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Metalla Royalty & Streaming (TSXV: MTA) announced on Monday a major addition to its royalty portfolio: the Lama project in San Juan, Argentina, held by Barrick Gold (NYSE: GOLD; TSX: ABX).
Under a royalty purchase agreement with an arm’s length third party, Metalla would acquire an existing 2.5% to 3.75% gross value return (GVR) royalty on gold and silver, and a 0.25% to 3.0% net smelter return (NSR) royalty on copper and other non-precious minerals, extracted from the majority of the Lama project. Total consideration will be $7.5 million in common shares and cash.
“The Lama project is part of one of the largest gold deposits in the world currently being contemplated by Barrick as a standalone operation. Our royalty will provide Metalla shareholders with outstanding exposure to one of the most significant geological gold-bearing trends with a substantial amount of near-term growth, exploration upside and first in class operator,” CEO Brett Heath said in a news release.
Lama represents the Argentine portion of Barrick’s 21-million-ounce Pascua-Lama gold project straddling the border between Chile and Argentina. The Chilean Pascua portion has been placed into a closure process, while the Argentina Lama portion, which has contained metal of 3.13Moz gold and 236.9Moz silver, is being considered as a standalone underground project as part of a potential Veladero-Lama complex operation.
To date, Barrick has spent over $4 billion on infrastructure in the vicinity, and the Lama project would utilize the semi-completed process plant and tailings facilities. The gold miner has outlined a block cave underground Lama project with an initial processing capacity of 13-15 Kt/d with the potential to expand to 30 Kt/d in the future.
Barrick has committed up to $75 million at the Lama project with 10 to 12 drill rigs operating and studies ongoing to evaluate the capital required to complete the mill and plant facilities in Argentina. The goal is to reach a development decision in 2024.
Recent drilling in the royalty area has confirmed mineralization 300 metres to the east of the current known resource in an area known as Lama East with significant intercepts including 1.79 g/t gold-equivalent over 96.2 metres.
At the Lama porphyry target, drilling confirmed the existence of gold-copper porphyry style mineralization at depth with a footprint of 2 km by 1.5 km. The Lama deposit remains open to the east, south and west of the project, where no deep drilling has been conducted.
According to Metalla, the gold GVR royalty provides for an escalation feature whereby the royalty rate increases from 2.5% to 3.75% after 5Moz of gold production. In addition, the copper royalty, which begins at a 0.25% NSR royalty, escalates up to a 3.0% NSR royalty based upon the cumulative net smelter returns from the royalty area.
The GVR also extends towards Penelope, a satellite pit located in the southeast section of the Lama project and less than 10 km from the Veladero mine, which is a 50% JV between Barrick and Shandong Gold Mining.
In 2021, a small geo-metallurgical drill campaign was carried out to collect additional metallurgical data with a focus on the potential for treating the ore through heap leach processing at Veladero, where the mine is nearing an end.
The royalty purchase agreement, which grants Metalla a pre-emptive right on the future sale of the remaining half of the royalties, is expected to close in early 2023.
Shares of Metalla rose 1.1% on the TSX Venture Exchange by noon ET following the announcement. The royalty and streaming company has a market capitalization of C$331.3 million ($242.6m).
