Royal Gold Announces Preliminary Economic Assessment for the Peak Gold Project

DENVER–(BUSINESS WIRE)–ROYAL GOLD, INC. (NASDAQ:RGLD) (together with its subsidiaries,
“Royal Gold” or the “Company”) is pleased to report that the Peak Gold,
LLC joint venture (“Peak Gold”), of which our Royal Alaska, LLC
subsidiary (“Royal Alaska”) owns a 40% interest, has completed a
Preliminary Economic Assessment (“PEA”)1 on the Peak Gold
Project (the “Project”) located near Tok, Alaska. The PEA presents a
robust open pit mining operation with attractive economics at base case
gold and silver prices. All results presented herein are on a 100% Peak
Gold basis.

PEA Highlights

Highlights of the PEA results, assuming base case metal price parameters
of US$ 1,250 per ounce of gold and US$ 17.00 per ounce of silver,
include:

  • Pre-tax NPV5% of US$ 393 million and IRR of 37.0%;
  • After-tax NPV5% of US$ 283 million and IRR of 29.1%;
  • Mine life of 8 years with a 24-month pre-production period;
  • 9.3 million tonnes processed at an average grade of 3.99 g/t gold and
    11.7 g/t silver;
  • Average metallurgical recoveries of 91.6% for gold and 57.0% for
    silver;
  • Life of mine recovered gold of 1.093 million ounces and 1.996 million
    ounces of silver;
  • Life of mine strip ratio of 3.9 tonnes of waste to tonnes of material
    processed;
  • Life of mine total cash cost of US$ 428 per ounce of gold recovered,
    and US$ 470 per ounce of gold recovered including sustaining capital;
  • Life of mine capital cost of US$ 340 million, consisting of US$ 294
    million of initial development capital, and sustaining capital and
    closure costs of US$ 46 million; and
  • After-tax payback period for initial development capital of
    approximately 2 years.

The PEA was prepared by JDS Energy and Mining Inc. (“JDS”) of Vancouver,
British Columbia, Canada.

The results of the PEA are a significant milestone and show that the
Peak Gold Project is one of the most interesting emerging gold projects
in the United States,” commented Tony Jensen, President and CEO of Royal
Gold. “The combination of robust grade, near-surface open-pit resource,
and a large and prospective land package located close to existing
infrastructure, makes the Peak Gold Project unique. Royal Gold is
committed to this exciting Project over the long term and will focus on
opportunities to realize the value of our interest in a manner more
closely aligned with our core business model.”

PEA Overview

The PEA considers a conventional truck and shovel open-pit mining
operation covering the North, Main and West Peak deposits, feeding a
3,500 tonne per day processing plant with two-stage crushing, grinding
and a carbon in leach (“CIL”) recovery circuit, with production of
gold-silver doré bullion on site. The PEA is based on an update of the
mineral resource2 estimate for the Peak and North Peak
deposits previously announced by Royal Gold in our June 2, 2017 press
release.3

PEA Parameters and Economic Results

The main parameters and results of the PEA are summarized in the
following table:

 
Assumptions
Gold price   $/ounce   $1,250
Silver price   $/ounce   $17.00
Production Profile
Mine life   years   8
Total tonnes milled   million tonnes   9.3
Diluted gold grade   g/t   3.99
Diluted silver grade   g/t   11.7
Mill throughput   t/day   3,500
Gold recovery   %   91.6
Silver recovery   %   57.0
Recovered gold   million ounces   1.093
Recovered silver   million ounces   1.996
Average annual gold production   ounces/year   136,700
Average annual silver production   ounces/year   249,500
Operating Costs
Life of mine average total cash cost   $/oz gold   428
Life of mine cash cost + sustaining cost   $/oz gold   470
Capital Costs
Pre-production capital cost   $ million   294
Sustaining capital cost + Closure   $ million   46
Project Economics
Royalties   % of NSR   5.75
Alaska State Tax / Federal Tax   %   9.4% / 21%
Pre-Tax:
NPV5%   $ million   393
IRR   %   37.0
Payback period   years   1.5
Post-Tax:
NPV5%   $ million   283
IRR   %   29.1
Payback period   years   2.0
   

Economic Sensitivities

Sensitivity of the estimated post-tax NPV5% to changes to significant
value drivers is shown below:

 

Parameter

varied:

    Post-Tax NPV5% ($ million)
    -20%   -10%  

PEA Base
Case

  +10%   +20%
Gold price     129   206   283   358   433
Capital cost     348   315   283   250   217
Operating cost     327   305   283   260   236
 

Mineral Resource

The PEA is based on the resource estimate prepared by Independent Mining
Consultants, Inc. and reported by Royal Gold on June 2, 2017. The
resource estimate was updated using operating costs, pit slope estimates
and metal recoveries consistent with the PEA parameters in September of
2018, resulting in a revised resource estimate, which is summarized in
the table below:

Resource
Classification

  Tonnes   Grade   Contained Metal
  (000)  

Gold
(g/t)

 

Silver
(g/t)

 

Copper
(%)

 

Gold

(000
ounces)

 

Silver
(000
ounces)

 

Copper
(M lb)

Measured (M)   473   6.39   16.71   .148   97.1   254.0   1.5
Indicated (I)   8,728   3.96   14.06   .153   1,110.9   3,944.8   29.5
Total M + I   9,201   4.08   14.19   .153   1,208.1   4,198.8   31.0
Inferred   1,344   2.69   16.06   .151   116.4   694.1   4.5

The estimates of measured and indicated resources assumed metal prices
of $1,400 per ounce gold and $20.00 per ounce silver for development of
the pit shell. The cutoff grades used to define resources were 0.74 g/t
gold equivalent for the Main Peak deposit and 0.66 g/t gold equivalent
for the North Peak deposit.

Capital Costs

The PEA is based on a capital cost summary with an estimated accuracy of
+/- 30%, which is shown in the table below:

 
Capital Item   Pre-Production

($ million)

  Sustaining

($ million)

  Total

($ million)

Mining   28.8   9.1   37.9
Site Development   4.9     4.9
Crushing and Reclaim   8.5   0.5   9.0
Tailings Management   8.9   20.3   29.2
Processing Plant   54.8   2.5   57.3
Infrastructure   56.3   5.0   61.3
Project Indirects   45.0   0.1   45.1
Engineering and Project Management   16.1     16.1
Owner’s Costs   21.5     21.5
Subtotal   244.8   37.4   282.2
Contingency   49.0     49.0
Closure     8.4   8.4
Total Capital   293.8   45.8   339.6
 

Pre-production capital reflects the required investment to develop the
Project through to production. Sustaining capital is for the entire life
of mine and includes equipment, spare parts, expansion of the tailings
management facility, water management and closure costs.

Mining

The PEA assumes conventional open pit truck and shovel mining, and
production designed to achieve a processing rate of 3,500 tonnes per
day. The average mining rate assumed by the PEA is 15,000 tonnes per day
of total material mined, with a maximum of 22,000 tonnes per day
occurring in years 3 through 6.

The mine design assumed by the PEA will consist of two pits, with a
mining sequence intended to maximize grade in the early years, reduce
stripping requirements and maintain the processing facility at full
production capacity. Operations would begin at the North Peak deposit
and transition in year three to a single pit comprising the Main and
West Peak deposits for the remainder of the mine life.

The primary owner-operated diesel mine fleet is designed to consist of
64 tonne capacity haul trucks, 7.0 m3 front shovels, a 7.0 m3
front end loader and 127 mm diameter drills. The ancillary mine fleet
would consist of track dozers, graders, wheel dozers and water trucks.

Processing

The PEA assumes mineralized material would be processed using a
two-stage crushing circuit, a two-stage grinding circuit, and a CIL
circuit. Run of mine material would be fed to a primary jaw crusher,
after which oversize material would be fed to a secondary cone crusher.
Fine mill feed would report to a primary rod mill to be mixed with
cyanide, cement and milk of lime. The feed mixture would then proceed to
a secondary ball mill, after which it would enter a grinding thickener
followed by a five-stage leach/adsorption circuit. Gold and silver would
be recovered from the leach solution and smelted in an induction furnace
to produce doré bullion.

The PEA assumes CIL tailings would be pumped to a tailings thickener to
remove process water and recover free cyanide for reuse in the plant.
Thickened tailings would be detoxified and then pumped to the tailings
management facility (“TMF”) for storage. The TMF would be lined with a
synthetic geomembrane liner and would have foundation and underdrain
systems to minimize and control potential seepage. The tailings
embankment would be raised continuously over the mine life and would be
designed to allow capacity for future expansion, if required.

Project Infrastructure

The PEA assumes general infrastructure for the Project would support
operations on a 24 hour per day, seven day per week basis. Major
infrastructure items would include:

  • Site access road connecting to the Tetlin Village road and the Alaska
    Highway, with upgrades to the existing site access road over a
    10-kilometer distance;
  • Haul roads for waste and mill feed materials sized to accommodate 65
    tonne trucks;
  • Maintenance, warehouse, administration, laboratory, security and first
    aid buildings;
  • Plant facilities, including the crushing and grinding circuit,
    conveying equipment, and refinery;
  • Ancillary facilities, including a truck shop, explosives storage and
    fuel storage;
  • Power line from Delta Junction to a site substation (approximately 160
    kilometers) to supply a total connected load of 8 MW;
  • Camp accommodations in Tok for the portion of the workforce that does
    not come from Tok, Tetlin and the surrounding areas;
  • Water supply and management system to minimize water discharge from
    the site;
  • Lined TMF, constructed with an initial capacity for two years of
    tailings, with staged construction in subsequent years to increase
    storage capacity as required; and
  • Waste rock storage areas to allow segregation of waste depending on
    its characteristics.

Operating Costs

The PEA is based on assumed life of mine operating costs by activity
area, as shown in the table below.

       
Operating Costs     $/tonne Processed     $/ounce Gold
Mining     14.91     127
Processing     21.58     184
G&A     7.73     66
Royalties     8.58     73
Refining     1.10     9
By-product Credits     (3.64)     (31)
Total Cash Cost     50.26     428
Sustaining Capital + Closure     4.92     42
Cash Cost + Sustaining Capital     55.18     470
 

Under the mineral lease for the Project, Peak Gold would pay a
production royalty based on net returns of mineral production from the
lease area. The production payment rates under the lease for precious
metals are currently 2.25% of net returns for the first four years of
production, 3.25% of net returns for years five through seven inclusive,
and 4.25% of net returns for year eight and any following years. These
royalty rates can be increased at the option of the royalty holder to
3.0%, 4.0% and 5.0%, respectively, with the payment of an additional
$150,000, $300,000 and $400,000 to Peak Gold for each respective royalty
period, before July 15, 2020.

In addition, Peak Gold would pay a royalty to Royal Gold at a rate of
3.0% of net smelter returns on mineral production from the lease area
underlying the project considered in the PEA.

Permitting

Peak Gold holds the required permits and approvals to continue exploring
the areas comprising the Project. The collection of baseline water
quality data, material characterization analysis and wetlands
determination has progressed since 2012. A more comprehensive baseline
data collection program is being contemplated for 2019.

Project Enhancement Opportunities

Several opportunities have been identified that could enhance the
project considered by the PEA, including:

  • Expansion of the mine through delineation or development of additional
    mineral resources;
  • Pit slope steepening to improve the assumed waste to mill feed strip
    ratio;
  • Optimization of the assumed mine plan and development schedule; and
  • Potential recovery of copper.

About Peak Gold

Peak Gold is a joint venture between Royal Alaska and CORE Alaska, LLC
(“CORE Alaska”), a wholly-owned subsidiary of Contango ORE, Inc. Peak
Gold holds a 675,000 acre lease with the Native Village of Tetlin and an
additional 175,000 acres of State of Alaska mining claims, all located
near Tok, Alaska, on which Peak Gold explores for minerals. Royal Alaska
holds a 40% membership interest in Peak Gold and is the manager of the
joint venture. CORE Alaska holds a 60% membership interest in Peak Gold.
Royal Gold also holds a 13.2% equity interest in Contango ORE, Inc., and
royalties of 3.0% of net smelter returns on mineral production from the
lease and certain State of Alaska mining claims held by Peak Gold and
2.0% of net smelter returns from certain other State of Alaska mining
claims held by Peak Gold.

About Royal Gold

Royal Gold is a precious metals stream and royalty company engaged in
the acquisition and management of precious metal streams, royalties, and
similar production-based interests. As of September 1, 2018, the Company
owns interests on 191 properties on six continents, including interests
on 40 producing mines and 18 development stage projects. Royal Gold is
publicly traded on the Nasdaq Global Select Market under the symbol
“RGLD.” The Company’s website is located at www.royalgold.com.

Cautionary “Safe Harbor” Statement Under the Private Securities
Litigation Reform Act of 1995:
With the exception of historical
matters, the matters discussed in this press release are forward-looking
statements that involve risks and uncertainties that could cause actual
results to differ materially from projections or estimates contained
herein. Such forward-looking statements include: statements about the
PEA presenting a robust open pit mining operation with attractive
economics at base case gold and silver prices; statements about
highlights of the PEA results summarized in this press release regarding
assumed gold and silver prices, after tax NPV, mine life, tonnage,
grade, average metallurgical recoveries for gold and silver, life of
mine recovered gold and silver, life of mine operating cash cost per
ounce of gold recovered, per ounce of gold recovered including
sustaining capital, life of mine capital cost, consisting of initial
development capital, sustaining capital and closure costs, and after-tax
payback period for initial development capital; statements about the PEA
results being a significant milestone and showing that the Peak Gold
Project is one of the most interesting emerging gold projects in the
United States; statements about robust grade, near-surface open-pit
resource, and a large and prospective land package located close to
existing infrastructure, making the Peak Gold Project unique; statements
about Royal Gold being committed to this exciting Project over the long
term and focusing on opportunities to realize the value of our interest
in a manner more closely aligned with our core business model;
statements about the main parameters and results of the PEA summarized
in this press release regarding assumed gold and silver prices,
production profile, mine life, total tonnes milled, diluted gold and
silver grade, mill throughput, gold and silver recovery, recovered gold
and silver, average annual gold and silver production, operating costs,
life of mine average total cash cost, life of mine cash cost plus
sustaining cost, pre-production capital cost, sustaining capital cost
plus closure cost, project economics, royalties, Alaska State tax and
Federal tax, pre-tax NPV, IRR and payback period, post-tax NPV, IRR and
payback period; statements about sensitivity of estimated post-tax NPV
to changes to significant value drivers, including gold price, capital
cost and operating cost; Estimates of measured, indicated and inferred
resources for the Peak Gold Project and assumed metal prices for gold
and silver used to develop the pit shell, and cut off grades used to
define the resource for the Main Peak and North Peak deposits; and
statements about the PEA being based on a capital cost summary with an
estimated accuracy of +/- 30%; and statements about mining, processing,
project infrastructure, operating costs, permitting and project
enhancement opportunities. Like any joint venture or other interest on a
non-producing or not-yet-in-development project, our interests in the
Peak Gold Project and the results in the PEA and related statements are
subject to numerous and substantial risks, such as the ability of an
operator to progress the project successfully to feasibility, develop
the project into a mine and bring the project into production and
operate in accordance with feasibility studies, and the ability of Royal
Gold to obtain value for its interest in the Peak Gold Project.
Additional factors that could cause actual results to differ materially
include, among others, precious metals and copper prices; the ability to
find an operator to develop the project and finance project construction
to completion and bring the project into production as expected;
operator’s delays in securing or inability to secure necessary
governmental permits; decisions and activities of the operator of the
project; unanticipated grade, environmental, geological, seismic,
metallurgical, processing, liquidity or other problems the operator may
encounter; completion of feasibility studies; changes in the operator’s
project parameters as plans continue to be refined; changes in estimates
of reserves and mineralization by the operator; risks associated with
conducting business on Tribal lands ; changes in laws governing the
project; and other subsequent events; as well as other factors described
in the Company’s Annual Report on Form 10-K, Quarterly Report on Form
10-Q, and other filings with the Securities and Exchange Commission.
Most of these factors are beyond the Company’s ability to predict or
control. The Company disclaims any obligation to update any
forward-looking statement made herein. Readers are cautioned not to put
undue reliance on forward-looking statements.

1     The results of the PEA are preliminary in nature and are based on
various assumptions. These assumptions may be affected by
environmental, permitting, geological, metallurgical, legal, title,
taxation, socio-political, market or other relevant factors,
including changes in metal prices. In addition, no decision has been
made by Peak Gold to proceed with the mine plan described in the
PEA. A decision to proceed with the mine plan would require further
economic and resource study. No decision has been made by Peak Gold
to proceed with a further economic and/or resource study.
Accordingly, there is no certainty that the results of the PEA will
be realized even if Peak Gold decides to proceed with the mine plan
described in the PEA at any point in the future.
 
2 The PEA was prepared in accordance with Canadian National Instrument
43-101 (NI 43-101). The terms “mineral resource”, “measured mineral
resource”, “indicated mineral resource” and “inferred mineral
resource” as used in the resource estimate, the PEA and this press
release are Canadian mining terms as defined in accordance with NI
43-101. The U.S. Securities and Exchange Commission (SEC) does not
recognize these terms. “Resources” are not reserves under the SEC’s
regulations but are categorized under the securities laws
regulations of various foreign jurisdictions (including NI 43-101),
in order of increasing geological confidence into “inferred
resources”, “indicated resources”, and “measured resources”.
Investors are cautioned that resources cannot be classified as
mineral reserves unless and until further drilling and metallurgical
work is completed, until other economic and technical feasibility
factors based upon such work have been resolved and it is
demonstrated that they may be legally and economically extracted and
produced, and, as a result, investors should not assume that all or
any part of the mineralized material in any of these categories
referred to in the resource estimate, the PEA and this press release
will ever be converted into mineral reserves. In addition, the SEC
normally only permits issuers to report mineralization that does not
constitute mineral reserves as in-place tonnage of mineralized
material and grade without reference to unit amounts of metal.
 
3 The “Main Peak” and “West Peak” deposits were previously referred to
as the “Peak” deposit in the June 2, 2017 resource estimate.

Contacts

Royal Gold
Alistair Baker, 647-749-8204
Director, Business
Development

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