Metals Market Wrap-Up

1. Royalty company Royal Gold Inc. (RGLD) closed the purchase of the Penasquito project royalty from Minera Kennecott S.A. De C.V., based in Guadalajara, Jalisco, Mexico, on Wednesday paying $80 million in cash and 577,434 shares of its common stock for a 2 percent net smelter return royalty on a gold, silver, zinc and lead mine in Zacatecas, Mexico. The Penasquito project, composed of two main deposits called Penasco and Chile Colorado, is under development by Goldcorp Inc., but the royalties won't start flowing for quite a while. Royal Gold also obtained the right to acquire additional royalties ranging from 1 percent to 2 percent on a number of properties in the region. I previously wrote that a 2% smelter royalty seems a bit modest considering that RGLD tapped its entire cash hoard and even took the uncommon step of issuing equity to acquire the royalty, but maybe the idea is that RGLD will exercise the rights on such other royalties. RGLD has been very active since December, closing the Gold Hill and Penasquito royalty transactions and announcing the acquisition of a royalty on the Pascua Lama Gold Project from Barrick.

2. Gradient Analytics, an independent research firm specializing in research in executive compensation, reported the results of a study that found that early exercise of deep in the money options by company insider's is often correlated with subsequent share underperformance. "What we found was that not only do these early, deep-in-the-money exercises result in share price declines over the period that follows, but they also are associated with earnings misses and future misses," Gradient founder Carr Bettis said. This is neither surprising nor gold related, but I just thought I'd post it here while I was on the topic of RGLD. Some RGLD investors believe that RGLD insiders have been using stock options to profit excessively at the expense of RGLD's shareholders.

3. Gold Fields Ltd. (GFI) was down nearly 8% during the last two days after it announced Thursday that it sold US$1.2 billion worth of new shares to repay debt. The company said it will use the proceeds of its share sale to pay off the debt incurred by its acquisition of Barrick Gold Corp.'s 50 percent stake in the South Deep mine and its rights under a joint venture agreement with Western Areas Ltd.

4. Keep in mind that the Bema (BGO) shareholders meeting regarding the approval of KGC's acquisition of Bema will soon be held on January 30, 2007. I'm expecting a brief shareprice boost to KGC following the announcement that shareholders have approved the merger.