Elemental Royalty Corp (ELE) 2025 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Elemental Altus Royalties Corporation Q3 earnings call and webcast. (Operator Instruction) I'm pleased to turn the floor over to CEO Mr. Frederick Bell. Please go ahead, sir.

Thank you everyone for joining our Q3 call today. This will be the last quarterly call as Elemental Altus Royalties because for those paying attention to all of our announcements, we we shortly after our Q3s announced the closing of the merger with EMX Royalty. So I am here on this presentation as the CEO of Elemental Altus and I will be going into the COO. President role of Elemental Royalty Corporation and with me is David Baker who is the CFO of Elemental Altus Royalties to run through our Q3s and he will be assuming the Chief Investment Officer role for Elemental Royalty Corp moving forwards.

So with that, if we can go to our highlights for the third quarter, I think the overall message here is that it's the strongest financial position in the company's history, really good continuing cash build. We have for Q3 adjusted revenue of $8.2 million US dollars, and that is compared to Q3 in 2024 of $4.8 million. We announced the merger with EMX, and the day after our results came out, we announced the closing of it. In November and that creates about a billion dollars US dollar market cap royalty company, a portfolio of over 200 assets, and four really cornerstone royalties to build the company out going forwards. We also announced two acquisitions in September, and that was the Dugbe Royalty and the Laverton royalty in Australia, and we closed the Dugbe royalty and we expect to close the Laverton royalty shortly this quarter.

We have about $100 million US dollars of non-bilu of capital that we have available to deploy from today, and that is both from our credit facility that is existing and also our cash on hand.

And then lastly, alongside the closing of the merger with EMX, we also closed the previously announced $100 million financing with Tether that was part of the merger with EMX.

So a bit more detail here into the quarter and as you can see really strong continuing year on year growth in revenue, EBITDA data, and operating. Cash flow. We had Q3 royalty revenue of US 6.9 million and adjusted of 8.2 million, up 70% on the comparable period for 2024. And just to remind everyone, really that the key difference there between a royalty revenue and adjusted revenue number is the inclusion of our (Inaudible) royalty in that adjusted number.

We had adjusted EBITDA of $6.2 million US, which again is up nearly 70% on the Q3 period in 2024, and we had adjusted cash flows from operations of $5 million US dollars, up nearly 80% on Q3 2024.

In terms of revenue guidance increase and geo guidance, we are on track to meet the midpoint of our gold equivalent ounce geo guidance, and that is between the 11,600 and 13,200. Geo range and that translates to increased record adjusted revenue of approximately $42 million US dollars and that is basing it on a Q4 number of $4000 US dollars gold. So again just to make that really clear for everyone, our goal. Equivalent ounce number in attributable ounces from our operators and counterparties. We are on the midpoint of guidance range for that, but we are increasing the revenue guidance on the basis of using a higher gold price in the Q4 quarter, of which we are approximately halfway through at the moment.

Our Q3 gold equivalent ounces came in at 2,362, which is up about 22% on a geo basis from Q3 2024.

Our liquidity has improved significantly on the back of the cash flows, and we mention here that Karai Sid royalty, which continued to contribute in Q3 with about $1 million of revenue, and year-to-date the royalty has generated now over $10 million in revenue. And that was for those who recall, that was the first production from Kerali Sud, first royalty revenue coming in at the beginning of this year.

So it puts us in a really strong liquidity position and building on that is about $15 million we have added in milestone payments as well over the course of the year. So pro forma balance sheet for the post merger with EMX is about $48 million US dollars. I would note that in the last 48 hours, EMX also announced the acquisition of the Pukos royalty. And so this is this number is pre that and on top of that we have about 50 million credit facility available for drawdown.

So at this stage I'll hand over to Elemental Altus' CFO David Baker and our moving forward CIO to run through the rest of this quarterly presentation.

Thanks, Fred. Just a couple of minutes on the EMX merger because, it really is a genuinely transformative, transaction for both companies. The combination creates a billion dollar royalty company, a scale where few royalty companies have ever achieved. Together, we're managing more than 200 royalties, with a larger base of cash flowing and near cash flowing assets.

What also makes this merger, really compelling is the strategic fit between the two portfolios and the two businesses.

Elemental Altus bringing strong precious metals exposure, a track record of discipline acquisitions, EMX bringing exceptionally broad project, technical business, globally diversified, and real cornerstone royalties such as Timmo and Lee.

If you look at those combined portfolios, of Cornerstone assets, adding Casarron, Kalainda, and Laverton, we have a revenue and growth foundation that's high-quality, but also, very much back to, gold and copper, which are two very important metals for us. The companies have generated consistent value over a long period of time. And I'm confident that together we deliver even more growth, through that scale, flexibility, ability to now compete for larger and higher impact transactions, alongside our new large investor tether.

The merger really does represent a clear step change for for Elemental, and really positions us firmly in the intermediate, royalty space with enhanced access to growth and to capital.

So turning to the transactions that we've announced, in the quarter, starting with Laverton. Laverton is an exceptionally high-quality royalty opportunity. We're acquiring an additional 2%, gross revenue royalty, over Genesis, Metals Consolidated Laverton project that they acquired, from Focus. This is one of the largest undeveloped gold systems in Australia. It's Australia's third largest, undeveloped gold. Project, over 300 square kilometers, more than 2.1 million ounces of M&I resources, 99% of those resources within existing mining leases. So it really does reduce that permitting and development risk. Genesis, $4 billion Australian operator, has been very clear about the strategic rationale behind acquiring the Laverton assets. Provides high-quality mill feed, for their processing hub that's just 30 kilometers away.

So from our perspective, and the reason why we did the transaction is it creates that potential for fast pack development path, goal focused in WA and Genesis have already come out saying that they're fast tracking opportunities and drilling at Beaversley Creek.

So we at Laverton with a new well funded operator and a real district scale plan, we think we believe that Laverton's potentially be one of the most meaningful group of competitors to the to the portfolio over time. These are exactly the kind of deals we want to do.

Dube is another significant and strategic acquisition. One of the largest undeveloped gold deposits in West Africa. We've acquired a 2% to 2.5% NSR over 3.3 million, measured and indicated. Ounces, reserves of 2.8, 2.8 million ounces. It's got meaningful scale. Previous study work has suggested a 14-year mine life with over 170,000 ounces of gold produced per year. I would know that that was done at a $1700 gold price. So well below today's environment, gold price environment.

On those numbers, we believe this royalty could be generating for us more than $10 million annually, a tea production in royalty revenue, and again would make Due one of the most significant contributors to our portfolio.

Lots of catalysts from the Pasofino team. We're expecting an updated feasibility study, and then they're looking towards a financing and construction decision in 2026.

So in terms of the quarter, looking at some of our producing assets, which really do underpin our financial performance.

Capricorn had another strong quarter with more than 32,000 ounces of gold produced. Asset continues to perform consistently, efficiency, efficiently, and as previously announced, they've had that regulatory approval in hand for the major expansion to take production to 150,000 ounces of gold a year. So we've got some impedded growth into our 2% NSR.

Casarena again continues to be a pillar of stable revenue for for the company.

We're expecting higher, copperhead grades in the second half of 2025, and expected the Lunds to hit their full year production guidance. There was a bit of a, weather related delay in Q3 sales, but we'll expect to get those back in Q4.

Caserones continues to perform well. Nearly 20,000 attributable answers in Q3. Allied have been clear that they're expecting processing high grade material, second half of this year and across 2026 and 2027. And that gives us, A good visibility on higher revenues at these high gold prices. Karai should continues to perform, and continues to pay, and I think what's exciting there is, that they are still able to co-process or the main Saola, so we're looking forward to updates, from there on the, on the future production at at Karali soon.

CNY, we are still, we're waiting royalty payments, due to the external audit by the government of Burkina Faso, and, we will update you, when we have more information at wan CNY.

So in terms of the financial highlights, strong operating performance, had another, single quarter of significant financial growth, year on year. So compared to the same quarter in 2024, just revenue increases 70% year on year.

Just CBT are up 67%, and that just translates straight through with that margin expansion to nearly 80% increase in operating cash flow.

These are attributable to both, increased ounces being delivered in the profile and increasing metal prices.

In terms of the bridge, for cash flow.

Generated $5.2 billion in free cash flow for the year. We did, have start to have some, costs associated with the Airmax merger, affecting free cash flow, but still, it's still strong numbers, reflected by strong revenue in the quarter, and some, yeah, I partly offset by, transaction-related G&A and merger costs. Another couple of one-offs in the quarter as well, with acquiring the Dubay royalty.

Which you can see on the next slide, we made an initial payment, on the Laverton, to lock that in. So we'll close that in this quarter. Received, as expected, the $1.9 million through the royalty buyback, the partial royalty buyback at Arizona Saint Lawrence Parks Elliott, and through in the money share option exercises we received $2.2 million.

I think importantly as well, we've fully repay our loan in Q1, which lowers our cost structure and and allows us to be positive on interest income rather than interest cost.

And then just this is just to help help bridge our financial statements to our underlying performance. We do still pick up Caserones, below the line there as a share of profit associates. So that's represented there at number two. We are looking at ways to change that now that we have a significantly larger portion of Caserones with the EMX transaction. So we may be able to present that differently at year end.

Performance in the quarter, I'd say as expected, we were, very clear that that we're expecting production revenue to be weighted till the first half of 2020, First half of 2025, through the catch up at Karai soon.

And as Fred said earlier, we are on track to meet the midpoint of GEO guidance for the year, and for the second time this year, I've upgraded our revenue guidance, which is $42 million at the midpoint, to, reflecting higher metals prices.

EBITDA margins remain high, and that's, and back to where they should be in the 75% to 80%, affected somewhat in the quarter by starting to accrue merger related costs as a one-off.

And likewise, I'm very happy with the $5 million of operating cash flow, including cash flow and as dividends in the group. Clearly Q2 is going to be an outlier for a very long time, reflecting that one-off, one-off payment by by Karali So catching up in 2024. But we are seeing cash flow, in line with, rising metals prices and, keeping a fixed sustained cost base.

We have received, as expected, the material one-off payments in the year, led with the start of the year by the distribution from Ming Settlement. But then, as discussed earlier, we've had some milestone payments from Crowley Hood and the partial buyback of the cactus royalty to make nearly $15 million.

Of buybacks and milestone payments in the quarter.

So pro forma, market cap of the company, a billion dollars, as Fred said, $48 million in the bank, estimated pro forma less than $6 million of DMX paying for the PS acquisition. We have made a small investment, in gold, directly through Tether, this quarter.

So we've got a million dollars of actual exposure to gold. We'll keep that as a small proportion of our cash availability and then post-merger tether come out as 32%. Shareholders, of the company, with over 50% of the register is institutional. I would say as well that our NASDAQ listing remains well progressed.

And now that the US government and the SEC have reopened, we'll be looking to get on the main board, of the NASDAQ, as soon as possible.

And with that, I might, pass over back to Fred to sum up ahead of any questions.

Thank you, Dave, and look, I think the really key story here is closing the merger this week with EMX and it's been something that we have been working on and discussing for a long time in the background and I think really delighted to be able to get. That announced and now closed alongside in total 3 acquisitions between EMX and Elemental Altus over the last two months and in parallel with the financing from Tether, the share consolidation, and what we hope will shortly be the Nasdaq listing once the SEC gets gets to reviewing our file and finalizing that. So we will then have A company with a really high-quality portfolio (Inaudible) by four key assets. We have growth from three of those assets going forwards, and that is Timmoc moving into the lower zone. It is the mine expansion already under construction at Kalawinda, and it is the Laverton.

Project going into the Genesis' mine plan at the Mount Moor mill there. So I think all three of those are really material upgrades in terms of revenue from some of our cornerstone assets, and it puts us in a position where the company has a really strong.

Balance sheet to deploy into new acquisitions going forward, and we have the benefit of both the EMX and the Elemental teams combined in terms of looking at business development opportunities. So I expect us to continue to be very active on that front.

With that, we'll hand over to questions and thank you all for listening.

(Operator Instruction).

Okay, so it looks like we've got a question, I guess through the chat. I guess the first question I can cover, so the question is will we get any of the EMX Q3 financials?

So no, I guess EMX is now delisted, so we'll not be putting out its its Q3s. What we will do is we will provide at year-end, a summary of the EMX financials for for Q3 and the full year so we won't lose those numbers forever. And then, Elemental and the combined company will pick up in ex's share of profits and cash flows from the date of the merger closed. So that's yesterday, the 13th of November.

Second question, Fred, my past to you is, will collective G&A expenses be lower in the combined company?

Yes, thank you for that question. I think the answer is we're expecting multi-million dollar synergies. The teams are currently working through that at the moment, and we will have a budget for the 2026 year that will be agreed and I think will enable us to quantify some of the numbers across the team at the combined company at the moment. So yes, there will be synergies. The exact number we will put out alongside our budget for next year. And I think that's, putting these two companies together, clearly we get some immediate synergies in it, but I think one of the added benefits is actually being able to cover more ground and two material, I think, going forwards will be two material acquisitions that we announced just before the merger and we've closed one, and I think really good to see. Elemental team also announcing an acquisition this week, so we're going to continue to be very active going forwards now with a combined team, and we have integrated the business development teams and we've had people over in both US offices and London offices really working together to get on top of that going forwards.

Yeah, completely agree. Another question we have is, are we expecting any new, paying royalties, in the next few quarters, or any, just an estimate. Maybe I could start, is that we're expecting, I guess on the Elemental side, the Chappie mine in Peru is expected to restart production near term.

We also have a producing royalty at (Inaudible) that's currently playing on the offside. They've got a sulfide circuit under construction at (Inaudible) and also I think circuit to to reprocess the tails. So there's some new sources of revenue there. We also have a small royalty, a gold royalty in Australia, called Western Queen, and they're looking at, some contractor mining, there as well. So yeah, near term, there is, there's definitely some new, royalties that are expected to start paying us.

And then, Freda, and this leads in the question from Adrian is, Adrian Day, do we see better opportunities to royalty companies or individual royalty companies? Can we take part in more processes now we're larger and better access to capital?

Thank you for that, Adrian. Look, I think the key part here is where we see the best value, and we have been really active in the last two months in royalty opportunities, individual opportunities, and we continue to progress those, as well as some private portfolios, and I think as ever we look across the across the board at opportunities and see where we can add most value to the company, but as we sit here today, I think on consensus now of numbers, Elemental royalty Corp, a combined entity, is actually trading at a better valuation, a lower valuation than any of our peers in the space. So actually the best value company we would acquire today would be ourselves. So for the short-term we're very much focused on royalty opportunities where we where we see them and Yes, we are looking through processes as well, and we're familiar with how competitive those can be at times in the royalty space, but also we're now in a position where we can do some opportunities that we wouldn't have been able to do previously and where the combined team has some better insights into some of those assets and companies than either of us would have had individually. So I think continuing to look at deals, both ones we generated ourselves like Dubay, like Laverton, and ones that we see coming through processes where we can see compelling value and they add to the company.

Perfect.

And then a question from Simon, is asking about tether communicating, The intent around the AlphaStream option.

Hey, yes, so Tether have exercised their option to acquire the shares from AlphaStream. That was completed pre-merger. That was completed in October. So the 32% pro forma the Tether owner of the company, that's inclusive of that option to acquire shares from from AlphaStream. So that that deal has been completed.

That might be it in terms of questions.

(Operator Instuction).

Operator, thank you very much. I think I think with that we're good to close off our Q3 2025 call and note that that is the last quarterly call that we will do with Elemental royalties and going forward it will be as Elemental royalty call.

So hopefully look forward to speaking to you all and hearing from you all again in the new year.

(Operator Instruction).