward trajectory since Jan. 1., climbing up by over 36 per cent on the New York Stock Exchange.
Read more: NevGold’s latest Nevada drill results show exceptional gold mineralization
NevGold is a sponsor of Mugglehead news coverage
Follow Rowan Dunne on LinkedIn
rowan@mugglehead.com
