Royal Gold, Inc. (NASDAQ: RGLD) (“Royal Gold” or the “Company”) today provided an update on Mount Milligan and a summary of recent events resulting from the impact of COVID-19.
Mount Milligan Update
Reserves and Life of Mine Plan
Centerra Gold Inc. (“Centerra”) today published an updated National Instrument 43-101 (“NI 43-101”) technical report for the Mount Milligan Mine, which provides a detailed update to the life of mine plan contained in the previous 43-101 report for the Mount Milligan Mine published by Centerra in 2017. Key highlights as reported by Centerra include:
Centerra calculated proven and probable reserves at December 31, 2019 using a gold price of $1,250 per ounce, a copper price of $3.00 per pound, and an exchange rate of US$ 1.00 to C$ 1.25, which are consistent with the assumptions used in the December 31, 2018 reserve calculations.
The updated mine plan does not contemplate any growth capital or inclusion of additional mineralized material.
Impact on Royal Gold
Royal Gold holds the right to purchase 35% of the payable gold and 18.75% of the payable copper produced from Mount Milligan in return for a cash purchase price for gold equal to the lesser of $435 per ounce or the spot price for gold, and for a cash purchase price for copper equal to 15% of the spot price for copper, in each case at the time of delivery. As of December 31, 2019, Royal Gold has recognized a total of $679.2 million in revenue, or $458.8 million of revenue net of cash payments for gold and copper received, from its $781.5 million investment in Mount Milligan.
The net book value of Royal Gold’s investment as of December 31, 2019, was $589.3 million, and the depletion rate for its interest was $402 per ounce of gold and $0.81 per pound of copper production. Due to the reduction in gold and copper reserves at Mount Milligan, as reported by Centerra, the Company estimates its prospective depletion rates will increase to $750 to $775 per ounce of gold and $1.45 to $1.50 per pound of copper. The Company continues to analyze the updated life of mine information provided by Centerra, and although additional work must be completed, it is not currently anticipated that the updated reserve information will result in an impairment of the Company’s stream interests at Mount Milligan as the prospective depletion rate estimates remain well below current gold and copper prices.
Impact of COVID-19
Temporary Operating Suspensions
Due to the ongoing COVID-19 pandemic, several of Royal Gold’s operating counterparties have recently announced temporary operational curtailments:
It is too early to estimate whether the impact of these announcements and any potential additional impacts on operations resulting from COVID-19 could cause a material reduction or deferral of revenue attributable to Royal Gold.
Royal Gold Liquidity Update
Royal Gold remains well capitalized and has continued access to liquidity under its $1 billion revolving credit facility. Royal Gold may borrow under or repay the credit facility at any time without penalty and expects to continue to use this facility prudently to manage liquidity requirements.
About Royal Gold
Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production-based interests. As of December 31, 2019, the Company owns interests on 187 properties on five continents, including interests on 43 producing mines and 15 development stage projects. Royal Gold is publicly traded on the Nasdaq Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.
Cautionary “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained in this release. These forward-looking statements include among others, expectations about the Mount Milligan life-of-mine plan and 43-101, operational changes at certain properties, and the impacts of COVID-19 and resulting operational changes on the Company’s investments, results of operations, and financial condition. Factors that could cause actual results to differ materially from forward-looking statements include among others the impacts of COVID-19 including global economic and social impacts; precious metals prices; production changes; errors or disputes in calculating or accounting for stream deliveries and payments, or deliveries and payments not made in accordance with streaming agreements; counterparty failure to perform under contracts for sales of metal; economic and market conditions; and other subsequent events; as well as other factors described in the Company’s most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made in this release. Readers are cautioned not to put undue reliance on forward-looking statements.
1 Assuming a copper price of $3.00 per pound and an exchange rate of US$ 1.00 to C$ 1.25.
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Alistair Baker
Vice President Investor Relations and Business Development
(720) 554-6995