Categories: Precious Metals
Topics: General Precious Metals

Empress Royalty (TSX-V: EMPR)(OTC: EMPYF) Executive Chairman David Rhodes on Building a Cash-Flowing Precious Metals Powerhouse

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the executive chairman of Empress Royalty Corp. (TSX-V: EMPR)(OTC: EMPYF) — a man who needs no introduction if you work in the resource space. I'm talking, of course, about Mr. David Rhodes. 

David, it's great to have you on. How are you today, sir?

David Rhodes: Very well, Gerardo, and thank you for such a wonderful introduction.

Gerardo Del Real: Yes, and thank you for your time. It's always a pleasure when I can get someone of your background on the show, and I want to start there. I mentioned that you are the Executive Chairman of Empress Royalty, which is interesting to me because Empress is a relatively small company given your accomplishments and your background. 

So for those who may not be familiar, can you just briefly touch on your storied career?

David Rhodes: Sure, and thank you for that. I have been in the industry for over 25 years, and I started in the investment banking world. Barclays Capital was one of my main employers many, many years ago. 

Then, I joined a company called Endeavour Financial. And Endeavour is one of the largest financial advisors in the mining and metals space. And that company has been going for 30 years, and I'm the Managing Director of the company. We took the company private around 16 years ago, and I run that business now.

And that business is in this mining and metals space. It is in the financing world of mines and companies around the world. Around six years ago, we saw that there was no one out there looking to do small streams and royalties of which the likes of Empress does. When you look in the marketplace, you simply don’t see anybody doing it. There is no competition. So what do you do? You set up your own company.

And Endeavour — with Terra Capital and Australian private equity funds — we set up the company and got the team together. Quite a few people had worked with us before at Endeavor as we set up Empress. 

It is going great, as I’m sure we will discuss. As you said, we are fairly young. We are less than five years old. And we are making a lot of money and making a lot of cash, which is what it's all about for our shareholders.

Gerardo Del Real: And you are being modest. You have raised over US$12,000,000,000 of funding for mining companies. So when I see that background and I see the network you have developed over the years, it’s curious to me what it was that stuck out about Empress Royalty. 

And I would love to just touch on that because it's rare to have someone of your background, your experience, and your network come to a company that's relatively new and put together such an impressive team. 

David Rhodes: That is kind of it. As you can tell, I am English, so we are understated, and so I appreciate you doing the plug for me. So, two things really. Firstly, from a purely business point of view, Endeavour Financial needs people to provide financing to its companies; our clients that we work with. Setting up Empress met a need that Empress Financial has, which is, if there are any small streams and royalties to be done, it has a potential participant in Empress Royalty.

Secondly, the royalty and streaming model is a beautiful model. When you think about how to invest and how to actually get into the gold and silver market — which, obviously, the key priority here for Empress is gold and silver; they don't do any metals other than gold and silver — it was a perfect route, really, for two things. 

Firstly, for Empress to enter into a market where there is limited competition. Therefore, you can get fair and attractive returns. Secondly, it is a way for Endeavour Financial to have a new participant in the marketplace that can actually fulfill any needs if any of its clients need a smaller senior royalty. So it's really meeting two needs.

Additionally, we saw a lot of value in driving this business from where it is today and to keep growing it to make it, in the medium-term, a very worthwhile half billion or coming up to a billion-dollar market cap company in about another five years’ time. 

So there are three aspects to it. But the main one, really, is that we are seeing a great opportunity to make money for our shareholders. We are a major shareholder so we make money for ourselves as well. And we have a solid five-year to ten-year value play of making a good-sized market cap company.

Gerardo Del Real: You touched on being a shareholder. I have to believe it's really the perfect storm right now for Empress being focused on gold and silver and having gold above $3,000 per ounce and having silver wanting to break out of that $33 to $34 per ounce range. 

I also don't think it's a coincidence that you've also attracted the likes of shareholders such as Rick Rule, who, of course, much like yourself, has a storied and accomplished career and whom also doesn't need an introduction. But how do you see the overall landscape for the precious metals right now?

David Rhodes: Well, I just returned from the Swiss Mining Institute Conference where we see lots of our investors every year. And around this same time last year, I was saying that gold was going to $3,000 an ounce. And they all looked at me quizzically and said, ‘Ah, he's such a promoter!’

And to be honest, the advice from the analysts I work with and the experts in the industry that go through the charts and the structuring of the deals, they gave me this information… they said that gold was going to $3,000/oz. And I met with them again just a couple of days ago, and they are now saying it is going to $5,000/oz.

As you know, we set up this company solely to do gold and silver. We've always tried to keep the business simple… to keep it to two metals and to keep it to only precious metals. We don't mix it up with the base metals, which have a different analysis as to how you calculate and how you value those types of businesses. So we simply keep it to the precious metals. 

And yes, we did understand the market, and, yes, we do have some great experts behind the scenes who give us the “why” we think gold is going to do well. So we have always been bullish on gold, and we believe that by mid to the end of next year, it will be over $5,000 and moving forward.

In addition to that, we are even more bullish on silver. We think that silver is going to $50/oz and that it could potentially spike to well above $100/oz by the end of 2026. And that is all based on fundamental data done by our experts looking at the marketplace. So, very exciting times to be in the marketplace.

That confidence is going to be very exciting in terms of the opportunity with Empress having gold and silver in its portfolio. Obviously, we are looking to quickly develop and stretch out our portfolio to take advantage of what we believe is going to be an awesome run in the gold and silver price. Again, very exciting times.

Gerardo Del Real: I'm a contrarian by nature. But I have to admit that I am also an optimist by nature, which is kind of curious, right?

It's one thing for me to think that gold is going to $5,000 and that silver is going to $50 and higher. Yet, it’s a whole other thing when David Rhodes comes on and tells me that, based on the analysis and the charts and the history, that that’s also where you and your team see gold and silver headed.

What’s next for Empress, David? I have to believe that it is a fertile environment for streams and royalties, particularly given your network and capital markets background.

David Rhodes: Sure, and what we have done in the first five years of this company is get it stabilized. And by stabilized, what I mean is that we produced US$8,000,000 of revenue last year, which meant we are cash flow positive. We're generating cash. Our treasury is now building up with cash, which is great. In addition, we have organized a US$20,000,000 credit line, which is available… so we have US$20,000,000 to spend as well.

We are projecting well over US$15,000,000 of revenue this year, and that is at lower metals prices than what we are seeing today. We have our business in a great position where it is producing cash and where it has available credit. We are going to start strengthening and developing our portfolio, which is doing more royalties and streams to drive our revenue and to increase our revenue to drive our business and grow it from here.

We no longer need to worry about being a small company that doesn't have enough cash flow. We are now at a point where we are cash flow positive, and we’re developing our portfolio whilst taking advantage of the fantastic opportunities we have at present and, as well, in terms of what we believe we’ll be seeing in the marketplace, which is increasing gold and silver prices.

Gerardo Del Real: You are cash flow positive with silver around $33/oz and gold well above $3,000/oz. You are going to be very, very cash flow positive with gold at $5,000/oz and silver at $50/oz. It's been an absolute pleasure, David. Anything else you'd like to add before I let you go?

David Rhodes: Just if anybody else wants to do any analysis or chat further with me, please contact me, obviously, via yourself. Or they can contact me on the usual websites on that basis. I am happy to chat more. And also, just have a look at the other people out there talking about silver. It is very interesting.

MarketWatch is one of those websites that I look at, and I saw something pop up just as we were talking, saying that silver is going sky-high. Again, just look at what is happening in the marketplace. When cycles like this happen, you need to get on that wave and ride it. So please join us.

Gerardo Del Real: I couldn't agree with you more. We have been waiting a long time for this market to shape up the way it's shaping up. This is the time to maximize the cycle because it is definitely in our favor. David, it has been an absolute pleasure, and I look forward to having you back on. Thank you so much for your time, sir.

David Rhodes: Thank you, Gerardo. Have a great day.

Gerardo Del Real: Cheers. 

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