Silver Crown Royalties Inc. signed a letter of intent to provide US$2.5 million (US$2.5M) in cash to PPX Mining Corp. in exchange for a 15% royalty on silver produced at PPX's Igor 4 mining concession in Peru, a news release noted.
These funds would complete the financing PPX needs to build a carbon-in-leach and flotation plant, as it already secured a US$6M facility. At the new plant, gold and silver ore mined at the company's Callanquitas operation at Igor would be processed.
This transaction with Silver Crown would allow PPX "to start unlocking material value from its Igor project and setting the basis for a solid growth path," Brian Imrie, executive chairman of PPX, said in the release.
The royalty would expire either when PPX delivers 250,000 ounces (250 Koz) of silver or on the fifth anniversary of the deal closing, whichever happens later. Starting June 1, 2025, PPX would need to deliver a minimum of 50 Koz of silver per year.
Both parties expect to wrap up their due diligence efforts by March 31, finalize the definitive agreement by May 15, and close the deal by June 30 of this year.
Why This Company?
Headquartered in Toronto, Ontario, Silver Crown Royalties is a pre-public, silver-only royalty company. Its ongoing objective is to minimize the economic impact on mining projects (it aims for less than 2%) and simultaneously maximize returns for shareholders, according to the Silver Crown website.
The company's business model is this: It provides capital to a mining entity to apply toward some aspect of its operation, such as exploration, mine development, or facility construction, in exchange for receipt of a percentage of the miner's silver production. Silver Crown prefers to transact royalty deals on silver produced as a byproduct, allowing mining companies to create value from it.
In a deal transacted earlier this year, Silver Crown agreed to pay CA$1M to Tucano Gold in exchange for 90% of the payable silver it produced after restarting its Mina Tucano project in Brazil, a news release explained.
Looking further, through 2029, the silver market is expected to expand at a 5% compound annual growth rate, according to a report by Mordor Intelligence, a market research provider.
Once the Tucano deal closes, Silver Crown will have deployed CA$4.7M in capital in less than a year's time for delivery of 17 Koz ounces of silver annually.
The Canadian royalty firm is now receiving revenue from two of its royalties, and it has a number of prospective deals in the pipeline.
"With free cash flow, which we should have after we crystallize the pipeline, we become self-sufficient," Peter Bures, founder, chairman, and chief executive officer, said in a January 2024 interview. He pointed out that Silver Crown's only cash costs are some salaries.
One of a Kind Royalty Company
A number of characteristics differentiate Silver Crown from other royalty companies in the mining space, the company said. This includes three comparable companies, Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American), Vox Royalty Corp. (VOXR:TSX.V), and Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE), according to details provided on each company's website.
Silver Crown only enters into royalty deals, with which the investor receives a percentage of revenue from production. It does not conduct streaming deals, with which the investor receives the commodity mined in physical form. Metalla and Vox do royalty and streaming deals, and Wheaton only does streams.
Rather than transact royalties on various and multiple metals and minerals, Silver Crown focuses only on silver. It was the first company to create single metal net smelter return royalties, it said. In contrast, Wheaton covers gold, cobalt, and palladium in addition to silver; 95% of its revenue comes from precious metals. Metalla focuses solely on gold as well as silver. As for Vox, about 70% of its deals are in precious metals, with the remainder in base and platinum group metals and other commodities, including diamonds, uranium, and vanadium.
Also, sometime in H1/24, Silver Crown plans to go public and debut on the TSX Venture Exchange. Prior to its contemplated direct listing, management is targeting a CA$6−11M raise, of which CA$1.6M has closed in a number of tranches.
Silver Crown only targets producing or near-producing assets. Metalla only transacts with major mining companies in production. Vox pursues royalties and streams on assets with significant near-term growth and development catalysts.
Thus, most assets on which it has royalties/streams are in the exploration stage, followed by ones in development, and lastly, ones already producing. Wheaton opts for high-quality mine projects that can support streaming transactions in the long term.
Further, Silver Crown's royalty agreements are created by financial experts with experience in mining and metals, as opposed to prospectors. Silver Crown's royalties attempt to always include investor protection. Streams, on the other hand, the company said, seldom do.
Silver Crown's free cash flow is and will keep coming solely from revenues from mining operations, not from other vehicles such as investment income or derivatives.
Sector Seeing Increasing Demand
Silver demand is increasing around the globe. This year, demand is forecasted to hit 1,200,000,000 ounces in 2024, the second highest level recorded, reflecting a 1% year-over-year increase, according to The Silver Institute. The main demand driver is the transition to clean energy taking place worldwide.
Looking further, through 2029, the silver market is expected to expand at a 5% compound annual growth rate, according to a report by Mordor Intelligence, a market research provider.
Meanwhile, silver remains in undersupply, Rich Checkan, president and chief operating officer of Asset Strategies International, wrote in a recent note. He predicted the silver price will "move above and sustain levels above previous all-time highs."
Mary Anne and Pamela Aden, editors of The Aden Forecast, purported last month that silver, "a sleeping giant," is poised to go much higher and should continue its bullish momentum this year. Thus, they recommended investors buy and hold silver for several years.
Technical Analyst Clive Maund asserted in a February report that the outlook for the white metal, in the medium and long term, "could scarcely be better as it is considered to be probably the most undervalued asset in the world."
Analysts told CNBC just days ago that silver appears well positioned to relatively outperform gold in Q3/24 and Q4/24.
Eventful 2024 Ahead
Silver Crown has multiple developments slated to take place on the horizon, according to Bures.
An increase in current cash flow from revenue is due to occur soon when one of the company's royalties, as it is due to do, kicks in.
"Then, depending on how successful we are in raising the next US$2.5M, there can be another project behind that as well, which could see our revenues quadruple from current levels into next year," he added.
Also, sometime in H1/24, Silver Crown plans to go public and debut on the TSX Venture Exchange. Prior to its contemplated direct listing, management is targeting a CA$6−11M raise, of which CA$1.6M has closed in a number of tranches.
Meanwhile and afterward, the company could ink one or more royalty deals given it is actively working toward that end. Silver Crown wants to, over time, expand its portfolio to encompass at least 200 silver-only royalties and eventually pay a dividend.
Share Structure
In terms of capital structure, Silver Crown has 32.6 million (32.6M) basic shares outstanding, 38.7M fully diluted shares, 9.4M in CA$0.40 warrants and 2.2M in CA$0.80 warrants.
The company has an implied market cap of CA$12.9M.
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Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Silver Crown Royalties Inc. and Metalla Royalty and Streaming,
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- This article does not constitute investment advice and is not a solicitation for any 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. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
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