Vox Royalty Corp. (VOX:TSX.V) has been around since 2014 and went public in May, and it has moved quickly to amass a precious metals weighted portfolio of 42 royalties and streams, 37 of which were acquired over the last 18 months across 16 separate transactions.
"We set about building a company that could create strategic advantages in the royalty and streaming markets," CEO and Chairman Kyle Floyd told Streetwise Reports. "Even though the company is only six years old, we've been around longer than most of the new entrants, and that's allowed us to build the competitive advantages that we sought: intellectual property, deal sourcing networks around the world, and a team that is very technically savvy on the front lines of our business."
Analyst Derek Macpherson of Red Cloud Securities has been following Vox and wrote on July 13, "We are encouraged by Vox's pace and disciplined growth strategy. The ongoing acquisition of overlooked royalties at bargain prices highlights what makes Vox a unique new entrant in the royalty space."
Vox concentrates on acquiring existing royalties—third-party royalties—rather than buying new royalties to finance mining companies. "Finding these third-party royalties allows us to uncover royalties that have better value and better attributes because we're not constrained by going out to companies that need capital to finance a project," Floyd said.
"Typically, we buy from holders of royalties that see the asset as non-core. Think about a mining company that holds a few royalties it doesn't see any value in, or royalties that are held by telecommunications companies, technology companies, hearing aid companies, automotive companies, and others that don't have a long-term or core interest in holding them," Floyd explained, adding, "Sometimes they don't even know that they're holding these royalties."
Vox's deal sourcing efforts are led from the head office in Grand Cayman by Simon Cooper, who is both a geologist and mining engineer who has worked from Australia to the Congo to Kyrgyzstan and has been instrumental to Vox's exponential growth since 2016.
One of Vox's secret weapons is its proprietary database of over 7,000 royalties that it acquired when it purchased Mineral Royalties Online (MRO). With that merger, MRO's co-founders Spencer Cole and Riaan Esterhuizen joined Vox. "Spencer and Riaan are two of the most impactful executives in the royalty industry; adding the two co-founders of Mineral Royalties Online to the Vox team added technical expertise as well as a lot of firepower to our deal sourcing engine," Floyd said.
To create the proprietary royalty database, "we reviewed tens of thousands of public filings. We reviewed terabytes worth of private exploration reports. Our team worked on arrangements with different mining departments to access proprietary exploration reports and other primary data," Spencer Cole, Vox's Executive Vice President, North America, explained. "That resulted in a database of over 7,000 royalties that is growing by the day."
The company also continues to invest and build on its intellectual property advantages. Cole points to two key sourcing advantages the database provides: "The first advantage is first mover access to opportunities. Over the past 18 months, we've announced 16 separate royalty transactions, of which 15 have been done on a one-on-one or bilateral negotiation basis. The second key sourcing edge the database gives us is incredible due diligence speed. When we review opportunities in the database, we can review them in spreadsheet format, but also, more importantly, we can view our database in a spatial viewer, not dissimilar to Google Earth. We can react within minutes to news flow or local intelligence."
Vox has been on a tear, acquiring numerous royalties in the last year and a half. "We have industry-leading growth, announcing 16 transactions over the last 18 months when precious metals were not quite as in favor as they are today. However, we're still finding very good opportunities at very good value. One of the things we like to say is we pass on more deals than probably any other royalty company," Floyd said.
"We are very disciplined allocators of capital to build the most valuable portfolio for our investors at a highly accretive level. We're able to do that because we've had a lot of experience in this business. We've been through the down cycle and now the upcycle; it's positioned us really well in this new upturn with increased interest in this commodity cycle," Floyd explained.
Vox's portfolio is overweight Australia. "That is for a few deliberate reasons," Floyd said. "First, from a jurisdictional and operating perspective, we view Australia as, if not the best, certainly one of the best jurisdictions in the world to build and operate a mine, particularly if you're talking about gold. In addition, approximately 20% of our global proprietary royalty database covers Australian royalties. Three of Vox's four key business development executives are Australian citizens and have extensive networks there. Many of our competitors are largely focused on North American opportunities, so that gives us an advantage in Australia as well."
Cole highlighted several royalties in Vox's portfolio. "The Koolyanobbing iron ore royalty is on a producing mine in Western Australia and is just ending a $3 million prepayment, so we expect it could begin generating revenue for us in 2021. We identified this royalty in our proprietary database and it was actually sitting in the hands of a telecommunications company, which was a fantastic counterparty to do a deal with because it was an extremely non-core asset for them. Also, Vox has a uniquely technical management team, with two geologists and one mining engineer, which makes us able to pierce through to the true quality of the asset and the actual royalty itself. During due diligence, we formed the view that the size of the mineral resource was highly likely to be expanded. Sure enough, within six months of us acquiring this royalty, the operator, a $4 billion Australian iron producer listed on the ASX, doubled the size of the mineral resource and expanded production by 50%."
The Ashburton gold royalty is another at the top of Cole's highlights reel. Vox acquired this 1.75% gross revenue royalty as part of a portfolio of seven royalties earlier this year from an ASX listed explorer. "This Western Australia project was held by Northern Star, a $10 billion gold major. But despite having a 1.7 million ounce gold resource on it, it was subscale for such a large company," Cole explained. "Doing due diligence we realized that the main thing holding this project—and this royalty—back was the actual project ownership. We believed that when Northern Star sold this project to a more entrepreneurial company, its value would be more fully realized. And in the last month Northern Star has sold Ashburton to a much more motivated and nimble development partner, Kalamazoo Resources, and it is now their flagship gold project."
The company projects that in 2022, about 80% of its revenue should be gold or gold linked. "Precious metals have been a focal point that our investors really expected from us and we're happy to continue to deliver that exposure," Floyd said. "The difference with us—and we're probably similar to Franco-Nevada in this regard—is we will not ignore great value opportunities in other hard rock commodities when they present themselves. Franco-Nevada gets about 68% of its revenue from gold; Sandstorm, at the lower end, gets about 53% of its revenue from gold; Osisko Gold Royalty spun out with its primary and really only asset at the time—one of the largest gold royalties out there—and it has 80% of its revenue tied to gold. So we fit well within that spectrum where investors really want you to be a precious metals focused royalty company."
Floyd noted that 2021 will be the first of many years of organic growth and cash flow. "In 2021 we have a number of operations coming online, then 2022 will be much more significant, an exponential curve of both royalty revenue and cash flow. Koolyanobbing, one of our big cash flowing assets, is actually producing a very material amount of revenue right now, but there was a historical situation where the operator prepaid $3 million worth of royalty payments, and so they basically have to work through that prepayment and then the royalty revenue to Vox kicks in."
Vox raised CA$13.75 million in May when it closed a brokered private placement and currently holds approximately CA$8 million in its treasury. The firm has 32.2 million shares issued and no debt. Institutions and family offices hold 33% of the company, while management holds another 15%.
Floyd further emphasized Vox's competitive advantages. "We are one of the only companies, if not the only company excluding Franco Nevada, in the royalty space with true intellectual property; we have a track record of backing up just how much value that brings. To complement our intellectual property Vox invested in deal sourcing networks around the world that pay dividends for us with the amount of assets that we've been able to acquire in Australia, which has been less trafficked from largely Canada-based peers. Underpinning our transaction sourcing is a very tactically and technically focused management team. That combination of intellectual property, deal sourcing networks, and a technical team so deeply experienced in the royalty markets is allowing us to unlock immense value for our investors. We are able to find more deals and better deals than anybody else in the royalty space right now, and we're going to continue to do that," Floyd concluded.
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