Tap Into the Energy Transition with Electric Royalties

Electric Royalties: A Smart Bet for Exposure to Critical Minerals

Electric Royalties is a royalty company focused exclusively on the clean energy metals that will be crucial for the transition to renewable energy and electric vehicles. With a diverse portfolio of royalties on 22 development-stage projects, minimal costs, and near-term catalysts, Electric Royalties offers investors leveraged exposure to critical minerals while minimizing risks.

Focused on Metals Vital for the Clean Energy Future

Electric Royalties holds royalties on deposits containing metals that will see surging demand as the world shifts to renewable energy and electric transportation. This includes lithium, graphite, cobalt, nickel, copper, iron ore, and manganese.

As CEO Brendan Yurich explains, these deposits are rare and take millions of years to form. New sources can’t simply be created to meet rising demand. With assets on some of the best North American deposits of these minerals, Electric Royalties is positioned to benefit as demand outpaces supply.

Yurich highlights the company’s North American manganese asset as particularly strategic, calling it possibly the best manganese deposit for the EV industry in North America. With manganese critical for EV batteries, this royalty could prove highly lucrative.

Diversified Portfolio Reduces Risks

Rather than betting on just one or two assets, Electric Royalties has assembled a diversified portfolio of 22 royalties. This reduces risk, since the company won’t fail if any single project doesn’t reach production. The assets are roughly equal in size, so no single royalty will dominate revenues. Yurich notes that even if one or two projects stumble, Electric Royalties will be resilient. Diversification also exposes investors to more opportunities.

Minimal Costs and Capital Requirements

As a royalty company, Electric Royalties avoids the high holding costs, overhead, and capital requirements faced by mining companies. They simply collect a percentage of revenues once projects reach production. This means investors get leveraged exposure to rising commodity prices and mine production without exposure to operating costs and capital risks. Even amid inflation and supply chain issues that have increased the costs of building and running mines, Electric Royalties remains insulated.

Near-Term Catalysts Offer Upside

While many of Electric Royalties’ assets are still in development, Yurich highlights several near-term catalysts for revenue. The company’s OJ project in Quebec, which holds royalties on a major lithium deposit, is set to enter production within 12 months. This would make it Canada’s largest producing lithium mine. Electric Royalties also holds royalties on two graphite projects that could restart production quickly once project financing is secured. In addition, the company has options to increase its royalty stakes on existing producing assets over the next year. More royalty deals generating near-term cash flow are in the pipeline, with the company focused on adding diverse revenue sources that aren’t dependent on just one asset.

Funding to Execute Strategy Through Market Volatility

Despite weak equity valuations across the mining sector, Electric Royalties has funding available to continue acquiring royalties. This includes an existing $3.5 million facility with the company’s largest shareholder, which was recently expanded on favorable terms.

Rather than issuing shares at depressed prices, this flexible debt facility allows the company to execute its business plan through challenging markets. Once additional royalties start contributing revenue, Electric Royalties can cover overhead with just $1.5 million per year.

Tight Share Structure Limits Downside

Insiders own approximately 40% of Electric Royalties’ shares, limiting takeover risk and share dilution. Brendan Yurich and his family hold about 14% themselves. The company's largest external shareholder, who provided the $3.5 million credit facility, owns close to 20%. This concentration of supportive long-term shareholders should help maintain stability even if market conditions remain unfavorable. With limited room for large equity raises, Electric Royalties must fund growth organically rather than through shareholder dilution.

Experienced Management Team

CEO Brendan Yurich has over 10 years of experience in project financing and analysis in the mining sector. This provides valuable expertise for identifying and assessing royalty opportunities. According to Yurich, Electric Royalties has built a strong deal pipeline and network for sourcing royalties in the junior mining space. The company looks for experienced operators and reasonable capital costs when targeting potential royalty acquisitions. By focusing on smaller projects already partially de-risked and permitted, Electric Royalties avoids riskier grassroots exploration. Management’s disciplined approach provides confidence they can execute on their acquisition strategy.

The Bottom Line

With diversified exposure to crucial minerals needed for decarbonization, minimal costs, near-term catalysts, and experienced leadership, Electric Royalties offers investors an intriguing risk/reward proposition. While still an early-stage company, Electric Royalties seems positioned to capitalize on surging demand for the commodities underlying the global energy transition. For investors seeking leveraged upside to critical metals through an attractive royalty model, Electric Royalties warrants consideration.

Overall, I believe Electric Royalties could potentially be a good investment for investors seeking leveraged exposure to critical minerals needed for the clean energy transition. Here are the key reasons why:

• Focused on metals that will see massive demand growth as the world decarbonizes. Renewables, EVs, and batteries are extremely metal-intensive.
• Diversified portfolio reduces concentration risk and provides exposure to multiple opportunities.
• Minimal operating costs and capex as a royalty company. Investors get exposure to rising commodity prices without mining risks.
• Near-term catalysts like the OJ lithium project and graphite royalties could start generating revenue soon.
• Experienced management that has been judicious in selecting royalty opportunities.
• Funding available for acquisitions despite weak equity markets.
• Tight share structure limits dilution risk.

Of course, risks remain as a small royalty company focused on development-stage assets. But the attractive royalty model, leverage to crucial energy transition metals, seasoned leadership, funding availability, and portfolio approach make Electric Royalties an interesting speculative investment in the critical minerals space. For investors bullish on the clean energy revolution and want non-dilutive exposure, ERR could be worth considering.