Teck Cominco (TSX: T.TCK.B, Stock Forum) reported Monday that it has sold an interest in the gold production at the Andacollo Mine in Chile to Denver-based Royal Gold (TSX: T.RGL, Stock Forum) for $300 million.
Royal Gold will reportedly pay US$100 million in cash plus 4.45 million Royal Gold common shares valued at US$200 million.
Gross proceeds from this transaction attributable to Teck's 90% interest in Andacollo will be US$270 million, says the company. ENAMI, a Chilean state- owned entity dedicated to the promotion and development of small and medium sized mining in Chile holds the remaining 10% interest in Andacollo.
Royal Gold will receive 75% of the gold produced from the sulfide portion of the Andacollo deposit until 910,000 payable ounces of gold have been sold, after which Royal Gold will receive 50% of all future payable gold production from the property. The transaction is expected to close in the second quarter.
Teck says the transaction with Royal Gold will “provide more than sufficient funding to complete construction of the Andacollo expansion project, relieving Teck of a substantial funding obligation in 2009, and will also enable Teck to repatriate surplus funds from Chile to apply to the bridge loan associated with the Fording acquisition.”
The project is expected to be commissioned and achieve first concentrate production in the fourth quarter of 2009. Full commercial production is expected to be reached in the first half of 2010.
"This transaction is a unique opportunity and has all of the characteristics we look for in an acquisition. We are extremely pleased to partner with an experienced operator like Teck on this long-life project in the excellent host country of Chile. This is yet another great addition to our world-class gold royalty portfolio," says Tony Jensen, president and CEO of Royal Gold.
Shares of Teck climbed 2.5% to $8.66 Monday.
On the company’s Bullboard, Consvestor said: “The bottom line is that it appears quite unlikely that Teck will be forced to declare bankruptcy. It is unfortunate that they are forced to sell off some great assets, however with the issue of bankruptcy out of the way the shares should continue to see a good bounce[sic].”
moneyfornothin1 added:
I agree that they will see another day. Sad to see that they made acquisitions at the top of the market last year and are now having to sell what could be valuable assets when all hell breaks loose. The sale of gold and silver assets is unfortunate.
If the economic picture does not change over the next 18-24 mths they will be in a bind. demand for coal will drop, their contract sales will drop, POG will appreciate and TCK will be stuck with coal price somewhat reasonable but lower tonnage shipping. I still see trouble on the horizon[sic].
