(Ep.123) The Acquirers Podcast: Spencer Cole – Metal Royalty, Investing In Precious Metals Royalty And Streaming

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In this episode of The Acquirers Podcast, Tobias chats with Spencer Cole, CIO at Vox Royalty. During the interview Spencer provided some great insights into:

  • The Best Commodity Play Is Mining Royalty Investment Companies
  • Investing In Mining Royalties
  • Valuing Mining Royalty Investment Companies
  • Royalties vs Streams
  • Gold Has An X-Factor
  • A Lot Of Royalty Holders Don’t Know They’re Holding Them
  • The Impact Of Inflation On Precious Metals
  • The Best Royalty Deals Come From Existing Prospectors & Explorers
  • Validating Royalty Opportunities
  • Minimizing Portfolio Risk
  • Opportunities In Precious Metals
  • Salty Old Prospectors Don’t Use Email
  • Lots Of Upside For Vox Royalty
  • Adapting OCR To Develop A Royalty Database

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Full Transcript

Tobias: Hi, I’m Tobias Carlisle. This is The Acquirers Podcast. My special guest today is Spencer Cole. He’s the Chief Investment Officer of Vox Royalty, which is a mineral resource royalty and streaming investor. It’s an absolutely fascinating discussion coming up right after this.

Investing In Mining Royalties

Tobias: What is a mining royalty investment?

Spencer: That’s a good question, Toby. A mining royalty investment really is an income stream over a future production from a certain mine. Typically, they come about when a certain prospector discovers a certain gold deposit, but they don’t have $200 million to actually build the mine themselves. The bigger mining company will buy that new discovery for a small amount of cash up front. Then, they’ll give them a mining royalty contract that says that prospector gets 1% or 2% of all the future revenue from that potential mine. Then, that royalty stream, that is a contract that can then be on sold to an investment company, such as Vox.

Tobias: I see a lot of mining companies, particularly that list in Australia, often that is all that they have that single royalty stream, and it’s a farm in or farm out of some arrangement that they have. How do you find these opportunities?

Spencer: We apply, you could call it a big data approach to finding these royalties. Over the last 10 years, we’ve been constructing the world’s largest proprietary database of mining royalties. We use that to screen for mining royalties around the world. Often, we’re able to find them in the most unlikely of places. For example, we bought one gold royalty from an automotive company. We bought another iron ore royalty from a telecommunications company. We often try and target unconventional holders of these mining royalty contracts, because obviously, they’re non-core for that person or that company, and we can acquire them for deep value.

A Lot Of Royalty Holders Don’t Know They’re Holding Them

Tobias: How does an auto company or telco come to get a royalty like that?

Spencer: Typically, those types of companies used to be listed mining explorers, and they may have sold out of certain mining properties that have subsequently gone on to be spectacularly successful from an exploration and development perspective. Those companies are then hollowed out as listed shells, and then, when a new company, call it a telco or hearing aid company, which was another one we did a royalty deal with. When that new management team comes in, they drop in a new business.

It turns out that listed company still holds this really interesting mining royalty. We get into this interesting situation, Toby, where we knock on their door and we say, “We’re here to buy that mining royalty hold.” Often, these management teams say, “We don’t own a mining royalty. We’re a hearing aid company.” It’s a weird negotiation where we have to convince the company that they actually own this asset, before we make them an offer.

Tobias: How is it that you know that they have the royalty and the company doesn’t know?

Spencer: Yeah, no fault to the management teams that I was referencing earlier. Often, when you acquire a shell company, there’s only so much due diligence you can do. In one of the cases, one of those companies actually said to us, they said, “Thank God. This is a surprise on the upside. Most of the surprises for this shell company have been liabilities that we missed.” A lot of these royalty contracts, they aren’t centrally documented. They’re often just– a geologist puts them in the bottom drawer, and then, 10 years later, when the mines actually come into production, it’s only obsessive groups like us that have built this big database and combed through decades’ worth of data who actually can trace this this royalty through. Yeah, it’s no fault of those management teams, I should say.

Tobias: How are you tracking it down? Do you need to go to some government department and look at the tenements or something like that? How does that work?

Spencer: Yeah. We start with our proprietary database, and so we’ll see in the database– Actually, I’ll give you a worked example. September last year, we acquired a royalty on a goldmine in Western Australia. We initially got intelligence from our colleague in Perth that this certain mining company that’s based in Canada was applying for new mining concessions or mining leases over this large area of land. We went into our database to identify were there any historical royalties over those new mining areas? Then, we verified that against the government mining database, and sure enough, we saw in 1992, legacy, forgotten royalty, and then, within a space of two weeks, we were able to acquire that royalty. Then, within three months, that royalty area was being mined. We’re cross-checking against our own database with also various government mining databases as well.

The Best Commodity Play Is Mining Royalty Investment Companies

Tobias: You’re the CIO of Vox Royalty, which is a really interesting play on this thing, because you don’t have the investment of a traditional minor, but you have some of the advantage of the upside. If any of those commodities start to run, you’ll do quite well. What’s the history of royalty investing, and how do you find yourself in this position?

Spencer: Sure. It’s a niche industry, Toby, that has grown on steroids over the past 20 years. Some of the first royalty deals ever done were back in the mid-1980s. The most famous royalty deal in history was actually a company called Franco-Nevada that really– they’re the grandfathers of the whole industry. In 1986, they saw a small ad in a local newspaper in Elko in Nevada, that a salty old prospector was selling a gold royalty. They ended up buying that royalty for $2 million.

Now, fast forward to today, that was in 1986, that royalty they bought for $2 million has generated over a billion dollars of revenue to them, and the net present value of the future royalty revenue is still north of a billion dollars.

Tobias: Oh, wow.

Spencer: That $10 million investment from that salty prospector, that’s become one of the world’s largest gold mines. They’ve mined in excess of 50 million ounces of gold. I guess that shows you the leverage that you can get when you make the right investments in mining royalties. Since that fateful investment in 1986, the industry really caught fire about 20 years ago. In the last 20 years, it’s gone from basically a $2 billion industry that had basically four or five players, today, it’s a $70 billion industry with 30 listed mining royalty investment companies. It’s been the best way to play commodities across any asset class compared to mining companies, indices, equity indices, or actually the physical metal itself. Royalty companies have outperformed all of those commodity-linked benchmarks for the last 20 years.

Tobias: Why do you think that is?

Spencer: I think the key reason is that a royalty, and by extension, a royalty investment company gives you all of the upside that a mining company gives you. Exploration success, when you find the new bonanza gold deposit. Production increase, when they increase production, therefore, revenue. Also, price upside. As commodity prices run particularly in an inflation environment that we find ourselves in today, royalties give you all of that upside. But importantly, you’ve got capped downside, because with a royalty, your first investment in is your last dollar in. You’re not exposed to operating costs, capital cost overruns when you’re building a mine, which often happens. You’ve got none of that downside that mining companies typically have and all of the upside that mining companies offer you. So, I think it’s an asymmetric leverage that royalty companies, that causes them to outperform.

Tobias: What’s your background, Spencer?

Spencer: I’m a mining engineer, and I say a reformed investment banker. Those days– no offense to investment bankers listening in, but they’re behind me. About six years ago, I cofounded a business called Mineral Royalties Online, and we developed the world’s largest proprietary royalty database, and then vended that into Vox Royalty. I teamed up with the Vox team about three years ago, and since then, we’ve led the entire royalty industry in terms of our growth. We’ve done more deals than any other company. Now, it’s a $70 billion industry.

Tobias: You developed some expertise in finding these royalties globally, created a database of these opportunities, and then that database has been vended into Vox, where you’re now the CIO. So, you’ve got a pretty good idea where everything is around the world, where to look for them, at least.

Salty Old Prospectors Don’t Use Email

Spencer: Yeah, absolutely, Toby. One part of is where to look. The other part is actually how to get in front of some of these salty old prospectors. We deal with prospectors all the time that– this may shock to hear, but some of them don’t even have an email address.

Tobias: Lucky bastards. [laughs]

Spencer: Well, yeah, exactly. But for example, recently two months ago, we did a deal with some cattle ranchers in Nevada, a family that held this fantastic gold royalty. These are individuals that you can just go to the phonebook and look up. One part is identifying the royalty in a database, and then, the second part is having agents, boots on the ground that can augment that by getting in front of people in off the beaten path areas.

Validating Royalty Opportunities

Tobias: When you find an opportunity, how do you value an opportunity, how do you validate it, and what’s your process?

Spencer: The core of what we do in terms of due diligence is really technically informed. Our team at Vox has two mining engineers and two geologists. Statistically, mining is a very difficult business to make money in. Most discoveries are never built into mines, and most mines that are built historically lose money. To actually identify a new discovery and say, yes, this has the secret sauce to be a profitable mine, statistically, it’s very difficult. That all starts with technical evaluation above the deposit, the geology, the engineering.

Can you actually extract the rock at an economic level, the country and the community? Is this community supportive of a new mine? Will this government be true to their word around the fiscal regime? Then, once we’ve done technical due diligence, and fiscal or economic due diligence, then our general counsel does legal due diligence. Because ultimately, we’re not buying mines, we’re buying contracts that are derivatives of mines. So, we need to be damn sure that the piece of paper we’re buying is fully enforceable in the event that things go awry.

The Best Royalty Deals Come From Existing Prospectors & Explorers

Tobias: For the most part, these aren’t operating mines. These are just deposits. You have to make an assessment about the viability of the deposit and the other things that you’ve just mentioned then. You’re providing some money, which does go towards development, or does that simply to buy the royalty stream, and then, you need to find a partner, or there’s an operating partner, or how does that work?

Spencer: Yes, that’s an important question. There’s two ways that royalties are typically created in the mining industry. One is as I described before. The prospect is rewarded for their discovery, and they get a free royalty for selling out of the early-stage discovery. The other way, which we call origination, as a form of project finance. If you’re a mining company that’s building a mine, and let’s say you’re tapped out on equity, and you’re pre-revenue, so you can’t put a lot of leverage against the project. You might sell a new royalty to finance that last bit in the capital stack, where if you need $10 mil, $20 mil, just to get the mine into production, you can sell a new royalty over that mine.

We’ve back-tested over 40 years of royalty deals and over 600 separate transactions. Historically, the royalty deals with the most alpha or outperformance have been buying existing royalties from the likes of prospectors and explorers. We’re firmly focused on that part of the equation. So, we’re not funding the construction of new mines. We’re essentially creating a liquidity event for prospectors and explorers, who need to rebalance their own wealth and their own portfolio to other areas.

Opportunities In Precious Metals

Tobias: Do you have a preference for the underlying metal or commodity?

Spencer: We have 51 royalty investments that are all around the globe. We’re 70% weighted towards precious metals, and particularly gold, and to a lesser extent, silver and platinum group metals. The other 30% of our portfolio is opportunistically weighted across the commodity spectrum. We have exposure to about 20 different metals, and those 30% non-precious metal investments there across base metals that are often have a linkage to the electrification thematics, such as copper and nickel, and then, some lithium exposure as well. But, yeah, we are a precious metal focused royalty company, and that’s probably for two key reasons, Toby.

One is, from a macro perspective, we really love the fundamentals for the gold price at the moment, particularly with inflation and how it is in the moment. But the other aspect, which is probably a less obvious aspect is, when you look at the technical risks of, say, a simple open pit gold mine versus a more complicated the zinc or copper or a mine that has higher processing complexity, if you’re making risk-based capital allocation decisions, you’re going to go with the mine that has the lower risk, which is often gold mines over other mines.

The Impact Of Inflation On Precious Metals

Tobias: Let’s talk about inflation a little bit, and then, let’s talk about that in the context of those precious metals. What are your thoughts on inflation at the moment? Why do you think that inflation is likely to tick up? Because there has been an ongoing debate about, this is transitory, it doesn’t look like it’s going to continue on, or this is the real thing, and it’s going to persist.

Spencer: Yeah, it’s an interesting question. One that we discussed around the proverbial water cooler, quite a bit. When we look at from a consumer perspective, whether you’re looking at lumber prices, used car sales, and the lack of availability in used cars, or a lot of common consumer-based inflation, indices, and metrics, it seems hard to imagine that’s going to unwind in a hurry.

Certainly, when we look at the fiscal stimulus out of the US, and the fact that when you look at some of the core economic growth metrics, it doesn’t feel as if there’s an immediate end in sight to that, that wave of new money being pumped into the system. We’re not macro economists at the end of the day, so we don’t have a crystal ball. But certainly, a lot of those simplistic metrics that hit the consumer in the face that we look at that point to the fact that certainly in the medium term, precious metals are going to be pretty well supported.

Gold Has An X-Factor

Tobias: Let’s talk about precious metals, specifically. Gold had that incredible run through to 2011 or so, and then, it’s been sideways and choppy since then. So, why do you think now is a good time for gold?

Spencer: Look, I think gold has this X factor to it. It’s been the most explored for commodity. It’s probably been the most coveted physical substance on the planet’s history. There is this intangible X factor to it that particularly obviously, when there’s a flight to quality, and when there’s any instability, whether it’s China’s rumblings about what they’re doing in the South China Sea, or if it’s food and water shortages in parts of the Middle East, or floods in China, Germany, you name it. A lot of this insecurity, people continuously come back to gold.

Sure, we’ve seen a huge amount of speculation around crypto, and specifically bitcoin, but I think when you think about large, liquid stores of value that have historically been safe haven assets, gold has been the top of the list for decades. To your point around the relative performance of the gold price, yes, it has traded sideways over the last, call it a couple of years. But still from our perspective, we had both leverage links to the commodity price. With the gold price goes up, or even if the gold price goes down, but importantly, we also have huge operating leverage.

Gold companies as they make new discoveries, and as they bring exploration projects into production, we get the benefit of that across all of our 51 royalties. Even if the gold price does come off 20%, we’ve got a number of new royalty assets that are starting cash flow. So, some of that potential that downsizing in commodity prices or gold price is going to be well insulated and exceeded by some of the incremental royalties that are starting to cash flow for us.

Tobias: No doubt, you’ve got a preference for some performance out of gold, but do you need the gold price to do anything to generate reasonable returns?

Spencer: No. Importantly, Toby, when we run commodity price assumptions during due diligence, we’ll never use pie in the sky estimates. We price our deals on the basis of mean reversion for pretty much every commodity that we look at. We’ll never buy a 10-, 20-year investment on the basis of spot pricing. That’s just the quickest way to book an impairment next quarter, and make your auditors unhappy. So, we use very conservative commodity price assumptions.

Tobias: It’s not based on the existing spot price. In any event that has spiked, you base it on your expected return towards the longer run average.

Spencer: Yes, absolutely. We look at, say, consensus estimates around different commodity prices. If you take the gold price for example, Ink Spots around 1800. At the moment, most commodity analysts expect that long-term, it mean reverts to around 1500, 1550, there abouts. When we’re looking at new royalty investments, we invest in mines that are competitive from a cost perspective, well below even $1500. Recently, four months ago, we made an investment in a mine called Otto Bore, and that’s the third lowest cost gold mining in Australia. It feeds another operation called Thunderbox. These are mines that will be cost competitive, even if the gold price dropped by 30% or 40%.

Valuing Mining Royalty Investment Companies

Tobias: How do you think about valuation? Are you looking for some sort of yield? Is there a P/E ratio for the royalties? How does that work?

Spencer: It’s a really interesting nuance between, say, mining companies and royalty companies. Most mining companies, depending on where you are in the commodity cycle, they’ll trade it between, call it, five to eight times earnings, generally. Royalty companies typically trade at anywhere from 30 to 50 times earnings, which for some people, particularly generalist investors coming into the industry, they sit there scratching their heads and say, “Why the hell would I pay 40 times for this royalty company?” But for all the reasons I mentioned before and the fact that a royalty company say, take Franco Nevada. It’s a $28 billion royalty company. It’s run by 30 people. The operating cost profile and the leverage you’ve got to future investments is just this huge operating leverage. Moreover, every time a new discovery is made, they get all that upside without a single extra dollar out the door.

Going back to your question, how do we value royalties and how royalty company is valued, they typically evaluate on a price to cash flow or price to earnings multiple basis, and then also, the other metric that’s commonly used is price to NAV, because the other quirk about a lot of royalty companies is, they’ll trade at a substantial premium to their intrinsic net asset value. If you run a discounted cash flow model of all their key royalties, it’s sometimes between 1.5 to 3 times that intrinsic value, often, because a lot of these mines just continue to expand over multi decades.

Tobias: It makes total sense, because most of the royalty is falling through to the bottom line. It’s open for you to reinvest, whereas in a mining company, that’s being chewed up on the way through. That makes total sense. I sort of meant more, how do you think about the actual royalty itself, when you buy a royalty is there? What’s the basis for making a valuation for something like that?

Spencer: Yeah, sure. Sorry. Apologies, my previous– [crosstalk]

Tobias: No, it’s fascinating. It’s fine, but it’s just for my own interest.

Spencer: Yeah, sure. Within our 51 investments in our portfolio, we have 5 producing assets. Then, we have a further 16 assets that are at development stage, which have some level of engineering study that has been done on them. Then, the balance of the approximately 30 royalties are exploration stage royalties. When we approach a new royalty, typically we have a bias and a preference for something that has some level of engineering study done on it, whether that’s pre-feasibility, or a feasibility study. Then, what we’ll do is, we’ll apply discounted cash flow approach to it. But then, we’ll overlay a series of incremental risks on that.

We’ll run something like a risk tree, for example, and say, “What are the three or four or five binary risk events that will determine the success of this mine or this project?” For example, what’s the probability that this mine gets funded? What’s the probability that the community approves the environmental licenses? What’s the probability that the government tries to steal his mine? Then, we’ll use our team’s experience, and then, occasionally bring in third-party subject matter experts to price those specific risk events, so that what we’re left with is a risk-adjusted return profile of cash flows that we expect from that royalty investment.

Tobias: You’ve got this profile at the moment where you’ve got certain exposure to gold and the other the other metals. Is that intentional, or it’s opportunistic, you take what you can find at the time, and so, it’s possible that that could evolve over time? Or, is that something that you’re going to try to sustain that exposure to gold and so on as it is at the moment?

Spencer: Yes. It’s something that is quite deliberate. In our proprietary royalty database, we have almost 8000 royalties in there. We can change out targeted lens towards different commodity groups in different countries at will. The reality is, a large part of ours hit our overweighting towards gold is because as I mentioned before, gold has been the most explored for commodity in history, and so, every time a mining project is sold and a royalty is created, a lot of it’s a function of how many of those projects have been sold. Out of our 8000 royalties, the majority of those royalties are gold royalties, because that’s the most common project being explored for and sold for royalties.

Part of it’s just a function of how many gold royalties there are out there. But as I said, where precious metals have weighted, but opportunistic outside of that. We have had some of our investors have come to us and said, “Hey, we see you’ve got some of these other royalties. We don’t really like those commodities.”

So, we’re not really investing in you for that exposure to some of these niche metals, like graphite, for example. Three months ago, we entered into a deal, a partnership deal where we basically, are selling two of our non-core royalties they’re in graphite, and we’re selling it to a smaller royalty company that is firmly focused on battery metals, which graphite is a key component of it. That was an example where we rebalance that portfolio away from graphite, because we weren’t really getting much value from the market for graphite royalties, and we could see that the value is going to be unlocked by putting them into a much more nimble and smaller royalty company.

Minimizing Portfolio Risk

Tobias: When you think about the concentration that you have, not necessarily to the metal itself, but to individual royalties, how do you think about– What’s the largest you’d be prepared to hold in your portfolio? As a proportion of your portfolio’s what I mean.

Spencer: Yeah. This point around concentration risk is really interesting one, Toby, and it’s something that we really focus on quite acutely. Because we’ve allocated about just over $30 million to create this $100 million of market value in our portfolio. Across that $30 odd million that we’ve allocated, the ticket size has very poor investment. At the upper end, it’s been, call it, 4$ to $6 million. But the average deal size has been probably closer to between $250000 and $750000. We’ve looked at a number of larger royalty deals that would be $20 to $40 million ticket sizes, but ultimately, we never want to be overly exposed to one asset and one mining company.

We’ve just seen too many times in the past where a certain mine has operational disruptions, or a certain mining company goes bankrupt, and all of a sudden, if all your eggs are overallocated that basket, all of a sudden, your portfolio returns are impacted. The short answer to your question would be, I don’t think we would ever allocate more than, call it, 50% or probably closer to 25% of our total portfolio size to one asset. If we found a spectacular royalty investment that was quite large, we’d be happy to break it up with one of our peers to ensure that we’re not overly exposed to that one asset.

Royalties vs Streams

Tobias: When you first contacted me, I saw your Vox Royalty and Streaming, and I didn’t initially think that that was going [crosstalk] to be a mining royalty. What’s the basis for the terms, royalty and streaming? What’s the difference between those two things?

Spencer: They’re two different investments, but I guess related cousins. A royalty is typically an upfront percentage of future revenue or profit. You make a one-off investment to acquire the royalty, and then, you sit back and you get checks as production occurs. A metal stream is a different type of commodity-linked investment. With a metal stream, typically, you’ll pay a certain amount upfront to acquire the stream, but then, on an ongoing basis, you’ll get paid a certain percentage of that metal being produced out of that mine, and then, you’ll also refund them a percentage of their operating costs.

What’s very common is for example, if you’ve got a copper mine that might produce, let’s say, $100 million of copper a year, and then, it produces $10 million of gold a year as a byproduct metal. Often, that company will come along, and they’ll say, “I want to buy 50% of all the future gold that comes out of your copper mine.” That company might buy the metal streaming contract for say, $20 million today, and then, with every ounce that’s mined, they get 50% of all the ounces, and they might pay a pre-agreed percentage of operating costs, so 20% of their operating costs. It’s I guess a related cousin to royalties, but the key difference is, there’s an ongoing OPEX reimbursement, whereas with royalties, your upfront investment is your last investment.

Tobias: What was the experience going from being a startup, basically, operating an online database to being acquired by a listed company in the States? Sorry, in Canada, rather?

Spencer: It was interesting journey, to be perfectly frank, we were using that database as market makers or creating a marketplace for mining royalties. Then, we’d been approached by a number of different investment funds and principal investors to basically acquire our business and our intellectual property. When we first met the Vox team back in mid-2018, there was an alignment of values and alignment of vision as to how both the commodity and mining industries were evolving, and then also, the implications that would have for the royalty industry. We saw the value of what we’d created in our intellectual property, and we wanted to ensure that we were basically unlocking the maximum amount of value out of that by choosing the right partner to vend that intellectual property into. The Vox team, they’re a fun group of people, and we saw the world through similar lens.

But we started working together initially sourcing opportunities, and then, once we realized that, we could work really well together, then, we entered into an agreement to basically, formally, vending our intellectual property for equity. Importantly, my partner and I, Riaan, we didn’t want to take a single dollar off the table when we solve that intellectual property. We see the value of what this database, and what within Vox can create. We said, we only want to take equity, and moreover, we want to invest more into the IPO when we went public May of last year.

Adapting OCR To Develop A Royalty Database

Tobias: The idea of the mining royalty database is really clever. How did you come up with that?

Spencer: It really stems back about 10 odd years ago. My partner, Riaan, who’s a South African-Australian exploration geologist, he and I actually first met at BHP, the world’s largest mining company, when we were both working there. We kept running into same forgotten royalties that basically, value was being destroyed, because people had forgotten about them, both at BHP and then other mining companies as well.

As time and time again, we kept seeing these damn royalty agreements that people have forgotten about. In some cases, we saw multiple royalties where people owed tens of millions of dollars, and they didn’t even realize it. That planted the seed of an idea to say, “Well, how many other companies or individuals out there have got these extremely valuable royalty contracts?” But they’ve either forgotten about them, or they don’t have a marketplace, or they don’t know how to actually monetize them. That planted the seeds of an idea for us to basically say, “Let’s do a really wholesale global search to see how many of these royalties are out there.”

We reviewed tens of thousands of public filings using OCR and smart techniques. Then, we also went to a number of different mining departments and private groups to aggregate terabytes’ worth of private exploration data, essentially looking for any free text reference to a mining royalty, and then, georeferencing it against the underlying mining claims that are covered. It turned into a bit of an obsession, to be honest, Toby, and at times, when we were sifting through physical boxes of data in dusty storerooms, Riaan and I looked at each other and say, “What the hell are we doing here?” But fast forward a couple of years on and the value of what we’ve painstakingly built over 10 years is really unlocking value for our Vox shareholders.

Tobias: How does investment banker-miner come to develop those skills in optical OCR, optical character recognition?

Spencer: I love learning new skills and have quite a curious mind. I’ve been fortunate to collaborate with a number of other tech startups, and just saying– stepping outside of the mining industry, which can be a little bit draconian at times, and you see how people are using various forms of cutting-edge technology to create new solutions and unlock value, whether it’s machine learning, or you name the technology. Then, applying these even at a very basic level to the mining industry which still is ripe for disruption. We just saw the value of that use case instantly. But yeah, a lot of this comes back to just searching a lot of stuff on YouTube and googling a lot of stuff really.

Lots Of Upside For Vox Royalty

Tobias: Yeah, that’s the best way to do it. What’s the future hold for Vox? What’s the plan over the next immediate term and the longer-term plan?

Spencer: We currently have 51 royalties. One important thing for us over the coming quarters is really just revenue growth. When we went public May of last year, one criticism was, “Hey, Vox, you’ve only got one producing royalty. You’ve got all these earlier-stage royalties,” but I can’t really get that excited for one producing royalty. We said, “Well, hey, listen. We’re value hawks. We won’t ever overpay for royalties but where we consistently find the deepest value is royalties that are between 3 to 24 months away from first production.”

We said that from day one to our investors, and so even just in the last 12 months, organically we’ve gone from one producing royalty now to five producing royalties, and then we are on track to end next year north of 10 producing royalties just with what we’ve got in the portfolio. So, naturally, analysts expect our revenue to increase exponentially. Analysts have our top line revenues growing considerably over the coming quarters. I think the key thing for us as Vox management in the next 12 to 18 months is just demonstrating that revenue growth and delivering on what we’ve said we would to investors, particularly when we went public.

Beyond that in the medium to long term, particularly as we start generating considerable amounts of free cash flow, we’re looking at the best way to return that to investors. We have an ongoing buyback program that we’re actively executing on. We will look at dividends. A number of our investors have asked us to consider a US listing.

So, that’s something we’re actively working on. Then, beyond that, we’ve got a number of options in front of us, either we can become a huge dividend payer, or at a certain point in time, if one of our larger peers wants to acquire us, we serve at the behest of shareholders, and when we see a deal that truly values us fairly, we’d be open to it.

Tobias: Spencer, it’s a fascinating idea, really cleverly executed. If folks want to follow along with what you’re doing or get in contact with you, how do they go about doing that?

Spencer: Sure. I recommend they go to our website, so, voxroyalty.com, or if they want to email me directly, I may regret this, but spencer@voxroyalty.com. We love hearing from shareholders, both current and prospective Vox shareholders. But yeah, our website has a lot of our key information on it, Toby.

Tobias: Thank you very much, Spencer Cole, Vox Royalty.

Spencer: Thanks, Toby.

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