Maverix Metals has entered into a definitive agreement (Agreement) to acquire a portfolio of 25 precious metals royalties (Royalty Portfolio) from Kinross Gold Corporation (Kinross).
As consideration for the Royalty Portfolio, Maverix will issue to Kinross a total of 11.2 million common shares and make a cash payment of US$25 million upon closing of the transaction (the “Transaction”). Closing is expected to occur on or before December 31, 2019, and at which time Kinross will own a 9.4% basic interest in Maverix.
Certain royalties in the Royalty Portfolio are subject to rights of first refusal as well as the requirement for various transfer consents. Any proceeds from the exercise of a right of first refusal will be paid to Maverix.
Transaction Highlights
Increased Scale and Asset Diversification: The Royalty Portfolio consists of predominantly gold assets located in 7 different countries globally, ranging from production to exploration stage. The Transaction increases Maverix’s total asset portfolio to 105 royalties and streams, 14 of which will be paying, and increases Maverix’s exposure to assets containing significant measured and indicated gold resources;
Immediate Cash Flow and Accretive to Net Asset Value per Share: The Royalty Portfolio is expected to generate estimated cash flow of approximately US$3 million to US$4 million in 2020 with the potential to increase significantly in the future (1);
Strong Counterparties: Royalty counterparties include Barrick Gold Corporation (“Barrick Gold”), Agnico Eagle Mines Limited (“Agnico Eagle”), Polymetal International plc (“Polymetal”), Yamana Gold Inc., Coeur Mining Inc., and Integra Resources Corp. (“Integra Resources”);
Future Development and Optionality with Significant Future Cash Flow Potential: There are several royalties on projects that are in the project evaluation and development stage, that could meaningfully contribute to cash flow in the medium-term. In addition, a number of the royalties are on assets with large gold mineral inventories, many of which are being advanced through various stages of development; and
Adds New Supportive Shareholder: Kinross, one of the world’s leading gold mining companies with a market capitalization of more than US$5 billion, will own approximately 9.4% of the issued and outstanding shares of Maverix, joining Newmont Goldcorp Corporation and Pan American Silver Corp. as significant and supportive shareholders of Maverix. Kinross will provide Maverix with the opportunity to make an offer to acquire royalties or streams which Kinross may contemplate selling or creating in the future.
Dan O’Flaherty, CEO of Maverix, commented, “This transaction is another milestone in Maverix’s continued growth. We would like to thank Kinross for entrusting us to deliver superior value for their royalty portfolio. This transaction further validates our business model and growth strategy, and we welcome Kinross as a significant shareholder.”
Maverix will fund the transaction through a combination of cash on hand and drawing on its existing credit facility.
Royalty Portfolio
Key Assets
DeLamar Royalty
A 2.5% net smelter return (“NSR”) royalty on the DeLamar deposit which forms a portion of the DeLamar project, located in southwestern Idaho, and operated by Integra Resources. DeLamar has over 100 years of prior open pit and underground mining operations, with total historic production of 1.6 million ounces of gold and 100 million ounces of silver. In September 2019, Integra Resources completed a preliminary economic assessment for the DeLamar project that outlined a 10 year operation with an after-tax IRR of 43%. The NSR royalty decreases to 1.0% after C$10 million in royalty payments have been made.
For more information on the DeLamar project, please visit www.integraresources.com.
Omolon Royalty
A sliding scale gross revenue royalty on certain deposits that form part of the Omolon hub, located in the Magadan Region, Russia, and operated by Polymetal, a leading precious metals mining company listed on the London Stock Exchange with a market capitalization of approximately US$7 billion. The Omolon hub began operating in 2010 and produced 195,000 gold equivalent ounces in 2018. The gross revenue royalty is equal to 2.0% when the gold price is above US$650 per ounce.
For more information on the Omolon hub, please visit www.polymetalinternational.com.
Nevada Development Projects
The Royalty Portfolio contains seven royalties on development and exploration assets in Nevada, including a 2.0% NSR royalty on the Railroad project located in the Carlin Trend and operated by Gold Standard Ventures Corp. (“Gold Standard”) and a 2.0% NSR royalty on the McCoy-Cove project located in the Battle Mountain trend and operated by Premier Gold Mines Limited (“Premier Gold”).
In September 2019, Gold Standard completed a pre-feasibility study for the South Railroad project that outlined an initial eight year mine life producing an average of 116,000 ounces of gold per year.
In May 2018, Premier Gold announced the results of a preliminary economic assessment of the Cove project that outlined an eight year mine life producing an average of 92,400 ounces of gold per year. Barrick Gold currently has an option to earn a 60% interest in the exploration portion of the McCoy-Cove property by spending US$22.5 million in exploration before June 30, 2022. Maverix already holds another 1.5% NSR royalty on the McCoy-Cove project.
For more information on the Railroad project, please visit www.goldstandardv.com. For more information on the McCoy-Cove project, please visit www.premiergoldmines.com.
Future Projects with Large Gold Mineral Inventories
The Royalty Portfolio contains royalties on assets with large mineral inventories, including a 1.25% royalty on 25% of the gross revenues from the Cerro Casale project located in Chile. Cerro Casale is part of the Norte Abierto joint venture between Barrick Gold and Newmont Goldcorp and contains approximately 23 million ounces of gold in proven and probable mineral reserves.
The Royalty Portfolio also contains a 2.0% NSR royalty on the Hammond Reef project in northwest Ontario owned by Agnico Eagle which has measured and indicated resources of approximately 4.5 million ounces of gold.
