Reduction of 2.5% Royalty - payable to Franco Nevadahttps://s2.q4cdn.com/606446019/files/doc_presentations/2016/aug/22-CorpPresentation-Q2CorporateUpdate-29Aug16.pdf
KLG has until the
end of this month to cancel 1% of the above payable to FNV.
The cost at the time of the above KLG Aug 2013 presentation was US$36m.
However, KLG is permitted to recover C$30m of this 1% which has already been paid.
There would seem to be merits in reducing the Royalty from 2.5% to 1.5% since:-
- KLG has adequate cash to repay all debentures in 2017.
- It has generated free cash flow of C$59m this year, to the date of the above Aug presentation.
- In a bull market for gold, the royalty payment will only increase and there is no option to cancel after 31 October 2016.
- Cash is not required for the MNI merger. Indeed, NMI will be bringing cash to the marriage.
The NMI merger is unlikely to be approved before the end of the month, therefore it is hoped that this will not frustrate the royalty cancellation opportunity.