Ely Gold Royalties (ELY) - Growing Pains & Expected Gains

October 23 2020, 15:16 GMT+01:00

Ely Gold Royalties

  • TSX-V: ELY
  • Shares Outstanding: 137.35M
  • Share price: C$1.24 (22.10.20)
  • Market Cap: C$170.31M

Ely Gold Royalties is a Nevada-focused royalty investment company. They generate revenue by selling mineral properties to mining companies while retaining a long-term royalty that pays them for the life of the mine. Their business model includes the purchase of existing royalties from third parties as well as optioned sales of properties that provide ongoing revenue and eventual royalties. 

Ely Gold assemble valuable land packages near producing mines, which they sell with a life-of-mine royalty to mine operators. Trey Wasser explains how they have been advancing their royalty portfolio and property generation programme. 

The market has been paying attention and they have grown from C$0.56 and are now at C$1.32. The positive gold environment has allowed them to increase the size of deals that they are doing. Eric Sprott has invested and is the only royalty company that Sprott is invested in says Wasser. 

Please have a look at the previous interviews with Ely Gold and Wasser.

Interview with Trey Wasser, President and CEO of Ely Gold Royalties (TSX-V: ELY). 

We Discuss: 

  • 1:47 - Company Overview  
  • 2:35 - Then VS Now; History & Progression of Ely Gold 
  • 8:15 - Share Price Volatility Reasons & Potential Listing on NYSE 
  • 14:59 - Aggressive or Careful: Changes of Approach 
  • 16:54 - Q&A: Trey's Beef with Rick Rule? 
  • 18:43 - Fundamental Criteria for Projects 
  • 22:16 - Expectations for the Gold Market 
  • 25:46 - Strategies for Growth & Strengthening the Portfolio 
  • 29:04 - Resources & Facilities Available; E. Sprott Helping Out? 
  • 31:02 - Where Does Ely Gold Go From Here? 

Company Overview 

Ely Gold Royalties is a junior Royalty company with a jurisdictional focus primarily in Nevada, and secondarily in Canada, and they focus on Gold precious metal Royalties. By owning Royalties either purchased or generated through their property generation programme they've built quite a portfolio and the market is really starting to pay attention. 

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Ely Gold teamed up with Jerry Bachmann, the head of their Nevada Royalty subsidiary, and has been prospecting, selling properties and retaining Royalties for over 35-years. So, they have Jerry's database, and in 2017, purchased Bill Sheriff's portfolio and database tooEly Gold has a long history of staking, acquiring and consolidating property packages in Nevada, selling those and retaining Royalty. They now also purchase Royalties as their stock moved up and have access to more capital. Eric Sprott is involved to help them purchase some Royalties on some of Nevada's largest Goldmines. 

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Ely Gold Corp. Key Assets - Ely Gold Corporate Presentation Oct. '20

Progression of Ely Gold 

In 2019, Ely Gold were doing deals of USD$1M-USD$2M, then in March 2020, were doing deals of USD$5 -USD$10M. They are focused on maximising deals at about 10% of their market cap so are now looking at transactions up to as large as USD$20M 

Ely Gold has the Royalty generation programme, which has allowed them to build up to almost 40 properties in their exploration portfolio, most of which were generated through property sales. They also have 26 properties in their development asset portfolio, many of which were generated, and some were purchased, but in the development assets the criteria are those properties must be at or near to producing mines or projects that are in the permitting process for building a mine. The exploration and development-stage assets are covered with the Royalty-generation model, and Ely Gold are getting paid through the property sales and retaining the Royalty. This allows Ely Gold to retain shareholder capital in their Royalty acquisition programme on assets that are at or near production. In the last 12-18-months, they’ve purchased Royalties which would make up their 11 key assets of which 9 are at currently producing mines. 3 of those Royalties are already producing and 10 of the 11 are operated by companies that are already operating mines in the jurisdiction. These are on some of Nevada's largest Goldmines and operated by some of the best operators in the Goldmining business explains Wasser. 

Wasser forecasts that Ely Gold will do about $2.5M in revenue this year which should grow to about USD$5M next year, expanding to $7M and out to USD$10M, and by 2025 growing to over $20M.   

Share Price 

Ely Gold has been the best-performing Royalty company in the entire Royalty universe over the last 12-months by a wide margin says Wasser.  The share price went up to nearly C$2 at one point and then dropped back down to C$1.35 – C$1.36 now and Wasser adds that they are happy to see this consolidation, and the stock price pulling back a little bit, allowing investors to get in. With a C$200M market cap they are trading at about 1 x Net Asset Value and competitors trading at over 2 x their Net Asset Value, buWasser says that when you compare Ely Gold on a Net Asset Value basis to the other companiesthe quality of the mines that are already built and operating and the operators that are producing at those mines, their portfolio will literally stand up against any competitor. 

In March 2020, Ely Gold were at C$0.60c and by May had moved to about C$0.80c, then they brought in some new institutional shareholders and with new investment, raised over C$17M and before it closed the stock had run up to USD$2. The shareholders made profits in the stock and new shareholders came in too. Wasser thinks Gold prices will go higher and when Gold prices turn again, he expects their stock will rise too. 

Ely Gold are considering the NYSE as an option as it expands the shareholder base, especially in the US where they’re seeing a lot of attention. They are a Canadian company, and their primary listing is in Canada but most assets are in the US. With the TSX-V, they also graduated this year from the OTC-QB to the OTC-QX and are on the premier OTC listing. In terms of graduating to the NYSE, there's certain requirements that Ely Gold must meet, and they think that is on the cards probably next year. 

Project Criteria 

Now that the Gold price is pulling back, there is a lot more competition and what is really affecting the Royalty market is a plethora of new companies popping up says Wasser and the space is more competitive. When there is a bidding process, Ely Gold will not overpay, and they will restrict themselves on the size and the valuation of transactions.  

Wasser doesn’t get involved in predicting what the Gold price will do next but says that if people are investing in their company, then they want to be invested in Gold. When the price of Gold goes up the shareholders are happy, he saysHe does say however that, we couldn't be in a better environment for Gold right now.  

Growth Strategies 

Ely Gold announced a Royalty purchase this morning near to their Marigold project. With Gold pulling back now they will continue to acquire Royalties says WasserEly Gold plan to keep announcing deals on an ongoing basis and will continue to grow the company and they plan to get their share of the deals based more on relationships and strategic acquisitions than a bidding process.  

Eric Sprott is involved with Ely Gold and Wasser says that having him on the team is invaluable. They are the only Royalty company that Eric has invested in so there are opportunities on both sides. Wasser says that last year, Eric gave them a line of credit which allowed them to do the VEK transaction that brought in the Goldstrike, REN and the Marigold Royalties. Eric also sold them 0.5% NSR on his Jerritt Canyon mine that he owned personally.  

Wasser states that on the Royalty-generation side, Ely Gold is probably more active than they’ve ever been and with the Gold market and the market for exploration juniors to be able to raise money again, the demand for their properties from exploration companies in Nevada is at an all-time high. On the Royalty front they're continuing to see opportunities and will add Royalties when they fit. On the less expensive side, like the Marigold deal that was announced today, which was under a USD$1M transaction. This won't fall into their key assets right now, but it is a development asset and, in a place where SSR mining is expanding the Marigold mine and where Ely Gold already has a Royalty, so it fits perfectly in their portfolio. This was bought at a very attractive price says Wasser.  

Expansion is an important part of the Ely Gold business as a longer-term Royalty generation model. Ely Gold are different to other companies says Wasser as they manage the portfolio of exploration and development assets in consolidating claim packages and putting old mining districts togetherSome assets have been inherited or purchased and Ely Gold do a lot of work providing data and support for the exploration company doing the work.  

If anybody's interested in hearing more of the Ely Gold story, the most recent presentation is on YouTube now. Wasser is keen to encourage people to learn the whole Ely Gold story and what they’re doing and see the value in investing in our company. 

To find out more go to Ely Gold Royalties' website 

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