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A Golden Engagement of Seabridge Gold to RoyalGold

Now that you speak fluent gold-mining-gibberish, let me introduce you to RGLD. As a royalty-streaming company, RGLD engages in the acquisition and management of precious metals royalties and similar production based interests.

It owns royalty interests in various producing and development stage projects that explore for gold, silver, copper, nickel, zinc, lead, cobalt, and molybdenum. Its 5-year price chart is nothing short of incredible, as you can see below. It's had an overdue 20% correction from its recent high of $100.84.

RGLD's price-to-book ratio has settled down nicely as well. In June 2011, RoyalGold acquired one million Seabridge shares at a 15% premium to the then-market price. For this initial investment, RGLD was granted a royalty option to acquire a 1.25% NSR on all gold and silver production from the KSM project for C$100 million.

The RoyalGold the share option, if exercised, would entitle RGLD to a second royalty option to acquire a further 0.75% NSR on KSM's gold and silver production for an additional C$60 million.

RGLD's exercise of the share option brings its total royalty option for KSM to a 2% NSR royalty for which the exercise price is C$160 million.

Fronk said Seabridge welcomed RoyalGold's decision to increase its royalty option. "Our interests going forward continue to be fully aligned... to find the right partner to build and operate a mine at KSM when the time is right."

RGLD Chart RGLD data by YCharts

The additional C$18 million private placement will be used in part to complete the environmental assessment process.

The company invested more than $100 million at the KSM project and expects to file the environmental applications with regulators in January.

SA's principal assets are the KSM property located near Stewart, British Columbia, Canada, and the Courageous Lake gold project located in Canada's Northwest Territories.

It can be stated subjectively that it appears now is a great time to own these shares. Consider placing a trailing stop loss on the shares you buy to reduce risk while maximizing gains.

At the time of publication the author is long SA and RGLD.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.
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RGLD $35.76 0.00%
SA $7.58 0.00%
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