Battle Mountain: Royalties will fund exploration work

Mark Kutcher figures the bird he now holds in his hand gives his company some time to continue chasing the bird that it's seeking out in the bush.

Kutcher's Reno-based Battle Mountain Gold Exploration Corp.

last week said it's struck a deal to pay $21.8 million for a package of royalty interests in mines in the Americas.

The package that Battle Mountain Gold is buying from Toronto's IAMGOLD Corp.

includes royalties on three mines currently in production and six properties that are under development.

Battle Mountain Gold will pay $15.85 million in cash Macquarie Bank Ltd.

Is the company's lender and 12 million of its common shares.When the deal is done in early 2006, IAMGOLD will hold a 15 percent interest in Battle Mountain Gold.

The company will raise another $10 million in cash through the sale of warrants to Northern Securities Inc.

Battle Mountain will issue 22.2 million shares if Northern Securities exercises its warrants, and another 4.4 million shares if Northern exercises an option to provide another $2 million in financing.

Battle Mountain Gold currently has 42.5 million shares outstanding.

Kutcher, the chairman and chief executive officer of Battle Mountain Gold, told investors last week that the company is paying about 10 times trailing cash flow for the royalty interests.

The cash generated by the royalty interests will support the exploration program that led to the creation of Battle Mountain Gold in early 2004.

Wade Hodges, the company's vice president of exploration, spearheads an effort to track down gold deposits by analyzing water samples drawn from wells around the state.

Using technology that can spot gold in quantities as small as a few parts per trillion, Hodges thinks Battle Mountain Gold can track tiny quantities found in water back to their source.

The company focuses its current exploration effort near Hawthorne and near the Lone Tree and Marigold mines in the Carlin Trend of northern Nevada.

The company,Hodges said, doesn't face much competition as it assembles land positions.

"These are areas that other people aren't even aware of yet,"he said last week.

But even if land is cheap, exploration programs cost money, and Battle Mountain Gold has yet to record any revenue.

It posted a loss of $608,513 in the quarter ended Sept.

30, and it's run up losses of nearly $1.3 million since its inception.

In a filing with the Securities and Exchange Commission last month, the company acknowledged it needs to raise $2.3 million to continue its business plan through the next year.

A portion of that,Kutcher said,will come from the stream of royalty payments.

At the same time, he said the company now is an unusual combination of a grassroots gold exploration outfit with a company that owns a portfolio of royalty interests.

Royal Gold of Denver is the only company in the United States that makes a business exclusively on a stream of royalties many of them from Nevada mines.