Categories: Precious Metals
Topics: General Precious Metals / Gold Stocks

Empress Royalty (TSX-V: EMPR)(OTC: EMPYF) Executive Chairman David Rhodes on Positioning a Gold-Silver Royalty Powerhouse for Maximum Upside in This Record Metals Bull

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the executive chairman for Empress Royalty (TSX-V: EMPR)(OTC: EMPYF), Mr. David Rhodes. David, it's great to have you back on. How are you today, sir?

David Rhodes: I'm good, thank you, Gerardo. Great to be back, and good times to be back.

Gerardo Del Real: I mean, let's get right into it. The last time you and I chatted was towards the end of April. Empress Royalty was trading near the 45 cent level. Gold was lower, silver was lower, and we had a pretty in-depth conversation about gold, silver, and Empress. And here we are, just a tad bit over a month later. Empress is at all-time highs, gold is flirting with $3,400 again, silver's up some 4% today, breaking out towards the $36 level. And look, it's easier to have guests back on when they've been proven correct in a month's time. But you said gold and silver were going higher, and here we are. You also said Empress was headed higher, and here you are. So I wanted to have you on, I want to start with gold and silver, what are you seeing? What are you hearing? You have a lot of contacts in the space. Is it overbought? Do we still have some legroom? Where do you see it going?

David Rhodes: Yes, I think when we were speaking we were talking about our Q1 results. I think our gold average was $2,800 on our Q1. And as you say now, if you look at it in the Q2, it's like $3,100. I can't even get my head around the $3,000 number for that. So it is around $3,100. And silver, in Q1 was about $31an ounce. And now obviously in Q2 is more like $35 an ounce. So a big increase. You look at many benefits to Empress. It’s all about the weak dollar. The weak dollar and inflation. We have got an environment where there is a lot of uncertainty as you're seeing the dollar getting weaker and there certainly seems to be a view from the government that the dollar is getting weaker. So that's a big, big driver for gold and silver. And if you look at the central banks of other countries, they are buying gold. They’re not buying bonds anymore, US treasury bonds. So that shows you a lot of people are being clever, and buying gold. You have seen this spike in silver. People are buying silver as well because that's like mini gold in the sense.

So when you see other clever central banks doing it, you see where the gold price has been moving. You see where silver's been moving. You look at the weak dollar. It's only going to keep going one way, and it's going to keep going up.

Gerardo Del Real: In true phenomenal guest fashion, you took my next question and answered it for me. I was going to ask you about the bifurcation between the bond market and the dollar, because we do have a weaker dollar index. But we have a bond market where the bond vigilantes seem to be back, and the yields continue higher, at a time where even the most ardent of supporters of this administration coming into it, like Elon Musk, who was a big part of it obviously, are out there screaming and yelling about the deficit and the spending and how unsustainable that is. I had a great, as always, a great conversation with Mr. Rick Rule here a couple of weeks ago. And Rick, true to fashion, spoke mathematics and numbers and talked about the unsustainability of the current deficit. And so do you share similar sentiments? Do you see us in a situation where, mathematically we either inflate our way in a very severe way out of the debt, hence much higher gold prices, right? Or do we have a reset, Bretton Woods style type reset, which again also bodes well for the gold price?

David Rhodes: Yes, I mean, I did hear it. You would be glad to know, Rick was very kind to say, he is older than me, so he is much wiser and he doesn't do predictions. I'm obviously younger, and I do predictions. 

Yes, I think probably the listeners on your show, if you have too much debt, guess what? People are not going to want to give you more debt unless you pay a higher price. I mean, that's pure economics. And the bill that is going through at the moment is more spending. It doesn't matter how you calculate it. The issue is there is going to be more US debt. There is more US spending. It has been downgraded. I think Moody's downgraded the US so it's the first ... well the last one I think to downgrade it after AAA. So the people out there are watching very closely. When you get the agencies downgrading the US, that's just the tip of the iceberg when you look at other things, the other factors. As I mentioned central banks buying, other central banks buying, obviously the debt aspects keep getting repeated. But also the world is getting more uncertain. And obviously you need a safe haven, and that is what gold has always been, a safe haven for years and years, and continues to be for lots of people.

Gerardo Del Real: Yes. No look, I couldn't agree more with you, and with Rick obviously, and obviously we've all written checks to position ourselves for that upside, and for that re-rating.

Let's talk Empress. There's a lot of people that maybe listened to the April 24th interview with you and said, "Well, Gerardo gets excited, easy. He's a super optimist. Let me wait and see what happens." And all that's happened is the company's gone from 45 cents to 70 cents. It's still very early days. You've participated and helped finance transactions in the tens of billions of dollars. The management team over at Empress is absolutely top notch. Rick was kind enough, really, to go over that and mention that. And go over the experience of everyone from yourself, to Alex, to the rest of the team there. And it's just not something you see in a company at this early a stage. And with the market cap, the tiny market cap that the company is commanding from the market right now, what do you see as the next twelve to twenty four months of development for Empress? For those that may think, "Man, it ran up quicker than I thought it would, I probably missed the highs, let me just sit back and wait, or let me go look for something else."

David Rhodes: Yes, and it is a good point. I am the same. I mean, someone told me, one of my experts, when gold was $2,000, "It's going to $3,000.” I went, "Wow," I heard them and I did not believe them, but when it got to $3,000, I went, "Why didn't I put all my wealth at $2,000 gold." But you have got to be, there is a concerted nature when you see something run up, you think, "It's never going to go higher, it's never going to go higher." But guess what, Empress share price may go higher for lots of reasons. But the key one is, the reason for the run up is the fact that our Q1 results showed the market. We had USD$2.74 million of revenue in the first three months, and that's at those lower gold prices we are talking about. Obviously Q2, hopefully will be far in excess of that, with the high gold prices.

And also one of the assets, Tahuehueto, which is the silver asset, producing silver for us, that is ramping up as well. So we are getting more silver from that asset as well. So hopefully that will be a double whammy in that sense, in our Q2. So that once again will show the market that we are driving cash flow, driving revenue into the business. And the multiples in the royalty space are based on, there are revenue multiples, there are cash flow multiples, there are any NAV type multiples used. And we are still one of the smallest, in a sense of getting the value for our royalties and our stream in our market cap. So we are predicting a substantial increase this year from the USD$8 million we made last year. So we are hoping to double that, to double, we doubled last year, doubled this year. So if we can double our 8 million this year, which is our target, then you use a multiple. Typical revenue multiples range from say ten to twenty times, market valuation is ten to twenty times. And you can see the potential for us to easily double again in our share price. So it's just as proving to the market as we did in Q1. Continue to do that in Q2, Q3, Q4, showing that market, and getting the valuations that our peers get out there in the marketplace. And that will then reflect in an improving share price as our market cap expands.

Gerardo Del Real: You're talking a doubling just with the existing streams and royalties. And listen, I know, and not to date you or myself or anyone else, but I know that your Rolodex or your contact list, depending on who's listening to this, is extensive. I talked about those tens of billions of dollars in deals that you've participated in. How active are you in vetting other royalties, and looking to bring in accretive royalties for this particular cycle? Because look, frankly, this is the cycle that a lot of us have positioned for, and have been waiting for, some of us decades, and most of us definitely years, right?

David Rhodes: Yes, fair point. And I am a conservative guy, so I was really giving you and the audience some view on where we are, just standing as we are. But of course, I mean a business has to grow. I mean the mandate from the board to the executive is, spend that cash we have, use as much as we can do to really develop our business, and grow our business. And we have a lot of opportunities, obviously from the company that I also manage, Endeavor Financial, one of the top advisory boutiques. They see all the potential financing transactions in the marketplace, which they can, if relevant, feed into Empress as well as Empress's own business development team out there. So yes, a lot of opportunities. We have got some very exciting ones we are looking at, that we are getting through. We are looking at due diligence. So yes, very much our push this year, because the business is cashflow positive, it has stabilized, is to drive more, more and more royalties and streams into the business, grow it and expand our portfolio. Which will then have a knock-on effect on our revenue, improving our revenue, improving our cashflow. Which with the multiples I mentioned earlier, will drive our market cap and share price higher.

Gerardo Del Real: Now look, you have got the team, you have the cashflow, you have one heck of a precious metals market, and obviously the network to increase those multiples in that cashflow in the near-term, mid-term and the long term. David, it's an absolute pleasure to have you on. If you were a tech company, those multiples would be many, many times higher. I see a day where the precious metals companies are getting multiples, not in the eights and tens and twelves, right? But much, much higher than where they sit today. Whether or not that comes true, you're positioned beautifully. Anything else to add to that, before I let you go, sir?

David Rhodes: Just a bit of amusement, because we are obviously looking at the conference season. Rick Rule has his Boca Raton conference, which I recommend people to go to. Look online, you can see Rick Rule's conference. We are analyzing, what should we say, what would be our headline for that conference? And I came up with a flippant remark, "I told you so," should be the headline for our opening show at that conference. So please come along, I'm not going to be allowed to say that as my opening line, I'm sure, but hey, when you have 30 years in finance, 25 plus years in this business, and you said it as well, these markets don't come along every week. So this is a market which is here. I believe it is going to continue to be here for the next 18 months, maybe two years, let's see. But whilst it is here, enjoy it. And take the advice from the experts, and position yourself very wisely.

Gerardo Del Real: No, look, there's a time to be humble, and then there's a time to bang the drums and bang the table and scream it out, and I think this is the time to scream it out. I think there's a lot of meat on that bone left, and I think we're in for what's likely a volatile, but very profitable for those of us positioned well, couple of years. David, love having you on, let's do this again soon. And we may catch up at the conference, I know several mutual acquaintances and friends will be there. I'm going to try to make it myself. Thank you so much for your time today, sir.

David Rhodes: Pleasure, thanks Geraldo, see you at Boca.

Gerardo Del Real: All right. Cheers now.

David Rhodes: Bye. 

 

 

Click here to see more from Empress Royalty