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Royal Gold merges with International Royalty Corp in C$750m deal

Tuesday, 22 Dec 2009

Royal Gold, Inc and International Royalty Corporation today announced that they have entered into an agreement to undertake a Plan of Arrangement whereby Royal Gold will acquire all of the issued and outstanding common shares of IRC.

The transaction values IRC at approximately C$749 million. This represents a premium of approximately 70% over IRC's 20-day volume-weighted average trading price on the TSX through December 4, 2009, which was the last trading day prior to a publicly announced takeover bid for IRC.

At the election of the shareholder, each common share of IRC will be exchanged for either C$7.45 in cash or 0.1385 common shares of Royal Gold or a combination thereof, subject to a maximum of US$350 million in cash and a maximum of 7.75 million common shares of Royal Gold to be issued to IRC shareholders. Assuming the maximum cash election, this offer consists of 0.0700 shares of Royal Gold plus US$3.48 in cash for each fully diluted share of IRC, implying 51% stock consideration. 

IRC's board of directors has unanimously determined that the Arrangement is in the best interest of IRC and its shareholders and will recommend that IRC shareholders vote in favor of the transaction. All of the directors and senior officers of IRC, and one significant IRC shareholder have entered into voting agreements in which they have agreed to vote their shares in support of the transaction. Together, those subject to the voting agreements represent a combined ownership of 26.8% of IRC's fully diluted shares outstanding.

Tony Jensen, President and CEO of Royal Gold, stated, "The combination of Royal Gold and IRC brings together a portfolio of nearly 200 royalty interests and creates a combined company that would hold royalty interests on some of the highest quality mines in the world, generate substantial cash flow, and yield one of the most attractive project development pipelines in the entire mineral industry. For the twelve months prior to September 30, 2009, the combined entities generated US$113 million in royalty revenue, 71% of which was attributable to precious metals. With most of the future growth in the IRC portfolio coming from precious metals, both sets of shareholders will benefit from gold focused revenue growth. We are dedicated to building a premium precious metals royalty company and welcome IRC shareholders to participate in the upside already embedded within Royal Gold."

The strategic benefits offered by this transaction include:

• Significant Expansion of Royal Gold's Royalty Portfolio
• The combined company's portfolio would include 31 producing royalty properties, 20 development stage properties, and 143 evaluation and exploration projects further diversifying the company's revenue and asset base principally in the geopolitically attractive locations of Canada, Chile and Australia,
• The combined company would expand its royalty ownership of world-class assets with significant revenue potential, including a royalty interest on Vale's Voisey's Bay mine and an additional royalty interest that is nearly three times Royal Gold's existing interest at Barrick's Pascua-Lama project resulting in another long life, cornerstone precious metal royalty asset.
• Immediate Impact
• The combined company will immediately receive royalty revenue from an additional 11 producing assets upon closing,
• The combined company's precious metal revenue is initially projected at near 70% of total revenue and is expected to approach 80% of total revenue when Pascua-Lama is commissioned,
• While the number of assets would grow by 63%, significant overlap of business interests will result in improved expense efficiencies and enhanced margins.

Douglas B. Silver, Chairman and CEO of IRC, said, "The combination of IRC and Royal Gold offers IRC shareholders an opportunity to immediately increase the value of their shareholdings and to participate in the royalty industry's leading growth profile. Royal Gold's strong management team has built a high-quality royalty portfolio with impressive organic growth, and the even more rapid growth rate from IRC's existing precious metals royalties will enhance it significantly. The combined asset base, particularly with its concentration of precious metals royalties on long-life, low-cost mines, should afford shareholders the benefits of premium share valuations and outstanding organic growth for years to come."

The closing of the transaction is not subject to due diligence, Royal Gold shareholder approval or financing contingencies. The cash required for the acquisition will be sourced from available and unrestricted cash, together with committed credit facilities totaling US$225 million. The closing of the transaction is subject to, among other things, receipt of court approval and the affirmative vote of at least 66 2/3 percent of the votes cast by IRC shareholders and option holders at a special meeting of the IRC shareholders.

IRC shareholders residing in Canada will have the option to elect 0.1385 exchangeable shares of a wholly-owned Canadian subsidiary of Royal Gold in lieu of electing Royal Gold common shares. Each exchangeable share can be redeemed for one common share of Royal Gold at the election of the shareholder. No more than 7,750,000 Royal Gold common shares and exchangeable shares will be issued in the aggregate. 

About Royal Gold
Royal Gold is a precious metals royalty company engaged in the acquisition and management of precious metal royalty interests. The Company currently owns royalties on 118 properties on six continents, including royalties on 21 producing mines and 12 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol "RGLD," and on the Toronto Stock Exchange under the symbol "RGL." 

About International Royalty Corporation
International Royalty is a global mineral royalty company. IRC currently holds 84 royalties including an effective 2.7% NSR on the Voisey's Bay mine, a sliding-scale NSR on the Chilean portion of the Pascua-Lama project, a 1.5% NSR on the Las Cruces project and a 1.5% NSR on approximately 3.0 million acres of gold lands in Western Australia. IRC is senior listed on the Toronto Stock Exchange (TSX:IRC) as well as the NYSE Amex (NYSE-A: ROY).

Source: Royal Gold Website Dec 2009

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