Empress Royalty (EMPR.TSX.V) (EMPYF:OTCQB) is a Royalty & Streaming company with a portfolio of 15 gold and silver investments in Mexico, Mozambique and Canada.
What is a Royalty & Streaming company, and why are these wealth-creation instruments gaining favor with retail and institutional investors?
Let's start here: if bankers knew how to read drill logs—Royalty & Streaming companies wouldn't exist.
Lacking the geological expertise to accurately assess risk—big banks typically recoil when they get close to a proposed mine site.
"If we make a bad loan to a one mine company, we own the mine," stated CIBC Capital Markets, "and we don't want to own mines."
Royalty companies give cash to miners in exchange for a share of the mine's future sales.
It's like lending someone $10,000 to build a bakery—with the baker agreeing to give you 1% of all future bread sales. If the bakery never opens, you lose.
If the bakery produces bread for 30 years, you win.
If the price of bread triples, you win.
If the bakery doubles production, you win.
A "streaming" company is similar but it takes 1% of the baked bread, not money from the cash register.
Empress Royalty is solely focussed on gold and silver.
Streetwise recently spoke with EMPR's President and CEO, Alexandra Woodyer Sherron. We asked about her background and the changes she's seen in the mining industry over the last 15 years.
"I started at PricewaterhouseCoopers," recalls Woodyer Sherron, "I joined as an analyst at Endeavour Financial, worked my way up through the ranks. Opened the London office and became Director of Structured Finance."
Empress began trading on the TSX.V at the end of the end of December, 2020.
"We are focused on building out that portfolio by bringing in cash producing assets," stated Woodyer Sherron, "Looking at roughly $75 million worth of potential investments right now."
Royalty & Streaming companies are heavily leveraged to the commodity prices. Shareholders own an interest in metals that have yet to be extracted from the ground. But they side-step most of the downside risk. They don't own drill-rigs, transport trucks or tailing ponds.
"We don't have the overhead costs of miners," confirmed Woodyer Sherron, "We're much more streamlined. We help the miners by investing capital - to get them into production or expand production. This way, we can create significant value for our shareholders."
Empress has formed three important strategic partnerships:
· Endeavour Financial (London)
· Terra Capital (Australia)
· Accendo Banco (Mexico)
Often a "strategic partner" is code for "downstream end-user" or "smart money" – but EMPR's partnerships have deeper, more significant benefits.
"Each partner delivers different advantages to Empress," stated Woodyer Sherron, "Endeavour is a global mining finance company with a serious track record. It gives me access to cash flow modelers, financial analysts, mining engineers and geologists.
"It also gives me access to deal flow," added Woodyer Sherron, "Endeavour has a vast network that we can plug into."
About 10% of Australia's GDP comes from the mining industry. It is the third biggest gold producer, after Russia and China.
"The second partner is Terra Capital in Australia, run by Jeremy Bond," explained Woodyer Sherron, "Bond is also one of our directors and on our investment committee. He's able to quickly decide whether an opportunity in that part of the world is worth pursuing or not."
Mexico produces about 200 million ounces of silver a year.
"Our third partner is Accendo Banco," explained Woodyer Sherron, "We signed the strategic alliance with them in August, which gives us exclusive access to Mexican royalty and streaming deals."
Accendo Banco's mission is to accelerate the growth of medium-sized companies with growth potential through foreign exchange services, fiduciary and credit services, and advisory services to the Mexican mining industry.
On Sunday March 21, 2020 Woodyer Sherron flew to Mexico for meetings with miners, off-takers and Mexican government officials.
Empress Royalty believes in de-risking through geographic diversification.
"We're looking closely at Mexico, South America, Mozambique, Ghana, Kenya, Peru, Brazil and other countries," stated Woodyer Sherron, "We want to make sure we have the right balance in the portfolio. We don't want to be all in Africa, or all in South America."
Total global debt is set to hit $280 trillion this year. Most of that debt is based on fiat currency (paper money), and it is very easy to manipulate supply.
No act of Congress can magically make a tonne of gold appear on the lawn of the White House.
The argument against gold, is that – like cryptocurrency – it's only valuable if you think it's valuable (industrial uses are insignificant).
But unlike cryptocurrency the value of gold is buried deep in our ancestral psyches.
Shaved flakes of bullion have been found in Paleolithic caves dating back to 40,000 B.C. "Foul cankering rust, the hidden treasure frets," wrote Shakespeare in 1602, "But gold that's put to use – more gold begets."
"I think it's important that investors understand there are different types of royalty companies," stated Woodyer Sherron, "Some are focused on exploration projects, which are longer term. Some companies acquire third party royalties that already exist."
On March 17, 2021, Empress Royalty announced the upsize of its previously announced bought deal public offering to $15 million.
"We're looking for those cash-producing assets that will bring revenue into our company and then allow us to establish a dividend policy for our shareholders."
Empress has approximately 71.7 million shares outstanding and has no warrants or options. Terra Capital and Accendo Banco each hold 18%, while Endeavour and affiliates own 15%. Other institutional investors own 20% and management holds around 5%, leaving only 24% for public float.
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