Royal Gold Buys Streaming Agreement on Phoenix Gold Project

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On Tuesday morning we learned that Royal Gold (NASDAQ:RGLD) bought a streaming agreement on Rubicon Minerals’ (AMEX:RBY) Phoenix Gold mine in Ontario, Canada.

The Phoenix Gold Project is a deposit of roughly 3.3 million ounces of underground gold on Rubicon Minerals’ 100-square-mile property in the Red Lake mining district in Canada. It is supposed to go into production either later this year or early next year — depending on how long it takes the company to build the mine — and it will average 165,000 ounces of annual production for the next 13 years.

As per the agreement, Royal Gold will pay $75 million in five installments to Rubicon Minerals as it constructs the Phoenix Gold mine. This $75 million is nearly all of the additional funding that Rubicon Minerals needs in order to construct the mine, and it should have little trouble raising the additional $25 million it needs through debt issuance or stock issuance.

In exchange for this help in constructing the Phoenix mine, Royal Gold will receive 6.3 percent of any gold produced up to 135,000 ounces (a total of 8,505 ounces), and 3.15 percent of any gold produced afterwards. Thus presuming that the mine goes forward as planned, Royal Gold will receive about 5,200 ounces of gold annually for the life of the mine.

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