NIA observtion of ELY and Eric Sprott desire to own as much ELY as allowed.
Back on June 10th, Ely Gold Royalties (TSXV: ELY) wasn't even planning to conduct a private placement but billionaire Eric Sprott contacted the company requesting ELY to issue a large private placement solely to him. ELY didn't need the money and wasn't interested in diluting shareholders knowing that it has multiple major royalties that are about to begin generating HUGE revenue, but because Sprott has surpassed Frank Giustra to become the #1 kingmaker in the gold mining industry after recently profiting $1 billion on Kirkland Lake Gold (KL), ELY decided to sell him 5,615,454 shares for CAN$1,673,360 giving Sprott a 5.69% stake in ELY.
Sprott's investment into ELY came less than one month after he purchased 29,166,667 Wallbridge Mining (TSX: WM) shares for CAD$7 million equal to a 6.07% stake in WM. After investing into WM, Sprott realized that ELY owned a large 2% NSR royalty in WM's Fenelon project and decided that ELY was actually a much better way to play the high grade Fenelon gold mine because ELY will fully capitalize on all of Fenelon's upside without any of the downside risks (drilling costs, CAPEX, etc) of WM!
From what we understand, Sprott was interested in buying a much larger stake in ELY than the 5,615,454 shares that ELY was willing to offer. He is well aware that we are only nine months away from WM launching production at the Fenelon mine by initially mining/processing 400-500 tpd with grades in the 10-13 g/t range for initial annual production of 60,000 oz of gold per year. At current gold prices, WM's Fenelon mine will initially generate CAD$2.34 million in annual royalty income for ELY, thereby increasing ELY's annual revenue by more than 100% to CAD$4.45 million.
Based on the average enterprise value/revenue ratio of ELY's gold royalty peers of 20, this will value ELY at $0.94 per share for a gain of 176.47% from yesterday's close of $0.34 per share!
Sprott appears desperate to increase his ELY stake to 19.99% of the company. A few days ago, he made an unbelievable offer to ELY that we have NEVER seen him offer to any other company! Sprott knows that ELY doesn't want to dilute its shareholders right now, but because ELY is the most well-connected company in the Nevada gold royalty space... they sometimes come across unbelievable opportunities to acquire amazing royalty assets for pennies on the dollar.
Sprott has agreed to provide ELY with a CAD$6 million line of credit. If ELY came across a new unbelievable royalty acquisition opportunity, it now will have the ability to immediately draw down on this line of credit to make the acquisition immediately and ELY won't need to repay the money until 24 months later with Sprott receiving the right to convert all or any part of the outstanding line of credit into ELY shares at a price of C$0.37 per share (a premium of 7% when the deal was signed last week).
Sprott is hoping that ELY will draw down on this line of credit for the full CAD$6 million so that on the maturity date 24 months later he can convert the CAD$6 million owed into 16,216,216 ELY shares, which will give Sprott a total ELY stake of up to 19.9%! This is the maximum stake he can take under TSX rules and he only buys 19.9% stakes in a select few companies that he is extremely confident about! ELY appears ready to explode to new all-time highs!
It is easy to figure out what you believe. The difficulty lies in determining - is what you believe the truth.
