A Mining Royalty-Co Seeks Higher Ground

Wednesday April 3, 2024 latest: copper's 
3.3% daily gain to $4.20 a pound (futures) 
is the largest one-day rise since September 2018,
I see. Silver is rising 4.4% to $27.11.
Gold's price: new, high-volume high of $2,325
an ounce. See contracts please.

Outpacers Wednesday include Ivanhoe Mines IVN, 
just out with its copper production figures; 
First Mining Gold FF; Avino Silver & Gold ASM; 
Blackrock Silver BRC; many silver-cos; 
Victoria Gold VGCX. Throw a dart. 
TRADING NOTES BELOW.+

“It was morbidly slow,” says one of my (trusted source) mining execs.

I swung by the EMX Royalty booth (at the time EMX was Eurasian Minerals), The show was half-busy in a small room of 100 exhibitors, a quarter of them their tables unmanned.

EMX shares on NYSE were decompressing in a 4-year landslide to 95 cents that day.  Hard hit at that show were most royalty-cos, and producers, explorers, Again, morbid.

I already owned EMX and had since the glory days of the early 0h-1os. (Still do, and cut to chase, bought more last Friday and this morning.)

Buyers that day eight years ago saw EMX rising to $3.19 in the next 4 1/2 years; EMX along with many (but not all) metals equities (stocks).

Recall how well we did with Abitibi Royalties and parent Golden Valley Mines during that span? I started those positions in 2011 — the patience of you-kn0w-who.

EMX, as a royalty generator and buyer (with partner Franco-Nevada FNV in a new purchasing avenue it now travels), is looking primed for recovery with income from one  large copper and gold mine, Serbia’s Timok via Zijin Mining, and income from Chile’s copper-molybdenum Caserones via Lundin Mining.

Long-term debt is rattling some long-time owners; I will be mildly and pleasantly surprised to see EMX carve out a big chunk of some $34.6 million USD, with and without refinancing, after a June 2024 penalty date expires.

EMX’s CEO and co-founder, Dave Cole at his Colorado HQ, reached out to chat this week. I took notes. (The company is incorporated in Canada.)

For now, as I have to sort through those notes, I am going to abstract, with slides from our Zoom discussion. More to come and see takeaways below please.

As three patient fund managers — you know their names — indicate to me, EMX shares were weakened by SSR Mining‘s $8.9 million advertised sale of its stake in December 2023. Adrian Day and other fund managers saw that coming, sold shares and bought ’em back cheaper. 

When the light bulbs go off about the perpetuity value of Zijin Mining‘s producing copper-gold mine at Timok, the NSRs that EMX has on three areas, analysts will be talking half-a-billion of payments for this small roy-co with the lone bank analyst (HC Wainwright) and the stingy marketing budget. Patience requested.

The takeaway for now (TCRs, this EMX review will be updated through the week).

First, the inserted slides and select statements from Dave Cole do the talking for specifics, and the published MDA that gives EMX’s forecast guidance for the first time that I can remember.

[Mark this down: the stock is now a meager $1.80 USD/$200 million market value, and daily trading volumes are regularly surpassing 65-day averages.]

— Zijin gives some Western investors the shingles. Their nerve endings, not mine. “There is underground work on a second upper zone and we expect 10 years of production,” Dave says. “The big prize is the lower zone block-caving discovery. When you do block caving you mine it from the bottom up and the highest cave material will come first and possibly to the year 2074 as it bottoms out at 2 km at depth.” He calls this an endowment worth those many-zeroed figures some are throwing around — with EMX’s 0.3265% NSR.

 

— EMX is now buying back shares, and I have to believe execs and large stock owners will be adding to their holdings.

— Note that mineral resources in the lower zone are 12.83 million ounces of gold and 40.8 billion pounds of copper. Collectively, this is 43.99 billion pounds of copper and 15.27 million ounces of gold. These are not NI-43-101 compliant resources and numbers,, TCRs.

 

— Apply the 0.3625% NSR to those numbers, the royalty revenues’ life of mine, assuming 100% recoveries at today’s prices, with no increase in the copper or gold price and no exploration upside, would come to as much as $729 million. Pragmatically, why not slash that for now, what with the varying costs of recovery scenarios, the smelting into cathode material, the energy costs, to $500 million of net smelter returns. That is at current copper, gold and silver metals prices.

Naturally, if the commodities cycle for higher metals prices streaks onward, and-or Zijin benefits from further ore discovery at depth and laterally, the numbers grow. These envelope estimates also shrink with collapsed caves, a global slowdown or some investors’ nagging China shingles.

Still, Dave and his board members reference “what Gold Strike Mine in Nevada is to Franco Nevada.” FNV at $24 billion billion is the most successful mining roy-co in the world.

 

TCRs, I give you the boilerplate in the income statement for year-end 2023: cash flow of $7 million for the year; revenue and other income of $26.6 million.  I think barreling cash flows in the next 3 years will make EMX a takeover candidate … and-or groom it for an expanded Franco-Nevada project search partnership.

 

 

I hope this is not over-burden here, folks: “Zijin is the best counterparty to have because they are the best at getting metal out of the ground and have access to vast amounts of capital,” Dave Cole says. “If Freeport McMoRan FCX still had that thing they would still be twiddling their thumbs.”

* I also am heads over heels into Elemental-Altus Royalties (Africa, Egypt) ELE ELEMF and traded in London and in Canada and U.S.

I admire as well what Brett Heath has done to get his Metalla Royalty & Streaming MTA on NYSE to the dividending stage and a $270 million market value, and I will chat with Brett this week. Metalla in December completed its purchase of Nova Royalty’s 23 NSRs, all of them copper.

I add that MTA is just today-Wednesday April 3, 2024, exchanging hands above its 200-day moving average. The stock is rising 8.8%. Technical chart analysts use that moving-average rigger for momentum — up and down.

** Robo-trend analysis: MTA is showing strength within a longer-term bearish trend. Its MACD is above the signal line and shares are presently 4.1% above the 200-day moving average. That moving average is declining, implying that caution is still warranted. A LOOK AT METALLA (and roy-cos generally) COMING THIS WEEKEND.

+ Trading Notes [updated Thursday April 4]: TCRs, as you know, I own ELE but not MTA. Other ownership notes above please.

 

Also, I look in this first week of April 2024 copper-gold-silver rally to pare one or two holdings (as of April 4, 2024) to pay property taxes and to diversify and-or fortify existing stakes, namely Banyan Gold BYN; EMX Royalty; Elemental-Altus Royalties ELE. These will be approximately $1,400 of accelerating Ivanhoe Electric IE, of which we own approximately $13,000 USD worth, all profitably since first purchase four months ago; and $750 of (also) accelerating uranium-co enCore Energy EU. I will be placing these orders after this report reaches our TCRs.

** Robotics for trend analysis via Charles Schwab & Co.