Has Silver Crown Royalties Crossed a Tipping Point?

Malcolm Gladwell’s famous book, “The Tipping Point” is 25 years old, time flies. In this work, the author explains how adoption of a good or service often advances at a fairly steady rate until it reaches a “tipping point,’ where growth rates explode higher.

Most precious metal royalty/streaming companies start out small and are high risk due to constraints on capital and trust in management being able to; 1) see a lot of deal flow, 2) choose good projects, and 3) fund transactions without onerous debt and/or equity issuance.

Once management has several transactions under its belt, has shown meaningful growth, and has avoided bad outcomes (like resource nationalism canceling a mine), the company hits a tipping point –> having successfully passed through the riskiest phase of development.

There’s no exact definition of when a company’s risk profile is deemed safe & trustworthy, but achieving free cash flow breakeven (after debt service) is a good metric. Once there, management can take more risk (if it wants to).

Or, it can be pickier about the transactions it pursues, holding out for the very best opportunities. However, make no mistake, a company can’t remain at breakeven too long, investors will lose interest.

I believe Silver Crown Royalties (NEO: SCRI) / (OTCQB: SLCRF) is at, or very near, a tipping point after last week’s LOI with Kuya Silver Corp. Silver Crown signed on for a 4.5% royalty on Ag produced from Kuya’s Bethania mine in central Peru. 

This deal, if consummated, would be as good or better than the one with PPX Mining Corp. (“PPX”) for 15% of the (cash equivalent of) Ag produced from the Igor 4 project in Peru, capped at 225,000 ounces.

Management is currently raising equity capital to fund a second tranche of the PPX royalty, and go from the 6% to 15%. As of June 24th, about a third pf this private placement was done.

Before diving into the Kuya news, readers should note that Silver Crown is 100% exposed to Ag through royalties –> all Ag, all the time! It’s more leveraged to Ag than 98%+ of primary Ag producers who usually have one or more of Au, Pb, Zn, Mo, or Cu credits.

Kuya’s past-producing Bethania mine is ramping up to 350 tonnes/day, with a strong head grade of ~12 ounces Ag/t. Even at the highest quarterly (minimum) payment, 12,375 oz/month in years 3-10 — would be < 4% of Kuya’s total (Ag production) at Bethania.

Roughly speaking, assuming long-term silver at US$36/oz., the IRR of this LOI would be in the mid-20s percent. Under the terms of the LOI, Silver Crown will acquire a 4.5% royalty for US$3M in cash + US$2M in Silver Crown units issued at, or around, $6.50/unit.

Each unit consists of a common share and a half warrant. Each whole warrant is exercisable at $13.00/shr. for 3 years. 

Starting as soon as the 4Q/25, Silver Crown would receive the cash equivalent of; 4,500 oz/qtr for the first year, 9,000/qtr in year #2, and 12,375/qtr for years 3-10. This proposed royalty is capped at 475,000 ounces, plus a subsequent 1.00%, uncapped royalty for life.

Not including the 1% tail of the royalty, total proceeds returned to Silver Crown over 10 years at an assumed US$36/oz Ag would be C$23.4M vs. upfront investment of ~C$7.5M (including an estimated C$500K cost of warrants to Kuya).

At an average of $40/oz Ag, total proceeds would be C$26M, at $50, the total would be $32.5M, and at $60 –> $39.1M.

Peter Bures, Silver Crown’s Chairman & CEO, commented,

“We’re excited to initiate a partnership with Kuya Silver that can potentially translate to a materially impactful increase to SCRi’s silver revenue profile paving a way from 78,000 to over 128,000 annual silver ounces.”

Revenue from an annual run-rate 128,000 ounces by the end of 2027, at US$36/oz, would be C$6.3M, but that assumes no other deals are signed. At $40, it would be C$7.0M, and at $50, C$8.8M.

I’m not saying Ag will hit $50/oz this year or next — although plenty of pundits believe it will — but from 2027 on it certainly could be at or above $50. When thinking about juniors miners & royalty players it makes sense to take a longer-term view.

Examples of medium-term Silver forecasts (source: John Halloran)

Do the above levels of $55-$80/oz sound too high? They’re not! The ATH (adjusted for inflation) was in January 1980. In today’s dollars it’s ~$206/oz. Not only is $55-$80/oz reasonable, there’s a decent chance Ag will be north of $100/oz by 2030.

I asked seven chatbots for the percentage odds of Ag at $100+/oz by 2030. The average response was 25%, (range 10% to 55%). I think the odds are higher than 25%, but even $60-$80/oz would be tremendous for a pure-play Ag royalty company.

Circling back to the Kuya transaction, it pays out robustly for 10 years, before falling to an uncapped 1.00% rate for Ag produced at Bethania. Readers should note that the 1% uncapped segment could become meaningful if production rises above 350 tpd.

At 700 tpd from 2035 to 2050, assuming $60/oz Ag, and a 10% discount factor, 1% of production could be worth an incremental C$6.6M. This is not a forecast, I have no idea if production could be ramped that much, or how long the mine will be in production.

I mention the potential value of the 1% tail to demonstrate the compelling leverage royalty companies like Silver Crown have to both metal prices & production growth. This is why Franco-Nevada shares are up > 44,000% in the past 20 years!

How much is precious metal royalty/streaming revenue valued at? The average 2026 Enterprise Value to revenue multiple for Franco, Wheaton Precious Metals, Royal Gold, Triple Flag, OR Royalties, and Metalla Royalty & Streaming is ~20x.

If Silver Crown could warrant half of that market multiple in a few years — a 10x multiple of C$7M in revenue — that’s C$70M (at US$40/oz Ag). The question is how much debt + equity dilution might there be between now and 2027?

Assuming shares outstanding rise to 4.0M (currently 2.8M) and debt to C$3.0M (currently zero), C$70.0-$3.0M debt = $67.0M divided by 4.0M pro forma shares = C$16.75/shr. vs today’s share price of $6.44.

If it turns out debt & shares outstanding are higher, that would likely mean annual-run rate Ag ounces would be > 128,000 due to new transactions. Management hopes to announce another meaningful transaction in 2025, and 2-4 in both 2026 + 2027.

In the above chart are run-rate annual ounces on top and prospective silver prices down the left side. Assuming more transactions like Kuya are announced in the next 2.5 years, attributable annual ounces could grow substantially.

To reiterate, I believe Silver Crown Royalties (NEO: SCRI) / (OTCQB: SLCRF) is at, or near, a tipping point in terms of market acceptance of its business plan, management team, and growth prospects.

If/when a tipping point is passed, improved market awareness (higher trading volume + higher share price) should follow. Kuya & PPX are strong examples of what the next few years could look like for Silver Crown.

Most royalty/steaming companies yield around 0.75% to 1.00%. CEO Bures wants Silver Crown to yield a multiple of that and has pledged to reduce his annual salary to C$1 once the total dividends on his shares exceed C$250k/yr.

To that end, management wants to institute a dividend next year and ramp it up quite meaningfully over time, paying out a high percentage of FCF. Therefore, if one’s bullish on Ag, there’s a lot of Ag bang-for-the-buck in Silver Crown!

Disclosures/disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Silver Crown Royalties, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of Silver Crown Royalties are highly speculative and not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

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