DENVER, Dec. 5 /CNW/ -- ROYAL GOLD, INC.
(Nasdaq: RGLD; Toronto: RGL) today announced that it has finalized an
agreement with Somita SA ("Somita"), a 90%-owned subsidiary of High River Gold
Mines, Ltd. ("High River") (Toronto: HRG), to provide a total of $35 million,
over the next year, for the construction and development of High River's
Taparko open pit gold project, located in Burkina Faso, West Africa. High
River expects construction of the Taparko-Bouroum Project to be completed in
the fourth quarter of calendar 2006. Today's announcement follows last
month's announced (October 18, 2005) signing of the term-sheet agreement and
approval by both the Board of Directors of Royal Gold and High River.
In exchange for the $35 million in financing Royal Gold will receive two
concurrent production payments, a tail royalty and a milling royalty. The
first production payment is fixed at 15.0% of produced ounces (equivalent to a
15.0% gross smelter return royalty). The second production payment (also
equivalent to a gross smelter return royalty) is set at a 4.3% fixed
percentage rate of the produced ounces when the average monthly gold price
falls between $385 and $430 per ounce, or a sliding-scale at a calculated
percentage rate, when the average monthly gold price falls outside of this
range.
The calculated rate, expressed as a percentage, is determined by dividing
the average monthly gold price by 100 for gold prices above $430 per ounce,
not to exceed 10.0%, or by dividing the average monthly gold price by 90 for
gold prices below $385 per ounce (i.e., a $450 per ounce gold price results in
a rate of 450/100 = 4.5%). Both production payments continue until the
earlier of the production of 804,420 ounces or payments totaling $35 million
under the fixed 15.0% production payment.
The tail royalty, which is a 2.0% gross smelter return ("GSR") royalty, is
applicable to gold production from defined portions of the Taparko-Bouroum
Project area. The milling royalty is a 0.75% GSR royalty on ore that is mined
outside of the defined area of the Taparko-Bouroum Project and that is
processed through the Tarparko processing facilities to a maximum of
1.1 million tons (1.0 million tonnes) per year. Both of these royalties
commence once the two concurrent production payments have ceased.
As part of the $35 million funding, an initial payment of $6.4 million was
made to Somita upon closing. Subsequent funding of the Project is contingent
upon Somita's satisfaction of certain project requirements. If these are not
met within a specified time frame, Somita is obligated to repay this initial
payment with interest to Royal Gold.
High River, headquartered in Toronto, Canada, is an emerging mid-tier gold
producer with quality exploration and development properties in Russia and
West Africa.
Royal Gold is a precious metals royalty company engaging in the
acquisition and management of precious metal royalty interests. Royal Gold is
publicly traded on the NASDAQ National Market System under the symbol "RGLD,"
and on the Toronto Stock Exchange under the symbol "RGL." The Company's web
page is located at www.royalgold.com.
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 regarding completion of the Taparko Project in
Burkina Faso, royalty and production payments and funding of the project.
Factors that could cause actual results to differ materially from projections
include, among others, satisfaction of certain project requirements, precious
metals prices, decisions and activities of the operator of this property,
unanticipated grade, geological, metallurgical, processing or other problems
the operator may encounter, changes in project parameters as plans continue to
be refined, economic and market conditions, and changes in the political or
legal systems in Burkina Faso, as well as other factors described elsewhere in
this press release and in our Annual Report on Form 10-K, 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.
