Kenorland Minerals (KLD.V) has announced it issued a 2% Net Smelter Royalty on the South Uchi project to a newly formed and fully owned subsidiary. South Uchi is located in the Red Lake gold district in Ontario.
This appears to be the second step by Kenorland to prepare a royalty company for a standalone future. The subsidiary already owns a 4% NSR on the Frotet gold project (which can be reduced to 3.25% by Sumitomo, owner of the project and one of Kenorland’s largest shareholders for a cash payment of C$13M: An initial 0.25% can be repurchased for C$3M, while Sumitomo can repurchase an additional 0.50% for C$10M). We think the Frotet royalty alone could already back the current valuation of the company. It will be interesting to see how Kenorland further develops the subsidiary but it could very well be the best scenario to unlock the value of the Frotet Net Smelter Royalty.
Disclosure: The author has a long position in Kenorland Minerals. Please read the disclaimer.
