Vox Royalty (VOX) - Pick of the Week: Royalty Week

Vox Royalty is a growth precious metals royalty and streaming company with a portfolio of over 47 royalties and streams spanning 8 jurisdictions. The Company was established in 2014 and has since built unique intellectual property, a technically focused transactional team and a global sourcing network which has allowed Vox to become the fastest-growing company in the royalty sector. The company has been listed on the TSX-V for 9 months and was private before that..

A few weeks ago, we caught up with Spencer Cole, Executive Vice President – North America, of Vox Royalties, who shared with us the exciting growth trajectory that is occurring at Vox Royalties. More recently, we spoke with Kyle Floyd, Founder, Chairman and CEO at Vox, who offered his perspective as well. Both men highlighted their plans for growth and a focus on cash on cash returns. Music to my ears.

Kyle Floyd’s High-Level Perspective

It’s always good for investors and stakeholders to understand the CEO’s plan of attack. Floyd offered his: “Vox Royalty Corp is a royalty business primarily focused on acquiring existing 3rd-party royalties. What that means is we buy royalties from individuals and parties that have these royalties over projects that they do not operate. We don’t finance mining companies; we don’t give money to mining companies to go and develop new assets or their existing assets. We look for these third-party royalties all over the world and we’ve built competitive advantages in that business of finding these 3rd-party royalties over great assets, acquiring those, and bringing them into the portfolio at scale and great value". A pure play royalty, if you like.

VOX Share Price Concerns

Early in the interview we asked Floyd about the poor recent performance of Vox’s share price. We asked: “The share price has absolutely tanked from $3 down to $2.35. What’s happened?”

Floyd was happy to address the question and said that one of their investors “In what was a very solid fundamental book of investors with some of the who’s who of long-only gold funds” turned out to be a short-term-minded hedge fund that executed a fast turn around for a quick profit. He continued: “That is their business. That is how they make money. It’s unfortunate for us”.

He then turned to the bigger picture: “The good news is it’s a short-term blip. We have tremendous fundamental growth… it’s never fun to have that happen, the reality is it’s a short-term blip that’s not fundamentally linked and we actually have brought in a very good group of long-term only gold funds that are going to provide a really good layer of support here. I think what is a negative for us right now is a tremendous buying opportunity for your watchers and listeners”.

Positive Catalysts for Share Price        

Floyd strongly believes that Vox has done a tremendous job in building fundamental value. In support of that, here are some of the things he mentioned:

• “There is an upswell of organic growth in our portfolio, which means royalties we’ve already acquired that continue to build and develop value for us … and for our shareholders”.
• “We gave out maiden guidance today in revenue”, showing “Exponential growth” over the past year.
• “We continue to see absolutely tremendous growth at a fundamental level of the assets already in the portfolio”, which is “Hitting a point where I don’t think the market will be able to continue to ignore it”.

What Is “Exponential Growth”

Floyd continued on the theme of Vox’s exponential growth, admitting that it’s “A big word to use”. He dug deeper, re-visiting the market perception on Vox about a year ago: “I think the knock on the company was, ‘Vox, great you say you’re finding value but until that value manifests in the cash flow and revenue, it’s a ‘wait and see’ story”.

He then recapped for us that Vox specializes “In finding assets 3 to 24-months out.” Many of these are now maturing. So what does that mean?

That equates to revenue growth. Vox Royalty were essentially pre-revenue when they went public, but have now come out with maiden guidance. They've given the street what they believe are going to be very accurate numbers in terms of what will be delivered. That’s $1.7M - $2.5M for 2021 revenue, and that is growing exponentially. They are delivering on what they said they would deliver. 

Asset Maturation Moving Forward

We also touched on the conversation we had with Spencer Cole about the company’s abundance of LOI’s and how they intend to move them forward. Floyd addressed these LOI: “At this stage, we’re very happy with how that LOI backlog looks and us continuing to high-grade the opportunities that we’re presented with. We’re finding deep value. We turn down more deals than any other royalty company on the planet right now and we bring the best of what we’re finding at good value for our shareholders”.

Vox Does Not Gamble With Shareholder Capital

We discussed what other royalty companies appear to be doing: Overpaying at the beginning to get scale and early skin in the game. We asked Floyd about that operating model.

He compared other players’ business models with that of Vox Rotalties: “The reality is we’re aligned with shareholders. We don’t gamble with shareholder capital”. He went on: “How do we maximise that value? I think it’s a travesty in the industry that you have so many royalty companies going out and essentially gambling with shareholder value to get bigger scale, bigger size, so that they can eventually get paid more. That’s essentially what it equates to and it’s very frustrating”.

Vox’s style is much different he said: “When we buy a royalty, we buy a royalty that has to be accretive”. It must be accretive on a NAV basis and on actual, already discovered resource, he said.

He also offered this perspective: “A lot of royalty companies hide behind their cash flow multiple, trading at 50X cash flow. Well, look, there’s a lot of things that can be done accretively on that simple basis but you’re going to need miracles to happen to make that money back for investors”.

He closed out this part of the discussion by stating his belief that the precious metals royalty marketplace has changed: “It’s not going to be like the previous 10-years where most royalty companies worked. Investors, like when they choose mining companies, are going to have to be a little bit choosier about where they invest capital, specifically in the royalty sector”.

Forward-Looking Thoughts from the CEO

Floyd rounded out the dialogue with some bullish thoughts about several of the royalty assets that have had recent positive press releases: particularly Segilola in Nigeria, and Bulong in Western Australia, among others. He stated that Vox Royalty has been able “To come out with strong guidance” and that, although he can’t get into all of the particulars quite yet, that they are getting a “Tremendous number of surprises… in our portfolio. Some of them we thought would happen. Some of them are exceeding expectations”.

Our pick of Royalty Week

For full disclosure, following Royalty Week, our fund has taken a couple of large positions. Vox Royalty is one of them. It is our pick of Royalty Week. Congratulations to their standout team. 

An honourable mention must go to Maverix Metals too.

To find out more, go to Vox Royalty's Website.