David Garofalo's Gold Royalty to acquire Ely Gold Royalties

Gold Royalty (NYSE-AM: GROY), which went public in March and has a portfolio of 18 net smelter return royalties ranging from 0.5% to 2.0% covering 12 projects in the Americas, is acquiring Ely Gold Royalties (TSXV: ELY; US-OTC: ELYGF) in a deal valuing Ely at about $300 million.

Ely Gold Royalties is focused on Nevada and has royalties on three of the state's largest gold mines- Jerritt Canyon, Goldstrike and Marigold - as well as on the Fenelon mine in Quebec operated by Wallbridge Mining (TSX: WM).

Under the proposed deal, shareholders of Ely Gold Royalties have the option of receiving $1.46 per share in cash for each share they own, or 0.245 of a Gold Royalty share. The transaction represents a 42% premium to Ely Gold shareholders based on the 30-day volume weighted average price of the shares of Gold Royalty and Ely Gold ending on June 18.

If the transaction closes at the maximum aggregate cash consideration of $84 million, shareholders of Gold Royalty will own about 55% of the combined company and Ely Gold shareholders 45% on a fully diluted basis.

The combined company will have about US$33 million in cash, as well as "greater access to equity and debt capital markets and the critical mass to drive significant growth through acquisitions," the companies stated in a press release.

A Wallbridge Mining employee logs core samples at the company's Fenelon gold project. Credit: Wallbridge Mining.

Trey Wasser, Ely Gold's president and CEO, noted that the transaction is a "great outcome" for his company's shareholders, and "provides an immediate, compelling premium, a significant cash component and the opportunity to continue to participate in the growth of an outstanding combined asset portfolio."

Wasser, who will join the combined company's board of directors, also noted that the deal "provides the scale, balance sheet, access to capital and management team to drive significant growth and creates an excellent platform for further consolidation in the royalty space."

Ely Gold will hold a shareholders' meeting in August to seek approval for the deal.

Gold Royalty's president, CEO and chairman, David Garofalo, said the acquisition is "consistent" with the company's strategy of "identifying opportunities to create shareholder value," and that shareholders of the combined entity "will benefit through their participation in a larger, well-funded, and more diverse company that has the ability to acquire royalties in a variety of high-return projects globally."

He also noted that the acquisition could result in "further potential upside through a significant value re-rating."

In an interview at The Northern Miner's Global Mining Symposium in May, Garofalo noted that if companies want to attract generalist investors they need scale, adding that: "I think there's lots of pent-up M&A that is likely to come out in the coming months. In royalties, there has been a proliferation over the last couple of years. There's going to be a reckoning there."

Garofalo, previously served as CEO of Goldcorp between 2016 and 2019 until its merger with Newmont (TSX: NGT; NYSE: NEM). Before that, he was president and CEO of Hudbay Minerals (TSX: HBM; NYSE: HBM) (2010-2015) and vice president finance and chief financial officer at Agnico Eagle Mines (TSX: AEM; NYSE: AEM) (1998-2010).

Gold Royalty was spun out of GoldMining (TSX: GOLD; NYSE:GLDG) after its IPO on the NYSE American in March.

At presstime in Toronto, Ely Gold Royalties was trading at $1.22 per share within a 52-week range of 78 ? and $2.09.