Yamana Gold Inc.'s three-way deal with Xstrata and Goldcorp to sell its Agua Rica project, could yield the company about $550-million (U.S.)
The cash payments total $310-million, but the BMO Nesbitt Burns has modelled the additional royalty stream and projects the all-in benefit could reach $555-million. Yamana's royalty stream is on 65 per cent of Agua Rica gold production, up to a maximum of 2.3 million ounces, and Agua Rica is projected to produce 370 million pounds of copper and 148,000 ounces of gold each year for the first 10 years.
The three companies involved already have a working relationship, considering that they jointly own the Alumbrera just 35 kilometres away. Under the terms of the deal, Yamana will keep a 12.5 per cent interest in Agua Rica, which matches its current investment in the practically adjacent three-way project.
"From a strategic perspective, the targeted integration of Agua Rica into Alumbrera is logical, given the proximity to Alumbrera's facilities and potential synergies," BMO analyst David Haughton noted. "Moreover, the transaction clarifies Yamana's Agua Rica strategy, de-risks future capital requirements and reduces its copper exposure."
Bank of America Merrill Lynch advised Yamana on the deal.