Annual Report
Read Royalco's 2007 Annual Report
Royalties
Read about Royalco's Royalty Streams
Exploration
Read about Royalco's Exploration Program
Sustainability & Environment
Read about Royalco's Sustainability and Environment Program
Royalties
Introduction
Since its incorporation in 2001, Royalco’s initial operations centred on the acquisition of royalty interests to access potential mining cash flows.
Royalco has established itself within a niche category in the mining sector. Globally, there is a limited number of other listed companies with asset portfolios comprising royalty interests and exploration assets. This approach reflects the highly successful business models originally developed by companies such as Franco Nevada Mining Corporation, Royalgold Inc and Repadre Capital Corp in North America during the 1980s.
Royalty revenues are generally exposed to fewer risk factors than investment in pure exploration activities. This results in a more reliable income stream as royalty interests are maintained without the need for increased expenditures on exploration and drilling, nor are they subject to third party financing interests or charges.
Royalco has a portfolio of 15 royalty interests and possesses a highly experienced management team well versed in the intricacies of royalty analysis, evaluation and documentation. These skills have resulted in the compilation of a data base covering approximately 500 royalty interests identified throughout Australasia.
The Royalty Interests
| PROJECT | OPERATOR | ROYALTY | COMMODITY |
| Reefton | Oceana Gold Limited | 1 – 3 % ORR | Gold |
| Mt Garnet | Kagara Zinc Ltd | 3% NSR | Zinc, lead, silver |
| Mt Kelly | CopperCo Limited | 1% NSR | Copper, gold |
| Bowden’s | Silver Standard Resources Inc | 1 – 2 % NSR | Silver |
| Stanton | Hydromet Corp Ltd | 1% NSR | Nickel, cobalt |
| Dagworth/Huonfels | Georgetown Mining Limited | 1.5% ORR | Gold |
| Heathcote | Perseverance Corporation Limited | 2.5% ORR | Gold |
| Xanadu | Pelican Resources Limited | 4% ORR | Gold |
| LFB | Alkane Exploration Ltd | 3% NSR | Gold, copper |
| Lake Margaret | Copper Strike Limited | 1% NSR | Copper |
| Mt Lyndhurst | Syrah Resources Ltd | 1.5% NSR | Copper, uranium |
| Mackenzie/Archie | Syrah Resources Ltd | 1.5% NSR | Zinc |
| Levuka | Syrah Resources Ltd | 1.5% NSR | Copper |
| Munna | Syrah Resources Ltd | 1.5% NSR | Gold |
| Norfolk | Syrah Resources Ltd | 1.5% NSR | Zinc |
Note: ORR refers to over-riding royalty and NSR refers to a net smelter return based royalty
Primary Royalties
There are four primary royalties in the portfolio where, by virtue of the nature, size and stage of development of the Project underlying the royalty, and based on public statements and reports by the various entities holding the projects, the Company’s expectation is that the underlying project has the potential to commence production in a relatively short timeframe. The projects are summarized as follows:
Reefton Goldfield (Gold)
The Reefton Goldfield is located in the South Island of New Zealand and the Company understands from the operator, Oceana Gold Limited, (ASX Code: OGC, website www.oceanagold.com.au ) that any ore won from the Globe Progress mine will be concentrated on site and finally treated at the operator's facility at the Macraes Gold Project (located approximately 60km north of Dunedin). The Reefton royalty covers the Globe Progress deposit and numerous separate deposits including Sam’s Creek.
The Company understands that the probable life of the Globe Progress mine will be at least 7 years.
When cumulative production from Reefton (including Globe Progress) exceeds 1,000,000ozs the royalty calculations above will not apply and Oceana will thereafter deliver a gross production royalty of 1.5% of gold produced from all tenements each quarter.
Mt Garnet (zinc, copper, silver)
Kagara Zinc Ltd (ASX: KZL, website: www.kagara.com.au ) is the operator of the project located 150 kilometres west of Cairns in North Queensland.
Kagara’s initial zinc production commenced from the Mt Garnet open pit in early 2003, before switching production to the Surveyor open pit later that year. Kagara has a number of zinc deposits within its portfolio and is not scheduled to return to the Mt Garnet orebody until 2009/10. Since commissioning in 2003 the central plant, located at Mt Garnet, has undergone a number of upgrades with a current stated capacity of 137,000 tonnes of concentrate per annum.
The royalty from Mt Garnet commences once 24,000 tonnes of contained zinc has been produced. Total zinc production to date from Mt Garnet stands at 12,300 tonnes. The royalty rate is based on a 3% net smelter return.
Kagara had indicated that production from Mt Garnet was scheduled to resume in 2008.
Bowden's (silver)
The operator, Silver Standard Resources Australia Pty Limited, is a wholly owned subsidiary of Silver Standard Resources Inc, based in North America,(TSX code:SSO, website www.silverstandard.com )
Located near Mudgee, New South Wales, the project is now in the feasibility stage and completing additional infill drilling according to the Silver Standard website. Investors are referred to the website for results of the company’s prefeasibility studies.
The royalty is a 2% net smelter return up to US$5million, and 1% net smelter return thereafter.
Mt Kelly (copper)
Copperco Limited (ASX:CUO, website www.copperco.com.au ) is the operator over this historic copper mine located north of Mt Isa in Queensland. The feasibility study for the Lady Annie Copper Project, announced to the market in November 2005 by Copperco, has the potential to include a number of areas relating to the Mt Kelly royalty interests held by Royalco.
The feasibility study suggested that planned production of 15,000 tonnes of copper in concentrate per annum from commencement this year, increasing to 18,000 tonnes of copper per annum next year.
The 1% net smelter return is capped at $619,000, in each of the two separate areas, after the first 25 million pounds of copper has been produced, in each instance.