Star Royalties Ltd (TSX-V:STRR) said it has agreed to acquire an existing 2% net smelter return (NSR) royalty on the Elk Gold Mine in British Columbia from Almadex Minerals for a purchase price of about US$10.6 million.
The Elk Gold Mine, which is owned and operated by Gold Mountain Mining Corp, is expected to begin generating revenue during the fourth quarter of this year, with royalty revenue anticipated to average US$2 million per year following the third year of production, based on prevailing gold prices.
“We expect to double our revenue while diversifying and de-risking our portfolio with this attractive and accretive acquisition,” Star Royalties CEO Alex Pernin said in a statement.
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“The Royalty will complement our existing Copperstone gold stream that is under construction, our producing Keysbrook mineral sands royalty and our growing green royalty portfolio,” Pernin added.
The US$10.6 million purchase price will consist of $10 million in cash and 1,659,304 common shares of Star Royalties plus 829,652 common share purchase warrants, with each warrant exercisable for one Star Royalties common share at a price of C$0.70 for a period of 24 months from the closing date.
Star Royalties said the cash component of the royalty acquisition will be funded from the company’s existing cash balance.
Star Royalties also noted that Gold Mountain’s updated preliminary economic assessment (PEA) on the Elk Gold Mine from May 2021 highlights an 11-year combined open pit and underground operation with life-of-mine, all-in sustaining costs of US$554 per ounce.
Toronto-based Star Royalties is targeting 80% of its capital allocation to precious metals, with up to 20% available for predominantly green investments, with a 70/20/10 split between cash flowing, near-term cash flow, and non-cash flowing assets.
The company has a handful of standout assets in its portfolio: the Copperstone gold project in Arizona; Keysbrook, which is a mineral sands project in Western Australia, and a unique royalty on a carbon offset project in Ontario.
Contact Sean at sean@proactiveinvestors.com