Latest / Kitco MINING / How Empress Royalty Is Finding Opportunity In Today's Market | David Rhodes

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How Empress Royalty Is Finding Opportunity In Today's Market | David Rhodes · Kitco MINING

• 0:07
  SPEAKER_01: Hey everyone, welcome back.
• 0:08
  SPEAKER_01: I'm Jeremy Stafford here at the Rules Symposium at the beautiful Boca Raton Resort in Florida.
• 0:12
  SPEAKER_01: Now, here is a corner of the gold business.
• 0:14
  SPEAKER_01: A lot of investors walk right past.
• 0:16
  SPEAKER_01: Instead of digging the mine themselves, royalty and streaming companies put up the money to help build it, and in return, they collect a slice of gold for years.
• 0:24
  SPEAKER_01: I mean, without the cost, the labor, the day-to-day operating risks.
• 0:28
  SPEAKER_01: Now, it's uh long been one of the steadier ways to get exposure to the rising gold prices.
• 0:32
  SPEAKER_01: And you don't need to be a mining engineer to see the appeal.
• 0:46
  SPEAKER_01: So he knows a thing or two about money, probably more than most in this room.
• 0:50
  SPEAKER_01: Uh let's welcome you to the program.
• 0:51
  SPEAKER_01: David Roth.
• 0:52
  SPEAKER_01: Thank you.
• 0:52
  SPEAKER_01: Good to see you.
• 0:53
  SPEAKER_01: And you.
• 0:53
  SPEAKER_01: Uh, an interesting time.
• 0:54
  SPEAKER_01: I mean, obviously the medals are catching a little bit of a bid here today.
• 0:59
  SPEAKER_01: Um, however, the royalty side's been looking really nice.
• 1:02
  SPEAKER_01: And I and I kind of want to set it up there because uh just zoom out for people that don't know as much as you or maybe I talking about it, because even after this correction, I mean, gold's still north of$4,000.
• 1:13
  SPEAKER_01: You're growing fast.
• 1:14
  SPEAKER_01: Uh, what's the opportunity you're actually chasing right now?
• 1:17
  SPEAKER_01: And why why is this the moment to do it?
• 1:19
  SPEAKER_01: Sure.
• 1:19
  SPEAKER_00: No, I mean, I as you kindly remind me of people of being around a while.
• 1:24
  SPEAKER_00: Yeah.
• 1:25
  SPEAKER_00: So thanks for that.
• 1:25
  SPEAKER_00: I go 25 and keep it at 25, but thanks for the 30.
• 1:29
  SPEAKER_00: Um, yeah, I remember gold at$250 an ounce.
• 1:33
  SPEAKER_00: You know, I remember copper at 65 cents type of type of numbers.
• 1:37
  SPEAKER_00: So when you're looking at 4,000s and 60, 70 silver, these are fantastic prices.
• 1:44
  SPEAKER_00: You should see the margins mining companies are making, and obviously the royalty and streaming companies are making.
• 1:49
  SPEAKER_00: This is a good price.
• 1:50
  SPEAKER_00: I know it's come off, and obviously people are, oh, it's not where it is, but it's a great market to be in.
• 1:55
  SPEAKER_00: Yeah, most of the assets we look at are profitable, they are making a lot of money, and they're investments we want to be in.
• 2:02
  SPEAKER_00: Um, so you talk about the softness in the market, it's not, it's fantastic.
• 2:06
  SPEAKER_00: If you asked everybody five years ago, be 4,000, we'd have gone fine, we're gonna retire.
• 2:11
  SPEAKER_00: But no, we see even more opportunity now in the marketplace.
• 2:14
  SPEAKER_01: Good context, because last year at this time, I mean it was like but$3,500, and I always have to remind people year over year, I mean, we're still up significantly.
• 2:21
  SPEAKER_01: And you know, let's get to the discipline behind it because what kind of return hurdles are you underwriting deals at today?
• 2:27
  SPEAKER_01: I mean, uh, how much of that IRR has compressed as capital's kind of flooded into this space?
• 2:32
  SPEAKER_00: And this is where, and I'll do a bit of background if I can about um Empress and how it is and where it is today.
• 2:38
  SPEAKER_00: So I also run Endeavour Financial, one of the largest financial advisory houses.
• 2:42
  SPEAKER_00: So we look at projects around the world and find financing for them.
• 2:46
  SPEAKER_00: Um so it's a global business, and sick go back six years ago, we were looking for a small amount of money for stream.
• 2:53
  SPEAKER_00: So the client needed 30 million for stream, 20 million for stream, small amounts.
• 2:58
  SPEAKER_00: And we looked in the marketplace, couldn't find any streamer offering those small amounts.
• 3:03
  SPEAKER_00: And you go, okay, can't find anybody, um, no competition, no one doing it.
• 3:07
  SPEAKER_00: What do you do?
• 3:08
  SPEAKER_00: Set up your own company.
• 3:09
  SPEAKER_00: And that's what Empress.
• 3:10
  SPEAKER_00: So, Empress, we're one of the founding fathers of the business, setting up Empress, and how do you set it up quickly and efficiently?
• 3:16
  SPEAKER_00: You call upon people who worked with you before.
• 3:19
  SPEAKER_00: And that's what Alexander Woodja Sharon used to work with me in London, and the a lot of the team you see as Empress are ex-Endeavour financial employees in the past.
• 3:28
  SPEAKER_00: Strong team.
• 3:29
  SPEAKER_00: You know their weaknesses, their strengths, you know how to work together, and that's why we've been so successful so quickly.
• 3:33
  SPEAKER_00: Because it's about the team, not just about obviously the opportunities.
• 3:37
  SPEAKER_00: Um, so we are purely looking at the small streams, the 25 million, that's how we set up the company.
• 3:44
  SPEAKER_00: Um, I'm a businessman, so if you want to set up a company, you want to make money as quickly as possible.
• 3:48
  SPEAKER_00: So we looked at producing near-term producing assets.
• 3:52
  SPEAKER_00: So, very quickly within three years, we've again cash flow positive.
• 3:56
  SPEAKER_00: Right.
• 3:57
  SPEAKER_00: We've now got, you know, as the last reporting, 20 million in cash.
• 4:01
  SPEAKER_00: We've got a banking facility available.
• 4:04
  SPEAKER_00: So we've gone from a stage of, you know, really in six years of being, you know, now a very stable, strong balance sheet type royalty and streaming company.
• 4:12
  SPEAKER_00: And the next phase is obviously spending that money to expand the portfolio, which hopefully we can come through.
• 4:17
  SPEAKER_00: But just to give a background, we are doing the small streams.
• 4:20
  SPEAKER_00: The Wheatons of Francos who we deal with as Endeavour Financial, where they they do a billion dollar type ticket sizes.
• 4:26
  SPEAKER_00: They're not looking at 25.
• 4:27
  SPEAKER_00: You're not competing with us, right?
• 4:29
  SPEAKER_00: Oh no, no, don't want to.
• 4:30
  SPEAKER_00: Their cost of capital is really small.
• 4:32
  SPEAKER_00: They're looking at 30-year returns.
• 4:33
  SPEAKER_00: Um, so when you say about how we look at things, we're we're not the tier one, yeah.
• 4:38
  SPEAKER_00: Their guys do tier one, we're the tier two, tier three type assets.
• 4:42
  SPEAKER_00: Uh, and the reason it works for us is because we've got a great team of their experience.
• 4:47
  SPEAKER_00: Yeah, 30-year plus, thank you for that, type of type of uh I had to say I know, don't I don't.
• 4:53
  SPEAKER_00: I I kind of have to realize it too.
• 4:55
  SPEAKER_00: I'm trying to deny it as you can tell.
• 4:57
  SPEAKER_00: But so we we've got a great expertise in our team, like David Lang, who's on the technical side, those kind of guys who obviously um on the financial side, the analysis side, who can look at those assets and go, okay, this will work.
• 5:08
  SPEAKER_00: And that differentiates itself between the other guys who are really just looking at big tickets.
• 5:13
  SPEAKER_01: No, well said, and I mean we could kind of even get more into that.
• 5:15
  SPEAKER_01: I mean, on a new stream, where are the kind of ongoing delivery prices landing today?
• 5:20
  SPEAKER_01: And how much has that discount to spot kind of narrowed for the financier?
• 5:25
  SPEAKER_00: Well, you can imagine if you're uh if we're looking to obviously do a stream or royalty with a counterparty, they're looking at spot and they're going, oh, we want 5,000 as a valuation.
• 5:34
  SPEAKER_00: We're gonna work out how much we're getting, and we're going, no, no, no, you're gonna look, we're going back five years, we're looking at you know two and a half, three thousand.
• 5:41
  SPEAKER_00: Not running numbers at five thousand.
• 5:43
  SPEAKER_00: Correct.
• 5:43
  SPEAKER_00: We are certainly not doing that.
• 5:45
  SPEAKER_00: So that is the big counter.
• 5:46
  SPEAKER_00: And obviously that's why from as a business perspective, the gold coming off to where it is now has helped us.
• 5:52
  unknown: Yeah.
• 5:52
  SPEAKER_00: When it was going up and up and up, guess what?
• 5:54
  SPEAKER_00: The counterpart is we're going up and up and up in how we should value their asset.
• 5:58
  SPEAKER_00: Of course.
• 5:59
  SPEAKER_00: So coming off has helped us from a business perspective to now get back to okay, guys, it's not just going up and out.
• 6:05
  SPEAKER_00: And one thing that um you'll see, we haven't actually done that many transactions in the last 18 months or so for that reason.
• 6:12
  SPEAKER_00: I'm not chasing you know higher gold prices.
• 6:15
  SPEAKER_00: And that's why we're in a good position having the cash and the bank facility with these lower prices that are now in to expand and grow our business.
• 6:23
  SPEAKER_01: It almost feels as though the industry in itself has a lot more discipline this time around, too.
• 6:27
  SPEAKER_01: I mean, running those numbers.
• 6:28
  SPEAKER_01: Uh NSR royalty, metal stream, hybrid.
• 6:32
  SPEAKER_01: I mean, which kind of structure are you are you favoring in this market when we see a bit of a haircut in wine?
• 6:38
  SPEAKER_00: So I really, and as a business, we love the stream where you get the physical gold or silver, because we're just precious metals as a business.
• 6:45
  SPEAKER_00: So we get the physical silver and gold in our BMO.
• 6:48
  SPEAKER_00: So I'd advertise BMO, but that's our banker, um, in our metals account are there.
• 6:53
  SPEAKER_00: And we're holding the metal.
• 6:55
  SPEAKER_00: We're not putting into dollars.
• 6:57
  SPEAKER_00: So we have probably two-thirds of our actual cash, which you say on the balance sheets, is held in gold and silver.
• 7:03
  SPEAKER_00: That's why investors, we are gold, precious metal, silver, royalty, so we're gonna keep our cash in that metal as well.
• 7:10
  SPEAKER_01: Yeah, no, I mean everyone's obviously chasing yield in this market.
• 7:13
  SPEAKER_01: How do you keep that return discipline without reaching for those riskier deals here?
• 7:17
  SPEAKER_00: Um, two factors.
• 7:19
  SPEAKER_00: One, we, as you say, we're we're with a lower tier level.
• 7:23
  SPEAKER_00: So you get a better margin because those guys are not gonna get the wheat and you know, low capital type um or cheap capital type transactions.
• 7:31
  SPEAKER_00: So we get a premium compared to those.
• 7:33
  SPEAKER_00: Secondly, we're actually more into mining jurisdictions, but we're not looking for tier one.
• 7:40
  SPEAKER_00: We're not just Canada, you know, the Australia.
• 7:42
  SPEAKER_00: We're looking at more, as you can see, we've got Mozambique, we've got South Africa, no, we've got Peru, and we've got Mexico.
• 7:49
  SPEAKER_00: We're happy to take on a slightly riskier jurisdiction that people consider risky.
• 7:54
  SPEAKER_00: But with our expertise, I mean I've financed all those countries.
• 7:57
  SPEAKER_00: I've been we've been there.
• 7:58
  SPEAKER_00: We've up uh a lot of our team are operated in those countries, so we understand the local risks.
• 8:03
  SPEAKER_00: So long as we've got a good mining jurisdiction, they've got good mining regulations, we can obviously manage and structure a package around that to make sure we have got a good investment.
• 8:12
  SPEAKER_01: Now I want to zoom out a little bit just because you've been through so many cycles, uh David.
• 8:16
  SPEAKER_01: I mean you've arranged over that 12 billion, like I said, of mining, financing across your career.
• 8:21
  SPEAKER_01: How does this financing cycle kind of compare to the ones that you've lived through?
• 8:25
  SPEAKER_00: So I think we're in a unique position here.
• 8:29
  SPEAKER_00: Um in the sense that if you look through the cycles, there's say precious metals doing well, base isn't.
• 8:38
  SPEAKER_00: Often that happens.
• 8:39
  SPEAKER_00: It's a counter.
• 8:40
  SPEAKER_00: You know, one's one's about the economy, one's about GDP growth, that's obviously base metals.
• 8:45
  SPEAKER_00: And usually precious metals aren't so strong in those.
• 8:48
  SPEAKER_00: At the moment, we've got strength all the way through.
• 8:51
  SPEAKER_00: And then we've got the added benefit in this market, obviously, is critical metals.
• 8:55
  SPEAKER_00: You've got the you know, the whole anti-China, you know, look at the US, and we're doing a transaction at the moment where we're getting USXM, nearly three billion dollars from USXM, to build a new mine in the US for the critical metal that's being produced.
• 9:09
  SPEAKER_00: Australia have got their own programs out there to you know create their own critical metals reserve.
• 9:16
  SPEAKER_00: And they've got Europeans, of course, and now got a program in place to do exactly that.
• 9:20
  SPEAKER_00: So there's a lot of government money now coming in on the critical metals side, which is you know fantastic boost for the industry.
• 9:27
  SPEAKER_00: Yeah, man.
• 9:28
  SPEAKER_01: Yeah, uh I mean I always think about Rick Rule.
• 9:31
  SPEAKER_01: I mean, we're here at his symposium.
• 9:32
  SPEAKER_01: He's kind of he's talking about how the miners will sell streams to raise big capital here, especially right now where we're at.
• 9:37
  SPEAKER_01: But I mean,$4,000 gold, and you talked about it, with this fat cash flow and kind of cheap equities, uh, a stream seems like more expensive money a miner can take on, but you're not really finding deal flow harder to find because of your experience here.
• 9:52
  SPEAKER_00: Exactly.
• 9:52
  SPEAKER_00: Well, it's if you if you take a if you look at a small uh company, so uh, you know, not one of the guys you you interview here in that sense, but a small company, they produce 50,000 ounces.
• 10:03
  SPEAKER_00: Yeah, okay.
• 10:04
  SPEAKER_00: They wanna they want to expand their mill or do some more underground development work.
• 10:08
  SPEAKER_00: They need 20 million bucks.
• 10:10
  SPEAKER_00: Well, if if you went to a at the equity markets, you dilute too much.
• 10:15
  SPEAKER_00: If you go to a bank, well, their due diligence takes too long, you've got to repay the money at one point as well.
• 10:20
  SPEAKER_00: So you may have a five-year facility and you've got to repay.
• 10:23
  SPEAKER_00: And as we know, every every mine when it starts up or is expanding has hiccups.
• 10:27
  SPEAKER_00: So streaming is a long-term obligation.
• 10:30
  SPEAKER_00: So you're not paying it back in five years like a bank, you know, it's life or mine in that sense.
• 10:35
  SPEAKER_00: So it's less of a burden, and it just sits nicely between debt and equity.
• 10:41
  SPEAKER_00: Um, and and that's why it's become so you know, you think how popular it's become.
• 10:44
  SPEAKER_01: It has.
• 10:44
  SPEAKER_00: No, 20 years ago, it was like we don't want to just stream and come on.
• 10:48
  SPEAKER_00: And now, as you say, it's used as a major financing tool to develop a project.
• 10:52
  SPEAKER_00: Yeah.
• 10:52
  SPEAKER_01: Go back to that, you know, 20 years ago when it didn't, because I mean, you know, uh, streams have always had that reputation for kind of punishing operators when the metal runs, uh, capping their upside.
• 11:01
  SPEAKER_01: Uh, how do you structure a deal so that the miner still runs alongside with you?
• 11:05
  SPEAKER_00: So take a scenario.
• 11:07
  SPEAKER_00: So you need a hundred million bucks, Mr.
• 11:09
  SPEAKER_00: Mining Co.
• 11:10
  SPEAKER_00: If you did an equity raising for the hundred million, you probably dilute 25% of the company as an example.
• 11:18
  SPEAKER_00: I will take 1% of your production compared to diluting 25% of your shareholders.
• 11:25
  SPEAKER_00: It's a no-brainer, isn't it?
• 11:26
  SPEAKER_00: They're only diluting your asset by 1% by doing a string versus 25% dilution.
• 11:31
  SPEAKER_00: Go figure.
• 11:32
  SPEAKER_01: And when you're talking to these groups right now, we talked a little bit about these past cycles where you know deals were running at high valuations.
• 11:40
  SPEAKER_01: Different conversations in the room this time?
• 11:42
  SPEAKER_00: Every CEO thinks a share price is undervalued.
• 11:45
  SPEAKER_00: Yeah.
• 11:45
  SPEAKER_00: So it's the same.
• 11:46
  SPEAKER_00: It's been through the whether market's high or low, it's always the case.
• 11:50
  SPEAKER_00: Um, and that is a really a valuable negotiating tool.
• 11:53
  SPEAKER_00: I mean, okay, do you want to raise the money on equity?
• 11:55
  SPEAKER_00: No, we're undervalued.
• 11:56
  SPEAKER_00: Okay, stream just feels like out.
• 11:58
  SPEAKER_00: Can you get any more debt?
• 11:59
  SPEAKER_00: No, we've got we can't do any more debt.
• 12:00
  SPEAKER_00: So stream and royalties are the middle ground between can't raise any more debt, don't want to dilute.
• 12:06
  SPEAKER_00: And that's why it's so popular and used so often now.
• 12:09
  SPEAKER_01: Yeah, I mean, revenue up 200 plus percent, you're guiding to around 7,000 GOs, uh, yet you still treat uh at a steep discount, obviously, to the market than any of the major royalty names, and uh even on a nav basis.
• 12:22
  SPEAKER_01: So, what actually closes the gap besides scale?
• 12:25
  SPEAKER_00: Well, some of us can talk a good game and the market can hear it and go, wow, that's really exciting, you're undervalued.
• 12:32
  SPEAKER_00: They want to see evidence, and every quarter an hour, as you can, as you rightly said, we're gonna double revenue this year.
• 12:39
  SPEAKER_00: Touch wood projection.
• 12:41
  SPEAKER_00: Um, so every quarter we're we're done nine million Q1, nine million in revenue Q1.
• 12:46
  SPEAKER_00: You can times that by four to work it out because I can't say it according to um regulations.
• 12:51
  SPEAKER_00: But you know, our half-yearly will be coming out.
• 12:54
  SPEAKER_00: That will show you where so showing the market we're actually making this money and our cash is being generated, we'll hopefully close that gap.
• 13:01
  SPEAKER_01: It is a show me market, yeah, it feels like here.
• 13:03
  SPEAKER_01: Yeah.
• 13:04
  SPEAKER_01: Uh, you know, I wanted to talk a little bit about technology because you've been in this a long time and you've recently brought in this AI platform for kind of deal origination.
• 13:11
  SPEAKER_01: Uh what does it actually let you do that traditional sourcing couldn't, and how big of an edge is that?
• 13:19
  SPEAKER_00: I think it's a huge edge.
• 13:21
  SPEAKER_00: I mean, you can see in other businesses, other sectors, how AI is transforming them in that sense.
• 13:27
  SPEAKER_00: Um, so we have the typical model, and we still got the guys, our business item guys, their phone up, they're looking around, they're finding opportunities, they're bringing those in, and we have a lot of opportunities.
• 13:35
  SPEAKER_00: So those guys are out there.
• 13:37
  SPEAKER_00: I AI goes everywhere.
• 13:40
  SPEAKER_00: It goes back through all the databases, any press release, any where someone said, Oh, we have a royalty, it'll pick it out.
• 13:46
  SPEAKER_00: And obviously you've got set criteria, it comes back to.
• 13:48
  SPEAKER_00: Um, so we tested this last week, came up with one.
• 13:52
  SPEAKER_00: We said, find us one.
• 13:53
  SPEAKER_00: The one they came up with is an awesome opportunity.
• 13:56
  SPEAKER_00: Absolutely awesome.
• 13:57
  SPEAKER_00: This thing's sitting, this royalty sitting there, no one knows about it.
• 14:01
  SPEAKER_00: No one's even heard about it.
• 14:02
  SPEAKER_00: You Google it, it doesn't come up.
• 14:03
  SPEAKER_00: What about it?
• 14:04
  SPEAKER_00: What am I gonna see that news really?
• 14:06
  SPEAKER_00: We'll find out.
• 14:06
  SPEAKER_00: We've got to do our due diligence.
• 14:08
  SPEAKER_00: Yeah, of course.
• 14:09
  SPEAKER_00: Yeah, we're a we're a patient, conservative manager.
• 14:11
  SPEAKER_00: We've got to do our DD check, and then we've got a counterparty to negotiate with.
• 14:14
  SPEAKER_00: Yeah, of course.
• 14:15
  SPEAKER_00: And then we go, I didn't know we had it.
• 14:16
  SPEAKER_00: Oh wow, it's worth hundreds.
• 14:18
  SPEAKER_00: No, no, calm down.
• 14:19
  SPEAKER_00: Yeah, um, but AI is even that clever.
• 14:22
  SPEAKER_00: It comes up with um at the bottom of the um summary page, how we pitch it to the counterparty.
• 14:28
  SPEAKER_00: It comes up with look, you guys need to pitch it this way to be able to win this.
• 14:33
  SPEAKER_00: So it kind of makes an ABC of how to do it as well.
• 14:36
  SPEAKER_00: Not that we need it, but you know.
• 14:38
  SPEAKER_01: But it helps.
• 14:38
  SPEAKER_01: I mean, it's just another tool in the toolbox.
• 14:40
  SPEAKER_00: Um and that's just one of many that's gonna happen.
• 14:44
  SPEAKER_01: We talked about those past cycles, dilution, obviously going to market.
• 14:47
  SPEAKER_01: How do you kind of fund the next leg without diluting holders here?
• 14:50
  SPEAKER_01: And do you do you see Empress as kind of a consolidator in this space?
• 14:54
  SPEAKER_00: So funding it, our revenue this year is gonna be you know double.
• 14:58
  SPEAKER_00: So we're gonna have a lot of cash coming in, um, which obviously helps.
• 15:02
  SPEAKER_00: Um having that kind of revenue, having that kind of you know strong balance sheet means we can get some financing as well on the base to avoid that dilution question as well.
• 15:10
  SPEAKER_00: And we're all big shareholders, so we care about dilution.
• 15:13
  SPEAKER_00: We care, you know, we care about it.
• 15:15
  SPEAKER_00: Um, so that I think will be the next stage of growing using our internal cash flow, pulling some debt as well on that side of things.
• 15:23
  SPEAKER_00: And let's see what the assets are.
• 15:26
  SPEAKER_00: Hopefully, some of them are cash flow producing, so obviously increased revenue, we can obviously increase our um our facilities on that basis.
• 15:33
  SPEAKER_01: Yeah.
• 15:33
  SPEAKER_01: And that's where we kind of kind of talk a little bit about the asset risk and the balance, because I mean, as a growing book, how do you think about concentration?
• 15:40
  SPEAKER_01: I mean, how many assets?
• 15:42
  SPEAKER_01: Uh, what mix before you kind of are comfortably diversified?
• 15:45
  SPEAKER_00: That's a difficult question because we are only four assets at the moment.
• 15:49
  SPEAKER_00: And you see the other guys, we've got 600 orders and streams.
• 15:52
  SPEAKER_00: Hallelujah to you guys.
• 15:53
  SPEAKER_00: It's we're not about the number, yeah.
• 15:55
  SPEAKER_00: We're really about the quality and the cash flow generation and the return we have for shareholders.
• 16:00
  SPEAKER_00: So as a company grows, and this is obviously our our medium-term plan is to continue to grow, continue to develop, as long as we have good assets that we're making a good sound return on, we'll continue to do those.
• 16:11
  SPEAKER_00: If we can't find them, then as you've seen over the last 18 months, we'll be quiet.
• 16:15
  SPEAKER_00: It's not that we're not doing stuff, we're just not finding the right assets for this company.
• 16:19
  SPEAKER_00: We want a long-term um growth company, not a short-term win, Ivan Aswanami.
• 16:24
  SPEAKER_01: And I mean, if people know the management team, which people do and they know you, they know that you're not not doing anything.
• 16:29
  SPEAKER_01: Yeah.
• 16:29
  SPEAKER_01: Um I mean, it just made that cost.
• 16:31
  SPEAKER_01: Yeah, you have to.
• 16:32
  SPEAKER_01: Just in case, uh just in case they don't know.
• 16:34
  SPEAKER_01: I mean, you know, uh royalty investors obviously pay up for perpetual exploration optionality, as you know.
• 16:40
  SPEAKER_01: I mean, on your ground, where's the real resource expansion upside um that isn't kind of in the numbers yet?
• 16:47
  SPEAKER_00: So I think when we set the company up, we're very much cash flow focused.
• 16:51
  SPEAKER_00: So we wanted to be front-ended.
• 16:53
  SPEAKER_00: So a lot of the deals we have, um, Leluca um Silver Stream, that has a step down.
• 16:59
  SPEAKER_00: But the step down goes to like 1%.
• 17:02
  SPEAKER_00: So we've got that forever.
• 17:03
  SPEAKER_00: And most all our streams have a longevity to them.
• 17:06
  SPEAKER_00: It's just not as high as it was.
• 17:07
  SPEAKER_00: So that's something which was we was to drive the business to drive cash flow so we can reinvest it.
• 17:12
  SPEAKER_00: Um, and that was a strategy done for that reason, um, which is proved right.
• 17:17
  SPEAKER_00: So still was done well, we've got a lot of cash to now reinvest.
• 17:20
  SPEAKER_00: So they all have a longevity, um, and there may be some caps on them, but that was an earlier strategy.
• 17:26
  SPEAKER_00: We're now in the strong position of having a balance sheet where we don't need to negotiate those types of caps, those types of step downs.
• 17:32
  SPEAKER_00: So that will change.
• 17:34
  SPEAKER_00: Also, we've got the ability now to take a longer-term view on some of the, so you know, the the expiration plays, where you may be 10 years away from being a mine, we've now got the cash without diluting, which is an important factor, to actually do some of those longer-term royalties.
• 17:47
  SPEAKER_00: So that's something we're looking at as well.
• 17:49
  SPEAKER_00: That's a business.
• 17:50
  SPEAKER_01: I mean, for an investor, and you I mean, we obviously have a big investment community and they understand a little bit on the mining, but I mean, how does an investor kind of choose between that diversified major that you talked about, 600, you know, this kind of thing, and a growth name like yours?
• 18:02
  SPEAKER_01: I mean, what's the honest case for the growth in?
• 18:04
  SPEAKER_00: I think you also mentioned it just, you know, it's our valuation.
• 18:08
  SPEAKER_00: Yeah.
• 18:08
  SPEAKER_00: You know, we are not getting 16 times cash flow, we're getting five.
• 18:13
  SPEAKER_00: So proving to the market we are, and we are proving to the market, you're seeing it in our results, that we are performing, we are generating, our business model is working, should get us not from five but to ten.
• 18:23
  SPEAKER_00: That's a double.
• 18:24
  SPEAKER_00: Or maybe twelve.
• 18:26
  SPEAKER_00: I don't know, get too excited about it.
• 18:28
  SPEAKER_00: I'm realistic about you know, we're not a Wheaton.
• 18:31
  SPEAKER_00: Yeah, we want to be, yeah, but that took 20 odd years.
• 18:34
  SPEAKER_00: So we'll hopefully do this in 20 years' time.
• 18:36
  SPEAKER_01: I mean, you've been doing this a long time.
• 18:37
  SPEAKER_01: When we watched that run-up past$5,000 gold, I mean, you thought it was kind of getting a little frothy there.
• 18:42
  SPEAKER_01: Did you kind of take a pause and say, okay, let's wait?
• 18:44
  SPEAKER_00: We didn't do any deals.
• 18:45
  SPEAKER_00: Yeah.
• 18:45
  SPEAKER_00: We didn't do any deals.
• 18:47
  SPEAKER_00: And that's purely because, you know, expectations on the other side of it.
• 18:50
  SPEAKER_00: I am very bullish about gold and silver.
• 18:53
  SPEAKER_00: I'm one of those guys that without certain geopolitical events happening, I think we could be looking at a much higher gold price, much, much higher gold price.
• 19:02
  SPEAKER_00: But obviously, investor take a step back when you've got some major geopolitical event happening.
• 19:07
  SPEAKER_01: Yeah.
• 19:07
  SPEAKER_01: And I mean, learning from these past cycles, I mean, from the deals crossing your desk, is is capital discipline holding across the entire sector, or is this kind of the froth from the past cycle starting to creep back in?
• 19:19
  SPEAKER_00: I think the generalist investors are still not in the business yet.
• 19:24
  SPEAKER_00: We still, everybody is still, I mean, you see some people here who are interested and they're looking at opportunities, but then the real money isn't even at the door of the mining community yet.
• 19:36
  SPEAKER_00: Um, you've got a lot of private equity guys who set up, you know, oil guys setting up private equity shops to invest in gold and silver.
• 19:42
  SPEAKER_00: There's a few people there that have done quite well recently on that, but that's still not a huge amount of money.
• 19:48
  SPEAKER_00: There still is a wave of capital that has not gone to the mining space.
• 19:51
  SPEAKER_00: And I think the only way that's going to come our way is if there is a substantial crash in the stock market.
• 19:57
  SPEAKER_01: Right.
• 19:57
  SPEAKER_01: I was gonna ask that AI trade kind of cracks and maybe some generalist comes over.
• 20:01
  SPEAKER_00: And then and then they'll be going, okay, where is the cheapest cap, where's the cheapest place we can put our money to make a return?
• 20:07
  SPEAKER_00: And that would obviously be mining.
• 20:09
  SPEAKER_00: Um, but we're not there.
• 20:11
  SPEAKER_00: The market still continues to um hit all-time highs.
• 20:14
  SPEAKER_01: I mean, we're in a room full of retail investors now.
• 20:16
  SPEAKER_01: What are the discussions like?
• 20:18
  SPEAKER_01: Are they starting to understand it a little bit better?
• 20:19
  SPEAKER_01: Are people shopping right now, or did the volatility get them out in the first place?
• 20:23
  SPEAKER_00: No, I mean we're finding good long-term shareholders who are going, okay, you guys are cheap, and you were.
• 20:29
  SPEAKER_00: You're still making lots of money, you're at 4,000, um, etc.
• 20:33
  SPEAKER_00: So we're we're we're in.
• 20:35
  SPEAKER_00: We're in.
• 20:36
  SPEAKER_00: They believe in the model, and as you rightly said, royalty streaming model is a good way to invest.
• 20:42
  SPEAKER_00: You're really outsourcing all the portfolio work to the management team as the investments, and they're getting uh top line revenue.
• 20:49
  SPEAKER_00: The thing about a royalty and stream is we get top line revenue.
• 20:52
  SPEAKER_00: We don't get money after operating costs and everything else.
• 20:55
  SPEAKER_00: So if there's, I mean, the bankers lending money, they get it down the bottom.
• 20:58
  SPEAKER_00: If there's anything left, they get repaid.
• 21:00
  SPEAKER_00: Dividends from mining companies, good luck.
• 21:02
  SPEAKER_00: That's really, really at the bottom.
• 21:04
  SPEAKER_00: A royalty and stream, we get top line revenue.
• 21:06
  SPEAKER_00: So you know, we get gold straight from the refinery.
• 21:10
  SPEAKER_01: Tell me just a little bit about your career here.
• 21:12
  SPEAKER_01: I mean, obviously, I was thinking about the last time I was sitting in this chair a year ago, gold was sitting around 3,500.
• 21:17
  SPEAKER_01: You know, the shot up obviously went past, it had a little bit, well, not a little, but it had a correction here.
• 21:22
  SPEAKER_01: We're sitting still year over year, you know, 41 today.
• 21:27
  SPEAKER_01: In your career, and just on the human aspect of it, I mean, do you wait for this kind of are you having a time of your life right now?
• 21:34
  SPEAKER_00: Time of my life, yes.
• 21:36
  SPEAKER_00: Yeah, so the team of guys I work with who do most of the work, um, I've said to them, this is it.
• 21:42
  SPEAKER_00: Okay, this next three to five years, you know, you can become a very successful people.
• 21:49
  SPEAKER_00: Um, so get working.
• 21:51
  SPEAKER_00: Yeah, you know, you can play golf in five years' time in your own golf course if you do well.
• 21:56
  SPEAKER_00: So, you know, come on.
• 21:57
  SPEAKER_00: This is this is utopia, yeah, I have to say.
• 22:00
  SPEAKER_00: And people have got to realize that this will not happen.
• 22:03
  SPEAKER_00: Uh, you know, uh we'll all get the usual downturn, so make the most of it while we can.
• 22:08
  SPEAKER_01: All right, fantastic.
• 22:09
  SPEAKER_01: It's we've been interesting to watch.
• 22:11
  SPEAKER_01: That's certainly the case.
• 22:12
  SPEAKER_01: All right, David Rhodes, Epros Royalty, executive chairman of that uh issuer.
• 22:16
  SPEAKER_01: I really appreciate your time and uh thanks for joining us.
• 22:19
  SPEAKER_01: Pleasure.
• 22:19
  SPEAKER_01: Thank you.