The Great Royalty Freak-Out
Issue 138, September 2015
Every self-respecting mining executive is playing the royalty game these days. It's the hippest, sharpest word to use in a press release.
Royalty and streaming finance is a relatively new source of mining capital, accounting for less than 1 per cent of the industry's total funding needs. But with industry leader Franco-Nevada trading near record premiums versus metal producers, the model is attracting its fair share of bold, new pretenders.
Some recent examples have been farcical. Corvus Gold recently dumped its Alaskan assets, selling them for $120,000, but CEO Jeff Pontius framed the deal as “the creation of a Corvus
royalty portfolio”, because the company kept royalties over the discarded tenements.
Del Toro Silver, valued in the thousands on the US Pink Sheets, is one step ahead, announcing maiden royalty revenue from the Natchez Pass gold property last month. The mine produced 24 ounces of gold in July, Del Toro confirmed, yielding royalty receipts of 1 gold ounce.
Del Toro's finance director called it a “milestone”, saying “we chose to take our royalty in gold to memorialize the first production.” He is looking forward to “consistent production” and a “material royalty revenue stream,” though operations have since been suspended.
Increasingly, deals cannot go through without a royalty component. Even in Australia, where the model has failed to take a firm hold, carving-out royalties on tenements has become a favourite new game: Talga Resources, Emmerson Resources and Cullen Exploration have all recently converted “non-core” assets into “risk-free” upside. Standard Metals Processing, Entree Gold and Sailfish are yet more names for investors to contend with.
But in the melee, some exceptional assets are emerging. With royalties being broken-out in all corners of the market, we profile 20 stray royalties in gold, silver, coal, iron ore and base metals that are plausible, desirable targets for established royalty groups.