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Message: Teck Announces US$300 Million Andacollo Gold Royalty Transaction (Royal Gold)

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Teck Announces US$300 Million Andacollo Gold Royalty Transaction (Royal Gold)

posted on Apr 06, 09 02:59AM

April 6, 2009

Teck Announces US$300 Million Andacollo Gold Royalty Transaction

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 6, 2009) - Teck Cominco Limited (TSX: TCK.A and TCK.B, NYSE: TCK) announced today that Compania Minera Carmen de Andacollo has agreed with Royal Gold Inc. (NASDAQ: RGLD; TSX: RGL) to sell an interest in the gold production from the Andacollo mine for US$300 million. Gross proceeds from this transaction attributable to Teck's 90% interest in Andacollo will be US$270 million. ENAMI, a Chilean State owned entity dedicated to the promotion and development of small and medium sized mining in Chile holds the remaining 10% interest in Andacollo.

Royal Gold will pay US$100 million in cash plus approximately 4.45 million Royal Gold common shares valued at US$200 million based on a 5 day trailing volume weighted average price of US$44.90 per share. To the extent that Royal Gold completes a public offering of shares prior to closing, the cash portion of the purchase price will be increased by 50% of the net proceeds of the offering and the stock portion of the purchase price will be decreased by 50% of the shares sold in the offering.

Under the agreement, Royal Gold is entitled to payment based on 75% of the payable gold produced until total cumulative production reaches 910,000 ounces of payable gold (the current projected life of mine gold production), and thereafter to payment based on 50% of any payable gold production above 910,000 ounces. As with royalty agreements in general, Royal Gold also assumes the production risk associated with the mining and processing of the gold. Closing of the transaction is subject to customary conditions, including satisfactory completion of limited due diligence, there being no withdrawal or threatened withdrawal of material project permits, and completion of concentrate marketing agreements for a specified percentage of concentrate production from Andacollo. The transaction is expected to close in the second quarter of 2009.

The transaction with Royal Gold will provide more than sufficient funding to complete construction of the Andacollo expansion project, relieving Teck of a substantial funding obligation in 2009, and will also enable Teck to repatriate surplus funds from Chile to apply to the bridge loan associated with the Fording acquisition. For accounting purposes, no gain or loss will be recorded. The proceeds received will be accounted for as deferred revenue and amortized to revenue based on the gold sold over the life of the hypogene project.

The Andacollo mine is located 350 kilometres north of Santiago. The mine is currently constructing a concentrate project that is expected to produce an estimated 168 million pounds of copper and 53,000 ounces of gold in concentrate annually on average over the first 10 years of production. The project is expected to be commissioned and achieve first concentrate production in the fourth quarter of 2009. Full commercial production is expected to be reached in the first half of 2010.

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