Electric Royalties Ltd (TSX-V:ELEC, OTC:ELECF) announced it has entered into a Letter of Intent to acquire a portfolio of 126 lithium properties spanning more than 1 million acres in Eastern Canada, a region the company believes could be the center of clean energy metals production in the decades to come.
The company said the properties cover prospective land on the same geological trends and surround major lithium discoveries in Ontario, Canada.
“Of these 126 properties, 101 have been optioned to various companies under a royalty prospect-generation model, whereby exploration companies make cash payments to the royalty prospector,” Electric Royalties CEO Brendan Yurik said in a statement.
“This generates near-term cash flow while maintaining long-term upside via royalties on those assets.”
The company anticipates that the portfolio will yield option payments of approximately C$1.4 million in 2024, C$2 million in 2025, and C$2.7 million in 2026, for a total of about C$6 million over the next three years.
Yurik noted that the acquisition could not have come at a better time as the United States is experiencing an electric vehicle (EV) battery boom.
“The lithium properties of Eastern Canada are strategically located in close proximity to the U.S. battery belt that stretches from the northeast to the southeast of the country,” the CEO said.
“Canadian-sourced lithium is expected to play an important role in the EV battery supply chain, especially since the U.S. Inflation Reduction Act incentivizes lithium sourced from Canada.”
Proposed transaction terms
Electric Royalty will pay the vendors – Perry English, Michael Kilbourne, 1544230 Ontario Inc. and Gravel Ridge Resources (ASX:RID) Ltd. – C$75,000 in cash in consideration for entering into an exclusivity period ending March 28, 2024, to perform due diligence on the lithium project portfolio.
On closing of the transaction, Electric Royalties will issue 3 million shares and make a cash payment of $3 million less the exclusivity fee and certain payments received by the vendors under any earn-in, option, royalty, or similar agreement on or after January 1, 2024.
It will also make a cash payment of C$750,000 on the 12-month anniversary of the closing and a further C$750,000 cash payment on the 18-month anniversary of the closing.
Electric Royalties is a royalty company established to take advantage of the demand for a wide range of commodities (lithium, vanadium, manganese, tin, graphite, cobalt, nickel, zinc and copper) that will benefit from the drive toward electrification of a variety of consumer products: cars, rechargeable batteries, large scale energy storage, renewable energy generation and other applications.
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