As part of the acquisition of the Kinross Gold (K.TO, KGC) royalty portfolio, some of the royalties had a right of first refusal attached to them giving the owners of the underlying projects the opportunity to repurchase the royalty at the same price Maverix Metals (MMX.TO, MMX) paid for them. Most of those ROFRs expired without anyone exercising their right to purchase the royalties, but Agnico Eagle Mines (AEM, AEM.TO) appears to be optimistic about its chances to develop the Hammond Reef project as the company coughed up US$12M to repurchase the 2% NSR on Hammond Reef.
The cash inflow means the total purchase price of the royalty portfolio has now been reduced to 11.2M shares (unchanged) and around US$13M (down from the US$25M cash component that has initially been paid) to Kinross.
Maverix is also carefully watching the situation of Lydian International (LYD.TO) which has entered the CCAA procedures after the company’s access to its Amulsar gold project in Armenia has been blocked for in excess of 18 months now. Maverix has a payment stream agreement on the Amulsar project which currently has a book value of C$18.9M which may have to be impaired depending on the outcome of the CCAA proceedings. This will be a non-cash charge which would have a negative impact on the income statement but would have no impact on the company’s cash flow or cash position. Too bad, as the scheduled quarterly payments of US$1M (approximately C$1.3M) would have resulted in an undiscounted pre-tax NPV of around C$26M. No decision on the potential impairment charge has been taken yet.
Disclosure: The author has a long position in Maverix Metals. Maverix is a sponsor of the website.