Royal Gold, Inc. RGLD announced that it will acquire a 3.75% net value royalty (“NVR”) covering a considerable area of Barrick Gold Corporation’s ABX Cortez gold mine, including the Crossroads deposit from a private party seller. Royal Gold will pay $70 million to the seller.
Royal Gold’s interests at Cortez Crossroads will comprise of a 4.37% NVR and a 5% sliding scale Gross Smelter Return (“GSR”) royalty at the current gold price, after the acquisition. Royal Gold’s interest on production from Pipeline, South Pipeline and portions of the Gap deposits consists of a 4.76% NVR and a 5% GSR royalty at the current gold price.
Royal Gold created its first royalty at Cortez and it forms an important property for the company. The company feels that with additional contribution from Crossroads, which has an estimated mine life of about 9 years, Cortez will become a significant contributor for Royal Gold again in the near future.
Royal Gold plans to finance the acquisition from its revolving credit facility. After concluding the acquisition, the company anticipates that it will have about $305 million available and $345 million outstanding under the facility.
As of Dec 31, 2015, proven and probable reserves subject to Royal Gold’s interests at Cortez were estimated at 3.7 million ounces, including around 3 million ounces at Crossroads.
Royal Gold reported net income attributable to stockholders of $20.4 million, or 32 cents per share, in fiscal fourth-quarter 2016 (ended Jun 30, 2016) compared with net income of $14.8 million, or 23 cents per share, in the year ago quarter.
Royal Gold’s revenues were $94.1 million for the fourth quarter, up 27.9% year over year.
Royal Gold currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the mining space include New Gold, Inc. NGD and Newmont Mining Corporation NEM, both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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