Funds to be used for Royalty Acquisitions and Long-Term Capital Management
Vancouver, British Columbia--(Newsfile Corp. - October 17, 2019) - Ely Gold Royalties Inc. (TSXV: ELY) (OTCQB: ELYGF) ("Ely Gold") or the ("Company") is pleased to announce that it has reached a mutual agreement (the "Agreement") with Eric Sprott ("Sprott") whereby Sprott will provide Ely Gold with a C$6.0 million line of credit (the "LOC"). Each draw on the LOC will be in the form of a convertible note (each a "Note") maturing 24 months from its issue date (a "Maturity Date"). At each Maturity Date, Sprott can elect to convert all or any part of the outstanding LOC into common shares of the Company ("Conversion Shares") at a deemed issue price of C$0.37 per share (an approx. 7.0% premium to the last closing price). The LOC will be secured by a registered security interest over all of the Company's assets, subordinate only to existing prior encumbrances.
An election by Sprott to convert the full C$6.0 million principal amount of the LOC would result in the Company issuing 16,216,216 Conversion Shares. Based on the Company's current capital structure, such number of Conversion Shares would represent 14.0% of the Company's issued and outstanding shares and, taken together with Sprott's existing holdings of Company common shares and share purchase warrants, would represent 20.76% of the partially-diluted equity of the Company. Sprott has agreed that he will not seek to convert an amount of the LOC into Conversion Shares if such conversion would result in his partially-diluted holdings of the Company being in excess of 19.9% based on the then-current outstanding shares of the Company.
Ely Gold will use the proceeds of the LOC for the acquisition of additional producing or near-term producing royalties as well as to prioritize its long-term capital management.
In connection with the Agreement, the Company will issue 300,000 warrants as an LOC arrangement fee to an arm's length registered dealer (each an "Arrangement Fee Warrant"). Each Arrangement Fee Warrant will be exercisable to purchase one common share of the Company (each a "Warrant Share") at an exercise price of C$0.37 per Warrant Share for a term of three years.
The Notes, Conversion Shares, Arrangement Fee Warrants and Warrant Shares will be subject to a four-month hold period, in the case of the Notes and Arrangement Fee Warrants, running from date of issue of the security and, in the case of the Conversion Shares and Warrant Shares, running from the date of issue of the applicable underlying convertible security.
The LOC will be available to be drawn down by the Company in two tranches between November 2019 and January 2020, each tranche having a Maturity Date 24 months from the date of the initial draw of the tranche. A first tranche in the amount of C$4.0 million will be made available at closing, and a second tranche of C$2.0 million will be available to the Company by the earlier of January 15, 2020 or the date by which the Company identifies a suitable additional royalty acquisition opportunity. Interest on the LOC will be 10.0% on drawn funds and 2.5% on stand-by funds, compounded monthly and payable quarterly.
The LOC financing and, to the extent applicable, the Company's acquisition of any royalties, will be subject to the settlement by the Company and Sprott of definitive loan and security documentation, and all necessary regulatory approvals, including the acceptance of the TSX Venture Exchange.
Trey Wasser, Ely Gold's President and CEO, commented, "We are very pleased that Eric Sprott continues to support and recognizes the rapid growth profile of Ely Gold Royalties. Having this credit line will allow us to seek out and participate in a wider range of royalty sale processes and allow us to manage our future equity offerings according to market conditions."
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