Get the Latest Investment Ideas Delivered Straight to Your Inbox. Subscribe

TICKERS: EMPR; EMPYF

How to Invest in Gold & Silver in the Ground Without Buying Mining Equipment

Share on Stocktwits

Source:

Royalty & streaming company Empress Royalty's three strategic partnerships give it access to precious metal projects in different parts of the world.

Empress Royalty Corp. (EMPR:TSX; 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 focused 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," recalled 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)

Empress Partnerships

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, 2021, 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."

Royalty companies

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 25, 2021, Empress Royalty announced the closing of its upsized bought-deal public offering of CA$15.75 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 104 million shares outstanding.

[NLINSERT]

Disclosure:
1) Lukas Kane compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Empress Royalty. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.




Want to read more about Gold and Silver investment ideas?
Get Our Streetwise Reports Newsletter Free and be the first to know!

A valid email address is required to subscribe