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Vox Royalty (VOX) - $16.8M Raise to Deliver on 10 New Royalties

April 14 2021, 13:45 GMT+01:00

Vox Royalty

  • TSX-V: VOX
  • Shares Outstanding: 38.3M
  • Share price C$2.62 (30.03.2021)
  • Market Cap: C$99M

Vox Royalty is a growth precious metals royalty and streaming company with a portfolio of over 47 royalties and streams spanning eight jurisdictions. The Company was established in 2014 and has since built unique intellectual property, a technically focused transactional team and a global sourcing network which has allowed Vox to become the fastest-growing company in the royalty sector. The company has been listed on the TSX-V for 9 months.

We recently interviewed Spencer Cole, Executive Vice President – North America, of Vox Royalties. He touched on a number of details about his company’s growth and key aspects of Vox’s newly enlarged royalty portfolio.

Company Overview

Vox Royalties is a growth-focused royalty and streaming precious-metals company. Vox has a portfolio of 47 royalties, one of which is cash flowing and four others in a production-stage situation. It growth track is illustrated by over 18 separate transactions resulting in the acquisition of over 40 royalties since 2019. The company has been in existence since 2014 and was recently listed on the Toronto Stock Exchange (TSXV: VOX) 9 months ago.Vox Royalty (VOX) - $16.8M Raise to Deliver on 10 New Royalties

Business Model

Vox Royalties is a firm believer in the royalty and streaming business model. This model provides exposure to a diverse portfolio of royalty and streaming assets over multiple mining properties and jurisdictions, with no exposure to CAPEX or OPEX risks. Within the royalty space, VOX believes that it has a competitive advantage arising from being one of the fastest-growing royalty companies, its strong M&A pipeline, and its proprietary usage of intellectual properties to acquire attractive royalties for its portfolio.Vox Royalty (VOX) - $16.8M Raise to Deliver on 10 New Royalties

Vox Management Team                         

In addition to Cole, the management team is rounded out by Kyle Floyd, CEO and Chairman; Simon Cooper, Head of Business Development; Rian Esterhuizen, Executive Vice President  - Australia; Pascal Attard, CFO; and Adrian Cochrane, Vice President Legal Affairs. Three of the members hail from Australia. Hence, their knowledge of the Western Australia mining districts is a great fit for the Vox portfolio, which is weighted to assets in that part of the world.

All members of the management team are highly familiar with royalty investments. According to Cole: “ In our prior lives, over the last 10-years, our management collectively has been involved in over USD$1.5Bn in Royalty transactions, either on the principal side, on the sell-side advisory side or somewhere in between. The total Royalty deal number that we've been involved in would be in excess of 50 as a team”. In addition, Cooper, Esterhuizen, and Cole were trained as engineers or geologists.

Database-Driven Results

Vox Royalties has built a unique approach to building shareholder value that involves detailed database construction and intellectual properties analysis. Their proprietary database has close to 8,000 hard-rock royalties around the globe and was built over a 10-year time frame. This unique intellectual property provides a unique competitive advantage and provides a database methodology to high-grade opportunities considered for addition into the royalty portfolio.

Cole spoke further about this: “The overwhelming majority of opportunities that we source through that database and our deal sourcing are deals that we call bilateral deals; so just us and the royalty seller without any brokers or investment bankers involved in those deals. I think that intellectual property and also augmented by our technical team, because our management team is comprised of mining engineers and geologists, makes is quite a differentiated Royalty company”.

He continued to describe how this approach fits into the company’s business model: “We back-tested over 600 Royalty deals that have cleared the market over the past 40-years. That benchmarking and back testing has consistently shown that the greatest alpha for shareholders is in acquiring existing royalties. Based on that back-testing and our own transactional experience within our management team … we're firmly focused on existing royalties”.

We asked Cole about the extent of the proprietary differentiator that this database approach brings. He added: “We're certainly not saying that our competitors are blind to all 8,000 of those. They may have visibility around a subset of that, but what we're very confident on is that no one has the full extent of that database, and also, for us, the proof in the size and quality of that database is that we consistently find ourselves as the only buyer at the negotiating table with royalty sellers”.Vox Royalty (VOX) - $16.8M Raise to Deliver on 10 New Royalties

Portfolio Details

Vox’s portfolio is predominantly focused on precious-metals royalties, which make up over 50% of our portfolio weighting by NAV. In addition to precious-metals royalties, the company also has exposure to a more diverse array of commodities, including base, battery, and bulk metals. To date they have deployed about $25M to create this $100M company.

The portfolio spans 4 continents but is heavily weighted to Australia and North America, where over 80% of the components are located. In Australia, Vox is the second largest holder of hard-rock royalties, behind only Franco-Nevada. Currently producing mines within the portfolio include Brauna, Dry Creek, Graphmada, and Koolyanobbing.

Cole continued about Vox’s portfolio selection process saying that they really want to acquire de-risked assets. He is well aware that this is not necessarily standard practice in the industry: “One thing we see consistently in the royalty industry is people buying Royalties of large ore bodies that frankly are a little bit sleepy. The original feasibility study might have been done 20 years ago, which should be quite telling that that project is not moving ahead in a hurry”.

He also spoke about Street expectations: “The Street has us going from USD $2M to $6M to $8M in top-line revenue. When you work out that on a gold-equivalent ounce-production basis, broadly speaking, it goes from about 1,000 oz. to 3,000oz. - 4,000oz. gold equivalent ounces, then up towards 5,000oz. And that's just based on what's in the portfolio today”.

Cole was honest about some of the pushback that Vox received when they went IPO: “One criticism when we went public was that we've only got 1 producing asset and the cash flow profile is fairly anaemic. Part of that is because we consistently find the deepest value when we acquire royalties that are 3 to 24-months out of out of first production. We've naturally built a portfolio that is at the start of a hockey stick in terms of the number of assets that are coming online and the associated cash flows that come from that”. By the end of the year, Vox Royalties expects to have 7 to 8 producing assets according to Cole, with an “outside chance” at 10.

Vox Stock Price

We pressed Cole on the price decline in the Vox stock price, which has declined from over $3 to $2.62 at the time of the interview. This decline occurred relative to Vox’s raising $16.85M, despite being public for only 9 months. Currently, Vox is trading at a 0.8 to 0.9 ratio to net asset value.

Cole responded that: “As with any capital raising, there are obviously some investors that weren't that thrilled about us going back to market, we've only been listed for 9-months, but as I mentioned, we've led the industry in terms of acquisition growth”. He added: “We've been putting up deals at really compelling prices” and that they are “Funding a really attractive portfolio of bilateral deals that we've locked in under LOI”.

Strong Organic Growth

Cole was especially optimistic about Vox’s organic growth potential: “Organic growth is what our investors get for free. Every month we are gifted with a huge amount of positive news flow on our 47 Royalty assets from our 40 operating partners”.

As an example, he cited a recently inked deal for 3 early-stage gold royalties in Western Australia: “It was a tiny deal compared to our competitors – a $300,000 deal. But what we really liked about those 3 Gold projects was that each of the 3 is actively being drilled. One of them has a resource of about 100,000oz. gold on it. And importantly, from an execution risk perspective and a future cash flow perspective, each of those 3 assets are within trucking distance of a third-party processing mill. For our investors, they're getting a very cheap lottery ticket on a project that is substantively de-risked because it could be a potential source of gold ore for an adjacent processing mill”.

Going out over the next 12 month’s, Cole remains bullish on organic growth: “On the production front we expect organically to increase from 4 producing assets to 6, with some surprise to the upside potential above 6, but 6 that we can definitively point to. From a development perspective we have 3 exploration-stage royalties that are just about to release feasibility studies and PEAs in the next 6 months, so they'll mature into that development bucket. From an exploration-stage perspective we expect to be at a 120,000m-130, 000m worth of partner-funded drilling on our expiration properties, with a number of resource updates and maiden resource estimates expected to be released on those exploration properties this year”.

Cole says the company is looking to add “accretive deals”. When pressed on the meaning of that term, he responded specifically: “An accretive deal for us is really a deal that has above average or meaningful rate of return on all key metrics, so it adds value on a net asset value perspective. If we're trading at 0.9x NAV and if we're acquiring an asset for 0.4x or 0.5x, that's adding value on a net asset value basis”.Vox Royalty (VOX) - $16.8M Raise to Deliver on 10 New Royalties

LOI Details

Vox Royalties currently has 10 pending deals under LOI. We pressed Cole about that, given that LOI’s are not binding agreements.

He responded: “Historically, our conversion rate of executing and completing on LOIs is extremely high. We typically don't paper up any deal until we have a verbal alignment and verbal agreement from the counterparty”. Indeed, he went further that there are “Aspects to our standard LOIs that are binding insofar as exclusivity and confidentiality… If one party breaches that or if the seller decides to try and shock the deal around once they've executed the LOI, then there are financial repercussions for that”.

Final Thoughts

Cole left us with 3 final thoughts about Vox Royalties:

  • “We are the fastest-growing royalty company in the industry. We've done over 19 deals in the last 2-years alone.”
  • “We’ve built a truly unique and disruptive Royalty company which is centered around the world's largest proprietary Royalty database that we built.”
  • “Investors today are getting in at the ground floor.”

There is literally one handful of the royalty companies interviewed this week that we like, but if pushed Vox Royalty would be our pick. We watch this one with great interest because of the management team's track record in transacting on royalties, complete knowledge and control on the numbers that matter and zero attempt with smoke & mirrors.   

To find out more, go to Vox Royalty's Website. 


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