Vox Royalty (VOX) - No.1 Royalty Pick, finishes 50% higher than GDXJ

Vox Royalty 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 Kyle Floyd, CEO, and Chairman, Vox Royalty. Kyle created the concept, built the team, and raised the capital required to commence Vox Royalty’s operations as a metal royalty and streaming company. He is responsible for the general operational and strategic direction of the business and helped lead the company to become one of the fastest-growing mining royalty businesses over the past 2 years. Previously, he held the position of Vice President - Practice Lead of the global mining investment banking department at Roth Capital Partners between 2007 and 2013. During his time at the company, he led the international OTCQX and cross border listing advisory group and led business development execution on all mining transactions, ultimately financing and advising nearly $1Bn over more than 60 transactions including M&A assignments, private placements of debt and equity, IPOs and follow-up offerings. His educational credentials include a Bachelor of Business in Corporate Finance from the University of Washington along with a Master of Science degree in Mineral Economics from Colorado School of Mines.

Company Overview

Vox Royalty is a royalty and streaming company founded in 2014. The company is headquartered in Toronto, Canada. 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). 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 precious metals-focused third-party royalty acquisition company. The company looks for great royalties around the world that entitle it to a revenue interest in the projects.

The Limpopo Project

The Limpopo Project is located on the northern sector of the Eastern Limb of the Bushveld Igneous Complex within the Limpopo Province. It is situated 250km northeast of Johannesburg and 50km south of Polokwane. 

Vox Royalty recently announced its binding agreement with Sibanye Stillwater, a private South African registered company to acquire 2 platinum group metals (PGM) royalties for CAD$10.4M. This includes CAD$1.5M in Vox stock upfront, with a 2-year restriction. 

The deal includes a 1.0% gross receipts royalty over the Dwaalkop Project and a 0.704% gross receipts royalty over the Messina Project. These 2 projects cover the full extent of the Limpopo PGM Project, which is operated by Sibanye Stillwater. It is important to note that this deal is a gross royalty. 

This deal was under consideration for a long time by the company. The deal has massively increased the company’s gold equivalent ounces under resource inventory and royalty. The asset features a 50Moz all-in gold equivalent resource. The asset was a past producer in 2008 and was placed under care and maintenance in 2009. It was operated by Lonmin Plc, one of the premier mining companies globally. 

Vox Royalty is looking to create value for its shareholders through this royalty. The company has focused on avoiding dilution through equity raises. The company has instead looked for ways to stretch the balance sheet in the most ideal ways possible to avoid a capital raise. The deal is within a 2-5 year timeline, which is a development horizon for the asset. This deal has enabled Sibanye Stillwater to reduce its project’s risk. In addition, the upside of Vox Royalty’s stock further benefits Sibanye. 

The Dwaalkop Project and the Messina Project encompass the entirety of the known resource, featuring 50Moz gold equivalent ounces. The Baobab Shaft at the asset reaches a depth of 450m. Back in the early 2000s, tens of millions of dollars were spent on the asset to bring it into production. As platinum prices dropped from $2000/oz to $200/oz, the project stopped production and was placed into care and maintenance. The deposit primarily features platinum, palladium, and rhodium along with gold and nickel.

Even though the project went out of production, it has had 2 studies completed since 2017. Since the time this asset was placed into care and maintenance back in 2008-2009, the basket of metal prices has increased by a factor of 7. 

Project Deliverables

The actual project deliverables will be highlighted in detail by way of a closing press release in the near future. Vox Royalty is largely focused on meaningful production milestones being hit on the project. The company considers this royalty as a risk-appropriate opportunity that significantly increases its overall metal inventory in the ground. The company anticipates that the project will come online and the CAD$10.4M will be paid in due time. 

Notably, the Limpopo PGM Project had a Feasibility Study completed in 2017, and in 2020, the study was reviewed at a conceptual level. 

The deal is structured in a way that will provide an additional payment to the operator when production commences and royalty revenue is received. Following this, there will be a larger payment that brings in the CAD$10.4M when millions of dollars have been realized in royalty revenue. 

According to Vox Royalty, the next 12-18 months will have significantly more shares going out than coming in. The company is confident that the deal is well-organized in terms of compensation for the opportunity. It also helps Sibanye Stillwater through project de-risking. Sibanye Stillwater has developed an active 2-5 years plan for the project. The company is investing in the cleantech metal space. This space is majorly composed of nickel, a huge by-product of the project. 

Historical Production

The Limpopo PGM Project was originally held by a company called SouthernEra. It was later acquired by Lonmin. Following this, the project was acquired by Sibanye, which later acquired Stillwater. Under Lonmin Plc, the Limpopo PGM project produced 73,500oz of PMG with 752t nickel and 513t copper.

Based on the 2017 Feasibility Study, and past production numbers, the asset is expected to produce around $1.3M in cash flow per annum for decades. The updates to the study indicate that the Baobab Shaft, located at a 450m depth can provide a significant supply on its own, leading to the security of interest due to its past production history. 

The Dwaalkop Project is located on the mineralization, where the veining moves continuously across the land package. This is essentially the grouping of high-grade veins. Vox Royalty anticipates that once the project comes online and the orebodies as part of the production plan, the annual revenue could jump from $1.3M to about $3M, based on conservative estimates of metal prices. This would potentially lead to decades of $3M annual revenue with significant room for upside as Sibanye Stillwater continues to carry out studies and investments into the asset. 

Vox Royalty is focused on creating value for its shareholders. The decision to offload the project in the future will be determined by its shareholder base. This is in line with the company’s strategy of disciplined acquisitions and finding forgotten royalties. 

The Differentiating Factor 

Vox Royalty helps generate significant value through its global transactions. It has a highly-skilled technical team. The company has created massive value through a systematic and high-discipline approach. This enables the company to avoid overpaying for deals. The company has a competitive advantage that has enabled it to create more value than any other royalty company within the sector. 

According to the company, an investor should focus on the price to book for an asset along with the revenue generated before making an investment decision. Price to book is determined by the value of the company compared to the funds expended for the acquisition of royalties and streams. The second important factor to consider is the amount paid against the revenue generated. 

Vox Royalty focused on buying assets at a fraction of its NAV (Net Asset Value) and allowing the assets to be re-rated within the company’s portfolio. This strategy has enabled the company to deliver the highest rate of organic revenue growth in 2021. The assets acquired free revenue which in turn, generated additional revenue, leading to extremely high gross margins. In fact, taking into account the depletion of orebodies would still result in extremely high gross margins. In comparison, most other royalty companies are known to pay a huge premium up front which leads to a cash flow wash situation when the depleting orebodies depreciate against the generated revenue. 

The Best Deal of 2021 

Although Vox Royalty made several significant deals in 2021, the company’s best deal for the previous year was the acquisition of the Janet Ivy producing gold royalty. This was bought at a fraction of the asset value and delivered as per the expectations. The asset was operated by Norton Gold Fields, which is owned by Zijin Mining. The company had plans to invest hundreds of millions of dollars to develop the Janet Ivy project into the largest heap leach gold operation in Australia. This took place in the middle of a huge ramp-up in operations. 

Overall the company has had several notable acquisitions last year. It focuses on growth from the perspective of creating good value for great projects. Vox Royalty has plans to publish its Q4, 2021 results in April. The company is currently focused on operating cash flow as opposed to the net income. The company is in discussions for new additions to its portfolio, the details for which will be furnished in the coming months.

To find out more, go to the Vox Royalty website