22:53:30 EDT Tue 26 May 2020
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Ely Gold Royalties Inc
Symbol ELY
Shares Issued 131,723,995
Close 2020-05-19 C$ 1.10
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Ely Gold completes acquisition of 94.2% of VEK

2020-05-19 08:56 ET - News Release

Mr. Trey Wasser reports


Through its wholly owned subsidiary REN Royalties LLC, Ely Gold Royalties Inc. has substantially completed the agreement with VEK Associates, a privately held Nevada corporation, announced on Feb. 28, 2020. The agreement provided for the purchase of up to 100 per cent of the outstanding shares of VEK for cash consideration of $5-million (U.S.) plus 2,005,164 Ely Gold share purchase warrants, each exercisable over a 24-month term to purchase one Ely Gold common share at an exercise price of 62 cents per share. The company has now closed on the acquisition of 94.2 per cent of the outstanding VEK shares.

The agreement

Pursuant to the agreement, Ely Gold made a tender offer to purchase 100 per cent of the outstanding shares of VEK Associates and 92.4 per cent of the shares have been tendered for transfer to Ely Gold's wholly owned subsidiary, REN Royalties LLC. The remaining VEK shareholders have committed to sell the remaining 7.6 per cent of the VEK shares to the company, pending the completion of required share transfer documentation. VEK currently has 13,734 outstanding shares; each of VEK's shareholders, all of whom are arm's length to Ely Gold, will receive cash consideration of $364.06 (U.S.) and 146 warrants per VEK share. VEK's principal assets are made up of five properties made up of a portfolio of unpatented lode mining claims and leases with royalties, together with VEK's database, all as described in greater detail below.

VEK Associates

VEK was formed in 1982 by the U.S. Geological Survey geologist Ralph J. Roberts. Mr. Roberts is credited with the discovery of the Carlin and Battle Mountain gold trends, which today comprise the richest gold-mining regions in the world. Mr. Roberts and two well-known associates, Victor E. Kral and William Andrus, joined forces to form VEK/Andrus Associates, a Nevada general partnership over 35 years ago. While the VEK/Andrus team staked a number of properties over the years, today VEK/Andrus holds five properties, all of which are currently leased. Four of the leases are with Nevada Gold Mines joint venture (Barrick 61.5 per cent/Newmont 31.5 per cent) and the other lease is with SSR Mining Inc. VEK owns 50 per cent of VEK/Andrus, the remaining 50 per cent being owned by the heirs of Mr. Andrus. Four of the leases, discussed in greater detail below, pay advance minimum royalty payments and carry a 3.0-per-cent net smelter returns royalty with no buydowns.

REN property -- currently leased to Nevada Gold Mines

The REN property consists of 86 contiguous unpatented lode mining claims covering 7.4 square kilometres of the Northern Carlin trend. REN is centred along the northern Carlin trend and has gold mining operations surrounding the property. The Goldstrike and Meikle mines are within two kilometres of the southern boundary of the property, and the Bootstrap/South Arturo and the Dee mines wrap around the REN property to the west and north. The REN property is contiguous to the Banshee mine within the Goldstrike complex. At the Meikle, Goldstrike and Deep Post deposits, the Post fault is recognized as a potential control fault for high-grade gold mineralization within the northern Carlin trend. Readers are cautioned that mineralization hosted on adjacent and/or nearby projects is not necessarily indicative of the mineralization hosted on the company's properties. The Post fault, on the REN property, has not been explored for 1.4 kilometres starting at the southern end of the property. With its orientation on the Post fault, REN has the potential to host a mineralized deposit within the Devonian-age Popovich limestone along the footwall of the Post fault.

Marigold property -- currently leased to SSR Mining

The Marigold property consists of 205 unpatented lode mining claims covering 7.8 square kilometres within the SSR Mining operation on the Battle Mountain-Eureka trend. SSR Mining has three outlined within VEK/Andrus claims at Marigold. The areas are 8N, 8D and 8 South Extension. In a National Instrument 43-101 technical report on the Marigold mine, dated effective Dec. 31, 2017, and released July 31, 2018, SSR Mining highlighted drill results in the following areas within their current mine expansion exploration:

  • 8D and 8N (also known as H1): Drill hole MR6045 intersected 164.6 metres grading 1.67 grams per tonne gold.
  • 8 South Extension: Drill hole MR6034 intersected 91.4 metres grading 2.48 g/t gold.

VEK sold one-half of the Marigold royalty to Franco Nevada, reducing the VEK royalty to 0.75 per cent.

Lone Tree property -- currently leased to Nevada Gold Mines

The Lone Tree property consists of 38 unpatented lode mining claims covering 3.2 square kilometres along the Battle Mountain-Eureka trend in sections 13, 14, 23 and 24, Township 34N and 36N, Range 42E in Humboldt county, Nevada. This property was generated by VEK/Andrus by plotting gravity trends extending northerly from the Lone Tree gold deposit. The trends have identified horst in the subsurface alluvium. The company believes that there is a good potential for additional discoveries between the Lone Tree and Chimney VEK/Andrus claims.

Pinson property -- currently leased to Nevada Gold Mines

The Pinson property consists of 53 unpatented lode mining claims covering 4.4 square kilometres along the Osgood Mountain trend in sections 4, 8 and 16, Township 37N, Range 42E, in Humboldt county, Nevada. This property was generated by VEK/Andrus using geologic mapping along structures from the existing Pinson and Mag deposits. Surface mapping revealed hydrothermally altered limestone host rocks that could be projected into the VEK/Andrus claims.

Carlin trend property -- currently leased to Nevada Gold Mines

The Carlin trend property consists of 84 unpatented lode mining claims covering 7.0 square kilometres along the Carlin trend in sections 1, 2, 3, 10, 11, 12, 20, 21, 28, 34 and 35, Township 35N and 36N, Range 49E and 50 in Eureka county, Nevada. These claims were staked in the early days of the Carlin discovery and are scattered along the Carlin trend. They represent many targets identified by Mr. Roberts but have seen very little modern exploration.

VEK Associates data

In addition to the 50-per-cent interest in VEK/Andrus, Ely Gold will be purchasing the entire database generated by Mr. Roberts and the VEK/Andrus team.

VEK/Andrus advance royalty payments

The 2019 advance royalty payments provided in the leases to VEK/Andrus were as displayed in the attached table.

Property       Payments (in U.S.$; 50% to VEK Associates 2019)

REN                                                  $458,712
Marigold                                             $156,500
Lone Tree                                             $15,000
Pinson                                                $21,780
Carlin trend                                          $43,560
Total                                                $695,552

All of the leases, with the exception of Lone Tree, have inflation adjustment clauses associated with the payments, and all the leases carry a 3.0-per-cent net smelter returns royalty (50 per cent to VEK Associates), except Marigold where VEK Associates holds a 0.75-per-cent royalty.

Qualified person

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.

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