Predator becomes gold royalty company

Golden Predator, is dividing itself into a royalty company and an exploration company as it feels its royalty portfolio was not being given any recognition by the markets.

Author: Lawrence Williams
Posted: Wednesday , 20 Feb 2013

LONDON (Mineweb) -

Junior gold explorer, Golden Predator, which just happened for historical reasons to have a portfolio mostly of gross smelter royalties in Nevada, has decided that being in the junior exploration space in the current environment is no longer a great place to be.

Its primary exploration targets in the Yukon are to be hived off into Golden Predator Canada Corp. as a separate company while Golden Predator itself will hold the royalties portfolio and will be changing its name to Americas Bullion Royalty Corp. to reflect its change in focus. Americas Bullion Royalty will thus take on the Golden Predator quote on the TSX.

Americas Bullion Royalty Corp. will focus on royalty and streaming assets providing revenue as well as lower risk exposure to shareholders through project diversity in first world jurisdictions. The Company's existing portfolio is highlighted by Gross in-kind Royalties on Midway Gold's Pan and Gold Rock deposits, as well as 2 separate projects encompassing more than 34 square miles at Barrick's Bald Mountain project in Nevada.

The Company holds additional royalties including a Net Smelter Royalty on the Taylor Silver project and a portion of the Tonkin Springs project also in Nevada. The entire package comprises more than 100,000 acres located primarily in Nevada, with 7 of the projects located in Wyoming, Oregon, California and Mexico. Current royalty revenue is anticipated to experience acceleration as early as 2014 as several of these projects begin to advance.

As Americas Bullion Royalty Corp., the Company's royalty portfolio is unique in the mineral development industry due to its ability to receive the majority of projected revenues in-kind (gold bullion as opposed to cash).

Most of the Nevada royalties came from a transaction entered into some years ago purchased from the monetisation of the Lyle F. Campbell Trust for $4.7 million some years ago.

Other royalties have arisen from land on which Golden Predator retained an interest from prior exploration activities. None of the royalties are huge, and at the moment there is only marginal income from them, but they should start paying out reasonably from next year and grow substantially until the end of the decade as planned new mine developments – notably those for Midway Gold and Barrick Gold - come to production.

Interestingly around 90% of the royalties can be taken up in kind – i.e. in gold bullion – rather than in cash if required.

Sheriff also reckons that while major sized royalties are very much the preserve of the big royalty companies like Franco Nevada and Royal Gold there are also a myriad of small royalties owned by municipalities, first nation groups and others which have been largely ignored because they are too small. He sees these as major opportunities for a company like Americas Bullion Royalty.

Altogether the company has 34 royalties in place, and virtually all bar one are in the USA and Canada which, Sheriff believes, sets them apart from any other royalty company and should be seen as a positive by the investment community.. However most of these are on exploration properties that may or may not come to anything. Most of the royalties are gross rather than on net smelter returns.

The advantage of the royalty company is that once the royalties start paying out, there are no mining or capital costs due – the company just keeps raking in revenues as long as the mines keep producing. Overheads are low – Americas Bullion Royalty plans to employ just 10 people out of its new offices near Coeur d’Alene in Idaho. Once the revenues do start to flow Sheriff says the company plans to institute a dividend policy and his own view is that this should be at around 20% of profits.

There is currently a delay in hiving off the Yukon Assets (the Brewery Creek project) into the new company – Golden Predator Canada, due to a significant permitting delay and that is currently being put on hold with all the employees on that laid off (except for one administrator) until the permitting issues are resolved.

The company also holds an 18% stake in Silver Predator and 15% in Wolfpack Gold – both explorers and also owns a 1,320 ton/day mill at the Taylor silver project in Nevada.

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