Avanco secures $12m deal
The BlackRock World Mining Trust is negotiating a $12 million royalty deal with copper and gold aspirant Avanco Resources, in the latest example of BlackRock eyeing investments that have less risk than the traditional purchasing of shares.
The trend began about 14 months ago, when BlackRock invested $110 million in an African-focused company called London Mining.
Rather than simply buy shares, BlackRock bought a royalty on all sales revenue, under a move designed to avoid the pitfalls of owning mining shares, such as rampant cost inflation and poor dividend flows.
BlackRock's investment chief Evy Hambro has highlighted BlackRock's ability to borrow money at much cheaper rates than junior miners, and he is increasingly keen for BlackRock to fill a niche around project financing.
"We are planning to do a whole series of transactions into instruments that deliver exposure to commodity prices, to production levels and to the fortunes of companies, but not necessarily at the equity level. We believe there is a massive opportunity out there in the market right now based on this huge divergence in the cost of capital for resource companies," he told BusinessDay, during an interview in London in February.
Avanco, which is developing a mine in Brazil, looms as the next cab off the rank, with BlackRock to receive a percentage of revenues from sales of gold, copper and other metals if the deal is finalised. Avanco will need to jump hurdles around licences and geological standards before the deal can be activated.
News of the BlackRock proposal on Tuesday prompted the heaviest day of trading in Avanco shares in a year, with volumes almost nine times higher than the daily average.
Avanco shares rose 0.7¢ to 9¢. The stock was fetching 5.6¢ in late June.
Frequently Asked Questions about this Article…
The article says the BlackRock World Mining Trust is negotiating a $12 million royalty deal with Avanco Resources. If finalised, BlackRock would receive a portion of sales revenue from Avanco’s production rather than taking an equity stake.
According to the article, BlackRock prefers royalties because they can provide exposure to commodity prices and production without the direct risks of owning mining shares, such as cost inflation and weak dividend flows. BlackRock can also borrow more cheaply than junior miners, enabling project financing strategies.
About 14 months earlier BlackRock invested $110 million in London Mining, but instead of buying shares it bought a royalty on all sales revenue. That transaction is cited as the start of BlackRock’s trend toward royalty and project-financing deals.
If the deal is finalised, BlackRock would receive a percentage of revenues from sales of gold, copper and other metals produced by Avanco’s Brazilian mine projects, according to the article.
The article states Avanco will need to overcome hurdles around licences and geological standards before the royalty arrangement can be activated.
News of the BlackRock proposal prompted the heaviest trading day in Avanco shares in a year, with volumes almost nine times the daily average. Avanco shares rose 0.7 cents to 9 cents, and the stock had been trading at 5.6 cents in late June.
Evy Hambro is BlackRock’s investment chief quoted in the article. He said BlackRock plans a series of transactions that deliver exposure to commodity prices and production levels without necessarily taking equity, and highlighted a big opportunity from the divergence in cost of capital for resource companies.
The article suggests BlackRock’s move reflects a shift toward lower‑risk instruments that tie returns to commodity revenues rather than equity. For everyday investors, it highlights growing interest from large funds in royalties and project financing, which can affect share trading and investor sentiment in junior mining stocks like Avanco.
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