Royal Gold, Inc. signed a commitment letter and binding term sheet with Centerra Gold Inc. related to the Company’s streaming interest at the Mount Milligan mine that is owned by Thompson Creek Metals Company Inc.
Centerra entered into a definitive arrangement agreement to acquire Thompson Creek and pay its outstanding bonds.
“Royal Gold has actively engaged with companies regarding Mount Milligan over the last ten months,” commented Tony Jensen, President and CEO of Royal Gold. “To broaden interest and maximise value, we demonstrated some flexibility in amending our gold stream to generate interest from gold companies. We are extremely pleased to support Centerra’s acquisition of Thompson Creek which delivers our two goals we have discussed for some time; namely, the retention of our economic value at Mount Milligan, without discount, and the introduction of a financially strong operator.”
Under the terms of the commitment letter, Royal Gold’s 52.25% gold streaming interest at Mount Milligan will be amended, conditional and effective on closing of Centerra’s acquisition of Thompson Creek, to a 35% gold stream and 18.75% copper stream.
Royal Gold will continue to pay $435 per ounce of gold delivered and will pay 15% of the spot price per metric tonne of copper delivered. Royal Gold said it estimates this amendment to be value-neutral on a discounted cash flow basis, and expects about two-thirds of its future net revenue from Mount Milligan will be gold related and one-third copper related over the next ten years. After transition to the amended stream, Royal Gold expects that approximately 85% of its total net revenue will come from precious metals and 15% from base metals.
Royal Gold’s security position related to Mount Milligan will remain unchanged with respect to gold and will be amended to include copper.
“Thompson Creek developed Mount Milligan into a world class asset that attracted interest from several quality operators,” Jensen stated. “We are especially pleased to welcome Centerra as a new operator, as we respect their operating and development skills. We view this overall transaction as favorable for the continued successful operation of the Mount Milligan mine and to all its stakeholders, including Royal Gold.”
Centerra’s proposed acquisition of Thompson Creek is subject to court approval of the Plan of Arrangement as well as approval of Thompson Creek shareholders and other customary conditions. Final closing is expected in the fall of 2016.
Royal Gold was advised by Goldman, Sachs & Co. as well as law firms Kirkland and Ellis, Hogan Lovells, and McCarthy Tétrault.
Royal Gold is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production based interests. The Company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol “RGLD,” and until July 8, 2016, on the Toronto Stock Exchange under the symbol “RGL.”