Canadian gold major聽B2Gold聽(TSX: BTO; NYSE-AM: BTG) has agreed to sell a portfolio of 10 precious and base metals revenue shares to Sandbox Royalties, to be renamed Versamet Royalties, for about $90 million in scrip.
Under terms of the deal, B2Gold receives 153.2 million common shares of Versamet for a 33% equity stake. Sandbox was聽founded in 2022聽by two industry heavyweights 鈥斅燬andstorm Gold Royalties聽(TSX: SSL; NYSE: SAND) and聽Equinox Gold聽(TSX: EQX), combining assets in Europe and the Americas.
This new partnership offers B2Gold a chance to see the value in generally unrecognized royalties, president and CEO Clive Johnson said in a statement Thursday.
鈥淎s a significant shareholder, B2Gold is pleased to retain meaningful upside exposure and leverage to Versamet as its experienced management team stewards its strengthened asset base and continues executing on its growth strategy to create future shareholder value,鈥� Johnson said.
Metals streaming companies make money by providing upfront capital to miners in exchange for the right to purchase a portion of future production at a discounted price. In contrast, royalty companies earn a percentage of revenue from mine production without direct involvement.
The benefits sold include such assets as a 2.7% net smelter return (NSR) royalty on the Kiaka and Toega gold projects, both in Burkina Faso and owned by聽West African Resources聽(ASX: WAF), and a 2% net profit royalty on the Quebradona project in Colombia owned by聽AngloGold Ashanti聽(NYSE: AU).
They also include a 2% NSR royalty on the Mocoa project by聽Libero Resources聽(TSXV: LBC) 鈥� also in Colombia 鈥� and a 1.5% NSR royalty on the Primavera project in Nicaragua owned by聽Calibre Mining聽(TSX: CXB).
Value enhancing
BMO Capital Markets mining analyst Brian Quast says Versamet鈥檚 portfolio includes 28 royalties, with two cash-flowing and several expected cash-flowing soon.
Quast maintains an 鈥榦utperform鈥� rating and a price target of C$6.00 for B2Gold, suggesting that the bank views the transaction positively from an investment perspective. He quantifies the modest impact on B2Gold鈥檚 net present value, noting a slight increase from $3.764 million to $3.781 million.
The first phase of the royalty transaction, including royalties on the Kiaka, Toega, and Primavera projects, had closed, with B2Gold receiving 122 million shares valued at $72 million. The remaining royalties are expected to close in the next three months.
B2Gold retains a 22.5% silver royalty on聽Glencore鈥檚 (LSE: GLEN) Hackett River project in the Kitikmeot region of Nunavut. B2Gold is developing the Back River gold district in this emerging territory after it acquired Sabina Gold & Silver for C$1.2 billion in April last year.
The partnership includes a shareholder rights agreement, which allows B2Gold to nominate a board member and participate in future capital raises, providing continued exposure to Versamet鈥檚 royalty portfolio.
B2Gold, with operations in Mali, Colombia and Finland, forecasts total gold production of between 860,000鈥�940,000 oz. this year.
B2Gold鈥檚 Toronto-quoted equity traded in the black Thursday, adding up to C$0.05 or 1.3% per share in the morning session before settling back to C$3.78 by midday. The stock has traded between C$3.18 and C$5.16 in the past 12 months, dropping 27%. It has a market capitalization of C$5 billion.