Thanks for your posting.  As you point out shifts in total production as well as relative production of copper and gold together with changes in commodity prices can change everything.

One comment I would make is to forget about historical studies that talk about $900 gold and $2.50 copper.  The data is completely out of date.  99% of new mines would have to go on care and maintenance at these prices.  For example original capex was estimated at roughly $900m whereas the actual will be roughly $650m more than that.   That $650m has to be recovered before any real profit happens.  There would be no cash flow in 2014 if we had $900 gold and $2.50 copper.  Phone the company to get input on this point if you doubt me.

Miners give various production guidance;

1  1st 5 or 6 years when they typically mine a rich part of the ore body and get great production

2  1st 10 years which overlaps the first 5 or 6.  This number is sometimes presented

3  LOM or life of mine

I had used LOM as stated at some time in the past.  When you use the early year numbers the math gets even better for Royal Gold

Here are my LOM numbers which I used previously

            Ave  Annual production    Price     Tot revenue

Gold                 195,000                $1,400       $273m

Copper             81m pounds         $3.37         $273m (intentionally tweaked per pound price)

Total                                                                $546m

 

The royalty will pay out $950 net for 52.25%   for $96.8m.   This amount is pure profit for Royal as soon as they get capital returned.

This amount is 18% of total mine revenue.

Here are early year numbers


         Ave  Annual production    Price     Tot revenue

Gold                 256,760                $1,400       $359.5m  (almost 56% of total revenue)

Copper             85m pounds         $3.37        $286.5m  (copper, not gold is the by product)

Total                                                                $646.0m

 

The royalty will pay out $950 net for 52.25%   for $127.45m per year.   This amount is pure profit for Royal as soon as they get capital returned.

This amount is 19.73%% of total mine revenue

Observation;  If TCM can realise 92% to 95% of projected production during the first 6 years then we can expect cash flow and profits to be quite good at $1,400 gold and $3.37 copper.   The risk is that many mines fail to realise plans.  Think of OSK DGC so far, Copper Mountain, Taseko Gibraltar, Kinross Tasiest, Barrick with Equinox assets.  Mines can take 2 3 or 4 years to succeed in reaching targetted production and many never achieve more than 90% of the stated goal.  This happens due to dilution, harder rock, lower grades, lower recoveries not to mention weather such as floods or cold, machinery failures etc

 

There is a lot to like about TCM and it is on my watch list.