Barrick Gold has signed a gold and silver streaming agreement with RGLD Gold, a subsidiary of Royal Gold, for production linked to Barrick's 60 percent interest in the Pueblo Viejo mine.
In return, Royal Gold has agreed to make an upfront cash payment of $610 million plus continuing cash payments for gold and silver delivered under the agreement.
Under the terms of the agreement, Barrick will sell gold and silver to Royal Gold equivalent to:
- 7.5 percent of Barrick’s interest in the gold produced at Pueblo Viejo until 990,000 ounces of gold have been delivered, and 3.75 percent thereafter.
- 75 percent of Barrick’s interest in the silver produced at Pueblo Viejo until 50 million ounces have been delivered, and 37.5 percent thereafter. Silver will be delivered based on a fixed recovery rate of 70 percent. Silver above this recovery rate is not subject to the stream.
Ongoing cash payments to Barrick are tied to prevailing spot prices rather than fixed in advance, maintaining material exposure to higher gold and silver prices in the future. Barrick will receive ongoing cash payments from Royal Gold equivalent to 30 percent of the prevailing spot prices for the first 550,000 ounces of gold and 23.1 million ounces of silver delivered. Thereafter payments will double to 60 percent of prevailing spot prices for each subsequent ounce of gold and silver delivered.
Barrick co-president Jim Gowans said: "The innovative structure of this streaming agreement will allow us to crystalize significant value from Pueblo Viejo in a volatile metal price environment, strengthening our balance sheet in the short term while preserving material exposure to higher gold and silver prices in the future.
"We have made substantial progress on our $3 billion debt reduction target, with $250 million in debt retired so far this year, in addition to $2.45 billion raised through asset sales, joint ventures and streaming. Collectively, these actions represent $2.7 billion, or 90 percent of our target."
Barrick will maintain its 60 percent equity ownership interest in Pueblo Viejo and its associated rights under the joint venture agreement with Goldcorp Inc., including operatorship of Pueblo Viejo.
The transaction will be accounted for as a deferred sales contract and will not have any impact on our reported production or all-in sustaining cost metrics. The obligation of Barrick to sell gold and silver under the agreement is serviced using after tax cash flow being remitted from the Dominican Republic. The agreement is unsecured and is not subject to a Barrick guarantee.
The transaction is subject to customary closing conditions and is expected to be completed early in the fourth quarter. Rothschild Inc. is acting as financial advisor to Barrick. Davies Ward Phillips & Vineberg LLP is acting as legal counsel to Barrick.