Northern Dynasty Minerals Ltd. (NDM-TSX, NAK-NYSE) said Wednesday it has struck a royalty deal with an un-named investor who has agreed to pay up to US$60 million over the next two years in return for the right to receive a portion of future gold and silver production from the Pebble project in Alaska.
Northern Dynasty shares advanced on the news, rising 8.6% or $0.03 to 38 cents on volume of 158,940. The shares are currently trading in a 52-week range of 78 cents and 32 cents.
The company said it received an initial payment of US$12 million from the royalty holder concurrently with the execution of the agreement.
“It became clear to us that to develop a world-class mineral deposit like Pebble requires time, patience and sufficient liquidity to successfully navigate the established legal process and continue ongoing efforts to work with the people in the region,’’ said Northern Dynasty President and CEO Ron Thiessen.
“This financing, when completed, also gives us the financial wherewithal to keep fighting against what we consider to be unfounded interference by U.S. Federal Government agencies in an otherwise well-established legal permitting process, as well as to deal with challenges from well-funded parties from outside the area that lack scientific and other factual studies to support their opposition,’’ he said.
Under the agreement, the royalty holder made the initial payment of $12 million in exchange for the right to receive 2.0% of the payable gold production and 6.0% of the payable silver production from the Pebble project, in each case after accounting for a notional payment of to the royalty holder of US$1,500 per ounce of gold and US$10 per ounce of silver, respectively, for the life of the mine.
If in future, spot prices exceed US$4,000 per ounce of gold and US$50 per ounce of silver, then the company will share in 20% of the excess price for either metal. Additionally, the company will retain a portion of the metal produced for recovery rates in excess of 60% for gold and 65% for silver, and so is incentivized to continually improve operations over the life of the mine, the company said.
They royalty holder has the right to invest additional funds, in $12 million increments, to an aggregate total of up to US$60 million, within two years of the date of the agreement, in return for the right to receive up to 10% of the payable gold and up to 30% of the payable silver on the same terms as the first tranche.
Subject to certain conditions, the agreement does not restrict the company’s ability to form partnerships to assist in the development of the proposed project, for example (but not restricted to) other mining companies or Alaska Native Corporations.
First discovered in 1989, the Pebble project ranks as one of the world’s largest undeveloped gold-copper resources.