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Ely Gold Royalties Inc
Symbol C : ELY
Shares Issued 100,195,928
Close 2019-09-06 C$ 0.31
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Ely Gold closes purchase of Jerritt royalty interest

2019-09-09 07:49 ET - News Release

Mr. Trey Wasser reports

ELY GOLD ROYALTIES PURCHASES JERRITT CANYON PRODUCTION ROYALTY (TSXV: ELY) (OTCQB: ELYGF)

Ely Gold Royalties Inc., through its wholly owned subsidiary, Nevada Select Royalty Inc., has closed its previously announced purchase of 100 per cent of all rights and interests in a per-ton royalty interest on the Jerritt Canyon processing facilities (the PTR) from an arm's-length third party.

The Jerritt Canyon operations, located in Elko, Nev., are operated by Jerritt Canyon Gold LLC, a privately held company (JCG). The closing of the transaction was subject to certain conditions precedent, including approval of the transaction by the TSX Venture Exchange. (See press release dated May 23, 2019.)

The PTR was granted in an amended licence agreement dated May 19, 2015, between former operator, Veris Gold Corp., JCG and the owner. Pursuant to the terms of the licence agreement, the owner granted to JCG a perpetual licence for the patent to certain proprietary scrubbing technology involved in the removal of mercury from gas that is currently being used at the Jerritt Canyon processing facilities. The licence agreement entitles the owner to receive a per-ton royalty payment (the PTR payment) based on overall throughput from mining operations at the Jerritt Canyon processing facilities with increasing PTR payments at higher gold prices.

Royalties are calculated, in U,S. dollars, as:

  1. 15 cents per ton if the gold price is less than or equal to $1,300 per ounce; or
  2. 22.5 cents per ton if the gold price is greater than $1,300 but less than or equal to $1,600 per ounce; or
  3. 30 cents per ton if the gold price is greater than $1,600 but less than or equal to $2,000 per ounce; or
  4. 40 cents per ton if the gold price is greater than $2,000 per ounce.

Trey Wasser, Ely Gold's president and chief executive officer, commented: "The acquisition of this producing royalty at Jerritt Canyon is another significant asset for our portfolio. The pricing structure of this per-ton royalty offers excellent leverage to gold prices, similar to a traditional mineral royalty. Based on current production, the July PTR payment was $16,516 (U.S.). At $2,000 gold, this royalty has the potential to pay up to $48,000 (U.S.) per month."

Since mining began at Jerritt Canyon, more than eight million ounces of gold have been produced. Gold was first discovered at Jerritt Canyon in 1972, with the first gold poured in 1981. Underground operations began in 1993. The mineral processing operation at Jerritt Canyon is one of only three gold processing plants in Nevada that uses roasting in its treatment of refractory ores. Jerritt Canyon is designed to process highly refractory gold ores up to 4,000 tons per day and has processed in excess of 1.1 million tons in 2017 and 1.2 million tons in 2018 (1).

Under the terms of the transaction, Ely Gold paid total cash consideration of $650,000 (U.S.):

  1. $300,000 (U.S.) cash at closing;
  2. 500,000 warrants at closing. Each warrant will entitle the owner to purchase one additional common share for a period of three years at an exercise price of 18 Canadian cents.

And will make deferred payments as follows:

  1. $150,000 (U.S.) cash on the first anniversary of closing;
  2. $150,000 (U.S.) cash on the second anniversary of closing;
  3. $50,000 (U.S.) cash on the third anniversary of closing.

The deferred payments will accrue simple annual interest at 5 per cent and be secured by the PTR. If production or PTR payments cease at the facility for two consecutive months or greater, deferred payments will be delayed by an amount equal to the time the production is halted.

Stephen Kenwood, PGeo, is a director of the company and a qualified person as defined by National Instrument 43-101. Mr. Kenwood has reviewed and approved the technical information in this press release. The company does not intend to file a technical report supporting disclosure with respect to acquisition of this royalty interest.

(1) Source: Jerritt Canyon Gold LLC.

About Ely Gold Royalties Inc.

Ely Gold Royalties is a Vancouver-based, emerging royalty company with development assets focused in Nevada and Quebec. Its current portfolio includes 33 deeded royalties and 20 properties optioned to third parties. Ely Gold's royalty portfolio includes producing royalties, fully permitted mines and development projects that are at or near producing mines. The company is actively seeking opportunities to purchase existing third party royalties for its portfolio and all the company's option properties are expected to produce royalties, if exercised.

We seek Safe Harbor.

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