Vox Royalty (VOX) - Increased Revenue Flow & Acquisitions

Vox Royalty Corp. is a high-growth, precious metals-focused royalty, and streaming company. The company has a portfolio of more than 50 royalties and streams spanning nine jurisdictions. A technically focused transactional team and a global sourcing network have allowed it to become the fastest-growing company in the royalty sector. Since 2019, the company has announced over 20 separate transactions to acquire more than 45 royalties.

Matt Gordon caught up with Spencer Cole, Chief Investment Officer, Vox Royalty. Spencer is the Co-Founder of Mineral Royalties Online which was acquired by Vox Royalty. He is a mining engineer and a former investment banker. He has over a decade of experience with BHP (M&A, Feasibility Studies), South32 (Hermosa Project, Boddington Bauxite Mine, Corporate), and UBS Investment Bank. Spencer has been historically involved in over $1Bn of royalty transactions. His educational credentials include a Bachelor of Commerce degree in finance and a Mining Engineering degree.

Company Overview

Vox Royalty is a royalty and streaming company founded in 2014. The company is headquartered in the Cayman Islands. Vox Royalty Australia Pty Ltd and Mineral Royalties Online Pty Ltd. are the company's subsidiaries. It is listed on the Toronto Stock Exchange (TSX-V: VOX) and the OTC markets (OTCQX: VOXCF). The company aggregates its royalties into a portfolio for shareholders. The company's major focus is on precious metals and assets that are between 1-3 years out of production.

Vox Royalty is a unique mining royalty investment company targeting the highest return on invested capital in the entire $70B industry. The company has been around for 10 years and has been listed for the past 2 years. The company offers a ground floor opportunity for investors.

On 26th May 2022, the company published its maiden revenue guidance for the current year, featuring CAD$10M-CAD$12M toppling revenue. The company successfully doubled its CAD$4.6M revenue from last year. It is now delivering on its commitment to investors. A large number of the company’s key royalty assets are starting to come online, and the portfolio has grown organically over the last two quarters.

Vox Royalty is unsatisfied with the recent share price response because, despite the challenging market conditions, the company was able to double its revenue guidance. The equity market conditions seem bleak at this point. Despite the positive news flow, the company isn’t immune to the changing market conditions. The company continues to deliver record revenue growth each quarter. It is also working on a secondary listing on the NASDAQ, which would be highly beneficial from a liquidity perspective.

In recent times, the company has had promising meetings with several large institutional investor funds. It anticipates that enhancing the trading liquidity would be essential to stimulate share price movement.

Third-Party Marketing

On 8th June 2022, Vox Royalty put out a disclosure in response to a query from the OTC markets. It is important to note that the release was made on the company’s initiative and it wasn’t compelled to do so.

The company talked about a recent engagement made with a third-party marketing firm called GRA. The firm is responsible for developing newsletters and emails which are sent to its investor network. GRA has been hired by other royalty companies in the past. The OTC had concerns regarding the wording used in the emails. The emails were based on publicly available information that was factual in nature. As a result, Vox Royalty decided to re-think its engagement with GRA.

Vox Royalty’s management controls the fundamental value in its royalty portfolio. It continues to acquire great royalty assets at a great value. The company is constantly focused on finding new pools of investors. The association with GRA was an effort to access a new investor pool that would be interested in Vox’s story, especially in times of high inflation.

It is important to note that each time Vox Royalty engages with third-party marketing firms, it has fairly strict engagement terms. The standard engagement terms also include editorial control. Following the incident, the company has effectively stopped all marketing activities with GRA.

As an organisation, the company is fixated on experimenting with new strategies. The company is constantly seeking new investors. It has plans to work with other marketing firms in order to access new pools of investor capital.

M&A Activity

On 26th May 2022, the company announced a major acquisition. The company acquired a producing iron-ore royalty called the Wonmunna Iron Ore Project, located in Western Australia. The asset is operated by an AUD$11Bn iron-ore producer called Mineral Resources. Vox Royalty has a strong working relationship with Mineral Resources.

Mineral Resources also operates one of the other producing royalty properties. The Wonmunna asset is located in the Pilbara region, 30km away from some of the world’s largest iron-ore mines. The asset has been producing for the past 12-18 months and the mine life is between 10-18 years based on the current production numbers. The operator is currently carrying out extensive drilling at the asset.

The mine is currently producing 5Mt per annum and is fully installed and fully permitted to double its production capacity to 10Mt. The asset has a significant expansion potential, paving the way for additional revenue generation opportunities in the future.

In the past 2 years, Vox Royalty has lost about 15 royalties to mining operators. This is challenging for the company as it has to carry out all the legwork to acquire each royalty, which is then picked up by a large mining company. In such cases, the operators often have different priorities. The operators might be focused on operating the mine, or do not get notified of the deal until the final paperwork is signed. There are a host of reasons why different mining companies won’t acquire royalties. One of the reasons is that these companies are purely focused on operations and do not seek out third-party royalties.

In June this year, Vox Royalty announced that it has executed a binding royalty sale and purchase agreement with an individual prospector to acquire rights to three Canadian gold royalties for a total consideration of up to CAD$1,800,000.

The royalties include a 1% NSR (Net Smelter Return) royalty over part of the Goldlund Project in Ontario, which is operated by Treasury Metals Inc. Vox Royalty really liked Treasury Metals’ management team. The company believes that Treasury Metals is a credible mine builder that is equipped with the type of management team that is ideal for operating Vox’s royalty assets.

Since the deal was closed through a Canadian prospector, Treasury Metals wasn’t directly involved in the royalty transaction. Notably, Sprott Resources Streaming and Royalty Corp (SRSR) invested $20M in Treasury Metals to acquire a 2% royalty. Interestingly, Vox Royalty paid a much lower price than SRSR because the former bought a secondary or existing royalty that covers part of the Goldlund deposit.

Based on the ongoing drill operations, Vox Royalty anticipates that the deposit is likely to grow. The operator is expected to publish the PFS (Preliminary Feasibility Study) on the Goldlund deposit later this year. It also has a Feasibility Study planned for 2023 and is looking to make a construction decision within 18 months.

It is important to note that the project is full-financed into a construction decision. Project milestones and de-risking events are important considerations when Vox Royalty is looking to acquire a new royalty. The company has acquired the royalty at a great value today and anticipates that as the management continues de-risking the project, the asset’s value will re-rate in the coming quarters.

Acquiring a new royalty can take months at a time. When acquiring a secondary or existing royalty, the company needs to dig through the royalty’s history. While some holders keep royalties in decent shape, others require a bit more due diligence.

When dealing with an individual close to the age of retirement, it is a personal choice to sell the existing royalties. Dealing with prospectors and their families takes longer because the individuals need to be completely comfortable with the company, the transaction, and how it’s structured. Although the time taken is longer, the value outcomes are highly-attractive.

Over the past 2 years, Vox Royalty has gone from 1 producing royalty asset to 6. The company expects to end 2023 closer to 11 producing assets. The revenue will continue to grow alongside the free cash flow.

The company is focused on dividend policies and increased trading liquidity through a secondary listing. It anticipates that the combination of an increased trading volume, an increase in free cash flow, the exploration of a potential dividend policy, and the maturing of the 60-royalty portfolio will make it highly likely that the share price will respond.

Vox Royalty is looking to implement a dividend policy when it cannot deploy the capital into more accretive uses such as M&A (Mergers and Acquisitions) or acquiring new royalties. The company has plans to consider dividends as the year progresses and the free cash flow continues to grow.

As per the company, an increase in revenue makes it much more attractive to the market. Any potential royalty acquirer is seeking a base of revenue that can be built upon, leading to a huge amount of option value by the size of the portfolio.

Vox Royalty has 60 royalties in its portfolio along with a CAD$10M-$CAD12M revenue in 2022. The analysts expect the revenue to grow next year. The company ticks a lot of boxes for potential acquirers. The company’s management team has 15% ownership. Vox Royalty is open to the possibility of a potential M&A if the deal compensates its investors for the option value that has been built through the royalty portfolio. As the company’s revenue continues to grow each quarter, it is not compelled to carry out any corporate M&A in its current standing. However, the company is open to discussions with groups as it has the potential to maximise shareholder value.

To find out more, go to the Vox Royalty website