Categories: Precious Metals
Topics: General Precious Metals

Vox Royalty (TSX-V: VOX)(OTC: VOXCF) Chief Investment Officer Spencer Cole on Topping Best Performing Royalty Stock in 2021 & Providing an Inflation Hedge

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the chief investment officer for Vox Royalty — Mr. Spencer Cole. Spencer, it's great to have you back on. How are you?

Spencer Cole: I'm very well, thanks, Gerardo. How are you doing?

Gerardo Del Real: I am doing well. We talked a bit off air. I mentioned we are definitely living through interesting times. We could spend hours chatting about all of the events going on globally. But let's talk Vox.

You had a news release a couple of days ago that I thought did a brilliant job capturing, one, the near-term potential of the pipeline of royalties and streams that you've developed; two, the quality of royalties and streams that you've selected; three, the multiple commodity exposure that you provide not just retail investors but institutions and family offices that are looking for diversified commodity exposure in very, very stable jurisdictions. 

And I'd love for you to provide an update on that release and an overview of how things are coming along.

Spencer Cole: I'd love to give you that update, Gerardo. Look, I think one thing to start out with that's quite interesting is a lot of our investors asked us at the end of last year — it was a record year in Vox's eight-year history; record revenues; we were the top-performing stock in the entire $70 billion royalty industry — and, understandably, a lot of investors said:

‘How are you going to top that… how are you possibly going to beat those sorts of records going into 2022?’ 

I think the short answer to that is… seeing how our portfolio has already started to really ramp up and continue to develop in the first quarter of this year… we think we're on-track for another record year in 2022.

So in terms of our 55 royalties and how they're developing, as you mentioned, Gerardo, we just announced, yesterday, some updates on five of our key royalty properties; two development-stage properties and three exploration updates. 

I think some of the most exciting highlights out of that announcement were on the South Railroad gold project in Nevada. They just released a Feasibility Study. That project is probably going to be one of the fastest-tracking gold projects in Nevada moving into production. 

They've got a large private equity group in Orion Mine Finance standing behind the project with a $200 million term sheet looking to finance the project. So management thinks that project will be fast-tracked into first production as soon as 2024. So hugely positive update there on that South Railroad project.

Likewise, on another one of our key development properties — the Lynn Lake gold property that Alamos Gold is advancing — they've reiterated their guidance towards a construction decision later this year. So that's another project that has revenue likelihood in 2024-25. 

And then, across the other three projects, we had some brilliant drilling results across two gold projects. And then, likewise, our Sulphur Springs copper-zinc project in Western Australia; they hit some of the highest grade copper and zinc in the project's history, and they're already moving that project into the early underground development.

So while these are 5 of 55 separate royalties we have, Gerardo, these developments are suggesting that 2022 will be a record year for Vox, which we're very excited about.

Gerardo Del Real: You being chief investment officer, obviously, there's a bigger emphasis on accountability as it relates to picking right. And much like real estate, where I have a bit of a background, you have to buy right, correct? 

And so, just looking at the portfolio, looking at the multiple commodity types, forecasting where I believe base metal and precious metals prices are headed — it sure looks like you picked right!

Spencer Cole: No, you're absolutely right, Gerardo. One of your opening comments talking around the quality of the projects that we focus on… there's a lot of metal in the ground around the world but it's not all created equal. 

We've looked at a number of interesting royalties in the Ukraine and Russia. And obviously, we're extremely saddened by what's going on there. But it's a good example where there's a lot of different jurisdictions you could explore for minerals in but not all of them are as safe as, say, Australia, the US, and Canada. 

So when we allocate capital to new royalty investments, we're heavily skewed towards jurisdictions where we can see, I guess, low risk of developing projects. So 80% of our royalties are located in Australia, the US, and Canada. So I think, geographically, we trend towards quite low-risk jurisdictions. 

And then, in terms of the actual mining projects and the attributes of what's in the ground themselves, we're very careful that when we forecast returns on investments, we build in a lot of conservatism into our engineering assumptions so that, even in a low commodity price environment — which is certainly not where we find ourselves today — our investments are still going to achieve industry-leading rates of return. So we are very careful about double and triple checking the quality of the projects before we make any investment.

Gerardo Del Real: What's your outlook as it relates to inflation and the effect that that's going to have not just on metals prices but, obviously, as a side, on the portfolio here?

Spencer Cole: No, it's a great question, Gerardo. And we've been getting this question from a lot of generalist investors recently. Look, I think inflation certainly is showing no signs of slowing down. I think everyone's got their own personal stories about how their hip-pocket is being impacted. 

But I think what we are seeing is we're seeing a huge flood of generalist investors moving money into the royalty industry largely because, in times of high inflation, you want exposure to the rising tide, so to speak. And as commodity prices continue to climb, you've got two obvious things to invest in: You could invest in the miners to get that exposure or you could invest in royalty companies.

Now, the benefit with royalty companies is you get all of that commodity price linked upside without any of the cost inflation that the underlying miners are experiencing right now. 

If you are a gold mining company, you're paying huge fuel costs right now. A royalty company, by comparison, that has a 1% or 2% revenue royalty on that same gold mine — they're getting that price upside as the gold price goes through US$2,000 an ounce or as the nickel price goes through… I don't even know where we're at today, US$20 a pound… but without any of that cost inflation. 

So the short answer is… unfortunately, we see inflation continuing to climb. But the good news is… I think generalist investors are really starting to wake up to the fact that they can get a really smart hedge against that inflation by buying royalty stocks such as Vox.

Gerardo Del Real: Vox as an inflation hedge… that was a great update… I appreciate it, Spencer. Anything else to add to that?

Spencer Cole: No, look, I think all I'll leave you with, Gerardo, is Vox is in a really exciting chapter in the company's history. As I said, last year, we had record growth. We went from one producing asset to five. We're on-track to organically grow to 10 and probably 12 to 13 producing assets in the next 18 months. 

So investors looking for an inflation hedge with the benefit of diversification across 55 separate royalties — they should seriously have a look at a company such as Vox Royalty.

Gerardo Del Real: Spencer, a pleasure as always… insightful as always… thank you for your time.

Spencer Cole: Thanks for your time, Gerardo. Have a great day.

Gerardo Del Real: You as well.