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How Empress Royalty is poised for growth through its unique business model

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A look at mill construction at the Tahuehueto project in Mexico, which is owned by Telson Mining Corporation.

By: Don Hauka

  • Gold and silver have seen abnormal behaviour over the past few months as the pandemic has run its course
  • Empress Royalty and its rapidly expanding portfolio of investments is well-positioned for continued growth
  • By creating win-win situations with its unique business model, the company earns revenue through streaming and mining agreements

Precious metals have been on a COVID-19 rollercoaster ride in the last year, with gold and silver experiencing highs and lows as the pandemic played havoc with prices. But despite recent fluctuations, gold bullion gained over 25 per cent in 2020, its highest annual performance in a decade.

Silver experienced similar peaks and valleys, but the Silver Institute is forecasting the demand for the metal to reach an eight-year high of 1.025 billion ounces in 2021, driven by a resurgence in industry uses like semiconductors, solar panels and batteries. In fact, despite bumps along the way, silver was the best performing precious metal in 2020, up nearly 48 per cent.

Overall, the future of precious metals looks bright as markets emerge from pandemic panic into a cautiously optimistic "new normal." A report by Grand View Research forecasts the size of the global precious metal market — valued at USD$182.1 billion in 2019 — to grow at a compound annual growth rate of nine per cent in terms of revenue from 2020 to 2027.

Empress Royalty rapidly expanding in promising precious metals space

That's the sort of luminous landscape that puts a shine on companies like Empress Royalty Corporation (TSXV: EMPR | OTCQB: EMPYF), headquartered in Vancouver, B.C. Empress Royalty is a new precious metals royalty and streaming company with a portfolio of 16 investments that's actively seeking more projects as it rapidly expands.

Focused on creating financing solutions for mining companies, the company has several strategic partnerships that give it a global reach.

"We're continuing to build and grow our portfolio. We're looking globally and there are many opportunities right now in South America and Africa."Alexandra Woodyer Sherron, CEO and President, Empress Royalty Corporation.

Founded in 2020 just as the pandemic was hitting markets hard, Empress Royalty assembled an experienced management team that kept its eyes on the future and used their collective expertise to put together a diversified portfolio of projects with promising production potential.

"The most important thing about making investments is having the right people involved," says Empress Royalty Executive Chairman and Investment Committee Chair, David Rhodes.

"We have people who are knowledgeable in the business who can choose the right deals and look after those investments to maximize the returns for all stakeholders."

Rhodes has over 25 years of industry experience and has worked in the North and South American, European, CIS and African markets.

Empress Royalty's business model creates "win-win" deals

The business model that Rhodes, Woodyer Sherron and the rest of the Empress Royalty team use is built on royalty and streaming agreements with companies exclusively in the precious metals sector.

Streaming agreements give Empress Royalty a percentage of one of the metals the mining company produces at a reduced cost. Royalty agreements see the mining company pay a percentage of the value of production or the operating profit of the mine, usually for its operational life.

How stream (left) and royalty (right) investments work.

In return, mining companies get capital needed to go into production or expand operations. The cash-infusion is non-dilutive capital because it doesn't require a change of ownership or shares of the mining company receiving the investment. It's a win-win formula, says Empress Royalty CEO and President, Alexandra Woodyer Sherron.

"We're not trading paper around. We're very much focused on the creation of new royalties and new streams," she explains.

"For the mining companies, this gives them the capital they need and it's a much more flexible structure and less restrictive than other financing methods."

The upside for Empress Royalty is a guaranteed revenue stream without the risk of investing in a mining company still in the exploration and development stage. Since most royalty and streaming agreements last for the lifetime of the mining operation, the company also benefits from increases in precious metals prices and any extended lifespan of the operation.

The business model also protects Empress Royalty from the potential risks of capital cost overruns and operating cost pressures, which are the responsibility of the mining company. It also gives the flexibility of investing in low-cost opportunities during downturns in the market while reaping the revenue rewards when prices rise.

Building a portfolio with deals in Mexico and Mozambique

Using this model, Empress Royalty has built a portfolio of 16 royalty and streaming investments, putting the company in a strong position for future growth as it looks for new streams and opportunities.

"We're continuing to build and grow our portfolio," says Woodyer Sherron. "We're looking globally and there are many opportunities right now in South America and Africa."

One recent addition is a one per cent Net Smelter Return (NSR) royalty on production from the Pinos Gold and Silver project owned by Candelaria Mining Corporation in the Zacatecas mining belt in north-central Mexico.

The first investment in a Mexican royalty following the strategic alliance between Empress Royalty and Mexican financing firm, Accendo Banco, the deal saw an aggregate consideration of USD$1.5 million to Candelaria Mining in exchange for the NSR, which continues in perpetuity and is registered against title.

Additional milestones for Empress Royalty include the closing of the Manica Royalty. Back on February 22, 2021, Empress executed a Royalty Purchase Agreement for the creation of a royalty on gold sales from the Manica project for an aggregate consideration of USD$2,000,000.

Manica gold project – existing mill and grinding circuit.

Key features at the project include:

  • 1.262 Moz SAMREC compliant Au resources (782 koz measured and indicated)

  • Low cost, near-term ready-to-build production

  • Metallurgical risk solved by fine grinding and pressure oxidation

  • Additional nearby prospects for further exploration success, namely: Guy Fawkes, Boa Esperanza, Dot’s Luck, which all have declared resources

  • Further optimisation is possible and ongoing

Empress has also closed the acquisition of Telson Mining’s silver stream on the Tahuehueto project in Mexico.

Telson has announced that its Tahuehueto project is approximately 60 per cent constructed, with initial production forecast for late 2021 and full-scale production forecast for early 2022.

Mill construction at Tahuehueto.

The value of the company’s strategic partners has been demonstrated by the execution of the Manica Royalty (Endeavour Financial) and the Telson Stream (Endeavour Financial and Accendo Banco).

Strategic partnerships power Empress Royalty’s growth and access to capital

Strategic partnerships are critical to Empress Royalty's early success and future growth. The company has strategic partnerships with Endeavour Financial in London, Terra Capital in Australia and Accendo Banco in Mexico. This gives Empress Royalty access to global investment opportunities as well as bringing it unique mining finance expertise, deal structuring and access to capital markets.

"Our partners have their fingers on the pulse of the precious metals space around the globe," says Rhodes, who is also Managing Director of Endeavour Financial.

"Partnering with these companies gives us access to a whole pipeline of deals. It brings value to the company and sets the stage for future growth and access to capital."

Listing on the TSXV raises the company's profile

Standing out from other companies is critical for Empress Royalty, having just recently been listed on the TSXV. The listing has helped the company gain greater visibility to retail investors and is key in pursuing its goal of building a portfolio of cash and near-term cash producing precious metal investments.

Guiding the building of that portfolio is a team of experienced executives with a collective 250 years of business experience and $6 billion in mining transactions. Woodyer Sherron, who was born into the mining business, has 20 years of experience and has delivered $1.5 billion in transactions during her career.

"We have a great management team in place with incredible experience and connections. It's the kind of team that can build on our success to date and catapult us into the future," says Woodyer Sherron.

One of the key issues that the management team will deal with this year is the potential for dividends as the company grows. Rhodes says the Empress Royalty investment committee will look at the stability of the company's revenue streams to develop the timetable for implementation.

"Once we have a stable revenue platform, then you can look at a dividend policy. We're committed to returning value to shareholders," says Rhodes.

Sharp focus on cash flow makes Empress Royalty stand out

Empress Royalty's goal for this year is to experience rapid growth by working with their strategic partners to expand their project portfolio, create new royalties and streams and continuing to help mining companies get into production or expand existing operations. Rhodes says investors can expect more of the same — way more.

"As these assets get into production over the course of this year and the beginning of next year, we'll start to see more revenue from our existing portfolio while at the same time working on more deals with big returns for shareholders and further expanding the business," explains Rhodes.

With forecasts for positive growth in the precious metals space, more investors are looking for investments that offer safety and good returns on their investment.

There's no shortage of companies competing in the sector. But Woodyer Sherron says the capacity that the company's strategic partners bring to finding projects, developing and closing deals as well as accessing capital set Empress Royalty apart from other streaming and investment firms.

"We're very much focused on cash and cash generation, which is what makes us different. Our strategic partners give us global access to deals to flow through our pipeline and that also makes us stand out from other companies," says Woodyer Sherron.

Visit Empress Royalty’s website to learn more.

Watch Empress Royalty’s Market One Minute to learn more about the company’s robust portfolio of investment opportunities.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.