Ero Copper in US$110 million gold streaming with Royal Gold
Ero Copper Corp. [ERO-TSX, NYSE] on Wednesday announced details of a US$110 million streaming agreement with unit of Royal Gold Inc. [RGLD-NASDAQ], involving gold production from Ero’s NX Gold Mine in Brazil.
Key components of the deal include an upfront cash consideration of US$100 million for the purchase of 25% of the gold produced until 93,000 ounces has been delivered, decreasing to 10% of gold produced over the remaining life of the mine.
Royal Gold will make ongoing payments equal to 20% of the prevailing spot gold price for each ounce of gold delivered until 49,000 ounces of gold have been received, after which it will pay 40% of the prevailing spot prices for each ounce of gold delivered.
An additional amount of up to US$10 million will be payable to Ero, an amount that is subject to certain performance conditions related to planned exploration drilling and increases to the NI 43-101 compliant measured and indicated resources of the NX Gold Mine.
Ero Copper shares advanced on the news, rising 5.0% or $1.27 to $26.72 in light trading volume. The shares are currently trading in a 52-week range of $29.76 and $15.98.
Ero is a Brazil-focused base metals mining company. Its key asset is a 99.6% stake in Mineracao Caraiba S.A. (MCSA), a long-established Brazilian copper mining company with 40 years of operating experience in the Curaca Valley of Bahia, Brazil. MCSA’s primary assets are the fully integrated mining and processing operations of the MCSA Mining Complex in northeastern.
The MCSA Mining Complex produced 42,814 tonnes of copper in concentrate in 2020.
In addition, MCSA owns 100% of the “turn key” Boa Esperanca, development project, an IOCG-type copper deposit located in Para State Brazil.
The 97.6%-owned NX Gold Mining Complex consists of fully integrated underground mining and processing facilities. The high grade, shear-zone-hosted quartz vein system is accessed via a single decline, and current mining operations are focused on the Santo Antonio vein. NX Gold is located in southeastern, Mato Grosso State, Brazil, approximately 670 kilometres east of the capital city of Cuiaba.
Dore bars containing gold and silver, as well as lesser amounts of lead, are shipped from the mine weekly by airplane via a gravel airstrip located on the property.
Total probable reserves at the site stand at 244,700 ounces of gold, grading 8.83 g/t. On top of that is an indicated resource of 270,000 ounces of gold, grading 10.90 g/t.
In 2020, The NX Gold Mine produced 36,830 ounces of gold and 22,694 ounces of silver
Assuming Ero’s 2021 gold production guidance from the NX Gold Mine of 34,500 to 37,500 ounces is achieved, gold deliveries to Royal Gold over the eight-month period from May 1, 2021 to December 31,2021 is expected to be approximately 6,000 ounces. The effective date of the transaction is May 1, 2021.
Post-transaction, Ero said the NX Gold mine will continue to be a high-margin gold producer, highlighted by Q1, 2021 all-in-sustaining costs of US$643 per ounce of gold produced.
Under the deal, Royal Gold has pledged to commit US$5 per ounce of gold delivered under the NX gold stream to support the company’s environmental, social and governance commitments for the NX gold mine and surrounding communities.