This Blackrock deal is a dud. It may be non dilutive but it has the same or worse effect, sacrificing future earnings to get the cash now. For the 12 million it will cost avb over 4 million in royalties based on production forecasts for the first year. This is based on a gold price of $1300 and a copper price of $8000, gold royalty of 25% and copper royalty of 2% and royalties paid on the full sale price of production.
Total royalty from gold and copper in the first year would be 4 195 000. In year 2 to 3 production will increase to 40000 tpa copper and if gold production increases at the same rate it will increase to 23 333 oz p.a.
This means the total royalty in year 3 could be 13 983 225 to Blackrock and every year after that. I cant see how management would have signed this deal based on these figures. Another bank loan or equity raising would have been non dilutive not a royalty that must be paid for the life of the mine. Not sure if these figures are entirely right so please correct me if I am wrong
AVB Price at posting:
6.7¢ Sentiment: None Disclosure: Held
