Royal Gold Acquires Gold Streams on Wassa, Bogoso and Prestea from Golden Star Resources
May 07 2015 - 7:15AM
Business Wire
Transaction provides immediate cash flow from
well-established operator
ROYAL GOLD, INC. (NASDAQ: RGLD; TSX: RGL) (“RGI”)
announces that its wholly owned subsidiary RGLD Gold AG (“Royal
Gold” or the “Company”) has entered into a $130
million gold stream transaction with a wholly owned
subsidiary (“Golden Star”) of Golden Star Resources Ltd. that will
finance underground development projects at the Wassa and Prestea
mines in Ghana. Separate from the stream transaction, RGI will
provide a $20 million, four-year term loan to Golden Star, and
Golden Star Resources Ltd. will issue warrants to purchase 5
million shares of its common stock to RGI.
Stream Transaction Details
- Royal Gold will make $130 million
in advance payments to Golden Star in stages, including a $55
million upfront payment, subject to certain conditions, and the
balance on a pro rata basis with spending on the Wassa and Prestea
underground projects, which Royal Gold expects to make in five, $15
million payments quarterly beginning September 1, 2015, and ending
on September 1, 2016;
- Golden Star will deliver to Royal Gold
8.5% of gold produced from Wassa, Bogoso and Prestea until 185,000
ounces have been delivered, 5.0% until an additional 22,500 ounces
have been delivered, and 3.0% thereafter; and
- Royal Gold will pay Golden Star 20% of
the spot price at the time of delivery until 207,500 ounces have
been delivered, and 30% of the spot price thereafter.
Transaction Highlights for Royal Gold
- Gold stream applies to all production
from April 1, 2015;
- Estimated average annual deliveries of
approximately 15,000-20,000 gross gold ounces;
- Investment supporting brownfield
expansion of established deposits with excellent exploration
potential;
- Proven and probable reserves of 1.9
million gold ounces across both deposits, and Measured and
indicated resources of 3.5 million ounces at Wassa and 3.1 million
ounces at Bogoso and Prestea;
- Stable political jurisdiction with
strong history of gold mining in the Ashanti Gold belt; and
- Experienced management team with 15
years of production history in Ghana.
Loan Details
- Subject to certain conditions, RGI will
provide a $20 million, four-year term loan to Golden Star;
- Golden Star will pay interest to RGI
quarterly, at an interest rate calculated at 62.5% of the average
daily gold price for the relevant quarter divided by 10,000 (for
example, 7.5% at US$1200), but not to exceed 11.5%; and
- The loan will be subject to mandatory
prepayments that will range between 25-50% of excess cash flow
after the development period for the projects.
Warrants
- Subject to certain conditions, RGI will
be granted warrants to purchase 5 million shares of Golden Star
Resources Ltd. common stock at a price equal to a 30% premium on
the weighted average share price for the 10 day period ending two
days prior to announcement of the transaction; and
- The warrants will have a four-year
term.
About Wassa, Bogoso and Prestea
The Wassa mine is located 150km west of Accra and has operated
continuously since 2005. Golden Star Resources Ltd. forecasts
calendar 2015 production of 113,000 ounces of gold from the single
Wassa open pit. Open pit proven and probable reserves are 831,000
ounces at 1.39 grams per tonne. Royal Gold’s investment will fund
development of the Wassa underground deposit, which has 746,000
ounces of proven and probable gold reserves at 4.27 grams per
tonne. Golden Star Resources Ltd. estimates $41 million of capital
investment will be needed for the underground development.
Processing will leverage the existing Wassa plant. Golden Star
Resources Ltd. forecasts first underground gold production from
Wassa in the first half of 2016.
Bogoso and Prestea are located 200km west of Accra and have
produced over 9 million ounces from both open pit and underground
sources over the last 100 years. Underground development on the
Prestea underground is already well advanced and Golden Star
Resources Ltd. plans to modify the Bogoso plant to process Prestea
material. Golden Star Resources Ltd. expects to spend $40 million
of capital investment on Prestea, which includes hoist and shaft
upgrades, electrical infrastructure, ventilation and a process
plant upgrade. Once in full production, Golden Star Resources Ltd.
expects annual production of approximately 75,000 ounces from
Prestea, with estimated life of mine production of 620,000 ounces.
Golden Star Resources Ltd. forecasts first underground gold
production from the Prestea underground in the second half of
2016.
About the Purchase and Sale Agreement between Royal Gold and
Golden Star
- Royal Gold will make $130 million in
advance payments to Golden Star in stages, including a $55 million
upfront payment, subject to certain conditions, and the balance on
a pro rata basis with spending on the Wassa and Prestea underground
projects, which Royal Gold expects to make in five, $15 million
payments quarterly beginning September 1, 2015, and ending on
September 1, 2016;
- Until the advance payment is offset
against deliveries of physical gold, Royal Gold will hold a first
priority security interest in all the assets of Golden Star
Resources Ltd.’s two operating companies that own the Wassa and
Prestea mines, as well as charges over the equity of all associated
holding companies;
- Royal Gold will subordinate its
security over assets and charges over equity in support of up to
US$25 million in financing for the projects; and
- Golden Star may offer to repurchase up
to 50% of the tail stream percentage after 207,500 ounces have been
delivered; Royal Gold retains the right to either accept the
repurchase offer or pay the same amount for an increase of up to
50% in the stream percentage.
Tony Jensen and Chris M.T. Thompson, who serve as directors of
both RGI and Golden Star Resources Ltd., and in the case of Mr.
Jensen, President and CEO of RGI, recused themselves from the
transaction process.
CORPORATE PROFILE
Royal Gold, Inc. is a precious metals royalty and stream company
engaged in the acquisition and management of precious metal
royalties, streams, and similar production based interests. The
Company owns interests on 196 properties on six continents,
including interests on 38 producing mines and 23 development stage
projects. Royal Gold, Inc. is publicly traded on the NASDAQ Global
Select Market under the symbol “RGLD,” and on the Toronto Stock
Exchange under the symbol “RGL.” The Company’s website is located
at www.royalgold.com.
About Golden Star Resources
Golden Star Resources Ltd. (NYSE MKT: GSS; TSX: GSC; GSE: GSR)
is an established gold mining company that holds a 90% interest in
the Wassa, Prestea and Bogoso gold mines in Ghana. In 2014, Golden
Star Resources Ltd. produced 261,000 ounces of gold and is expected
to produce 250,000 – 275,000 ounces in 2015. They are pursuing
brownfield development projects at its Wassa and Prestea mines that
are expected to transform these mines into lower cost producers
from 2016 onwards. As such, Golden Star Resources Ltd. offers
investors leveraged exposure to the gold price in a stable African
mining jurisdiction with significant development upside
potential.
Qualified Person
Information on reserves and resources were published in Golden
Star Resources, Ltd.’s press release dated March 26, 2015. The
technical contents of that press release were reviewed and approved
by S. Mitchel Wasel, BSc Geology, a Qualified Person pursuant to NI
43-101. Mr. Wasel is Vice President Exploration for Golden Star
Resources Ltd. and an active member of the Australasian Institute
of Mining and Metallurgy. The 2014 estimates of Mineral Resources
were prepared under the supervision of Mr. Wasel. The 2014
estimates of Mineral Reserves were prepared under the supervision
of Dr. Martin Raffield, Senior Vice President Technical Services
for Golden Star Resources. Dr. Raffield is a "Qualified Person" as
defined by NI 43-101.
Cautionary “Safe Harbor” Statement Under the Private
Securities Litigation Reform Act of 1995: With the exception of
historical matters, the matters discussed in this press release are
forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially from
projections or estimates contained herein. Such forward-looking
statements include statements about the Company’s stream and RGI’s
loan transactions with Golden Star and Golden Star Resources Ltd.,
and Golden Star Resources Ltd.’s expectations concerning
development, production and mine life at the projects. Factors that
could cause actual results to differ materially from the
projections include, among others, precious metals prices; actual
tax rates; performance of and production at the properties subject
to our royalty and stream interests; decisions and activities of
the operators of these properties; operators’ delays in securing or
inability to secure necessary governmental permits; changes in
operators’ project parameters and timelines as plans continue to be
refined; economic and market conditions; unanticipated grade,
geological, metallurgical, processing, regulatory and legal or
other problems that the operators of mining properties may
encounter; completion of feasibility studies; the ability of the
various operators to bring projects into production as expected;
and other subsequent events, as well as other factors described in
the Company's Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, and other filings with the Securities and Exchange
Commission. Most of these factors are beyond the Company’s ability
to predict or control. The Company disclaims any obligation to
update any forward-looking statement made herein. Readers are
cautioned not to put undue reliance on forward-looking
statements.
Royal Gold, Inc.Karli Anderson, 303-575-6517Vice
President Investor Relations
Royal Gold (NASDAQ:RGLD)
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