THE BASIC ROYALTY CONCEPT AND WHAT MAKES SILVER CROWN ROYALTIES STAND OUT
With the royalty and streaming business model, the royalty/streaming company provides funds to an operation (explo¬ration, mining, mill, autoclave) in need of capital and, in return, either receive a portion of future revenue generated by an operation (royalty) or a portion of the physical metal produced (streaming). Royalties often cover multiple minerals or metals and offer no investor protection but are generally registered on title. Streams offer minimal protection for investors, are generally not registered on title, tend to cover a single element/mineral, and are considered a secured debt instrument. Registered on title means that, a royalty/streaming agreement is legally recognized and attached to the property itself. This ensures that the rights to receive proceeds from any production remain intact if the property is transferred or sold.
Silver Crown Royalties combines the best attributes of the streaming and the royalty model into one business. A key feature of SCRI is that it focuses only on silver royalties (90% silver only), setting it apart from other companies that pursue the royalty business model. It increases investor protection by ensuring all royalties are always registered on title, tying a minimum delivery obligation to funding, and spreading out investments in tranches contingent on certain milestones being achieved. The royalties should be mutually beneficial to both parties involved. SCRI’s strategy involves acquiring silver royalties in projects and opera¬tions where silver’s contribution to overall expected revenue is small (usually under 2%). This is important because it allows operators to derive value for a by-product or co-product of an asset without having a hefty royalty or streaming agreement reducing the profits from the main economic driver of a mine.
Investment Highlights
- Silver Crown Royalties (“SCRI”, or “Company”) is a recently listed royalty company that focuses exclusively on silver. It is currently the only listed royalty company to do so, giving it a first-mover advantage.
- Recently listed and generating cashflow: Listed in July 2024, the company already boasts cash f ow generating silver royalties. It is likely to add new acquisitions in the near future, growing its cash flow base.
- Clearly formulated growth strategy: SCRI targets projects and operations where silver contributes a small portion to overall revenue. The company has identified a vast Opportunity set of 2,200 operating mines and over 33,000 projects where this is the case.
- Company Management: The team has already delivered its first successes in implementing the formulated strategy. SCRI management has the relevant industry experience to drive the company’s growth and success.
We are initiating coverage with a BUY rating for the company over the next 12-month period.
