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(Kitco News) - Royal Gold (NASDAQ: RGLD) announced on Monday that its wholly-owned subsidiary has entered into a binding commitment letter with ACG Acquisition Company to acquire new royalty interests on the producing Serrote and Santa Rita mines in Brazil for total cash consideration of $250 million, subject to satisfaction of certain conditions, including negotiation and execution of definitive documentation.
According to a company statement, the royalty interests consist of a gold royalty on the Serrote mine, a gold, platinum and palladium royalty on the Santa Rita mine, and a copper and nickel royalty on both the Serrote and Santa Rita mines.
Royal Gold noted that ACG Acquisition Company has agreed to acquire the Serrote and Santa Rita mines from funds advised by Appian Capital Advisory, adding that the company has agreed to pay the cash consideration for the royalty interests upon the closing of the transaction between ACG and Appian, which is expected to occur by the end of July 2023.
Serrote is a copper/gold mining operation situated in northeast Brazil in the State of Alagoas. Originally explored in the 1980s, Appian acquired the Serrote project in 2018 and subsequently published a feasibility study with a plant capacity of 4.1 million tonnes per year. Construction began in 2019 and first concentrate was shipped in November 2021.
Life of mine copper production is expected to average approximately 44 million pounds per year at an approximate 85% recovery rate and all-in sustaining cost (AISC) of approximately $1.85 per pound. Gold recovery is targeted at 65% and gold accounts for approximately 7% of the expected revenue from the Serrote mine.
Santa Rita is an open pit nickel sulphide mine located in Bahia State, Brazil, approximately 600 kilometers south of Serrote. Appian acquired the mine in 2018 and following an optimization of the open pit mine plan and refurbishment of the processing plant, first concentrate was shipped in early 2020.
The open pit is expected to recover an average of 32 million pounds of nickel per year at an AISC of $5.26 per pound of nickel over the mine life. The projected revenue over the open pit mine life is approximately 84% nickel, 9% copper and 2% cobalt, with the remaining 5% from platinum, palladium, and gold.
President and CEO Bill Heissenbuttel commented, "This proposed acquisition meets our strategic criteria for investment as the royalties will provide predominantly precious metals revenue on producing mines that we believe have excellent long-term potential, are run by experienced local operating management complemented by seasoned corporate leadership, and are located in a mining-friendly jurisdiction."
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 March 31, 2023, the company owned interests on 182 properties on five continents, including interests on 40 producing mines and 19 development stage projects.
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