News

Elemental Royalties Announces Record Revenue And Operating Cash Flow In Q3 2021 Results

November 16, 2021 – Vancouver, BC: Elemental Royalties Corp. (“Elemental” or “the Company”) (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.”

Asset Highlights

  • Capricorn Metals (“Capricorn”) 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.

Financial Highlights

  • 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.

Outlook

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
Commodity: Gold
Operator: Capricorn Metals Ltd. (“Capricorn”)
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
Commodity: Gold
Operator: Endeavour Mining Corp. (“Endeavour”)
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)

Location: Chile
Commodity: Gold
Operator: Austral Gold Corp. (“Austral”)
Royalty: 2.25% Net Smelter Return (“NSR”)
  • 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)

Location: Mexico
Commodity: Gold & Silver
Operator: Equinox Gold Corp. (“Equinox”)
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

On behalf of Elemental Royalties Corp.

Frederick Bell
CEO and Director

Corporate Inquiries:
Dustin Zinger, Investor Relations Manager
Corporate Website: www.elementalroyalties.com
Direct: +1 (604) 653-9464
Email: dustin@elementalroyalties.com

Elemental is a proud member of Discovery Group. For more information please visit: www.discoverygroup.ca or contact 604-653-9464.

TSX.V: ELE | OTCQX: ELEMF | ISIN: CA28619L1076

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.

Qualified Person

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.

Neither the TSX-V nor its Regulation Service Provider (as that term is defined in the policies of the TSX-V.) accepts responsibility for the adequacy or accuracy of this press release.

1 Elemental has included certain performance measures in this press release that do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS). The Company’s royalty revenue is converted to an attributable gold equivalent ounce basis by dividing the royalty revenue received in a period by the average gold price for the same respective period. The presentation of this non-IFRS measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate these non-IFRS measures differently. The production forecast was derived using information that is available in the public domain as at the date hereof, which included guidance and estimates prepared and issued by management of the operators of the mining operations in which Elemental holds an interest. The production forecast is sensitive to the performance and operating status of the underlying mines. None of the information has been independently verified by Elemental and maybe subject to uncertainty. There can be no assurance that such information is complete or accurate.

2 The Tuart deposit in Elemental's Mt Pleasant royalty area has been assigned a historical resource estimate on both conceptual underground and open pit mineralisation on the basis of Norton Gold Fields Limited's announcement dated February 3, 2015, titled "January 2015 Mineral Resource & Ore Reserve update". The estimate was prepared by Norton Goldfields Ltd (ASX: NGF) in accordance with the JORC Code 2012 for the situation at Dec 31, 2014, and is available on the ASX website at: https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01596085. Elemental believes that the resources disclosed are fundamentally reliable but they should not be relied on as a current resource estimate, and no qualified person of Elemental has done sufficient work to classify the above estimate as current Mineral Resources. Elemental is not treating the historical estimate as current Mineral Resources or Mineral Reserves and it is unknown how much of the historical resource will be economic under the proposed mine plan. Elemental understands that there has been no production from the area since the historical resource estimate was published

3 Panoramic Resources Ltd.’s ASX announcements dated September 30, 2015, titled “Mineral Resources and Ore Reserves at June 30, 2015”, The ASX announcement is prepared in accordance with the JORC Code and is available on Panoramic’s website at https://panoramicresources.com/asx-announcements/.

Cautionary note regarding forward-looking statements

This release contains certain “forward looking statements” and certain “forward-looking information” as defined under applicable Canadian 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.

Forward-looking statements and information include, but are not limited to, statements with respect to the future growth and development of the Company. 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 statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of Elemental to control or predict, that may cause Elemental’s actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to: the requirement for regulatory approvals and third party consents, the impact of general business and economic conditions, the absence of control over the mining operations from which Elemental will receive royalties, including risks related to international operations, government relations and environmental regulation, the inherent risks involved in the exploration and development of mineral properties; the uncertainties involved in interpreting exploration data; the potential for delays in exploration or development activities; the geology, grade and continuity of mineral deposits; the impact of the COVID-19 pandemic; the possibility that future exploration, development or mining results will not be consistent with Elemental’s expectations; accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties or interruptions in operations; fluctuating metal prices; unanticipated costs and expenses; uncertainties relating to the availability and costs of financing needed in the future; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations; currency fluctuations; regulatory restrictions, including environmental regulatory restrictions; liability, competition, loss of key employees and 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.