Ely Gold snaps up Nevada royalty portfolio

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Ely Gold Royalties Inc. [ELY-TSXV; ELYGF-OTC] said Friday February 28 that it has agreed to acquire VEK Associates, a private company that was formed in 1982 by the legendary U.S. geologist Ralph J. Roberts.

In 1960, Roberts published a paper that predicted the existence of important mineral-bearing rocks in Nevada that led to the discovery of the Carlin and Cortez-Battle Mountain gold belts, mining districts which now represent the richest gold mining region in the United States.

Over 35 years ago, Roberts and his associates Victor Kral and William Andrus joined forces to form VEK/Andrus Associates, a Nevada general partnership which today owns five properties, all of which are generally leased.

Four of the leases are with a Nevada Gold Mines a joint venture held by Newmont Goldcorp Corp., [NGT-TSX;., NEM-NYSE] and Barrick Gold Corp. [ABX-TSX.;, GOLD-NYSE]. The other lease is with SSR Mining Inc. [SSRM-TSX, NASDAQ].

VEK owns 50% of VEK/Andrus. The other 50% is held by heirs of William Andrus. All of the leases pay advance minimum royalty payments and carry a 3.0% net smelter return royalty with no buy-downs.

Ely said Friday it will acquire 100% of the outstanding shares of VEK in return for US$5 million in cash and 2,005,164 Ely Gold share purchase warrants. Each warrant is exercisable over a 24-month period and enables the holder to purchase one Ely common share for 62 cents.

The acquisition is expected to complete on May 1, 2020, and remains subject to certain closing requirements and approvals including approval by the TSX Venture Exchange.

Ely shares advanced on the news, rising 8% or $0.05 to 67 cents. The shares are currently trading in a 52-week range of 16 cents and $1.02.

Prior to Friday’s announcement, Ely was establishing itself as an emerging company that operates with an organic model that involves the staking and sale of properties and the retention of royalty interests following the sale of the properties. Its portfolio includes 77 properties, mostly located in Nevada, and 27 royalties. Ely Gold began life as an exploration company.

When it sold its Mt. Hamilton Project in Nevada to a subsidiary of Waterton Precious Metals Fund 11 Cayman LP in July, 2015, Ely received (US$6 million). “But rather than use that money to develop another property, it elected to do something for shareholders that management thought could add value faster,” said Trey Wasser, President and CEO of Ely Gold Royalties.

“So we changed the business model to what we are currently doing, and started buying properties from well-known prospectors in Nevada and the Yukon,” Wasser said.

The decision to acquire 31 properties in the Nevada region paid off for Ely Gold last year when the emerging royalty company saw its share price rise to 46 cents on December 30, 2019, from 13 cents in February, 2019.

Ely is backed by an investor group that includes financiers Eric Sprott and Rick Rule.

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