In a news release, Ely Gold Royalties Inc. (ELY:TSX.V; ELYGF:OTCQX; I4U:FSE) announced it agreed to purchase a 1% net smelter returns royalty on 46 mining claims in Ontario from Sanatana Resources for total consideration of $3 million.
The claims, also known as the Watershed property, are located in Ontario's Yeo and Chester counties and surround the Coté gold deposit. Some of the claims were included in a feasibility study done in 2018. The Coté project is a joint venture between IAMGOLD and Sumitomo Metal Mining.
The total consideration Ely Gold will pay Sanatana for the Watershed royalty will consist of $2.5 million in cash and 1 million Ely Gold warrants. The warrants will be exercisable for five years at CA$1.31 apiece and will have a four-month holding period.
The completion of the sale is based on the following conditions: "(i) receipt by Sanatana of a waiver from IAMGOLD of its right of first refusal as provided in Watershed Royalty ("ROFR"); (ii) the negotiation of a definitive agreement; and (iii) applicable approval of the TSX Venture Exchange." There is a 90-day period of exclusivity.
Also in conjunction with this deal, Ely Gold will pay Sanatana $10,000 for assignment of the rights and interest in Sanatana's 2016 purchase agreement with IAMGOLD for the claims. The Nevada-based royalty firm also will buy $500,000 worth of Sanatana common shares at CA$0.30 per share through a Sanatana nonbrokered private placement.
Ely Gold noted that there are certain deferred payments: "$1,500,000 upon a production decision by IAMGOLD on the Watershed Property; and $1,500,000 upon the commencement of commercial production by IAMGOLD on the Watershed Property."
"In the event that IAMGOLD exercises the ROFR and either of the Deferred Payments are made to Ely Gold, it will pay 50% of any such Deferred Payments to Sanatana," the company reported.
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