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Royal Gold's (RGLD) Arm to Buy Gold Stream From NX Gold Mine

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Royal Gold, Inc.’s RGLD wholly-owned subsidiary, Royal Gold AG., has entered into an agreement with Ero Gold Corporation to purchase gold stream from the latter’s NX Gold Mine located in Brazil. The agreement came into effect on May 1, 2021, and deliveries are accrued from that date.

Royal Gold will purchase 25% of the mine’s gold production until 93,000 ounces have been delivered and 10%, thereafter. Royal Gold will make payments for 20% of the gold spot price for each ounce delivered until the delivery of 49,000 ounces and thereafter, pay 40% of the spot gold price. Following the deal’s closure, Royal Gold will make an advance payment of $100 million and subsequent payment of up to an additional $10 million depending on the exploration and resource additions. Per the agreement, Royal Gold will receive monthly gold stream deliveries and expects to sell the gold within a few weeks of receiving each delivery.

The latest acquisition supports Royal Gold’s focus on investments in a bid to boost gold revenues, cash flow, exploration scopes and underutilized installed processing capacity. Ero projects its NX Gold mine to produce 34,500-37,500 ounces of gold in the current year. Considering this, the mine is expected to deliver 6000 ounces of gold to Royal Gold over the eight-month period beginning May 1 through Dec 31, 2021. The deal will be funded by existing cash in hand. Royal Gold expects to close the transaction in the third quarter of calendar-year 2021.

Royal Gold’s revenues are derived entirely from stream and royalty interests in properties owned and operated by third parties. The Peñasquito mine will continue to be a significant revenue generator for Royal Gold. The mine’s operator, Newmont Corporation NEM, has been focusing on improving its performance. Newmont’s exploration activities are estimated to extend the mine's life by almost 10 years to 2040. Meanwhile, Barrick Gold Corporation GOLD continues to advance the feasibility study for the process plant expansion and proposed tailings storage facility for extension of the mine life at the Pueblo Viejo mine. The project is likely to significantly boost the throughput and allow the mine to maintain an average annual gold production of approximately 800,000 ounces after 2022.

Price Performance

Royal Gold’s shares have gained 7.6% so far this year, as against the industry’s loss of 6.9%.

Zacks Investment Research
Zacks Investment Research

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Royal Gold currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the basic materials space includes Nucor Corporation NUE, which sports a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has a projected earnings growth rate of 259.9% for the current year. The company’s shares have appreciated 82% so far this year.

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Nucor Corporation (NUE) : Free Stock Analysis Report

Newmont Corporation (NEM) : Free Stock Analysis Report

Barrick Gold Corporation (GOLD) : Free Stock Analysis Report

Royal Gold, Inc. (RGLD) : Free Stock Analysis Report

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