Electric Royalties Announces Agreement To Acquire Cash-Flowing Copper Stream From Minera Cobre Verde in Chile

ACCESSWIRE · (Electric Royalties Ltd.)
Electric Royalties Ltd.
7 min read

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VANCOUVER, BC / ACCESSWIRE / September 18, 2024 / Electric Royalties Ltd. (TSXV:ELEC)(OTCQB:ELECF) ("Electric Royalties" or the "Company") is pleased to announce the signing of a binding letter agreement dated September 17, 2024 (the "Agreement") with Minera Cobre Verde ("MCV"), a subsidiary of Cobre y Metales, to acquire a copper stream (the "Stream") on the Minera Cobre Verde Mine ("MCV Mine"), located in the Antofagasta Region of Chile (the "Transaction").

Under the terms of the Agreement, Electric Royalties will pay consideration to MCV of US$2.1 million to acquire the Stream, whereby Electric Royalties will have the immediate right to acquire a fixed amount of 76,000 pounds of copper monthly at a fixed price of US$2.75 per pound for a term of four years. The Stream will be cash-settled and is not dependent on actual copper production at the MCV Mine.

The parties will also have the opportunity (by mutual agreement) within 30 days of closing of the Transaction to increase the amount of the Stream by an additional 76,000 pounds of copper monthly (the "Opportunity") by Electric Royalties paying an additional US$2.1 million in cash to MCV.

Brendan Yurik, CEO of Electric Royalties, commented, "With this transaction, Electric Royalties is gaining direct exposure to copper prices over the next four years and is progressing towards becoming cash flow positive ahead of our numerous advanced royalties expected to enter or re-enter production over the next six to 48 months.

"We are thrilled to be partnering with MCV on our first streaming acquisition - a transaction that's expected to significantly boost our revenue and cash flow on a per share basis, while also providing long-term potential to partner and help fund production expansion in the future. MCV routinely lowers risk by buying production material from multiple local sources, an approach in which Franck Lan?on and his management team have tremendous experience."

Neither MCV nor Cobre y Metales is a Non-Arm's Length Party of the Company or its Associates or Affiliates, within the meaning of TSX Venture Exchange policy.

Transaction Highlights:

  • Accretive to Electric Royalties' cash flow

    • Electric Royalties expects to potentially benefit from copper prices projected to reach US$10,100 per metric ton in 2025, according to a Goldman Sachs note published on September 2, 20241.

    • The Stream will have a term of four years from closing. Payments will be settled in cash rather than physical copper and will be calculated each month as copper payable multiplied by the difference between the average LME monthly spot price and the fixed copper price of US$2.75 per pound.

    • Illustrative potential revenues from the Stream are as follows:

      • at a copper price of US$11,000 per metric ton, equating to approximately US$5 per pound, the Stream (without exercise of the Opportunity) would equate to a monthly revenue stream of approximately US$162,450 (approximately US$1.95 million annually).

      • at a copper price of US$11,000 per metric ton and if the Opportunity is exercised, the monthly revenue stream will be approximately US$324,900 (approximately US$3.9 million annually).

      • at a copper price of US$8,800 per metric ton, equating to approximately US$4 per pound, the Stream (without exercise of the Opportunity) would equate to a monthly revenue stream of approximately US$90,250 per month (approximately US$1.1 million annually).

      • at a copper price of US$8,800 per metric ton and if the Opportunity is exercised, the monthly revenue stream will be approximately US$180,500 (approximately US$2.2 million annually).

    • Provides Electric Royalties immediate cash flow over the next four years while portfolio royalties mature and provides high leverage to potentially increasing copper prices, provided there is no guarantee that copper prices will increase or even maintain at current prices over the term of the Stream.

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