Elemental Royalties Announces Record Quarterly Royalty Revenue in Q2 2020
August 31, 2020
Vancouver, BC: Elemental Royalties Corp. (“Elemental” or “the Company”) (TSX-V: ELE) is pleased to announce its operating and financial results for the second quarter ended June 30, 2020.
For complete details please refer to the Financial Statements and associated Management Discussion and Analysis for the quarter ended June 30, 2020, available on SEDAR (www.sedar.com) or the Company’s website (www.elementalroyalties.com).
Q2 2020 Financial Overview
- Gross revenue of US$1.29 million, 2020 year to date US$2.51 million
- Cash and cash equivalents balance of US$1.24 million plus royalty receivables of US$1.51 million
Table 1: Royalty Revenue (US$ million)
- Royalty revenue due to Elemental after hurdle, being the earlier of: (a) the date on which 450,000 ounces of gold equivalent have been produced after July 28, 2016 and b) the sixth anniversary of that date (July 28, 2022)
“We are thrilled to report Elemental’s highest quarterly revenue ever, fuelled by a significant increase in production at Wahgnion coinciding with record gold prices.” commented Frederick Bell, CEO. “With the closing of the $24 million financing in July, increased 2020 production guidance at Wahgnion, and operations returning to normal at Amancaya, the outlook for the remainder of 2020 and beyond remains strong.”
- As announced on August 6, Teranga has increased Wahgnion’s 2020 production guidance to between 150,000 – 165,000 ounces, a 15% – 18% increase from earlier guidance of 130,000 – 140,000 ounces, providing higher than expected royalty revenues
- Production at Amancaya was disrupted by a 24 day miners’ strike and precautionary measures due to COVID-19. Austral Gold has maintained 2020 Guidance of 55,000 – 60,000 ounces
- Kwale mineral sands operations performed as expected, with good pricing and customer support
- Mercedes has lowered short term production rates to improve efficiencies. Throughput is expected to increase back towards nameplate over time, aligning with Elemental’s royalty paying from July 2022 following a time hurdle
- Subsequent to the quarter end, completion of $24 million financing and commencement of trading on the TSX Venture Exchange (“TSX-V”) of the Company’s shares under the symbol “ELE”
- The demonstrated outperformance of the newly commissioned Wahgnion Gold Mine in Burkina Faso during its first year of operation has resulted in a material increase in forecast production through to at least 2025
- Operationally, Teranga have reported excellent initial performance, being able to consistently deliver and process 25% more tonnes than planned, while also delivering the planned grade and recovery performance predicted by planning
- Teranga have rescheduled the Life of Mine production to materially bring revenue forward, and increase gold deliveries by 15% over the first six years of production to an average of 150,000 ounces per annum
- This schedule inevitably reduces the Reserve life as currently defined, but Teranga have committed to a multiyear exploration program, highlighting the high quality, district scale potential of the 933km2 exploration area targeting more than a dozen high priority greenstone gold targets
- Austral Gold have maintained 2020 production guidance for their Chilean operations in spite of disruptions which resulted in a temporary reduction in total quarterly production to 9.2kOz Au equivalent,
- Elemental’s gross royalty revenue of US$0.35 million was less affected, with nearly all production from Amancaya, strong grade performance and stronger gold prices.
- The production disruptions were due to COVID pandemic staffing restrictions at site, and 24 days lost due to strike action associated with the renegotiation of the three year mining contract. However management indicate that they will still be able to achieve production at the lower end of their earlier 2020 Guidance of 55,000 – 60,000 ounces of gold equivalent, indicating expected total production in excess of 28,000 ounces for H2/2020
- With the limitations in place, production has virtually all been sourced from the higher grade Amancaya mine in the Royalty Area
- Exploration has also been limited to mapping, reinterpretation and drill planning, with work in the Royalty Area looking to extend the Amancaya Resource blocks along strike to the north as well as designing a Resource to Reserve conversion infill drilling program, and working to progress the next best drilled prospect, Veta Julia, to the south west of the mine.
- Strong royalty revenue from Kwale this quarter of US$0.17 million gross, was in the upper end of Base’s guidance for all products for their financial year
- As Base Resources (ASX: BSE) Base has lowered forecast production for FY2021 (June year end), with both fewer tonnes, partly due to a scheduled relocation of mining plant, and slightly lower grades; resulting in about a 20% drop in forecast ilmenite and zircon production
- Rutile, the most economically important product and has been delivering a consistent positive reconciliation in the South Dune, is only forecast to reduce production volumes by approximately 5%
- Market expectations appear strong in spite of expected demand weaknesses, due to a mix of already contracted sales, stronger than expected demand in some segments and production disruptions elsewhere
- Exploration work is planned, but there is limited potential for significant additional tonnages beyond the defined Resource within the royalty area.
- Mercedes has begun a phased restart to operation after a two month government-mandated shutdown due to COVID19, with the plan to manage the site workforce by limiting production to the higher grade Diluvio / Lupita complex and targeting 1.2ktpd of production
- Ongoing exploration and delineation drill programs are expected to enable mill throughput to increase toward nameplate capacity over time
- The Diluvio / Lupita complex has generated exploration success, Reserve and Resource increases and good production, as the geological potential becomes better understood
- The start of royalty payments will now almost certainly be initiated by the expiry of a time hurdle in July 2022, rather than the 450,000 ounce production hurdle
- Production at Mt Pleasant, part of Zijin’s larger Paddington Operations, has been intermittent with small production from stockpiles and pillar recovery at the Homestead underground mine, while exploration and mine planning takes place on the Tuart and Racetrack orebodies
- During Q2 there was no reported production on the royalty area
- Zijin’s announcement in their 2019 Annual Report of plans for a A$550M, 3.3Mtpa low grade / refractory heap leach project is likely to include the Racetrack Resource in our royalty area, but details of timing and ore source sequencing have not yet been announced, or probably determined; and site management have been advising us of a small underground operation being assessed on the Tuart orebody
- Subsequent to the end of the second quarter, on July 28, 2020, the Company announced the closing of its previously announced business combination resulting in the reverse takeover (“RTO”) of Fengro Industries Corp.
- In connection with the RTO, Elemental completed a brokered subscription receipts financing for gross proceeds of approximately $24 million
- On July 30, 2020, Elemental announced the commencement of trading of the Company’s shares on the TSX-V under the symbol “ELE”
- Elemental joined Discovery Group, an alliance of public companies focused on the advancement of mineral exploration and mining projects with a proven track record of generating shareholder value through responsible, sustainable, and innovative development
Elemental is a gold focused royalty company with a portfolio of five royalties over producing assets spanning Burkina Faso, Chile, Mexico, Kenya and Western Australia. The portfolio is heavily weighted towards precious metals and producing royalties, providing a diversified foundation of revenue from the outset, while minimising shareholder dilution.
Richard Evans, FAusIMM, is 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.
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 firstname.lastname@example.org.
Elemental Royalties Corp. is a proud member of Discovery Group. For more information please visit: discoverygroup.ca or contact 604-653-9464.
Neither the TSX Venture Exchange Inc. nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange Inc.) accepts responsibility for the adequacy or accuracy of this press release.
This press release contains certain "forward looking statements" and certain "forward-looking information" as defined under applicable Canadian and U.S. 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. The forward-looking information contained herein is provided for the purpose of assisting readers in understanding management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. Forward-looking statements and information include, but are not limited to, statements with respect to the Company's financial guidance, outlook, proposed plans for acquiring additional royalty and similar interests and the potential of such interests to provide returns and the completion of mine expansion under construction phases at the mines or properties that the Company holds an interest in. Forward-looking statements and information are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that, while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual actions, events or results to be materially different from those expressed or implied by such forward-looking information, including but not limited to: the impact of general business and economic conditions; the absence of control over mining operations from which Elemental will receive royalty payments and risks related to those mining operations, including risks related to international operations, government and environmental regulation, delays in mine construction and operations, actual results of mining and current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined; accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties or interruptions in operations; problems inherent to the marketability of gold and other metals; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses; industry conditions, including fluctuations in the price of the primary commodities mined at such operations, fluctuations in foreign exchange rates and fluctuations in interest rates; government entities interpreting existing tax legislation or enacting new tax legislation in a way which adversely affects Elemental; stock market volatility; regulatory restrictions; liability, competition, loss of key employees , other related risks and uncertainties. Elemental undertakes no obligation to update forward-looking information except 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, readers are advised not to place undue reliance on forward-looking statements or information.
Cautionary Note to U.S. Persons Concerning Estimates of Reserves and Measured, Indicated and Inferred Resources
Information contained or referenced in this press release or in the documents referenced herein concerning the properties, technical information and operations of Elemental has been prepared in accordance with requirements and standards under Canadian securities laws, which differ from the requirements of US securities laws. The terms "mineral resource", "measured mineral resource", "indicated mineral resource", "inferred mineral resource" “mineral reserve”, “probable mineral reserve,” and “proven mineral reserve” used in this press release or in the documents incorporated by reference herein are mining terms as defined in accordance with NI 43-101 under guidelines set out in the Definition Standards for Mineral Resources and Mineral Reserves adopted by the Canadian Institute of Mining, Metallurgy and Petroleum Council on May 10, 2014. While such terms are recognized and required by Canadian securities laws, they are not recognized by SEC standards and normally are not permitted to be used in reports filed with the SEC. Investors are cautioned not to assume that all or any part of the disclosed mineral resource estimates will ever be confirmed or converted into reserves that meet the definitions used by the SEC. Disclosure of contained ounces are or may be permitted disclosure under regulations applicable to Elemental; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in-place tonnage and grade without reference to unit of production measures. Accordingly, certain information contained in this press release or in the documents incorporated by reference herein concerning descriptions of mineralization and mineral resources under these standards may not be comparable to similar information made public by US companies subject to reporting and disclosure requirements of the SEC.