Centerra Gold in deal to sell Kemess stream, royalty portfolio

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The Kemess gold-copper project facilities 430 km north of Prince George, northern British Columbia. Source: Centerra Gold Inc.

Centerra Gold Inc. [CG-TSX] said Thursday May 17 that its wholly-owned subsidiary AuRico Metals Inc. (AMI) has reached agreements with Triple Flag Mining Finance in connection with the sale of its royalty portfolio and a silver stream on the Kemess Project in northern British Columbia for combined aggregate proceeds of US$200 million.

The agreement includes the sale of the AuRico Metals’ royalty portfolio, together with new 0.5%, 2.0% and 2.0% net smelter return royalties on AMI’s Kliyul, Chuchi, and Redton exploration properties in B.C., respectively for up front proceeds of US$155 million. The Kemess Stream consists of the sale of 100% of the silver production from the Kemess Project.

Triple Flag will pay AMI a cash consideration of US$45 million as an advanced payment, payable in tranches of US$10 million, US$10 million, US$12.5 million and US$12.5 million on the public announcement by Centerra that its board of directors has approved a construction decision with respect to the Kemess underground development project and three succeeding anniversaries of such date, respectively.

In addition, Triple Flag will make ongoing payments of 10% on the then current market price for each ounce of silver delivered.

Centerra announced the friendly acquisition of AuRico Metals (including its royalty portfolio and the Kemess gold-copper development asset) in early November 2017, for a total cash consideration of US$242 million (C$310 million).

“The royalty sale and the Kemess Stream represents a compelling way for the company to realize significant cash proceeds from non-core assets, which will further enhance our strong balance sheet and assist in funding Centerra’s growth development pipeline,” said Centerra President and CEO Scott Perry.

Centerra shares advanced 0.55% or $0.04 to $7.32 in early afternoon trading, Thursday. The 52-week range is $9.35 and $5.90.

Centerra is focused on operating, developing, exploring and acquiring gold properties in North America, Asia and other markets worldwide. Centerra ranks as the largest western-based gold producer in Central Asia.

The company operates two flagship assets, the Kumtor Mine in the Kyrgyz Republic and Mount Milligan Mine in British Columbia. Centerra is also building its 100%-owned Oksut Gold Mine in Turkey.

In 2017, Kumtor exceeded its revised production guidance by producing 562,749 ounces of gold at an all-in sustaining cost of US$698/oz.

When Centerra said it had reached a friendly deal to acquire AuRico, the latter company was developing the Kemess property. Kemess is a low-cost brownfield development asset that it host to the feasibility-stage Kemess Underground and preliminary economic assessment level Kemess East projects.

AuRico also owned a free-cash flow generating royalty portfolio which includes a 1.5% net smelter return royalty on the Young-Davidson gold mine in Ontario and 2.0% NSR royalty on the Fosterville Mine in Australia. It also held a portfolio of additional producing and pre-production royalty assets located in North America and Australia.

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