Royal Gold Announces Additional Agreement with Centerra that Provides for Mine Life Extension at Mount Milligan
“This announcement demonstrates our willingness to work with our operating counterparties and be flexible and creative in order to find mutually beneficial opportunities to maximize value,” commented
The features of the agreement include:
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Significant consideration payable to
Royal Gold including cash and gold in the near term, and a free cash flow interest in the long term.Royal Gold will receive approximately$125 million in near-term consideration, comprised of$24.5 million of cash and 50,000 ounces of gold1, and a long-term free cash flow interest on theMount Milligan Mine . -
Long-term cost support to the
Mount Milligan Mine to allow for an extended mine life.Royal Gold will provide cost support payments for metal deliveries starting in approximately 2030 that provide a basis for an immediate reserve increase and extension of theMount Milligan mine life to 2035. Longer-term, the cost support payments are intended to incentivize Centerra to continue to invest and maximize the value of the large mineral endowment at theMount Milligan Mine . According to Centerra, this investment would include continued exploration drilling and studies to review capital projects that could lead to the conversion of existing resources to reserves, as well as drilled inventory that is not included in existing resources. Centerra expects to complete a Preliminary Economic Assessment in the first half of 2025 to evaluate a mine life extension beyond 2035.
1 Value of
Cost Support Agreement Overview
The Cost Support Agreement is independent from the Existing Stream Agreement and uses the Existing Stream Agreement to provide a reference for metal deliveries. Metal deliveries referenced by the Cost Support Agreement are those with a bill of lading date on or after
The key features of the Cost Support Agreement are discussed below.
Cash and Gold Consideration
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A
$24.5 million cash payment (“Cash Consideration”) upon the execution of the agreement. -
Gold deliveries totaling 50,000 ounces (the “Deferred Gold Consideration”) to be delivered in equal installments of 2,500 ounces for a period of 20 quarters commencing on the earlier of the delivery of 375,000 ounces of gold or 30,000 tonnes of copper from the Reference Date, or
June 30, 2030 . As part of the Deferred Gold Consideration,Royal Gold is entitled to receive three tranches of 11,111 ounces each (the “Greenstone Deliveries”), with the last delivery expected before year end 2027. Each of the Greenstone Deliveries received shall reduce the number of ounces in any remaining Deferred Gold Consideration delivery on a pro-rata basis. The Deferred Gold Consideration deliveries will require no cash payment fromRoyal Gold , and will be made irrespective of the operating status of theMount Milligan Mine .
The Greenstone Deliveries relate to the obligation byOrion Mine Finance Group to deliver gold to Centerra within 30 days following the dates upon which cumulative amounts of 250,000 ounces, 500,000 ounces and 700,000 ounces of refined gold have been produced from theGreenstone Gold Project being developed by Equinox Gold Corp. Each of the Greenstone Deliveries will be delivered toRoyal Gold within 30 days of such delivery to Centerra.
Free Cash Flow Interest
Free cash flow is defined as gross revenue less total costs including treatment and refining costs, operating costs, exploration costs, capital costs and the net stream costs.
FCF Interest payments will not be payable if the free cash flow is negative in a given calendar year, and Centerra is entitled to recover any negative free cash flow before FCF Interest payments resume.
Cost Support
Delivery thresholds used to define the periods of cost support are the earlier deliveries of:
- 375,000 ounces of gold or 30,000 tonnes of copper from the Reference Date (the “First Threshold”).
- 665,000 ounces of gold or 60,000 tonnes of copper from the Reference Date (the “Second Threshold”).
Near-Term Cost Support Through Approximately 2029
At Centerra’s request, in the event that both the gold price is at or below
Any Pre-Threshold Support provided by
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For gold, any cost support payment will be reduced by the difference between the gold price and
$1,600 per ounce. For example, if the gold price is$1,700 per ounce, the long-term cost support payment required byRoyal Gold for any delivery will decrease by$100 per ounce. -
For copper, any cost support payment will be reduced by the difference between the copper price and
$3.50 per pound. For example, if the copper price is$4.00 per pound, the long-term cost support payment required byRoyal Gold for any delivery will decrease by$0.50 per pound.
For reference, current spot prices for gold and copper are approximately
2 As published by
Cost Support from Approximately 2030 Through Approximately 2035
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With respect to gold, the lower of either
$415 per ounce, or 50% of the spot gold price less$435 per ounce, for each ounce of gold delivered under the Existing Stream Agreement. - With respect to copper, 35% of the spot copper price for each pound of copper delivered under the Existing Stream Agreement.
Cost Support After Approximately 2036
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With respect to gold, the lower of either
$615 per ounce, or 66% of the spot gold price less$435 per ounce, for each ounce of gold delivered under the Existing Stream Agreement. - With respect to copper, 51% of the spot copper price, for each pound of copper delivered.
Suspension of Cost Support
The obligation for
Summary of Future Payments for Mount Milligan Metal Deliveries
The combined effect of this Cost Support Agreement on the payments for metal deliveries from
Period: |
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~2030 through ~2035 |
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~2036 and Beyond |
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Au |
Cu |
Au |
Cu |
Au |
Cu |
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Payments for Existing Stream Agreement: |
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15% of spot Cu |
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15% of spot Cu |
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15% of spot Cu |
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Additional Agreement: Delivery Thresholds(1) defining triggers for cost support payments:
(from |
Pre-Threshold
(if Au<= |
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First Threshold (after the earlier delivery of either 375,000oz Au or 30,000t Cu) |
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Second Threshold (after the earlier delivery of either 665,000oz Au or 60,000t Cu) |
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Cost Support Payments(2) |
Lower of
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35% of spot Cu
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Lower of
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35% of spot Cu
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Lower of
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51% of spot Cu
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Combined Effective Payments(3):
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If Au<=
Cu<= |
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Lower of
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50% of spot Cu |
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Lower of |
66% of spot Cu |
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Lower of |
50% of spot Cu |
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All other metal prices: |
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15% of spot Cu |
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Notes: |
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1. |
Delivery Thresholds are defined by metal deliveries under the Existing Stream Agreement, which is independent from the additional agreements and is used only as a reference for metal deliveries. |
2. |
Pre-Threshold Support payments prior to the First Threshold are at Centerra’s option, and are recoverable from any cost support provided after the First Threshold is reached at metal prices above |
3. |
Includes the total amount payable per ounce of gold or pound of copper when the effect of the Cost Support Agreement is considered with the Existing Stream Agreement. |
4. |
Given the relevant calculations, the Cost Support payments are only payable above a spot gold price of |
Corporate Profile
Forward-Looking Statements: This press release includes “forward-looking statements” within the meaning of
Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following: a lower-price environment for gold or copper; future operating activities or financial performance at the
Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.
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For further information, please contact:
Vice President Investor Relations and Business Development
(720) 554-6995
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