DESIGNATED NEWS RELEASE
VANCOUVER, BC, July 31,
2023 /PRNewswire/ - Gold Royalty
Corp. (NYSE American: GROY) ("Gold Royalty" or the
"Company") is pleased to announce that it has entered into
an agreement (the "Agreement") to acquire an existing 1.0%
net smelter return ("NSR") royalty (the "Royalty")
from Endeavour Silver Corp. ("Endeavour") on portions of the Cozamin
Copper-Silver Mine, located in Zacatecas,
Mexico, ("Cozamin") for total cash consideration of
US$7.5 million. Cozamin is owned and
operated by Capstone Copper Corp. ("Capstone").
The Company also announces that it expects that, with the
completion of the proposed acquisition, its board of directors will
suspend dividends under its previously announced dividend program
to focus capital on executing its strategic priority of growing
cash flow and net asset value per share through accretive
acquisitions.
David Garofalo, Chairman and CEO
of Gold Royalty commented, "The acquisition of the Cozamin royalty
brings immediate cash flow, complementing our peer-leading revenue
growth rate from our portfolio of high-quality, long-life North
American assets. Capstone is an experienced and proven operator and
we are excited to see them continue to deliver strong operating and
exploration results at Cozamin for years to come. We currently
expect to be generating positive free cash flow in 2024 with, among
other things, the addition of Cozamin, the Côté Gold Project on
track to enter production early next year, and corporate overhead
costs continuing to decrease."
Acquisition Highlights:
- Cozamin is an established, low-cost operating copper-silver
mine which has been in production since 2006 and has a history of
exploration success and mine life extensions;
- The Royalty generated revenue of over US$1.0 million over the last year and is expected
to add meaningful cash flow to Gold Royalty going forward, along
with leverage to increasing copper and silver prices during the
life of mine;
- Capstone published an updated National Instrument I 43-101 ("NI
43-101") technical report for Cozamin in May
2023 which outlined a life of mine plan extending to 2030
based only on mineral reserves1;
- The Royalty covers two concessions over the Calicanto vein at
Cozamin. As part of the transaction, Gold Royalty has been granted
the option to acquire additional royalties on five contiguous
concessions to the south of the Royalty for consideration of up to
US$500,000.
- The Company intends to fund the transaction through its
existing cash and cash equivalents.
______________________________
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1 Based on
the NI 43-101 Technical Report titled "NI 43-101 Technical Report
on the Cozamin Mine, Zacatecas, Mexico" prepared for Capstone
Copper Corp. with an effective date of January 1, 2023, a copy of
which is available under Capstone's profile at www.sedar.com (the
"Cozamin Report") . C1 cash costs per payable pound of copper
produced is a measure reflective of operating costs per unit.
Capstone calculates C1 cash costs as cash production costs of metal
produced net of by-product credits.
|
The Cozamin Royalty
Cozamin is a copper-silver underground mine with a surface
milling facility, located 3.6 km north-northwest of Zacatecas City in the mineral-rich state of
Zacatecas, Mexico. Since the first
full year of operation, Cozamin has generated free cash flow at all
points of the copper price cycle.
Cozamin has been continuously operated by Capstone since late
2006, when it commenced commercial production at a rate of 1,000
tonnes per day. At the time, it had a three-year mine life based
upon then existing mineral reserves. Since then, successful
exploration has extended the expected life of the mine to 2030
based on existing mineral reserves1.
From 2023 to 2030, average annual production is currently
forecasted by Capstone at 20,000 tonnes of copper and 1.3 million
ounces of silver at average C1 costs of US$1.51 per payable pound of copper. Between 2023
to 2027, average projected annual production is expected by
Capstone to be higher at 24,000 tonnes of copper and 1.7 million
ounces of silver, at lower average projected C1 costs of
US$1.46 per payable pound of
copper1.
Capstone announced on February 1,
2023 that it plans to update its mine plan in 2024 to
introduce cut-and-fill mining, which it expects will allow it to
convert additional resources to reserves and provide a pathway to
increase production at the mine to better utilize the installed
mill capacity of 4,400 tonnes per day.
The Royalty was created under a 2017 concession division
agreement between Endeavour and
Capstone, under which, among other things, if Capstone outlined a
primarily base metals mineral resource estimate (defined as >60%
of NSR value) on certain concessions owned by Endeavour, it would grant Endeavour a 1% NSR royalty on such
concessions. The Royalty applies to two concessions (Calicanto and
Vicochea) where the base metals threshold was met. Gold Royalty has
also been granted an option by Endeavour to acquire a 1% NSR royalty on five
additional concessions if such royalties are granted in the future.
Pursuant to the option, Gold Royalty would acquire such royalties,
subject to existing rights of first refusal held by Capstone, in
exchange for US$300,000, in the case
of the Mise concession and US$50,000
in the case of each other concession, which amount may, at the
option of Gold Royalty, be satisfied by issuing Gold Royalty common
shares.
The acquisition of the Royalty is subject to customary closing
conditions and is currently expected to be completed in
August 2023.
About Gold Royalty Corp.
Gold Royalty Corp. is a gold-focused royalty company offering
creative financing solutions to the metals and mining industry. Its
mission is to invest in high-quality, sustainable, and responsible
mining operations to build a diversified portfolio of precious
metals royalty and streaming interests that generate superior
long-term returns for our shareholders. Gold Royalty's diversified
portfolio currently consists primarily of net smelter return
royalties on gold properties located in the Americas.
Qualified Person
Alastair Still, P.Geo., Director
of Technical Services of the Company, is a qualified person as such
term is defined under NI 43-101 and has reviewed and approved the
technical information disclosed in this news release.
Notice to Investors
Except where otherwise stated, the disclosure in this news
release relating to Cozamin has been derived from the Cozamin
Report and other public information disclosed by the operator and
has not been independently verified by the Company. Specifically,
the Company has limited, if any, access to the property subject to
the Royalty. Although the Company does not have any knowledge that
such information may not be accurate, there can be no assurance
that such third-party information is complete or accurate. The
Royalty does not cover the entire project area of Cozamin, or the
entirety of the areas covered by existing mineral reserve and
resource and estimates. Please refer to the Cozamin Report for
further information regarding the mineral reserve.
Unless otherwise indicated, the technical and scientific
disclosure contained or referenced in this news release, including
any references to mineral resources or mineral reserves, was
prepared by the project operator in accordance with NI 43-101,
which differs significantly from the requirements of the U.S.
Securities and Exchange Commission (the "SEC") applicable to
domestic issuers. Accordingly, the scientific and technical
information contained or referenced in this news release may not be
comparable to similar information made public by U.S. companies
subject to the reporting and disclosure requirements of the
SEC.
Cautionary Statement on
Forward-Looking Information:
Certain of the information contained in this news release
constitutes 'forward-looking information' and 'forward-looking
statements' within the meaning of applicable Canadian and U.S.
securities laws ("forward-looking statements") which involve known
and unknown risks, uncertainties and other factors that may cause
the Company's actual results, performance and achievements to be
materially different from the results, performance or achievements
expressed or implied therein. Forward-looking statements, which are
all statements other than statements of historical fact, include,
but are not limited to, statements respecting future dividends, the
Company's strategy and business plans, the expected completion of
the acquisition of the Royalty, expectations regarding operations
at Cozamin and expectations regarding the Company's cash flows from
Cozamin and its other interests. Forward-looking statements are
based upon certain assumptions and other important factors,
including assumptions relating to commodities prices, the projects
underlying the Company's royalty interests, expected operations at
Cozamin and other projects underlying the Company's interests and
the business of the Company. Forward-looking statements are subject
to a number of risks, uncertainties and other factors which may
cause the actual results to be materially different from those
expressed or implied by such forward-looking statements including,
among others, risks related to the ability of the parties to
complete the proposed transaction and satisfy the conditions
thereof, any inability of the operators of the properties
underlying the Company's royalty interests to execute proposed
plans for such properties or to achieved planned development and
production estimates and goals, risks related to the operators of
the projects in which the Company holds interests, including the
successful continuation of operations at such projects by those
operators, risks related to exploration, development, permitting,
infrastructure, operating or technical difficulties on any such
projects, the influence of macroeconomic developments, the ability
of the Company to carry out its growth plans and other factors set
forth in the Company's Annual Report on Form 20-F and its other
publicly filed documents under its profiles at www.sedar.com
and www.sec.gov. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward-looking statements,
there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that
such statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue
reliance on forward-looking statements. The Company does not
undertake to update any forward-looking statements, except in
accordance with applicable securities laws.
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SOURCE Gold Royalty Corp.