Denver, Colorado-based mining company Royal Gold announced this week that is has entered into a life of mine purchase and sale agreement with the Botswana Khoemacau Copper Mining company, a fully-owned subsidiary of Cupric Canyon Capital LP. The deal will see Royal Gold pay US$212mn in advance for 80% of the silver produced by the Khoemacau Copper Project, with an option to pay $53mn for the remaining 20%.
Royal Gold expects average annual silver deliveries of 1.5 million ounces at a stream rate of 80%, or 1.9 million ounces based on a stream rate of 100%, with initial deliveries expected to start in the first half of 2021. The deal is expected to last until certain delivery thresholds are met.
“We are pleased to announce the acquisition of this high quality and long-lived silver stream on the Khoemacau Copper Project in Botswana, which has an expected initial mine life of 21 years and excellent exploration potential,” remarked Tony Jensen, President and CEO. “The Khoemacau stream will fit nicely into our production profile and will add another component of growth. Coupling our stream with the Red Kite Mine Finance (‘Red Kite’) debt facility also announced today, Khoemacau is now fully funded and development activities can accelerate, with initial production and stream deliveries expected in the first half of 2021. We have been working closely with the Cupric team and GNRI on this opportunity for almost a year and are delighted to be developing those relationships into long-term partnerships.”
The stream rate will drop by 50% upon the delivery to Royal Gold of 32 million ounces for the Silver Stream, and 40 million ounces in the case that the Option Stream is fully exercised. Royal Gold will make ongoing cash payments per ounce of silver delivered equal to 20% of the spot silver price at the time of delivery. Depending on the achievement by Cupric of mill expansion throughput levels above 13,000 tonnes per day (30% above current mill design capacity), Royal Gold will pay higher ongoing cash payments for ounces delivered in excess of specific annual thresholds.
Khoemacau is a copper-silver project located in a sparsely populated region of northwestern Botswana in the Kalahari Desert. It is located in the Kalahari copper belt, although the main mineralized zone demonstrates a high-grade copper tenor that is atypical of what has been discovered in the belt thus far.