Silver Crown Royalties Inc. has announced the closing of the first tranche of a net smelter return (NSR) royalty for up to 90% of the cash equivalent of silver produced from Pilar Gold's PGDM Complex as Silver Crown looks to "disrupt" the NSR model by creating a silver-only royalty company.
The company said it looks to protect investors by investing in just the single metal (silver), requiring minimum delivery obligations from mines to get payments, and limiting exposure to any singular project.
"We want this company to be a one stop shop for precious metals investing needs, we want to take all the worries and all the risk away from the investor," said founder, Chairman and Chief Executive Officer Peter Bures. "If you have any one out there who wants precious metals exposure, they don't have to think about if they need to buy physical bullion or a silver ETF, … they can just buy Silver Crown Royalties. We'll do the portfolio diversification and all the all the other work for them, and kick back a dividend to them as well."
Some comparable companies include royalty and streaming companies such as Vox Royalty Corp. (VOXR:TSX.V), Metala, and Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE), the company said.
But Bures points out that no other royalty company he is aware of focuses on a single metal, as Silver Crown does on silver.
"We've studied the royalty and streaming business models for the last 20-plus years," Bures said. "And we think that what we did is we took the best elements from them. And we also saw some opportunities to perhaps improve on the business model a little bit."
But what is a royalty, when it comes to mining? According to Denton's Mining Law, "The ownership of a portion of a mineral resource or the revenue it produces. The holder of the royalty interest is entitled to a stake in the output of the mining property's production."
The advantages of owning such companies over regular explorers? It can expose the investor and simplify the upside of owning interest in multiple projects, as well as protect them from some of the risks associated with owning mining companies.
Vox Royalty & Streaming Corp.
In business since 2014, Vox Royalty has amassed much more exposure to both precious and non-precious metals than Silver Crown.
Vox said it has a portfolio of more than 60 royalty assets in the United States, Canada, and Australia and has a proprietary database of more than 8,000 royalties.
Since forming, Vox has "built unique intellectual property, a technically focused transactional team and a global sourcing network which has allowed Vox to target the highest returns on royalty acquisitions in the mining royalty sector. Since the beginning of 2020, Vox has announced over 25 separate transactions to acquire over 50 royalties," the company said.
Vox claims to be "the fastest growing royalty company in the industry," according to a Fact Sheet on its website.
"The third-party royalty acquisition model Vox employs has been proven to generate alpha in the royalty industry as we know it," the company noted.
The company said it has a track record of buying assets with significant near-term growth and development catalysts. It is predominantly geared toward precious metals royalties, which make up of over 70% its portfolio. But unlike Silver Crown, Vox also has exposure to an array of other commodities, including base, battery, and certain bulk commodities.
Its portfolio spans four continents, but 80% of them are located in Australia and North America.
About 36% of the company is owned by institutions and 58% by strategic entities, Reuters reported. Top shareholders include ORG Partners LLC with 19.92%, Robert David Sckalor with 9.9%, Kyle Floyd with 6.16%, and Konwave AG with 5.08%.
Vox's market cap is CA$131.29 million with 49.75 million shares outstanding, 38.81 million of them free-floating. It trades in a 52-week range of CA$4.25 and CA$2.59.
Metalla Royalty & Streaming Ltd.
Another possible comparable royalty company, Metalla Royalty & Streaming Ltd., is fresh off the acquisition of another streaming company, Nova Royalty Corp.
Metalla looks at itself as "an emerging mid-tier royalty and streaming company now with over 100 royalties and streams with several cornerstone assets."
The company said it had six producing assets already with three more scheduled to start producing in 2024.
Key contributing projects are expected to be Tocantinzinho, Wharf, Aranzazu, La Encantada, Amalgamated Kirkland, and Endeavor with a projected gold equivalent ounce (GEO) production of more than 30,000 ounces annually by 2030.
"After a combined 12 years of respective acquisitions of high-quality growth assets at Metalla and Nova Royalty Corp., the combination underpins a portfolio that is expected to produce over 30,000 GEOs annually by 2030," Metalla President and Chief Executive Officer Brett Heath said. "We anticipate near-term free cash flow growth to be driven by Tocantinzinho, Endeavor, and Amalgamated Kirkland for the 2024/2025 period, firmly establishing our business as a mid-tier royalty company.”
Analyst Adrian Day recently named Metalla a "Top Buy."
About 14% of the company is owned by Institutions, and about 38% is owned by Strategic Entities, according to Reuters.
Top shareholders include Beedie Investments Ltd., the CEO Heath with 5.89%, Euro Pacific Asset Management LLC with 5.31%, and Van Eck Associates Corp. with 4.51%.
Its market cap is CA$221.4 million, with 52.84 million shares outstanding and 40.15 million free-floating. It trades in a 52-week range of CA$7.91 and CA$3.56.
Wheaton Precious Metals Corp.
Day also recently rated Wheaton Precious Metals a Hold, if you can. No operating cost exds
One other comparable company is Wheaton Precious Metals, which on its website named some similar advantages Silver Crown did: "No capital cost exposure, no operating cost exposure, exploration upside, and … a highly sustainable dividend."
Day wrote, "The company also recently announced that Vale's Salobo III expansion had passed its first-phase completion test, in line with Wheaton's previous guidance, triggering a payment of $370 million," Day wrote. "The Salobdo expansion is expected to increase throughput to 36 milliona Mtpa by the end of 2024, up from 24 Mtpa before the expansion."
At that point, Wheaton will make another payment, estimated at $163 million, depending on the timing. Salobo represents just over 40% of Wheaton's operating NAV. Wheaton can fund these payments readily, ending the quarter with $834 million in cash as well as $2 billion on an undrawn credit facility. The stock is up nearly 25% since the beginning of October bottom in gold."
About 71% of Wheaton is owned by Institutions, and less than 1% Strategic Entities. The rest is retail. Top shareholders include Capital World Investors with 7.36%, First Eagle Investment Managers, Van Eck Associates with 4.12%, and the Vanguard Group Inc. with 3.53%.
It has a market cap of CA$, with 453 million shares outstanding, 451.44 billion. lt trades in a 52-week range of CA$71.39 and CA$52.055.
Silver Crown Royalties Inc.
Silver Crown said it was "focused on generating consistent and growing income sources through our expanding portfolio of mining royalty interests."
All in all, Bures and his colleagues said they are improving on an impressive business model at Silver Crown, but that silver has usually been a "by-product" credit in this process in these deals with miners.
"We just take the silver," Bures said, said of Silver Crown Royalties.
"But the key here with those … companies is that they do not originate new royalties," he said of the other royalty companies.
SCR is looking all over the world for projects that have silver as a byproduct. We aim to monetize the silver value of those operations for both our partners and shareholders.
The mining company has to contractually deliver a certain amount of silver to Silver Crown for us to give them any money to start with.
"Other royalty companies simply buy a royalty and kind of hope that you know it goes into production or it starts paying," Bures sad. "There's a minimum obligation that the vendor has to us that they have to deliver as long as they're operating. So that's one big difference the other one, as well difference, and we've seen this to a lesser extent applied as well. "
The company has already issued several rounds of pre-IPO placements, with management participating in a 3.3 million share issue at 5 cents in May 2022 and management and partners describing bidding on 3.3 million shares in February.
Silver Crown is targeting a CA$6 to CA$11 million raise with the IPO. The company said about 6% of it is owned by institutions, about 30% management, and the rest is retail, including close relationships and brokers.
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