DENVER--(BUSINESS WIRE)-- Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) announced today that its wholly owned subsidiary, RG Royalties, LLC, has acquired two portions of a gross smelter return royalty (the “Idaho Royalty”) that together cover a large area including the Cortez mine operational area and the entirety of the Fourmile development project in Nevada (the “Cortez Complex”) from certain holders who are successors in interest to Idaho Mining Corporation for cash consideration of $204.1 million. The area within the Cortez Complex is owned or controlled by Nevada Gold Mines LLC (“NGM”), a joint venture between Barrick Gold Corporation (“Barrick”) (61.5% owner and operator) and Newmont Corporation (“Newmont”) (38.5% owner), with the exception of the Fourmile development project which is 100% owned and operated by Barrick.

“With this transaction we have further consolidated our royalty position at the world-class Cortez Complex,” commented Bill Heissenbuttel, President and CEO of Royal Gold. “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. We have consistently worked to enhance and extend the average life of the Royal Gold portfolio and this transaction again demonstrates our successful execution of this long-term strategy.”

“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. We recognize that our royalty coverage of the Cortez Complex has grown to become more complicated, so as part of this announcement we are introducing a simplified approach to describing our multiple royalty interests across the Cortez Complex,” continued Mr. Heissenbuttel. “This simplification should highlight our exposure to Cortez and align our disclosure with that of NGM.”

Acquisition Highlights

Cash acquisition of life of mine gross royalty provides Royal Gold shareholders with immediate revenue and increased exposure to the Cortez Complex: The Idaho Royalty is currently generating revenue and covers a total area of approximately 630 square miles without stepdowns or caps. Using available liquidity sources to fund the acquisition provides Royal Gold shareholders with full exposure to exploration and production success without equity dilution.
Established world-class gold mining complex with district-scale and long-term growth potential: The Cortez Complex has been operating since 1969, has produced approximately 27 million ounces of gold to date, and has consistently replaced resources in excess of depletion. The Idaho Royalty covers a large area including the producing Crossroads, Pipeline and Cortez Hills mines, the Goldrush, Fourmile and Robertson development projects, and several exploration targets. Royal Gold expects further production and exploration potential at these mines, projects and targets to contribute revenue to the portfolio for decades.
Cortez is expected to be a top three revenue producer in the Royal Gold portfolio: The Cortez Complex is a Principal Property for Royal Gold 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. Including this acquisition the Cortez Complex is expected to rank within the top three revenue producers in Royal Gold’s portfolio in 2023.
NGM is a joint venture between the world’s two largest gold mining companies, both of which have deep roots in Nevada: The NGM joint venture partners, Barrick and Newmont, have long and established operating histories in Nevada. NGM owns and operates processing facilities designed to process a wide range of ore types, and the NGM partners are the widely acknowledged global leaders in Carlin-type deposit geology.
Nevada is a low-risk and established mining jurisdiction: Nevada is one of the world’s most prolific gold mining jurisdictions and was third in the Fraser Institute’s ranking of top global mining jurisdictions in 2021.
Royal Gold’s knowledge of the Cortez Complex provided unique insights into the review of the future potential: Royal Gold has been involved in the Cortez Complex since 1987 and was a founding partner in the original Cortez Joint Venture. Several members of Royal Gold’s senior management and Board of Directors worked with NGM predecessor companies, including Placer Dome Inc. and Barrick, and have first-hand operating and project development experience at the Cortez mine.
Royalty Details

The details of the portions of the Idaho Royalty that comprise this acquisition are as follows:

0.24% gross royalty rate covering areas including the Pipeline and Crossroads deposits; and,
0.45% gross royalty rate covering areas including the Cortez Hills, Goldrush, Fourmile and Robertson deposits.
The Idaho Royalty is life of mine, is not subject to any stepdowns or caps, and there are no deductions applicable.

The economic effective date for the transaction is December 1, 2022, and all revenue derived from production from the areas covered by the Idaho Royalty after that date will be attributable to Royal Gold. Royal Gold expects to receive payment for the Idaho Royalty on a monthly basis, and the first revenue is expected to be recognized in the fourth quarter of 2022 with the first payment to be received in the first quarter of 2023. Royal Gold expects the Idaho Royalty to contribute approximately 4,000 ounces to Royal Gold’s account in 2023, increasing to over 5,000 ounces in 2028.

Information rights for the royalty are broad and include site visits and audit rights.

Applicable taxes on the royalty include 21% U.S. Federal income tax and the 5% Nevada Net Proceeds of Minerals Tax.

Transaction Details

Royal Gold paid cash consideration of $204.1 million to certain holders who are successors in interest to Idaho Mining Corporation. The cash consideration was sourced from available cash resources and a total draw of $200 million on the revolving credit facility.

After completion of this transaction and a $75 million repayment on the revolving credit facility on December 6, 2022, the revolving credit facility currently has an outstanding balance of $575 million and a remaining undrawn amount of $425 million. In keeping with Royal Gold’s capital allocation strategy, the Company expects to repay this outstanding debt from future cash flow, which is estimated to occur by the second half of 2024 at current metal prices and absent further acquisitions.

Background on Cortez, the Cortez Complex, and Nevada Gold Mines

Detailed background information on Cortez, the Cortex Complex and NGM was provided in the press release issued August 2, 2022 entitled “Royal Gold Announces Acquisition of Additional Royalty Interest on World-Class Producing Cortez Gold Complex in Nevada, Adding Significant Scale, Duration and Optionality to the Royal Gold Portfolio” (Press Release - August 2, 2022).

Simplified Description of Royal Gold’s Royalty Interests at the Cortez Complex

Royal Gold owns multiple royalty interests at the Cortez Complex that have been acquired over time. Table 1 below summarizes those royalty interests for each of the deposits at the Cortez Complex as of December 31, 2022, after the acquisition of the Idaho Royalty. To simplify the overlapping royalties that cover each of the deposits, Table 1 also provides approximate blended royalty rates.

For purposes of simplified disclosure, Royal Gold has divided its royalty interests at the Cortez Complex into two zones: the Legacy Zone and the Cortez Complex Zone (the “CC Zone”). The “Legacy Zone” is Royal Gold’s largest royalty exposure at the Cortez Complex, representing an equivalent 9.4% GSR royalty rate over the Pipeline and Crossroads deposits. The CC 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. The nomenclature in Table 1 will be used to describe Royal Gold’s royalty interests in the future.

NGM does not provide guidance or production results for the individual mines within the Cortez Complex, and each of the NGM partners provides consolidated guidance and results for their respective interests. Royal Gold has typically provided, and expects to continue to provide, annual guidance for the total gold production subject to the Legacy Zone royalty interest. This guidance includes overlapping contributions from the Pipeline and Crossroads deposits in certain areas and is not directly comparable to actual production from these deposits.

To provide perspective, if these new royalty interests had been held by the Company at the beginning of January 2022, Royal Gold would have had the same forecast 2022 gold production subject to the Legacy Zone royalty interest of 280,000 ounces but subject to a 9.4% GSR equivalent (instead of 8%), and in addition, would have had forecast 2022 gold production subject to the CC Zone royalty interest of 780,000 to 860,000 ounces, less production from the Pipeline and Crossroads deposits.

Table 1 - Royal Gold Royalty Coverage at the Cortez Complex

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