Summit Royalties (TSXV:SUM) - Doubling Revenue as More Assets Enter Production

Drew Clark (0:00)

Hi, my name is Drew Clark, President and CEO of Summit Royalties.

Summit is just coming up on a year of trading. I'm here to meet with Matt and Beaver Creek to tell them about how we got to where we are today, but more importantly, where we're going the next four months, the next six months are pretty exciting. And we remain the cheapest of the companies that are in the precious metal space today on a price to cash flow and a price to not basis. So hopefully Matt can ask some tough questions and we can unpack all of that.

Matt (0:25)

Drew, good to see you, Matt. Good to see you too. I forgot, it's just a year.

Drew Clark (0:29)

Yeah, not even a year, it's November 10th, so.

Matt (0:31)

Yeah, so that's what you want to do. And what I want to do is see if you kind of kept your promises. So when you set out day one, what were the goals? Remind me.

Drew Clark (0:40)

The initial goal was to generate 10 million a year in revenue or create a company that could do that. We've got that in spades. But some of the simple goals at the beginning were like, form the company, go public, raise the money, hire a CFO, like stuff like that, this thought doesn't matter. But I think what the biggest promise that I think we made to investors that we've kept is we've kept our head down, we worked hard and we've done a creative deal. We've grown the per share value.

We've had research coverage come up from two shops now. We've got non-deletive capital in the case of debt. So I'm very proud of what we've done. And it's been a busy, busy year.

Matt (1:16)

Yeah, you've been right, Frank, for sure. But some of the more recent things that we've talked about is obviously getting that credit facility in place. I'm interested in maybe starting there and then we're going to work out where you allocate that. You need to be a steep allocators of capital. So we'll work out in a second whether you have been.

So describe the facility first of all, there's two components to it, right?

Drew Clark (1:37)

It's essentially the same facility, but one is available right now, the other one's available. If they like our use of capital, if they like what we're proposing to use it on, and we've been well behaved. Yeah.

So we have 25 million upfront, 25 million US, and another 25 million that comes in an accordion. The interest rate is somewhere between 6 and 7 percent depending on leverage ratios. Right now, we have no debt, so that would be on the lower side.

But I think the one thing that I think institutions and maybe not the average retail investor appreciates is, National Bank goes through every technical report, every management contract, we have strategy discussions. They don't just give you at the time, which was more than half of our market cap without going through the books, so it's a validation that I think comes with it, not just the capital that I think is very important for us to put to work, but also that validation that has unpacked it. You asked another question, one was, what do we do with it?

Matt (2:32)

Well, get on to that. I want to stick with the money. I want people to explain how you view investments, because you got to make a return because the money is costing something. The 25M Revolver, you can draw money down or you can pay money back. It is a facility that is subject to certain conditions that you have got to meet. There is another 25M bucks there. Like you say, Net Net is around a bit of market costs and a bit of performance cost to them.

That is about right at the moment.

The next question that comes from that is, when you look at that 25M bucks available to you, first of all, how much is actually drawn down so far? Zero. None. How much does it cost you to not draw money down?

Drew Clark (3:21)

I believe it is 0.52%. Right.

Matt (3:23)

So it is nothing. You have got a facility.

Drew Clark (3:25)

I am not saying it is nothing, but it is worth it every day.

Matt (3:29)

Well, it comes to that question of later on when you are generating cash, one of your other topics you talked to me about in the past was about creating a kind of cash pile, like build the money pile. Do you use that money pile to pay down any outstanding debt? Or do you let the debt kind of float? I mean, how do you treat it further down the line when you have got that problem?