Maurice J.: Joining us for conversation is David Cole, the president, CEO and director of EMX Royalty Corp. (EMX:TSX.V; EMX:NYSE.American), the royalty generator. Mr. Cole, we brought you on today to discuss EMX Royalty's transactions and interest in the Goodpaster District of Alaska. But before we begin, Mr. Cole, please introduce us to, EMX Royalty, and the opportunity you present to the Market.
David Cole: EMX Royalty Corp. is a company that acquires royalties on metal deposits, most specifically gold, and copper, and other metals of interest around the world. Royalties are fantastic financial instruments that expose the royalty holder to long-term upside of these assets.
Maurice J.: Mr. Cole, the company is thriving, while much of the natural resource space, witnessing supply destruction and competition, is becoming capital constrained. Share with us how EMX Royalty employs a highly efficient, three-pronged business model.
David Cole: We are really proud of our business model, and it's worked very, very well. We generate royalties through the prospect generation business model, where we go out and acquire prospective mineral rights utilizing our economic [and] geologic skill sets, and we have done that to a great degree around the world.
We've reviewed over 5 million acres of mineral rights in our history. We have over two million acres of mineral rights on the books. We acquire mineral rights. We add value. We sell them to an industry hungry for prospective areas, and we maintain royalties on those positions. We grow a royalty portfolio via that business model. Most other royal companies do not do it that way.
Long-term, it's a vastly less expensive way to acquire royalties. We also buy royalties, and a couple key royalties we have in the portfolio we have purchased. The two augmented together is a very powerful way to approach the industry.
And then thirdly, with those smart, economic geologists around the world, occasionally they identify strategic investing opportunities to buy shares in other companies where there is something special going on. Based upon our business acumen and geological intellect we identify these opportunities.
Our strategic investing history, throughout the time that we've had. . .is just fabulous [at a] 40% the internal rate of return after tax.
Recently we had a strategic investment that was liquidated in Russia. That paid off handsomely. That put us in a situation where we have a very large treasury, and no debt. And, it's a very good time in the market cycle to have a large treasury, as you know.
Maurice J.: Speaking of strategic investing and royalty generation, EMX has been very active in Alaska, recently. Mr. Cole, take us to the Goodpaster District of Alaska, and introduce us to what is becoming one of the hottest contested mining jurisdictions.
David Cole: EMX is very excited about our interest in Goodpaster. The Goodpaster District is host to the Pogo Mine, which is a mine that has produced over three—almost four—million ounces of gold in its history. It's currently in production.
It was recently sold to a company called Northern Star. Northern Star has implemented an aggressive drilling program that has resulted in some nice discoveries being made along the trend of mineralization.
That caught our eye, and we recognize this as a prospective, geological terrain. And Millrock Resources Inc. (MRO:TSX.V; MLRKF:OTCQX). . .has actively been working this area for some time. They owned a lot of property in that area, and they had some ideas about further acquisition. They approached us and said, "Hey, we need some money to act upon this intellectual knowledge base that we have [and] acquire more property ahead of this ongoing discovery."
And we said, "Great, let's do a deal." Part of that deal was a blended deal, where we invested corporate equity into Millrock and became a significant shareholder in that company, which we believe is a good prospect generator and royalty generator—in addition to acquiring royalties on the properties that they acquired with the money that we put in.
That was a fabulous way for us to do a deal that has great optionality, where we can win via the royalties we have on the properties in addition to the share ownership in the company.
Maurice J.: Yes, that's a fantastic transaction for both team. And full disclosure, Millrock Resources is a sponsor of Proven and Probable.
There's also a second strategic investment you made, and that was with Corvus Gold Inc. (KOR:TSX). Share the details with us.
David Cole: Yeah, happy to. So, you know, one good deal begets another. Corvus sold a database to Millrock many years ago, in exchange for a royalty. And Corvus was active in this mining district and had royalties within that broader area of Goodpaster, and somewhat beyond Goodpaster, and owned a royalty portfolio there.
Corvus is working on a discovery in Nevada called Mother Lode, in the Bull Frog District. And they need money to advance that asset. They come to us, and they said, "We'll sell you our Goodpaster royalties if you make a modest investment in the company."
So, once again, it was a blended equity and royalty deal, which we like—with that embedded optionality of being able to win in a couple of different directions.
And, I would like to point out that the total royalty footprint that both of those transactions combined together gives EMX Royalty Corp is 223,000 acre-percent royalty interest. What I mean by that is the percentage of royalty that we have on the various land pieces throughout the district times the number of acres that we have at that royalty percent, cumulated during that entire position, is 223,000.
It's a very nice footprint over a large area with substantial geochemical anomalies—anomalies that are indicative of the potential for gold mineralization. We're just happy to have that portfolio and happy to be supportive of the development in that emerging district in Alaska.
Maurice J.: Where else may shareholders anticipate hearing news from this year?
David Cole: Oh, that's a great question. You know, we have some $19 million dollars a year being spent on our properties by our counterparts around the world, which would include many of world’s major mining houses. Anglo-American Exploration is drilling on projects in Arizona. BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) is drilling on projects in Arizona. We have Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) [zinc], the largest company in the world, drilling on multiple projects they've acquired from us. South32 Ltd. (S32:ASX; S32:LSE), another major company in the copper business, is drilling on our Riddarhyttan property in Sweden, and is working with us on acquisition of additional properties in the western United States.
So, we never know where news can come from. But there's a lot of activity going on across our portfolio, and that's one of the great leveraging aspects of being a royalty holder. Where you get the counterparty to pay for the advancement of these important assets, it works really well.
Maurice J.: Let's shift the focus from the Goodpaster District and discuss the value proposition we had before, as in EMX Royalty as a whole. Mr. Cole, how many projects are in the asset portfolio?
David Cole: It's getting close to one hundred—let's say, ninety plus.
Maurice J.: How many active royalties does EMX have?
David Cole: Over sixty.
Maurice J.: And what's the current capital structure?
David Cole: EMX Royalty is in fantastic shape. We have zero debt. We have over US$55 million in the bank, and millions of acres of mineral rights, great counterparties. So, we've never been in a stronger position than we are today.
Maurice J.: Multilayered question: What's the next unanswered question for EMX Royalty; when can we expect a response; and what determines success?
David Cole: Well, success is increasing our cash flow, ultimately from the royalties we own around the world. And there are multiple opportunities for that to come organically within our portfolio, in addition to the opportunities for us to be able to buy cash-flowing royalties with our cashed-up treasury. Success can come from many different angles, and that speaks to the optionality embedded in our portfolio, and our business approach.
Maurice J.: Sir, what keeps you up at night that we don't know about?
David Cole: Yeah, Maurice, that's a good question. I'm always negotiating another deal, and I'm always thinking about the terms of that negotiation, and competitor activity. And, you know of course, I care very deeply about our team. There's a lot of intellect there, and I always want to make sure they're traveling around the world safely.
Maurice J.: Last question. What did I forget to ask?
David Cole: It's always good to talk about the ongoing success on the cash flow and royalty we have on the northern portion of the Carlin Trend at Leeville, where Newmont Goldcorp Corp. (NEM:NYSE) dropped in a new, $300 million shaft [and] where production continues forward. Newmont continues to announce good drill intercepts within the footprint of our royalty.
And that's a good, cash-flowing royalty for us, retrospectively paying around US$1.5 million per year. We expect royalty and cash flow to continue for many years to come. That's a key asset to have in the portfolio.
And then, well, I guess it's OK if I have two things. The Cukaru Peki, a royalty we have in the magnetic complex of Serbia, which is huge [and] ongoing. It's the largest ongoing capital discovery in Europe. We're very, very pleased to have a 0.5% royalty covering that discovery. That's an embedded company maker within our portfolio. We're always happy to remind folks that we own that one.
Maurice J.: Mr. Cole, for investors that want to get more information about EMX Royalty, please share the website address.
David Cole: That would be emxroyalty.com.
Maurice J.: For direct inquiries, please contact, Scott Close at (303) 973-8585; he may also be reached via e-mail emxroyalty.com. EMX Royalty trades on the TSX.V:EMX| NYSE: EMX.
And just for the record, for every bullion purchase I make this years, I'm matching with shares in EMX Royalty. EMX is a sponsor of Proven and Probable, and we're proud shareholders for the virtues conveyed in today's message. Finally, please visit provenandprobable.com for mining insights, and bullion sales.
David Cole, of EMX Royalty, thank you for joining us today on Proven and Probable.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
[NLINSERT]Disclosure:
1) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: EMX Royalty and Millrock Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: EMX Royalty and Millrock Resources. Proven and Probable disclosures are listed below.
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