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.
Yukon-Nevada Gold Corp. (TSX: YNG) on Wednesday announced a forward gold purchase agreement with Deutsche Bank’s London office for $20 million.
Yukon-Nevada now have funds to expand its SSX-Steer mine to ramp up to 1,200 tons per day and start the development of Starvation Canyon at its Jerritt Canyon Mine in Nevada.
Good news for shareholders. An even better deal for the merchant bank – according to the press release the $20 million buys gold from Yukon-Nevada at at $716/oz. On Wednesday the spot price was a good $1,000 above that.
Yukon Nevada says it will deliver 27,950 ounces of gold over a 43 month term at a rate of 650 ounces per month starting end of Q1.
The company says the 27,950 ounces that have been committed under this gold facility represent approximately 3.90% of the gold reserves or 0.90% of the total gold resources at Queenstake, the vehicle for the transaction.
While the $20 million pre-payment is set at bargain basement prices Yukon-Nevada will make up the difference over the next three-and-half years because “the remainder of the purchase price for the gold will be paid to Queenstake upon completion of the monthly gold deliveries to Deutsche Bank and will be equal to the amount that the gold price exceeds US$850 up to a maximum gold price of US$1,750,” says the company.
Deutsche Bank also gets a share purchase warrant, which can be exercised to purchase 40,000,000 common shares at a price of 44c per share on or before February 7, 2015 if Yukon-Nevada does not deliver the required monthly ounces. Yukon Nevada opened at 46c on the TSX on Wednesday, up a handy 4.5%, before tracking back to par.
