Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold Royalty (NYSE: GROY) has agreed to acquire an existing 0.75% net smelter return (NSR) royalty on a portion of the Côté gold project held jointly by Iamgold (NYSE: IAG) (TSX: IMG) – the project operator – and Sumitomo Metal Mining.
As consideration for the royalty purchase, Gold Royalty will pay a total of $15.87 million, of which $15 million will be cash payment. The balance will be paid through the issuance of Gold Royalty’s common shares, based on the 20-day volume weighted average price of the shares on the NYSE American as of the business day immediately preceding closing.
“With first cash flow expected in 2023, the acquisition of the royalty on the Côté gold project will further enhance our sector-leading growth profile and expand our portfolio to include 28 producing and developing royalties anchored in Tier one jurisdictions,” said David Garofalo, CEO of Gold Royalty, in a media statement.
“This transaction represents the fifth major acquisition undertaken by Gold Royalty since our IPO last year, representing an unprecedented pace of growth and resulting in a diverse and well-balanced portfolio of 192 high-quality precious metal royalty assets. This enhanced scale drives increased trading liquidity, lower cost of capital and, ultimately, higher valuations,” Garofalo added.
Together with Canadian Malartic’s Odyssey project, the company would now own royalties on what is expected to be two of Canada’s largest and longest-life gold mines.
The Côté project is located in the Chester and Yeo townships in northeastern Ontario, within the District of Sudbury. It is approximately 125 km southwest of Timmins and 175 km northwest of Sudbury.
In October 2021, Iamgold completed a new technical report on the project describing a 36,000 tonne per day open pit operation with estimated average annual production of 489,000 oz. gold over the first 5 years of operation. Average annual production over the entire 18-year mine life is estimated at 367,000 oz. gold at an all-in sustaining cost of $802/oz.
A construction decision on the project was made back in July 2020, with an estimated cost of $1.3 billion.
Gold Royalty’s NSR covers the southern portion of the proposed open pit at Côté. Based on the geometry of the deposit, the royalty coverage is coincident with the higher-grade mineralization and is expected to be scheduled during the initial phases of production.
(This article first appeared in the Canadian Mining Journal)
