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Royal Gold CEO: Not 'surprised' if discounted miners go private

Miners trading at steep discounts might consider going private, Royal Gold Inc. President and CEO Tony Jensen said in opening remarks during a fiscal year-end conference call.

"Operators have limited access to equity markets, and few wish to issue equity today because of large market value discounts," Jensen said. "We would not be surprised to see precious metals miners going private in this market, something I certainly haven't seen before in this sector."

Jensen said he was not speaking for miners, but he considered it a viable strategy for them to capture value in cases where they are trading well under net asset value.

"When you're trading at 0.5x NAV, it's awfully tempting to capture that value internally," Jensen said. "And there are some assets that are trading at that kind of level."

It was not clear from his comments if Royal Gold might consider playing a role in a deal where a miner went private, perhaps as a source of funding. Jensen said Royal Gold is "malleable" in arranging financing and develops strategies to propose to potential clients.

On "some of the more creative things, we're acting like an investment banker," the CEO said.

A Royal Gold spokesperson declined to comment and doubted Jensen would take a follow-up question on the topic. The spokesperson said what Jensen expressed during the call was consistent with his view.

One veteran of the private equity space, who did not want to be named, was skeptical that a swath of miners would go private but did not write-off the possibility that the odd miner might do it.

The source said there are very few firms with the wherewithal to back miners that want to go private. It would take a special asset and backer.

"I think he's right," the source said. "I think it could happen. Will it happen a lot? No. But, I mean, every downturn we see stuff like this, but never in large enough numbers that you would say it's a trend."

The source said that with "boring" gold prices in the US$1,200/oz to US$1,300/oz range, he doubted many private equity firms would see value in pursuing the strategy. The source also found it interesting that Jensen, who the source considered "exceptionally disciplined," brought up the point in his prepared remarks during the earnings call.

"If he's making that statement, he's making that statement for a reason," the source said.