A World Class Streaming and Royalty Company
RGLD Nasdaq 69.63 -0.10 -0.14% Volume: 332,692 December 7, 2016
Current Gold Price 1175.77 +6.06 +0.52% Volume: December 7, 2016

Metal Streams

What is a metal stream?

A metal stream is an agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more the precious metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Metal stream acquisitions are often larger in size than royalty acquisitions, have more flexibility in the negotiation of terms and conditions, and generally provide both parties with tax advantages. The creation of precious metal streams on base metal mines offers additional opportunities for Royal Gold to add precious metal revenue to its portfolio, beyond seeking royalties on mines that produce primarily precious metals.

How does it work?

An example of a metal stream held by Royal Gold is the acquisition of 35% of the gold and 18.75% of the copper from the Mount Milligan copper-gold mine in British Columbia, Canada. Precious metal streams are typically paid in two components.  First, we committed to pay approximately $782 million prior to commercial production, as financing for the mine construction. Second, we pay $435 per ounce of gold, and 15% of the spot price per metric tonne of copper delivered to us over the life of the mine. In return for this investment, Royal Gold will be delivered 35% of all gold produced and 18.75% of all copper at Mount Milligan. At December 31, 2015, there were 5.7 million ounces of gold reserves and 2.2 billion pounds of copper reserves at this property.

Royalties

What is a royalty?

A royalty is the right to receive a percentage or other denomination of mineral production from a mining operation.

Most of Royal Gold’s royalties are based on production generated from a mine. For example, a 2.0% gross value royalty on a mine that produces 100,000 ounces of gold annually, would generate payments having a value of nearly 2,000 ounces of gold per year. At a gold price of $1,600 per ounce, this would result in royalty revenue to us of nearly $3.2 million per year.

Types of royalties

The Company’s portfolio contains several different kinds of royalties or similar interests which are defined as follows:

Gross Proceeds Royalty (GPR): A royalty in which payments are made on contained ounces rather than recovered ounces. 

Gross Smelter Return (GSR) Royalty: A defined percentage of the gross revenue from a resource extraction operation less, if applicable, certain contract-defined costs paid by or charged to the operator.

Gross Value (GV) Royalty: A defined percentage of the gross value, revenue or proceeds from a resource extraction operation, without deductions of any kind.

Milling Royalty (MR): A royalty on ore throughput at a mill.

Net Profits Interest (NPI) Royalty: A defined percentage of the gross revenue from a resource extraction operation, after recovery of certain contract-defined pre-production costs, and after a deduction of certain contract-defined mining, milling, processing, transportation, administrative, marketing and other costs.

Net Smelter Return (NSR) Royalty: A defined percentage of the gross revenue from a resource extraction operation, less a proportionate share of incidental transportation, insurance, refining and smelting costs.

Net Value Royalty (NVR): A defined percentage of the gross revenue from a resource extraction operation, less certain contract-defined costs.

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