Looking to insulate yourself while participating in the coming precious metals bull market?

If you're looking to participate in the precious metals bull run but have little knowledge of the sector you might want to take a look a royalty companies. They are insulated against inflation and market downturns in other sectors.

TSXV:ELE is expected to have a record Q2, projected to reach USD$45 this year. Revenue growth is usually weighted towards the end of the year in this company, soon they will have no debt on the balance sheet. Strong insiders, making a dilution unlikely. Good access to London capital markets.

TSXV:ELE has a strong reach in Africa as well as T1 jurisdictions. Personally the difference between T1 and other jurisdictions is minimal. In tier 1 jurisdictions land ownership rights are good, but permitting can take you up to 30 years. In Africa, land ownership is unstable but permitting is a breeze, so pick your poison.

They will have USD$15-20 million this year which they plan to use on acquisitions/buy backs and a possible dividend.

So this is about getting in on the ground floor.

Analysis of TSXV:ELE with Precious Metals Bull Market (2026–2029)

Company Overview

• Business Model: Precious metals royalty company with a focus on gold, silver, and copper royalties/streams. Key assets include producing royalties (Karlawinda, Wahgnion, Mercedes, Amancaya, Casposo) and development royalties (Los Azules, Marina, Laverton).
• Market Capitalization: ~C$290M (195M shares at C$1.48/share, June 2024).
• Revenue (2023): ~C$15M, primarily from Karlawinda (1.5% NSR) and Wahgnion (1% NSR).
• Development Projects (assumed to reach production):
  • Los Azules (Argentina, copper-gold-silver, 0.4% NSR): Production by 2028.
  • Marina (Argentina, lithium, 1.5% NSR): Production by 2027.
  • Laverton (Australia, gold, 2% NSR): Production by 2029.

Bull Market Assumptions (2026–2029)

• Precious Metals Bull Market:
  • Gold and Silver Prices: Already assumed at $4,000/oz (gold) and $50/oz (silver), which are bullish relative to current prices (~$3,330/oz gold, ~$40/oz silver, June 2025). These prices are maintained, as they align with a strong bull market driven by inflation, geopolitical uncertainty, and demand (e.g., central banks for gold, industrial use for silver).
  • Market Sentiment: Bull markets increase investor appetite for precious metals equities, pushing valuation multiples (P/E, P/S) higher. Royalty companies like ELE benefit disproportionately due to high margins and leverage to commodity prices.
  • Valuation Multiples: P/E ratios for royalty companies rise to 35–45x (vs. 20–40x in neutral markets, e.g., Franco-Nevada at ~40x in bull markets). P/S ratios increase to 15–20x (vs. 10–15x).
  • Capital Inflows: Increased investment in junior mining and royalty stocks boosts share prices, even for exploration-stage companies.
• Copper: $5/lb is slightly above current levels (~$4.86/lb), consistent with steady demand (electrification, renewables) but not a full bull market for base metals. No additional premium applied.
• Inflation (7.5%): Continues to support higher nominal commodity prices and royalty revenues, with minimal impact on ELE’s costs (royalty model).
• Oil ($60/bbl): Reduces operator energy costs, supporting project economics.
• Iron Ore (Stable): Irrelevant, as ELE has no iron ore exposure.
• Production Timeline: Marina: 2027, Los Azules: 2028, Laverton: 2029.
• Share Dilution: ~2% annual dilution, reaching ~200M shares by 2030.

Strengths (Bull Market Context)

• Leverage to Precious Metals: High gold ($4,000/oz) and silver ($50/oz) prices amplify royalty revenues, especially from Karlawinda, Wahgnion, and Mercedes.
• Bull Market Premium: Higher P/E and P/S multiples during 2026–2029 increase share price potential.
• Portfolio Growth: Los Azules (copper-heavy but with gold/silver) and Laverton (gold) add significant cash flows by 2028–2029, coinciding with peak bull market sentiment.
• Low-Cost Model: Royalty structure insulates ELE from inflation-driven cost increases, maximizing margins.

Weaknesses (Bull Market Context)

• Jurisdictional Risks: Argentina (Los Azules, Marina) and Burkina Faso (Wahgnion) remain vulnerable to political instability, potentially amplified by global economic pressures during a bull market.
• Development Delays: Even in a bull market, financing or permitting issues could delay Los Azules or Marina, tempering revenue growth.
• Post-Bull Market Correction: A potential precious metals price correction post-2029 could lower valuations by 2030.
• Dilution Risk: Equity raises to fund new royalties could offset share price gains, though bull market sentiment may mitigate investor concerns.

Share Price Projection (2025–2030)

Revenue Projections

A bull market may accelerate project timelines or increase production slightly due to improved operator financing.

• 2025 (Pre-Bull Market, Current Portfolio):
  • Karlawinda: 110,000 oz Au × $4,000 × 1.5% NSR = ~C$6.6M
  • Wahgnion: 130,000 oz Au × $4,000 × 1% NSR = ~C$5.2M
  • Mercedes: 50,000 oz Au × $4,000 × 1% + 500,000 oz Ag × $50 × 1% = ~C$2.5M
  • Amancaya/Casposo: ~C$3M
  • Total: ~C$17.3M
• 2027 (Marina Starts, Bull Market Begins):
  • Current portfolio: ~C$18.5M (inflation-adjusted)
  • Marina: 20,000 t LCE × $15,000 × 1.5% NSR = ~C$4.5M
  • Total: ~C$23M
• 2028 (Los Azules Starts, Peak Bull Market):
  • Current + Marina: ~C$24.7M (inflation-adjusted)
  • Los Azules: (400,000 t Cu × $11,000 × 0.4%) + (100,000 oz Au × $4,000 × 0.4%) + (1.5M oz Ag × $50 × 0.4%) = ~C$17.8M
  • Total: ~C$42.5M
• 2030 (Laverton Starts, Post-Bull Market):
  • Current + Marina + Los Azules: ~C$45.9M (inflation-adjusted)
  • Laverton: 50,000 oz Au × $4,000 × 2% NSR = ~C$4M
  • Total: ~C$49.9M

Earnings Projections

• Operating Margin: 85% (royalty model, insulated from cost inflation).
• Net Income:
  • 2025: C$17.3M × 85% = ~C$14.7M
  • 2027: C$23M × 85% = ~C$19.6M
  • 2028: C$42.5M × 85% = ~C$36.1M
  • 2030: C$49.9M × 85% = ~C$42.4M
• EPS (200M shares):
  • 2025: C$14.7M ÷ 200M = C$0.074
  • 2027: C$19.6M ÷ 200M = C$0.098
  • 2028: C$36.1M ÷ 200M = C$0.181
  • 2030: C$42.4M ÷ 200M = C$0.212

Share Price Calculation (Bull Market Adjustment)

• Valuation Method: During the 2026–2029 bull market, P/E multiples for royalty companies rise to 35–45x (average 40x), and P/S multiples reach 15–20x (average 17.5x). Post-2029, multiples normalize to 30x P/E and 12x P/S due to a potential correction.
• Share Price (P/E-Based):
  • 2025: C$0.074 × 30x (pre-bull market) = C$2.22
  • 2027: C$0.098 × 40x (bull market) = C$3.92
  • 2028: C$0.181 × 40x (peak bull market) = C$7.24
  • 2030: C$0.212 × 30x (post-bull market) = C$6.36
• P/S-Based:
  • 2028: C$42.5M × 17.5x ÷ 200M = C$3.72
  • 2030: C$49.9M × 12x ÷ 200M = C$3.00
  • Average for 2030: (C$6.36 + C$3.00) ÷ 2 = C$4.68
• NPV Adjustment: Discounting 2030 share price to 2025 at 10% annual rate:
  • NPV = C$4.68 ÷ (1.1)^5 ≈ C$2.90
• Bull Market Peak (2028): C$7.24 (range: C$6.50–C$8.00)
• Final 5-Year Projection (2030): C$4.68 (range: C$4.00–C$5.30)
• 2025 Target: C$2.22 (range: C$2.00–C$2.50)

Bull Market Impact

• Higher Multiples: The 2026–2029 bull market pushes P/E to 40x and P/S to 17.5x, significantly boosting share prices during 2027–2028.
• Peak Valuation: 2028 represents the bull market peak, with a share price of ~C$7.24, driven by Los Azules cash flows and heightened investor sentiment.
• Post-Bull Market: By 2030, valuations normalize (30x P/E, 12x P/S), reducing the share price to ~C$4.68, still a ~216% increase from C$1.48 (June 2024).
• Additional Upside: New royalty acquisitions or outperformance by operators (e.g., higher production at Karlawinda) could push the 2030 price toward C$5.30.
• Downside Risks:
  • Bull market volatility could lead to sharp corrections post-2029.
  • Political risks in Argentina/Burkina Faso remain significant.
  • Delays in Los Azules or Marina could shift cash flows beyond 2030.

Summary

• Current Share Price: C$1.48 (June 2024).
• 5-Year Share Price Projection (2030): C$4.68 (range: C$4.00–C$5.30), a ~216% increase, driven by production from Los Azules, Marina, and Laverton, and bull market multiples.
• 2025 Target: C$2.22 (range: C$2.00–C$2.50), a ~50% increase, pre-bull market.
• Bull Market Peak (2028): C$7.24 (range: C$6.50–C$8.00), reflecting peak sentiment and cash flow growth.
• Key Drivers:
  • Precious metals bull market (2026–2029) amplifies valuation multiples (40x P/E, 17.5x P/S).
  • High commodity prices ($4,000/oz gold, $50/oz silver, $5/lb copper) and new royalties drive revenue to ~C$49.9M by 2030.
  • Royalty model benefits from 7.5% inflation without cost increases.
• Risks: Political instability, project delays, and post-bull market corrections could lower outcomes.

Recommendation: TSXV:ELE is well-positioned to capitalize on a 2026–2029 precious metals bull market, with significant upside from development projects and high commodity prices.