Royal Gold to Acquire Interest in the Gold Production from Andacollo

DENVER, CO Ð Royal Gold, Inc. reported that it has signed a definitive agreement with a subsidiary of Teck Cominco Limited, to acquire an interest in the gold production at the Andacollo mine located in Chile. The purchase price consists of $100 million in cash and approximately 4.5 million shares of Royal Gold common stock, each subject to potential adjustments.
Royal Gold will receive 75% of the gold produced from the sulfide portion of the Andacollo deposit until 910,000 payable ounces of gold have been sold, after which Royal Gold will receive 50% of all future payable gold production from the property.
The Andacollo mine has been in production since 1996, producing copper cathodes from the oxide portion of the deposit. A mill and flotation circuit to produce copper and gold from the sulfide portion of the deposit, known as the "Hypogene Project," is currently under construction. Teck expects the Hypogene Project to begin initial gold production in late calendar 2009 and reach commercial production in the first half of calendar 2010.
Teck estimates the sulfide reserves to contain proven and probable mineral reserves of approximately 393.5 million tonnes grading 0.13 grams of gold per tonne. This equates to 1.6 million ounces of gold in the sulfide reserves which will be mined over 20 years of production. Over the first 10 years of the mine life, Teck expects production will average 53,000 ounces of gold and 76,000 tonnes of copper in concentrate annually. Royal Gold's interest does not apply to the production of copper.
Pursuant to the acquisition agreement, the cash portion of the purchase price will be increased by 50% of the net proceeds from any underwritten public offering of common stock by Royal Gold in the next 90 days, and the stock portion of the purchase price will be decreased by 50% of the shares sold in any such offering. Royal Gold has also entered into a stockholder agreement with Teck and its subsidiary company which includes customary standstill provisions to vote in accordance with the recommendations of Royal Gold's board of directors and limited transfer restrictions.
The transaction is subject to completion of concentrate marketing for a specified percentage of production from the Andacollo mine, the condition that material governmental approvals are not withdrawn or challenged, satisfactory completion of certain limited outstanding due diligence and other customary closing conditions.
The company’s address is 1660 Wynkoop Street, Suite 1000, Denver, CO 80202, 303-573-1660.