Elemental Royalties: A $290 Million Deal Changes the Game

Trevor Hall (0:30)

The NASDAQ and the TSX with the symbol ELE.

A little bit of a transformation going on with Elemental. It's been a transformation in Elemental, but going hand in hand here for the last couple of years. But they did announce a $290 million acquisition of royalty streaming portfolio from Orion Mine Finance, and then a little bit of a shift with the makings of the company as well. Happy to welcome in Fred Bell, now CEO once again of Elemental Royalties. Fred, good morning. Good to have you.

Fred Bell (1:05)

Hi, Trevor. Good to be here. And when you were talking about a transformation, I was again, I was thinking it reminded me of our earnings, which I think we had record earnings for quite a few quarters coming through. And at one stage, it was sort of, we were asking a question of when we won't have a record quarter of earnings. And I think that these transactions, I should say, because there's two of them really, it does really streamline the company going forwards into a pure play, royalty and streaming one, and we'll come on to it, I'm sure. But I think that that does, it makes the company significantly leaner and more focused going forwards.

Trevor Hall (1:49)

Yeah. All right. We're going to kind of dive into that news, and also we need to dive into the Vizsla Panuco royalty as well, because that's also been a headline the last couple of weeks. But let's start with you, Fred.

You founded this company, you were the CEO for an eight-year stretch, and then with the merger with then EMX, you took a step into the COO president role. But now stepping back into the Chief Executive Officer desk, what does it feel like to step back into that top seat? And what's the mandate now that maybe is a little bit strategically different than it was just a few weeks ago?

Fred Bell (2:34)

Well, look, I think it's royalty streaming companies are known for being pretty lean teams.

And on the royalty and on the corporate side, nothing really changed with the merger. It was actually quite, we were doing much the same thing. We've been incredibly active, I think, record in terms of how many transactions we have done. And some of that came from the work that we had done in the year before, in the two years before on some of these deals. So they didn't all happen overnight. But I think that we have certainly been keeping ourselves very occupied. And I think it's, whether I am COO and President, whether I am CEO in title, I don't think the role changes much either way. I think we're still laser focused on really trying to find good opportunities that can add value for the company. And at the same time, getting out there and introducing the company to a whole new range of investors. Now that we are larger, now that TSX listed 70 times the liquidity, it gives us a very good platform then to talk to investors. And I think that is the consistency that we've had. And in terms of the team working on transactions, the core of that team, I think, have been with the company doing this for years. And even with the guys going to Carlin East, I mean, we're going to be one of, if not the biggest shareholder there. We're going to share 50-50 interest in, call it 20 or 30 early stage royalties and option agreements. So I suspect that it will streamline the business.

But other than that, I think it will be very much continuing as we are.

Trevor Hall (4:23)

Okay. Let's talk about the two massive deals that happened in the last six weeks. And those are basically back-to-back announcements. You closed that Vizsla royalty acquisition on September 15th.

Six days later, less than a week, you announced that $290 million Orion portfolio acquisition.

So quick turnaround here, you're being aggressive. I think that's kind of what people were expecting would happen with Elemental since Tether came in as the major shareholder. But from the outside, it's pretty aggressive. Was that timing planned or did these opportunities just kind of come together all at the same time?

Fred Bell (5:04)

I think it was, we constantly work on, try and work on multiple deals in parallel. And that's often because along the way, we may kill a deal through the due diligence we're doing, or it may not happen because of different valuation expectations and other things. So I think we're always working on things in parallel.

It was a coincidence they happened so close together. I think probably for our sanity, having a week apart gap at least is nice. But look, the Vizsla getting that approval from the Antitrust in Mexico, I think that probably took a week. We guided that it would be in that timeframe, but we probably hoped it would be a bit sooner. I think it was good to see it come through. On that note, really encouraging to see Discovery Mining get their permits for the Cordero project this week from Mexico. So that's the fifth mining company in Mexico that have got their permits over the course of this year. Panuco's, I would say, probably number in the next three, in terms of if there's effectively a queue of companies waiting for permits. Maybe there were nine, five have got their licenses, and there's a couple left, including Panuco. So I think that's really encouraging. But yes, it took us a bit longer to get that sign off from the Antitrust Commission. They had dealt with a royalty transaction similar to ours before, where it was a royalty company being acquired with the only assets in Mexico. So we worked through that. And then the portfolio acquisition we made from Orion, we initiated that earlier in the year.