Electric Royalties Targets Multi-Asset Revenue Streams in 2025 from Diverse Portfolio

• Electric Royalties is a clean energy royalty company focused on 9 different clean energy metals, with over 73 royalty assets
• Thesis is based on long-term opportunity in clean energy metals driven by EVs, energy storage, renewable energy generation
• Recently announced 41st royalty on a producing copper-gold mine in Chile; 35 assets could contribute to cash flow in 2025
• Targets gross revenue royalties on top clean energy metal projects in safe jurisdictions like North America, Europe, Australia
• Expects to enter revenue generation phase in 2025 with royalties on lithium properties, potential restarts of other royalties

As the world increasingly shifts towards clean energy solutions to combat climate change, investors have a compelling opportunity to gain exposure to the critical metals underpinning this transition. Clean energy technologies like electric vehicles, renewable power generation, and grid-scale battery storage all rely heavily on an array of metals and minerals. Surging demand for these clean energy metals, coupled with looming supply shortfalls, presents a persuasive long-term investment case.

Interview with CEO Brendan Yurik

Rising Clean Energy Metal Demand 

Clean energy metal demand is poised for explosive growth in the coming decades. Electric vehicles are a major driver, as global automakers invest hundreds of billions of dollars to electrify their fleets. EVs require substantial amounts of lithium, nickel, cobalt, graphite and other metals compared to conventional vehicles.

Energy storage is another emerging source of demand. As Brendan Yurik, CEO of Electric Royalties explains,

Energy storage batteries for cities - the first ones of those are just actually getting installed in the US. That's another big demand driver we haven't even seen really hit the market.

Renewable energy generation, which requires significant volumes of copper, nickel, and rare earth elements, will be an added tailwind. This soaring demand for clean energy metals appears likely to persist for decades as the world strives to decarbonize.

Our thesis since the beginning has been that we see two decades of opportunity at least in the clean energy metal space.

Insufficient Supply 

While clean energy metal demand is set to surge, supply is likely to struggle to keep pace due to chronic underinvestment in new mines and processing capacity. According to Yurik,

Your average development timeline is about 15 years. It's really hard to overcome that supply-demand imbalance that we see coming.

This supply shortfall is likely to be particularly acute in western countries, which are aiming to reduce reliance on China for clean energy metals. China currently dominates the production and processing of many critical minerals. With rising geopolitical tensions, the US and its allies are increasingly focused on developing secure, domestic supply chains.

However, there is a scarcity of quality clean energy metal projects in stable jurisdictions like the US, Canada, Europe and Australia. Those that do exist will be strategic assets as security of supply becomes paramount. As Yurik explains,

When you look at the amount of deposits that actually could fit that bill, we have royalties on most of them because there aren't that many.

The combination of robust demand growth and tight supplies is likely to be a potent catalyst for higher clean energy metal prices over time. This should benefit the owners and developers of high-quality projects in desirable locations.

Royalty Model Advantages 

Royalty and streaming companies provide investors leveraged exposure to clean energy metals with a lower risk profile than miners. Royalty companies provide upfront capital to mining projects in exchange for a percentage of future revenues. This model has several compelling benefits for investors.

First, royalty companies have asset-level diversification, reducing the impact of operational issues at any single mine. For example, Electric Royalties has over 73 royalties across 9 different clean energy metals, with no asset comprising more than 10% of its value.

The wins that you will get in that portfolio will more than offset the losses.

Second, royalty companies typically have significantly lower operating and capital costs than miners.

Our general and administrative costs are very low, so we can weather the tough times.

This provides downside protection during weak commodity price environments.

Third, royalty companies provide leveraged exposure to commodity prices with no additional costs.

If prices go up on any of our royalties, our revenue goes up exactly proportional. If manganese prices doubled, our revenues from [our manganese producing assets] would double.

Royalty companies focused on clean energy metals provide investors an attractive way to gain exposure to the energy transition mega-trend. Asset-level diversification, low operating costs, and commodity price torque make royalties a compelling way to play rising clean energy metal demand.

Near-Term Revenue Potential 

While many clean energy metal developers have assets that are years away from production, some royalty companies are poised to begin generating revenues in the near-term. For example, Electric Royalties expects several of its portfolio assets to begin paying royalties in 2025.

You look back at last year, we just acquired the lithium portfolio. Of that, there's a number of properties optioned out to third parties. We expect revenue back from that - around $850,000 or so for the next 12 months. And that's across 29 different properties and multiple different operators. 

Electric Royalties also has several more advanced-stage assets that could begin generating revenue next year, including a tin royalty in Europe, a zinc project in Tennessee, and a graphite asset in Canada. In total, the company has 35 assets which could contribute to its cash flows in 2025. For investors, this provides potential near-term catalysts in addition to the longer-term secular growth potential of the clean energy transition.

The Investment Thesis for Electric Royalties:

• Offers exposure to key clean energy transition metals like lithium, graphite, manganese, tin, zinc and copper through a diverse portfolio of 73 royalties
• 35 assets could potentially generate revenues in 2025, including lithium properties and several near-production projects
• Recent acquisition of a cash-flowing copper-gold royalty in Chile provides immediate revenue
• Royalty model provides direct leverage to rising metal prices with no cost inflation
• Experienced management team with a proven track record of acquiring royalties on attractive clean energy metal assets
• Trading at a significant discount to revenue-generating royalty peers, providing potential valuation upside as assets enter production

Macro Thematic Analysis:

The transition from fossil fuels to clean energy is one of the most powerful macro trends of our time. Efforts to combat climate change will require a massive buildout of clean energy infrastructure in the coming decades. According to a recent report from the International Energy Agency, the world will need to quadruple its annual clean energy investments by 2030 to over $4 trillion per year to reach net zero emissions by 2050.

This represents an enormous opportunity for the metals and mining sector. Clean energy technologies are far more mineral-intensive than their fossil fuel counterparts. For example, an electric vehicle requires 5-6x more critical minerals than a conventional car. Meanwhile, an onshore wind plant requires 8x more minerals than a gas-fired power plant of the same capacity. As society electrifies, demand for key energy transition minerals like lithium, cobalt, nickel, copper, and rare earths is set to skyrocket.

However, supplies of many critical minerals are likely to be constrained. Current mining projects and processing facilities will not be sufficient to meet rising demand. Significant investments in new mines and mineral processing capacity will be required. Companies that can bring new clean energy metal projects into production stand to benefit immensely from this trend.

The scarcity of quality clean energy metal projects in stable jurisdictions, coupled with strong demand growth, is likely to be a powerful tailwind for higher commodity prices in the years ahead.