Mine investment firm bullish on BC

1 of 2Tony Jensen, president and chief executive officer of international mining investment firm Royal Gold, Inc. — Photo courtesy of Royal Gold, Inc.

2 of 2Jacques Perron, the chief executive officer of Thompson Creek Metals Co. Inc., the company that owns British Columbia's Mt. Milligan copper/gold mine, said because of Royal Gold, Inc.'s financial help in developing the mine, Royal Gold now receives 52 per cent of the gold produced at Mt. Milligan, while Thompson Creek retains the rest and 100 per cent of the copper. — Photo courtesy of Thompson Creek Metals Co. Inc.

The head of an international mining investment firm says British Columbia’s current stance towards mine development is responsible for his company’s involvement in the province.

Tony Jensen, president and chief executive officer of Royal Gold, Inc., said in a presentation at the Premier’s BC Natural Resource Forum January 22 in Prince George, B.C., that his company “really had no interest being in British Columbia” during the 1990s. But provincial government policy changes have altered that view, encouraging Royal Gold to become active in the province in a big way.

“We don’t mind working within a very stringent environmentally friendly legal system,” Jensen said about one government policy affecting mine investment. “But we really want those rules to stay the same.”

Today, Jensen’s company is involved in 14 properties in B.C., including Thompson Creek Metals Co. Inc.’s Mt. Milligan copper/gold mine, 155 kilometres northwest of Prince George.

And although the B.C. properties represent only seven per cent of Royal Gold’s property count (currently totalling about 200 worldwide), they do represent about 37 per cent of the company’s book value. Jensen said Royal Gold’s present market capitalization makes it a US $3.3-billion company.

Jensen also said Royal Gold, based in Denver, Colorado, remains keen on doing business in the province and is particularly interested in helping the Tulsequah Chief and Kerr-Sulphrets-Mitchell (KSM) projects in northwestern B.C. become functioning mines.

He said too that B.C. has two key advantages over other mining jurisdictions—an abundant supply of fresh water and affordable power—that will continue to make the province a mining mecca if it maintains its mining-industry-friendly policies.

Jensen said during his presentation that his company’s role in the resource development and metal sectors involves providing financing to mining and base metal companies. In exchange for providing financing for development and construction of mines, mine expansions, or exploration work, Royal Gold receives precious metal royalties or metal streams.

A royalty is the right to receive a percentage or other denomination of mineral production from a mining operation, according to Royal Gold’s website.

Jensen said currently the bulk of Royal Gold’s revenues come from five cornerstone mining properties, including Mt. Milligan. The phased start-up of Mt. Milligan began this past August 15.

In fact, Jensen said once Mt. Milligan reaches full production, it’s expected to become Royal Gold’s largest revenue source and could add about 50 per cent to the company’s existing production base.

Back in 2010, Thompson Creek Metals Co. Inc. approached Royal Gold and asked it if it would help Thompson Creek complete a friendly takeover of Terrane Metals Corp., then Mt. Milligan’s owners. As Thompson Creek had much greater financial resources to build a mine, Royal Gold agreed.

In June 2010, Royal Gold provided Thompson Creek with US $311.5 million to help it buy Terrane. As part of the deal, Thompson Creek agreed to sell 25 per cent of the gold eventually to be produced at Mt. Milligan during its suspected 22-year lifespan to Royal Gold.

But in later years, Royal Gold took advantage of two more opportunities to invest in Mt. Milligan. It now has contributed US $781.5 million into the project’s $1.6-billion development cost.

As a result, Thompson Creek’s chief executive officer, Jacques Perron, said in a later forum presentation Royal Gold now receives 52 per cent of the gold produced at Mt. Milligan, while Thompson Creek retains the rest and 100 per cent of the copper.

Royal Gold also gets involved with mining companies long before a mine’s construction begins, Jensen said. The company usually chooses projects based on the quality of assets, their operators and the jurisdictions they’re in.

Recently it provided Chieftain Metals Inc. with US $10 million in order to help finance a feasibility study for Chieftain’s proposed Tulsequah Chief gold, silver, copper, lead and zinc mine, Jensen said. It’s also agreed to provide Chieftain with another US $50 million once all permits are in place, the feasibility study is done, all financing is complete and a construction decision is reached.

Royal Gold is also keen on gaining a foothold in the area around Pretium Resources Inc.’s recent high-grade Brucejack gold strike, 65 kilometres north of Stewart, Jensen said. To that end, it has bought equity in Seabridge Gold, Inc. as it continues to explore its nearby massive Kerr-Sulphrets-Mitchell (KSM) gold, copper, silver and molybdenum project.

In return, Royal Gold has obtained a right of option to invest a larger amount of money with Seabridge as the KSM project moves closer to reality.

“So at some point in the future, we can invest another CAD $160 million for a two per cent royalty on this property,” Jensen said.