Star Royalties Ltd (TSX-V:STRR) has announced a non-brokered private placement of 15,384,620 common shares of its subsidiary, Green Star Royalties Ltd (TSX-V:STRR) at a price of C$1.00 per Green Star share of which Agnico Eagle Mines Limited has agreed to purchase 14,134,620 shares for an aggregate purchase price of C$14.13 million.
Agnico Eagle is a senior Canadian gold mining company, producing precious metals from operations in Canada, Australia, Finland and Mexico. It has a pipeline of high-quality exploration and development projects in these countries as well as in the United States and Colombia.
In a statement, Alex Pernin, chief executive officer of Star Royalties, commented: "We are thrilled to establish a strategic relationship with Agnico Eagle and we look forward to jointly maximizing the potential of Green Star Royalties. We recognize the alignment between our and Agnico Eagle's commitments to sustainability and we welcome their expertise as not only a highly reputable senior Canadian gold mining company, but also a global ESG leader in their industry.
"The Private Placement supports the growing valuation of Green Star Royalties and represents a strong endorsement of our green royalty business model. We believe this support for our green strategy and increased scale following the Private Placement should accelerate our growth, which we expect would lead to a lower cost of capital going forward."
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Perrin added: "Green Star Royalties is focused on the origination of top-quality carbon sequestration projects that will contribute to the reduction of global greenhouse gas emissions. We innovated the first forest carbon credit royalty and we recently announced a scalable carbon credit royalty in regenerative agriculture with our partner Blue Source LLC, North America's leading carbon offset developer and marketer. We are also in discussions with respect to several significant regenerative agriculture and forestry carbon credit opportunities in North America that we intend to advance aggressively following the closing of the Private Placement."
Star Royalties' management team and board of directors have agreed concurrently to purchase the remaining 1,250,000 Green Star shares in the private placement for an aggregate purchase price of C$1.25 million.
Upon completion of the private placement, Green Star Royalties will have approximately 40.4 million shares issued and outstanding, which will be owned in the approximate amounts as follows: 61.9% by Star Royalties, 35% by Agnico Eagle and 3.1% by Star Royalties management. The private placement values the company's 61.9% ownership of Green Star Royalties at C$25 million.
The private placement is expected to close in April 2022 and is subject to certain closing conditions, including the receipt of all necessary approvals of the TSX Venture Exchange, the satisfactory completion of due diligence by Agnico Eagle, the negotiation of a unanimous shareholders agreement among the shareholders of Green Star Royalties and a co-investment agreement under which Agnico Eagle will have the right to co-invest with Green Star Royalties in green projects, and the entering into of a management agreement between Green Star Royalties and Star Royalties.
The company said the private placement is expected to accelerate the company's ability to pursue larger green opportunities and to establish a substantial pure-green royalty company that should attract capital from both generalist and ESG-focused investors.
Rationale for creation of Green Star Royalties
Since its inception, Star Royalties has been committed to funding sustainable environmental solutions for a carbon-neutral economy and continues to view ESG-related investments as a highly scalable business model with attractive returns.
As part of its original portfolio development strategy, Star Royalties targeted a long-term 80% capital allocation to precious metals with the remaining 20% reserved for predominantly green investments, including the development of carbon offset credit projects (nature-based and renewable energies) and green technology opportunities (diesel usage displacement).
Following the overwhelmingly positive response thus far to the company's innovative green royalty model, numerous origination opportunities, and the superior potential returns, on October 18, 2021, Star Royalties announced the creation of a new subsidiary, Green Star Royalties, with the sole purpose to accelerate the growth of its green portfolio beyond the initial limitations of its 80/20 allocation framework.
A more rapid build-out of the green investment strategy will allow Star Royalties to maximize its strong relationships and first-mover advantage in carbon offset credit and ESG-related investments. The company's current vision is to use existing management, infrastructure and oversight to grow Green Star Royalties at a minimal cost as a private subsidiary and, subject to market conditions, unlock additional value when an appropriate public market valuation is achieved.
Star Royalties is a precious metals and green royalty and streaming investment company. The company created the world's first carbon-negative gold royalty platform and offers investors gold exposure with an increasingly negative carbon footprint.
Contact the author at jon.hopkins@proactiveinvestors.com