New Gold (NGD.TO, NGD) has announced last month it has signed an agreement with Royal Gold (RGLD) whereby Royal Gold will provide $175M in cash in return for a gold stream on the development-ready Rainy River gold project. Royal Gold will pay $100M upon signing the contract and will wire the remaining $75M once the project’s capital expenditures has been spent.
In return for the $175M, New Gold has committed to sell Royal Gold 6.5% of its annual gold production until 230,000 ounces have been delivered to Royal Gold, whereafter the steaming percentage will drop by 50% to 3.25% of the annual production. On top of that, Royal Gold will be entitled to receive 60% of the annual silver production from Rainy River up to 3.1 million ounces of silver whereafter the percentage will also drop to 30% per year.
Royal Gold will pay 25% of the spot prices of gold and silver when those ounces will be delivered to the company.
> Click here to go to New Gold’s website
Disclosure: The author holds no position in either New Gold or Royal Gold. Please see our disclaimer for current positions.
