CA - EMX Royalty Corporation: The One To Watch

2023-05-15 15:01:56 ET

Summary

• I tend to think of a Royalty company as the “numbers” guy who provides funds in the early stages of a mine's life in order to reap the rewards later.
• EMX Royalty Corp has had a bumpy ride so far which is to be expected in the gold and silver space.
• The stock price has experienced a fair amount of volatility recently and has traded sideways for the last 12 months.
• This company's activities straddle a wide range of countries which offer both opportunities and geopolitical risks as not all mining jurisdictions operate under the same rules.

Introduction

We will start with a quick definition of a Royalty company which is to provide an injection of cash up front to the mine builder in return for some of the miner's net smelter return on a property. The contract will be unique between the two parties and will vary considerably in percentage terms from deal to deal. The contract is usually an agreement to purchase a certain percentage of its metal production at a considerable discount to the spot price of the metal. I tend to think of a Royalty companies as "numbers" guys who provide funds in the early stages of a mine's life in order to reap the rewards at a later date. Having fixed the price of the metal beforehand they are well placed to enjoy the benefits of delivery especially in a Bull Market for that particular metal.

Below is a Table of the some of the Royalty/Streaming Companies:

Today we will take a quick look at one such company, which is EMX Royalty Corporation ( EMX ) which sits in mid-range on a Market Capitalization basis.

EMX Royalty Corp : Brief Description

In their words:

EMX's business model is designed to efficiently manage the risks inherent to the minerals exploration and mining industry, and to that end owns a portfolio of 250 projects spread across five continents as depicted below.

Their Business Model illustrated below is a clear graphic of how their business works which is no secret these days, so it boils down to who can make the best deals with the mining companies.

Financials

EMX Royalty Corp has a market capitalization of $222.491M, an EPS of $0.03 and a P/E ratio of 67 and as yet has not paid a dividend. The average volume of shares traded on a daily basis is 136,537 so the liquidity is light for those traders wanting to trade on a daily basis. The 52-week trading range has been from a low of $1.57 to a high of $2.23, so volatility in the stock price, shown on the chart further down, should be taken into consideration before making an acquisition.

If we take a quick look at Seeking Alphas Quant reading we can see that it is ranked 122 out of 277 in sector and has a 'Hold' rating on it.

EMX is quoted on the TSX at CAD 2.69, NYSE American: USD 2.01 and in Frankfurt: 6E9.F: at €1.89

A Quick Look At The Chart Of EMX Royalty Corp

The chart shows that the 50dma has crossed the 200dma in an upward swing sometimes referred to as the Golden Crossover which is usually a positive indicator for a stock. The stock price has experienced a fair amount of volatility recently and has traded sideways for the last 12 months, given that the stock price has remained at around $2.00 throughout this period. The technical indicators used on this chart, the STO, MACD and the RSI are neutral for now. It has also formed a Double Top recently but has failed to stay above it, this can happen especially when liquidity is low, and trading is slow.

In terms of comparative analysis we can see that we have had a mixed bag of results over the last 12 months, however, EMX Royalty did manage to stay in the green with a small gain of 8.06% when similar stocks lost some of their value.

There are a number of new players in this sector of the market, and they are all vying to be the next success story such as Franco-Nevada Corporation ( FNV ) Wheaton Precious Metals Corp. ( WPM ) Osisko Gold Royalties Ltd ( OR ) etc. Whether or not EMX Royalty can achieve that sort of success remains to be seen, however I think they deserve to remain on the Watch List with the view to making a purchase in the near future.

Conclusion

EMX Royalty Corp has had a bumpy ride so far which is to be expected in the gold and silver space. However, they have put together a number of interesting royalty streams which bode well for their future growth plans. The price of gold is holding above the $2000/Oz level and silver trades at around $24/Oz, so the underlying commodities are doing well.

EMX also derives some of its revenue from base metals which provides a spread across the metals, so not totally dependent on gold and silver .

This company's activities straddle a wide range of countries which offer both opportunities and geo-political risks as not all mining jurisdictions operate under the same rules.

There are a number of royalty companies now operating in this space, so it is worth spending some time looking at what the other companies have to offer before deciding which companies meet with your particular objectives.

I am of the opinion that this stock should perform well going forward so I will keep monitoring its progress and look for an opportunity to present itself whereby I can pick up a bargain.

For the record, I have been long physical gold and silver for a number of years and also own a portfolio of stocks in the precious metals sector including Sandstorm Gold Ltd. ( SAND ), Wheaton Precious Metals Corp, Agnico Eagle Mines Limited ( AEM ) and SSR Mining Inc. ( SSRM ).

You must have a comment so please add it to the commentary and I will do my best to address each and every one of them as the discussion is such a benefit for all concerned in these endeavors.

Go gently.

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