Annual Report
Read Royalco's 2011 Annual Report
Royalties
Read about Royalco's Royalty Streams
Exploration
Read about Royalco's Exploration Program
Sustainability & Environment
Read about Royalco's Community Relations, 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 and Royalgold Inc in North America.
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 10 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. This database is reviewed on a regular basis to identify potential acquisition opportunities.
The Royalty Interests
| PROJECT | OPERATOR | ROYALTY | COMMODITY |
| Reefton (i) | Oceana Gold Limited | 5000 ounces per annum 1-3% ORR | Gold |
| Sam's Creek | Oceana Gold Limited | 1% ORR | Gold |
| Mt Garnet | Kagara Zinc Ltd | 3% NSR | Zinc, lead, silver |
| Mt Kelly | CST Mining Group Ltd | 1% NSR | Copper, gold |
| Bowden’s | Silver Standard Resources Inc | 1 – 2 % NSR | Silver |
| Stanton | Hydromet Corp Ltd | 1% NSR | Nickel, cobalt |
| Dagworth/Huonfels | Deutsche Rohstoff Limited | 1.5% ORR | Gold, silver |
| Gambang | Vale Exploration Inc | 1.3-1.5% NSR* | Copper, gold |
| LFB | Alkane Exploration Ltd | 3% NSR | Gold, copper |
| Mt Lyndhurst | Syrah Resources Ltd | 1.3-1.5% NSR* | Copper, gold |
ORR: Overriding Royalty
NSR: Net Smelter Return
* Subject to option exercise
Primary Royalties
There are three primary royalties in the portfolio which are already in production and provide Royalco with a substantial cash flow. The projects are summarized as follows:
Reefton Goldfield (Gold)
The Reefton Goldfield is located in the South Island of New Zealand where the operator is Oceana Gold Limited, (ASX Code: OGC, website www.oceanagold.com.au ). Ore won from the Globe Progress mine is 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, Blackwood etc.
The Globe Progress mine component of the Reefton project pays a royalty based on the $NZ gold price. At a gold price of NZ$900 or greater, the amount is 5,000 ounces p.a. until 400,000 ounces has been produced from this tenement.
Areas of the Reefton project outside of this tenement are subject to a variable royalty of between 1% ORR and 3% ORR, again based on the $NZ gold price, until 1,000,000 ounces have been produced in all areas , when the royalty reverts to a fixed 1.5% ORR.
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.
The royalty from Mt Garnet fluctuates with the amount of Mt Garnet ore processed, which partly depends upon suitable ore for blending with Kagara's other mining operations. The royalty rate is based on a 3% net smelter return.
Mt Kelly (copper)
CST Mining Group Ltd (985:Hong Kong) is the operator over this historic copper mine located north of Mt Isa in Queensland.
Operations commenced under the previous owner, Copperco Limited and our interest is a 1% net smelter return capped at $1,000,000, after the first 25 million pounds of copper has been produced. Our entitlement commenced in the December quarter 2008 and to date we have received approximately $305,000.