Featured Companies: Electric Royalties
Electric Royalties (TSX-V: ELEC)(OTC: ELECF) CEO Brendan Yurik on Building a Diversified Portfolio of Electric Metals Royalties for the Global EV Space
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Electric Royalties — Mr. Brendan Yurik. Brendan, how are you?
Brendan Yurik: I'm doing great, thanks. How are you doing today, Gerardo?
Gerardo Del Real: I am doing well. Thank you so much for having me on. And you pronounced my name correctly; I'm impressed! That's a heck of a way to introduce you to our audience.
Brendan Yurik: I'm glad I did because I was feeling a little worried about it.
Gerardo Del Real: No, no worries. Gerardo's fine… “Gerardo” if you can roll the R's. But listen, I'm actually really excited to tell this story for two reasons. One, I am a firm believer that the electric metals, the critical metals, that are necessary for the electric revolution are going to have a long, long run.
And two, I really like the royalty model. And so the combination of electric royalties is appealing to me. I want to get into that in a second.
But before I do, I think it's important for the audience to understand the background of the team and where Electric Royalty comes from, right, because I think that speaks to the caliber of the people involved.
Brendan Yurik: Yeah, sure. I guess I'll start off with myself. Spent my entire career, basically, in mining finance, alternative mining finance, financial advisory to junior mining companies. Started off my career in London with Endeavour Financial and have worked with most of the mining houses in Vancouver: King & Bay West, the Hunter Dickinson Group, the Fiore Group.
Our chairman [Marchand Snyman] has been around mining a long time as well. He's also the co-founder of RE Royalties, which is a renewable energy royalty company. Like us, they kind of were a first mover; the first renewable energy royalty company to kind of start up. And they've put together, I think, close to nine royalties now over the past three and a half, four years.
We've also got really good experience on our board. Guys like Bob Schafer; he's one of the founding directors of International Royalty Corp. — sold on to Royal Gold for $700 million.
We've got a really good team; a lot of experience previously with royalties, building out royalty companies, and definitely not lacking on the management team side of things. We have a lot of advisors. And in addition to that, it's kind of a tricky space… we follow eight commodities; there's a lot of constant changes.
We've got guys like Greg Bowes who's our graphite advisor. He also happens to be the CEO of Northern Graphite. Guys like Richard Williams… happens to be an advisor for us on matters related to tin and some other things as well. He's the CEO of Cornish Metals. They've got the South Crofty tin project in the UK; very exciting tin project. We've added some people to the advisory team surrounding the management team that also already have 10 years’ experience in this space. So we feel pretty comfortable about that.
You're right though… there is two decades of runway, honestly, ahead of us here, at least, where you see exponential growth across all of these different metals. You've never seen a new source of demand like this hit this many metals all at once.
And while that may not be a revelation for most people — here's where it really kind of kicks in, right? It's a 15-year development timeline, typically, for the average mining project. You poke a drill hole down… you find that there's copper… it takes 15 years, if everything goes right, to actually take that into production and actually produce copper that you might need. That's the most inelastic sector of all-time; it takes 15 years, right… I need something, and it might take 15 years.
And those supply pipelines are extremely thin, honestly, across the board. It's probably the biggest risk to the transition to clean energy is having enough of these metals out there. There's been no money coming from this sector for a long, long time. I think it's, probably, for every dollar that goes into oil and gas, you might get a penny that has gone to the battery metals sector for the last 10 years. So there's a lot of different factors that are lining up to that.
And on the growth side, demand side, I mean, it's practically legislated at this point in time. Government does not only legislate it, but they're funding it with the bailout money to try and boost ourselves out of this COVID recession, as it were. Yeah, it's basically funded and mandated by the government at this point in time on the demand side. So yeah, we're really excited.
Gerardo Del Real: The timing is excellent. Just to be clear on the nine metals that you're targeting, it's lithium and, correct me if I'm wrong, but it's lithium, copper, graphite, manganese, nickel, cobalt, zinc, tin, and vanadium. Is that correct?
Brendan Yurik: Yeah, that is correct.
Gerardo Del Real: Wonderful. Walk me through the share structure because, again, I think you closed today at C$0.36? I believe you have fully diluted – and again, correct me if I'm wrong – but I believe it's right around 54 million shares outstanding?
Brendan Yurik: Yeah, there's just a little bit over 52 million shares outstanding. We have no warrants, and there's about four million options outstanding. So fully diluted, pretty close to that. Market cap today is a little under C$20 million, and we've got about C$2.2 million cash in the bank.
Myself and my family are probably the largest single combined shareholder; 15% to 20%. We’ve got high net worth individuals… some really good guys… guys like Ian Telfer and Paul Matysek that are pretty well known names in the industry. But high net worth; combined probably about 30%-40% of the company. We've got some good institutional groups actually already in – including Commodity Capital, Pathfinder Asset Management – for about 15%.
And then our royalty partners, actually, own about 10% of the company as well. One of the things that we've been trying to do is actually provide the groups – these operators and companies that we go to – with exposure to the upside of what we do and as we grow as well. It's been exciting and, yeah, really tight shareholder structure; really good group of people, and kind of built, honestly, to build this out into a big company.
Gerardo Del Real: Let's talk about those royalties. I understand you just acquired your first cash-flowing royalty from Globex. Walk me through what the next couple of quarters looks like for shareholders, because, frankly, you're going to get a lot of attention.
I think, again, your timing is perfect. The model is a good one; it's proven. And with the tiny market cap you have — there's a lot of runway for growth here.
Brendan Yurik: Oh yeah, we're just getting started. I mean, we went public in July of last year in the middle of COVID as it were.
Gerardo Del Real: Good timing!
Brendan Yurik: Yeah, great timing… a lot of fun! We ended up closing the bulk of our deal flow we already had. So we ended up closing on 11 of our royalties as of last month. And we kind of got off to a bit of a slow start at the end of last year. We’ve really started to pick it up this year.
We're now up to… well, this would be 14 royalties with the latest that we've just announced, including our first cash-flow royalty acquisition. It's a really great first foundational piece, you could say. The operator is Trafigura; huge company. I think their revenues last year were like $150 billion; a proven operator in the mining sector.
The mine is actually in the US, Tennessee. And it has produced, intermittently over 50 years, very consistent operating history, recoveries, etc. — it's paying off about $1.2 - $2 million a year over the last 4.5 - 5 years in terms of royalty revenue back. But we see a lot of upside to that with this new operator coming in. They’ve still got 15 years of resources. But it only ever had 15 years of resources; it's already been producing for 50 years. We expect that that's going to continue to grow as well.
So it’s a good long-life cash-flowing royalty that not only covers our G&A – so we never have to go back out to market – and leaves us a little bit of cash left over to reinvest back in additional royalties and kind of grow the portfolio.
Gerardo Del Real: Tell me a bit about that portfolio… how aggressively you plan on growing that out and where the focus is. Is the focus on near-term cash flowing royalties or are you content to do a combination of near-term cash flowing royalties along with some longer-term options there?
Brendan Yurik: Yeah, so I've never been one to pigeonhole myself into only one thing. I always try and be opportunistic. And it's really a balance, right? We are looking for some producing royalties like the one that we just announced. Cash flow is king. It’s always nice to have cash flow; cash flow that could, eventually – not too far down the road – pay out dividends to our shareholders.
But you pay more for producing royalties… the further down you go. We do like to pick up royalties not in production simply because, when you look at the supply pipelines, you can kind of make a guess, internally estimate, which projects you’re actually going to need to fill that gap in supply going forward. For all of these metals, there's not that many of them, right; there's other circumstances.
As we go further down the line – like the manganese, for example – there's one manganese district in all of North America right now that is actually developing a project for supplying manganese to the EV space for North America. One district in the entire North American continent, right? In those kinds of cases, it makes sense, if you can see it, and that's regionally such a strategic deposit resource — we're happy to move down into the resource stage and pick up royalties at that point because you can't make this stuff. It's not like fiat money; you can't print it. Just like gold, these are metals that hold their ground, that hold their value. They're underground, and you can't just produce it out of thin air.
And so we can be a bit more strategic about getting some earlier stage stuff. We plan to be very aggressive. Our portfolio is already at 14 royalties. But we're going to be adding… I mean, our deal flow has definitely jumped up exponentially as of this year.
We get a lot of inbounds. We have about five or six deals that we're chasing right now in parallel to this one that we just announced. So you're going to see a real quick growth profile here over the next, kind of, six months to a year.
Gerardo Del Real: Well, Brendan, it sounds like you and I will be chatting frequently. I want to thank you for coming on and sharing the story. Anything else that you'd like to add?
Brendan Yurik: Yeah, I would say that one of the other key things that we're trying to do is actually stay diversified throughout this growth process. And so we're diversified across assets, for sure… that's a big thing… it’s pretty common with the royalty space. But we're also diversified across commodities with interest in zinc, lithium, manganese, vanadium, graphite, and cobalt, already, and we're trying to keep that kind of going forth.
We're really one safe way for people to play and get exposure to the entire EV battery revolution – the transition to clean energy – with the investment profile of a royalty company and the benefits that go with that.
I'm excited to chat with you again in the future. Thanks for having me on today. I hope your readers enjoy that… and always happy to come back and answer more questions.
Gerardo Del Real: Looking forward to it. Thanks again.
Brendan Yurik: Yeah, thank you.Click here to see more from Electric Royalties