Categories: Precious Metals
Topics: General Precious Metals

Vox Royalty (TSX-V: VOX)(OTC: VOXCF) CIO Spencer Cole on Meticulous Approach to Building Billion Dollar Royalty Giant

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Chief Investment Officer for Vox Royalty Corp. Mr. Spencer Cole. Spencer, how are you today?

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

Gerardo Del Real: I am excellent. Thank you so much for asking. A busy, busy time for Vox. I want to get into what you describe as the event driven acquisition model, because frankly, I think you've done a beautiful job executing these royalties and these deals and I think it's really interesting that you like to do it prior to major project developments, so that you're as efficient as possible. And before I get into all of that I would love for you to just share a bit about your background and then we can get into the approach and why everyone's excited here for Q4 2021 and Q1 2022.

Spencer Cole: Absolutely, Gerardo and thanks again for having me on your program today. As some of your listeners may be aware, from hearing my accent, you could probably guess, I'm from Australia originally but so apologies if the accent's too severe for some listeners. So I'm based in Toronto now and I'm the Chief Investment Officer for Vox. My background is as a mining engineer and also as a former mining investment banker. I've worked for some of the major mining companies globally such as BHP and South32 and then worked in banking with UBS, many years ago but about six or seven years ago, I co-founded a business called Mineral Royalties Online. We developed what is the world's largest proprietary royalty database and then we subsequently vendored that intellectual property into Vox about three years ago. And that's the cornerstone intellectual property that we use at Vox to identify below the radar royalty opportunities, mostly that our competitors are blind to.

Gerardo Del Real: You... Since 2019... You mentioned the proprietary database and I want to talk about that a bit, if you could explain that to us but you've obviously put that database to work. You've announced, I think over 20 separate transactions, with nearly fifty royalties since 2019. Walk me through the vetting process and talk to me a bit about that database and why it's been so critical in sourcing these royalties that clearly are paying off literally, paying off.

Spencer Cole: Yeah, absolutely. So I guess our due diligence process really starts with technical due diligence at the front of the business. So, where... Vox has been created with the technical management team so we're a group of mining engineers and geologists. We do all of our technical diligence in house because what we've seen across the industry is typically when bad investments are made, it's often when technical due diligence is outsourced to consultants. So we try and do that work in house, given we own 15% of the company ourselves. So it keeps us aligned from a diligence perspective. In terms of how we use the royalty database, we have over 8,000 proprietary royalties within that database. We typically target royalties that are over really interesting mining projects but equally as importantly, royalties that we believe our competitors aren't necessarily aware of because the best way to unearth deep value within the royalty industry is acquiring royalties outside of auctions.

Spencer Cole: So doing what we call bilateral royalty deals, where you can come in negotiate in good faith with the royalty seller and then conclude a transaction before your competitors are alerted to the deal. Then in terms of the specific types of royalty assets that we target, Gerardo, our sweet spot is as you mentioned, acquiring royalties that are right on the cusp of a major event. So they may be right about to move into production. Call it three months to 12 months from first production or they might just be on the cusp of a major expansion so that we expect that they're going to move into construction for that expansion within three to six months. So not only are we buying the royalties at very disciplined prices today but as we project that value out, over six to 12 months, we can see our investors are going to get a significant uplift on the value of that royalty as those events play out.

Gerardo Del Real: Excellent. Walk me through what the vision is for Vox. You're a relatively new company though, we joked offline. It's 10 years in the making and now you're an overnight success, right? But you're relatively new to the market and you're definitely new to our audience. Can you explain to everyone what the vision is for the company here in the next several quarters and frankly, the next several years.

Spencer Cole: Absolutely, Gerardo. So look, the vision of the company really is... It's quite straightforward. We are targeting the highest risk adjusted returns on capital invested within the entire $70 billion royalty industry. So per dollar invested, we're trying to get the highest risk adjusted rate of return of any company in our industry. That's from Franco-Nevada at $30 billion all way down to the junior royalty companies. We're trying to allocate capital in a very disciplined fashion to exceed the rate of return of any of our competitors. And we expect to be able to deliver that over the coming quarters and certainly in years to come.

That really is our North Star and as a subset of that we are doing that by obviously minimizing risk so that takes the form of minimizing geopolitical risk particularly because 80% of our royalties are located in Australia, the United States and Canada. And then also targeting projects with low technical risk. So fairly simple mining operations and then obviously maximizing the upside and the revenue profile, targeting mines that have considerable exploration upside, operators who are likely to expand the operations. So I guess that is in a nutshell, what we're targeting over the coming quarters and years. Continuing to deliver the highest risk adjusted returns within our industry.

Gerardo Del Real: We talked about the database a bit. I have to imagine that it's something that you are vigilant about and consistently looking through. Can we expect any deals here in the next quarter or two? I got to believe that you're looking at stuff.

Spencer Cole: Look, we're certainly not sitting on our hands, Gerardo. We've got a number of deals up our sleeves, so to speak, but it's always hard to say exactly when the ink will be wet on these final binding purchase agreements. But we would certainly expect over the next couple of months to be announcing some really exciting deals to the market. I think those deals that are likely to be announced will continue to be highly weighted towards precious metals, given where 70% precious metals weighted and over assets that have very large ore bodies and that we believe have near term revenue potential. So in short, yes, plenty of exciting deals to come, we expect, Gerardo.

Gerardo Del Real: I'm looking forward to it. Thank you so much for your time today, Spencer. Anything else to add to that?

Spencer Cole: No, look, I think all I would just leave your investors and your audience with is that Vox is in a really fortunate position now where we're experiencing exponential organic growth. And so on a month on month, quarter on quarter basis, we're having a huge amount of organic growth without any additional capital invested. So organically, we expect to grow from five producing royalty assets currently to 10 and potentially beyond 10, by late 2023. So yeah, we appreciate investor interest and we would welcome any new investors to join us on this adventure at Vox Royalty.

Gerardo Del Real: Looking forward to it. Thanks again. Take care.

Spencer Cole: Thanks so much, Gerardo.