Wheaton Precious Metals (TSX: WPM, NYSE: WPM; LSE: WPM) is buying a 1% gross revenue royalty on Vista Gold’s (TSX: VGZ; NYSE-AM: VGZ) Mt. Todd project in Australia for $20 million.
The advanced-stage project, one of the country’s largest undeveloped gold ventures, already has environmental and operating permits. It may cost $350 million to build for access to 7 million proven and probable oz. of gold at the site about 250 km southeast of Darwin in the Northern Territory, according to a scoping study released this year.
“We believe Mt. Todd represents a significantly de-risked, advanced development-stage gold project that we welcome into our global portfolio,” Wheaton CEO Randy Smallwood said in a news release on Thursday.
The project could be developed for output of less than 200,000 oz. per year, according to the scoping study. Or it could be built for $892 million to produce 479,000 oz. a year in a large-scale plan in a feasibility study released last year.
“This funding provides Vista with the opportunity to demonstrate a development strategy for Mt. Todd that requires substantially lower initial capital investment and maintains high returns through staged development,” Vista president and CEO Fred Earnest said in the same news release.
The stream payment from Wheaton is to be staggered with $3 million by year’s end, $7 million after Australian foreign investment regulator approval and $10 million within six months of the first payment as long as Vista has started a drilling program.
The drilling at the Batman deposit aims to add as much as 1 million oz. gold to Mt. Todd’s 280.4 million proven and probable tonnes with an average grade of 0.77 gram gold per tonne at a cut-off grade of 0.35 gram, according to the feasibility study.
Mt. Todd, acquired by Vista in 2006, has been a mining site on and off for well over a century. Prospectors discovered gold and tin in 1889 which was mined 1902-14. A Billiton-Zapopan joint venture found the Batman deposit in 1988 and output began in 1993. Pegasus Gold owned and operated the site 1995-97, then new owners failed and the mine closed in 2000.
Vista estimates the site still has about $130 million in infrastructure such as a paved road, a gas line for energy generation, power lines, a freshwater reservoir and a tailings facility.
