Commodities & Metals
Royal Gold Buys into Another Mine (RGLD, TCK)
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Royal Gold, Inc. (NASDAQ:RGLD) has agreed to purchase an interest in a Chilean gold mine owned by Teck Cominco Ltd. (NYSE:TCK) for $100 million in cash and about 4.5 million shares of Royal Gold common stock. The company also announced that it would issue 6.5 million new shares of common stock on its existing shelf registration to pay for the acquisition.
In the deal with Teck, Royal Gold will receive 75% of the gold from a portion of the mine until 910,000 ounces have been sold. At that point, Royal Gold will get 50% of all future production from the property. Teck estimates that there are 1.6 million ounces of gold in the portion of the mine that Royal Gold has acquired an interest in.
The acquisition is subject to a marketing deal, government approvals, and completion of due diligence. The underwriters for the stock offering have a 30-day over-allotment option for 975,000 shares.
Teck expects to complete a currently under-construction project to begin production by the end of 2009. Commercial production is expected in the first half of 2010.
Royal Gold shares are down about 5% on the news, probably with gold itself, while Teck shares are up slightly.
Paul Ausick
April 6, 2009
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