/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED
STATES/
VANCOUVER, BC, Nov. 23, 2020 /CNW/ - Elemental
Royalties Corp. ("Elemental" or "the Company") (TSXV:
ELE) (OTCQX: ELEMF), a gold-focused royalty company providing
investors with exposure to a growing portfolio of royalties, is
pleased to announce that it has entered into a definitive agreement
(the "Agreement") to acquire a portfolio of three gold
royalties in Australia
("South32 Gold Royalty Portfolio") from a wholly owned
subsidiary of South32 Limited ("South32") for consideration
of US$40 million in cash and
US$15 million in equity (the
"Acquisition"). The Company is also pleased to announce that
it has entered into an engagement letter with Canaccord Genuity in
respect of a $12 million private
placement of subscription receipts to partially fund the
Acquisition.
Acquisition Highlights
- Addition of three high quality gold royalties: the
South32 Gold Royalty Portfolio consists of royalties over gold
assets located in Western
Australia, ranging in stage from construction to advanced
exploration
- Karlawinda is a transformative asset: 2% Net Smelter
Return royalty over a new, construction stage, Western Australian
gold project with commissioning targeted for the quarter ending
March 2021
- Significant cash flow: from mid-2021 onwards, the
Acquisition is forecast to nearly double royalty revenue with
continuing revenue growth in 2022 and 2023
- Value-accretive transaction: the Acquisition is
accretive to Elemental across key metrics
- Tier 1 jurisdiction: the South32 Gold Royalty Portfolio
re-weights Elemental's portfolio towards Western Australia, widely considered a
world-class, Tier 1 jurisdiction
- Operator diversification: the addition of three
ASX-listed operators; Capricorn Metals Ltd, Focus Minerals Ltd and
Rumble Resources Ltd, diversifies counterparty exposure for
Elemental
- Exploration optionality: ongoing exploration across the
royalty assets provides increased optionality at no additional cost
to Elemental shareholders
- Elemental welcomes South32 as a cornerstone shareholder:
South32 will become Elemental's largest shareholder following the
Acquisition, with the right to nominate a director to the
Board
Frederick Bell, CEO of Elemental commented: "We are delighted
to announce this transformative acquisition from South32, which is
our first as a public company and the second major gold royalty
acquisition we have completed this year. This continues the
Elemental team's excellent track record of sourcing high-quality,
value-accretive royalty opportunities, whilst immediately adding
scale, increasing diversification and exposure to Tier 1
jurisdictions. We are grateful for the support of South32 and look
forward to working together to continue creating value for
shareholders."
South32 Gold Royalty Portfolio
Asset
|
Operator
|
Location
|
Commodity
|
Stage
|
Royalty
|
Karlawinda
|
Capricorn Metals
Ltd
|
Western
Australia
|
Gold
|
Construction
|
2% NSR
|
Laverton
|
Focus Minerals
Ltd
|
Western
Australia
|
Gold
|
Development
|
2% GRR
|
Western
Queen
|
Rumble Resources
Ltd
|
Western
Australia
|
Gold
|
Advanced
Exploration
|
A$6-20/oz
|
Key asset
Karlawinda NSR Royalty
A 2% Net Smelter Return royalty payable on all production from
Capricorn Metals Ltd's ("Capricorn") mining licence and a
surrounding exploration licence at their in-construction Karlawinda
Gold Project in Western
Australia.
The Karlawinda Gold Project is located in the Pilbara region of
Western Australia, 70km by road
south-east of the town of Newman and close to key infrastructure
and mining support services. Karlawinda is an advanced gold project
which includes the Bibra deposit and numerous significant
exploration targets including the Francopan prospect. Capricorn
acquired the project in February
2016.
In April 2020, Capricorn announced
an updated mineral reserve for the Bibra Deposit comprising 43.5
million tonnes @ 0.9 grams per tonne ("g/t") of gold ("Au") for 1.2
million ounces ("Moz") of gold, a 35% increase from the previously
announced reserve of 892,000 ounces ("oz"). The mineral reserve
final pit design yields a 12-year mine life involving pit staging,
with a life-of- mine (LOM) stripping ratio of
3.6:11.
Construction at Karlawinda is well underway, with plant
commissioning targeted to commence in the March 2021 quarter and first gold production to
follow in the June 2021 quarter.
Capricorn is targeting annual gold production at Karlawinda of
110,000 – 125,000 oz. Increased crushing capacity has been achieved
in the final design process by up scaling and modifying equipment
selection and associated structures. On November 18, 2020, Capricorn announced completion
of 4 million tonnes ("Mt") of grade control drilling for the first
year's mill feed, ball mill manufacture completion and en route to
site, and mobilisation of the earthmoving contractor and first
blast of waste rock in the stage 1 open pit.
For more information on Karlawinda, please visit
http://capmetals.com.au/
Other portfolio assets
Laverton GRR Royalty
A 2% Gross Revenue Royalty payable on certain licences held by
Focus Minerals Ltd ("Focus") at their brownfield Laverton gold
project in Western Australia. In
addition, there is a separately defined royalty covering nickel,
copper and platinum group metals on certain of the tenements.
The Laverton Gold Project is located in the Eastern Goldfields
region of Western Australia,
surrounding the town of Laverton, approximately 250km north of
Kalgoorlie.
Focus has been actively exploring royalty-linked tenements and
advancing its Stage 1 production plan, which contemplates open pit
mining of the Beasley Creek, Beasley Creek
South, Telegraph and Wedge – Lancefield North deposits, with
first production targeted for 2022. The Pre-Feasibility Study is
expected to be released before the end of December 2020.
Focus is also advancing its Stage 2 production plan, which
contemplates mining of the refractory Lancefield Underground, Rumor
and Apollo deposits (among others), with first production targeted
for 2025.
For more information on Lancefield, please visit:
http://www.focusminerals.com.au/
Western Queen Royalty
An A$6-20/oz royalty over the
9.8km2 Western Queen Central Mine and associated
prospects held by Rumble Resources Ltd in Western Australia.
The Western Queen Gold Project lies 110km NW of Mt Magnet within
the Yalgoo mineral field of Western
Australia, located within a 110km radius of three operating
gold processing mills.
The project hosts the entire Warda
Warra north-south trending mineralised greenstone belt which
is 35km in length and up to 3km wide. The greenstone belt hosts the
mineralised Western Queen Shear Zone which is up to 50m in width and hosts a series of high-grade
gold structures including two mined deposits for a combined
historic production of 880,000t @ 7.6 g/t Au for 215,000oz.
Current drilling is targeting multiple near-surface plunging
high-grade gold shoots along the Western Queen Shear zone.
For more information on Western Queen, please visit
http://www.rumbleresources.com.au/
Terms of the Acquisition
Elemental will issue to South32 a total of 13,065,100 common
shares and pay US$40 million in cash
upon closing of the Acquisition. The shares issued to South32 will
represent approximately 19.7% of the Company's common shares after
giving effect to the Offering (as defined below).
Closing is expected to occur on or before February 28, 2021, and is subject to certain
conditions including the approval of the TSX Venture Exchange
("TSX-V"), Australian Foreign Investment Review Board approval and
closing of the Offering.
A majority of Elemental shareholders, including the Board of
Directors of Elemental, have agreed to vote in favour of approving
the Acquisition and have entered into voting and support
agreements.
South32 Investor Rights Agreement
At Closing South32 and Elemental will enter into an Investor
Rights Agreement ("Rights Agreement") that will include:
- The right for South32 to nominate a director to Elemental's
Board provided that South32's shareholding remains over 10% of
Elemental's outstanding common shares;
- Pre-emptive and top-up rights in favour of South32 to maintain
its shareholding percentage in Elemental provided that South32's
shareholding is over 10% of Elemental's outstanding common
shares;
- Certain restrictions on South32's shareholding, including a
minimum hold period of 9 months, and following that, certain
processes to ensure the orderly disposition of its shareholdings;
and
- Piggy back rights in favour of South32 related to any
prospectus offering undertaken by Elemental, provided that
South32's shareholding is over 10% of Elemental's outstanding
common shares.
Concurrent Bought Deal Private Placement
In connection with the Acquisition, Elemental has entered into
an agreement with Canaccord Genuity, on behalf of a syndicate of
underwriters (the "Underwriters"), pursuant to which the
Underwriters have agreed to purchase 8,000,000 subscription
receipts ("Subscription Receipts") at a price of C$1.50 per Subscription Receipt (the "Issue
Price") for aggregate gross proceeds of approximately C$12 million, on a bought deal private placement
basis (the "Offering"). In addition, the Underwriters shall have
the option (the "Underwriters' Option"), exercisable until the
closing of the Offering, to sell up to an additional 1,200,000
Subscription Receipts at the Issue Price for additional gross
proceeds to the Company of up to C$1.8
million.
Each Subscription Receipt will entitle the holder thereof to
receive one common share (a "Common Share") of Elemental,
without any further action on the part of the holder and without
payment of additional consideration, upon satisfaction of the
escrow release conditions including the satisfaction of all
conditions precedent to completing the Acquisition. The aggregate
gross proceeds of the Offering, less 50% of the Underwriters
commission and certain expenses of the Offering, will be held in
escrow pending closing of the Acquisition.
In the event that the Acquisition is not completed within four
months of the closing of the Offering, the escrow agent shall
return to the holders of the Subscription Receipts an amount equal
to the aggregate purchase price paid for the Subscription Receipts
held by each holder.
The net proceeds of the Offering will be used to fund part of
the cash portion of the consideration payable in connection with
the Acquisition.
The Subscription Receipt offering is expected to close on or
about December 15, 2020 and is
subject to customary regulatory and stock exchange approvals,
including approval of the TSX-V.
Sprott Credit Facility
Alongside the Offering, Elemental has entered into a term sheet
with Sprott Private Resource Lending II (Collector), LP ("Sprott")
pursuant to which Elemental and Sprott intend to enter into an
amended and restated credit agreement (the "ARCA"). Subject
to the terms and conditions of the ARCA, Elemental expects to draw
US$25 million to be used to partially
finance the Acquisition (the "Sprott Facility").
The Sprott Facility will have a 2-year term and incur interest
at an annual rate of 9% plus the greater of (i) US 3-month LIBOR,
and (ii) 1% per annum, payable monthly. In connection with the
Sprott Facility, Elemental will issue to Sprott (or as Sprott may
direct) 653,255 common shares. Financial close of the Sprott
Facility is subject to completion of definitive documentation and
other customary closing conditions.
Not for distribution to U.S. news wire services or for
dissemination in the United
States.
This news release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities in
the United States. The securities
have not been and will not be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act") or
any state securities laws and may not be offered or sold within
the United States or to U.S.
Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such
registration is available.
(1)
|
Mineral Reserves
effective as of April 17, 2020. For more information please refer
to Capricorn Metals' ASX announcement dated April 17, 2020, titled
"Gold Reserves Increase 35% to 1.2 Million Ounces". The ASX
announcements are prepared in accordance with the Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore
Reserves ("JORC Code"). The ASX announcements are available on
Capricorn's website:
http://capmetals.com.au/investor-centre/asx-announcements
|
|
|
|
BHP Billiton Ltd
("BHP") retains a claw-back right whereby BHP can elect to acquire
a 70% interest in the Karlawinda project for 3 times total costs
incurred, but only if Capricorn has delineated a JORC-compliant
resource of 5Moz of gold or 120kt of nickel. Under the current
agreement, in the event the clawback is exercised the Karlawinda
NSR Royalty is no longer payable.
|
Qualified Person
Richard Evans, FAusIMM, Senior
Vice President Technical for Elemental, and a qualified person
under National Instrument 43-101 Standards of Disclosure for
Mineral Projects, has reviewed and approved the scientific and
technical disclosure contained in this press release.
On behalf of Elemental Royalties Corp.
Frederick Bell
CEO and Director
Elemental Royalties Corp. is a proud member of Discovery Group.
For more information please visit: discoverygroup.ca or contact
604-653-9464.
Neither the TSX-V nor its Regulation Service Provider (as
that term is defined in the policies of the TSX-V.) accepts
responsibility for the adequacy or accuracy of this press
release.
About Elemental Royalties
Elemental Royalties is a
gold-focused royalty company listed on the TSX-V in Canada and provides investors with lower risk
precious metals exposure through a portfolio of nine high-quality
royalties. This enables investors to benefit from ongoing
royalty revenue, future exploration upside and low operating costs.
Elemental's experienced team seeks to secure royalties in advanced
precious metals projects, run by established operators, from its
pipeline of identified opportunities.
Cautionary note regarding forward-looking statements
This release contains certain "forward looking statements" and
certain "forward-looking information" as defined under
applicable Canadian. securities laws. Forward-looking
statements and information can generally be identified by the use
of forward-looking terminology such as "may", "will", "should",
"expect", "intend", "estimate", "anticipate", "believe",
"continue", "plans" or similar terminology.
Forward-looking statements and information include, but are not
limited to, statements with respect to the transactions
contemplated under the Acquisition, anticipated cash flows upon
completion of the Acquisition, the entering into of the Sprott
Facility, future financial reporting by Elemental, the closing of
the Offering, the use of proceeds of the Offering, the entering
into of the Rights Agreement, the receipt of payments from
Elemental's mining royalty portfolio and proposed future
transactions Elemental may undertake and their expected timing.
Forward-looking statements and information are based on forecasts
of future results, estimates of amounts not yet determinable and
assumptions that, while believed by management to be reasonable,
are inherently subject to significant business, economic and
competitive uncertainties and contingencies. Forward-looking
statements and information are subject to various known and unknown
risks and uncertainties, many of which are beyond the ability of
Elemental to control or predict, that may cause Elemental's actual
results, performance or achievements to be materially different
from those expressed or implied thereby, and are developed based on
assumptions about such risks, uncertainties and other factors set
out herein, including but not limited to: the requirement for
regulatory approvals and third party consents, the impact of
general business and economic conditions, the absence of control
over the mining operations from which Elemental will receive
royalties, including risks related to international operations,
government relations and environmental regulation, the inherent
risks involved in the exploration and development of mineral
properties; the uncertainties involved in interpreting exploration
data; the potential for delays in exploration or development
activities; the geology, grade and continuity of mineral deposits;
the impact of the COVID-19 pandemic; the possibility that future
exploration, development or mining results will not be consistent
with Elemental's expectations; accidents, equipment breakdowns,
title matters, labour disputes or other unanticipated difficulties
or interruptions in operations; fluctuating metal prices;
unanticipated costs and expenses; uncertainties relating to the
availability and costs of financing needed in the future; the
inherent uncertainty of production and cost estimates and the
potential for unexpected costs and expenses, commodity price
fluctuations; currency fluctuations; regulatory restrictions,
including environmental regulatory restrictions; liability,
competition, loss of key employees and other related risks and
uncertainties. Elemental undertakes no obligation to update
forward-looking information except as required by applicable law.
Such forward-looking information represents management's best
judgment based on information currently available. No
forward-looking statement can be guaranteed and actual future
results may vary materially. Accordingly, readers are advised not
to place undue reliance on forward-looking statements or
information.
SOURCE Elemental Royalties Corp.