{kanada_flagge}EMX Royalty Corp (TSX: EMX; FRA: 6E9) functions like a Swiss Army knife for the resource sector, compact and universal. At the same time, the company is an evolved one-of-a-kind entity that has only acquired its all-around capabilities through the diligence and perseverance of its consistent management team over its more than 20-year history. Like the knife that cuts, uncorks, opens cans, cuts out or stabs as needed, EMX creates, secures, options, sells or trades commodity projects and associated licenses, while also being a major idea and venture capital provider to the resource industry. Holdings on five continents include gold, silver, copper, lead, zinc, cobalt and other metals. Assets range from royalty properties to early-stage exploration projects. Depending on an investor’s needs and preferences, EMX thus serves multiple purposes, some of which may seem contradictory at first glance. The most important are access to opportunities and risk management. The whole is greater than the sum of its parts.
{kanada_flagge}EMX Royalty Corp (TSX: EMX; FRA: 6E9) functions like a Swiss Army knife for the resource sector, compact and universal. At the same time, the company is an evolved one-of-a-kind entity that has only acquired its all-around capabilities through the diligence and perseverance of its consistent management team over its more than 20-year history. Like the knife that cuts, uncorks, opens cans, cuts out or stabs as needed, EMX creates, secures, options, sells or trades commodity projects and associated licenses, while also being a major idea and venture capital provider to the resource industry. Holdings on five continents include gold, silver, copper, lead, zinc, cobalt and other metals. Assets range from royalty properties to early-stage exploration projects. Depending on an investor’s needs and preferences, EMX thus serves multiple purposes, some of which may seem contradictory at first glance. The most important are access to opportunities and risk management. The whole is greater than the sum of its parts.
EMX combines the leverage of early-stage investing with a portfolio approach
EMX combines the extreme leverage of early-stage individual investments with diversification with a portfolio approach that one would otherwise expect to find only in a fund. At the same time, EMX is precisely not a fund, but entrepreneurially managed. Decisions are made by geologists, not purely financial investors. Founder Dave Cole (61) and his team currently employ 15 permanent geologists and additional freelance consultants around the world who are constantly on the lookout for new opportunities for the company. Their knowledge and expertise alone can transform a piece of land that is worthless in itself into an investable raw material project, giving it the chance to become a mine in the first place.
Decades usually pass in between, though, and the risk of failure is extremely high. EMX therefore consistently outsources: the projects are in turn passed on to hungry explorers, who then take on the task of putting capital and labor into the projects. In return, EMX lets itself be paid with a mix of shares, cash and milestone payments and, above all, royalties. If a company can no longer make the payments, the project reverts to EMX. The cash flow from royalties is the most uncertain and most distant payment stream, but also the most valuable in the long term, because in the event of successful production, EMX benefits for life – based on the life of a project – from the entrepreneurial success without having to take any entrepreneurial risk itself. License fees – usually 0.5 to 2 percent – are calculated from gross revenues. Therefore, high costs or inflation do not play a role for this side of the EMX business.
EMX was worth an investment to industry leader Franco Nevada
The royalty and streaming industry is dominated in mining by three major players: Franco-Nevada, Wheaton Precious Metals and Royal Gold together account for 94% of the market capitalization in the segment. In addition, despite its long history of development, EMX still looks almost like an (advanced) start-up with a current market capitalization of around CAD 270 million. However, major investors have long since recognized the value of the business model and its long-term prospects. Last year, even the industry leader Franco-Nevada made a strategic investment in EMX – at a premium to the market value at the time. This was an accolade for EMX, as Franco does not normally invest in other royalty companies. Other well-known names on the shareholder list are Newmont, Sprott or SSR-Mining. One reason for the entry of mining experts and companies is certainly not only the impressive list of about 300 projects and about 180 royalties that EMX has collected, but also the fact that EMX holds about 30 percent of its portfolio not in gold, but in the strategic battery metals segment. This segment is expected to become one of the boom sectors in mining for the foreseeable future. Other well-known names on the list of shareholders include Adrian Day, Rick Rule, Frank Holmes, etc.
EMX invests along the entire development path of projects. Instead of rigid investment rules, opportunity always decides in the end: In this way, EMX has already bought past producers out of insolvency or acquired royalties and even entire royalty portfolios from other mining companies such as SSR Mining. In the 20 years of its existence, EMX has gained such a good reputation as a “project picker” that various large companies, such as South 32 or Rio Tinto, have secured the right of first refusal for new projects, at least regionally, or have agreed on regional alliances.
2023 could be a transformative year for EMX
The year 2023 could become a special year for EMX and also for founder Dave Cole, as there is a good chance that EMX will become a dividend stock itself for the first time in that year. This has always been the ambitious goal and it would also be the crowning achievement of the business model, which seeks to combine extreme risk with the greatest possible security. The move from project generator to dividend company should open up a whole new layer of more conservative investors to the company, who are interested in the permanent return on their money.
Bottom line: while EMX already has a sizable fan club (10,500 in North America), it is still likely to be known predominantly only to die-hard commodity investors. Other mining royalty companies don’t even bother to create projects and licenses themselves. They simply buy or trade existing licenses. As such, these companies act more like financial investors and lack the operating cash flow and creative surprise element of ground-floor entry that sets EMX Royalty apart from all its competitors. Independent market watchers such as Seeking Alpha financial infuencer Taylor Dart have calculated the potential for EMX to generate $26 million in cash flow in 2023. We at Goldinvest.de are committed to making EMX’s name known to a broader range of shareholders in Europe in the future. After all, EMX is a smart alternative to commodity funds or to ETFs that only play the commodity market passively or from the second row.
EMX in a nutshell:
– EXM is a major venture capital investor in the discovery of new commodity deposits.
– Unlike royalty firms, EMX creates a good portion of its investments out of thin air.
– EMX offers the benefits of a fund without being a fund. Its investments are diversified.
– EMX will very likely become a dividend company itself by the end of 2023 after more than 20 years of incubation.
– EMX was worth investing in even for Franco Nevada, the largest royalty company in the world. Franco’s strategic investment last year was an accolade for EMX. (At a premium – 25% to market price – details in April 2022 press release).
– EMX is not a pure gold royalty company, but is diversified by sector.
– EMX provides investors with the opportunity to gain exposure to political risk countries such as Botswana (Premium Nickel Resources Ltd. (TSXV: PNRL)). There, EMX holds 5 percent of the shares through a strategic investment.
– EMX reduces the risk of its early entry by making initial investments, some of which are very small. For example, the Balya project in Turkey was staked 20 years ago for an initial CAD 18,000 and subsequently sold for CAD 100,000 plus 4% royalty. The first royalty check for 95,000 CAD then fluttered into the house in the 3rd quarter of 2022. From 2024 onwards, the private operator of the project could easily pay a royalty in the millions annually.
– As near-term catalysts that could impact the company’s value, EMX expects negotiations with Chinese state-owned Zijin for royalty on the Timok mine in Serbia to be successfully concluded. Zijin does not dispute the royalty obligation as such, but the parties disagree on the exact amount of the royalty payment. Also relevant to the share price are likely to be the royalty payment releases received by EMX this year: Caserones, Gediktepe, Leeville, Balya and then hopefully Timok.
– EMX could become a dividend stock itself for the first time in 2023.
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According to §34b WpHG i (Germany) and according to Paragraph 48f Paragraph 5 BörseG (Austria) we would like to point out that principals, partners, authors and employees of GOLDINVEST Consulting GmbH hold or may hold shares of EMX Royalty Corp. and therefore a possible conflict of interest exists. We also cannot exclude that other stock letters, media or research firms discuss the stocks we recommend during the same period. Therefore, symmetrical information and opinion generation may occur during this period. Furthermore, there is a consulting or other service contract between EMX Royalty Corp. and GOLDINVEST Consulting GmbH, which means that a conflict of interest exists.
