Mining: Royalty Financing

The royalty financing technique is often used by mining companies when indicated reserves are in place and bridge financing is needed to complete further exploration and development work and to produce a “bankable” feasibility study.  This enables the mining company to attract a larger partner with proven operating capabilities to put the property into production.  The advantage of financing with a royalty agreement is that the issuer does not dilute its ownership in the property or its interest in the company, and there is no impact on the management of the operations.  Financing decisions can be made quickly and the transaction value is generally in the $1 million to $10 million range.

IBK Capital acted as agent to Ring of Fire Resources (now Noble Mineral Exploration Inc.) to raise a total of $4 million from Franco Nevada Corporation to purchase a very large private land package from a timber company located just north of Timmins, Ontario, Canada.  The $4 million came in the form of a $500,000 purchase of certain royalty rights and $3.5 million in a series of convertible debentures.

IBK Capital acted as agent to Triton Mining Corp. to raise $3.6 million from Repadre Capital Corp(now part of Norvista Resources Corporation).  IBK Capital structured and negotiated a creative financing package consisting of a private placement of units of common shares and warrants of Triton as well as a 5% net smelter return royalty and a 6% net profit interest in Triton’s El Limon/La India mining operations in Nicaragua.

As an alternative to raising capital in the public markets, many junior mining companies have sought business partnerships with senior producers who can offer both financial and technical assistance and expertise, the “Partner of Choice” alternative. The key to completing such transactions in a manner beneficial to the long term interests of both parties is the ability to initiate creative financing structures and to execute them in a timely fashion with strategically chosen partners.

IBK Capital advised Billiton Metals Canada Inc. on the purchase of Trimin Resources Inc.’s interest in the Hanson Lake zinc/lead property.  Common to many junior exploration and development companies at that time, Trimin Resources had increasing difficulty meeting the funding commitments to its joint venture partner on the project, Cameco.  The sale of this interest for $17.5 million enabled Trimin Resources to redeploy its cash resources in ventures better suited to the expertise of the management team.  This transaction provided Cameco with an experienced Partner of Choice in Billiton Metals Canada Inc.