Elemental Royalties Corp. (TSX-V: ELE) (OTCQX: ELEMF) is pleased to announce its operating and financial results for the three and nine months ended September 30, 2021. For complete details please refer to the Financial Statements and associated Management Discussion and Analysis for the three and nine months ended September 30, 2021, available on SEDAR (www.sedar.com) or the Company’s website (www.elementalroyalties.com).
Frederick Bell, CEO of Elemental commented:
“Elemental generated record quarterly revenue following maiden production from our operating partner at the Karlawinda gold mine. With the achievement of steady state operations at the end of the quarter, Karlawinda promises to be a cornerstone of Elemental’s portfolio for many years to come. Alongside continuing strong operating performance at Wahgnion, Elemental is now repaid for the 2018 acquisition of the 2.25% NSR royalty on Austral Gold’s Amancaya gold mine in Chile, making it the second royalty after Kwale to be fully repaid.
“We are also excited to see operator funded exploration efforts start to unearth the value across our portfolio with the announcement from Endeavour of a major multi-year exploration programme at Wahgnion. Exploration success has the potential to deliver material value for shareholders alongside continuing organic revenue growth highlighted by the royalty at the Mercedes mine starting to contribute from July 2022. This combination of growing revenue, continuing discoveries at no cost and royalty acquisition opportunities position the Company with the best platform for growth it has had.”
- Capricorn Metals achieved steady-state operations with production of 24,329 gold ounces, with an above budget 92.6% recovery, generating first royalty revenue to Elemental of over A$1 million from sales of 21,921 ounces of gold in Q3 2021.
- Endeavour announced a discovery target of 1.5 to 2.0 million ounces of Indicated Resources at Wahgnion over the next five years with $5 million spent in Q3, consisting of 31,500 meters of drilling with a continued focus on the extension and expansion of the Nogbele mineralization.
- Wahgnion produced 34koz gold ounces in Q3 and is positioned to achieve the lower end of FY-2021 production guidance of 140,000 – 155,000 gold ounces at an AISC of $940 – 990 per ounce, for the post acquisition period commencing on 10 February 2021.
- At Amancaya, challenges in the quarter let to a total of 208 attributable GEOs sold in Q3, providing Elemental with US$0.4 million revenue. Production was lower than forecast due to staff turnover within the underground mining contractor and availability of the underground fleet. An action plan is being implemented by Austral Gold Corp (“Austral”) to improve productivity at the mine and strengthen the underground fleet.
- Mercedes produced 9,722 gold ounces in Q3. A substantial development program is underway to increase access to multiple ore bodies, with gold production on track to achieve 30,000 to 35,000 ounces for the period post-acquisition on April 7, 2021 to December 31, 2021.
- Record quarterly revenue of US$1.9 million for Q3 2021 and US$4.3 million for the nine months ended September 30, 2021 generated from five royalties, including maiden revenue from Karlawinda received in the quarter.
- Record 1,062 attributable gold equivalent ounces1 (‘GEOs’) sold in Q3 2021 and 2,385 attributable GEOs sold in the nine months ended September 30, 2021, at zero cash cost to the Company.
- Record Cash flow from Operations of US$0.8 million before working capital for Q3 2021 (approximately C$0.015/share) and US$1.5 million for the nine months ended September 30, 2021.
- Record Adjusted EBITDA1 of US$1.2 million for Q3 2021, and US$2.4 million for the nine months ended September 30, 2021.
- Net loss of US$0.8 million for Q3 2021, and US$3.1 million for the nine months ended September 30, 2021.
- 2021 guidance revised to 3,400 – 3,800 GEOs as a result of revised production guidance at Amancaya in the quarter.
- Organic growth expected in 2022 with a full year of Karlawinda revenue and the Mercedes royalty payable from July 2022.
- Cash and cash equivalents of US$5.6 million as of September 30, 2021.
In 2021, Elemental expects 3,400 – 3,800 attributable GEOs from its existing portfolio, with over 90% of expected revenue derived from gold and silver production. The revised GEOs for 2021 follows updated production guidance from Austral published in October 2021. In Q1 2021 Austral announced their expectation that production would increase during the second half of the year to meet the 45,000 – 50,000 GEOs guidance for 2021. Despite gradual improvements at the Guanaco/Amancaya mine complex Austral has revised production guidance for 2021 to 30,000 – 35,000 GEOs.
At an US$1,800 per ounce average received gold price the expected 3,400 – 3,800 attributable GEOs would provide Elemental with revenue of US$6.1 to US$6.8 million.
Elemental expects revenue growth to continue in 2022, with a full year of royalty revenue from Karlawinda and first revenue from Mercedes expected in Q3 2022.
Principal Asset Updates
Karlawinda (2% NSR)
Location: Western Australia
Operator: Capricorn Metals Ltd.
Royalty: 2% NSR
- During the September 2021 quarter, Capricorn completed commissioning and ramp-up activities, achieving guided throughput rates on a steady-state basis
- Gold production of 24,329 ounces with an above budget 92.6% recovery
- Mining volumes expected to increase in the December 2021 quarter with the second mining fleet now onsite and operating at full capacity
- From August mill throughput has been above budgeted throughput rate for harder laterite ore
- Processing plant throughput and grade expected to increase as higher grade and soft oxide ore mined in December 2021 quarter
- Construction and commissioning of two additional CIL tanks providing additional leaching time for anticipated higher processing plant throughput is nearing completion
- Production for the year ending June 30, 2022, is expected to be 110,000 – 120,000 ounces inclusive of commissioning production
- Multiple near-pit exploration projects advanced during the quarter and are awaiting assays
Wahgnion (1% NSR)
Location: Burkina Faso
Operator: Endeavour Mining Corp. Royalty: 1% NSR
- On February 10 2021, Endeavour completed the acquisition of Teranga Gold, including the Wahgnion mine
- Wahgnion produced 34,022 gold ounces in Q3 2021 and sold 35,011 gold ounces, a slight decrease on Q2 2021 due to lower mill throughput and recovery rates, reflecting the high proportion of fresh material processed and the impact of the wet season, balanced out by average grade milled increasing slightly to 1.40 g/t as the proportion of higher-grade ore sourced from the Nogbele South deposit rose
- Wahgnion is positioned to achieve the bottom half of production guidance of 140,000 – 155,000 gold ounces for the post acquisition period commencing on 10 February 2021
- Production has been accelerated since commissioning in 2019 to feed the plant which was running at 30% above nameplate capacity. To meet this demand, in September 2021 Endeavour announced a discovery target of 1.5 to 2.0 million ounces of Indicated Resources (21 to 39Mt at 1.2 to 3.0g/t gold) at Wahgnion over the next five years, committing to a US$36 million exploration budget
- An exploration program of up to US$12 million is planned for 2021, of which US$8 million has been spent year to date consisting of 41,100 meters of drilling across 330 drillholes
- During Q3 2021, US$5 million was spent on exploration consisting of 31,500 meters of drilling with a continued focus on the extension and expansion of the Nogbele mineralization, expected to continue in Q4 2021 and in 2022
- Additional delineation drilling at the Fourkoura and Hillside targets, as well as reconnaissance drilling at Ouahiri South, Kassira and Bozogo will also continue in Q4 2021 and in 2022
Amancaya (2.25% NSR)
Operator: Austral Gold Corp.
Royalty: 2.25% Net Smelter Return
- Production at the Guanaco/Amancaya complex totalled 9,422 GEOs (9,120 gold ounces and 21,390 silver ounces) in the quarter. Most production comes from Amancaya, with only residual small scale heap leach production at Guanaco
- Despite gradual improvements at the Guanaco/Amancaya mine complex, Austral Gold has revised production guidance for 2021 to 30,000-35,000 GEOs from 45,000-50,000 GEOs provided at the beginning of the year
- Production was lower than forecast due to staff turnover within the underground mining contractor and availability of the underground fleet. An action plan is being implemented to hire certified instructors and engage a specialized contractor in vertical drilling to improve productivity at the mine, introduce expatriate personnel from Austral’s Casposo mine in Argentina and strengthen the underground fleet with new acquisitions
Mercedes (1% NSR)
Commodity: Gold & silver
Operator: Equinox Gold Corp.
Royalty: 1% NSR
- Mercedes produced 9,722 gold ounces in Q3 2021
- Work underway on substantial development program to increase access to multiple ore bodies
- Royalty revenue is due to Elemental after the earlier of: (a) the date on which 450,000 ounces of gold equivalent have been produced after July 28, 2016 or (b) the sixth anniversary of that date (July 28, 2022). Elemental expects that as a result of the COVID-19 stoppages, the start of royalty payments are likely to be payable from July 28, 2022, rather than the 450,000 ounce production hurdle
- On December 16, 2020 Equinox and Premier Gold Mines (“Premier”) announced that the companies had entered into a definitive agreement whereby Equinox would acquire all of the outstanding shares of Premier. The acquisition was completed on April 7, 2021 on which date Equinox assumed operational control of the Mercedes Mine.
- Equinox have guided gold production is on track to achieve 30,000 to 35,000 ounces for the period post-acquisition on April 7, 2021 to December 31, 2021
Laverton (2% Gross Revenue Royalty)
- Focus’ strategy is to identify sufficient open pit Resources across the Laverton tenement package to commence a Stage 1 mining operation
- Drilling at Laverton has been completed across multiple royalty linked deposits and a number of Mineral Resource updates are in progress
- Subsequent to quarter end, Focus announced a material increase in the Mineral Resource of the Beasley Creek deposit, which was previously mined by WMC in the late 1980s and early 1990s
- The updated Beasley Creek Mineral Resource is:
- Indicated: 3.7 Mt at 2.0g/t for 244koz Au
- Inferred: 0.4 Mt at 1.6g/t for 21koz Au
- Mineral Resource updates are expected to be completed by Q1 2022 to form a preliminary economic assessment of a Stage 1 operation at Laverton
About Elemental Royalties
Elemental is a gold-focused royalty company listed on the TSX-V in Canada and provides investors with lower risk precious metals exposure through a portfolio of nine high-quality royalties. This enables investors to benefit from ongoing royalty revenue, future exploration upside and low operating costs. Elemental’s experienced team seeks to secure royalties in advanced precious metals projects, run by established operators, from its pipeline of identified opportunities.
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.