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In conversation: In a crowded royalty field, what's Elemental's game strategy

Elemental Royalties (TSX.V:ELE) listed in July 2020. By year end, the company reported gross revenues of $5.1 million, a 110% increase year-over-year. Company guidance is for an annual growth rate of more than 50% over the next two years.  Supported by Discovery Group, Tembo Capital and an experienced board and advisory panel, Elemental Royalties is purpose built to create scalable lower risk growth in the gold space. We talked with Elemental Royalties CEO Frederick Bell on the company’s sweet spot for deals and future dealflow. Part 3 of 3.

There are many royalty companies; it’s a crowded field of play. What is your sweet spot to competing in this environment?

Frederick: Our key advantage is we’re kind of in that spot size-wise where $2M to $20M deals can still be really material for us. If you are a $1B company, a $2M deal is not on the table. The difference now is that by the second half of this year we should be US$10M/year in revenue. So, we can readily execute on those $2M-$20M deals that check off our boxes.

What’s exciting is that we have a pipeline of deal flow already baked into our company. We’ve been doing this for three years. There is a large number of deals we’ve seen that didn’t fit us when we were private and didn’t have balance sheet. Now that we’ve listed and grown, we’ve been able to revisit a lot of those deals we liked. Our royalty portfolio acquisition from South 32 is an example. We first talked to South 32 more than two years ago when we weren’t as well capitalized as we are now. We pitched the idea, but nothing materialized. However, I don’t think our subsequent successful deal with South32 would have materialized had they not met us before. I think that’s one of the benefits we can capitalize on now in terms of dealflow. It’s been three years; we’re not starting from scratch. It puts Elemental in a strong position to potentially do more deals on par with South 32, where we’re getting some really high-quality assets like Karlawinda, Australia’s nearest gold mine. As a team, this has us really excited about our future potential and what could be possible.