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Significant Increase in Revenue -EMX Royalty (TSXV:EMX)

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Gwen Preston, the Resource Maven sat down backstage at the Metals Investor Forum with Dave Cole President and CEO of EMX Royalty for an update on the largest copper and gold mine in Europe to be ever put into production and asked about the resolution on their royalty deal with Zijin Mining for the Timok project. The agreement was rewritten to avoid future disputes, and all back royalties have been paid. Zijin has announced plans to invest billions of dollars in the project, which has a long mine life and generational potential in the lower zone.

EMX also discussed drill holes in its advanced assets, such as Parks-Salyer and Peak, which have triggered stage-gate payments. Additionally, EMX purchased a royalty on the Caserones project, which was taken over by Lundin Group. Lundin plans to increase production and conduct aggressive exploration. EMX's unique partnership with Franco-Nevada (NYSE/TSX:FNV) has expanded, with Franco now owning part of EMX and a joint venture to find new royalties through micro-financing royalty deals

Gwen Preston: Hello, everyone. I'm Gwen Preston of Resource Maven. I'm here at the Metals Investor Forum in September, and I am joined by Dave Cole of EMX. Nice to see you.

David Cole: Gwen, always a pleasure.

Gwen Preston: So EMX always has a lot going on. You have massive portfolio, all kinds of projects, project generation, royalty generation. So I want to talk about a few things that have happened of late to just get your insight on some of these events. So the biggest headline thing is certainly your deal with Zijin, coming to a resolution on the royalty at the Timok project. Talk about that a little bit and then talk about where you think that project is going.

David Cole: Happy to, and I'm happy to have it finally done.

Gwen Preston: Exactly.

David Cole: I'm sorry it took so long, but good things come with patience. I will say up right up front that working with Zijin has been a pleasure. It did take a long time. It was a little slow, but they were honorable to work with. They never went back on their word in any aspect. We worked our way through and rewrote the whole royalty agreement in a manner it won't be argued again.

Gwen Preston: Amazing.

David Cole: I'm just delighted about that. All the back royalties have been paid. We're looking forward to receiving quarterly royalties going forward now for a very long mine life, which comes to the other part of your question, that's what's happening there. So they're mining in the upper high grade zone. They've told the market that the upper high grade zone will likely last 10 more years.

Gwen Preston: Great.

David Cole: Okay? So that's great. And our current royalty pay rate, it's been increasing each year, but our current royalty pay rate, there's just under 4 million US a year. So that's nice. They have also told the market that they expect the lower zone to come into production within five to seven years, and they have announced that they plan a 3.5 to 3.8 additional billion US dollar investment.

Gwen Preston: So when we talk about the lower zone... The upper zone is a good mine. It's good grade. It's got a good mine life, altogether of something like 13 years or whatever something like that's going to be. The lower zone is immense.

David Cole Immense.

Gwen Preston: Absolutely immense.

David Cole: Immense. The last 43-101 compliant resource, which was put out was by Nevsun. Zijin does not put out 43-101 compliant resources. They do have a reserve on their website that everyone's welcome to go see. Strictly speaking, I'm not supposed to mention that, but I can mention that the last compliant resource put up on-

Gwen Preston: Which was back in 2018 or something?

David Cole: Yeah. It was roughly in the 2 billion tons of 1% copper equivalent range. This is a generational copper, gold assets, the largest discovery of copper and gold and largest copper and gold mine to be ever put into production in the continent of Europe.

Gwen Preston: Which is why $4 million a year for the next 10 years is great, but three and a half billion dollars of investment to build a massive underground block cave mine tapping 1% porphyry over which you have the same royalty is even more important.

David Cole: 100%. Yes. And we have royalties throughout the district on other place. I will also point out that lower zone when it was geologically formed is straight up and down but it's subsequently been tilted thanks to some dynamic plate tectonic shifts. And so that actually plunges towards another royalty that we have.

Gwen Preston: I didn't know that. Okay.

David Cole: So there's a boundary where we have the .3625% NSR and then the other side on the Brestovac West license, we have a 2% royalty on gold and silver and 1% on all other metals.

Gwen Preston: Amazing.

David Cole And Zijin has specifically announced that they plan to drill that plunging body to two kilometers of depth.

Gwen Preston: Generational asset with the dispute now totally resolved and a great working relationship. So that, huge accomplishment.

David Cole: Thank you.

Gwen Preston: And I'm sure a weight off your shoulders, just having it done. Let's talk about some of the other things that have been going on. How about some of the drill holes that have been happening on some of the more advanced assets that you have, the ones on which you have royalties. The ones that come to mind are Parks-Salyer and Peak.

David Cole: Yeah. Those are both in Arizona. And the Parks-Salyer discovery is in and amongst an area that's getting a lot of action now between Ivanhoe Electric and Arizona Sonoran. I think in other companies in there as well, defining deposits. I wish that our royalties were a little bit broader in that district, but at least we got a chunk of it.

Gwen Preston: At least you got some. Yeah.

David Cole: And that did trigger a stage-gate payment. Many of the deals we write, we have stage-gate payments tied to them so we can get some nickels and dimes before we get the dollars. And that was a $3 million payoff to us.

Gwen Preston: Amazing.

David Cole: So that's super.

Gwen Preston: I did not realize that. That's great.

David Cole: 3 million USD in the bank.

Gwen Preston: You've used that nickels and dimes to dollars line before. That's a good one. I like it.

David Cole: And you know what? The amount of pre-production royalty and lease payments that we get across the company exceeds $3 million a year now. So it adds up.

Gwen Preston: It matters. Yeah.

David Cole: It adds up.

Gwen Preston: Okay. Let's talk about one of the big royalties that you purchased in the last little while is Caserones. Talk about what's been going on down there. The Lundin Group came in and took over that asset. What does that mean for you? What has that done to your view on that asset?

David Cole: So when we bought that royalty, and we've purchased it now in three tranches. One tranche was syndicated with Elemental Altus. Another tranche was syndicated with Franco-Nevada. And then there's a third small piece that came to us as well. We're delighted to have increased our royalty on that. We had the viewpoint that there was a lot of exploration upside, which is why you want to buy royalties. We also have the viewpoint that it's going to be a generational copper asset and we want to be exposed to copper prices. And we felt that there was a reasonable probability that somebody might increase production. So then here comes Lundin swooping in, buys 51%. They have an option to buy additional 30% I believe from JX Nippon. JX Nippon was doing a great job. They were a good operator. Lundin, even better. And Lundin has told the market that they plan to increase production 20-25%. They have some water desalinization synergies that will help the project because one of the limiting factors is freshwater. Another thing that they have said, and anyone who follows Lundin money know this is their forte, they'll do aggressive exploration.

Gwen Preston: Yeah. Yeah. For sure.

David Cole: And our royalty footprint there is sizable. So we're well beyond the mine. I'm very pleased. Franco's very pleased with that purchase that they did with us. And it adds another generational copper, in this case, copper, molybdenum, asset to our books. So it's great. Now we have two generational copper assets supporting the value of EMX.

Gwen Preston: Okay. Last question. You just mentioned Franco, who you partnered with, syndicated with, to buy part of that Caserones royalty. But your partnership with Franco is now getting multifaceted and deep. So you worked together to buy that royalty, which is you end up with your pieces, but now Franco owns part of EMX. Franco's never owned part of a junior company before, junior royalty company before.

David Cole: That's correct.

Gwen Preston: And you also recently announced a joint venture where you're going to go out and try and find new royalties. So talk about why you think that that's an opportunity. And it's cool to me. We were just talking about top end stuff like cash flowing royalties and how that's working for EMX. This agreement is more building of the bottom.

David Cole: That's absolutely 100% correct. And this building of the bottom is why Franco likes EMX. They like our royalty generation business. They like that long-term optionality. I was having a conversation with Paul Brink, the CEO of Franco, on the phone. He says, "Dave, you should go out and capture some prospective mineral rights from these broke explore cos."

Gwen Preston: And there's so many broke explore cos.

David Cole: Yeah. And I said, "Well, I think the best way to do that actually is to do micro-financing royalty deals, royalty micro-financing." It's coming into somebody that has prospective mineral rights, smart team, no money. "Hey. We'll give you some money to drill. We'd like a royalty." We have yet to get one of these across the line since we've done the joint venture, but there's several that we're analyzing right now.

Gwen Preston: Sure. Okay. Okay.

David Cole: And the Franco team is so intelligent. They're wonderful folks. We love working with them. Anything that we can do to further our relationship is to everyone's... Certainly to our benefit.

Gwen Preston: Do you think that that's... There's a lot of broke explore cos out there, so I think they're probably open to financing opportunities in ways that they wouldn't be necessarily in a stronger market. What's the reception been, I'm just curious, this is an honest question, to the idea of selling a royalty on a fairly early stage asset, which is this sort of micro royalty concept that you just described?

David Cole: Yeah, we've had a few sincere people knock on the door since the press release came out.

Gwen Preston: Okay.

David Cole: Yeah. It's not overwhelming, but yeah, there's definitely people that are willing to do it.

Gwen Preston: There's interest. Yeah. Fantastic. Well, because you didn't have enough angles to your business, let's just add another one in there so that when we have a 10-minute presentation at a conference, it's even harder to get through everything that EMX does.

David Cole: I barely got there today.

Gwen Preston: Fantastic. Well, congrats on everything. And I mean, I look forward to seeing where EMX ends up in the next little while.

David Cole: Always a pleasure to talk to you, Gwen. Thank you.

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