Ely Gold Royalties closes Cote Lake deal with IAMGOLD
Ely Gold Royalties Inc. has closed the purchase, a 1% net smelter returns royalty from Sanatana Resources Inc. that was announced on September 29, 2020. The Watershed Royalty was granted to Sanatana in connection with an Asset Purchase Agreement between the Company and Trelawney Augen Acquisition Corp., now IAMGOLD Corporation, dated January 12, 2016, whereby IAMGOLD acquired a 100% interest in 46 mining claims in Chester and Yeo Counties, Ontario.
In addition to the purchase of the Watershed Royalty, Ely Gold was assigned the Purchase Agreement and participated in a private placement of Sanatana Common shares (the “Private Placement” and collectively the “Transactions”) The Transactions were closed onDecember 12, 2020 (the “Closing”). All currency references herein are expressed in Canadian Dollars.
The Watershed Property surrounds the Coté Gold Project (“Coté”), a joint venture between IAMGOLD (70%) and Sumitomo Metal Mining Company (30%), which demonstrates potential to produce 460,000 ounces of gold annually at low all-in sustaining costs of approximately $700 per ounce in the first six years of production with an 18-year mine life. Coté is located in northern Ontario approximately 20 km southwest of Gogama and 130 km southwest of Timmins. Coté is now scheduled to become one of Canada’s largest gold mines as a production decision, by the partners, and ground-breaking was announced in July 2020. (see IAMGOLD press release dated July 21, 2020). Part of the Watershed Claims are included in the November 1, 2018 Feasibility Study Boundary and the balance of the claims surround the project. (see Figure 1).
Trey Wasser, President & CEO of Ely Gold commented on the Transactions, “We are excited to be a part of one of Canada’s largest gold mines. While the Watershed Royalty may be a longer-term investment, the existence of the Deferred Payments makes the purchase a compelling value and an excellent addition to the growth profile of our royalty portfolio. We continue to see compelling value in royalty investment, like Coté, on long-lived gold assets in key mining jurisdictions”.
The Watershed Royalty Purchase
Ely Gold acquired the Watershed Royalty from Sanatana for total consideration of $2,500,000 in cash and 1,000,000 Ely Gold warrants (the “Ely Gold Warrants”). The Ely Gold Warrants have a five-year term and will have an exercise price of C$1.31 (the “Exercise Price”). They can be accelerated if Ely Gold common shares trade at a 50% premium to the Exercise Price for a 10-day period. Securities issued under the Ely Gold Warrants will be subject to a four-month hold period. The Watershed Royalty is subject to a buydown provision whereby the royalty rate can be reduced to 0.5% for a payment of $2,000,000.
Purchase Agreement Assignment
Sanatana and Ely Gold also executed definitive agreement whereby Sanatana assigned its rights and interest in the Purchase Agreement to Ely Gold (the “Assignment”) for $10,000 cash.In connection with the Assignment, Ely Gold purchased 1,666,666 Sanatana common shares (the “Common Shares”) at $0.31 $500,000 in through a non-brokered private placement.
The Purchase Agreement provides for certain deferred payments as follows:
- $1,500,000 upon a production decision by IAMGOLD on the Watershed Property; and
- $1,500,000 upon the commencement of commercial production by IAMGOLD on the Watershed Property (together, the “Deferred Payments”)
Private Placement
In connection with the Assignment, Sanatana is announced a non-brokered private placement (the “Private Placement”) of $500,000 in Sanatana common shares (the “Common Shares”) to be purchased by Ely Gold at a price of $0.30per Common Share.Securities issued under the Private Placement will be subject to a four-month hold period which will expire four months and one day from the date of closing of the Private Placement. Ely Gold did not pay any finder’s fee in connection with Transactions.
The completion of the Transactions was subject to:
- receipt by Sanatana of a waiver from IAMGOLD of its right of first refusal as provided in Watershed Royalty (“ROFR”), which was received by Sanatana prior to the closing of the agreement;
- receipt by Sanatana of a consent from IAMGOLD for the Purchase Agreement Assignment, which was received by Sanatana prior to the closing of the agreement; and
- applicable approval of the TSX Venture Exchange (the “TSX-V”).
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