Vox Royalty (VOX) – “Exponential Growth” by the End of 2021?

Vox Royalty Corp.
  • TSX-V: VOX
  • Shares Outstanding: 32M
  • Share price C$2.88 (21.02.2020)
  • Market Cap: C$93M

Interview with Kyle Floyd, CEO of Vox Royalty (TSX-V: VOX).

‘A growth-focussed royalty and streaming company.’ Is this just another royalty company or something different?

Vox Royalty was established in 2014, but it only went public back in May. It promises exponential growth, but when can shareholders expect to see this?

Vox Royalty is a mining royalty and streaming company with a portfolio of 41 royalties and streams spanning 7 different jurisdictions. Since its origin, Vox Royalty claims to have constructed ‘unique intellectual property, a technically focused transactional team and a global sourcing network.’ As a consequence, the company claims to have become ‘the fastest-growing royalty company in the sector.’ Intriguing. Since the start of the year, Vox Royalty has announced 15 separate transactions that have contributed towards the acquisition of 36 royalties. 36 royalties in a year? That’s quite an impressive rate of growth.

Matthew Gordon talks to Kyle Floyd, July 2020

The company’s portfolio is predominantly geared towards precious metals royalties; these make up 50% of its portfolio (based on net asset value). However, Vox Royalty also offers investors exposure to a diverse array of commodities that include base metals, battery metals and bulk metals. The portfolio is primarily weighted towards the stable mining jurisdiction of Australia, where more than 75% of the company’s assets are found. The company claims to have a track record of purchasing assets with numerous development catalysts and the potential for meaningful growth in an accelerated timescale.

The team has a cumulative 30 years of royalty-specific experience, being involved in over US$1.5B of royalty transactions. The company’s ‘proprietary database’ of over 7,000 global royalties was built under the radar over nearly a decade by an online company, Minerals Royalties, and this ‘unique intellectual property’ could provide the company with a strategic advantage with the potential for additional commercial opportunities now the two companies have fused. It has allowed Vox Royalty to strengthen its sourcing relationships across the royalty sector.

Floyd likes to talk up the prospects of explosive growth, but with C$8M in the bank and no debt, what will happen in terms of revenues over the next few years. It looks like late 2021 could be the moment that all of this potential begins to materialise into palpable value and organic growth as producing assets come online, driving cash flow. Between now and then, the company will “basically tread water,” cover its G&A and look at accretive acquisitions that will increase the cash-flow profile. This is a value proposition that is waiting to ignite, and investors need to decide if they believe in the fundamentals enough right now to roll the dice and wait it out for a year. There is no shortage of royalty investment opportunities out there.

Impressively, the capital structure of Vox Royalty is extremely tight with just c. 32M shares outstanding. Working as a private company for several years has clearly taught the management team how to exercise discipline with regards its capital allocation. Floyd believes his company has acquired royalties at a higher NAV for a cheaper rate than most of its peers, and investors can expect a full study on this data in the future. The company has driven accretive growth, other than for the share price, without having to dilute its shareholders just yet.

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I’m a big fan of royalty companies because they provide exposure to the exciting upside mining can offer with less of the down, but will a small fish like Vox Royalty find capital expensive to come by in the big wide pond of the royalty sector? It’s certainly a disadvantage compared to the majors, and Floyd is candid about this but claims the company is constantly thinking about ways to mitigate issues pertaining to an elevated cost of capital. By using its shares to make transactions to the maximum extent, Vox Royalty is able to work around this somewhat. While some companies are always going to want to see dollar bills, Vox Royalty will continue to utilise a combination of the two in an effort to eventually bring capital costs down. The aim is first to push the company into a mid-tier, but the eventual ambition lies well beyond this point.

The Vox management team owns around 15% of the business: that’s reasonable skin in the game. They are very equity incentivised and the G&A is at the “very low end of the spectrum.” The company has just 6 full-time employees, with just C$2M in cash cost pa. A lot of the emerging entrants have less staff with a higher G&A.

What did you make of Kyle Floyd and Vox Royalty?

Company Website: https://www.voxroyalty.com/

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