Euro-Nevada buys Mt. Muro royalty

Royalty owner Euro-Nevada Mining (TSE) has agreed to pay US$18.5 million for a sliding-scale net smelter return (NSR) royalty on production from the 480-sq.-km Mt. Muro project in Indonesia.

Situated on the island of Kalimantan, Mt. Muro is 90%-owned and controlled by a subsidiary of Australian-based Aurora Gold. In its latest quarterly report, Aurora announced that Mt. Muro had produced 55,000 oz. gold and 1.5 million oz. silver for the first six months of 1995.

At the end of 1994, proven minable reserves at Mt. Muro were greater than 1 million oz. gold and 23.6 million oz. silver. Aurora will spend $4 million at Mt. Muro this year in order to expand reserves.

The sliding-scale royalty, which is in the form of a deferred purchase payment, is pegged at a 3% NSR when gold is priced at US$325 per oz. or lower. The royalty rises to a 7% NSR when gold reaches a price of US$410 per oz. and higher. At the current price of US$383, the applicable rate is 6%. The payment rate is effective on the first 1.5 million oz. of gold and silver produced by the operator.

Though better known for its royalty interests in Nevada, Euro-Nevada holds two other royalties in the southeastern Pacific region. The company has a 2.25% NSR royalty in the Browns Creek gold mine, 220 km north of Sydney, Australia, and a 10% NSR royalty on the Henty Gold project on the western coast of Tasmania.

Euro-Nevada paid US$700,000 for the 2.25% royalty on the Browns Creek property. Currently, the mine is producing 33,000 oz. gold per year and has proven and probable reserves of 300,000 oz.

Euro-Nevada purchased the 10% NSR at Henty for US$17.7 million before the new mining code came into effect. As a result, the royalty has been grandfathered and is not subject to taxation.

Proven and probable reserves at the development-stage Henty gold project are 600,000 oz. Production is expected to begin next June at an annual rate of 90,000 oz.