Empress Royalty: Gold & Silver Streaming With Torque

• Empress Royalty is a royalty and streaming company focused exclusively on gold and silver, investing in revenue-generating or near-term revenue-generating assets.
• The company currently has four revenue-producing assets, including projects in Mozambique, South Africa, Peru, and Mexico (Luca).
• Empress Royalty's revenue is growing, from $3 million last year to an expected $6 million this year, with projections of $12 million in the near future.
• The company is looking to move up to larger deals in the $10-15 million range, potentially even bigger for strategic opportunities.
• Empress Royalty differentiates itself by directly investing in companies rather than buying third-party royalties, allowing for closer relationships with operators.

In the dynamic world of precious metals investing, royalty and streaming companies have emerged as an attractive option for investors seeking exposure to gold and silver without the operational risks associated with mining. Empress Royalty Corp. (TSXV:EMPR) is a relatively new entrant in this space, but one that is rapidly making a name for itself through strategic investments and a focused approach to portfolio building. This article delves into the company's strategy, recent performance, and future prospects, providing investors with a comprehensive overview of what makes Empress Royalty a compelling investment opportunity in the precious metals sector.

Gold and Silver Royalty and Streaming Model

Empress Royalty, founded in 2020, is a royalty and streaming creation company focused exclusively on gold and silver. The company's strategy revolves around investing in revenue-generating assets or near-term revenue-generating assets, primarily in the small to mid-cap mining sector. This focus allows Empress to capitalize on opportunities that might be overlooked by larger players in the industry while still providing significant growth potential.

Alexandra Woodyer Sherron, President and CEO of Empress Royalty, explains the company's approach:

"We are a royalty and streaming creation company focused exclusively on gold & silver, and we invest in revenue-generating assets or near-term revenue-generating assets."

This clear and focused strategy sets Empress apart in a sector where diversification is often the norm.

Current Portfolio and Performance

Empress Royalty's portfolio currently consists of four revenue-producing assets spread across different geographies:

1. Mozambique Project: This asset has been providing consistent revenue for over two years. It started as a development asset and successfully transitioned into production. The company holds a 1% royalty across the entire project, with ongoing exploration work potentially extending the mine life.
2. South Africa (Galaxy Mine): A recent investment of $5 million made in February, this project is in the final stages of ramping up production. The Galaxy mine represents a significant growth opportunity for Empress.
3. Peru Project: This was Empress's first producing asset when they invested. The company receives gold credits weekly from this operation, demonstrating the immediate cash flow benefits of their investment strategy.
4. Mexico (Luca Project): Empress invested in this project about two and a half years ago. The company takes 100% of the silver production, which represents about 10% of the mine's total production. Recent management changes and additional funding for drilling and development work make this an increasingly interesting prospect.

The company's revenue growth trajectory is impressive.

As Woodyer Sherron states, "Our revenue last year was $3 million. We're expecting $6 million this year, and after that, it should be $12 million. And that's if we did nothing else, that's just with our 4 revenue-producing assets now."

This rapid growth demonstrates the effectiveness of Empress's investment strategy and its ability to select projects with strong potential.

Investment Approach and Due Diligence

One of the key differentiators for Empress Royalty is its hands-on approach to investments. Unlike some royalty companies that simply acquire existing royalties, Empress directly invests in mining companies. This approach allows for a deeper understanding of the projects and closer relationships with the operators.

Woodyer Sherron emphasizes the importance of this approach:

"Because the way we structure our portfolio and do the investments, we're directly investing into the company. I'm not buying third-party royalties, so we have that direct relationship. We've got monthly reporting, if something's going to miss, we get weekly flash reports. So we're very hands-on with them."

This level of involvement not only provides Empress with better insights into their investments, but allows them to work collaboratively with the mining companies to overcome challenges and drive success.

As Woodyer Sherron puts it, "We need them to be successful for us to be successful, and we want to work with them."

Interview with President & CEO Alexandra Woodyer Sherron

Future Growth and Scaling Up

Having proven its concept with smaller investments, Empress Royalty is now setting its sights on larger deals. The company initially focused on investments under $25 million, with deals ranging from $3 million to $10 million. However, with the success of their current portfolio and growing revenue, Empress is looking to scale up.

Woodyer Sherron explains, "Now we want to kind of move up a bit. We've been looking at a lot of opportunities in the $10 to 15 million range, maybe a little bit bigger if it's the right strategic opportunity."

This scaling up represents a natural progression for the company and could lead to even more significant revenue growth in the future.

Market Opportunities and Challenges

The current market environment presents both opportunities and challenges for companies like Empress Royalty. While there is a general expectation that money from larger mining companies will trickle down to junior miners, this process is often slower than anticipated. This creates opportunities for royalty and streaming companies to provide alternative financing options.

As Woodyer Sherron notes, "The markets are never perfect, so we adjust accordingly, and we've demonstrated that."

Empress Royalty's flexibility and willingness to adjust to market conditions is a key strength. This adaptability allows the company to capitalize on opportunities in various market conditions.

Geographical Diversification and Risk Management

Empress Royalty's portfolio is geographically diverse, with assets in Africa, South America, and potentially expanding into Asia and North America. This diversification helps mitigate country-specific risks. The company's management team, with extensive experience in structured finance and operations in various jurisdictions, is well-equipped to navigate the complexities of international mining investments.

Woodyer Sherron highlights the company's approach to geographical risk:

"We are, due to our background and our experience, Endeavour Financial being a large partner of ours. I'm ex-Endeavour Financial, we're very comfortable operating in Africa. We know how to structure deals in those jurisdictions, how to get the appropriate security over the assets, registration, everything."

Focus on Precious Metals

Unlike some royalty companies that diversify across various commodities, Empress Royalty maintains a strict focus on gold and silver. This specialization allows the company to leverage its expertise in these metals and capitalize on their potential for price appreciation.

"We're pretty much the only pure gold & silver royalty company, and we plan on staying that way," Woodyer Sherron states.

This focus could be particularly appealing to investors seeking targeted exposure to precious metals without the need to invest directly in mining operations.

Empress Royalty represents an intriguing investment opportunity in the precious metals sector. The company's focused strategy, rapid revenue growth, and plans for scaling up position it well for future success. Its hands-on approach to investments and ability to work closely with mining companies provide a level of insight and control that is unique in the royalty and streaming space.

While still a relatively young company, Empress Royalty has already demonstrated its ability to identify and capitalize on promising opportunities in the gold and silver mining sector. As it moves towards larger deals and continues to grow its revenue, it could become an increasingly attractive option for investors looking for exposure to precious metals through a royalty and streaming model.

However, as with any investment in the mining sector, there are risks to consider. The performance of Empress Royalty is tied to the success of its partner mining companies and the overall performance of gold and silver prices. Investors should carefully consider these factors alongside the company's growth potential when making investment decisions.

The Investment Thesis for Empress Royalty

• Pure-play exposure to gold and silver: Empress Royalty offers investors focused exposure to precious metals without the operational risks of mining.
• Rapid revenue growth: The company has demonstrated strong revenue growth, from $3 million to an expected $6 million, with projections of $12 million in the near future.
• Scaling up: Empress is moving towards larger deals ($10-15 million range), which could accelerate growth.
• Hands-on approach: Direct investments in companies allow for better control and insight into operations.
• Geographical diversification: Assets spread across multiple jurisdictions help mitigate country-specific risks.
• Experienced management: The team has a strong background in structured finance and international mining operations.
• Potential for value creation: As a relatively new and small company, Empress has significant room for growth and value appreciation.

Actionable Advice

• Consider Empress Royalty as part of a diversified portfolio for exposure to precious metals.
• Monitor the company's progress in securing larger deals, as these could be catalysts for growth.
• Keep an eye on gold and silver prices, as these will impact Empress Royalty's performance.
• Research the specific projects in Empress's portfolio to understand their potential and risks.
• Compare Empress Royalty's valuation and performance metrics with other royalty and streaming companies to assess relative value.

Macro Thematic Analysis

The investment case for Empress Royalty is closely tied to the broader macro themes in the precious metals sector, particularly gold and silver. These metals have historically been seen as safe-haven assets and hedges against inflation and economic uncertainty.

In the current global economic landscape, characterized by persistent inflation concerns, geopolitical tensions, and economic uncertainties, the appeal of gold and silver as investment assets remains strong. Central banks worldwide continue to hold and acquire gold as a reserve asset, underscoring its enduring value. Moreover, the ongoing transition to renewable energy and the increasing adoption of electric vehicles are driving demand for silver, which is used in solar panels and various electronic components. This industrial demand, coupled with silver's monetary characteristics, provides a dual driver for potential price appreciation.

The royalty and streaming business model that Empress Royalty employs is particularly well-suited to this macro environment. It allows investors to gain exposure to precious metals without the operational risks associated with mining, while still benefiting from potential upside in metal prices. This model also provides a degree of inflation protection, as royalties are typically based on a percentage of production or revenue, which naturally increases as metal prices rise.

Furthermore, in an environment where traditional financing for mining projects may be constrained, royalty and streaming companies like Empress can play a crucial role in providing capital for development and expansion projects. This positions them to potentially benefit from a lack of new mine supply, which could support higher metal prices in the long term.

As Alexandra Woodyer Sherron aptly summarizes the opportunity:

"With where we believe commodity prices are going, we really should see that lift in the share price."

This encapsulates the potential for Empress Royalty to benefit from both its growing portfolio of assets and favorable macro trends in the precious metals sector.

Empress Royalty presents an interesting opportunity in the precious metals sector, offering investors exposure to gold and silver through a royalty and streaming model. The company's focused strategy, rapid revenue growth, and plans for scaling up to larger deals position it well for future success. Its hands-on approach to investments and ability to work closely with mining companies provide a unique advantage in the industry.

As Empress Royalty continues to grow and prove its business model, it could become an increasingly attractive option for those seeking exposure to precious metals without direct involvement in mining operations.