The following sets forth material information with respect to the Offer. The questions and answers below are not meant to be a substitute for the more detailed description and information contained in the Offer to Purchase and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery. You are urged to read the entire Offer to Purchase and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery carefully prior to making any decision regarding whether or not to tender your Elemental Shares. Unless otherwise defined here, capitalized terms have the meanings given to them in the “Definitions” section of the Circular.
WHAT IS THE OFFER?
Gold Royalty Corp. (“Gold Royalty” or the “Offeror”) is offering to purchase all issued and outstanding Elemental Shares and the accompanying SRP Rights on the basis of 0.27 of a Gold Royalty Share for each Elemental Share.
On December 17, 2021, the last trading day prior to the Offeror's announcement of its intention to make an offer, the closing price of the Elemental Shares on the TSX-V was C$1.30, and the closing price of the Gold Royalty Shares on the NYSE American was US$5.15. Based upon the daily exchange rate posted by the Bank of Canada on December 17, 2021 and such closing prices of the Elemental Shares and Gold Royalty Shares on December 17, 2021, the Offer Consideration has a value of approximately C$1.78 per Elemental Share, representing a premium of approximately 37% as of the close of trading on December 17, 2021.
WHO IS OFFERING TO PURCHASE MY ELEMENTAL SHARES?
Gold Royalty is making the Offer. The Offeror is a corporation organized under the Laws of Canada. The Offeror's head and executive office is located at 1030 West Georgia Street, Suite 1830, Vancouver, British Columbia V6E 2Y3.
WHAT ARE THE GOLD ROYALTY SHARES?
The Gold Royalty Shares are common shares in the capital of Gold Royalty. Gold Royalty is a precious metals-focused royalty company offering creative financing solutions to the metals and mining industry. Its mission is to acquire royalties, streams and similar interests at varying stages of the mine life cycle to build a balanced portfolio offering near, medium and longer-term attractive returns for its investors.
WHAT ARE THE CLASSES OF SECURITIES SOUGHT IN THE OFFER?
The Offeror is offering to purchase all the outstanding Elemental Shares (including any Elemental Shares to be issued upon exercise, exchange or conversion of the Convertible Securities prior to the Expiry Time). As of November 16, 2021, there were 68,991,221 Elemental Shares issued and outstanding. The Offer includes Elemental Shares that may become outstanding after the date of this Offer to Purchase, but before the expiration of the Offer, upon exercise, exchange or conversion of any Convertible Securities. The Offer is not being made for any Convertible Securities or other rights to acquire Elemental Shares.
WHY ARE YOU MAKING THIS OFFER?
The Offeror is making the Offer because it wants to acquire control of, and ultimately the entire equity interest in, Elemental. If the Offeror completes the Offer but does not then own 100% of the Elemental Shares, the Offeror currently intends to acquire any Elemental Shares not deposited to the Offer in a second-step transaction. This transaction would likely take the form of a Compulsory Acquisition or a Subsequent Acquisition Transaction.
WHY ACCEPT THE OFFER?
Gold Royalty believes that the Offer is compelling, and represents a superior alternative to continuing on the course set by the current Elemental Board and management of Elemental. Shareholders should consider the following factors in making a decision whether to accept the Offer:
- Significant Upfront Premium to Shareholders. The Offer represents a 37% premium to Shareholders based on the closing prices of each of the Offeror's and Elemental's shares on December 17, 2021. The Offer implies consideration of C$1.78 per share, which exceeds Elemental's 2021 peak share price.
- The Combination of Gold Royalty and Elemental will create a Sector-Leading Portfolio of 200 Strategic Royalties. The combined entity will have a balanced portfolio of cash flowing, development and exploration royalty assets owned by premier operating partners and located in Tier 1 mining jurisdictions. This provides Shareholders with ownership in a larger, more diversified, higher quality portfolio of royalty assets anchored by cornerstone royalties on portions of the Canadian Malartic Property (Québec, Canada), Fenelon Gold Property (Québec, Canada) and Karlawinda Gold Project (Australia). In addition, the portfolio's peer-leading near-term growth profile will be further complemented by a deep development and exploration pipeline, including Gold Royalty's royalty on REN (Nevada, USA), Gold Royalty's royalty generator model and future acquisitions.
- Enhanced Trading Liquidity. Gold Royalty averaged approximately US$3.2 million of daily trading liquidity over the six months ended December 17, 2021, as compared to approximately US$62 thousand for Elemental over the same period. A combination with Gold Royalty is expected to allow Elemental shareholders to realize an immediate premium in a more liquid vehicle.
- Strong Balance Sheet and Access to Capital. Gold Royalty currently has approximately US$37 million in cash and marketable securities and no debt. With an oversubscribed US$90 million initial public offering in March 2021, Gold Royalty has demonstrated the ability to access capital markets at an attractive cost of capital, providing the combined company with the critical mass to drive continued growth through acquisition.
- Management Track Record in Maximizing Shareholder Value. Gold Royalty has a management team with deep mining and capital markets expertise and an established track record of success in the royalty and mining industry. The Gold Royalty management team has demonstrated its ability, through the recent acquisitions of Ely Gold, Abitibi Royalties and Golden Valley, to successfully execute transformative acquisitions in an increasingly competitive market.
- Clear Path to Re-rate Through Increased Scale, Asset Quality and Precious Metals Focus. In combination with Elemental, Gold Royalty will be strategically positioned as a preeminent intermediate gold royalty company. In addition to the upfront premium, Shareholders may benefit from a potential valuation re-rating as a result of the combined company's increased scale, portfolio diversification, trading liquidity, index inclusion within the GDXJ, and the potential for future growth both organically and through acquisition.
WHAT DOES THE ELEMENTAL BOARD OF DIRECTORS THINK OF THE OFFER?
Under applicable securities Laws, a directors' circular must be prepared and delivered by Elemental's board of directors to Shareholders no later than 15 days from the date of commencement of the Offer. The directors' circular must include either a recommendation to accept or reject the Offer, and the reasons for such recommendation, or a statement that the board of directors of Elemental is unable to make or is not making a recommendation, and if no recommendation is made, the reasons for not making a recommendation. On December 23, 2021, Elemental issued a press release stating that its board of directors intended to reject the Offer. However, the Offeror has not been advised by Elemental of the formal recommendation of its board of directors, if any, in respect of the Offer.
WHAT ARE SOME OF THE SIGNIFICANT CONDITIONS OF THE OFFER?
The Offer is conditional upon the specified conditions being satisfied, or where permitted, waived at 5:00 p.m. (Toronto time) on April 27, 2022 or such earlier or later time during which Elemental Shares may be deposited under the Offer, excluding the 10-day Mandatory Extension Period or any extension thereafter, including:
- there having been validly deposited pursuant to the Offer and not withdrawn at the Expiry Time that number of Elemental Shares, together with the associated SRP Rights, which constitutes more than 50% of the Elemental Shares outstanding, excluding those Elemental Shares beneficially owned, or over which control or direction is exercised, by the Offeror or by any persons acting jointly or in concert with the Offeror, if any. This condition cannot be waived by the Offeror;
- there having been validly deposited under the Offer and not withdrawn, at or prior to the Expiry Time, such number of Elemental Shares, together with the associated SRP Rights, that, together with the Elemental Shares held by the Offeror and its affiliates, represents not less than 66.66% of the total number of outstanding Elemental Shares, calculated on a fully diluted basis;
- the Offeror having determined, in its sole judgment, that there does not exist and there shall not have occurred or been publicly disclosed since the date of the Offer, a Material Adverse Effect (as defined herein); and
- certain Regulatory Approvals (as defined herein) having been obtained and/or waiting periods expired, each as more particularly described herein.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER TO THE OFFER?
You have until the Expiry Date of the Offer to tender. The Offer is scheduled to expire at 5:00 p.m. (Toronto time), on April 27, 2022 unless it is extended or withdrawn. Subject to applicable Law, the Offeror may be required to extend the Offer for an additional period of 10 days following the Expiry Date and may extend the Offer for one or more additional periods..
HOW DO I ACCEPT THE OFFER AND TENDER MY ELEMENTAL SHARES?
If you are a registered Shareholder, you can accept the Offer by delivering to the Depositary before the Expiry Time: (a) the certificate(s) or DRS Advices representing the Elemental Shares in respect of which the Offer is being accepted; (b) a Letter of Transmittal in the form accompanying the Offer to Purchase and Circular properly completed and duly executed as required by the instructions set out in the Letter of Transmittal; and (c) all other documents required by the instructions set out in the Letter of Transmittal. If your Elemental Shares are registered in the name of a nominee (commonly referred to as "in street name" or "street form"), you should contact your broker, investment dealer, bank, trust company or other nominee for assistance in tendering your Elemental Shares under the Offer. You should request your nominee to effect the transaction by tendering through a book-entry transfer, which is detailed in the Offer to Purchase and Circular and thus have your Elemental Shares tendered by your nominee through CDS or DTC, as applicable.
If you cannot deliver all of the necessary documents to the Depositary in time, you may be able to complete and deliver to the Depositary the enclosed Notice of Guaranteed Delivery, provided you are able to comply fully with its terms.
Shareholders are invited to contact the Depositary for further information regarding how to accept the Offer.
IF I ACCEPT THE OFFER, WHEN WILL I RECEIVE THE OFFER CONSIDERATION?
If the conditions of the Offer are satisfied or waived, and if the Offeror consummates the Offer and takes up your Elemental Shares, the Offer Consideration for the Elemental Shares you tendered will be delivered to the Depositary as agent for you as a registered Shareholder or to your nominee as soon as possible and in any event no later than three Business Days after the Elemental Shares are taken up.
In accordance with applicable Law, if the Offeror is obligated to take up such Elemental Shares, the Offeror will extend the period during which Elemental Shares may be deposited under the Offer for the 10-day Mandatory Extension Period following the expiration of the initial deposit period and may extend the deposit period for Optional Extension Periods. Any Elemental Shares tendered during the 10-day Mandatory Extension Period and any Optional Extension Period will be taken up and paid for as soon as possible and in any event no later than 10 days after such tender.
IF I DO NOT TENDER BUT THE OFFER IS SUCCESSFUL, WHAT WILL HAPPEN TO MY ELEMENTAL SHARES?
If the conditions of the Offer are otherwise satisfied or waived and the Offeror takes up and pays for the Elemental Shares validly deposited under the Offer, the Offeror intends to acquire any Elemental Shares not deposited under the Offer: (i) by Compulsory Acquisition, if at least 90% of the outstanding Elemental Shares are validly tendered under the Offer, other than Elemental Shares held at the date of the Offer by, or by a nominee for, the Offeror or its affiliates and not withdrawn; or (ii) by a Subsequent Acquisition Transaction on the same terms as such Elemental Shares were acquired under the Offer, if a Compulsory Acquisition is not available or if the Offeror decides not to proceed with a Compulsory Acquisition.
FOLLOWING THE OFFER, WILL ELEMENTAL CONTINUE AS A PUBLIC COMPANY?
Depending upon the number of Elemental Shares purchased pursuant to the Offer, it is possible the Elemental Shares will fail to meet the criteria for continued listing on the TSX-V. If this were to happen, the Elemental Shares could be delisted on the TSX-V and this could, in turn, adversely affect the market or result in a lack of an established market for the Elemental Shares.
If the Offeror acquires 100% of the Elemental Shares, and if permitted under applicable securities Law, the Offeror intends to apply to delist the Elemental Shares from the TSX-V as soon as practicable after completion of the Offer or a Compulsory Acquisition or Subsequent Acquisition Transaction and, subject to applicable securities Law, to cause Elemental to cease to be a reporting issuer under the securities Laws of each province and territory of Canada in which Elemental is a reporting issuer.
WHAT WILL HAPPEN IF THE CONDITIONS OF THE OFFER ARE NOT SATISFIED?
If the conditions of the Offer are not satisfied or, where permitted, waived by the Offeror, the Offeror will not be obligated to take up, accept for payment or pay for any Elemental Shares tendered to the Offer. Subject to applicable Law, the Offeror reserves the right to withdraw or extend the Offer and to not take up and pay for any Elemental Shares deposited under the Offer unless each of the conditions of the Offer is satisfied or, where permitted, waived by the Offeror at or prior to the Expiry Time. Notwithstanding the foregoing, in no case will the Offeror waive the Statutory Minimum Condition.
DOES GOLD ROYALTY BELIEVE THAT THE NECESSARY REGULATORY APPROVALS TO COMPLETE THE OFFER WILL BE RECEIVED?
The Offeror believes that it will receive all requisite Regulatory Approvals within the initial bid period.
WILL I HAVE THE RIGHT TO HAVE MY ELEMENTAL SHARES APPRAISED?
No. Shareholders will not have dissenters' or appraisal rights in connection with the Offer. However, Shareholders who do not tender their Elemental Shares to the Offer may have rights of dissent in the event that the Offeror acquires their Elemental Shares by way of a Compulsory Acquisition or Subsequent Acquisition Transaction. The completion of either a Compulsory Acquisition or a Subsequent Acquisition Transaction may result in registered Shareholders having the right to dissent and demand payment of the fair value of their Elemental Shares. If the statutory procedures governing dissent rights are available and are complied with, this right could lead to judicial determination of the fair value required to be paid to such dissenting Shareholders for their Elemental Shares.
WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
You will not have to pay any brokerage or similar fees or commissions if you are the owner of record of your Elemental Shares and you tender your Elemental Shares under the Offer by depositing the Elemental Shares directly with the Depositary to accept the Offer. However, an investment advisor, stockbroker, bank, trust company or other nominee through whom a Shareholder owns Elemental Shares may charge a fee to tender any such Elemental Shares on behalf of the Shareholder. Shareholders should consult such nominee to determine whether any charges will apply.
HOW WILL CANADIAN RESIDENTS AND NON-RESIDENTS OF CANADA BE TAXED FOR CANADIAN FEDERAL INCOME TAX PURPOSES?
A Resident Shareholder who holds Elemental Shares as capital property and who exchanges such Elemental Shares pursuant to the Offer will not realize a capital gain (or capital loss) on such shares in respect of the exchange unless such Resident Shareholder elects to report such gain (or loss) on such shares in its Canadian tax return for the year of disposition.
Similarly, a Non-Resident Shareholder who holds Elemental Shares as capital property and who exchanges such Elemental Shares pursuant to the Offer will not realize a capital gain (or capital loss) on such shares in respect of the exchange unless such Non-Resident Shareholder elects to report such gain (or loss) on such shares in its Canadian tax return for the year of disposition. In addition, a Non-Resident Shareholder who elects to report a capital gain (or capital loss) in its Canadian tax return for the year of disposition resulting from a disposition of Elemental Shares pursuant to the Offer will not be subject to tax under the Tax Act unless Elemental Shares constitute "taxable Canadian property" other than "treaty-protected property".
Depending on the manner and circumstances in which a Subsequent Acquisition Transaction is undertaken, the tax consequences applicable to a Shareholder who is disposing of Elemental Shares pursuant to a Subsequent Acquisition Transaction could differ in a materially adverse way from the tax consequences that would be applicable to such Shareholder if it were to dispose of Elemental Shares under the Offer. In the case of a Non-Resident Shareholder, a portion of the consideration received on the disposition of Elemental Shares pursuant to a Subsequent Acquisition Transaction could be subject to Canadian withholding tax.
The foregoing is only a brief summary of principal Canadian federal income tax consequences and is qualified by the description of principal Canadian federal income tax considerations in Section 22 of the Circular, "Certain Canadian Federal Income Tax Considerations". Shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them of an exchange of Elemental Shares, including the associated SRP Rights, pursuant to the Offer or a disposition of Elemental Shares pursuant to any Compulsory Acquisition, Compelled Acquisition, Subsequent Acquisition Transaction, or any other disposition in connection with the Offer.
HOW WILL U.S. TAXPAYERS BE TAXED FOR U.S. FEDERAL INCOME TAX PURPOSES?
The exchange of Elemental Shares for Gold Royalty Shares pursuant to the Offer is intended to qualify as a reorganization. If the Offer qualifies as a reorganization, subject to the possible application of the "passive foreign investment company" ("PFIC") rules (described in Section 23 of the Circular, "Certain United States Federal Income Tax Considerations"), the Offer should result in the following U.S. federal income tax consequences: (a) no gain or loss would be recognized by a U.S. Holder on the exchange of Elemental Shares for Gold Royalty Shares pursuant to the Offer, (b) the aggregate tax basis of a U.S. Holder in the Gold Royalty Shares acquired in exchange for Elemental Shares pursuant to the Offer would be equal to such U.S. Holder's aggregate tax basis in Elemental Shares exchanged, and (c) the holding period of a U.S. Holder in the Gold Royalty Shares acquired in exchange for Elemental Shares pursuant to the Offer would include such U.S. Holder's holding period for the Elemental Shares exchanged. The Offeror has not sought or received a ruling from the United States Internal Revenue Service. Accordingly, the Offeror cannot provide any assurance that reorganization treatment will apply to the exchange. If the Offer is not treated as a reorganization, the Offer would be treated as a taxable transaction for U.S. federal income tax purposes.
This summary is qualified in its entirety by Section 23 of the Circular, "Certain United States Federal Income Tax Considerations" and U.S. Holders are encouraged to read that section and consult with their tax advisers regarding the U.S. federal income tax consequences of the Offer, including the possible application of the PFIC rules to them in their particular circumstances.
WHOM CAN I CALL WITH QUESTIONS?
The Information Agent for the Offer is Laurel Hill Advisory Group. You can call the Information Agent at 1-877-452-7184 toll free in North America or at 1-416-304-0211 outside of North America or you can e-mail the Information Agent at [email protected] if you have questions or requests for additional copies of the Offer to Purchase and Circular.
No Offer or Solicitation
This website is for informational purposes only and does not constitute an offer to buy or sell, or a solicitation of an offer to sell or buy, any securities. Gold Royalty Corp.’s offer to acquire the outstanding common shares of Elemental Royalties Corp is being made made solely by, and subject to the terms and conditions set out in the Offer to Purchase and Circular, a copy of which is available on this website. Shareholders are urged to read such materials in their entirety as they contain important information regarding such offer.