Electric Royalties Doubles Up Portfolio for the Clean Energy Metals Transition

• Electric Royalties is a royalty company focused on clean energy metals, with 22 royalties in its portfolio
• Two producing royalties are temporarily suspended due to permitting and pricing issues but are expected to resume
• The company plans to acquire 22 additional lithium royalties in Ontario, Canada while reducing the total cost of acquisition
• Several royalties are expected to begin production in the near term, providing significant cash flow potential
• Has access to a $10M credit facility from a supportive major shareholder to fund further royalty acquisitions

Doubling the Company Portfolio

Electric Royalties is a royalty company laser-focused on metals critical for the clean energy transition. With 22 royalties already in its portfolio spanning key battery metals like lithium, tin, zinc, manganese, and graphite, Electric Royalties offers investors exposure to the electrification megatrend through a diversified basket of assets. The company aims to acquire more royalties on high-quality deposits in mining-friendly jurisdictions in North America, Europe and Australia that can provide a secure domestic supply of these strategic metals for decades to come.

Interview with CEO Brendan Yurik

Recent Developments

Two of Electric Royalties' cash-flowing royalties, the Penouta Tin-Tantalum Mine in Spain and the Middle Tennessee Mine Zinc property in the US, which were temporarily suspended for production in late 2022. The Penouta Tin-Tantalum Mine is facing a permitting issue that management expects to resolve in the near term. As Yurik explained, "There's a reason why we chose that management team to invest in...I don't think I've ever seen before mass demonstrations in support of the mine." Meanwhile, the Middle Tennessee zinc mine is using the downtime to drill out the deposit to expand the resource while also installing a germanium and gallium recovery circuit to produce valuable byproduct metals.

Lithium Royalty Acquisition

In November, Electric Royalties signed an agreement to acquire a package of 126 hard rock lithium properties in Ontario. Due to softening in the lithium market, the company is restructuring the deal to acquire 22 of the properties that already have royalties while preserving the option to acquire the others later. This will immediately double Electric Royalties' portfolio to 44 royalties.

"Yes the lithium market has gone a little bit crazy to the one side, so much money came in, so much hype," acknowledged Yurik. "But we're a long-term player, we're a royalty player, we think development is going to happen faster there...We love hard rock lithium in eastern Canada."

The revised deal will cut the cash cost in half to around $2 million while still providing significant near-term cash flow from option payments on the properties.

Near-Term Cash Flow Potential

Beyond the 2 temporary shutdowns, Electric Royalties has several other royalties that could reach production and begin providing cash flow in the near term.

• The Graphmada graphite mine in Madagascar, on which Electric Royalties holds a royalty, has operated in the past and could restart production with a $25 million capital injection.
• In Quebec, the Authier Lithium project is in the final permitting stages, with operator Sayona Mining already in production at its nearby mine.
• The Seymour Lake lithium project in Ontario is also being fast-tracked, with a definitive feasibility study expected later this year.

As Yurik explained, "Gross revenue royalties are very simple to calculate...Essentially if you can tell what the annual production is at a project, and you know what our percentage of royalty is, you can essentially pick your commodity price that you want to use, times those three numbers together and that would be the annual cash flow you'd expect from one of our royalties."

Long-Term Assets

Electric Royalties also holds royalties on several large, long-life assets that provide exposure to key battery metals. The Bissett Creek graphite project in Ontario has a mine life of over 70 years based on its current resource, with production expected to start in 2025 at a rate of 100,000 tonnes per year, which would generate around $5 million per year in royalties to Electric Royalties. The Battery Hill manganese project should have a preliminary economic assessment completed soon, and recent royalty acquisitions on similar manganese assets were done at $7 million per year over a 49-year mine life. The Mont Sorcier iron and vanadium project, a partnership between Vanadium One Iron and Glencore, is expected to complete a feasibility study by early 2025. "That again was a 30-year asset and we were expecting about a million and a half a year in royalty revenue," noted Yurik.

Funding

To fund further royalty acquisitions, Electric Royalties recently expanded its convertible debt facility with its largest shareholder to $10 million, of which $4.5 million has been drawn. The facility has a four-year term with no principal or interest payments required and the ability to convert to equity at the holder's option.

"We've got lots of time on that facility," said Yurik. "Eventually it's going to make sense to convert, especially given where we are today."

The company could also raise capital by selling individual royalties from its portfolio or partnering with larger royalty companies or streaming funds.

With a diverse portfolio of royalties on the metals required for the energy transition, a disciplined acquisition strategy focused on near-term cash flow, and a supportive capital structure, Electric Royalties offers investors a compelling way to gain exposure to the electrification megatrend. As more of its royalties reach production and begin generating cash flow, the company should attract greater market attention and re-rate higher.

The Investment Thesis for Electric Royalties

• Provides pure-play exposure to clean energy metals through a diversified royalty portfolio
• Targeting near-term cash flow to validate the business model and fund further growth
• Acquiring royalties at attractive valuations by providing capital to near-production assets
• Focused on top-tier mining jurisdictions in North America, Europe and Australia
• Proven management team with a strong track record and aligned through 15% insider ownership
• Potential to grow royalty portfolio to 80+ assets in the near term
• Multiple potential near-term catalysts as royalties reach production and cash flow inflection point

Macro Thematic Analysis

The energy transition is one of the defining megatrends of our era, requiring trillions of dollars of investment over the coming decades in renewable power generation, electric vehicles, and energy storage. McKinsey forecasts EV uptake will grow 22% per year through 2035, while Goldman Sachs projects EV sales to grow 10x over the next 10 years. This will drive exponential growth in demand for battery metals like lithium, nickel, cobalt, manganese and graphite.

As Brendan Yurik explained, "We love this market over the next two decades - the prices that you can get in on these assets now would be 150th of where it would be two and a half years ago."

However, the supply of these critical metals is constrained due to underinvestment, long lead times, and geopolitical risks. This is creating a compelling opportunity for companies that can bring new supplies online in a timely and sustainable manner. Electric Royalties aims to capitalize on this opportunity by providing strategic capital to high-quality projects in stable jurisdictions in exchange for long-term royalties on production.