Royalties Inc. Reports Federal Prosecutor Recommends Denying Capstone's Amparo

Executive Summary

• Federal Prosecutor opposes Capstone Gold’s Amparo, recommending denial of the constitutional challenge to a court ruling that upholds MPZ’s 2% royalty rights over five concessions at the Cozamin mine.
• The opposition marks the final procedural step before potential collection of estimated US $10 million in royalties owed by Capstone for production from 2019‑2026, with further upside as copper and silver prices have risen sharply since 2019.
• Royalties Inc. projects that proper royalty payments (≈US $2 M per year) would support a market valuation of roughly US $100 million, underscoring the material financial impact of the dispute’s resolution.

Key Details

• Stakeholding: Royalties Inc. holds an 88% ownership interest in Minera Portree de Zacatecas (MPZ).
• Legal Milestone (Feb 6 2026): Federal Prosecutor filed formal opposition to Capstone’s Amparo, stating the appellate decision complies with constitutional principles and should be upheld.
• Court History:
• June 16 2025 – First‑instance ruling in favor of MPZ.
• Nov 4 2025 – Appellate court upheld that ruling, rejecting Capstone’s arguments.
• Royalty Basis: 2% NSR on five mining concessions (“Portree claims”) at the Cozamin mine, originating from a 2002 agreement.
• Disputed Transfer (2019): Attempted assignment of royalty to Capstone declared “non‑existent” due to lack of MPZ consent and improper authority.
• Potential Royalty Receivable: Estimated US $10 million for the period 2019‑2026, before interest and damages.
• Commodity Price Impact: Copper price >2× and silver price >4× since 2019, increasing future royalty value.
• Projected Annual Royalties: With current production guidance, a 2% NSR translates to ~US $8 million per year; historical payments approximated at US $2 million annually.
• Valuation Implication: Proper royalty collection could support a US $100 million market cap for Royalties Inc., based on peer‑group valuation models.
• CEO Statement (Tim Gallagher): Emphasized confidence in MPZ’s rights, highlighted ongoing drilling in the core Portree area, and noted recent legal actions to protect records and halt improper practices by Capstone.

Notable Quotes

“We have been asking Capstone to recognize MPZ's 2002 rights to royalties since 2020 and to properly pay the amount owed on production but have been consistently stonewalled… Finally, we believe Cozamin is now drilling into the main part of the Portree claims… which is a very exciting development in establishing the proper future value of the royalties.” – Tim Gallagher, CEO & Director, Royalties Inc.