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Price Performance (1-year)
*See important disclosures at the bottom of this report rating and risk definitions. All figures in C$ unless otherwise specified.
Shares of miners have outperformed streamers in the past year
Streamers are trading at a significantly higher EV/Revenue as they have higher EBITDA margins, robust five-year revenue growth, and lower debt/capital
Streamers typically target a return of 15%-20% p.a. on their investments
In exchange, they receive a predetermined percentage of metals produced, typically ranging between 0.5% to 2% of a miner’s production
40 investments totaling $20M (paid in cash and shares), including 25 lithium, three graphite, two each of cobalt, nickel, copper, tin, and manganese, and one each of zinc and vanadium
30 projects in Canada, and four in Australia
In May 2024, ELEC acquired the Ontario Lithium Projects (OLP), comprised of 18 royalty agreements and 32 lithium properties in Ontario, for $1.87M in cash and 2.25M shares. Of the 32 properties, 31 are optioned to third parties. ELEC can receive up to $2.2M in option payments over the next 2.5 years, after which these options will convert to royalty interests. Should any of these options not be exercised, ELEC will retain ownership and seek to re-option or monetize such properties, as streamers do not actively engage in exploration or development.
32 hard-rock lithium properties in Ontario, with many strategically located near well-known lithium deposits
ELEC’s royalty portfolio consists of:
25 out of the 40 projects are held by publicly traded companies; we note that investments in publicly traded companies offer higher transparency.
The most advanced project is the Authier lithium project (#4 on this list). Its owner, Sayona Mining (ASX: SYA/MCAP: $312M), plans to integrate production from Authier with their existing North American Lithium (NAL) operation, which has been operational since March 2023. Sayona has not yet announced a firm timeline for production; our models assume production will commence in 2026.
Several upcoming catalysts from investees
At the end of Q1-2024, ELEC had $0.17M in cash, and $17.5M in royalty investments. As of June 2024, ELEC had drawn $2.5M from a $10M credit facility.
ELEC is trading at a 41% discount (previously 27%) to the average sector Enterprise Value/Royalty Investments
We have updated our models to include the nine most advanced-stage projects (previously eight)
We believe ELEC’s portfolio has potential to generate US$10M+ in royalties by 2028 (previously US$7M+)
As a result, our valuation increased from $1.06 to $1.12/share
We are reiterating our BUY rating, and adjustintg our fair value estimate from $1.06 to $1.12/share. Upcoming catalysts include ongoing newsflow from investee companies.
We are maintaining our risk rating of 4 (Speculative)
We believe the company is exposed to the following key risks:
