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Barrick Closes Gold & Silver Streaming Deal with Royal Gold

Barrick Gold CorporationABX has closed its earlier announced gold and silver streaming deal with RGLD Gold AG, a fully-owned subsidiary of Royal Gold, Inc. RGLD , for production linked to Barrick's 60% interest in the Pueblo Viejo mine.

Barrick has received an upfront cash payment of $610 million and will get continuing cash payments for gold and silver delivered under the agreement. Proceeds from the transaction will be utilized to cut debt.

Per the deal, Barrick will sell gold and silver to Royal Gold equivalent to 7.5% of the former's interest in the gold produced at Pueblo Viejo until 990,000 ounces of gold have been delivered, and 3.75% thereafter. Barrick will also sell gold and silver equivalent to 75% of its interest in the silver produced at Pueblo Viejo until 50 million ounces have been delivered, and 37.5%from then on. Silver will be delivered on the basis of a fixed recovery rate of 70%.

Barrick will get ongoing cash payments equivalent to 30% of the prevailing spot prices for the first 550,000 ounces of gold and 23.1 million ounces of silver delivered. After that, payments will double to 60% of prevailing spot prices for each subsequent ounce of gold and silver delivered. Ongoing cash payments to Barrick are tied to prevailing spot prices rather than fixed in advance.

Barrick will retain its 60% equity interest in Pueblo Viejo and its related rights under the joint venture deal with Goldcorp Inc. GG , including operatorship of Pueblo Viejo. The transaction will not impact any of Pueblo Viejo's obligations to the Dominican Government.

The deal brings considerable upside price participation for Barrick. It will not be subject to a Barrick guarantee, and will not be treated as a debt-like obligation. Barrick's obligation to sell gold and silver under the deal is serviced using after tax cash flow being remitted from the Dominican Republic.

Currently, Barrick carries a Zacks Rank #3 (Hold).

A better-ranked mining company is Asanko Gold Inc. AKG , which holds a Zacks Rank #2 (Buy).

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BARRICK GOLD CP (ABX): Free Stock Analysis Report

ROYAL GOLD INC (RGLD): Free Stock Analysis Report

GOLDCORP INC (GG): Free Stock Analysis Report

ASANKO GOLD INC (AKG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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