Royal Gold Acquires Royalty Interest in Andacollo Mine


The Hypogene project at Teck’s Andacollo mine will produce an average of 53,000 oz/y of gold
and 76,000 mt/y of copper over its first 10 years of operation.
Royal Gold and Teck Resources, which officially approved its name change from Teck Cominco on April 23, have agreed to a purchase by Royal Gold of a substantial royalty interest in gold produced from the Hypogene project now under construction at Teck’s 90%-owned Andacollo mine in central Chile. Consideration for the purchase combines cash and Royal Gold shares valued at about $300 million. Teck anticipates that the transaction will provide more than sufficient funding to complete construction of the Hypogene project while also enabling the company to repatriate some funds from Chile to apply to the bridge loan associated with its acquisition of Fording Coal.

The Andacollo mine has been in production since 1996, producing copper cathodes from the oxide portion of the deposit. A mill and flotation plant to produce copper-gold concentrates from the sulphide portion of the deposit—the Hypogene project—is currently under construction. Teck expects this project to start production in late 2009 and to reach commercial production in the first half of 2010.

The sulphide portion of the Andacollo deposit contains estimated proven and probable mineral reserves of about 393.5 million mt, grading 0.13 g/mt gold and containing 1.6 million oz of gold, which will be mined over 20 years. During the first 10 years of operation, production is expected to average 53,000 oz/y of gold and 76,000 mt/y of copper contained in concentrates. Royal Gold’s interest will not apply to the copper production.

Royal Gold will receive 75% of the gold produced from the sulphide portion of the Andacollo deposit until 910,000 payable oz of gold have been sold, after which it will receive 50% of all future payable gold production from the property.

Tony Jensen, president and CEO of Royal Gold, said, “This transaction is a unique opportunity and has all of the characteristics we look for in an acquisition. We are extremely pleased to partner with an experienced operator like Teck on this long-life project in the excellent host country of Chile. This is yet another great addition to our world-class gold royalty portfolio.” Royal Gold currently owns royalties on 117 properties on five continents, including royalties on 25 producing properties and 10 development stage properties.

The Andacollo mine is located at an elevation of 1,000 m near the town of Andacollo, 55 km southeast of La Serena and 350 km north of Santiago. Teck acquired its interest in the mine when it acquired Aur Resources in August 2007. Empresa Nacional de Minería, a Chilean government entity, owns the 10% interest not owned by Teck. The Andacollo oxide operation produces LME Grade A copper cathode, utilizing crushing, agglomeration, heap leaching, dump leaching and SX-EW processing.

As featured in Womp 2009 Vol 04 - www.womp-int.com