Soma Gold Corp. (TSXV: SOMA | OTC: SMAGF) Repurchases El Limón Royalty to Enhance Margin Profile
Analyst Note | Sector: Precious Metals | Market Cap: ~$150M CAD
Key Takeaway
Soma Gold Corp. (“Soma” or the “Company”) has entered into a definitive agreement with Red Rock Resources PLC to repurchase and extinguish the longstanding royalty encumbering its flagship El Limón gold mine in Antioquia, Colombia. This transaction removes both current and future royalty obligations and is expected to enhance operating margins and free cash flow once the mill resumes production later this year.
Following its $17M+ equity financing completed in August 2025, Soma is executing on strategic initiatives to optimize its asset base. The royalty repurchase builds on the company’s ongoing efforts to reinforce financial strength, reduce leakage, and position the platform for its next phase of growth.
Transaction Summary
Royalty Structure Eliminated:
- 3.0% NSR on production revenue (capped at C$2.77M / US$2.0M)
- 0.5% NSR thereafter (capped at C$1.38M / US$1.0M)
Buyout Terms:
- C$1.876M in cash (equivalent to £1.0M)
- 200,000 warrants @ C$2.00, exercisable for 3 years
- Funded through existing working capital
- Subject to TSX Venture Exchange approval
Strategic Rationale
Soma’s management believes the elimination of the royalty will:
- Improve operating leverage at El Limón when production resumes in Q3 2025
- Streamline the cost structure, preserving future EBITDA
- Enhance NAV per share and support long-term valuation re-rating potential
“The elimination of the Royalty is expected to have an immediate positive impact on operating margins once the El Limón plant resumes production,” said Geoff Hampson, CEO of Soma Gold. “This agreement demonstrates our commitment to unlocking the full value of our Colombian portfolio.”
ArcStone View
We view this transaction as a smart, margin-accretive move that reflects Soma’s disciplined capital management and long-term value orientation.
- NAV Impact: The buyout removes more than C$4.1M in future obligations at a ~55% discount, preserving economic upside.
- Capital Position: The use of working capital without additional equity dilution underscores balance sheet flexibility.
- Warrant Structure: Priced at C$2.00 vs. current market of ~C$1.35, with limited dilution unless a significant re-rating occurs.
With gold trading above $3,600/oz and El Limón’s restart expected in Q3, Soma is increasingly well-positioned to benefit from margin expansion and asset leverage heading into 2026.
About Soma Gold Corp.
Soma is a profitable, fully permitted gold producer with over 43 km² of mineral concessions along the prolific OTÚ fault corridor in Antioquia, Colombia. The Company operates two mills:
- El Bagre Mill – 450 TPD (operational)
- El Limón Mill – 225 TPD (restart scheduled for Q3 2025)
Exploration is being funded from internally generated cash flow, reflecting a strong commitment to organic growth and capital efficiency.
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