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A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Royal Gold (NASDAQ: RGLD) has further consolidated its royalty position at the Cortez gold complex in Nevada, which has been operating since 1969 and produced approximately 27 million ounces of gold to date.
On Thursday, the company announced it has acquired two portions of a gross smelter return (GSR) royalty that together cover a 1,630 square kilometre area, including the Cortez mine operation and the entirety of the Fourmile development project in Nevada, for cash consideration of $204.1 million.
The royalty package consists of a 0.24% gross royalty covering areas including the Pipeline and Crossroads deposits, both of which are producing mines, and a 0.45% gross royalty covering areas including the Cortez Hills mine and the Goldrush, Fourmile and Robertson deposits that are in development.
The royalty interests were previously held by certain holders who are successors in interest to Idaho Mining Corporation. Royal Gold is funding the acquisition using available cash resources and a total draw of $200 million on its credit facility.
The area within the Cortez complex is controlled by Nevada Gold Mines, a joint venture between Barrick Gold (61.5% owner and operator) and Newmont (38.5% owner), with the exception of the Fourmile project, which is 100% owned and operated by Barrick.
“Cortez is a cornerstone asset for Royal Gold, and this acquisition increases and expands our interest at one of the world’s most prolific gold mines, which is operated by two of the leading companies in the gold business,” Royal Gold CEO Bill Heissenbuttel said in a news release.
“The royalty covers areas similar to those covered by the Rio Tinto royalty that we acquired in August, 2022, with the important difference that the Idaho royalty includes the existing Robertson deposits,” Heissenbuttel added.
Following the royalty acquisition, Royal Gold has reorganized its multiple royalty interests at the Cortez complex and divided them into two zones: the “legacy zone” and the Cortez complex zone.
The former represents its largest royalty exposure at Cortez — an equivalent 9.4% GSR royalty rate over the Pipeline and Crossroads deposits. The Cortez complex zone includes an equivalent 1.6% GSR royalty over the Cortez Hills, Cortez Pits, Fourmile and Goldrush deposits, a 2.2% GSR royalty rate over the Goldrush SE deposit, and a 0.45% GSR royalty rate over the Robertson deposit.
According to the company, Cortez is expected to be a top three revenue producer in the Royal Gold portfolio. The Cortez complex represents a principal property for the company and has provided total royalty revenue of over $400 million over a 27-year period, from the first royalty payment in 1995 through September 30, 2022.
Shares of Royal Gold traded 0.6% lower on the NASDAQ as of 12:30 p.m. ET. The gold stream and royalty company has a market capitalization of $7.8 billion.
