ELYGF - Ely Gold Royalties (ELYGF)(ELY:CA) - Poised to Broaden Its Horizon?
Transactions expected to close soon. We expect Ely to close on several announced transactions this month. First is the acquisition of an additional one percent NSR royalty on Coeur Mining’s Lincoln Hill property announced on July 21. Second is the acquisition of a package of three net smelter returns (NSR) royalties on properties in Nevada announced on August 11.Ready to expand its opportunity set? Ely Gold Royalties has largely focused its efforts on Nevada. However, based on an expanding universe of royalty companies and an increasingly competitive acquisition environment, we would not be surprised if the company expands its opportunity set by considering other mining jurisdictions, including in Latin America. While we would expect gold royalties to remain central, an expansion of the opportunity set could also extend to silver. In our view, management has an extensive network and successful record of building relationships which we think could successfully be applied to other jurisdictions.Updating estimates. During the second quarter, Ely reported a net loss of C$(0.02) per share compared to net income of C$0.01 during the prior year period and our estimate of C$0.00. The variance to our estimate is attributed to higher amortization, management fees and share-based payments although revenue of $1.1 million was modestly above our estimate. We have trimmed our 2020 and 2021 EPS estimate to $(0.01) and $0.04 from $0.01 and $0.05, respectively, to reflect modestly higher costs.Rating remains Outperform. Ely has made several significant transactions in recent months that are expected to accelerate revenue and cash flow growth. According to the company's July presentation, the company had total liquidity of C$19.5 million, including C$6 million of availability under its line of credit and thus has ample financial flexibility for additional royalty acquisitions. Based on the company’s successful record of growing its project portfolio coupled with a constructive gold price outlook, we think Ely Gold Royalties offers attractive growth potential.Read More >>