Earnings call transcript: Elemental Royalties sees record Q1 2025 growth

Elemental Royalties Corp (Market Cap: $252M) reported a record-breaking Q1 2025, showcasing substantial growth across key financial metrics. The company achieved significant year-over-year increases in revenue and earnings, driven by strong performance from its royalty assets. The stock price rose by 1.42% following these results, closing at $1.41. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, with the stock trading near its 52-week high of $1.09.

Key Takeaways

• Record Q1 2025 adjusted revenue of $13.3 million, up 179% YoY.
• Adjusted EBITDA reached $11.5 million, marking a 259% YoY increase.
• Elemental Royalties remains debt-free with a $50 million undrawn credit facility.
• Gold equivalent ounces increased by 102% YoY to 4,606.

Company Performance

Elemental Royalties Corp delivered an exceptional Q1 2025, with notable improvements in its financial performance. The company reported record revenue and earnings, driven by its robust royalty portfolio, including significant contributions from the Karali Sud and Kalawinda assets. This performance is set against a backdrop of strong gold prices, which have positively impacted the company’s revenue streams. InvestingPro data reveals impressive last twelve-month revenue growth of 39% and an industry-leading gross margin of 98.5%. For deeper insights into Elemental Royalties’ performance metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $13.3 million, up 179% YoY.
• Adjusted EBITDA: $11.5 million, up 259% YoY.
• Operating cash flow: $3.3 million, up 82% YoY.
• Net income: $3.4 million, compared to a loss in the previous year.
• Gold equivalent ounces: 4,606, up 102% YoY.

Outlook & Guidance

Elemental Royalties provided guidance for 2025, expecting gold equivalent ounces to range between 11,600 and 13,200. The company anticipates adjusted revenue between $30 million and $34 million. Management is also exploring growth opportunities in non-producing royalty assets, which could further enhance future earnings. InvestingPro analysis supports this positive outlook with multiple favorable indicators, including strong liquidity (Current Ratio: 6.3) and moderate debt levels. InvestingPro subscribers have access to 8 additional key insights and detailed financial metrics that can help evaluate the company’s growth potential.

Executive Commentary

Frederick Bell, CEO, stated, "2025 will be a record year both in terms of gold equivalent ounces." He emphasized the company’s strong position, noting, "We are in the strongest position the company has ever been in." David Baker, CFO, highlighted the success of Q1 2025 as "the strongest quarter in the history of the company."

Risks and Challenges

• Commodity price volatility could impact revenue, given the company’s exposure to gold and copper prices.
• Operational risks associated with the expansion of key assets like Kalawinda.
• Potential delays in realizing revenue from non-producing royalty assets.
• Macroeconomic factors, such as inflation and interest rate changes, could affect overall market conditions.

Q&A

During the earnings call, analysts inquired about the Karali Sud production details and the company’s conservative approach to accounting for the Wahgnion royalty. Management also discussed the potential in non-producing royalties like Cactus and MacTun, emphasizing the strategic importance of these assets for future growth.

Full transcript - Elemental Royalties Corp (ELE) Q1 2025:

Frederick Bell, CEO, Elemental Altus: Thank you, everyone, who’s coming today for Elemental Altus’ q one twenty twenty five earnings call. We’re just giving it a little bit of time as we’ve got a few people still joining. But in the meantime, thank you for those in all the way in Vancouver morning time, and I I see we’ve got some Australian shareholders as well. So, well represented across the different time zones. And today, you have got myself, Frederick Bell, the CEO of Elementalitas, and you’ve got David Baker, our CFO, who is going to take the majority of this call and and walk you through.

Look. It was I think I think we’re good to begin now, and I would say that q one twenty twenty five was the strongest quarter in the company’s history. We had record record adjusted revenue of 13,300,000.0 US dollars. And for comparison, q one in the equivalent period 2024 was $4,700,000. And on top of that revenue, we subsequent to the quarter end, we received approximately 9,600,000.0 US dollars related to the mainstream that we had.

And, I think it’s worth mentioning, our newest producing royalty, Kerali Sud, that also made a strong contribution this quarter, and that was about 6,600,000.0 US dollars. And it puts us in a position today where we have over $70,000,000 available to the company in nondilutive capital to deploy, and that is from a combination of cash and undrawn credit facilities. And that is by a long distance, the largest in the history of the company. And it’s worth mentioning that we do have flexibility. We have a normal course issuer bid that we put in place earlier in the year and, is available for us to use going forwards.

A bit more detail and color than on on some of the on some of the numbers coming out from q one. So it was a record both in terms of revenue, EBITDA, and operating cash flow. We had q one royalty revenue of 11,600,000.0 US dollars, and the adjusted revenue, as mentioned, was 13,300,000.0. And for those not so familiar, the adjusted revenue includes our Casarones royalty, and that is up about a 79% on the equivalent quarter in 2024. We had q one adjusted EBITDA of circa US $11,500,000, which is up 259% on the same period in 2024.

And then the q one adjusted cash flows from operations was 3,300,000, up a 82% on on the same period in 2024. I would just note that the difference between the revenue and and the cash flow there reflects the fact that, typically, we get a lot of these royalty payments post quarter end, and, they convert into, cash flow from operation in the following quarter. In terms of gold equivalent ounces then, that was another record at 4,606 gold equivalent ounces for the quarter, up over a % from the respective period in 2024. The company remains on track to meet its its guidance for this year. And just to reiterate, our guidance was 11,600 to 13,200 gold equivalent ounces, about a 38% increase on 2024 at the midpoint.

And for that guidance, we’re using a $2,600 gold price and a $4 copper price. We expected our 2025 adjusted revenue to be between 30,000,000 and 34,000,000 US dollars approximately. And at the midpoint, that’s about a 50% year on year increase in adjusted revenue. Clearly, we’ve seen the impact of higher commodity prices coming in, over q one, but more particularly coming in to q two. And the longer that stays above our our guidance level of $2,600 gold and full dollar copper, we expect to see a, you know, a very positive impact on the revenue numbers coming in.

And then in terms of Kurale Sud, that generated, as we said, 6,600,000.0 in in the first quarter, and that was about 2,309 gold equivalent ounces. Would note that that production covered the period coming from q four last year into q one and the first sales, but it’s it’s a really important milestone for us. And as a reminder for people, this is an asset that we sold to Allied Gold. They brought very quickly into production, and this has been the first time that we have got a royalty payment from it. And I think we see a lot of potential for it going into the future, and we can we can talk to that.

We also have some milestone payments related to the royalty, and those are both on commercial production and also subsequent production milestones as it progresses. And so, look, at the end post end of the quarter, as of the today, the May 20, we have over 22,000,000 US dollars in cash, plus undrawn credit facility. Then I will touch on this slide on on to hand over to David Baker, our CFO. So this is our newest royalty and, as we said, made a really material contribution in q one. It is a 3% net smelter return royalty on the licenses highlighted in that map there called Karali Sud and the Central.

And, look. We had a Allied started production from this in q four twenty four and and and continued through an ongoing production there. And this first royalty payment really reflected production from that q four and q one period combined. So expecting the contribution from Karate Sid to be heavily weighted to h one twenty twenty five for us. But I think what is, really encouraging here is, I think, the lack of exploration that has that has really gone on across Karate certainly historically and the opportunity for for Allied.

And we sold this asset approximately, I think, a bit over eighteen months ago to Allied. And in that time, they have managed to declare a maiden measurement indicated resource, convert it to reserves. They have got a mining, convention with the government. They have started, their first mining, under the new code, which they had to negotiate in parallel, and they’ve got it up in q four. They did just under 50,000 ounces just from Karali Sud.

So I think in terms of the geological prospectivity, it’s it’s excellent. In terms of the the the asset, I think it’s a lot of potential for us going into the future and as Allied continue to advance the ground and explore it. I think even though it is partial coverage and will have displacement risk on this royalty, I think we see a lot of value for it over the medium to longer term going forwards. And with that, I will hand over to Dave to walk through some of the details on the financial side.

David Baker, CFO, Elemental Altus: Thanks, Brad. Yeah. Portfolio continues to be underpinned by two cornerstone cash flowing assets and royalties, Kalawinda and Casaones. Both in the quarter delivered strong operational performance and then that continuing upside potential. At Kalawinda, we had gold production of over 30,000 ounces that led to over US1.8 million dollars of revenue.

That was driven by higher than expected volumes from the Bibra Open pit, combined with record gold prices. Capricorn itself has maintained production guidance of 110,000 to 120,000 ounces of gold for the year to June 2025, so in line with our estimates. And as we’ve spoken to previously, Capricorn have announced a major expansion at Kalawinda targeting 150,000 ounces of gold annually. That’s a 30% increase on what they’re currently doing, while still maintaining that current ten year mine life, which we think has plenty of room for expansion. Casaronas also shown strong performance in the quarter, revenue of USD 1,600,000.0, that benefited from higher mill throughput, and some of those delayed December shipments that we’d spoken to previously, that were completed in Q1.

Lundin has reiterated 2025 production guidance of 115,000 to 125,000 tonnes of copper, and it’s pretty consistent with previous years. These two royalties, accorded our cash flow base. We’ve clear visibility on growth and, mine life expansion, which leaves us well positioned to benefit from both commodity upside and operational scale. We also see strong contributions from the border portfolio, as Fred says, including the commencement of revenue from from Karale Sud, continued strong performance of Bonacro and also like to give you an update on Wahgnion. Bonacro contributed Q1 royalty sales on nearly 19,000 ounces, down slightly year on year, but we’d expect stronger performance ahead, as Allied expects, to process high grade material from H2 twenty twenty five, through 2026 and 2027.

So we’re expecting that to drive growth in our royalty revenue over the short and the medium term. As we’ve spoken to, we had first revenue from Karoly Sud in Q1 twenty twenty, ’20 ’20 ’5, with 80,000 ounces, more than 80,000 ounces of royalty, attributable ounces sold, that includes some of the catch up sales from Q4 twenty twenty four. We are expecting that revenue from Kralesud to be heavily weighted towards the first half of this year, but we are expecting toward, updates from Allied in terms of future production performance from from Allied. At Wahgnion, Wahgnion is currently, undergoing an external audit following the sale of the mine to the state of Burkina Faso from from Lilium and then Endeavour, and they have put a temporary pause on on royalty payments. We haven’t received the q one royalty statement.

So, as a conservative approach, we haven’t accrued revenue in q one. But once we receive that statement, that royalty revenue earned in q one will be recognized once statements have, have, been received. We are in active dialogue with the management team at Wahgnion and their external auditors. I’ve spoken personally, to the external auditor. And based on those discussions, we expect payment in in 2025.

We we see Wahgnion as a timing issue, rather than than a frustration issue, and we’ll just keep shareholders posted, on payments at Wahgnion. In terms of Q1, understandably, was because of Corrali Sur, it was a record quarter for Elemental Altus. Adjusted revenue up 179% year on year to USD 13,300,000.0. Would just note there that Casarena’s is reported separately due to our equity accounting treatment. As a result, we had a 102% increase in gold equivalent ounces over the quarter.

Adjusted EBITDA, rises nearly 260% to US11.5 million dollars profitability scaling alongside our revenue. We had delivered net income of US3.4 million dollars compared to a loss last year. And cash flow was also robust. Operating cash flow is up 182% to US3.3 million dollars Record revenue, record profitability, record cash flow. Q one marks a step change in our growth trajectory, which is in line with our estimates, but really underscores the strength of our royalty model, demonstrates the cash generative power of our portfolio and sets that strong foundation for 2025.

We generated $3,200,000, into free cash flow in Q1, as you can see in the waterfall chart there. See that as a really solid result with some timing related considerations. As Fred spoke to at the start of the call, that $7,500,000 working capital movement mostly reflects the timing of issues of Q1 revenue cash receipts falling into Q2. So we’d expect that to be all caught up in Q2, and we’ve as I say, we’ve got that currently sort of cash in the bank. G and A expenses in line with expectations, and interest costs are down 8086% year on year, thanks to ongoing debt reduction and we are debt free, as of the end of the quarter.

Ended Q1 with US4.8 million dollars in cash, up from US4.5 million dollars and that includes fully repaying the remaining $3,000,000 of debt, that we had on the facility at the end of the year. So we are fully debt free, full $50,000,000 available on that facility. Free cash flow grew more than five times quarter on quarter, reaching, $3,200,000. That’s driven by strong strong royalty, income and and, lower costs. Sorry.

I just lost that. So q one marked a major major uplift in operating financial performance, strong margins and growing profitability across the board. Operating profit, reached US4.4 million dollars reversing a small operating loss a year ago. That’s driven by higher revenues, in line G and A and no expense transaction costs for the quarter. We also saw a significant increase in adjusted EBITDA to US11.5 million dollars for Q1.

I haven’t included this on the slide, but that $11,500,000, compares with $15,100,000 for the whole of q, of 2024. So nearly caught up to all of 2024 in in in one quarter for the year. So really sets us off for for an excellent excellent 2025. Q ’1 ’20 ’20 ’5 is strongest quarter in the history of the company. Adjusted revenue more than doubling to $13,300,000 and that’s driven by that that material contribution from Crowley Sood.

Likewise, we got that new, new record high in, gold equivalent ounces of 4,600 GEOs, doubled year over year. This is a significant inflection point for the company, continued tailwinds going forward from stronger gold prices and cash flowing royalties. We are seeing margin increases, revenue scales. EBITDA margin at 87%, that’s a record for the company, driven by increased revenue and cost discipline. I mean, with that Karali Sud, larger revenue for the quarter, the chart clearly shows an upward trend in both EBITDA and margins over the past year.

And that’s a real testament to our portfolio scale, our operating leverage and cost discipline. Our cash flow growth remains strong, with further upside ahead as we receive Quralee Sud, receipts and high gold prices flowing through to q two and beyond. In terms of the corporate structure and the balance sheet, we’ve got $50,000,000 of available credit from three, three large Canadian banks. That’s National, CIBC, and RBC. We have no debt on the balance sheet, so it’s fully undrawn and available as of today, and $22,600,000, US in the bank as of today.

That gives us excellent flexibility for non dilutive growth. And with a strong institutional shareholder base as we’ve spoken to before, market cap, about $250,000,000 as of today, EV about 225,000,000 US dollars. I think that prevents presents a compelling valuation versus our peers, and it also gives us a great positioning to move quickly on the right royalty opportunities. And then on that basis, I’ll, I’ll head back to, to Fred to, to summarize, and then we’ll, allow room for for q and a.

Frederick Bell, CEO, Elemental Altus: Well, look. And thank you, David, and and also to the team for bringing up together and all the work. And where it puts us is it puts us in a position where 2025 will be a record year both in terms of gold equivalent ounces, but also with the corresponding exposure to the gold price and and that leverage to it day to day. And I think where the gold price is today gives us material room for improvement on the guidance in terms of revenue numbers that we had at the start of the year. We also have the milestone payments of which we’re expecting the majority to land in the first half of the year, and we have received that first large payment on the mainstream.

In terms of the portfolio, we continue to be anchored by by two really high quality uncapped royalties in Casa Rones with Lundin Mining in Chile and Carl Winder with Capricorn Metals in West Australia. We have continuing growth from the portfolio with the addition of the second half of the AlphaStream portfolio contributing coming into 2025 with the first revenue from the Karani Sud royalty, and then looking ahead actually even into 2026 with the expansion underway at the Karawinda gold project. We have a track record of value creating transactions. And if you look at our presentation, we update that as every quarter goes by with revenue numbers that we can incorporate. And I think what it shows is over time, those those returns tend to get better, and and it shows the value of the royalty model and the value of the optionality that comes through that.

We are in terms of financial positioning and positioning to transact in opportunities. We are in the strongest position the company has ever been in. And to put that into perspective, I I think the company deployed approximately $18,000,000 in the first four years of its history, and we have more than that in the bank today. And we can deploy up to 70,000,000 without needing to raise any further capital. And if you if you look at the, the opportunities in front of us, I think that where we are today, the same team that we have here would be able to manage a portfolio that is materially larger than what we have today at really insignificant additional cost.

And so that margin expansion that that we see in this quarter and we’ll see in the next quarter, that is, I think, part of the benefit of a model like this where you can scale the business really quickly. And then compelling valuation and entry point and and quite aside from the producing assets that we have and aside from the development and exploration portfolio, which we really don’t talk to in this presentation and the progress that is being made and the partners who are drilling and adding value across our licenses there. I think the other point that is worth mentioning is also the current gap between the long term consensus gold price and and where we are at spot gold. And we don’t make predictions in the long term going forwards on the gold price, but what we can say is that every week, every month, the gold price stays above the consensus and above where our guidance is. We have a portfolio that is immediately leveraged and benefits from that.

So, look, I think that is really the the conclusion there of the presentation and a summary on the company, and happy to take any questions if there are some.

David Baker, CFO, Elemental Altus: Thanks, Fred. We got we’ll lead off with one question, which is on Karali. So just a breakdown of ounces for q four and q one and the expected quarterly run rate. I can kick off with that. So in terms of the production line or the sales, royalty sales because we get paid on sales, not production, we had about 49,000 ounces, that was unsold in q four, that that contributed to q one.

And we’ll say approximately 80,000 ounces that were in Q1, so that would be the difference. So we’re looking at approximately 30,000 ounces in Q1. We don’t guide on an asset. We don’t any we don’t guide revenue by, or or GEOs by asset. But we had approximately, based on discussions and and publicly available information from Allied, we had about 100,000 ounces for the year, from from Karali Sud in terms of our internal expectations.

So we’re about 80,000 ounces of that at the moment. Again, still expect that to be weighted to the first half of the year. I would say that does leave, a lot of room for exploration upside, commingling potential of of a Karali soot as well, so I think there’s upside to that. So say about 49,000 ounces in, and 40,000 ounces in in q four, about thirty thirty one thousand ounces in in q one, and then expecting about another twenty, twenty five thousand ounces for the rest of the year. But, again, we’re still awaiting updates from the operator on the on the upside there.

Hi, Brian. So a question for Brian MacArthur. Hope you’re well. I’ll talk about cash flow from Wahgnion. We didn’t book revenues in q one.

When did we let our last cash payment, and how much is owed? Thanks. Thanks, Brian. So we received a cash payment in Q3, 2024, and that was related to to Q2 production. So the current receivable on the books relates to to Q3 and Q4.

That’s a bit just a bit over $1,000,000, in post tax revenue, and we have booked that as as a receivable. And so, like I said, we haven’t booked anything in in q one. So, our view is that that receivable is full and payable. We’ve had nothing, to to the difference from either the company’s external auditor or the operators. So we’re looking to to get those payments restarted post post audit.

Brad, I might pass this over to you. Another question from from Do we have a gold for metals exposure long term? Is that gold? Is that silver?

Is that

Frederick Bell, CEO, Elemental Altus: anything else? Look, it’s a good question. Thank you, Pearce. And I think that currently, we have approximately 85% in terms of our revenue exposure to gold and 15% to copper. And our portfolio has a a heavy weighting to copper with some of the development assets.

I think that long term, we’d like to keep the majority of the portfolio weighted towards precious metals and include silver in that and not as many silver opportunities in the market as as we have discussed, but it is, primarily gold and silver. But I think what it what it does do and and where we are today is it also allows us the flexibility to opportunistically look at assets and royalties that are in different commodities where we see compelling value. And so broadly speaking, that is that is how we’ll approach it, which is a focus on precious metals, but also a willingness to look at other opportunities where we where we see really compelling value and with the basis that we we have a the majority of the portfolio weighted already towards precious metals.

David Baker, CFO, Elemental Altus: Right.

Frederick Bell, CEO, Elemental Altus: And then there was one question, Dave, just in the chat from Adam, which was around the thank you for the for the comment, but it was also around the 10,800,000.0 that’s accrued royalty income and and how much of that is related to Wahgnion?

David Baker, CFO, Elemental Altus: Yeah. So thanks, Adam. And so it’s an excellent question. Yeah. So we’ve we’ve accrued we’ve accrued nothing, for for Wahgnion for for the quarter.

We’ve taken taken a conservative approach given that we don’t we don’t have the statements available. Certainly, that was a very considered approach by management. We decided to take a very conservative view there. But what we would look to do is when we have statements available to us that we will accrue that revenue in a subsequent in a subsequent quarter. So, yeah, we’ve had at this stage, we’ve accrued no revenue, a new revenue in in q one for for Wahgnion.

Frederick Bell, CEO, Elemental Altus: And it might just be worth saying to add to that that we have accrued approximately 1,100,000.0 US in post tax royalty revenue from Wahgnion today. Dave, correct me if that’s Yeah.

David Baker, CFO, Elemental Altus: Correct. But but

Frederick Bell, CEO, Elemental Altus: we have not for q one. Yeah. Yeah. Exactly right. At the moment, that is all the questions we have.

So I’ll just ask if anyone else has a question, please add it. Oh, here we go. Yes. We have, we have a question here from from Mark. Thank you, Mark.

Relating to can you talk to any promising developments in the nonproducing royalties perhaps looking ahead over the next twelve months? Look. I I think that’s a it’s a good question because we we don’t often get the chance to talk about the other 60 to 70 royalties in our portfolio. I think on these quarterly calls, the focus is is largely on the producing assets and the cash flow, but it is a large part, the majority of our portfolio actually on on assets that are in the preproduction stage. And I think there are some exciting events on silos, and one or two we can perhaps talk to in in a bit more detail, maybe two development assets that we have acquired in the last eighteen months.

One of those is the the Cactus copper royalty with Arizona and Sonoran, and that is a project where we bought the royalty approximately eighteen months ago. We have seen the the metal gone in our royalty area approximately triple over that period. We have seen Hudbay coming as a strategic investor alongside Rio Tinto and also Tenbo. We have seen the company, I think, make a lot of progress across studies, both incorporating Newton, which is a a technology Rio Tinto have incubated, but also looking at more traditional processing routes. And we recently saw, I think, in two to three months ago, Royal Gold actually come in and acquire the sister royalty to us at about a 65% higher price.

So I think that is a good demonstration of the value add on on one of those assets where I think we’re continuing to see a lot of progress being made over the course of this year. And and maybe another one that we acquired last autumn, which was the royalty on MacTun. And at the end of last year, we saw the announcement of approximately 25 US million dollars in funding from the US government, DOD, and the Canadian government provisionally to fast track that to financial, final investment decision. And I think they’re targeting a feasibility study for 2027. And, from our point of view, look, that’s that’s a that that is a really good catalyst there.

That is a project that in unusually has seen six to seven years of permitting done in Canada. So the time frame from taking that project from feasibility through to construction And FID is is is a lot shorter than it would be comparatively for any project without that. So those two, I think, really good examples where recent acquisitions on an increasing phase, and both of those have seen significant catalysts. And in one case, in the case of cactus, actually, a market precedent transaction at a significantly higher price than than what we historically paid for it. I think there’s another a number of other assets, particularly some of the brownfield former operating gold mines where we have royalties in Canada and in Australia, where I think the we’re, we’re looking to get updates over the summer on on progress on those that I think could be, quite encouraging, and, we’ll we’ll see how those go.

Alright. Well, we’re just coming up for the half hour mark. So and I think that is the last question we’ve received. So, Dave, I might hand it over to you to round off.

David Baker, CFO, Elemental Altus: Thanks, everyone, for joining.

Frederick Bell, CEO, Elemental Altus: Oh, we might have lost your audio, Dave.

David Baker, CFO, Elemental Altus: Apologies. Let’s try try again. Thanks, Fred. Thanks, everyone, for for joining. Again, a record record quarter, for for revenue, EBITDA, and and profitability for for the company, made in revenue at Karali Sud with our newest producing royalty.

I’m looking forward to that trend continuing with record gold prices and growth in some of our material assets. So thank you everyone, and I look forward to speaking soon.

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