Teck Resources (TSX: TECK.b) holds a previously undisclosed royalty on Barrick Mining’s (TSX: ABX) Fourmile gold project in Nevada, a stake that could be worth billions and may dent the valuation of Barrick’s planned North American IPO, according to documents reviewed by industry sources.
The royalty agreement, filed in Nevada’s Eureka County in 2011, grants Teck a 10% net profits interest on Fourmile, escalating to 15% after six million ounces of gold are produced. This covers a portion of the project tied to a former joint venture between Placer Dome and Cominco, as confirmed by Teck’s vice-president of communications, Doug Brown. Barrick has not publicly acknowledged this royalty, despite touting Fourmile as a generational discovery with potential annual output of 750,000 ounces over 25 years.
With gold prices hovering near US$4,800 per ounce and Barrick’s estimated all-in sustaining costs at US$650 to US$750 per ounce, Teck’s royalty could generate roughly US$300 million annually once Fourmile starts production, expected in three to four years. Over the mine’s lifespan, total payouts could stretch into the billions, significantly altering the project’s economics.
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This revelation casts a shadow over Barrick’s upcoming IPO of its North American assets, which includes a full stake in Fourmile alongside interests in Nevada Gold Mines and the Pueblo Viejo mine. Analyst Josh Wolfson of RBC Dominion Securities, who previously valued Fourmile at US$15 billion, noted that the royalty could reduce the project’s worth by about 10%, potentially lowering the IPO’s overall appeal to investors.
The royalty also complicates Barrick’s relationship with Newmont (NYSE: NEM), its joint venture partner at Nevada Gold Mines. While Fourmile is currently outside that partnership, it is slated to be integrated once a feasibility study is complete, forcing Newmont to decide between paying cash to maintain its 38.5% stake or accepting dilution. The undisclosed royalty could influence those negotiations, with some suggesting Barrick may have downplayed the issue to preserve leverage.
Teck, meanwhile, continues to hold a portfolio of royalties from divested projects, with Fourmile emerging as a potential windfall. If production targets hold, the Vancouver-based company could see cash flows from the Nevada project as early as 2028, providing a substantial boost to its balance sheet amid other operational challenges.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
