Royal Gold, Inc. RGLD announced that it will acquire a 3.75% net value royalty (“NVR”) covering a considerable area of Barrick Gold Corporation’s ABX Cortez gold mine, including the Crossroads deposit from a private party seller. Royal Gold will pay $70 million to the seller.

Royal Gold’s interests at Cortez Crossroads will comprise of a 4.37% NVR and a 5% sliding scale Gross Smelter Return (“GSR”) royalty at the current gold price, after the acquisition. Royal Gold’s interest on production from Pipeline, South Pipeline and portions of the Gap deposits consists of a 4.76% NVR and a 5% GSR royalty at the current gold price.

Royal Gold created its first royalty at Cortez and it forms an important property for the company. The company feels that with additional contribution from Crossroads, which has an estimated mine life of about 9 years, Cortez will become a significant contributor for Royal Gold again in the near future.

Royal Gold plans to finance the acquisition from its revolving credit facility. After concluding the acquisition, the company anticipates that it will have about $305 million available and $345 million outstanding under the facility.
 

ROYAL GOLD INC Price

ROYAL GOLD INC Price | ROYAL GOLD INC Quote

As of Dec 31, 2015, proven and probable reserves subject to Royal Gold’s interests at Cortez were estimated at 3.7 million ounces, including around 3 million ounces at Crossroads.

Royal Gold reported net income attributable to stockholders of $20.4 million, or 32 cents per share, in fiscal fourth-quarter 2016 (ended Jun 30, 2016) compared with net income of $14.8 million, or 23 cents per share, in the year ago quarter.

Royal Gold’s revenues were $94.1 million for the fourth quarter, up 27.9% year over year.

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

Some better-ranked stocks in the mining space include New Gold, Inc. NGD and Newmont Mining Corporation NEM, both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
NEWMONT MINING (NEM): Free Stock Analysis Report
 
BARRICK GOLD CP (ABX): Free Stock Analysis Report
 
ROYAL GOLD INC (RGLD): Free Stock Analysis Report
 
NEW GOLD INC (NGD): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research