Vox Royalty - Investing in Gold With Reduced Risk Exposure

Vox Royalty Corp. is a high growth precious metals royalty and streaming company. The company boasts a portfolio of over 50 royalties and streams spanning eight jurisdictions and four continents. The company is focused on value creation for its shareholders and believes that it has been able to create one of the most interesting and undervalued royalty portfolios in the royalty and streaming space. 

Matthew Gordon caught up with Kyle Floyd, the CEO of Vox Royalty Corp. (TSX-V:VOX) to discuss the company’s recent activities.

Company Overview

The company recently released development and exploration updates from its royalty operating partners. The update showed various developments at the company’s partners with some of the highlights of the report including the 106% increase in mineral resources at the Pedra Branca project of ValOre Metals Corp. Vox Royalty Corp. holds a 1% net smelter return royalty over the Pedra Branca PGE project in Brazil and believes that the recent mineral resource increase is only the beginning with it expecting further resource growth in the future.

The Bulgera gold project by Norwest Minerals Limited, a project where Vox Royalty Corp holds a 1% net smelter return royalty reported an increase of 113% in its gold resource estimate. The company also holds a 1.75% gross revenue royalty on the Ashburton gold project of Kalamazoo Resources Limited in Western Australia, which recently reported a 94% gold recovery rate obtained through metallurgical test work as well as the commencement of an engineering study.

Vox Royalty Corp. aims to source pre-revenue royalties that are less than 3 years away from production.  The company believes that it is most adept at evaluating such operations. The company trusts that its ability to source various royalties globally coupled with its ability to identify quality royalties will continue to deliver value creation for its shareholders.

Management

The company is run by a management team that has performed over USD$ 1.5 billion of royalty transactions in the last 30 years as well as advising or financing an additional USD$ 1 billion in metals and mining transactions.

At the helm of this dynamic company is Kyle Floyd, who is the founder, CEO and chairman of Vox Royalty Corp. Floyd created the company concept, recruited the team and raised the necessary capital to create the company in 2014. Floyd is tasked with ensuring the strategic direction of the company is defined as well as followed, as well as to manage the general operation of the company. He previously served as the head of the global mining investment banking department of ROTH Capital Partners between 2007 and 2013. Floyd, during his time at ROTH Capital Partners, led the international OTCQX and cross border listing advisory group of the company in the execution of over USD$ 1 billion in mining transactions.

Pascal Attard is the Chief Financial Officer (CFO) of the company and holds a bachelor of accounting, with honours, from Brock University and holds the designation of Chartered Professional Accountant and Chartered Accountant. Attard has a vast amount of experience ranging from executive guidance for finance, accounting, contracts, treasury and taxation to mergers and acquisitions as well as investor relations. Attard held various positions at McGovern Hurley LLP, from where he joined Delivra Corp. in June 2015. He played an integral part in the sale of Delivra Corp. to Harvest One Cannabis Inc. in 2019.

Spencer Cole is the Chief Investment Officer (CIO) of Vox Royalty Corp. and has been involved in vast amounts of royalty transactions.  Cole holds a bachelor of commerce degree in finance from the University of Melbourne and a master’s degree in mining engineering from Queen’s University. He was the co-founder of Mineral Royalties Online, which was acquired by Vox Royalty Corp. in 2019. Cole has held positions including Mining Engineer as well as Investment Banker and has been a part of companies such as BHP, South32 and UBS Investment Bank.

Simon Cooper is the Vice President (VP) of Corporate Development for the company. He holds a bachelor’s degree in Geology from the University of New South Wales as well as a master’s degree in mining engineering from the Camborne School of Mines. Cooper has experience in project evaluation, mergers and acquisitions and project finance in the base, speciality and precious metals industry spanning five continents

Riaan Esterhuizen holds the position of Executive Vice President, Australia and joined the team after the acquisition of Mineral Royalties Online in 2019. Esterhuizen was a co-founder of Mineral Royalties Online as well as a principal advisor. He has more than 20 years of experience in multi-commodity exploration and commercial management roles including tenures at companies such as BHP, Rio Tinto, Randgold and Goldfields.

Adrian Cochrane rounds out the esteemed management team as Vice President of Legal Affairs And General Counsel at the company. Cochrane has extensive experience in representing clientele with global assets in the Canadian and Cayman Islands legal systems. He was previously a solicitor at Blake, Cassels and Graydon LLP in Toronto and Walkers in Grand Cayman, where he advised clients on capital markets matters and transactions, international corporate reorganisations, mergers and acquisitions as well as private equity transactions.

The exponential revenue growth of Vox Royalty Corp. can be accredited to its management team as well as to its royalty and streaming business model.

Approach to picking royalties

The royalty and streaming space has become increasingly popular with investors over the last few years. The reason for this investment avenue gathering so much attention is due to its inherent low-risk exposure. The traditional form of investing, where an individual would take a direct position in a company is a high-risk position as the investment is dependent on the performance of a single asset or entity. The investment of an individual into a royalty and streaming company spreads the risk over various companies, which leads to a lower risk investment for an individual.

Vox Royalty Corp. prides itself on its ability to correctly identify assets in which to take a royalty or streaming position. The company has been able to grow its revenue over the past 5 quarters exponentially due to this ability and has shown a 350% growth in its revenue between Q3 2020 and Q3 2021.

The company accredits its ability to identify high-growth assets to the ability of its technical team, primarily consisting of geologists and mining engineers, to objectively review the quality and opportunity of an asset. The team evaluates an asset primarily with regard to its net asset value (NAV), cash flow and potential return on investment (ROI).

Kyle Floyd sums up what the company looks for in an asset as follows:

“What we're looking for is pre-revenue Royalties, that is not 10-years out, but in the next call it anywhere from 3-months to 3-years, that's really our sweet spot where our engineers and our geologists are really able to do the hard work on the front lines to be very good asset selectors and good Royalty selectors within that. And so that's our core focus and that's allowing us to generate what is, if you look at the return on investment, return on invested capital, return on investment from NAV perspective, we're leading the industry by a very, very wide margin in that respect.”

The 350% growth in revenue of the company in 5 quarters, is a testament to the company’s ability to identify the correct assets.

High-value returns

Vox Royalty Corp. recently published the development and exploration updates of its assets. The company is able to boast that various assets in its portfolio have shown immense growth. The first of the company’s assets that have shown great development is the Pedra Branca platinum group elements (PGE) project by ValOre Metals Corp. which has seen a 106% increase in its mineral resource. Vox Royalty Corp. holds a 1% net smelter return (NSR) royalty over the Pedra Branca PGE project in Brazil, which the company believes shows even more growth potential.

Vox Royalty Corp. holds an AUD$ 1 per ton production royalty on part of the Kookynie gold project in Western Australia, owned by Genesis Minerals Ltd. The company believes that the asset holds the potential to deliver a 50x revenue multiple on its royalty investment. The Bulgera gold project located in Western Australia and owned by Norwest Minerals has shown a 113% increase in its gold resource estimate and has also shown the potential to be amenable to low-cost production.

The AUD$ 0.50 per ton production royalty Vox Royalty Corp. holds over the Janet Ivy gold project in Western Australia, owned by Zijin Mining Group Ltd. will start to deliver returns in the form of revenue for the company in the second half of 2022. Zijin Mining Group Ltd. announced that the Janet Ivy gold project is scheduled to initiate production in the second half of 2022.

The company believes that its business model as well its assessment ability will continue to create value for its shareholders.

The advantage of investing in royalties

Kyle Floyd believes that investing in a royalty company focused on commodities in the current inflationary global environment offers investors a low risk and high return opportunity. Floyd believes that the current global economic environment is reminiscent of 2007/2008 and believes that the intrinsic value of commodities will be shown again now as it was then, he states:

“This inflationary environment is very real and I think one of the things that should be informing investors is past precedent and past data and what has worked in these cycles. It feels very much like 2007, 2008 to me where you saw there was inflation back then that was a lot predicated and really kind of furthered by government spending… in those cycles, commodities have outperformed”

Royalty companies have delivered higher returns at lower risk profiles over the past 20 years than investing in ETFs, individual mining companies or physical gold. He states:

“…you have to kind of break that down into those call it four categories. Well, within those four categories and including the S&P 500, Royalty companies over the last 20-years have exceeded the returns of those other four categories by a very, very wide margin. I would say based on past precedent; Royalty companies are a good place to look.”

Floyd believes that the reason why royalty companies have outperformed the various other investment avenues is due to a royalty being fixed to the price of a commodity i.e. 1% of product value and not being affected by increased operational costs due to inflation. Floyd explains:

“The reason they've outperformed, I believe, is because they offer a lot less risk and really a different kind of upside. Royalty companies are typically not, they're not continuing to invest, to realise the growth of these projects. The benefit of that is you're not putting more capital out for existing projects and the success of those projects; you're just continuing to realise compound returns. As metal prices go up, so this is a Royalty code basic, you're getting the compounded benefit of an increase in resources, our press release touches on that, increases in production. So, increases in mine life, all at higher metal prices, but you're not afflicted by the rising costs, they are also eating away at the margins and earnings power of the mining companies. And you're diversified across, in our case 55 Royalties & Streams alongside the natural inherent benefit of a Royalty, which is never diluted. So that's why Royalty companies, I believe, have outperformed.”

Floyd believes that should an individual be looking for a low-risk investment with high upswing potential in this high inflationary environment, the royalty space is the ideal investment avenue, he states: 

“…if you're really looking for a place to park capital in these inflationary regimes, the data would suggest Royalty companies are probably the better place to be.”

To find out more, go to the Vox Royalty website