cameron smelter royalty sale, page-2

here's how the original sale and smelter royalty worked:

http://www.nuinsco.ca/news/display/index.php?d=1094909

Nuinsco Announces Sale of Cameron Lake Gold Property

'Consideration totals approximately $12 million, including 3% NSR


TORONTO, ONTARIO--(Marketwire - Dec. 23, 2009) - Nuinsco Resources Limited ("Nuinsco" or "the Company") (TSX:NWI) (www.nuinsco.ca) today announced that it has signed a binding Heads of Agreement to sell a 100% interest in its Cameron Lake Gold Project along with a 700-800 tpd gold mill to Coventry Resources Limited ("Coventry"). Under terms of the binding Heads of Agreement, Nuinsco will receive total consideration valued at approximately $12 million, allocated as follows (all currency amounts in Canadian dollars, unless otherwise indicated):

$100,000 on execution of the binding Heads of Agreement (completed);

$5.9 million in cash, on execution of a Definitive Sale and Purchase Agreement (the "Agreement") (to be completed no later than March 5, 2010);

12 million Coventry shares, representing 17% of the currently outstanding shares of Coventry, (on execution of the Agreement). Coventry shares closed on the ASX at A$0.26 on December 22); and,

A 3% net smelter return ("NSR") royalty. Coventry will have the right to buy back 2.0% (net) of the royalty at any time within five years from signing the Agreement by making a cash payment of $2 million or issuing to Nuinsco $2 million worth of Coventry shares (valued at the 30-day volume-weighted average price for the period immediately preceding the payment date).'

Given some unknown third party has now agreed to pay $5.1 million for the 3% royalty from any gold produced and smelted out of the cameron project, it is very interesting that CVY did not exercise the option it had to buy 2% (ie 66% of the total royalty) back via a $2 million share issue to nuinsco.

Presumably, if they had done this, CVY could have then instantly on sold that interest to the same buyer for a $3 million+ gain!

The sale of the whole 3% NSR to a mystery buyer could only be made WITH CVY's full consent, and their agreement to waive the 5 year option they had in place over the NSR which meant 2% of the NSR was still under CVY option until 2015.

The only reason you can imagine they would agree to this is if a big player of strategic value to the future of their Cameron and Rainy River gold projects wanted the smelter royalty as part of some bigger deal related to the funding of the move from explorer to producer status for CVY.

If the buyer of the smelter royalty is a player that can deliver producer status to the Cameron project (the only way to get smelter royalties rolling) then this all makes perfect sense, and is hugely bullish for CVY.

The NSR sale ann'd by nuinsco is obviously subject to the continuous disclosure obligations on CVY.

They will have to update the market on this next week.

I can't wait to find out who it is that has $5.1 million worth of confidence that CVY is set to become a gold producer...

some serious SP fireworks next week for CVY IMO.