- Evolve Royalties has arranged a revolving credit facility of up to US$75 million with BMO.
- The company focuses exclusively on copper royalties, providing exposure to mining revenues without directly operating mines.
- Management plans to expand its portfolio through new royalty and streaming transactions.
Copper demand is rising alongside investment in electrification, AI data centres and infrastructure, but developing new mines remains expensive and complex. Evolve Royalties (CSE:EVR; OTCQX:EVRYF) is taking a different approach.
In the latest episode of The Capital Compass, Ricki Lee speaks with President and CEO Joseph de la Plante about Evolve’s copper-focused royalty model, its growth strategy and a new revolving credit facility of up to US$75 million with BMO.
Rather than developing mines directly, Evolve provides capital to mining companies in exchange for a share of future revenues. This model offers exposure to potential production growth and copper prices without the same direct operating and construction costs faced by mine operators.
This content has been prepared as part of a partnership with Evolve Royalties, a third-party issuer, and is intended for informational purposes only.
De la Plante believes copper faces a growing supply-demand imbalance as electric vehicles, data centres and electrification increase consumption, while ageing mines and limited new discoveries constrain supply.
The company’s management team previously helped establish Nomad Royalties, which Sandstorm acquired in 2022. De la Plante says Evolve is applying a similar strategy to copper, supported by an expanding portfolio and existing cash flow.
With its financing facility in place, Evolve intends to pursue additional royalty and streaming agreements to scale the business.
Watch the full interview above to hear how Evolve plans to expand its portfolio and capitalize on long-term copper demand.
Transcript
This transcript has been lightly edited for clarity and readability.
Ricki: What if there was a way to gain exposure to copper without taking on the risks and costs of building and operating a mine?
Hello, I’m Ricki Lee, and this is The Capital Compass.
Today, we’re taking a closer look at Evolve Royalties (CSE; OTCQX), a company focused exclusively on copper royalties at a time when demand for the metal continues to be driven by electrification, infrastructure investment and the global energy transition.
Royalty companies have long been popular in the precious metals space, but Evolve is one of the few publicly traded companies at its size offering investors direct exposure to a copper-focused royalty model.
Combined with an experienced management team and a growing portfolio, the company is working to build a scalable business around one of the world’s most important industrial metals.
Joining me now to walk us through the strategy, recent portfolio developments and growth plans is Joseph de la Plante, President and CEO of Evolve Royalties.
Joseph, it’s great to have you with us.
Joseph: Thanks for having me, Ricki.
Ricki: Thank you for joining us today.
Joseph, let’s start with the big picture. For viewers who may be new to the story, can you explain the Evolve Royalties model and why you’ve chosen to focus exclusively on copper rather than building a broader royalty portfolio?
Joseph: Evolve is a royalty company, and I contrast that with companies that are focused on finding or developing new copper mines or copper projects.
What we do instead is invest in these projects in the form of a royalty.
What a royalty is, is that we get a percentage of future revenues from the mine as the mine starts producing.
Typically, in a royalty arrangement, we provide capital upfront, and then we benefit from these royalties for the duration of the life of the mine.
The way a royalty contrasts with a mining company is that our portfolio can grow over time and develop a really unique risk-return profile for our investors, where we don’t have exposure to ongoing operating costs or capital costs, but we provide our investors with full exposure to the underlying growth in the deposits.
What you get as an investor in a royalty company is exposure to these really long-term revenue profiles and growth, but with diminished risk alongside that.
It’s a wonderful business model. It’s a business model that our team knows well. This is the third royalty company that we’ve created.
And a big contrast this time is that we’re focusing on copper, whereas in the past we’ve done gold royalty businesses.
The reason I think it’s a great time to be doing this is that copper is continuing to get more and more attention in the market.
There’s a really huge, growing demand for copper investment and ways to invest and get exposure to copper, but there are relatively few ways to do that.
By being one of the first royalty companies to apply a proven business model to a new theme in the market, where there’s huge investment demand but not a lot of places for that to land, we think we’re creating a really unique investment proposition here.
And one that we think can outperform over the next many years as the theme of copper continues to build, using this very unique business model that has shown time and time again why it can deliver superior returns to most other mining investments.
Ricki: A lot of that demand for copper comes from electrification, for example, or infrastructure development.
How do you see the long-term outlook for copper? And why do you believe a dedicated copper royalty company makes sense in today’s market?
Joseph: Quite simply, copper has been driven by electrification, which is not a new theme. Electrification has been around for a very long time.
What we’re seeing now is electrification taking a new form, where on top of the traditional growth that we see as economies grow and develop, we’re seeing drivers of electrification from electric vehicles and AI data centres.
All these new demand drivers are areas where we expect significant growth over the next 10, 15 or 20 years.
And all of that is going to require a significant amount of copper.
Now, the problem with that is we don’t have many sources of copper.
When we look at the supply-demand picture, specifically the supply side, we have underinvested in copper exploration and copper development over the last 20 years.
And so we’re at a point now where most of our mines are quite mature.
The grade profiles are declining, and there are relatively few new copper discoveries to fill in the pipeline of what we see coming.
There’s this big imbalance that’s brewing.
As the demand for EVs and data centres continues to grow, we’re going to see some pressure on the copper price.
We’re very bullish on copper. We think that ultimately we’re going to see significant moves in the price.
And that’s why we’re focusing on copper.
We’re focusing on building as much exposure to what we think is going to be a really great place to have your capital in the market over the next decade.
Ricki: The company recently announced a new revolving credit facility for up to US$75 million with BMO.
How does the facility play into Evolve’s strategy to finance new growth?
Joseph: As a royalty company, we’re a provider of capital to the market.
What that means is we’re out there talking with companies that have exciting projects that either want to continue exploring, developing or building these projects.
And we’re there as a financing partner to fund all of those developments.
For us, having access to what is a very significant credit facility puts us in a great position to have those conversations and to position Evolve as the go-to player for capital in this part of the mining space.
It’s a very significant development for us.
It’s a very significant tool that we can use to finance not just our partners, but our own growth.
As we think about how Evolve is going to grow over the next few years, having this facility really puts us in the driver’s seat to deliver great transactions that are going to grow our portfolio and exposure to these metals.
Ricki: Management experience is often a key differentiator in the royalty sector.
Can you talk about the team’s background and how previous successes are helping shape the company’s approach to growth and capital allocation?
Joseph: As I mentioned, Evolve is the third royalty company that our team has created.
Prior to Evolve, we were behind Nomad Royalties, which was a precious metals royalty vehicle that was listed on the New York Stock Exchange and the TSX and was ultimately acquired by Sandstorm in 2022.
The main point is that this is a playbook that we’ve used before, and the approach to Evolve is very similar, if not identical, to the Nomad playbook.
The only difference is that we’re focusing on a different set of commodities.
To your point, when you’re thinking about growing a royalty business, growing in the royalty space is very different from growing when you’re developing a mine or a project.
We’re not operating these mines. We’re not drilling ourselves. We’re providing capital to other partners who do that on our behalf.
Having a management team that has the relationships in the sector to continue to deploy capital, and having a team that has the experience of structuring these contracts, because there’s a lot of structuring involved, really positions the company to be able to grow.
In the absence of those things, it can be challenging to deliver a steady pace of transactions, which is really what these companies need in order to grow at a level that’s interesting for shareholders.
Ricki: And finally today, Joseph, with investors looking ahead over the next few years, how do you plan to scale Evolve Royalties, and what milestones should they be watching as the company grows its copper royalty portfolio?
Joseph: I think the really wonderful thing for new investors looking at Evolve today is that a lot of the heavy lifting is behind us when it comes to all the structuring that we need to position ourselves to continue our growth.
We went public in December of last year.
We’ve done a number of transactions already delivering cash flow into the portfolio. We already have a growing cash flow profile.
And now, with this new credit facility, we add the financing firepower to go out and deliver new transactions.
The objective to this point has been to build a platform that we can now use to deploy capital and go out and invest in new mines and grow by adding royalties and streaming arrangements into the portfolio.
Now it’s just a question of executing on those transactions.
And these companies, they’re built brick by brick.
We’re just at the start, but we’re very well positioned now to deliver that for our shareholders.
Ricki: Joseph, thank you so much for joining us today and sharing the Evolve Royalties story.
Joseph: Thank you very much for having me.
Ricki: For more information, you can visit www.evolveroyalties.com.
