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Newmont pays $75M to remove Holt royalty exposure

Newmont says it has struck a US$75 million deal with Kirkland Lake Gold on the dormant Holt property in northern Ontario that removes a US$350 million royalty payment liability from its June 30, 2020, accounts.
Newmont pays $75M to remove Holt royalty exposure Newmont pays $75M to remove Holt royalty exposure Newmont pays $75M to remove Holt royalty exposure Newmont pays $75M to remove Holt royalty exposure Newmont pays $75M to remove Holt royalty exposure

Newmont and Kirkland Lake have entered a strategic partnership to explore and develop their respective northern Ontario assets

Staff Reporter

The global gold major says under a "strategic alliance" agreement with Kirkland that will see the two companies cooperate on exploration at Timmins (Newmont) and neighbouring Holt ground, it can eliminate long-term exposure to a royalty payable to Royal Gold on certain Holt mining and mineral rights via the $75 million payment to Kirkland.

That option arrangement is subject to Kirkland not resuming production at Holt, which was suspended earlier this year amid the COVID-19 pandemic response measures taken by the Ontario government.

Kirkland, which produces close to 1Moz of gold a year from its Fosterville (Australia), Macassa and Detour (Canada) operations, has classified Holt as non-core.

"Kirkland has the right to assume Newmont's obligations under the Holt royalty at any time, in which case the [Newmont] option would terminate," Newmont said.

"The effect of the option structure is that Newmont will have no additional liability exposure in relation to the Holt royalty.

"As a result of the strategic alliance agreement and the option, Newmont expects to remove the approximately $350 million liability for the Holt royalty on its balance sheet at June 30, 2020, and record a gain of approximately $275 million ... from discontinued operations in its results for the third quarter of 2020."

Meanwhile, formation of the strategic alliance would enable allocation of funding to "evaluate strategic alternatives for the future of the Holt mining complex", and for joint exploration.

Kirkland Lake would act as manager of strategic alliance activities.

Shares in Newmont (NYSE:NEM) were up 7% Monday to US$68.35, capitalising it at $55 billion.

Kirkland Lake (TSX:KL) shares added 6.25% Monday. The company has a market value of $19 billion (US$14.4 billion).