Elemental Royalties Doubles IN Asset Size with Agreement to Acquire GOLD Royalty Portfolio from SOUTH32 and Announces $12 Million Bought Deal Private Placement
Not for distribution to U.S. news wire services or for dissemination in the United States
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Elemental Royalties Corp | 1020 - 800 West Pender Street | Vancouver, BC | V6C 2V6 | Canada
ELEMENTAL ROYALTIES DOUBLES IN ASSET SIZE WITH AGREEMENT TO ACQUIRE GOLD ROYALTY PORTFOLIO
FROM SOUTH32 AND ANNOUNCES $12 MILLION BOUGHT DEAL PRIVATE PLACEMENT
November 23, 2020 – Vancouver, BC: Elemental Royalties Corp. (“ Elemental” or “the Company”) (TSX-V: 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 Ele mental 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 forw ard 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
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Elemental Royalties Corp | 1020 - 800 West Pender Street | Vancouver, BC | V6C 2V6 | Canada
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 de posit 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 3.6:1 1.
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/
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Elemental Royalties Corp | 1020 - 800 West Pender Street | Vancouver, BC | V6C 2V6 | Canada
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 ad vancing 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 9.8km 2 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 Yalg oo 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 tw o mined deposits for a combined
historic production of 880,000t @ 7.6 g/t Au for 215,000oz.
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Elemental Royalties Corp | 1020 - 800 West Pender Street | Vancouver, BC | V6C 2V6 | Canada
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 inc luding 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 an d 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 pe riod 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 Under writers 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 conditio ns 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
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Elemental Royalties Corp | 1020 - 800 West Pender Street | Vancouver, BC | V6C 2V6 | Canada
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 t o 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 great er 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 r efer 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 th e
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
For further information about Elemental Royalties Corp. or this news release, please visit our website at
www.elementalroyalties.com or by email at [email protected].
Elemental Royalties Corp. i s 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.
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Elemental Royalties Corp | 1020 - 800 West Pender Street | Vancouver, BC | V6C 2V6 | Canada
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 portfoli o 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 man agement 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 a re 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, un certainties 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, labo ur 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 exc ept 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, r eaders are
advised not to place undue reliance on forward-looking statements or information.