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Khoemacau

Botswana Flag

Operator: Khoemacau Copper Mining (Pty.) Limited (“KCM”)

Location: Botswana

Stream:

84% Payable Silver (can be increased to 100% prior to production at the election of KCM)

Term of Stream: Life of Mine

Khoemacau is a copper-silver project located in a sparsely populated region of northwestern Botswana in the Kalahari Desert. It is located in the Kalahari copper belt, although the main mineralized zone demonstrates a high-grade copper tenor that is atypical of what has been discovered in the belt thus far.

Khoemacau is made up of over 4,040 square kilometers of mineral concessions, which include concessions acquired from Hana Mining Ltd. (Hana) in 2013 as well as concessions and a plant and associated infrastructure (the “Boseto Mill”) acquired out of the receivership of Discovery Metals Inc. in 2015. While the Zone 5 deposit was discovered by Hana in 2012, it was not thoroughly explored and evaluated until 2013. Since the consolidation of the properties, KCM has focused on exploration and development of the Zone 5 orebody and integration of Zone 5 with the Boseto Mill. Cupric Canyon Captial LP (Cupric) reports that the mineralization has proven to be very consistent over the known linear strike of nearly four kilometers and 60 degree dip, and averages 9 to 10 meters in width.

KCM’s current mine plan envisions mining and processing of 74.4 million tonnes grading 2.0% copper and 21.4 g/t silver over the 21-year mine life, averaging payable production of approximately 62,000 tonnes of copper and 1.9 million ounces of silver per year. Excluding the impact of the silver stream, KCM forecasts life of mine by-product C1 plus sustaining capital costs of approximately US$1.71 per pound of copper on a by-product basis at a silver price of US$16.00 per ounce, placing the operation at approximately the 50th percentile on the global copper cost curve. At a silver price of US$16.00 per ounce and a copper price of US$2.90 per pound, silver represents approximately 7% of the mine’s expected revenues.

KCM expects the first shipment of concentrate to occur in the third quarter of calendar 2021.

Royal Gold, through its wholly-owned subsidiary RGLD Gold AG, holds a life of mine purchase and sale agreement for silver produced from the Khoemacau Copper Project in Botswana with Khoemacau Copper Mining (Pty.) Limited (“KCM”), a wholly-owned subsidiary of Cupric Canyon Capital LP (Cupric).  Cupric is a private company owned by management and funds advised by Global Natural Resource Investments.

On January 6, 2021, Royal Gold completed the total $212 million advance payment to earn the base silver stream of 80% of payable silver. KCM has an option to access up to an additional $53 million in advance payments from Royal Gold for up to the remaining 20% of the silver produced. On April 7, 2021, KCM, at their option, drew a further $10.6 million advance payment, increasing Royal Gold’s silver stream interest to 84% of payable silver. A further $42.4 million in advance payments is available to KCM to be drawn at their option.

The stream rate will drop by 50% upon the delivery to Royal Gold of 33.6 million ounces for the 84% silver stream, and 40 million ounces in the case that the option to increase the stream interest to 100% is fully exercised.

Royal Gold will pay 20% of the spot price of silver for each ounce delivered. Depending on the achievement by KCM of mill expansion throughput levels above 13,000 tonnes per day, which is 30% above the current mill design capacity, Royal Gold will pay higher ongoing cash payments for ounces delivered in excess of specific annual thresholds.

Royal Gold extended a $25 million subordinated debt facility to KCM to fund potential cost overruns, subject to various conditions. On April 7, 2021, KCM drew $18 million from the facility.  On July 6, KCM drew the remaining $7 million.