4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
20-F 1 form20f.htm FORM 20-F
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended December 31, 2018
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission File Number: 001-35404
EMX ROYALTY CORPORATION
(Formerly Eurasian Minerals Inc.)
(Exact name of Registrant as specified in its charter)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8
(Address of principal executive offices)
Christina Cepeliauskas, Chief Financial Officer
Telephone No.: 604-688-6390
Facsimile No.: 604-688-1157
Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares, without par value
Name on each exchange on which registered
NYSE American LLC
Securities to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the Company’s classes of capital or common stock as of the close of the period covered by the
annual report: 80,991,155
Indicate by check mark if the registrant is a well-known seasoned Company, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
1/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
See definition of “large accelerated filer", "accelerated filer,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [X]
Emerging growth company [ ]
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant
to Section 13(a) of the Exchange Act.
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAA P [ ]
International Financial Reporting Standards as issued
by the International Accounting Standards Board [X]
Other [ ]
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow:
Item 17 [ ] Item 18 [ ]
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [X]
2
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
2/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
TABLE OF CONTENTS
Glossary of Geological and Mining Terms
Introduction
Cautionary Statement Regarding Forward-Looking Statements
Cautionary Note to United States Investors Regarding Reserve and Resource Information
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16A.
Item 16B.
Item 16C.
Item 16D.
Item 16E.
Item 16F.
Item 16G.
Item 16H.
PART I
Identity of Directors, Senior Management and Advisors
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Operating, Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other Than Equity Securities
PART II
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
Audit Committee Financial Expert
Code of Ethics
Principal Accountant Fees and Services
Exemptions from the Listing Standards for Audit Committees
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Change in Registrant’s Certifying Accountant
Corporate Governance
Mine Safety Disclosure
PART III
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
Page
1
9
11
12
13
13
14
19
54
68
79
81
82
83
96
96
97
97
97
97
98
98
98
99
99
99
99
103
103
103
3
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
3/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Glossary of Geological and Mining Terms
Certain terms used in this Form 20-F are defined as follows:
Alunite: a hydrated aluminium potassium, sulfate mineral [(KAl3(SO4)2(OH)6].
AMR: advance minimum royalty
Andesite: an extrusive igneous rock of intermediate composition with a fine grained to porphyritic texture.
Argillic Alteration: hydrothermal alteration of rock which introduces clay minerals including kaolinite, smectite and illite.
Assay: a quantitative chemical analysis of an ore, mineral or concentrate to determine the amount of specific elements.
Breccia: a coarse-grained clastic rock composed of broken rock fragments held together by a mineral cement or in a fine-grained matrix.
Carbonate: a sedimentary rock made mainly of calcium carbonate (CaCO3).
Dacite: an extrusive igneous rock with a fine grained to porphyritic texture and intermediate in composition between andesite and rhyolite.
Diorite: a grey to dark-grey intermediate intrusive igneous rock composed principally of plagioclase feldspar, biotite, hornblende, and/or pyroxene.
Dike: a tabular igneous intrusion that cuts across the country rock, generally vertical in nature.
Doré: a mixture of predominantly gold and silver produced by a mine, usually in a bar form, before separation and refining into gold and silver by a
refinery.
Epithermal: said ofa hydrothermal mineral deposit formed within about 1 kilometer of the Earth’s surface and in the temperature range of 50oC to
200oC.
Feasibility Study: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as a comprehensive technical and economic study of
the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with
any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is
reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial
institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility
Study.
Foliation: repetitive layering in metamorphic rocks.
Footwall: the underlying side of a fault, ore body, or mine working; particularly the wall rock beneath an inclined vein or fault.
Formation: a persistent body of igneous, sedimentary, or metamorphic rock, having easily recognizable boundaries that can be traced in the field
without recourse to detailed paleontologic or petrologic analysis, and large enough to be represented on a geologic map as a practical or convenient unit
for mapping and description.
Gneiss: a type of rock formed by high-grade regional metamorphic processes from pre-existing formations of igneous or sedimentary rocks.
Granodiorite: a group of plutonic rocks intermediate in composition between quartz diorite and quartz monzonite.
Greenfields: conceptual exploration; relying on the predictive power of ore genesis models to search for mineralization in relatively unexplored
ground.
1
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
4/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Hanging wall: the overlying side of an ore body, fault, or mine working, especially the wall rock above an inclined vein or fault.
Hornfels: a fine-grained rock composed of a mosaic of equidimensional grains without preferred orientation and typically formed by contact
metamorphism.
Hydrothermal: of or pertaining to hot water, to the action of hot water, or to the products of this action, such as a mineral deposit precipitated from a
hot aqueous solution, with or without demonstrable association with igneous processes.
Igneous rock: rock that is magmatic in origin.
Indicated mineral resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as that part of a Mineral Resource for
which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of
Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived
from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between
points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only
be converted to a Probable Mineral Reserve.
Inferred mineral resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as that part of a Mineral Resource for which
quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not
verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated
Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be
upgraded to Indicated Mineral Resources with continued exploration.
Intercalated: said of layered material that exists or is introduced between layers of a different character; especially said of relatively thin strata of one
kind of material that alternates with thicker strata of some other kind, such as beds of shale intercalated in a body of sandstone.
Jasperoid: a dense chert-like siliceous rock, in which chalcedony or cryptocrystalline quartz has replaced the carbonate materials of limestone or
dolomite.
Kriging: a weighted, moving-average interpolation method in which the set of weights assigned to samples minimizes the estimation variance, which is
computed as a function of the variogram model and locations of the samples relative to each other, and to the point or block being estimated.
Leach: to dissolve minerals or metals out of ore with chemicals.
Limestone: a sedimentary rock consisting predominantly of calcium carbonate.
Lithocap: the shallow part of porphyry copper systems typically above the main Cu-Au/-Mo zone; upper alteration zone.
Measured mineral resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as that part of a Mineral Resource for
which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of
Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from
detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of
observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred
Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.
Meta: a prefix that, when used with the name of a sedimentary or igneous rock, indicates that the rock has been metamorphosed.
Metamorphic rock: rock which has been changed from igneous or sedimentary rock through heat and pressure into a new form of rock.
Mineral Reserve: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as the economically mineable part of a Measured
and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted
and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate
that, at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined, usually the point
where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a
saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public disclosure of a
Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.
2
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
5/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Mineral Resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as a concentration or occurrence of solid material of
economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge, including sampling.
Modifying factors: is defined in the CIM Definition Standards (2014) as the considerations used to convert Mineral Resources to Mineral Reserves.
These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and
governmental factors.
NSR: net smelter return.
Net smelter return royalty or NSR royalty: a type of royalty based on a percentage of the proceeds, net of smelting, refining and transportation costs
and penalties, from the sale of metals extracted from concentrate and doré by the smelter or refinery.
NI 43-101: National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators.
Oxide: a compound of ore that has been subjected to weathering and alteration as a result of exposure to oxygen for a long period of time.
Pegmatite: a very coarse-grained igneous rock that has a grain size of 20 millimetres or more.
Phyllite: a regional metamorphic rock, intermediate in grade between slate and schist. Minute crystals of sericite and chlorite impart a silky sheen to
the surfaces exposed by cleavage.
Plagioclase: a series of tectosilicate minerals within the feldspar family.
Plutonic: intrusive igneous rock that is crystallized from magma slowly cooling below the surface of the Earth.
Porphyry: igneous rock consisting of large-grained crystals dispersed in a fine-grained matrix or groundmass.
Pre-Feasibility Study: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as a comprehensive study of a range of options
for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground
mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a
financial analysis based on reasonable assumptions on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a
Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be converted to a Mineral Reserve at the time of reporting.
A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study.
Preliminary Economic Assessment: is defined in NI 43-101 and NI 43-101CP as a study, other than a pre-feasibility or feasibility study that includes
an economic analysis of the potential viability of mineral resources. The term preliminary economic assessment can include a study commonly referred
to as a scoping study. A preliminary economic assessment might be based on measured, indicated, or inferred mineral resources, or a combination of
any of these. These types of economic analyses include disclosure of forecast mine production rates that might contain capital costs to develop and
sustain the mining operation, operating costs, and projected cash flows.
Probable mineral reserve: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as the economically mineable part of an
Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve
is lower than that applying to a Proven Mineral Reserve. The Qualified Person(s) may elect to convert Measured Mineral Resources to Probable
Mineral Reserves if the confidence in the Modifying Factors is lower than that applied to a Proven Mineral Reserve.
3
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
6/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Proven mineral reserve: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as the economically mineable part of a
Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors. Application of the Proven
Mineral Reserve category implies that the Qualified Person has the highest degree of confidence in the estimate with the consequent expectation in the
minds of the readers of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which any
variation in the estimate would not significantly affect the potential economic viability of the deposit. Proven Mineral Reserve estimates must be
demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.
Pyroclastic: pertaining to clastic rock material formed by volcanic explosion or aerial expulsion from a volcanic vent; also, pertaining to rock texture
of explosive origin.
Qualified Person: is defined in NI 43-101 as an individual who (a) is an engineer or geoscientist with a university degree, or equivalent accreditation,
in an area of geoscience, or engineering, relating to mineral exploration or mining; (b) has at least five years of experience in mineral exploration, mine
development or operation or mineral project assessment, or any combination of these, that is relevant to his or her professional degree or area of
practice; (c) has experience relevant to the subject matter of the mineral project and the technical report; (d) is in good standing with a professional
association; and (e) in the case of a professional association in a foreign jurisdiction, has a membership designation that (i) requires attainment of a
position of responsibility in their profession that requires the exercise of independent judgment; and (ii) requires A. a favourable confidential peer
evaluation of the individual’s character, professional judgement, experience, and ethical fitness; or B. a recommendation for membership by at least two
peers, and demonstrated prominence or expertise in the field of mineral exploration or mining;
Run-of-mine: ore in its natural state as it is removed from the mine that has not been subjected to additional size reduction.
Schist: a strongly foliated crystalline rock, which readily splits into sheets or slabs as a result of the planar alignment of the constituent crystals. The
constituent minerals are commonly specified (e.g. “quartz-muscovite-chlorite schist”).
Shear zone: a tabular zone of rock that has been crushed and brecciated by parallel fractures due to “shearing” along a fault or zone of weakness. These
can be mineralized with ore-forming solutions.
Silicification/Silicified: the introduction of, or replacement by, silica, generally resulting in the formation of fine-grained quartz, chalcedony, or opal,
which may fill pores and replace existing minerals.
Skarn: metamorphic zone developed in the contact area around igneous rock intrusions when carbonate sedimentary rocks are invaded by large
amounts of silicon, aluminum, iron, and magnesium.
Spectrography: the process of using a spectrograph to map or photograph a spectrum.
Stockwork: a complex, cross -cutting system of structurally controlled or randomly oriented veins.
Strata: layers of sedimentary rock with internally consistent characteristics that distinguish them from other layers.
Strike: the direction, or course or bearing of a vein or rock formation measured on a level surface.
Stratabound: confined to a particular stratigraphic layer or unit.
Stratiform: occurring as or arranged in strata.
Strip (or stripping) ratio: the tonnage or volume of waste material that must be removed to allow the mining of one tonne of ore in an open pit.
Sulfides or sulphides: compounds of sulfur (or sulphur) with other metallic elements.
Tailing: material rejected from a mill after the recoverable valuable minerals have been extracted.
Terrane: a rock formation or assemblage of rock formations that share a common geologic history.
Tuff: a general term for consolidated pyroclastic rocks.
Vein: sheet-like body of minerals formed by fracture filling or replacement of host rock.
4
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
7/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Vuggy: containing small cavities in a rock or vein, often with a mineral lining of different composition from that of the surrounding rock.
5
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
8/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Linear Measurements
1 inch
1 foot
1 yard
1 mile
Area Measurements
1 acre
1 hectare
1 square mile
Units of Weight
1 short ton
1 long ton
1 metric tonne
1 pound (16 oz.)
1 troy oz.
1 troy oz. per short ton
Analytical
1%
1 gram/tonne
1 troy oz./short ton
10 ppb
100 ppm
Temperature Conversion Formulas
Degrees Fahrenheit
Degrees Celsius
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
2.54 centimeters
0.3048 meter
0.9144 meter
1.609 kilometers
0.4047 hectare
2.471 acres
640 acres or 259 hectares or 2.59 square kilometers
2000 pounds or 0.893 long ton
2240 pounds or 1.12 short tons
2204.62 pounds or 1.1023 short tons
0.454 kilograms or 14.5833 troy ounces
31.1035 grams
34.2857 grams per metric tonne
grams per metric tonne
troy oz per short ton
10,000
1
34.2857
0.01
100
291.667
0.029167
1
0.00029
2.917
percent
1%
0.0001%
0.003429%
nil
0.01
(°C x 1.8) + 32
(°F - 32) x 0.556
6
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
9/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Frequently Used Abbreviations and Symbols
AA
Ag
As
Au
°C
CIM
cm
C.P.G.
CSAMT
Cu
ESIA
F
°F
g
g/t
Hg
HSE
ICP AES
ICP MS
atomic absorption spectrometry
silver
arsenic
gold
degrees Celsius (centigrade)
Canadian Institute of Mining, Metallurgy and Petroleum
centimeter
Certified Professional Geologist
Controlled source audio-frequency magnetotellurics
copper
Environmental & Social Impact Assessment
fluorine
degrees Fahrenheit
gram(s)
grams per tonne
mercury
high sulphidation epithermal
inductively coupled plasma atomic emission spectroscopy
inductively coupled plasma mass spectroscopy
ICP MS/AAS
inductively coupled plasma mass spectroscopy/atomic absorption spectroscopy
IOCG
IP
JORC
JV
kg
km
m
Ma
Mn
Mo
n
oz
opt
oz/ton
oz/tonne
Pb
PEA
PGE
ppb
ppm
QA
QC
QP
sq
iron-oxide-copper-gold
Induced polarization
Joint Ore Reserves Committee
joint venture
kilogram
kilometer
meter(s)
million years ago
manganese
molybdenum
number or count
troy ounce
ounce per short ton
ounce per short ton
ounce per metric tonne
lead
Preliminary Economic Assessment
platinum group element
parts per billion
parts per million
quality assurance
quality control
Qualified Person
square
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
7
10/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Frequently Used Abbreviations and Symbols
Sb
VMS
Zn
antimony
volcanogenic massive sulfide
zinc
8
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
11/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
INTRODUCTION
EMX Royalty Corporation (the “Company” or “EMX”) was incorporated under the laws of the Yukon Territory of Canada on August 21, 2001 as
33544 Yukon Inc. and, on October 10, 2001, changed its name to Southern European Exploration Ltd. On November 24, 2003, the Company completed
the reverse take-over of Marchwell Capital Corp., a TSX Venture Exchange (“TSX-V”) listed company incorporated in Alberta on May 13, 1996 and
which subsequently changed its name to Eurasian Minerals Inc. On September 21, 2004, EMX continued into British Columbia from Alberta under the
Business Corporations Act. On July 19, 2017, EMX changed its name to EMX Royalty Corporation to better reflect the nature of its business.
EMX’s head office is located at Suite 501 – 543 Granville Street, Vancouver, British Columbia V6C 1X8, Canada, and its registered and records office
is located at Northwest Law Group, Suite 704 – 595 Howe Street, Vancouver, British Columbia V6C 2T5, Canada.
EMX is a reporting company under the securities legislation of British Columbia and Alberta and is listed on the TSX-V, as a Tier 1 Company, and the
NYSE American LLC (“NYSE American”). EMX’s common shares without par value (“Common Shares”) are traded on the TSX-V and the NYSE
American under the symbol “EMX”.
BUSINESS OF EMX ROYALTY CORPORATION
EMX is principally in the business of exploring for, and generating royalties from minerals properties, as well as identifying mineral property royalty
opportunities for purchase. Under the royalty generation business model, the Company acquires and advances early-stage mineral exploration projects
and then sells the projects to, other parties in consideration of a retained royalty interest, as well as annual advance royalty and other pre-production
cash or share payments and work commitments. Through its various agreements, EMX may also provide technical and commercial assistance to such
companies as the projects advance. By selling interests in its projects for a royalty interest, EMX:
(a)
(b)
(c)
(d)
reduces its exposure to the costs and risks associated with mineral exploration and project development,
receives near term cash flow from scheduled pre-production and milestone based bonus payments,
maintains the opportunity to participate in exploration upside, and
develops a pipeline for potential production royalty payments and associated greenfields discoveries in the future.
This approach helps preserve the Company’s treasury, which can be utilized for further project acquisitions and other business initiatives.
Strategic investments are an important complement to the Company’s royalty acquisition and royalty generation initiatives. These investments are made
in under-valued exploration companies identified by the Company. EMX helps to develop the value of these assets, with exit strategies that can include
royalty positions or equity sales, or a combination of both.
EMX started receiving royalty income as of August 17, 2012 when it acquired Bullion Monarch Mining, Inc. (“Bullion Monarch” or “BULM”). The
Company’s royalty and royalty generation portfolio mainly consists of properties in North America, Turkey, Europe, Haiti, and Australia.
FINANCIAL AND OTHER INFORMATION
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“C$” or “$”). References to “US$” are to
United States dollars. The Government of Canada permits a floating exchange rate to determine the value of the Canadian dollar against the U.S. dollar.
FORWARD-LOOKING STATEMENTS
The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act and Rule 405 under the Securities Act of 1933, as amended
(the “Securities Act”). Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act
pursuant to Rule 3a12-3 thereunder.
9
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
12/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report, including the documents incorporated by reference herein, may contain forward-looking statements. These forward-looking
statements may include statements regarding perceived merit of properties, exploration results and budgets, mineral reserves and resource estimates,
work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic
viability of a project, timelines, strategic plans, completion of transactions, market prices for metals or other statements that are not statements of fact.
These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and
assumptions of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the
extent that they involve estimates of the mineralization that will be encountered if the property is developed.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or
future events or performance (often, but not always, identified by words or phrases such as “expects”, “anticipates”, “believes”, “plans”, “projects”,
“estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events,
conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and
similar expressions) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are based on a number of material assumptions, including those listed below, which could prove to be significantly
incorrect:
the Company’s ability to achieve production at any of its mineral properties;
estimated capital costs, operating costs, production and economic returns;
estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying the
Company’s resource and reserve estimates;
the Company’s expected ability to develop adequate infrastructure at a reasonable cost;
assumptions that all necessary permits and governmental approvals will be obtained;
assumptions made in the interpretation of drill results, the geology, grade and continuity of the Company’s mineral deposits;
the Company’s expectations regarding demand for equipment, skilled labor and services needed for exploration and development of mineral
properties; and
the Company’s activities will not be adversely disrupted or impeded by development, operating or regulatory risks.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or
results to differ from those reflected in the forward-looking statements, including, without limitation:
uncertainty of whether there will ever be production at the Company’s mineral exploration and development properties;
uncertainty of estimates of capital costs, operating costs, production and economic returns;
uncertainties relating to the assumptions underlying the Company’s resource and reserve estimates, such as metal pricing, metallurgy,
mineability, marketability and operating and capital costs;
risks related to the Company’s ability to commence production and generate material revenues or obtain adequate financing for its planned
exploration and development activities;
risks related to the Company’s ability to finance the development of its mineral properties through external financing, joint ventures or other
strategic alliances, the sale of property interests or otherwise;
risks related to the third parties on which the Company depends for its exploration and development activities;
dependence on cooperation of joint venture partners in exploration and development of properties;
credit, liquidity, interest rate and currency risks;
risks related to market events and general economic conditions;
uncertainty related to inferred mineral resources;
risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of the Company’s mineral deposits;
risks related to lack of adequate infrastructure;
mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated
difficulties with or interruptions in development, construction or production;
the risk that permits and governmental approvals necessary to develop and operate mines on the Company’s properties will not be available on a
timely basis or at all;
commodity price fluctuations;
10
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
13/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
risks related to governmental regulation and permits, including environmental regulation;
risks related to the need for reclamation activities on the Company’s properties and uncertainty of cost estimates related thereto;
uncertainty related to title to the Company’s mineral properties;
uncertainty as to the outcome of potential litigation;
risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and
related cost increases;
increased competition in the mining industry;
the Company’s need to attract and retain qualified management and technical personnel;
risks related to hedging arrangements or the lack thereof;
uncertainty as to the Company’s ability to acquire additional commercially mineable mineral rights;
risks related to the integration of potential new acquisitions into the Company’s existing operations;
risks related to unknown liabilities in connection with acquisitions;
risks related to conflicts of interest of some of the directors of the Company;
risks related to global climate change;
risks related to adverse publicity from non-governmental organizations;
risks related to political uncertainty or instability in countries where the Company’s mineral properties are located;
uncertainty as to the Company’s passive foreign investment company (“PFIC”) status;
uncertainty as to the Company’s status as a “foreign private issuer” and “emerging growth company” in future years;
uncertainty as to the Company’s ability to maintain the adequacy of internal control over financial reporting; and
risks related to regulatory and legal compliance and increased costs relating thereto.
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements
about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from
those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to
under the heading “Key Information” (as defined below), which is incorporated by reference herein.
The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date of this Annual Report, and
the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions
should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
11
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
14/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
CAUTIONARY NOTE TO UNITED STATES INVESTORS REGARDING RESERVE AND RESOURCE INFORMATION
Unless otherwise indicated, all resource estimates, and any future reserve estimates, included or incorporated by reference in this annual report or Form
10-K have been, and will be, prepared in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-
101”) and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“CIM
Definition Standards”). NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an
issuer makes of scientific and technical information concerning mineral projects.
Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and reserve and resource information contained or
incorporated by reference into this annual report on Form 20-F may not be comparable to similar information disclosed by U.S. companies. In
particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”. Under SEC Industry Guide
7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally
produced or extracted at the time the reserve determination is made. SEC Industry Guide 7 does not define and the SEC’s disclosure standards normally
do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or
other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the
SEC. U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great
uncertainty as to their economic and legal feasibility. An inferred mineral resource has a lower level of confidence than that applying to an indicated
mineral resourceand must not be converted to a mineral reserve. It is reasonably expected that the majority of inferred mineral resources could be
upgraded to indicated mineral Resources with continued exploration. Under Canadian rules, estimated “inferred mineral resources” may not form the
basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “inferred mineral
resource” exists or is economically or legally mineable. Disclosure of “contained ounces” or "contained pounds" in a resource is permitted disclosure
under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC
standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not
the same as those of the SEC, and any reserves reported by us in the future in compliance with NI 43-101 may not qualify as “reserves” under SEC
standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable to information made public by companies that
report in accordance with United States standards.
12
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
15/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable.
PART I
ITEM 3. KEY INFORMATION
3.A.1. and 3.A.2 Selected Financial Data
The selected financial data of the Company for the fiscal years ending December 31, 2018, 2017, 2016, 2015, and 2014 was derived from the financial
statements of the Company that have been audited by Davidson and Company LLP, Independent Registered Public Accountants, as indicated in their
audit report, which are included elsewhere in this Annual Report.
The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy
of the Company is to retain all available funds for use in its operations and the expansion of its business.
Table No. 3 is derived from the financial statements of the Company, which have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Table No. 3
Selected Financial Data
(C$)
3.A.3. Exchange Rates
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“C$”). The Government of Canada permits a
floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (“US$”).
Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended December 31, the average rates for
the period, and the range of high and low rates for the period. The data for each month during the most recent six months is also provided.
13
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
16/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
For purposes of this table, the exchange rate means the Bank of Canada noon rate.
3.B. Capitalization and Indebtedness
Not applicable
3.C. Reasons For The Offer And Use Of Proceeds
Not applicable
3.D. Risk Factors
Investment in the Common Shares involves a significant degree of risk and should be considered speculative due to the nature of the Company’s
business and the present stage of its development. Prospective investors should carefully review the following factors together with other information
contained in this Annual Report before making an investment decision.
Mineral Property Exploration Risks
The business of mineral exploration and extraction involves a high degree of risk. Few properties that are explored ultimately become producing mines.
The Company mitigates this risk by cost-sharing with exploration partners and by continuously evaluating the economic potential of each mineral
property at every stage of its life cycle. At present, none of the Company’s properties has a known commercial ore deposit. The main operating risks
include ensuring ownership of and access to mineral properties, which the Company mitigates by confirmation that licenses, claims and leases are in
good standing and by obtaining permits for drilling and other exploration activities.
The market prices for precious and base metals can be volatile and there is no assurance that a profitable market will exist for a production decision to
be made or for the ultimate sale of the metals even if commercial quantities of precious and other metals are discovered.
Revenue and Royalty Risks
The Company cannot predict future revenues or operating results of the area of mining activity. Management expects future revenues from the Carlin
Trend Royalty Claim Block, including the Leeville royalty property in Nevada, to fluctuate depending on the level and location of future production
and the price of gold. Specifically, there is a risk that the operator of the property, Newmont Mining Corporation (“Newmont”), will cease to operate in
the Company’s area of interest, therefore there can be no assurance that ongoing royalty payments will materialize or be received by EMX.
14
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
17/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Financing and Share Price Fluctuation Risks
EMX has limited financial resources and has no assurance that additional funding will be available for further exploration and development of its
projects. Further exploration and development of one or more of the Company’s projects may be dependent upon the Company’s ability to obtain
financing through equity or debt financing or other means. Failure to obtain this financing could result in delay or indefinite postponement of further
exploration and development of its projects which could result in the loss of one or more of its properties.
The securities markets can experience a high degree of price and volume volatility, and the market price of securities of many companies, particularly
those considered to be development stage companies, such as EMX, may experience wide fluctuations in share prices which may not necessarily be
related to their operating performance, underlying asset values or prospects. There can be no assurance that share price fluctuations will not occur in the
future, and if they do occur, the severity of the impact on EMX’s ability to raise additional funds through equity issues.
Foreign Countries and Political Risks
The Company operates and owns royalty interests in countries with varied political and economic environments. As such, it is subject to certain risks,
including currency fluctuations and possible political or economic instability which may result in the impairment or loss of mineral concessions or other
mineral rights, opposition from environmental or other nongovernmental organizations, and mineral exploration and mining activities may be affected
in varying degrees by political stability and government regulations relating to the mineral exploration and mining industry. Any changes in regulations
or shifts in political attitudes are beyond the control of the Company and may adversely affect its business. Exploration and development may be
affected in varying degrees by government regulations with respect to restrictions on future exploitation and production, price controls, export controls,
foreign exchange controls, income taxes, expropriation of property, environmental legislation and mine and site safety.
Notwithstanding any progress in restructuring political institutions or economic conditions, the present administration, or successor governments, of
some countries in which EMX operates or owns royalty interests may not be able to sustain any progress. If any negative changes occur in the political
or economic environment of these countries, it may have an adverse effect on the Company’s operations in those countries. The Company does not
carry political risk insurance.
Competition
The Company competes with many companies that have substantially greater financial and technical resources than it in the acquisition of mineral
properties and royalty interests and development of projects as well as for the recruitment and retention of qualified employees.
We do not intend to pay any cash dividends in the foreseeable future.
The Company has not declared or paid any dividends on our Common Shares. Our current business plan requires that for the foreseeable future, any
future earnings be reinvested to finance the growth and development of our business. We do not intend to pay cash dividends on the Common Shares in
the foreseeable future. We will not declare or pay any dividends until such time as our cash flow exceeds our capital requirements and will depend
upon, among other things, conditions then existing including earnings, financial condition, restrictions in financing arrangements, business
opportunities and conditions and other factors, or our Board determines that our shareholders could make better use of the cash.
15
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
18/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
No Assurance of Titles or Borders
The acquisition of the right to exploit mineral properties is a very detailed and time consuming process. There can be no guarantee that the Company
has acquired title to any such surface or mineral rights or that such rights will be obtained in the future. To the extent they are obtained, titles to the
Company’s surface or mineral properties may be challenged or impugned and title insurance is generally not available. The Company’s surface or
mineral properties may be subject to prior unregistered agreements, transfers or claims and title may be affected by, among other things, undetected
defects. Such third party claims could have a material adverse impact on the Company’s operations and ownership of royalty interests.
Unknown Defects or Impairments in Our Royalty Interests
Unknown defects in or disputes relating to the royalty interests we hold or acquire may prevent us from realizing the anticipated benefits from our
royalty interests, and could have a material adverse effect on our business, results of operations, cash flows and financial condition. It is also possible
that material changes could occur that may adversely affect management’s estimate of the carrying value of our royalty interests and could result in
impairment charges. While we seek to confirm the existence, validity, enforceability, terms and geographic extent of the royalty interests we acquire,
there can be no assurance that disputes over these and other matters will not arise. Confirming these matters, as well as the title to mining property on
which we hold or seek to acquire a royalty interest, is a complex matter, and is subject to the application of the laws of each jurisdiction to the particular
circumstances of each parcel of mining property and to the documents reflecting the royalty or stream interest. Similarly, royalty interests in many
jurisdictions are contractual in nature, rather than interests in land, and therefore may be subject to change of control, bankruptcy or the insolvency of
operators. We often do not have the protection of security interests over property that we could liquidate to recover all or part of our investment in a
royalty interest. Even if we retain our royalty interests in a mining project after any change of control, bankruptcy or insolvency of the operator, the
project may end up under the control of a new operator, who may or may not operate the project in a similar manner to the current operator, which may
negatively impact us.
Operators’ Interpretation of Our Royalty Interests; Unfulfilled Contractual Obligations
Our royalty interests generally are subject to uncertainties and complexities arising from the application of contract and property laws in the
jurisdictions where the mining projects are located. Operators and other parties to the agreements governing our royalty interests may interpret our
interests in a manner adverse to us or otherwise may not abide by their contractual obligations, and we could be forced to take legal action to enforce
our contractual rights. We may or may not be successful in enforcing our contractual rights, and our revenues relating to any challenged royalty
interests may be delayed, curtailed or eliminated during the pendency of any such dispute or in the event our position is not upheld, which could have a
material adverse effect on our business, results of operations, cash flows and financial condition. Disputes could arise challenging, among other things:
the existence or geographic extent of the royalty interest;
methods for calculating the royalty interest, including whether certain operator costs may properly be deducted from gross proceeds when
calculating royalties determined on a net basis;
third party claims to the same royalty interest or to the property on which we have a royalty interest;
various rights of the operator or third parties in or to the royalty interest;
production and other thresholds and caps applicable to payments of royalty interests;
the obligation of an operator to make payments on royalty interests; and
various defects or ambiguities in the agreement governing a royalty interest.
Limited Access to Data and Disclosure for Royalty Interests
The Company has varying access to data on the operations on the properties covered by its royalty interests, making it difficult in some instances to
accurately assess the value of the royalty interests. In addition, some royalty interests may be subject to confidentiality agreements that govern the
disclosure of information about the royalties, and as a result the Company may not be in a position to publicly disclose non-public information with
respect to certain royalties. The limited access to data and disclosure may result in a material and adverse effect on the Company’s profitability, results
of operation and financial condition. The Company mitigates this risk by building relationships, and where feasible, contractual disclosure obligations,
with operators and counterparties concerning information sharing.
16
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
19/156
4/2/2019
Currency Risks
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Certain of the Company’s royalty interests are denominated in US dollars, and therefore expose the Company to foreign currency fluctuations. In
addition, the Company’s equity financings are sourced in Canadian dollars but much of its expenditures are in local currencies or U.S. dollars. At this
time, the Company has no currency hedges in place. Therefore, currency fluctuation could have an adverse impact on the value of royalty payments and
a weakening of the Canadian dollar against the U.S. dollar or local currencies could have an adverse impact on the amount of exploration funds
available and work conducted.
Exploration Funding Risk
The Company’s exploration strategy is to seek exploration partners through options to fund exploration and project development. The main risk of this
strategy is that the funding parties may not be able to raise sufficient capital in order to satisfy exploration and other expenditure terms in a particular
agreement. As a result, exploration and development of one or more of the Company’s property interests may be delayed depending on whether EMX
can find another party or has enough capital resources to fund the exploration and development on its own.
Insured and Uninsured Risks
In the course of exploration, development and production of mineral properties, the Company is subject to a number of risks and hazards in general,
including adverse environmental conditions, operational accidents, labor disputes, unusual or unexpected geological conditions, changes in the
regulatory environment and natural phenomena such as inclement weather conditions, floods, and earthquakes. Such occurrences could result in the
damage to the Company’s property or facilities and equipment, personal injury or death, environmental damage to properties of the Company or others,
delays, monetary losses and possible legal liability.
Although the Company may maintain insurance to protect against certain risks in such amounts as it considers reasonable, its insurance may not cover
all the potential risks associated with its operations. The Company may also be unable to maintain insurance to cover these risks at economically
feasible premiums or for other reasons. Should such liabilities arise, they could reduce or eliminate future profitability and result in increased costs,
have a material adverse effect on the Company’s results and a decline in the value of the securities of the Company.
Some work is carried out through independent consultants and the Company requires all consultants to carry their own insurance to cover any potential
liabilities as a result of their work on a project.
Environmental Risks and Hazards
The activities of the Company are subject to environmental regulations issued and enforced by government agencies. Environmental legislation is
evolving in a manner that will require stricter standards and enforcement and involve increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees.
There can be no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental
hazards may exist on properties in which the Company holds interests which are unknown to the Company at present.
We or the mining properties in which we have an interest are subject to substantial government regulation in the United States and in the other
jurisdictions in which we operate. Changes to regulation or more stringent implementation could have a material adverse effect on our results of
operations and financial condition.
Mining and exploration activities are subject to various laws and regulations relating to the protection of the environment, such as the federal Clean
Water Act and the Nevada Water Pollution Control Law. Although we currently believe that we are in compliance with existing environmental and
mining laws and regulations and that our proposed exploration programs will also meet those standards, no assurance can be given that we will remain
in compliance with applicable regulations or that new rules and regulations will not be enacted or that existing rules and regulations will not be applied
in a manner that could limit or curtail production or development of our properties.
Reform of the General Mining Law could adversely impact our results of operations.
A majority of our mining properties in the United States consist of unpatented mining claims on federal lands. Legislation has been introduced regularly
in the U.S. Congress over the last decade to change the General Mining Law of 1872, as amended (the "Mining Law"), under which we hold these
unpatented mining claims. It is possible that the Mining Law may be amended or replaced by less favorable legislation in the future. Previously
proposed legislation contained a production royalty obligation, new environmental standards and conditions, additional reclamation requirements and
extensive new procedural steps which would likely result in delays in permitting. The ultimate content of future proposed legislation, if enacted, is
uncertain. At present, there is no royalty payable to the United States on production from unpatented mining claims, although legislative attempts to
impose a royalty have occurred in recent years. Amendments to current laws and regulations governing our operations and activities of exploration,
development mining and milling or more stringent implementation thereof could have a material adverse effect on our business, financial condition and
results of operations and cause increases in exploration expenses, capital expenditures or production costs or reduction in levels of production or require
delays or abandonment in the development of new mining properties. If a royalty on unpatented mining claims were imposed, the profitability of our
U.S. unpatented mining claims could be materially adversely affected.
17
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
20/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Any such reform of the Mining Law could increase the costs of mining activities on unpatented mining claims, or could materially impair our ability to
develop or continue operations which derive ore from federal lands, and as a result, could have an adverse effect on us and our results of operations.
Mineral reserves are only estimates which may be unreliable.
Although mineralization may not be classified as a “reserve” unless the mineralization can be economically and legally extracted or produced at the
time the “reserve” determination is made, “mineral reserves” are estimates only, and no assurance can be given that the anticipated tonnages and grades
will be achieved, that the indicated level of recovery will be realized or that mineral reserves can be mined or processed profitably. Mineral reserve and
mineral resource estimates may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing and other relevant
issues. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond our control.
Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of
available data, the nature of the mineralized body and of the assumptions made and judgments used in engineering and geological interpretation. These
estimates may require adjustments or downward revisions based upon further exploration or development work or actual production experience.
Fluctuations in metal prices, results of drilling, metallurgical testing and production, the evaluation of mine plans after the date of any estimate,
permitting requirements or unforeseen technical or operational difficulties may require revision of mineral reserve estimates. Prolonged declines in the
market price of precious and base metals may render mineral reserves containing relatively lower grades of mineralization uneconomical to recover and
could materially reduce our mineral reserves. Should reductions in mineral reserves occur, we may be required to take a material write-down of our
investment in mining properties, reduce the carrying value of one or more of our assets or delay or discontinue production or the development of new
projects, resulting in increased net losses and reduced cash flow. Mineral reserves should not be interpreted as assurances of mine life or of the
profitability of current or future operations. There is a degree of uncertainty attributable to the calculation and estimation of mineral reserves and
corresponding grades being mined and, as a result, the volume and grade of mineral reserves mined and processed and recovery rates may not be the
same as currently anticipated. Any material reductions in estimates of mineral reserves, or of our ability to extract these mineral reserves, could have a
material adverse effect on our results of operations and financial condition.
Fluctuating Metal Prices
Factors beyond the control of the Company have a direct effect on global metal prices, which have fluctuated widely, particularly in recent years, and
there is no assurance that a profitable market will exist for a production decision to be made or for the ultimate sale of the metals even if commercial
quantities of precious and other metals are discovered on any of the Company’s properties. Consequently, the economic viability of any of the
Company’s exploration projects and its ability to finance the development of its projects cannot be accurately predicted and may be adversely affected
by fluctuations in metal prices.
Extensive Governmental Regulation and Permitting Requirements Risks
Exploration, development and mining of minerals are subject to extensive laws and regulations at various governmental levels governing the
acquisition of the mining interests, prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal,
toxic substances, land use, environmental protection, mine safety and other matters. In addition, the current and future operations of EMX, from
exploration through development activities and production, require permits, licenses and approvals from some of these governmental authorities. EMX
has obtained all government licenses, permits and approvals necessary for the operation of its business to date. However, additional licenses, permits
and approvals may be required. The failure to obtain any licenses, permits or approvals that may be required or the revocation of existing ones would
have a material and adverse effect on EMX, its business and results of operations.
18
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
21/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Failure to comply with applicable laws, regulations and permits may result in enforcement actions thereunder, including orders issued by regulatory or
judicial authorities requiring the Company’s operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment or remedial actions. EMX may be required to compensate those suffering loss or damage by reason of its mineral
exploration activities and may have civil or criminal fines or penalties imposed for violations of such laws, regulations and permits. Any such events
could have a material and adverse effect on EMX and its business and could result in EMX not meeting its business objectives.
In addition, we are required to expend significant resources to comply with numerous corporate governance and disclosure regulations and
requirements adopted by U.S. federal and state and Canadian federal and provincial governments, as well as the TSX and NYSE American. These
additional compliance costs and related diversion of the attention of management and key personnel could have a material adverse effect on our
business, financial condition and results of operations.
Key Personnel Risk
The Company’s success is dependent upon the performance of key personnel working in management and administrative capacities or as consultants.
The loss of the services of senior management or key personnel could have a material and adverse effect on the Company, its business and results of
operations. The Company does not carry “key personnel” insurance.
Conflicts of Interest
In accordance with the laws of British Columbia and the United States, the directors and officers of a Company are required to act honestly, in good
faith and in the best interests of the Company. EMX’s directors and officers may serve as directors or officers of other companies or have significant
shareholdings in other resource companies and, to the extent that such other companies may participate in ventures in which the Company may
participate, such directors and officers may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. If
such a conflict of interest arises at a meeting of the Company’s directors, a director with such a conflict will abstain from voting for or against the
approval of such participation or such terms.
Passive Foreign Investment Company
U.S. investors in common shares should be aware that based on current business plans and financial expectations, EMX currently expects that it will be
classified as a passive foreign investment company (“PFIC”) for the tax year ending December 31, 2018 and expects to be a PFIC in future tax years. If
EMX is a PFIC for any tax year during a U.S. shareholder’s holding period, then such U.S. shareholder generally will be required to treat any gain
realized upon a disposition of common shares, or any so-called “excess distribution” received on its common shares, as ordinary income, and to pay an
interest charge on a portion of such gain or distributions, unless the U.S. shareholder makes a timely and effective “qualified electing fund” election
(“QEF Election”) or a “mark-to-market” election with respect to the common shares. A U.S. shareholder who makes a QEF Election generally must
report on a current basis its share of the Company’s net capital gain and ordinary earnings for any year in which EMX is a PFIC, whether or not EMX
distributes any amounts to its shareholders. For each tax year that EMX qualifies as a PFIC, EMX intends to: (a) make available to U.S. shareholders,
upon their written request, a “PFIC Annual Information Statement” as described in Treasury Regulation Section 1.1295 -1(g) (or any successor
Treasury Regulation) and (b) upon written request, use commercially reasonable efforts to provide all additional information that such U.S. shareholder
is required to obtain in connection with maintaining such QEF Election with regard to EMX. EMX may elect to provide such information on its website
www.EMXRroyalty.com. This paragraph is qualified in its entirety by the discussion below the heading “Taxation – Certain United States Federal
Income Tax Considerations.” Each U.S. investor should consult its own tax advisor regarding the PFIC rules and the U.S. federal income tax
consequences of the acquisition, ownership and disposition of common shares.
Corporate Governance and Public Disclosure Regulations
The Company is subject to changing rules and regulations promulgated by a number of United States and Canadian governmental and self-regulated
organizations, including the United States Securities and Exchange Commission (“SEC”), the British Columbia and Alberta Securities Commissions,
the NYSE American and the TSX-V. These rules and regulations continue to evolve in scope and complexity and many new requirements have been
created, making compliance more difficult and uncertain. The Company’s efforts to comply with the new rules and regulations have resulted in, and are
likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-
generating activities to compliance activities.
19
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
22/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Internal Controls over Financial Reporting
Applicable securities laws require an annual assessment by management of the effectiveness of the Company’s internal control over financial reporting.
The Company may, in the future, fail to achieve and maintain the adequacy of its internal control over financial reporting, as such standards are
modified, supplemented or amended from time to time, and the Company may not be able to ensure that it can conclude on an ongoing basis that it has
effective internal control over financial reporting. Future acquisitions may provide the Company with challenges in implementing the required
processes, procedures and controls in its acquired operations. Acquired Corporations may not have disclosure controls and procedures or internal
control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to the Company.
No evaluation can provide complete assurance that the Company’s internal control over financial reporting will detect or uncover all failures of persons
within the Company to disclose material information otherwise required to be reported. The effectiveness of the Company’s controls and procedures
could also be limited by simple errors or faulty judgments. In addition, should the Company expand in the future, the challenges involved in
implementing appropriate internal control over financial reporting will increase and will require that the Company continue to improve its internal
control over financial reporting.
ITEM 4. INFORMATION ON THE COMPANY
4.A. History and Development of the Company
General Background
EMX Royalty Corporation was incorporated under the laws of the Yukon Territory of Canada on August 21, 2001 as 33544 Yukon Inc. and, on October
10, 2001, changed its name to Southern European Exploration Ltd. On November 24, 2003, the Company completed the reverse take-over of
Marchwell Capital Corp., a TSX-V-listed company incorporated in Alberta on May 13, 1996 and which subsequently changed its name to Eurasian
Minerals Inc. On September 21, 2004, EMX continued into British Columbia from Alberta under the Business Corporations Act. On July 19, 2017,
EMX changed its name to EMX Royalty Corporation to better reflect the nature of its business.
EMX is a reporting issuer under the securities legislation of British Columbia and Alberta, and is listed on the TSX-V Exchange as a Tier 1 issuer and
the NYSE American Exchange, with both listings under the symbol “EMX”.
The Company’s corporate office is located at Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8, and its telephone
number is 604-688-6390. The Company’s registered and records office is located at Suite 704, 595 Howe Street, Vancouver, British Columbia, V6C
2T5. The Company’s technical office is located at 10001 W. Titan Road, Littleton, Colorado, United States of America, 80125, and its telephone
number is 303-973-8585. The contact person is Lori Pavle, Corporate Secretary.
20
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
23/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Fiscal Year ended December 31, 2016
•
•
•
•
On February 23, 2016 the Company announced the execution of a purchase agreement (the “Golden Predator Agreement”) for net smelter
return royalty interests on the Maggie Creek and Afgan gold properties from Golden Predator US Holding Corp. (“Golden Predator”), a wholly-
owned subsidiary of Till Capital Ltd. ("TCL"). Golden Predator had a 2% NSR royalty on all precious metals and a 1% NSR royalty on all other
minerals for the Maggie Creek property, which is located north-northeast of Newmont Mining Corporation's ("Newmont") Gold Quarry open pit
operations on the Carlin Trend, and a 1% NSR royalty on all minerals for the Afgan property, which occurs on the Battle Mountain-Eureka
Trend. The addition of these two royalty assets strengthened the Company's growing Nevada gold portfolio that includes the Leeville royalty
property on the Northern Carlin Trend, as well as the Maggie Creek South royalty property located south-southeast of Gold Quarry.
A summary of the Golden Predator Agreement's commercial terms includes:
-
-
-
Purchase by the Company of Golden Predator’s NSR royalties covering the Maggie Creek (2% NSR on precious metals and 1% NSR
royalty on all other minerals) and Afgan (1% NSR royalty) properties;
Issuance by the Company of 250,000 EMX shares to TCL as consideration for the purchase; and
Approval by the TSX-V and NYSE American as a condition precedent to closing the transaction.
On March 7, 2016 the Company announced that the purchase of net smelter return royalty interests had been completed for the Maggie Creek
and Afgan gold properties from Golden Predator after receiving approvals from the TSX Venture and NYSE American Exchanges.
In Q1 2016, EMX sold its 100% controlled Grand Bois project in Haiti, which was outside the Joint Venture with Newmont, to a privately held
Nevada corporation. EMX retained a 0.5% NSR royalty interest in the Grand Bois project and the right to acquire any properties proposed to be
abandoned or surrendered from the Grand Bois project in the future.
On July 25, 2016 the Company reported that IGC advised that approval to advance the Malmyzh copper-gold project had been received from
the Government Commission on Monitoring Foreign Investment (the "Commission") chaired by Prime Minister Dmitry Medvedev. The
Malmyzh exploration and mining licenses are held by IGC (51%) and Freeport- McMoRan Exploration Corporation (49%) (the "Joint
Venture"), with IGC operating and managing the project. The Commission's approval marks a pivotal milestone in the development of the
Malmzyh project. EMX is IGC’s largest shareholder.
IGC advised that the Commission's approval represents the successful completion of the review process required for “strategically significant”
deposits according to Russian law (i.e., the Law on Foreign Investments in Strategic Industries, also termed the Strategic Industries Law or
"SIL"). The SIL approval process commenced after the Joint Venture, through its Russian subsidiary Amur Minerals LLC, received certified
“on balance C1+C2 reserves” from the GKZ (State Reserves Committee) that exceeded thresholds for both copper and gold defining Malmyzh
as a "strategically significant" mineral deposit. EMX emphasizes that the Malmyzh “C1+C2 reserves” were estimated according to the rules and
regulations of the Russian Federation, and are not the same as reserves under NI 43-101 or SEC Industry Guide 7. According to IGC, highlights
of the Commission's approval included:
-
-
-
The Joint Venture, as a majority foreign owned business entity, has been approved to retain control of the Malmyzh project exploration
and mining licenses.
The Joint Venture, therefore, maintains mining and production rights for the Malmyzh and Malmyzh North exploration and mining
licenses.
The Joint Venture holds 100% of the rights for the Malmyzh and Malmyzh North exploration and mining licenses, and is entitled to
recover all minerals of economic value including copper, gold and by- product minerals.
The conclusion of the SIL process initiated a new, multi-year phase in the project's development, including additional technical work (i.e.,
drilling, exploration, metallurgy, engineering, and hydrology), as well as environmental, social, and economic assessments. This next phase of
work will ultimately conclude as a detailed "TEO1 of Permanent Conditions" report, which is considered to be a precursor to commencement of
exploitation and mining.
1 Technico-Economicheskiye Obosnovaniye (Technical-Economic Basis)
21
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
24/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
•
•
•
•
On August 3, 2016, the Company announced the sale of EBX Madencilik A.S., the wholly-owned EMX subsidiary that controls the Sisorta gold
property (the “Sisorta Property”) in Turkey, to Bahar Madencilik Sinayi ve Ticaret Ltd Sti ("Bahar"), a privately owned Turkish company,
pursuant to a Share Purchase Agreement (the “Sisorta Agreement”) with Bahar.
The Sisorta Agreement provides for Bahar's staged payments to EMX as summarized below (all amounts in USD):
-
-
-
-
-
$250,000 cash payment to EMX upon closing of the sale.
Annual cash payments of $125,000 (“Advance Cash Payments”) payable on each anniversary of the closing date until commencement
of commercial production from the Sisorta Property.
3.5% of production returns after certain deductions (“NSR Payment") for ore mined from the Sisorta Property that is processed on-site
(increased to 5% if the ore is processed off-site).
The Advance Cash Payments will be credited at a rate of 80% against the NSR Payment payable after commercial production
commences.
The NSR Payment is uncapped and cannot be bought out or reduced.
Bahar intends to conduct advanced exploration and development work on the Sisorta project.
On August 8, 2016 the Company announced the sale of AES Madencilik A.S., the wholly-owned EMX subsidiary that controls the Akarca
gold-silver project (the “Akarca Property”) in western Turkey, to Çiftay Insaat Taahhüt ve Ticaret A.S. ("Çiftay"), a privately owned Turkish
company. The Akarca Property is an EMX grassroots discovery highlighted by six separate gold-silver mineralized centers occurring within a
district-scale area.
The terms of the sale provide payments to EMX as summarized below (all dollar amounts in United States dollars and all gold payments can be
as gold bullion or the cash equivalent):
$2,000,000 cash payment to EMX upon closing of the sale (completed).
500 ounces of gold every six months commencing February 1, 2017 up to a cumulative total of 7,000 ounces of gold.
7,000 ounces of gold within 30 days after the commencement of commercial production from the Akarca Property provided that prior
gold payments will be credited against this payment.
250 ounces of gold upon production of 100,000 ounces of gold from the Akarca Property.
250 ounces of gold upon production of an aggregate of 500,000 ounces of gold from the Akarca Property.
A sliding-scale royalty in the amount of the following percentages of production returns after certain deductions (“Akarca Royalty”) for
ore mined from the Akarca Property:
For gold production: 1.0% on the first 100,000 ounces of gold; 2.0% on the next 400,000 ounces of gold; 3.0% on all gold production in
excess of 500,000 ounces produced from the Akarca Property.
For all production other than gold production: 3.0%.
The Akarca Royalty is uncapped and cannot be bought out or reduced.
--
-
-
-
-
-
-
-
In addition, Çiftay must conduct a drilling program of at least 3,000 meters on the Akarca Property during each 12- month period starting on
August 5, 2016 until commencement of commercial production.
On September 8, 2016 the Company provided an update on exploration results from the Company's spring and summer programs in Norway
and Sweden. EMX built a portfolio of exploration projects in Scandinavia, and compiled geologic information and generated drill targets on
those properties. Reconnaissance drilling at the Gumsberg Volcanogenic Massive Sulfide (“VMS”) project, located in the prolific Bergslagen
district of Sweden, yielded several shallow high grade intercepts of polymetallic mineralization along a > 2 kilometer trend of mineralization.
On October 17, 2016 the Company announced the sale of five patented mining claims comprising its Ophir property in Utah (the “Utah
Property”), through its wholly owned subsidiary Bullion Monarch Mining Inc., to Kennecott.
Upon closing of the sale of the Utah Property:
-
-
-
Kennecott paid EMX US$75,000,
EMX retained a 2% NSR royalty, and
EMX retains the rights to exploration data generated from the Property.
As a result of the sale, the Ophir property has been added to EMX's royalty portfolio.
22
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
25/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
•
•
•
On October 19, 2016 the Company announced the execution of an Exploration and Option to Purchase Agreement (the "Copper King
Agreement"), through its wholly owned subsidiary BCE, for the Copper King porphyry copper project (the “Copper King Project”) with
Kennecott. The Copper King Project is located approximately 100 kilometers east of Phoenix, Arizona within the Superior Mining District, and
approximately four kilometers northwest of the Resolution porphyry copper deposit.
Pursuant to the Copper King Agreement, Kennecott can earn a 100% interest in the Copper King Project by (a) reimbursing the 2016 holding
costs and making option payments, together totaling US$504,314 (US$29,314 related to holding costs received), and (b) completing
US$4,000,000 in exploration expenditures before the fifth anniversary of the Copper King Agreement. Upon exercise of the option EMX will
retain a 2% NSR royalty on the Copper King Project which is not capped or purchasable.
After exercise of the option, AMR payments are due starting at US$100,000 and commencing on the first anniversary of the exercise of the
option. The AMR payments will increase to US$150,000 upon completion of an Order of Magnitude Study ("OMS") or PEA. Kennecott may
make a one-time payment of US$3,500,000 to extinguish the obligation to make AMR payments. In addition, if not previously extinguished,
total AMR payments after the OMS or PEA milestone payment are capped at US$3,500,000, and all AMR payments cease upon
commencement of production from the Project.
In addition, Kennecott will make milestone payments consisting of:
-
-
-
US$500,000 upon completion of an OMS or PEA;
US$1,000,000 upon completion of a Prefeasibility Study; and
US$2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against future royalty payments.
On October 27, 2016 the Company announced that it had entered into an exploration and option agreement (the “Coeur Agreement”), through
its wholly-owned subsidiary BCE, with Coeur Explorations, Inc., a subsidiary of Coeur Mining, Inc. (“Coeur”) for the Mineral Hill gold-copper
property (“Mineral Hill Property”) in Wyoming. EMX’s Mineral Hill project is held under a pooling agreement with a private group, Mineral
Hill L.P. (“MHL”), with all proceeds split 50:50, except for the sale of surface rights associated with several patented mining claims.
Pursuant to the Coeur Agreement, Coeur may acquire a 100% interest in the Mineral Hill Property by a) making yearly option payments,
beginning upon execution of the Coeur Agreement, totaling US$435,000 (US$10,000 received upon execution), b) making exploration
expenditures totaling US$1,550,000 on or before the fifth anniversary of the agreement, and c) paying US$250,000 upon exercise of the option.
Upon exercise of the option, EMX and MHL will retain a 4% NSR royalty, of which Coeur may purchase up to 1.5% of the NSR royalty if,
within sixty days after the completion of a PEA, Coeur purchases the first 0.5% for US$1,000,000. Coeur may purchase an additional 0.5% or
1% of the NSR royalty at any time thereafter for US$2,000,000 per 0.5% interest (maximum total buy down of 1.5%), with EMX and MHL
retaining a 2.5% interest.
After the option exercise, EMX and MHL will receive annual advance minimum royalties of US$150,000 and, upon completion of a feasibility
study, a milestone payment of US$1,000,000.
On November 22, 2016 the Company announced the execution of a definitive agreement with Boreal Metals Corp. (“BMC”), a British
Columbia corporation, pursuant to which BMC acquired two wholly-owned subsidiaries of the Company that control the Gumsberg and Adak
exploration assets in Sweden and the Tynset and Burfjord assets in Norway (the “Scandinavian Properties”). Closing occurred in Q1 2017.
-
-
-
At closing, EMX transferred to BMC its entire interest in its wholly-owned subsidiary Iekelvare AB, which owns or will own that
portion of the Scandinavian Properties located in Sweden, and its entire interest in its wholly-owned subsidiary EMX Exploration
Scandinavia AB, which owns that portion of the Scandinavian Properties located in Norway.
At closing, BMC issued to EMX that number of common shares of BMC that represents a 19.9% equity ownership in BMC; BMC had
the continuing obligation to issue additional shares of BMC to EMX to maintain its 19.9% interest in BMC, at no additional cost to
EMX, until BMC has raised CDN$5,000,000 in equity; thereafter EMX has the right to participate pro-rata in future financings at its
own cost to maintain its 19.9% interest in BMC.
EMX will receive an uncapped 3% NSR royalty on each of the Scandinavian Properties. Within five years of the closing date, BMC has
the right to buy down up to 1% of the royalty owed to EMX on any given project (leaving EMX with a 2% NSR) by paying EMX
US$2,500,000 in cash and shares of BMC. Such buy down is project specific.
23
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
26/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
-
-
-
EMX will receive AAR payments of US$20,000 for each of the Properties commencing on the second anniversary of the closing, with
each AAR payment increasing by US$5,000 per year until reaching US$60,000 per year, except that BMC may forgo AAR payments on
two of the four Scandinavian Properties in years two and three. Once reaching US$60,000, AAR payments will be adjusted each year
according to the Consumer Price Index (as published by the U.S. Department of Labor, Bureau of Labor Statistics).
EMX will receive a 0.5% NSR royalty on any new mineral exploration projects generated by BMC in Sweden or Norway, excluding
projects acquired from a third party containing a mineral resource or reserve or an existing mining operation. These royalties are not
capped and not subject to a buy down.
EMX has the right to one seat on the Board of Directors of BMC.
•
On December 16, 2016 the Company announced that it was changing the ticker symbol of its common shares listed on the NYSE American
from EMXX to EMX effective Monday, December 26, 2016. The Company trades on both the TSX Venture and NYSE American exchanges as
EMX.
Fiscal Year ended December 31, 2017
•
•
•
•
On January 24, 2017 the Company announced initial results from IGC's fall-winter drill program at the Malmyzh copper- gold porphyry project,
including the longest mineralized intercept drilled to date on the property. Drill hole AMM-213 intersected 747.4 meters (108.7-856.1 m)
averaging 0.49% copper equivalent (0.41% copper and 0.17 g/t gold) principally hosted in phreatomagmatic breccias and diorite porphyries at
the Freedom Northwest prospect (true width). The hole doubled the drilled vertical extent of the Freedom Northwest system, while bottoming in
mineralization. In addition, reconnaissance drilling at the Sleeper West prospect intersected a shallow zone of 109 meters averaging 0.58%
copper equivalent (0.53% copper and 0.09 g/t gold) starting at 13.5 meters in hole AMM-210 (true width). Freedom Northwest and Sleeper
West are not included in the current Malmyzh resource estimate, which underscores the project's additional exploration upside. The Malmyzh
exploration and mining licenses are held by IGC (51%) and Freeport- McMoRan Exploration Corporation (49%) (the "Joint Venture"), with
IGC operating and managing the project. EMX is IGC’s largest shareholder.
On January 25, 2017 the Company provided an update on the Company's Leeville royalty property that covers portions of Newmont Mining
Corporation's ("Newmont") underground mining operations in the Northern Carlin Trend. EMX has noted an increase in Leeville royalty
revenue and equity gold ounces starting in mid-2016. In addition to royalty income from gold production, the Leeville property also provides
the Company with upside exposure to Newmont's ongoing exploration advancements at the Rita K and Full House gold deposits. Newmont
expects initial resources for Rita K in 2018, and has already outlined resources at Full House.
On February 8, 2017 the Company announced the receipt of a payment of US $601,825, the cash equivalent of 500 troy ounces of gold, from
Çiftay Insaat Taahhüt ve Ticaret A.S. ("Çiftay"), as part of the payment schedule for the Akarca gold-silver project in western Turkey. The
Akarca Property was transferred to Çiftay in August, 2016 for a combination of cash, future payment streams denominated in gold bullion, and
a royalty interest. Çiftay informed EMX that it had completed an initial 49 hole diamond drill program comprising 6,032 meters on the Akarca
Property in the 4th quarter of 2016.
On February 28, 2017 the Company announced the execution of an option agreement (the "Copper Springs Agreement"), through its wholly
owned subsidiary BCE, for the Copper Springs porphyry copper project ("Copper Springs Project") with Anglo American Exploration (USA),
Inc. (“Anglo American”). The Copper Springs Project is located approximately 120 kilometers east of Phoenix, Arizona within the Globe-
Miami Mining District.
Pursuant to the Copper Springs Agreement, Anglo American can earn a 100% interest in the Copper Springs Project by (a) reimbursing BCE’s
2016 holding and permitting costs and making annual option payments, together totaling US$447,000, and (b) completing US$5,000,000 in
exploration expenditures before the fifth anniversary of the Agreement. Upon exercise of the option, Anglo American will pay EMX an
additional US$110,000 and EMX will retain a 2% NSR royalty on the Copper Springs Project. The royalty is not capped or purchasable, except
over two parcels of Arizona State Land where Anglo American can buy a 0.5% NSR royalty from EMX for US$2,000,000.
After exercise of the option, AMR Payments of US$100,000 are due, commencing on the first anniversary of the exercise of the option. The
AMR Payments will increase to US$200,000 upon completion of a Scoping Study or PEA. Anglo American may make a one-time payment of
US$3,500,000 to extinguish the obligation to make any post-Scoping Study AMR payments. All AMR Payments cease upon commencement of
production from the project.
24
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
27/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
In addition, Anglo American will make milestone payments consisting of:
•
•
•
•
•
•
•
-
-
-
US$500,000 upon completion of a Scoping Study or PEA;
US$1,000,000 upon completion of a Prefeasibility Study; and
US$2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against future royalty payments.
Anglo American will manage and operate the Copper Springs Project.
On April 12, 2017 the Company announced the completion of a non-brokered private placement (all dollar amounts in CDN). The Company
raised $7,000,000 by the issuance of 5,000,000 units at a price of $1.40 per unit. Each unit was comprised of one common share and one-half of
one non-transferable common share purchase warrant. Each whole warrant entitles the holder to purchase an additional common share for $2.00
until April 12, 2019. Fees were paid on a portion of the Private Placement. The fees consisted of 246,604 units (6% of the units sold to investors
introduced by finders) issued to Sprott Global Resource Investments, Ltd. (219,424 units), Sprott Private Wealth LP (15,000 units), Haywood
Securities Inc. (10,380 units) and Mackie Research Capital Corporation (1,800 units). Insiders of the Company purchased 89,230 units and Pro
Group members a further 19,000 units.
On May 3, 2017 the Company announced the appointment of Mr. Thomas G. Mair as General Manager of Corporate Development.
On July 17, 2017 the Company announced a name change from Eurasian Minerals Inc. to EMX Royalty Corporation effective July 19, 2017 to
better reflect the nature of its business.
On July 25, 2017 the Company announced IGC's 2017 drill results from the Malmyzh copper-gold porphyry project's Freedom Northwest
prospect, including an intercept of 417.3 meters (219.4-636.7 m) averaging 0.60% copper equivalent (0.50% copper and 0.21 g/t gold),
including a higher grade sub-interval of 142.6 meters (255.4-398.0 m) averaging 0.74% copper equivalent (0.62% copper and 0.26 g/t gold)
from hole AMM-216 (true widths). The mineralization is principally hosted in magmatic-hydrothermal breccias. The ongoing exploration
program at Freedom Northwest represents the first deep drill testing at Malmyzh, as previous drilling has been concentrated on shallow
mineralization throughout the district. Freedom Northwest is not included in the current Malmyzh resource estimate, which further emphasizes
the project's exploration upside. EMX is IGC’s largest shareholder.
On August 4, 2017, EMX received a payment of US$634,015, the cash equivalent of 500 troy ounces of gold as the second gold bullion
payment, from Çiftay, as part of the payment schedule for the Akarca gold-silver project in western Turkey. The Akarca Property was
transferred to Çiftay in August, 2016 for a combination of cash, future payment streams denominated in gold bullion, and a royalty interest.
On September 19, 2017 the Company announced that Koonenberry Gold Pty Ltd. (“KNB”) had completed the earn-in requirements under the
Exploration and Option Agreement (the “Koonenberry Agreement”) dated January 31, 2014 between North Queensland Mining Pty Ltd.
(“NQM”) and the Company, and had elected to acquire EMX’s Koonenberry exploration licenses (the "Koonenberry Project") in New South
Wales, Australia. KNB is the successor in interest to NQM under the Koonenberry Agreement. In accordance with the Koonenberry Agreement,
EMX has transferred its wholly-owned subsidiary EMX Exploration Pty Ltd, the holder of the Koonenberry licenses, to KNB, a private
Australian company formed for the sole purpose of developing the project. EMX has retained a 3% production royalty on all future production
from the Koonenberry licenses. As a result of this transaction, all of EMX’s interests in the Koonenberry Project have been converted to
retained royalty interests.
On December 4, 2017 the Company announced the execution of an option agreement (the "Sienna Agreement") for the Slättberg project (the
"Slättberg Project") with Sienna Resources Inc. (“Sienna”) (TSX Venture: SIE). The Sienna Agreement provides EMX with immediate share
equity in Sienna, and upon Sienna's earn-in through work commitments, additional share equity and a 3% NSR royalty on the Slättberg Project.
The Slättberg Project hosts nickel- copper-cobalt enriched massive sulfide mineralization and is located approximately 25 kilometers northwest
of Falun, Sweden.
Pursuant to the Sienna Agreement, Sienna can earn 100% interest in the Slättberg Project by the issuance of shares to EMX and performance of
work during the one-year option period, as described below:
25
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
28/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
-
-
-
-
-
On signing the agreement, Sienna issued to EMX 3 million common shares of Sienna stock.
As a condition to the exercise of the option, Sienna must undertake work commitments of at least $500,000 on the Project, including
drilling of at least 750 meters.
Upon exercise of the option, Sienna will issue to EMX an additional 3 million shares of Sienna stock, and EMX will receive a 3% NSR
royalty on the properties comprising the Project.
Within six years of the execution of the agreement, Sienna may purchase 0.5% of the NSR royalty for $1,500,000, leaving EMX with a
2.5% NSR royalty.
After exercise of the option, Sienna will use commercially reasonable efforts to raise $3,000,000 for development of the project and
other activities. Once Sienna has raised that amount, Sienna will issue an additional 4 million shares to EMX. Thereafter, EMX will
have the right to participate pro-rata in future financings at its own cost to maintain its interest in Sienna.
•
On December 18, 2017 the Company announced the execution of an option agreement (the "Antofagasta Agreement") through its wholly
owned subsidiary BCE, for the Greenwood Peak copper porphyry project (the "Greenwood Peak Project") with a wholly owned subsidiary of
Antofagasta plc (“Antofagasta”). The Greenwood Peak Project, located approximately 175 kilometers northwest of Phoenix, Arizona, contains
a copper porphyry target concealed beneath younger gravels and basin fill sediments.
Pursuant to the Antofagasta Agreement, Antofagasta can earn 100% interest in the Greenwood Peak Project by a) Reimbursing BCE’s
acquisition costs and making annual option payments, together totaling US$630,000; and b) Completing US$4,500,000 in work expenditures
within the five year option period. BCE will be the operator of the Project for Antofagasta. Upon exercise of the option EMX will retain a 2%
NSR royalty on the Project, which is not capped and not subject to buy-down. After exercise of the option, AAR payments are due starting at
US$100,000 on the first anniversary of the exercise of the option, and will increase to US$175,000 upon completion of a scoping study for the
Project. Antofagasta may make a one-time payment of US$4,000,000 to extinguish the obligation to make AAR payments after completion of
the scoping study. All AAR payments are recoupable against royalty payments owed to EMX.
Antofagasta will also make project milestone payments consisting of:
-
-
-
US$500,000 upon completion of a scoping study;
US$1,000,000 upon completion of a pre-feasibility study; and
US$2,000,000 upon completion of a feasibility study.
The feasibility milestone payment is recoupable against royalty payments owed to EMX.
Fiscal Year ended December 31, 2018
•
On January 16, 2018 EMX announced that the execution of a definitive agreement (the "Boreal Agreement") for the sale of the Modum cobalt
project (the "Modum Project") in Norway to Boreal Metals Corp. (“Boreal”) (TSX Venture: BMX). The agreement provides EMX with
additional share equity in Boreal, a 3% NSR royalty on the project, and advance annual royalty payments. The Modum Project is located in
southern Norway’s Modum mining district, ~75 kilometers west of Oslo. The project partially surrounds the historic Skuterud mine property,
which was Europe’s principal producer of cobalt from the late eighteenth through nineteenth centuries.
Pursuant to the Boreal Agreement, Boreal can acquire 100% interest in the Modum Project according to the following terms:
-
-
-
-
At closing, Boreal will issue to EMX 1,324,181 common shares of Boreal that will bring EMX’s share of equity ownership in Boreal to
19.9%. EMX will have the right to participate pro-rata in future financings at its own cost to maintain its 19.9% interest in Boreal.
At closing, EMX will transfer its Modum exploration licenses to Boreal.
EMX will retain a 3% NSR royalty on the Project, of which 1% may be purchased by Boreal on or before the fifth anniversary of the
closing date in 0.5% increments for a total of US $2,500,000 in cash and common shares of Boreal stock.
EMX will receive AAR payments, with an initial US $20,000 payment, commencing on the second anniversary of the closing, with each
subsequent AAR payment increasing by US $5,000 per year until reaching US $60,000 per year. Once reaching US $60,000, AAR
payments will be adjusted each year according to the Consumer Price Index (as published by the U.S. Department of Labor, Bureau of
Labor Statistics).
26
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
29/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
•
•
•
•
On February 5, 2018, EMX received a payment of US$665,525 as the cash equivalent to the third 500 ounce gold bullion payment from Çiftay,
as part of the payment schedule for the Akarca gold-silver project in western Turkey. The Akarca Property was transferred to Çiftay in August,
2016 for a combination of cash, future payment streams denominated in gold bullion, and a royalty interest. Receipt of this third payment leaves
a pre-production total of 5,500 ounces of gold (or the cash equivalent) to be paid to EMX.
On February 8, 2018 the Company announced the execution of an option agreement (the "Kennecott Agreement"), through its wholly owned
subsidiary BCE, for the Buckhorn Creek copper porphyry project (the "Buckhorn Creek Project") with Kennecott. The Kennecott Agreement
provides for work commitments as well as cash payments to EMX during Kennecott's earn-in period, and upon earn-in, a 2% NSR royalty
interest in addition to pre-production and milestone payments to EMX's benefit. The Buckhorn Creek Project is located in north-central
Arizona, approximately 70 kilometers north of Phoenix, and lies in the greater Castle Creek Mining District.
Pursuant to the Kennecott Agreement, Kennecott can earn 100% interest in the Buckhorn Creek Project by: (a) making a US $30,000 payment
upon execution of the agreement and making subsequent option payments, together totaling US $550,000, and (b) completing US $4,500,000 in
exploration expenditures before the fifth anniversary of the agreement. Upon exercise of the option EMX will retain a 2% NSR royalty on the
project which is not capped or purchasable.
After exercise of the option, annual advance minimum royalty (“AMR”) payments are due starting at US $100,000 and increasing to US
$150,000 upon completion of an Order of Magnitude Study ("OMS") or PEA. Kennecott may make a one-time payment of US $3,500,000 to
extinguish the obligation to make AMR payments. All AMR payments cease upon commencement of production from the project.
In addition, Kennecott will make milestone payments consisting of:
-
-
-
US $500,000 upon completion of an OMS or PEA,
US $1,000,000 upon completion of a Prefeasibility Study, and
US $2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against future royalty payments.
On February 9, 2018 the Company announced the execution of a purchase agreement (the "BEMC Agreement") for the Guldgruvan cobalt
project (the "Guldgruvan Project") in Sweden with Boreal Energy Metals Corporation (“BEMC”), a newly created and wholly owned subsidiary
of Boreal Metals Corporation (“Boreal”) (TSX Venture: BMX). Pursuant to the BEMC Agreement, the Guldgruvan nr 101 license will be
transferred to BEMC in exchange for the issuance of shares of BEMC, a royalty interest on the Guldgruvan Project, and other considerations
according to the terms described below:
-
-
-
-
-
At closing, BEMC will issue to EMX that number of common shares of BEMC that represents a 5.9% equity ownership in BEMC.
BEMC will have the continuing obligation to issue additional shares of BEMC to EMX to maintain its 5.9% interest, at no additional
cost to EMX, until BEMC has raised CDN $3,000,000 in equity. Thereafter, EMX will have the right to participate pro-rata in future
financings at its own cost to maintain its 5.9% interest in BEMC.
EMX will receive an uncapped 3% NSR royalty on the project. Within five years of the closing date, BEMC has the right to buy down
up to 1% of the royalty owed to EMX (leaving EMX with a 2% NSR) by paying EMX US $2,500,000 in cash and shares of BEMC.
EMX will receive annual advance royalty (“AAR”) payments of US $20,000 commencing on the second anniversary of the closing,
with each AAR payment increasing by US $5,000 per year until reaching US $60,000 per year. Once reaching US $60,000, AAR
payments will be adjusted each year according to the Consumer Price Index (as published by the U.S. Department of Labor, Bureau of
Labor Statistics).
EMX will also be reimbursed for its acquisition costs and previous expenditures on the project.
The issuance of BEMC shares to EMX, as set forth in the Agreement, is subject to TSX Venture Exchange approval.
On February 15, 2018 the Company announced its acquisition of 1,324,181 common shares of Boreal Metals Corp., representing 2.6% of
Boreal’s issued and outstanding shares. EMX acquired the shares pursuant to the sale to Boreal of the Modum cobalt project in Norway (see
EMX news release dated January 16, 2018). The shares were issued to EMX at a deemed price of CDN$0.26 per share. Immediately prior to the
acquisition, EMX owned 9,205,883 common shares, representing 17.8% of Boreal’s outstanding common shares. After the acquisition the
Company owned 10,530,064 common shares, representing 19.9% of Boreal’s outstanding common shares. The Company filed an Early
Warning Report with the British Columbia, Alberta and Ontario Securities Commissions in respect of the acquisition.
27
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
30/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
•
•
•
•
•
•
•
On March 1, 2018 the Company announced drill results from Boreal Metals Corp.’s first five holes totaling 1,146.7 meters of diamond drilling
to confirm high grade zinc-lead-silver mineralization at EMX’s Gumsberg royalty property. Of particular significance was the intersection of
multiple styles of massive sulfide mineralization, including silver-rich zinc and lead mineralization in hole BM-17-005, which was drilled in the
vicinity of the historic Östersilvberg Mine, Sweden’s largest silver producer in medieval times.
On March 5, 2018 the Company announced that IG Copper LLC's winter drill campaign was underway at the Malmyzh copper-gold porphyry
project. The first two holes were drilled to acquire material for metallurgical test work from the Valley and Freedom Southeast resource
deposits. In addition, the Company announced that Scotiabank Europe plc, the U.K. subsidiary of The Bank of Nova Scotia, had been retained
to assist with IGC’s strategic business initiatives.
On March 20, 2018 the Company announced its acquisition of 2,979,798 common shares of Boreal Energy Metals Corp. (“BEMC”),
representing 5.9% of BEMC’s outstanding common shares. Prior to this transaction, BEMC was a wholly- owned subsidiary of Boreal Metals
Corp. EMX acquired the shares pursuant to the sale of the Guldgruvan cobalt project in Sweden to BEMC (see EMX news release dated
February 9, 2018). The shares were issued to EMX at a deemed price of CDN$0.05 per share.
On April 11, 2018 the Company announced the execution of a purchase agreement for the Njuggträskliden and Mjövattnet nickel-copper-cobalt
projects in Sweden with Boreal Energy Metals Corporation. Pursuant to the agreement, BEMC will acquire 100% interest in the projects
according to the following commercial terms (all dollar amounts in USD, unless otherwise noted):
-
-
-
BEMC issued to EMX common shares of BEMC that represented a 4% equity ownership in BEMC, bringing EMX’s aggregate interest
to 9.9% of BEMC’s issued and outstanding shares. BEMC has the continuing obligation to issue additional shares of BEMC to EMX to
maintain its aggregate 9.9% interest in BEMC, at no additional cost to EMX, until BEMC has raised CDN $3,000,000 in equity.
EMX received an uncapped 3% NSR royalty interest on each of the projects. Within five years of the closing date, BEMC has the right
to buy down up to 1% of the royalty owed to EMX by paying EMX $2,500,000 in cash and shares of BEMC for each project.
EMX will receive annual advance royalty payments for each project commencing on the second anniversary of the closing.
On April 17, 2018 the Company announced the receipt of drill data for the 2017 exploration programs at the Akarca royalty property in western
Turkey. Çiftay Insaat Taahhüt ve Ticaret A.S., the owner and operator of the Akarca project, informed EMX that it had completed 7,844 meters
of diamond drilling across five target areas, resulting in a significant increase in the footprints of drill defined gold and silver mineralization on
the property. EMX also announced that it had received a cash payment of US $665,525 in February 2018, the cash equivalent of 500 ounces of
gold.
On April 19, 2018 the Company announced the execution of an option agreement, through its wholly owned subsidiary Eurasian Minerals
Sweden AB, for the Riddarhyttan Iron-Oxide-Copper Gold (“IOCG”) and massive sulfide project in Sweden to South32 Ltd. (“South32”).
Pursuant to the agreement, South32 can earn 100% interest in the project during a five year earn-in period by (all dollar amounts in USD):
-
-
-
Making option and cash payments that total approximately $210,600,
Making a one-time option exercise payment of $500,000, and
Completing $5,000,000 of exploration work on the project within five years of the execution date.
Upon exercise of the option, EMX will retain a 3% NSR royalty, 0.75% of which may be purchased by South32 for $1,900,000 within five
years of executing the agreement. After exercising the option, annual advance royalty payments of 50,000 pounds of copper (or the cash
equivalent) will be due to EMX, but will be deductible from future royalty payments. In addition, South32 will make milestone payments of:
350,000 pounds of copper (or the cash equivalent) upon publication of an initial resource on the project, and 750,000 pounds of copper (or the
cash equivalent) upon delivery of a feasibility study.
On May 2, 2018 the Company announced additional high grade zinc-lead-silver diamond drill results from Boreal Metals Corp.’s winter drill
campaign at the Gumsberg royalty property. The new drill intercepts reported by Boreal were from holes BM-17-006 through BM-17-012,
which successfully tested massive sulfide horizons at the Vallberget and Östersilvberg prospects.
28
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
31/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
•
•
•
•
•
•
•
•
•
•
On May 4, 2018 the Company announced that it had entered into a credit facility agreement with Sprott Private Resource Lending (Collector),
LP (“Sprott”) providing EMX with a US$ 5 million senior secured credit facility (the “Credit Facility”). The US$ 5 million loan made under the
Credit Facility carried an annual interest rate of 12%, payable monthly. In consideration of the Credit Facility, EMX paid to Sprott a fee of US$
100,000. EMX used the proceeds of the Credit Facility for corporate and working capital purposes.
On May 18, 2018 the Company announced its acquisition of 2,020,202 common shares of Boreal Energy Metals Corp., representing an
additional 4% equity stake in BEMC, which brought EMX’s aggregate interest to 9.9% of BEMC’s issued and outstanding shares. EMX
acquired the additional shares pursuant to the sale of the Njuggträskliden and Mjövattnet nickel-copper-cobalt projects in Sweden (see EMX
news release dated April 11, 2018). The shares were issued to EMX at a deemed price of CDN $0.05 per share. EMX was also granted a 3%
NSR royalty on the two projects, as well as other consideration to EMX’s benefit.
On June 14, 2018 the Company announced that IG Copper LLC had executed a definitive Share Purchase Agreement to sell the Malmyzh
copper-gold porphyry to Russian Copper Company (“RCC”), a privately held, leading copper producer in the Russian Federation (the
“Transaction”). The closing of the Transaction was contingent on RCC completing additional due diligence that included drilling and
metallurgical studies, as well as receiving approval from the Russian Federal Anti-Monopoly Service.
On August 13, 2018 the Company provided updates on two of the Company’s royalty properties in Turkey, including drill results from the
Balya lead-zinc-silver carbonate replacement deposit in northwestern Turkey, and continued development permitting of the Sisorta high
sulfidation gold deposit in northeastern Turkey.
On October 1, 2018 the Company announced the execution of a purchase agreement for the Kimberley Copper Project in Western Australia
with Enfield Exploration Corporation (“Enfield"). The agreement provides EMX with 500,000 shares of Enfield, and a commitment from
Enfield to raise US $1,000,000 for an initial drill test of the project. EMX will also receive a graduated NSR royalty on the project, annual
advance royalty payments, and an additional 1,750,000 shares of Enfield upon the achievement of certain milestones.
On October 2, 2018 the Company provided an update on the sale of the Malmyzh copper-gold porphyry project to Russian Copper Company.
IG Copper LLC advised that all conditions precedent to completing the sale, as defined in the Share Purchase Agreement, had been fulfilled,
and the US $200 million completion consideration had been paid into escrow.
On October 11, 2018 the Company announced that IG Copper LLC had notified EMX that the sale of the Malmyzh project to Russian Copper
Company for US $200 million had closed. Of this amount, US $190 million was released from escrow, with the remaining US $10 million to be
held in escrow and released subject to certain conditions over the succeeding 12 months. The initial cash distribution to EMX by IGC was
estimated to be US $65 million, with subsequent cash distributions to EMX (up to US $4 million) to be completed upon the remaining funds
being released from escrow.
In support of the Malmyzh sale, EMX had borrowed US $18.5 million from Sprott Private Resource Lending (Collector), LP (“Sprott Loan”),
and then loaned the US $18.5 million to IGC (“EMX Loan”). Both the Sprott Loan and the EMX Loan have been re-paid. In connection with
the Sprott Loan, EMX issued 381,321 common shares and paid cash fees of US $550,000 and US $185,000 in interest to Sprott. In connection
with the EMX Loan, IGC issued EMX 37,000 units in IGC, reimbursed EMX for fees, interest payments and costs incurred under the Sprott
Loan, and paid EMX a fee of US $550,000 (this amount is included in the initial cash distribution noted above).
On October 30, 2018 the Company announced that it had received its initial cash distribution of US $65.15 million from IG Copper LLC’s sale
of the Malmyzh project.
On November 14, 2018 the Company announced that it had had repaid the US $5 million senior secured credit facility loan from Sprott Private
Resource Lending (Collector), LP.
On November 28, 2018 the Company provided an update on its royalty and mineral property portfolio consisting of over 90 projects on five
continents. The update discussed EMX’s royalty property interests, including Leeville in Nevada, the Timok Project’s Cukaru Peki deposit in
Serbia, and properties being advanced by operating companies in Turkey, the western U.S., Scandinavia, Haiti, and Australia.
29
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
32/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
•
•
•
On November 30, 2018 the Company provided a detailed disclosure regarding the US$3.8 million in bonuses awarded to EMX’s management
and staff in respect of their seven years of effort to monetize the Company’s investment in IG Copper LLC. This additional disclosure included
a summary of the rationale, approval process, recipients, and allocations related to the bonus.
On December 6, 2018 the Company announced the execution of a Regional Strategic Alliance agreement between wholly-owned subsidiary
Bronco Creek Exploration, Inc., and South32 USA Exploration Inc. (“South32”), a wholly- owned subsidiary of South32 Limited. The
agreement provides annual funding for generative work and acquisitions over a two year period, as well as a framework to advance projects of
interest. Generative work will focus on copper and other base metal projects within the Laramide and Tertiary magmatic arcs of Arizona, New
Mexico and Utah. Projects advanced to the drill program stage may be selected as Designated Projects. Designated Projects will advance under
separate option agreements providing for work commitments and cash payments to EMX during South32’s earn-in period, and upon earn-in, a
2% NSR royalty interest and pre-production and milestone payments to EMX’s benefit. South32 initially selected five EMX copper projects in
Arizona to begin advancing toward the drill program stage.
On December 13, 2018 the Company announced the execution of a purchase agreement for the sale of the Bleikvassli, Sagvoll, and Meråker
polymetallic projects in Norway, and the Bastuträsk polymetallic project in Sweden to OK2 Minerals Ltd. (name changed to Norra Metals Corp.
in February 2019). Pursuant to the agreement (all dollar amounts in USD, unless otherwise noted):
-
-
-
-
-
-
-
-
-
EMX will transfer to OK2 the Bleikvassli, Sagvoll, and Meråker exploration licenses in Norway, and its Bastuträsk exploration permits
in Sweden at closing.
Upon the closing of this transaction, OK2 will undergo a corporate restructuring by share consolidation and change its name to Norra
Metals Corp.
OK2 will issue to EMX that number of common shares of OK2 that represents a 9.9% equity ownership in OK2 at closing. OK2 will
have the continuing obligation to issue additional shares of OK2 to EMX to maintain its 9.9% interest in OK2, at no additional cost to
EMX (subject to a maximum of 13,398,958 post-consolidation common shares), until OK2 has raised CDN $5,000,000 in equity to fund
exploration and development on the Properties, or until five years after closing, whichever occurs first. Thereafter, EMX will have the
right to participate pro-rata in future financings at its own cost to maintain its 9.9% interest in OK2.
Further, there is an additional provision that requires OK2 to raise and spend CDN $2,000,000 on the Properties within two years of the
closing date, otherwise EMX’s 9.9% equity ownership shall be increased to a 14.9% continuing equity interest (subject to a maximum of
21,350,956 post-consolidation common shares).
EMX will retain an uncapped 3% NSR royalty interest on each of the Properties. Within six years of the closing date, OK2 has the right
to buy down up to 1% of the royalty retained by EMX on any given project (leaving EMX with a 2% NSR royalty) by paying EMX
$2,500,000. Such a buy down is project specific.
EMX will receive annual advance royalty (“AAR”) payments of $20,000 for each of the Properties
commencing on the second anniversary of the closing, with each AAR payment increasing by $5,000 per year
until reaching $60,000 per year, except that OK2 may skip AAR payments on two of the four Properties in
years two and three provided payments are made on the other two Properties in years two and three. Once
reaching $60,000, AAR payments will be adjusted each year according to the Consumer Price Index (as
published by the U.S. Department of Labor, Bureau of Labor Statistics).
EMX will receive a 0.5% NSR royalty on any new mineral exploration projects generated by OK2 in Sweden or Norway, excluding
projects acquired from a third party containing a mineral resource or reserve or an existing mining operation. These royalties are not
capped and not subject to a buy down.
EMX will also receive a 1% NSR royalty on OK2’s Pyramid project in British Columbia at closing.
EMX will have the right to nominate one seat on the Board of Directors of OK2.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC.
Additional information can be found at EMX’s website at www.EMXroyalty.com.
4.B. BUSINESS OVERVIEW
EMX Royalty Corporation is in the business of organically generating royalties derived from a portfolio of mineral property interests. The Company
augments royalty generation with carefully selected royalty acquisitions and strategic investments.
30
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
33/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX’s portfolio mainly consists of properties in North America, Europe, Turkey, Haiti, and Australia. The Company’s common shares are listed on the
TSX Venture Exchange and the NYSE American Exchange under the symbol EMX.
The three key components of the Company's business strategy are summarized as:
Royalty Generation. EMX's sixteen year track record of successful exploration initiatives has developed into an avenue to organically generate
mineral property royalty interests. The strategy is to leverage in-country geologic expertise to acquire prospective properties on open ground,
and to build value through low cost work programs and targeting. These properties are sold or optioned to partner companies for retained
royalty interests, advance minimum royalty payments, project milestone payments, and other considerations that may include equity interests.
Pre-production payments provide early-stage cash flows to EMX, while the operating companies build value through exploration and
development. EMX participates in project upside at no additional cost, with the potential for future royalty payments upon the commencement
of production.
Royalty Acquisition. EMX has been acquiring royalty property interests since 2012. The purchase of royalty interests allows EMX to acquire
quality assets that range from producing mines to development projects. The timely identification of acquisition opportunities is often informed
by the Company's in-country royalty generation initiatives.
Strategic Investment. An important complement to EMX's royalty generation and royalty acquisition initiatives comes from strategic
investment in companies with under-valued mineral assets that have upside exploration potential. Exit strategies can include equity sales,
royalty positions, or a combination of both.
EMX is focused on increasing revenue streams from royalties, pre-production and other cash payments, and strategic investments. This approach
provides a foundation for supporting EMX’s growth and increasing shareholder value over the long term.
Government Regulation and Environmental Protection
The Company’s current exploration activities are conducted in North America, Turkey, Europe, Australia and New Zealand. Such activities are affected
in varying degrees by political stability and government regulations relating to foreign investment and the mining industry. Changes in these regulations
or shifts in political attitudes are beyond EMX’s control and may adversely affect EMX’s business. Operations may be affected in varying degrees by
government regulations with respect to restrictions on production, income taxes, expropriation of property, repatriation of funds, environmental
legislation and mine safety.
The mining industry is also subject to extensive and varying environmental regulations in each of the jurisdictions in which EMX operates.
Environmental regulations establish standards respecting health, safety and environmental matters and place restrictions on toxins resulting from
mining activities. These regulations can have an impact on the selection of mining projects and facilities, potentially resulting in increased capital
expenditures by EMX or its joint venture partners. In addition, environmental legislation may require certain projects to be abandoned and sites
reclaimed to the satisfaction of local authorities. EMX is committed to complying with environmental and operation legislation wherever it operates.
The Company’s current or future operations, including exploration and development activities on its properties, require permits from various
governmental authorities, and such operations are, and will be, governed by laws and regulations governing exploration, development, taxes,
occupational health, waste disposal, toxic substances, land use, environmental protection and other matters. Compliance with these requirements may
prove to be difficult and expensive. While EMX has properties in numerous jurisdictions, its most advanced projects are located in Turkey and the
United States.
Governmental Regulation in Turkey
Mining Regulation
The legal mining regime in Turkey is principally governed by the Turkish Mining Law No. 3213, as amended most recently on February 4, 20151 for
the purpose of, among other things, avoiding labour accidents, and restating the mining license fees, governmental royalties, and sanctions in order to
make it more compliant with the most recent global conditions. The Turkish Mining Activities Implementation Communiqué was adopted and amended
during the amendment of Turkish Mining Law on June 10, 2010; however, this Implementation Communiqué has not been amended yet in accordance
with the latest amendments of Turkish Mining Law dated February 4, 2015. Turkey is still awaiting the adoption of the amendment of Implementation
Communiqué to comply with latest amended Turkish Mining Law. The mining sector is regulated under the umbrella of the General Directorate of
Mining Affairs of the Republic of Turkey, a unit of the Ministry of Energy and Natural Resources of the Republic of Turkey. Mining rights and
minerals are exclusively owned by the Turkish state, and the ownership of minerals in Turkey is not subject to the ownership of the relevant land. The
state, under the Turkish Mining Law and secondary mining legislation, delegates its rights to explore and operate to Turkish individuals or legal entities
established under Turkish law by issuing licenses for a determined period of time in return for the payment of a royalty. There is no distinction between
the mining rights that may be acquired by local investors and those that may be acquired by foreign investors so long as foreign investors establish a
company in Turkey under Turkish law.
____________________________________________
1 Turkish Mining Law No.3213 was first adopted on June 4, 1985 with several amendments on December 24, 1986, July 30, 1999, June 15, 2001, May
26 2004, June 3, 2007, June 10, 2010 and with the latest amendment on February 4, 2015.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
31
34/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The General Directorate of Mining Affairs, is the authorized body to regulate mining activities and to issue mining licenses in Turkey. In addition, local
administrative bodies of Turkey also have a certain level of authority relating to licenses and the regulation of mining facilities. Transferring the mining
license is subject to the prior approval of the Ministry of Energy and Natural Resources of the Republic of Turkey.
The Turkish Mining Law classifies underground resources into six different groups, and the licensing procedure for each group differs slightly. Briefly,
the groups are as follows: (I) sand and gravel, (II) marble and other similar decorative stones, (III) mineral salts from seas, lakes and fresh waters, (IV)
energy, metal and industrial minerals, including gold, silver, platinum, copper, lead, zinc, aluminum, uranium, thorium and radioactive minerals, (V)
precious minerals such as gemstones, and (VI) a group of minerals which is not stated amongst these groups shall be identified by the Ministry of
Energy and Natural Resources of Republic of Turkey under secondary legislation of Turkey.
There are two types of licenses granted for the exploration and operation of mines and one type of operation permit under the Turkish Mining Law, as
follows: Group II (b), Group III, Group IV minerals at the first stage require general exploration licenses. Group V minerals require exploration
certificates. Group I and Group II (a) and (c) are directly granted with operation licenses.
Exploration License. Enables its holder to carry out general exploration activities (i.e., all mining activities other than those carried out for
production) in a specific area issued for a period of two years for Group IV minerals including gold mining and one year for the other groups. If
the license holder owning a group of minerals satisfies its obligations, the license holder owning Group IV minerals will have a right to an
additional four years of detailed exploration; for Group II (b), Group III and Group V mines, the relevant license holder is obliged to meet the
operation license’s requirements until the end of its general exploration period.
Operation License. Enables its holder to carry out operational activities within the same area as stated in the exploration license for the proved,
potential and feasible mine reserve area. The term of the operation license for Group I (a) minerals are five years. The other groups of minerals
are at least ten years depending on the specific project. The terms of the operation licenses may generally be extended upon the application of
the license holder with a new operation project provided that such extension request is accepted by the General Directorate of Mining Affairs of
Turkey. The term of the operation license for Group I (a) minerals cannot exceed thirty years, for Group II minerals cannot exceed forty years,
and for other groups of minerals cannot exceed fifty years. Extension requests for more than thirty years for Group I (a) minerals and forty years
for Group II minerals are made directly to the Ministry of Energy and Natural Resources of the Republic of Turkey and for more than fifty years
for other groups of minerals are made directly to Ministry of Council of Republic of Turkey.
Operation Permit. Enables its holder to operate a specific mine as specified in the operation license and granted only for the proved mine
reserves area that is determined during the prospecting period. The license holder, within three years following the issuance of the operation
license shall obtain the required approvals, permits such as environmental impact assessment decision, ownership decision, land usage decision,
workplace opening and operation permit and other permits stated under clause 7 of the Mining Law and then, accordingly, the license holder is
granted the operation permit by the General Directorate of Mining Affairs of Turkey. The operation permit is required to be obtained until the
end of the term of the operation license.
The Turkish Mining Law provides for different royalty percentages for different groups of mines. The royalty percentages for Group IV minerals,
including gold, silver, platinum, lead copper, zinc, aluminum and uranium oxide minerals are in the below chart.
32
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
35/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Royalty Percentages For Group IV Minerals under Turkish Mining Law
Environmental Regulation
In Turkey, where EMX’s most advanced projects are located, both the level of environmental regulation and its enforcement have become more
stringent in recent years. Mining operations are subject to environmental laws and regulations promulgated by the Turkish Ministry of Environment and
Urban Planning, the Ministry of Forestry and Water Works and regional and local authorities. The Turkish Mining Law amended in 2015 has brought
more detailed provisions to the mining activities for the compliance of environmental rules. The Regulation on Environmental Impact Assessments, for
example, requires any entity that is involved in activities that could have an environmental impact to prepare a Report of Environmental Impact
Assessment or a Project Information File. No approvals, permits, incentives, or construction and occupancy licenses may be granted, nor any
investments made, nor any tenders awarded for these projects unless and until the Turkish Ministry of Environment and Urban Planning issues a
positive assessment of the environmental impact of the subject activities. The Turkish environmental laws and regulations also require certain
businesses to comply with ongoing requirements to reduce the environmental impact of certain operations and activities, which also include mining
activities. In addition, in Turkey, the issue of allocation of environmentally sensitive areas such as forest areas, hunting areas, special protection areas,
national parks and agriculture areas for the granting of licenses for activities to be carried out in such areas is also regulated and is under the supervision
of the Turkish Ministry of Forestry and Water Works.
Under current Turkish environmental laws and regulations, regulatory authorities may suspend or terminate non-compliant operations, levy monetary
penalties and require non-compliant entities to bear the cost of related remediation programs. For example, under Turkish environmental and criminal
laws, non-compliant operations may be subject to private action and liable for damages arising from their activities, as well as subject to criminal
penalties (such as imprisonment and monetary fines) for deliberately providing regulatory authorities with false or misleading information regarding
regulated activities or otherwise failing to comply with certain regulations. In addition, a property owner may be held liable for the cost of the removal
or remediation of hazardous or toxic wastes discovered on its property, the cost of which could be substantial, where generally such liability attaches
regardless of whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances.
Environmental laws, as they may be amended over time, can impose restrictions on the manner of use of properties, and compliance with these
restrictions may require substantial expenditures. Environmental laws and regulations impose sanctions for non-compliance and may be enforced by
governmental agencies. Third parties also may seek recovery from companies for personal injury or property damage associated with exposure to the
release of hazardous substances.
Commercial Regulation
The Turkish Commercial Code numbered 6762, which was in effect as of 1957, has been amended substantially with the new Turkish Commercial
Code numbered 6102 (the “New Turkish Commercial Code”). The New Turkish Commercial Code came into force on July 1, 2012. The New Turkish
Commercial Code is intended to provide for institutionalization, increased competitive power and the establishment of increased public confidence,
corporate governance and transparency, The code permits joint stock companies and limited liability companies to be established with only one
shareholder and with one board member.
33
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
36/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Some of the key features of the New Turkish Code include the following:
Companies are generally obliged to have a website online and to allocate a part of this website to publish certain issues, documents, financial
statements and resolutions whether publicly traded or not.
For joint stock companies, it is sufficient for the board of directors to consist of solely one member. A legal entity can also be a board member;
however in this case, a natural person must be designated to represent the legal entity. There is no restriction and mandatory requirement for the
board members to reside in Turkey and to be a Turkish citizen.
Board members of a joint stock company are no longer required to shareholders in the company.
The financial tables of a joint stock company are to be prepared in accordance with the financial reporting standards determined by the Turkish
Accounting Standards Board. These standards are expected to be amended to comply with the International Financial Reporting Standards
(“IFRS”).
The New Turkish Commercial Code enables the board members to attend and to vote in meetings via transfer of image and voice according to
the provisions of the articles of association of the company. The provisions regarding the meeting and decision quorum of the board of directors
shall also be applicable if the meetings of the board of directors are held in an electronic environment.
The New Turkish Commercial Code stipulates the rights of shareholders to attend, give proposals, declare opinions and vote at the general
assembly of joint stock company via electronic means.
The management and representation of a limited company may be performed by one or more managers. For a limited liability company, it is
sufficient to have at least one manager. If there is more than one manager then there is a board of managers. In this situation, one of the
managers is appointed by general assembly as a chairman of the board of managers. The President of board of managers has an authority to
make all statements and declarations on behalf of the company. In any case, at least one shareholder must be appointed as a manager who has a
right to manage and represent the limited liability company.
The limited liability company must keep a share ledger. The share ledger shall reflect the following; names/titles and addresses of the
shareholders, number of shares held by each shareholder, share transfer details, nominal value of shares, class of shares, encumbrances over the
shares and the names/titles and addresses of beneficiaries of such encumbrances created over the shares.
The limited liability company is obliged to keep the commercial books indicating the commercial transactions and asset structure of the
company. The LLC shall observe and apply Turkish Accounting Standards as announced by the Turkish Accounting Standards Board, including
the conceptual framework of accounting principles and interpretations while keeping its commercial books. An important change however, is
that the compulsory accounting standards will adopt IFRS. The opening and closing of the books must be certified by a notary public.
The manager(s) of a limited liability company must prepare and submit to the attention of the general assembly the financial charts, appendices
and the activity report of the company for the preceding accounting period. This must be done in accordance with the Turkish Accounting
Standards and within the first three months of the relevant accounting period (fiscal year) following the balance sheet date. The relevant Turkish
Accounting Standards have been applicable from January 1, 2013.
EMX cannot predict the outcome of each effect of the Turkish Code, and compliance with these requirements may prove to be difficult and expensive.
Repatriation of Earnings
Currently, there are no restrictions on the repatriation of earnings or capital to foreign entities from Turkey, where the Company’s most advanced
projects are located. However, there can be no assurance that any such restrictions on repatriation of earnings or capital from Turkey or any other
country where we may invest will not be imposed in the future.
Governmental Regulation in the United States
Mining Regulation
Mining activities in the United States are subject to numerous federal, state and local laws and regulations. At the federal level, mines are subject to
inspection and regulation by the United States Mine Safety and Health Administration (“MSHA”) under provisions of the Federal Mine Safety and
Health Act of 1977. The Occupation Safety and Health Administration also has jurisdiction over certain safety and health standards not covered by
MSHA. Mining operations and all proposed exploration and development require a variety of permits. In addition, any mining operations occurring on
federal property are subject to regulation and inspection by the United States Bureau of Land Management (“BLM”). The Company’s current projects
are also subject to state and local laws and regulations in Arizona, Nevada, Utah and Wyoming.
34
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
37/156
4/2/2019
Environmental Regulation
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Company’s exploration, mining and processing operations are subject to various federal, state and local laws and regulations governing
prospecting, exploration, development, production, labor standards, occupational health, mine safety, control of toxic substances, and other matters
involving environmental protection and employment. United States environmental protection laws address the maintenance of air and water quality
standards, the preservation of threatened and endangered species of wildlife and vegetation, the preservation of certain archaeological sites,
reclamation, and limitations on the generation, transportation, storage and disposal of solid and hazardous wastes, among other things.
Legislation and implementation of regulations adopted or proposed by the United States Environmental Protection Agency, the BLM and by
comparable agencies in various states directly and indirectly affect the mining industry in the United States. These laws and regulations address the
environmental impact of mining and mineral processing, including potential contamination of soil and water from tailings, discharges and other wastes
generated by mining process. In particular, legislation such as the Clean Water Act, the Clean Air Act, the Federal Resource Conservation and Recovery
Act and the National Environmental Policy Act require analysis and/or impose effluent standards, new source performance standards, air quality
standards and other design or operational requirements for various components of mining and mineral processing. Mining projects also are subject to
regulations under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, which regulates and establishes liability for
the release of hazardous substances. In addition, statutes may impose liability on mine developers for remediation of waste they have created.
Our operations are also subject to laws and regulations governing protection of endangered and other specified species. In May 2015, the U.S.
Department of the Interior released a plan to protect the greater sage grouse, a species whose natural habitat is found across much of the western United
States, including Nevada. The U.S. Department of the Interior’s plan is intended to guide conservation efforts on approximately 70 million acres of
national public lands. No assurances can be made that restrictions relating to conservation will not have an adverse impact on our operations in
impacted areas.
Mining Disclosure
EMX is subject to the requirements of National Instrument 43-101, and the SEC’s mining disclosure rules. See Item 4D. Property, Plant and Equipment.
Specialized Skill and Knowledge
All aspects of EMX’s business require specialized skills and knowledge. Such skills and knowledge include the areas of geology, finance, accounting
and law.
Competitive Conditions
Competition in the mineral exploration industry is intense. EMX competes with other companies, many of which have greater financial resources and
technical facilities, for the acquisition and exploration of mineral interests, as well as for the recruitment and retention of qualified employees and
consultants.
Raw Materials (Components)
Other than water and electrical or mechanical power – all of which are readily available on or near its properties – EMX does not require any raw
materials with which to carry out its business.
Intangible Property
EMX does not have any need for nor does it use any brand names, circulation lists, patents, copyrights, trademarks, franchises, licenses, software (other
than commercially available software), subscription lists or other intellectual property in its business.
35
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
38/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Business Cycle & Seasonality
The Company’s royalty and prospect generator business model is cyclical and is impacted by commodity prices and cycles; however, its business is not
seasonal.
Economic Dependence
Other than the contracts disclosed in this Form 20-F, the Company’s business is not substantially dependent on any contract such as a contract to sell the
major part of its products or services or to purchase the major part of its requirements for goods, services or raw materials, or on any franchise or
license or other agreement to use a patent, formula, trade secret, process or trade name upon which its business depends.
Renegotiation or Termination of Contracts
It is not expected that the Company’s business will be affected in the current financial year by the renegotiation or termination of contracts or sub-
contracts.
Environmental Protection
All phases of the Company’s exploration are subject to environmental regulation in the various jurisdictions in which it operates.
Environmental legislation is evolving in a manner which requires stricter standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and
employees. While manageable, EMX expects this evolution (which affects most mineral exploration companies) might result in increased costs.
Employees
At December 31, 2018, EMX had 39 employees and consultants working at various locations throughout the world.
Foreign Operations
Many of the Company’s properties are located outside of North America and many are located in areas traditionally considered to be risky from a
political or economic perspective.
Bankruptcy Reorganizations
There have not been any voluntary or involuntary bankruptcy, receivership or similar proceedings against EMX within the three most recently
completed financial years or the current financial year.
Material Reorganizations
There has not been any material reorganization of EMX or its subsidiaries within the three most recently completed financial years or the current
financial year.
Social or Environmental Policies
EMX has implemented various social policies that are fundamental to its operations, such as policies regarding its relationship with the communities
where the Company operates.
1. Environmental Policy
The Company believes that good environmental management at every project it manages, whether in the exploration phase, feasibility stage, project
construction or mine site operation, requires proactive health and safety procedures, transparent interaction with local communities and implementation
of prudent expenditures and business performance standards that constitutes the foundation for successful exploration and subsequent development if
the results warrant it.
36
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
39/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX will develop and implement appropriate standard operating procedures for different stages of its ground technical surveys, prospecting and
evaluation and development work which procedures will be designed to meet all applicable environmental requirements and best environmental
practices in the mineral exploration industry.
2. Community Relations, Communication and Notification Policy
Proactive interaction with the stakeholders on whom the Company’s exploration and development programs may impact is considered an important part
of the long-term investment that the Company is planning in its exploration programs in North America, Turkey, Europe, Australia, and the Asia-Pacific
region.
EMX recognizes that from the inception of exploration activities or a new field work program, and as the exploration project progresses towards
development, it will be important to:
♦
♦
♦
communicate and proactively engage with all local communities and other stakeholders that may be affected by its exploration programs;
inform and obtain a consensus with the full range of stakeholders that may be impacted upon by exploration, evaluation and development; and
identify any vulnerable or marginalized groups within the affected communities (e.g. women, elders or handicapped) and ensure they are also
reached by above information disclosure and consultation activities.
In these respects, EMX will work actively and transparently with governmental authorities, other elected parties, nongovernmental organizations, and
the communities themselves to ensure that the communities are aware of the activities of the Company, and that the impact and benefits of such
activities are a benefit to the communities.
When detailed or advanced exploration activities, including drilling, evaluation and other such programs, are implemented, the Company will endeavor
to identify how the impacts of such work on communities can best be managed, and how benefits can best be provided to communities through its
activities. This will be undertaken in consultation with the affected communities.
3. Labour, Health and Safety Policy
The health and safety of its employees, contractors, affected communities and any other role players that may participate and be affected by the
activities of EMX are crucial to the long term success of the Company.
The Company will establish and maintain a constructive work-management relationship, promote the fair treatment, non-discrimination, and equal
opportunity of workers.
Every effort will be made through training, regular reviews and briefings, and other procedures to ensure that best practice labor, health and safety and
good international industry practices are implemented and maintained by EMX, including prompt and in-depth accident and incident investigation and
the implementation of the conclusions thereof. The Company will take measures to prevent any child labor or forced labor.
The Company’s aim is at all times to achieve zero lost-time injuries and fatalities.
4. Development Stage Environmental and Social Management Policy
EMX will communicate and consult with local communities and stakeholders with a view to fostering mutual understanding and shared benefits
through the promotion and maintenance of open and constructive dialogue and working relationships.
United States vs. Foreign Sales/Assets
At December 31, 2018, 2017, and 2016, the Company’s assets were located in North America, Turkey, Europe, Haiti, Australia and New Zealand.
4.C. Organization Structure
The following table sets out the name, jurisdiction of incorporation and percentage ownership in each of the Company’s significant subsidiaries:
37
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
40/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
4.D. Property, Plant and Equipment
The Company’s executive offices are located in rented premises of approximately 4,200 sq. ft., shared by seven other companies at 543 Granville
Street, Suite 501, Vancouver, British Columbia Canada V6C 1X8. The Company began occupying these facilities on May 1, 2011.
The Company owns a house in Littleton, Colorado which serves as the Company’s office in the United States.
The Company’s royalty, royalty generation, and strategic investment portfolio mainly consists of properties in North America, Europe, Turkey,
Australia, Haiti, the Russian Federation, and Chile.
The terms “measured resource”, “indicated resource” and “inferred resource” used in this report are Canadian geological and mining terms as defined
in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators using the
guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves,
adopted by the CIM Council as may be amended from time to time by the CIM. We advise U.S. investors that while such terms are recognized and
permitted under Canadian regulations, the SEC does not recognize them. U.S. investors are cautioned not to assume that any part or all of the mineral
deposits in the measured and indicated categories will ever be converted into reserves.
An inferred resource is that part of a mineral resource for which quantity and grade are estimated on the basis of limited geological evidence and
sampling. Geological evidence is sufficient to imply, but not verify, geological and grade continuity. It is reasonably expected that the majority of
inferred resources could be upgraded to indicated resources with continued exploration. Inferred resources must not be included in the economic
analysis, production schedule, or estimated mine life in publicly disclosed Pre-Feasibility or Feasibility Studies, or in the Life of Mine plans and cash
flow models of developed mines. Inferred mineral resources can only be used in economic studies as provided under NI 43-101. U.S. investors are
cautioned not to assume that any part or all of an inferred resource exists, or is economically or legally mineable.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
38
41/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Disclosure of gold and silver resources expressed in ounces, or copper, lead, and zinc resources expressed in pounds or tonnes in the mineral resource
categories in this document is in compliance with Canadian NI 43-101, but does not meet the requirements of Industry Guide 7, Description of Property
by Corporations Engaged or to be Engaged in Significant Mining Operations, of the SEC, which will accept only the disclosure of tonnage and grade
estimates for non-reserve mineralization. See “Cautionary Note To United States Investors Regarding Reserve And Resource Information”.
The Company notes that on October 31, 2018, the SEC adopted amendments to modernize the property disclosure requirements for mining registrants,
and related guidance, which are currently set forth in Item 102 of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of
1934, and in Industry Guide 7. The amendments consolidate mining property disclosure requirements by relocating them to a new subpart of
Regulation S-K (Subpart 1300). The amendments will more closely align disclosure requirements and policies for mining properties with current
industry and global regulatory practices and standard. Registrants must comply with the new rules for the first fiscal year beginning on or after January
1, 2021.
EMX has been generating exploration projects for over sixteen years. Even if the Company completes its programs on its exploration properties and is
successful in identifying mineral deposits, a substantial amount of capital will still have to be spent on each deposit for further drilling and engineering
studies before management will know that the Company has a commercially viable mineral deposit (a reserve) on the property. In order to balance this
risk, EMX focuses on entering into agreements with other parties to convert its royalty generation exploration assets into royalty interests with early-
stage preproduction payments. EMX also looks to purchase royalty properties in the open market to help accelerate revenue streams.
EMX has a portfolio of precious metal, base metal, and polymetallic mineral property and royalty interests that includes over 90 projects and spans five
continents. These assets provide revenue streams from royalty, advance royalty and success-based bonus payments, while maintaining exposure to
exploration upside as projects are advanced by the operators and partners. The Company supplements mineral property revenue streams by making
strategic investments in companies with undervalued mineral property assets that provide upside potential from exit strategies can include royalty
positions, equity sales, or a combination of both.
EMX has material interests in the Leeville royalty property located in Nevada's Northern Carlin Trend, and the Timok Project properties located in
eastern Serbia. Other property descriptions are included in this report, but the Company does not consider that individually these properties are material
at this time. All of the Company's properties that have been optioned or sold include EMX royalty options. Many of these properties provide milestone
and advance minimum royalty ("AMR") or advance annual royalty ("AAR") payments that generate early revenue streams to EMX’s benefit prior to
production. Additional details on EMX’s royalty and royalty generation property portfolio are included in the following sections.
North America
EMX’s portfolio in North America totals thirty-eight royalty and royalty generation properties covering more than 47,000 hectares. There are fifteen
royalty properties and properties optioned for an EMX royalty interest, five projects that are being advanced under a regional strategic alliance, and
eighteen royalty generation properties available for partnership in Arizona, Nevada, Utah, and Wyoming. The royalty generation properties are
advanced through wholly-owned subsidiary Bronco Creek Exploration Inc. ("BCE"), and include porphyry copper, Carlin-type gold, alkalic hosted
gold, high-grade gold-silver vein, and polymetallic carbonate replacement projects.
The Company’s 2018 work focused on 1) executing new agreements for available projects, including a key regional strategic alliance, 2) generative
exploration, 3) advancing partner funded projects, 4) identifying royalty assets for purchase, and 5) consolidating land positions by staking claims on
open ground. EMX is in discussions with multiple parties for the available North American properties.
39
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
42/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Leeville Property
The Leeville royalty property is a material EMX asset acquired in the 2012 merger with Bullion Monarch. The Leeville 1% gross smelter return
("GSR") royalty covers portions of Newmont Mining Corporation’s West Leeville, Turf, and other underground gold mining operations and deposits in
the Northern Carlin Trend of Nevada. The Leeville royalty paid approximately US$1.42 million during the 12 months ending December 31, 2018.
Royalty production reported by Newmont for 2018 totaled 1,116 troy ounces of gold that were principally sourced from the West Leeville (61%) and
Turf operations (39%), with negligible contributions from other Newmont operations. The 2018 royalty ounces represent a 15% decrease from the
1,308 royalty ounces produced in 2017. The 2017 royalty production percentages for West Leeville (58%) and Turf (42%) are nearly equivalent to
those reported in 2018. The average realized gold price in 2018 was US$1,270 per troy ounce, increased marginally as compared to US$1255 per ounce
in 2017.
Newmont has stated that its Turf Vent Shaft Project, which was commissioned in November 2015, will provide the ventilation required to “increase
production” and “unlock” additional resources at “greater Leeville”. As understood by the Company, "greater Leeville" includes portions of EMX’s
royalty property. Newmont also continued to report exploration successes along the Rita K and Full House gold mineralized corridor, as well as at Four
Corners (see Newmont November 2018 Investor Presentation), which are partially covered by the Leeville royalty. The Turf Vent Shaft Project as
described by Newmont may potentially have a positive impact on the Leeville royalty, as may Newmont's exploration advancements. However, the
Company does not have access to the information from Newmont in order to confidently assess what, if any, these impacts have been, or will be. The
Company has adjusted its expectations to the lower royalty production levels that have prevailed over the last four years.
Maggie Creek and Maggie Creek South Properties
Additional Carlin Trend exploration upside is provided by EMX’s Maggie Creek South and Maggie Creek royalty properties.
EMX's Maggie Creek South 3% NSR royalty was acquired in the 2012 merger with Bullion Monarch. Maggie Creek South occurs approximately 1.5
kilometers south-southeast of Gold Quarry, and covers about 5.2 square kilometers of ground controlled by Newmont. Maggie Creek South occurs on
the southeast projection of the Good Hope fault trend, which has an alignment of deposits along its length including Mike, Tusc, Mac, and Gold Quarry,
as well as the down-dip projection of favorable host rocks. EMX is not aware of any work conducted by Newmont on EMX's royalty property during
2018.
The Maggie Creek gold property is located approximately two kilometers north-northeast of Newmont's Gold Quarry mining operation. EMX
purchased the Maggie Creek 2% NSR royalty on precious metals and a 1% NSR royalty on all other minerals from Golden Predator Corp. in 2016 (see
EMX news release dated February 23, 2016). The Maggie Creek royalty property covers approximately 7.2 square kilometers and is controlled by
Renaissance Gold Inc. Maggie Creek occurs along the northeast projection of the Gold Quarry fault zone, which is an important mineralizing control at
the Gold Quarry mine. Renaissance did not report any work completed on the project in 2018.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
40
43/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Afgan (Gold Bar South) Property
The Afgan gold property is located about 40 kilometers northwest of Eureka, Nevada on the Battle Mountain-Eureka Trend.
EMX purchased the Afgan 1% NSR royalty as part of the 2016 Golden Predator transaction that also included the Maggie Creek royalty (see above
section). The Afgan unpatented lode mining claim block is controlled by McEwen Mining Inc. ("MMI"). Afgan, which is approximately 2.5 kilometers
southeast of McEwen's Gold Bar North operation, has been renamed "Gold Bar South". The property hosts a north-northwest oriented zone of
sediment-hosted oxide gold mineralization.
In 2018, MMI filed a Gold Bar Project Feasibility Study Technical Report on SEDAR (March 30, 2018 issue date), which included updated resource
estimates for the deposits of Gold Bar North, as well as for Gold Bar South ("GBS"). The GBS open pit constrained resources at a 0.008 oz/ton cutoff
include indicated resources of 3,488 thousand tons averaging 0.029 oz/ton and containing 101 thousand ounces of gold, and inferred resources of 123
thousand tons averaging 0.042 oz/ton and containing 5 thousand ounces of gold. The open pit optimization was based on a gold price of US$1,350/oz,
assigned recovery of 82% for gold, mining cost of US$2.80/ton, waste mining cost of US$1.80/ton, processing cost of US$6.74/ton, and pit slopes of
50 degrees. According to the technical report, additional drilling and metallurgical test work is required to convert the GBS resources to reserves.
Cathedral Well Property
The Cathedral Well royalty property is located at the southern end of the Battle Mountain-Eureka Trend, and is adjacent to the historic Green Springs
mine.
EMX optioned Cathedral Well to Ely Gold and Minerals Inc. (now Ely Gold Royalties Inc.) ("Ely") in 2014 for staged option payments and a 2.5%
NSR royalty interest, inclusive of an underlying 0.5% NSR royalty. Ely completed their earn in for the property in November 2016 through a trade with
EMX, whereby a subsidiary of Ely executed a quit claim deed for 36 mining claims adjacent to EMX’s Spring Canyon property in Nevada in lieu of its
last US$25,000 option payment. The Cathedral Well royalty claim block is included as part of Ely's Green Springs project.
In 2016, Ely Gold announced it had optioned the Green Springs property to Colorado Resources Ltd. (see Ely news release dated December 7, 2016).
The option agreement was terminated by Colorado Resources in 2018 (see Colorado Resources news release dated May 10, 2018).
Hardshell Skarn Property
The Hardshell Skarn lead-zinc-silver royalty property, consisting of 16 unpatented federal lode mining claims, is located approximately 75 kilometers
southeast of Tucson, Arizona. EMX's early stage exploration programs targeted base and precious metals mineralization hosted in skarn and
replacement bodies within a series of Paleozoic limestones.
An Exploration and Option Agreement was executed in 2015 for the Hardshell Skarn property (the “Royalty Claim Block”) with Arizona Mining Inc.
("AMI”). In 2017, AMI earned 100% interest in the Royalty Claim Block by accelerating and completing the required US$85,000 in cash payments.
EMX retains a 2% NSR royalty on the property that is not capped nor subject to buy down, and is receiving nominal annual advanced royalty
payments.
The Hardshell Skarn Royalty Claim Block is included as part of the Hermosa project, and is now owned by South32 Limited ("South32") after the
completion of the plan of arrangement whereby South32 acquired all of the issued and outstanding common shares of AMI in Q3 2018 (see AMI news
release dated August 10, 2018).
During 2018, the Hermosa property's Taylor lead-zinc-silver carbonate replacement project, which is directly north of EMX’s Royalty Claim Block,
was advanced with an updated PEA study, ongoing drilling, and the commencement of twin exploration declines (see AMI news releases dated January
16, February 20, March 15, March 22, March 26, May 15, and May 22, 2018). Earlier Taylor drilling by AMI consisted of two angle core holes that
intersected zinc-lead-silver mineralization within the Hardshell Royalty Claim Block (see EMX news release dated August 30, 2017). South32 expects
to invest approximately US$100 million in fiscal year 2019 at the Taylor project (see South32 Financial Results & Outlook Year Ended 30 June 2018
dated August 23, 2018).
41
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
44/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
South32 Regional Strategic Alliance
EMX executed a Regional Strategic Alliance Agreement in late 2018 between its wholly-owned subsidiary Bronco Creek Exploration, Inc., and
South32 USA Exploration Inc. (“South32”), a wholly-owned subsidiary of South32 Limited (see EMX news release dated December 6, 2018). Under
the terms of the agreement, which has an initial term of two years, South32 will provide annual funding for generative work performed by EMX
personnel to identify properties for further exploration (“Alliance Exploration Properties” or “AEPs”) within the Regional Strategic Alliance Area of
Interest ("AOI") consisting of the states of Arizona, New Mexico, and Utah, but excluding South32’s Hermosa project in southern Arizona. EMX
personnel will conduct exploration activities on AEPs with additional funding from South32 to identify projects suitable for designation as Designated
Projects. Each Designated Project will be covered by a separate option agreement (see below). South32 will provide US$800,000 per year to cover the
generative work and salaries of EMX personnel involved in AEP work. South32 will also provide a separate annual fund of US$200,000 to pay for the
acquisition of new properties.
Each option agreement covering a Designated Project will provide that South32 can earn 100% interest in the project by reimbursing EMX’s holding
costs upon execution of the option agreement, and making option payments totaling US$525,000 and completing US$5,000,000 in exploration
expenditures during the five-year term of the option agreement. Upon exercise of the option by South32, EMX will retain an uncapped 2% NSR royalty
on the project (not subject to purchase or buy down) and receive annual advance royalty (“AAR”) payments equivalent to 50,000 pounds ("lbs") of
copper commencing on the first anniversary. All AAR payments are set off against 80% of future royalty payments. In addition, South32 will make
milestone payments as follows (project milestones are to NI 43-101 reporting requirements):
166,000 lbs of copper (or the cash equivalent) upon the completion of an initial resource estimate,
333,000 lbs of copper (or the cash equivalent) upon completion of a prefeasibility study, and
666,000 lbs of copper (or the cash equivalent) upon completion of a feasibility study.
Five Arizona porphyry-copper projects were selected as AEPs by South32, including Midnight Juniper, Jasper Canyon, Sleeping Beauty, Dragons Tail,
and Lomitas Negras. EMX and South32 have commenced work programs on these initial AEPs, and initiated a generative program to identify new
projects for acquisition.
Buckhorn Creek Property
The Buckhorn Creek project is located in north-central Arizona's greater Castle Creek mining district. The project lies within a structurally extended
belt of rocks with multiple outcrops of porphyry-related alteration and mineralization. EMX’s work on the property led to the recognition of an un-
tested porphyry target situated to the east of altered outcrops, and concealed beneath volcanic and sedimentary cover rocks.
In February 2018, EMX executed an Option Agreement with Kennecott Exploration Company ("Kennecott"), part of the Rio Tinto Group (see EMX
news release dated February 8, 2018). Kennecott can earn 100% interest in the project by a) making annual option payments totaling US$550,000, and
b) completing US$4,500,000 in exploration expenditures before the fifth anniversary of the agreement. Upon exercise of the option, EMX will retain a
2% NSR royalty on the project which is not capped or purchasable.
After exercise of the option, annual advance minimum royalty payments are due starting at US$100,000 and increasing to US$150,000 upon
completion of an Order of Magnitude Study (“OMS”) or Preliminary Economic Assessment (“PEA”). Kennecott may make a one-time payment of
US$3,500,000 to extinguish the obligation to make AMR payments. All AMR payments cease upon commencement of production from the project. In
addition, Kennecott will make milestone payments consisting of:
US$500,000 upon completion of an OMS or PEA,
US$1,000,000 upon completion of a Prefeasibility Study, and
US$2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against future royalty payments.
Kennecott, as the operator of the Buckhorn Creek project, conducted geologic mapping, geochemical sampling, and an initial drill test of a concealed
porphyry target in 2018. Kennecott's drilling consisted of two shallow reverse circulations holes totaling 673 meters. Both holes reached bedrock and
intersected geochemically anomalous levels of copper and molybdenum mineralization. As well, Kennecott conducted an IP geophysical survey that
highlighted an additional target area west of the two reconnaissance holes. Kennecott is currently working to permit follow-up holes, with drilling
scheduled to commence in early 2019.
42
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
45/156
4/2/2019
Copper King Property
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Copper King porphyry copper-molybdenum project is located approximately four kilometers northwest of the Resolution porphyry copper deposit
in the Superior (Pioneer) mining district of Arizona.
EMX executed an Exploration and Option to Purchase Agreement with Kennecott for Copper King in 2016 (see EMX news release dated October 19,
2016). Pursuant to the agreement, Kennecott can earn 100% interest in the project by a) reimbursing the 2016 holding costs and making option
payments, together totaling US$504,314, and b) completing US$,000,000 in exploration expenditures before the fifth anniversary of the agreement.
Upon exercise of the option, EMX will retain a 2% NSR royalty on the project which is not capped and not subject to buy down. After exercise of the
option, annual AMR and milestone payments will be due to EMX.
During 2018, Kennecott-funded work at Copper King included drill permitting activities.
Superior West Property
The Superior West project is located west of the historic mining town of Superior, Arizona and the Resolution porphyry copper project. The project
covers several porphyry copper targets, as well as the interpreted western extension of the historic Magma Vein.
EMX executed an Exploration and Option to Purchase Agreement with Kennecott for the Superior West project in 2015. Kennecott may earn 100%
interest in the project by completing US$5.5 million in exploration expenditures and making cash payments totaling US$149,187, after which EMX
will retain a 2% NSR in addition to annual AMR and certain project milestone payments (see EMX news release dated May 4, 2015).
During 2018, Kennecott conducted geochemical sampling, further structural geologic work, and drill permitting activities at Superior West.
Copper Springs Property
The Copper Springs project is located in the southern part of Arizona's Globe-Miami mining district. EMX's work and geologic interpretations led to
the recognition that the property covers a previously unrecognized porphyry trend that crosses largely untested, structurally down-dropped blocks
concealed beneath younger basin fill.
EMX executed an Option Agreement for Copper Springs with Anglo American Exploration (USA), Inc. (“Anglo American”) in 2017 (see EMX news
release dated February 28, 2017). Anglo American can earn 100% interest in the project by a) reimbursing 2016 holding and permitting costs and
making annual option payments, together totaling US$447,000, and b) completing US$5,000,000 in exploration expenditures before the fifth
anniversary of the agreement. Upon exercise of the option, Anglo American will pay EMX an additional US$110,000 and EMX will retain a 2% NSR
royalty on the project. The royalty is not capped or purchasable, except over two parcels of Arizona State Land where Anglo American can buy a 0.5%
NSR royalty from EMX for US$2,000,000. After exercise of the option, annual AMR payments and milestone payments will be due to EMX.
Anglo American-funded work in 2018 included the completion of a phase I reconnaissance drill program consisting of four holes totaling over 5,700
meters that tested concealed porphyry targets. The alteration and mineralization assemblages observed in bedrock intercepts were encouraging, and
Anglo American advised that it is planning a phase II follow-up program consisting of additional geophysics and drilling.
Ophir Property
The Ophir property is located in the northern portion of Utah's Ophir mining district, approximately 15 kilometers southwest of Rio Tinto’s Bingham
Canyon mine. The Ophir district is characterized by silver-lead-zinc-copper replacement deposits and fissure veins hosted within carbonate sedimentary
rocks and associated with monzonitic stocks and dikes. The district's silver and base metals mineralization may be a distal expression of associated
porphyry copper mineralization at depth.
EMX sold the five patented mining claims comprising the Ophir property to Kennecott in 2016 (see EMX news release dated October 17, 2016). EMX
received US$75,000 in cash upon closing and retained a 2% NSR royalty interest from the sale. Kennecott advised that in 2018 the claims were
maintained and that the property is in good standing.
Yerington West Property
43
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
46/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Yerington West property, located in the Yerington mining district of west-central Nevada, contains porphyry copper-molybdenum and copper-iron
skarn targets beneath post-mineral cover rocks.
Yerington West is under a 2009 Option Agreement that was originally with Entrée Gold Inc. ("Entrée"), and subsequently with Mason Resources Corp.
("Mason"). Hudbay Minerals Inc. ("Hudbay") acquired all of the issued and outstanding common shares of Mason in late 2018 (see Mason news release
dated December 19, 2018). Under the Yerington West agreement, Hudbay can earn up to an 80% interest in the project by making advance royalty
payments and delivering a feasibility study before the tenth anniversary of the agreement. Under the agreement, once earn-in has been completed, EMX
can convert its interest to a 2.5% NSR royalty. Hudbay has the option to buy down 1.5% of the NSR royalty for US$4.5 million. EMX is in discussions
with Hudbay regarding the terms of the Yerington West agreement, as it is due to expire in 2019.
Greenwood Peak Property
The Greenwood Peak copper porphyry project is located approximately 175 kilometers northwest of Phoenix, Arizona.
EMX executed an option agreement with a wholly owned subsidiary of Antofagasta plc (“Antofagasta”) in late 2017 for Greenwood Peak (see EMX
news release dated December 18, 2017). Antofagasta concluded a three hole, 1,035 meter reconnaissance drill program in Q1 2018 to test a concealed
porphyry target. The drilling intersected weak hypogene porphyry-related alteration in bedrock. The option agreement was terminated by Antofagasta
in Q3. EMX subsequently dropped the property due to a lack of encouraging results.
Mineral Hill Property
The Mineral Hill gold-copper project is located in the Black Hills of Wyoming, approximately 20 kilometers west of the Wharf mine in South Dakota.
The project is centered on an Eocene age alkaline intrusive complex consisting of an outer ring complex, interior intrusive complex, and interior breccia
zone. Historic small scale production in the project vicinity occurred between the 1870s and 1930s, and was principally sourced from alluvial gold in
drainages, gold and silver mineralization at the Treadwell Mine, and gold and copper mineralization near the Interocean Mine.
EMX entered into an Exploration and Option Agreement with Coeur Explorations, Inc. (“Coeur”), a subsidiary of Coeur Inc. for Mineral Hill in 2016
(see EMX news release dated October 27, 2016). After staking new claims, conducting geologic mapping, geochemical sampling, and permitting work
for a drill test of a newly identified copper-gold target in 2017, Coeur terminated the agreement in Q4 2018. Mineral Hill is now 100% controlled by
EMX and available for partnership.
Other Work Conducted by EMX in the U.S.
EMX continued evaluating property and royalty acquisition opportunities in North America, with generative work focused on gold opportunities in the
Great Basin and porphyry copper targets in Arizona, New Mexico, and Utah.
Qualified Person
Dean D. Turner, CPG, a Qualified Person as defined by NI 43-101 and consultant to the Company, has reviewed, verified and approved the above
technical disclosure on North America.
Europe
EMX has a portfolio of gold, copper, polymetallic, nickel and cobalt royalty and royalty generation properties in Scandinavia, as well as a portfolio of
copper and gold royalty properties in Serbia. In Scandinavia, the Company successfully pursued strategic agreements to advance and convert available
projects into royalties and added value through low cost generative exploration. EMX's royalty interests in Serbia include the Timok Project's Cukaru
Peki copper-gold deposit located in the prolific Timok Magmatic Complex.
44
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
47/156
4/2/2019
Scandinavia
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX focused on organically generating and growing the royalty portfolio in Sweden and Norway during 2018. These efforts resulted in the conversion
of nine exploration properties to royalty and equity interests in 2018, as well as the addition of new royalty generation properties. The Company's
Scandinavia portfolio totals 33 royalty and royalty generation projects.
Boreal Properties. EMX has eight royalty properties sold to, and operated by Boreal Metals Corp. ("Boreal") and Boreal Energy Metals Corporation
("BEMC"), a subsidiary of Boreal. Four of the properties were sold to Boreal in 2017, and include the Gumsberg and Adak properties in Sweden, and
the Tynset and Burfjord properties in Norway. Gumsberg, Adak, and Tynset host Volcanogenic Massive Sulfide (“VMS”) polymetallic mineralization,
and Burfjord is characterized by Iron-Oxide-Copper-Gold (“IOCG”) mineralization. The sale included an initial 19.9% equity interest in Boreal, annual
advance royalty payments, an uncapped 3% NSR royalty on each of the properties (1% may be purchased by Boreal under certain conditions), and
other consideration to EMX's benefit (see EMX news release dated November 22, 2016).
In Q1 2018, EMX executed a definitive agreement to sell the Modum cobalt project to Boreal (see EMX news release dated January 16, 2018). Modum
is located in southern Norway’s Modum mining district, ~75 kilometers west of Oslo. The project partially surrounds the historic Skuterud mine
property, which was Europe’s principal producer of cobalt from the late 18th through 19th centuries. Pursuant to the agreement, Boreal acquired 100%
interest in the project according to the following commercial terms:
Boreal issued to EMX common shares of Boreal that brought EMX’s share of equity ownership back up to 19.9%.
EMX retained a 3% NSR royalty interest on the project, 1% of which may be purchased by Boreal under certain conditions.
EMX will receive annual advance royalty payments commencing on the second anniversary of the closing.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
45
48/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Also during Q1, EMX sold the Guldgruvan cobalt project to Boreal Energy Metals Corporation (see EMX news release dated February 9, 2018). The
Guldgruvan project is located in Sweden’s Los mining district, a significant historic producer of cobalt and nickel, and the discovery locality of nickel.
Pursuant to the agreement, BEMC acquired 100% interest in the project according to the following commercial terms (all dollar amounts in USD,
unless otherwise noted):
BEMC issued to EMX common shares of BEMC representing a 5.9% equity ownership in BEMC. BEMC has the continuing obligation to issue
additional shares to EMX to maintain its 5.9% interest, at no additional cost to EMX, until BEMC has raised CDN $3,000,000 in equity.
EMX received an uncapped 3% NSR royalty interest on the project. Within five years of the closing date, BEMC has the right to buy down up
to 1% of the royalty owed to EMX (leaving EMX with a 2% NSR) by paying EMX $2,500,000 in cash and shares of BEMC.
EMX will receive annual advance royalty payments commencing on the second anniversary of the closing.
In Q2 2018, EMX executed a second agreement with BEMC to sell the Njuggträskliden and Mjövattnet nickel-copper-cobalt projects to BEMC (see
EMX news release dated April 11, 2018). The properties are located along Sweden’s “Nickel Line” in the Skellefteå mining district of central Sweden.
Both projects contain multiple zones of drill-defined nickel-copper-cobalt mineralization. Pursuant to the agreement, BEMC will acquire 100% interest
in the projects according to the following commercial terms (all dollar amounts in USD, unless otherwise noted):
BEMC issued to EMX common shares of BEMC that represented a 4% equity ownership in BEMC, bringing EMX’s aggregate interest to 9.9%
of BEMC’s issued and outstanding shares. BEMC has the continuing obligation to issue additional shares of BEMC to EMX to maintain its
aggregate 9.9% interest in BEMC, at no additional cost to EMX, until BEMC has raised CDN $3,000,000 in equity.
EMX received an uncapped 3% NSR royalty interest on each of the projects. Within five years of the closing date, BEMC has the right to buy
down up to 1% of the royalty owed to EMX by paying EMX $2,500,000 in cash and shares of BEMC for each project.
EMX will receive annual advance royalty payments for each project commencing on the second anniversary of the closing.
EMX's Boreal royalty properties in Sweden and Norway were advanced to varying degrees with geologic mapping, geochemical sampling, geophysical
surveys, and drilling in 2018. EMX provided technical assistance for this work on a 100% reimbursed consulting basis.
Of particular note were results from the Gumsberg royalty property drill programs. Boreal reported assays from the first five holes of a winter diamond
drill program in Q1 2018. The results included intersections of massive sulfide mineralization in hole BM-17-005, which was drilled in the vicinity of
the historic Östersilvberg Mine, Sweden’s largest silver producer in medieval times. The intercepts from BM-17-005 included 10.94 meters averaging
16.97% zinc, 8.52% lead, and 656.70 g/t silver (true width estimated at 20-50% of reported interval length) (see EMX news release dated March 1,
2018). In Q2, Boreal reported the remaining results from the winter program that included an intercept of 3.7 meters averaging 19.27% zinc, with 17.66
g/t silver and 0.25% lead in drill hole BM-17-006 (true width estimated to be 80-100% of the reported interval), which was drilled in the vicinity of the
historic Mellangruvan mine (see EMX news release dated May 2, 2018).
Riddarhyttan Property. EMX executed an option agreement with South32 Ltd ("South32") for the Riddarhyttan IOCG and massive sulfide project in Q2
2018 (see EMX news release dated April 19, 2018). The Riddarhyttan project is a past producer of iron and copper located in the Bergslagen mining
region of southern Sweden. Riddarhyttan is the locality where the element cobalt was first recognized, and is also the type locality of certain rare earth
elements and related minerals. Pursuant to the agreement, South32 can earn 100% interest in the project during a five year earn-in period by (all dollar
amounts in USD):
Making option and cash payments that total approximately $210,600,
Making a one-time option exercise payment of $500,000, and
Completing $5,000,000 of exploration work on the project within five years of the execution date.
Upon exercise of the option, EMX will retain a 3% NSR royalty, 0.75% of which may be purchased by South32 for $1,900,000 within five years of
executing the agreement. After exercising the option, annual advance royalty payments of 50,000 pounds of copper (or the cash equivalent) will be due
to EMX, but will be deductible from future royalty payments. In addition, South32 will make milestone payments of: 350,000 pounds of copper (or the
cash equivalent) upon publication of an initial resource estimate on the project, and 750,000 pounds of copper (or the cash equivalent) upon delivery of
a feasibility study.
46
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
49/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX conducted geologic mapping, geochemical sampling, and geophysical surveys during 2018 on a 100% reimbursed basis. These new data are
being used to generate follow-up drill targets.
Norra Properties. As a subsequent event in Q1 2019, EMX closed the sale of the Bleikvassli, Sagvoll, and Meråker polymetallic projects in Norway,
and the Bastuträsk polymetallic project in Sweden to Norra Metals Corp. ("Norra") (previously OK2 Minerals Ltd) (see EMX news releases dated
December 13, 2018 and February 19, 2019). The properties contain historic mining areas and/or historic, drill-defined zones of polymetallic base metal
mineralization (zinc-lead-copper) with variable levels of precious metal enrichments (silver ± gold). Pursuant to the agreement, Norra acquired 100%
interest in the projects according to the following commercial terms (all dollar amounts in USD, unless otherwise noted):
Norra issued to EMX that number of common shares that represented a 9.9% equity ownership in Norra. Norra has the continuing obligation to
issue additional shares to EMX to maintain its 9.9% interest in Norra, at no additional cost to EMX (subject to a maximum of 13,398,958
common shares), until Norra has raised CDN $5,000,000 in equity to fund exploration and development on the properties, or until five years
after closing, whichever occurs first. Thereafter, EMX will have the right to participate pro-rata in future financings at its own cost to maintain
its 9.9% interest in Norra.
There is an additional provision that requires Norra to raise and spend CDN $2,000,000 on the properties within two years of the closing date,
otherwise EMX's 9.9% equity ownership shall be increased to a 14.9% continuing equity interest (subject to a maximum of 21,350,956 common
shares).
EMX retains an uncapped 3% NSR royalty interest on each of the properties. Within six years of the closing date, Norra has the right to buy
down up to 1% of the royalty retained by EMX on any given project (leaving EMX with a 2% NSR royalty) by paying EMX $2,500,000. Such a
buy down is project specific.
EMX will receive annual advance royalty payments for each of the properties commencing on the second anniversary of the closing.
EMX will receive a 0.5% NSR royalty on any new mineral exploration projects generated by Norra in Sweden or Norway, excluding projects
acquired from a third party containing a mineral resource or reserve or an existing mining operation. These royalties are not capped and not
subject to a buy down.
EMX also received a 1% NSR royalty on Norra’s Pyramid project in British Columbia.
Slättberg Property. The Slättberg nickel-copper-cobalt project in Sweden was optioned in 2017 to Sienna Resources Inc. (“Sienna”) for equity interest,
payments and work commitments to earn 100% interest in the project, and upon earn-in a 3% NSR royalty and annual advance royalty and milestone
payments (see EMX news release dated December 4, 2017). In Q2 2018, Sienna announced drill results from a seven hole, 942 meter drill program at
Slättberg, along strike and down dip from historic mine workings in the area. These results included 2.8 meters averaging 1.05% nickel and 1125 ppm
cobalt and 0.79% copper in hole SIE-18-3 (true width 60-70% of reported interval length) (see Sienna news release dated May 17, 2018). EMX
provided technical assistance in 2018 for Sienna's drilling, geochemical sampling and geophysical survey work on a 100% reimbursed consulting basis.
Viscaria Property. EMX holds an effective 0.5% NSR royalty interest on Sunstone’s Viscaria copper project located in the Kiruna mining district of
northern Sweden. The Viscaria royalty was acquired by EMX from the purchase of the Phelps Dodge Exploration Sweden AB assets in 2010. Upon
receipt of US$12 million in royalty revenues, the royalty rate increases to a 1.0% NSR. Sunstone has a JORC (2012) mineral resource estimate and
"scoping study" based upon a combination open pit and underground scenario (see Sunstone news releases dated December 16, 2015 and April 5,
2016). In 2018, Sunstone announced that the Viscaria project was being sold to Stockholm listed Copperstone Resources AB (see Sunstone ASX
announcement dated December 21, 2018).
Royalty Generation Properties. EMX continued to pursue new acquisition opportunities in Scandinavia during 2018, with a focus on orogenic
lode/intrusion-related gold, IOCG, VMS, carbonate replacement, and nickel-copper-cobalt projects. The Company also conducted early-stage geologic
mapping, geochemical sampling, and geophysical surveys on existing projects in the royalty generation portfolio. These projects are available for
partnership, and have attracted interest from a number of parties.
Serbia
EMX's royalty portfolio in Serbia initially resulted from prospect generation and organic royalty growth via the 2006 sale of its properties, including
Brestovac West, to Reservoir Capital Corp, for uncapped NSR royalties of 2% for gold and silver and 1% for all other metals. Reservoir Capital Corp.
later transferred those interests to Reservoir Minerals Inc. (“Reservoir”).
47
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
50/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Subsequently, EMX acquired 0.5% NSR royalty interests (note: the royalty percentage is subject to reduction only as provided in the royalty
agreement) covering the Brestovac and Jasikovo-Durlan Potok properties held by Reservoir (see EMX news release dated February 4, 2014). Reservoir
was acquired by Nevsun Resources Ltd. ("Nevsun") in 2016 (see Reservoir news release dated June 23, 2016). In Q4 2018 Nevsun announced that a
friendly, all cash offer by Zijin Mining Group Co. Ltd. ("Zijin") to purchase all of the issued and outstanding Nevsun common shares for CDN $6.00
per share (~US $1.41 billion in total) had been successful (see Nevsun news release dated December 28, 2018). As a subsequent event, Nevsun was
delisted from the Toronto Stock Exchange and the NYSE American Exchange in Q1 2019.
EMX's Brestovac and Brestovac West royalty properties are included in the Timok Project, with Brestovac covering the Cukaru Peki deposit's Upper
Zone high sulfidation epithermal copper-gold project and the Lower Zone porphyry copper-gold project. Nevsun (now Zijin) 100% controls the Upper
Zone, and is in a joint venture with Freeport on the Lower Zone. EMX notes that a) the original Brestovac and Brestovac West permits are now covered
by the Brestovac Metonivca and Brestovac Zapad permits, and b) portions of a reconfigured Jasikovo-Durlan Potok permit (i.e., expanded in some
areas and reduced in other areas) are not covered by the EMX royalty.
An Upper Zone Pre-Feasibility Study ("PFS") was announced in 2018 with a probable mineral reserve of 27 million tonnes at 3.3% copper and 2.1
grams per tonne gold based upon metal prices of $3.00 per pound copper and $1300 per ounce gold (see Nevsun news releases dated March 28, 2018
and SEDAR filed Technical Report). The PFS outlined a 10 year mine life that yields approximately 1.7billion pounds of payable copper and 516
thousand ounces of payable gold, with an after tax NPV8 of US$1.82 billion valued at the start of construction. Initial Upper Zone production is
estimated to be in 2022. As a step towards development, construction commenced on the Upper Zone exploration decline in Q2 (see Nevsun news
release dated June 5, 2018). Subsequently, an initial inferred resource estimate was announced for the Lower Zone porphyry project at a $25/tonne
"dollar equivalent" cutoff of 1.659 billion tonnes averaging 0.86% copper and 0.18 g/t gold, and containing 31.5 billion pounds of copper and 9.6
million ounces of gold (see Nevsun news release dated June 26, 2018 and SEDAR filed Technical Report). The mining method is assumed to be by
block cave. In addition to the Upper Zone PFS reserves and Lower Zone inferred resources, high grade copper-gold drill results from a discovery 500
meters east of the Timok Upper Zone was announced in Q1 2018 (see Nevsun news release dated January 16, 2018).
EMX's Timok royalty properties add significant upside optionality from one of the world's top copper development projects.
Qualified Person
Eric P. Jensen, CPG, a Qualified Person as defined by NI 43-101 and employee of the Company, has reviewed, verified and approved the above
technical disclosure on Europe.
Turkey
EMX has royalty and royalty generation property interests in Turkey’s Western Anatolia and Eastern Pontides mineral belts. These properties include
high sulfidation gold, gold-silver vein, polymetallic carbonate replacement, and porphyry gold-copper targets. Five of the seven EMX projects in
Turkey are operated by partner companies. EMX has retained Dama Muhendislik Proje ve Maden San.Tic. A.S (“Dama”), a Turkish engineering
company based in Ankara, to manage EMX's interests in Turkey.
48
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
51/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Akarca Property
The Akarca royalty property covers a low sulfidation epithermal gold-silver district in the Western Anatolia mineral belt that was discovered by EMX
in 2006. The project has six zones of gold-silver mineralization defined by drilling, geologic mapping, geochemical sampling, and geophysical survey
programs.
EMX sold AES Madencilik A.S., the wholly-owned EMX subsidiary that controls the Akarca project, to Çiftay Insaat Taahhüt ve Ticaret A.S.
("Çiftay"), a privately owned Turkish company (see EMX news release dated August 8, 2016). Commercial terms of the sale are summarized as (gold
payments to EMX can be as gold bullion or the cash equivalent):
•
•
•
US$2,000,000 cash payment to EMX upon closing of the sale (completed).
Pre-production payments to EMX of 500 ounces of gold every six months commencing February 2, 2017 up to a cumulative total of
7,000 ounces of gold. In 2018, the third and fourth 500 ounce cash equivalent payments were made totaling ~US $1,274,000. The first
two pre-production payments were made in 2017 totaling US$1,235,840. Receipt of these four payments leaves a pre-production total of
5,000 ounces of gold (or the cash equivalent) to be paid to EMX.
Milestone gold payments of 7,000 ounces upon commencement of production (prior gold payments will be credited against this
payment), 250 ounces upon production of 100,000 ounces of gold, and 250 ounces upon production of an aggregate of 500,000 ounces
of gold.
–
A sliding-scale royalty in percentages of production returns after certain deductions (“Royalty”): a) for gold production 1.0% on
the first 100,000 ounces, 2.0% on the next 400,000 ounces, and 3.0% on all production in excess of 500,000 ounces, and b) for
all production other than gold production 3.0%.
•
The Royalty is uncapped and cannot be bought out or reduced.
EMX received Akarca drill data from Çiftay in Q2 2018 totaling 7,844 meters of diamond drilling across five target areas on the property (see EMX
news release dated April 17, 2018). This drilling resulted in a significant increase in the "footprints" of drill defined gold and silver mineralization.
Çiftay's drilling returned multiple high grade intercepts, including 9.5 meters averaging 50.30 g/t gold and 29.2 g/t silver, with a sub-interval of 1.8
meters averaging 256.25 g/t gold and 133.0 g/t silver in hole AKC-317 (true width ~85-95%) drilled at the Arap Tepe “Zone C” area, as well as 69.3
meters averaging 3.68 g/t gold and 4.8 g/t silver in hole AKC-264 (true width ~75-85%), drilled at the Hugla Tepe area. The program also included 24
new holes in the Percem Tepe target area, 23 of which contained significant intercepts of gold mineralization.
Çiftay has informed EMX that its planned 2018 exploration program was delayed while awaiting the required permits for drilling. Çiftay also advised it
conducted various metallurgical, engineering and environmental base line studies on the property while awaiting the drill permits.
49
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
52/156
4/2/2019
Sisorta Property
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Sisorta royalty property, located in the Eastern Pontides mineral belt, is a near-surface, volcanic-hosted, high sulfidation epithermal gold deposit.
Exploration programs at Sisorta have included diamond drilling, geologic and alteration mapping, geochemical sampling, and geophysical surveys.
This work has outlined a 1000 by 600 meter zone of shallow oxide gold mineralization with underlying copper and gold porphyry potential at depth.
EMX sold the wholly-owned EMX subsidiary that controlled the Sisorta property to Bahar Madencilik Sinayi ve Ticaret Ltd Sti ("Bahar"), a privately
owned Turkish company, in 2016 (see EMX news release dated August 3, 2016). The terms of the sale provide for Bahar's staged payments to EMX as
summarized below:
US$250,000 cash payment to EMX upon closing of the sale (completed).
Annual payments of US$125,000 on the anniversary of closing until commencement of commercial production.
3.5% of production returns after certain deductions (“NSR Payment") for ore mined from the property that is processed on-site (increased to 5%
if the ore is processed off-site). The NSR Payment is uncapped and cannot be bought out or reduced.
The annual payments will be credited at a rate of 80% against the NSR Payment after commercial production commences.
Bahar advised EMX in Q2 2018 that it had commenced with Environmental Impact Assessment (“EIA”) work as required under the mine permitting
process in Turkey. Bahar also informed EMX that the EIA report was filed with the Turkish government agencies in Q4 2018. Once approved, Bahar
intends to continue applying for other necessary permits for project development. Bahar advised that the permitting process is expected to take
approximately 1-2 years.
Balya Property
The Balya royalty property is located in the historic Balya lead-zinc-silver mining district in northwestern Turkey. EMX holds an uncapped 4% NSR
royalty that it retained from the sale of the property to Dedeman Madencilik San ve Tic. A.S. ("Dedeman"), a privately owned Turkish company, in
2006.
Dedeman advised EMX that it continued with limited, small scale underground development at the Hastanetepe deposit in 2018. Hastanetepe is a
moderately dipping, 750 by 450 meter zone that extends from depths of 10-20 meters to 200-300 meters as multiple stacked horizons of lead-zinc-silver
mineralization primarily developed along contacts between limestones and dacitic intrusions. Dedeman also advised that it commenced a 24,000 meter
step-out drill campaign to fill in a ~500 meter long corridor between mineralization at Hastanetepe and the Southern Zone target area. Dedeman
provided EMX with initial results from the program in Q3 2018, which included 12.75 meters averaging 11.39% lead, 5.92% zinc and 225.18 g/t silver
in hole DB108-B (true width ~95% of intercept length), as well as other intercepts in nearby holes at Hastanetepe (see EMX news release dated August
13, 2018).
The Balya royalty due to EMX from 2017 production, which was paid in 2018, totaled ~US$121,075. Dedeman advised EMX that it was considering
processing and business development alternatives for the project going into 2019.
Aktutan Property
EMX has a royalty interest in the Aktutan polymetallic project sold to Dedeman in 2007 for consideration that included a 4% uncapped NSR royalty
and annual advance royalty payments of US$100,000 per year. Dedeman has asked to re-negotiate the annual advance royalty payments in light of
discouraging exploration results. These negotiations are in process.
Golcuk Property
The Golcuk royalty property is located in the Eastern Pontides metallogenic belt of northeast Turkey. The mineralization at Golcuk primarily occurs as
stacked, stratabound horizons with disseminated copper and silver hosted in volcanic units, as well as in localized cross-cutting fault-controlled veins
and stockworks of bornite, chalcopyrite and chalcocite.
Pasinex Resources Ltd. (“Pasinex”) signed an agreement in 2012 granting Pasinex an option to acquire 100% interest in the Golcuk property, with
EMX retaining a 2.9% NSR royalty. In Q2 2018, Pasinex announced that it does not intend to further advance the Golcuk project (see Pasinex news
release dated May 25, 2018). Pasinex is evaluating its options with respect to the property, which may include a sale to a Turkish company or returning
the project to EMX.
50
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
53/156
4/2/2019
Trab-23 Property
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Trab-23 property is located in northeast Turkey. The project hosts both porphyry gold (+-copper-molybdenum) mineralization and epithermal
quartz-barite-gold veins.
Tumad Madencilik Sanayi ve Ticaret A.S. (“Tumad”), a privately owned Turkish company, executed an option agreement in 2013 granting it an option
to acquire Trab-23 from EMX. Tumad terminated the agreement in 2017, and in 2018 returned the property to 100% EMX control. Trab-23 is available
for sale or partnership.
Alankoy Property
The Alankoy gold-copper property, located in the Biga Peninsula of northwestern Turkey, occurs in an area noted for discoveries characterized by high
sulfidation style epithermal alteration and the development of vuggy silica lithocaps. EMX's work has outlined a six square kilometer area of lithocaps
and quartz–alunite and argillic alteration with gold-copper mineralization, as well as skarn and replacement style mineralization, based upon geologic
mapping, rock and soil sampling, spectral analyses, ground magnetics, and historic reconnaissance drill results. Alankoy is currently available for sale
or partnership.
Qualified Person
Eric P. Jensen, CPG, a Qualified Person as defined by NI 43-101 and employee of the Company, has reviewed, verified and approved the above
technical disclosure on Turkey.
Australia and New Zealand
EMX's assets in Australia include the Koonenberry royalty property in New South Wales, the Kimberley property in Western Australia, and the QLD
Gold property in Queensland. The agreement with E2 Metals Ltd. for the Neavesville royalty property in New Zealand was terminated in 2018. The
Company's programs in the region continued to evaluate royalty generation and royalty acquisition opportunities.
Koonenberry Property
The Koonenberry royalty property hosts gold occurrences and gold geochemical anomalies coincident with prominent structural features related to the
regional scale Koonenberry fault. Koonenberry Gold Pty Ltd. (“KNB”), a private Australian company, is the operator of EMX's Koonenberry royalty
property (see EMX news release dated September 19, 2017). EMX retains a 3% royalty on all production from the Koonenberry licenses.
51
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
54/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
KNB gained significant momentum with its Koonenberry exploration initiatives in 2018. Geologic mapping and reconnaissance sampling confirmed
the existence of palaeoplacer and reef gold showings across a number of prospect areas. In addition, KNB acquired drilling & support equipment, and
was granted the required permits to drill test four priority target areas. Over 700 meters of diamond drilling were completed that identified a number of
quartz vein sets prospective for gold mineralization. Future work will include delivery of a small scale gravity plant to allow mini-bulk sampling and
assessment of the alluvial and palaeochannel targets. KNB engaged Mining Plus to provide geological, metallurgical and environmental consulting
services to support advancement of the project.
Kimberley Property
The Kimberley copper project consists of the Menuairs Dome and Campbellmerry groups of exploration licenses in the Kimberley region of Western
Australia. The licenses were acquired by EMX on open ground in 2018, and contain sediment-hosted copper targets developed in geologic dome
structures.
EMX executed a purchase agreement with Enfield Exploration Corporation (“Enfield”) in Q4 2018 for the Kimberley project (see EMX news release
dated October 1, 2018). In order to give time to gain access for the commencement of work, the agreement has been deferred until the first half of 2019
to allow the monsoon season to abate and river levels to fall.
QLD Gold Property
EMX's QLD Gold project in southeastern Queensland, Australia contains multiple zones of intrusion related gold mineralization hosted by a suite of
granodioritic and porphyritic felsic intrusions. These zones were the focus of exploration and drilling campaigns in the 1990s. The project hosts
numerous historic mines, including the Monal Goldfields, which produced gold from bedrock sources in the late 1800s. The property also contains gold
and copper-rich skarns and epigenetic, sediment hosted copper mineralization.
Activities for 2018 consisted of fulfilling statutory requirements to keep the project in good standing. The QLD Gold project is available for
partnership.
Neavesville Property
The Neavesville gold-silver property consisted of a single exploration permit in the Hauraki Goldfield of New Zealand's North Island. The project had
been under a definitive agreement with ASX listed E2 Metals Ltd., which acquired the EMX subsidiary that controls the Neavesville property. E2
Metals terminated the agreement in October 2018. EMX elected not to exercise its right to have the property transferred back to the Company due to
concerns of gaining social license to advance the project.
Qualified Person
Eric P. Jensen, CPG, a Qualified Person as defined by NI 43-101 and employee of the Company, has reviewed, verified and approved the above
technical disclosure on Australia and New Zealand.
Haiti
EMX's interests in Haiti have all been converted into NSR royalties. These royalty properties principally resulted from EMX and Newmont Ventures
Limited (collectively, the "Joint Venture") exploring a land position along a 130 kilometer trend of Haiti’s Massif du Nord mineral belt starting in 2008,
with Newmont funding and managing the Joint Venture. In 2015, EMX sold its Haiti Joint Venture interests, which covered six designated exploration
areas to Newmont. Pursuant to the transaction, Newmont acquired all of EMX's interest in the designated exploration areas on the following terms: a)
Newmont paid US$4 million in cash to EMX at closing, b) the Joint Ventures were terminated, c) EMX retains a 0.5% NSR royalty on the 49 Research
Permit applications covering the designated exploration areas, and d) EMX retains the right to acquire any properties proposed to be abandoned or
surrendered by Newmont.
52
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
55/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
In 2016, EMX sold the Grand Bois project, which was outside the Joint Venture with Newmont, to Sono Global Holdings Inc. ("Sono"), a privately
held Nevada corporation. EMX retained a 0.5% NSR royalty interest in the Grand Bois project and the right to acquire any properties proposed to be
abandoned or surrendered from the Grand Bois project in the future.
In mid-2018, 3D Resources Inc. ("3D"), an ASX listed company, called force majeure and terminated the agreement to acquire a 70% interest in Ayiti
Gold Company SA, Sono's Haitian entity holding the Grand Bois license (see 3D news release dated June 25, 2018). According to 3D, "This decision
has been taken because of the lack of progress achieved to date due to the Company’s inability to obtain necessary permits to import equipment into
Haiti to facilitate drilling necessary to complete feasibility studies." Subsequently, a new acquisition agreement was executed, whereby 3D Resources
will acquire 100% ownership of Grand Bois, and Sono will receive a 25% net profit interest and other consideration (see 3D news release dated
October 16, 2018). In late 2018, the acquisition remained subject to satisfaction of a number of conditions precedent, and a revised deadline of March
31, 2019 was announced by 3D in a December 6, 2018 news release.
To the Company's knowledge, there were no significant advancements in 2018 by the Haitian government on implementing a new mining law, a
process which has been underway since 2013 when the Mining Convention process was suspended. As EMX understands, Newmont and Sono have
kept the properties covered by EMX's royalty interests on care and maintenance status.
Qualified Person
Dean D. Turner, CPG, a Qualified Person as defined by NI 43-101 and consultant to the Company, has reviewed, verified and approved the above
technical disclosure on Haiti.
Strategic Investments
IG Copper LLC
EMX is a strategic investor in IG Copper LLC ("IGC"), a privately held company with exploration properties in Khabarovsk Krai (administrative
region) of Far East Russia. The Malmyzh copper-gold project, which was in a joint venture between IGC and Freeport (IGC 51%, Freeport 49%), was
sold in 2018. IGC’s other exploration properties were retained, and are 100% controlled by IGC. EMX was an early investor in IGC, and was its largest
shareholder at the time of the Malmyzh sale, with approximately 42% of the issued and outstanding shares (39% equity position on a fully-diluted
basis) from investments totaling approximately US$13 million. The 2018 Malmyzh sale was a material event for EMX.
53
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
56/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Malmyzh Project
Malmyzh is a district-scale discovery with over 14 porphyry copper-gold centers identified within a 16 by 5 kilometer intrusive corridor. The project,
which occurs 220 kilometers northeast of the Russia-China border at Khabarovsk, has excellent logistical characteristics and available infrastructure.
There were a number of significant project advancements from 2015 to 2017, including 1) a statement of initial inferred resources reported to NI 43-
101 and CIM definition standards (see EMX's May 26, 2015 news release and SEDAR filed Technical Report), 2) Strategic Industries Law ("SIL")
approval from Russia's Government Commission on Monitoring Foreign Investment for the joint venture to advance the Malmyzh project as a majority
foreign owned business entity (see EMX news release dated July 25, 2016), and 3) exploration drilling that led to the discovery of significant breccia
pipe hosted copper-gold mineralization that is not included in the current resource estimate (see EMX news release dated January 24, and July 25,
2017). These positive results led to the engagement of Scotiabank Europe plc, the U.K. subsidiary of The Bank of Nova Scotia, to assist with IGC’s
strategic business initiatives.
In Q2 2018, IGC advised that a definitive Share Purchase Agreement (the “Agreement”) had been executed to sell the Malmyzh project for US $200
million to Russian Copper Company (“RCC”), a privately held copper producer in the Russian Federation (the “Transaction”) (see EMX news release
dated June 14, 2018). The closing of the Transaction was contingent on RCC completing additional due diligence, including drilling and metallurgical
studies, as well as receiving approval from the Russian Federal Anti-Monopoly Service. In early Q4, EMX announced all conditions precedent to
complete the sale, as defined in the Agreement, had been fulfilled, and the US$200 million completion consideration had been paid into escrow (see
EMX news releases dated October 2, and October 11, 2018). Of this amount, US$190 million was released from escrow, with the remaining US$10
million to be held in escrow and released subject to certain conditions over the subsequent 12 months. The Company received its initial cash
distribution of US$65.15 million from the Malmyzh sale as announced in a October 30, 2018 news release. Cash distributions of up to US$4 million
will be made to EMX as funds are released from escrow in 2019.
In support of the Malmyzh sale, EMX borrowed US$18.5 million from Sprott Private Resource Lending (Collector), LP (the “Sprott Loan”), and then
loaned the US$18.5 million to IGC (the “EMX Loan”). In connection with the Sprott Loan, EMX issued 381,321 common shares and paid cash fees of
US$550,000 and interest of US$185,000 to Sprott. In connection with the EMX Loan, IGC issued EMX 37,000 units in IGC, reimbursed EMX for fees,
interest payments and costs incurred under the Sprott Loan, and paid EMX a fee of US$550,000 (this amount is included in the initial cash distribution
of US$65.15 million). Both the Sprott Loan and the EMX Loan were re-paid (see EMX news release dated October 11, 2018).
After the sale of Malmyzh, and the initial distribution of funds to its share holding members, EMX's ownership was reduced to 19.9% of IGC. EMX's
investment in IGC is no longer considered to be material to the Company. As EMX is an investor in IGC, there are no direct holding costs to the
Company.
Revelo Resources Corp.
54
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
57/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX has a strategic investment in Revelo Resources Corp. (TSX-V: RVL "Revelo"), a company focused on the acquisition and exploration of mineral
properties in the prolific metallogenic belts of northern Chile. Revelo has a combination of wholly-owned projects (available for option, JV or sale),
option agreements, royalty interests (non-producing to date), and equity interests in mining and exploration companies.
Qualified Person
Dean D. Turner, CPG, a Qualified Person as defined by NI 43-101 and consultant to the Company, has reviewed, verified and approved the above
technical disclosure on Strategic Investments.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Years Ended December 31, 2018, 2017 and 2016
GENERAL
This discussion and analysis of financial position and results of operations is prepared as at March 26, 2019 and should be read in conjunction with the
audited annual consolidated financial statements of the Company for the years ended December 31, 2018, 2017 and 2016 and the related notes thereto.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
The Company and its subsidiaries operate as a royalty and prospect generator engaged in exploring for, and generating royalties from, metals and
minerals properties. The Company’s royalty and exploration portfolio mainly consists of properties in North America, Turkey, Europe, Australia, and
New Zealand. See Item 4.D. “Property, Plant and Equipment”.
The Company’s working capital position at December 31, 2018 was $88,902,976. With its current plans for the year and the budgets associated with
those plans, in order to continue funding its administrative and royalty generation programs from the date of this Form 20-F, management believes it
will require additional working capital to undertake its current business plan. The Company has incurred recurring losses and has an accumulated
deficit of $41,524,458. In order to maintain or adjust the capital structure, the Company may issue new shares through public and/or private placements,
sell assets, or return capital to shareholders. These uncertainties may cast doubt upon the Company’s ability to continue as a going concern.
Some of the Company’s activities for exploration and evaluation assets are located in emerging nations and, consequently, may be subject to a higher
level of risk compared to other developed countries. Operations, the status of mineral property rights and the recoverability of investments in emerging
nations can be affected by changing economic, legal, regulatory and political situations.
At the date of these consolidated financial statements, the Company has not identified a known body of commercial grade mineral on any of its
exploration and evaluation assets. The ability of the Company to realize the costs it has incurred to date on these exploration and evaluation assets is
dependent upon the Company identifying a commercial mineral body, to finance its development costs and to resolve any environmental, regulatory or
other constraints which may hinder the successful development of the exploration and evaluation assets.
These consolidated financial statements of the Company are presented in Canadian dollars unless otherwise noted, which is the functional currency of
the parent company and its subsidiaries except as to Bullion Monarch, the holder of a royalty income stream whose functional currency is the United
States dollar.
DESCRIPTION OF BUSINESS
EMX Royalty Corporation is in the business of organically generating royalties derived from a portfolio of mineral property interests. The Company
augments royalty generation with carefully selected royalty acquisitions and strategic investments. EMX’s portfolio mainly consists of properties in
North America, Europe, Turkey, Haiti, and Australia. The Company’s common shares are listed on the TSX Venture Exchange and the NYSE
American Exchange under the symbol EMX. The three key components of the Company's business strategy are summarized as:
55
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
58/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Royalty Generation. EMX's sixteen year track record of successful exploration initiatives has developed into an avenue to organically generate
mineral property royalty interests. The strategy is to leverage in-country geologic expertise to acquire prospective properties on open ground,
and to build value through low cost work programs and targeting. These properties are sold or optioned to partner companies for retained
royalty interests, advance minimum royalty payments, project milestone payments, and other considerations that may include equity interests.
Pre-production payments provide early-stage cash flows to EMX, while the operating companies build value through exploration and
development. EMX participates in project upside at no additional cost, with the potential for future royalty payments upon the commencement
of production.
Royalty Acquisition. EMX has been acquiring royalty property interests since 2012. The purchase of royalty interests allows EMX to acquire
quality assets that range from producing mines to development projects. These purchases are designed to "jump start" the organic royalty
portfolio growth process by providing EMX with immediate to near term royalty revenue. The timely identification of acquisition opportunities
is often informed by the Company's in-country royalty generation initiatives.
Strategic Investment. An important complement to EMX's royalty generation and royalty acquisition initiatives comes from strategic
investment in companies with under-valued mineral assets that have upside exploration potential. Exit strategies can include equity sales,
royalty positions, or a combination of both.
EMX is focused on increasing revenue streams from royalties, pre-production and other cash payments, and strategic investments. This approach
provides a foundation for supporting EMX’s growth and increasing shareholder value over the long term.
56
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
59/156
4/2/2019
5.A. Operating Results
Year ended December 31, 2018, 2017, and 2016
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The net income for the year ended December 31, 2018 (“FY18”) was $62,117,601 compared to a net loss of $7,393,384 for the prior year (“FY17”),
and a net loss of $2,683,482 for the year ended December 31, 2016 (“FY16”). The net income for FY18 was made up of a net royalty income of
$307,665 (FY17 – $455,033; FY16 – loss $47,265) after depletion and related tax, net exploration expenditures of $5,949,094 (FY17 - $4,471,074;
FY16 - $4,999,959), general and administrative expenditures of $4,139,498 (FY17 - $3,765,029; FY16 - $3,220,339) and other gains totaling
$68,215,261 (FY17 - loss $2,102,216; FY16 - gain $4,144,749) offset by a deferred income tax recovery of $3,683,267 (FY17 - $2,489,902 ; FY16 -
$1,439,332). Key items in “other income and losses” include: gains in an associated company (IGC) of $80,310,549 (“FY18”) (FY17 - loss $491,005;
FY16 - loss $312,934), impairment of royalty interest in FY18 of $7,256,340 (FY17 - $Nil; FY16 - $Nil), discretionary success bonus of $5,224,284
(FY17 -$Nil; FY16 -$Nil) and a write-down of goodwill of $1,879,356 (FY17 - $2,709,239; FY16 - $1,518,328).
Revenues
In FY18, the Company earned $2,131,947 (FY17 - $2,857,927 ; FY16 - $2,227,322) of royalty income. This included royalty income earned for 1,116
(FY17 - 1,308; FY16 - 1,361) ounces of gold totaling $2,131,947 (FY17 - $2,857,927; FY16 - $2,227,322). In FY18, the average realized gold price for
the Leeville royalty was US$1,270 per ounce, which is comparable to the US$1,255 received for FY17, and US$1,250 for FY16. Royalty income offset
by gold tax and depletion of $1,824,282 (FY17 - $2,402,894 ; FY16 - $2,274,587) for a net royalty gain of $307,665 (FY17 - $455,033; FY16 – loss
$47,265).
Exploration Expenditures
Exploration expenditures (gross) increased by $1,807,549 in FY18 compared to FY17, and decreased by $81,414 in FY17 compared to FY16.
Recoveries increased by $329,5291 in FY18 compared to FY17, and increased by $447,471 in FY17 compared to FY16 for a net increase in
exploration expenditures of $1,478,020 in FY18 compared to FY17, and a net decrease in exploration expenditures of $528,885 in FY17 compared to
FY16. Exploration expenditures and recoveries vary from period to period depending on the level of activity incurred and comparison between periods
does not accurately reflect the activity with the Company. See Item 4B for royalty and project review of current activities.
General and Administrative
General and administrative expenses (“G&A”) of $4,139,498 were incurred compared to $3,765,029 in FY17, and $3,220,339 in FY16. Some
changes between FY18 and FY17 to note are:
Investor relations increased by $140,129 in FY18 compared to FY17, and increased by $114,256 in FY17 compared to FY16. With the increase
in market activity and interest in the mining sector, the Company attended more industry trade shows in FY18.
Salaries and consultants increased in FY18 by $133,760 compared to FY17, and increased by $129,665 in FY17 compared to FY16. It should
be noted that many of our personnel expenditures companywide are denominated in United States dollars (“USD”) and an increase or decrease
in the value of the USD compared to the Canadian dollar, which is our reporting currency, will increase or decrease expenditures.
Share-based payments included in general and administrative expenses increased by $355,697 in FY18 compared to FY17 and increased by
$208,115 in FY17 compared to FY16, mainly due to the to the increase in the fair value of stock options granted during the year.
Other
During FY18, the Company realized a significant gain of $80,310,549 (2017 – loss $491,005; 2016 - $312,934) related to its investment in IGC.
The significant gain is the result of the Company’s share of IGC’s income of $98,919,337 (2017 - loss $994,548; 2016 - loss $1,295,568), offset
by a dilution loss of $577,963 (2017 - gain $503,543; 2016 - gain $982,634), and loss on the derecognition of IGC as an investment in an
associated entity of $18,030,825 (2017 - $Nil; 2016 - $Nil).
57
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
60/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Company recognized a net gain on the sale of certain exploration and evaluation assets during the year of $346,529 compared to $1,305,237
in the prior year, and $6,834,999 in FY16. In FY17, the gain on sale was the result of the Boreal transaction, offset by a small loss on the sale of
EMX Australia Pty. In FY16 the gain resulted from the sale of two significant assets in Turkey including $6,683,560 related to the sale of AES
to Çiftay.
Discretionary bonuses were awarded to management and staff totaling $5,224,284 (2017 - $Nil, 2016 - $Nil) in respect of their seven years of
effort to monetize the Company’s investment in IGC. Prior to the Malmyzh sales transaction, EMX’s management had developed a bonus plan
for strategic investments whereby 7.5% of the after- tax profits of an individual investment could be paid as a bonus. As part of the bonus
calculation, the Company’s cost basis was increased annually by 10% to reflect the time value of the investment.
The Company continuously reviews the production of gold from the Carlin Trend Royalty Claim Block, expected long term gold prices to be
realized, foreign exchange, and interest rates. As a result, periodically the Company revises its estimated annual gold production over the
expected mine life and adjusts its long term gold price. As a result of these adjustments, the Company recorded $7,256,340 (2017 - $Nil, 2016 -
$Nil) in impairment charges for the year ended December 31, 2018 related to the Carlin Trend Royalty Claim Block. Also related to the
valuation of the Leeville royalty is a writedown of goodwill in the amount of $1,879,356 (FY17 - $2,709,239; FY16 - $1,518,328).
The Company recorded a deferred income tax recovery of $3,683,267 compared to $2,489,902 in FY17, and $1,439,332 in FY16, and a net
increase in deferred tax assets of $3,424,345 (FY17 – decrease in tax liability of $2,933,017 ; decrease in tax liability FY16 - $1,748,562). A
significant component of the deferred tax recovery and decrease in the related liability is the result of any impairment of the royalty interest
partially offset by a cumulative translation loss as a result of the strengthening $USD compared to $CAD. During FY18 the Company
recognized an impairment of the Leeville royalty of $7,256,340 (FY17 - $Nil; FY16 - $Nil). The increase in the deferred income tax recovery
for FY17 compared to FY16 was mainly the result of a decrease in the long term expected federal tax rates for the US operations, which
decreased from 35% to 21%.
SIGNIFICANT INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
During the year ended December 31, 2018, the Company derecognized a 39.99% (2017 – 41%; 2016 – 39%) equity investment in IGC and reallocated
the fair value of the remaining investment to FVTPL.
On December 12, 2018, IGC underwent a recapitalization in which the Company did not participate and its investment was diluted to 19.9% and
derecognized its investment in IGC as an associated entity. Prior to the derecognition of IGC as an investment in an associated entity, including the
conversion of convertible notes and related interest due from IGC, cash purchases of shares including the exercise of warrants, and loan fees received in
shares, the Company had invested an aggregate of US$13,137,000 towards its investment (2017 - US$11,355,000; 2016 – US$8,967,000). At
December 31, 2018, the Company’s equity investment including dilution gains or losses, less its share of accumulated equity gains and losses, and any
distributions received was $Nil (2017 - $7,578,989; 2016 - $4,992,823). The Company’s share of the net income for the year ended December 31, 2018
was $98,919,337 (2017 – Loss of $$994,548; 2016 – loss of $1,295,568).
58
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
61/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The changes in the investment in IGC for the years ended December 31, 2018, 2017, and 2016 are as follows:
The aggregate assets, aggregate liabilities and net loss for IGC has not been disclosed for the year ended December 31, 2018 as the investment was
derecognized as an investment in associated entity during the year ended December 31, 2018.
As at December 31, 2017, associated companies’ aggregate assets, aggregate liabilities and net loss for the year ended are as follows:
As at December 31, 2016, associated companies’ aggregate assets, aggregate liabilities and net loss for the year are as follows:
The Company holds a 19.9% interest in IGC, has a minority position on the Board of IGC, and does not control operational decisions. The Company’s
judgment is that it does not have control or significant influence of IGC, and accordingly accounting for the remaining investment in IGC as FVTPL is
appropriate.
IGC – Sale of Malmyzh
On October 10, 2018, the Company was notified by IGC that the sale of the Malmyzh project to RCC for US$200 million had closed. Of this amount,
US$190 million was released from escrow, with the remaining US$10 million to be held in escrow and released subject to certain conditions over the
next 12 months. IGC distributed the net sale proceeds to membership unit holders by way of a combination of share buy back and dividends. For its
39.99% interest in IGC at the time of sale transaction, the Company received its initial cash distribution of $84,246,645 (US$65.15 million). A second
cash distribution to the Company of $5,243,291 (US$4 million) has been accrued as a receivable pending release from escrow.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
59
62/156
4/2/2019
Credit Facilities
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
In support of the sale of Malmyzh, on September 27, 2018, EMX borrowed US$18.5 million from Sprott Private Resource Lending (Collector), LP
(“Sprott”) and then loaned the US$18.5 million to IGC.
Sprott Private Resource Lending (Collector), LP – US$18,500,000
The loan made under the Sprott credit facility had a maturity date of January 31, 2019 and carried an annual interest rate of 12%, payable monthly. In
connection with the Sprott loan, EMX issued 381,321 common shares valued at $602,487 (US$465,212) or $1.58 per share, paid cash fees of
US$550,000, and legal fees of US$194,224.
During the year ended December 31, 2018, using an annual effective interest rate of 30.83%, the Company recorded interest expense of $271,921
(US$208,296). The loan was fully repaid on October 12, 2018 upon receipt of the distribution from IGC and the Company recorded a loss of
$1,481,950 from the early settlement. Included in restricted cash and due to EMX is $86,330 in funds held in trust as part of the Sprott agreement.
IG Copper LLC – US$18,500,000
Concurrent with the Sprott credit facility for US$18,500,000, on September 27, 2018 EMX loaned US$18,500,000 to IGC to facilitate the Malmyzh
property sale. The terms of the arrangement were identical to the Sprott loan to EMX. As such, in connection with the EMX Loan, IGC issued to EMX
37,000 membership units in IGC at US$10/membership unit, reimbursed EMX for fees, interest payments, and reimbursement of all legal costs. IGC
further agreed to pay EMX an additional fee of US$550,000 to EMX.
During the year ended December 31, 2018, using an annual effective interest rate of 38.64%, the Company recorded interest income of $332,078
(US$254,377). The loan was fully repaid on October 12, 2018 by IGC from the proceeds received from the sale of Malmyzh and the Company recorded
a gain of $2,014,950 from the early settlement.
During the year ended December 31, 2018, the Company loaned IGC US$300,000 with no specific terms of repayment, to be settled from proceeds
from the sale of Malmyzh. The loan was fully repaid on October 15, 2018 including $63,926 (US$49,000) in interest.
During the year ended December 31, 2018, the Company recognized a dilution loss of $577,963 (2017 – gain of $503,543; 2016 – gain of $982,634)
related to the Company’s change in ownership percentage as a result of IGC’s share issuance for cash proceeds and loan conversions.
SELECTED ANNUAL INFORMATION
Significant items to note for the year ended December 31, 2018 include the significant equity income of $98,919,337 (2017 – loss of $994,548; 2016 –
loss of $1,295,568) related to the Company’s investment in IGC. The equity income was offset by a dilution loss of $577,963 (2017 – gain of $503,543;
2016 – gain of $982,634), and a loss on derecognition of the investment as an associated entity of $18,030,825 (2017 - $Nil; 2016 - $Nil). Other
significant items to note in the year ended December 31, 2018 include an impairment charge of $7,256,340 (2017 - $Nil; 2016 - $Nil) on the royalty
interests, a related write-down of goodwill of $1,879,356 (2017 - $2,709,239; 2016 - $1,518,328), and a recovery of $3,683,267 (2017 -$2,489,902;
2016 - $1,439,332) of deferred income taxes, offset by a foreign exchange gain of $3,482,540 (2017 – loss of $659,473; 2016 – loss of $159,862) as a
result of holding US cash. Another item having a significant impact on the net income for the respective fiscal years include the payment of
discretionary success bonuses of $5,224,284 (2017 - $Nil; 2016 - $Nil).
60
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
63/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
OUTSTANDING SHARE DATA
At March 26, 2019, the Company had 80,991,155 common shares issued and outstanding. There were also 6,322,400 stock options outstanding with
expiry dates ranging from April 25, 2019 to December 14, 2023, and 2,623,306 warrants outstanding expiring on April 12, 2019.
Critical Accounting Policies and Estimates
STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
These consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board
(“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as fair value through
profit or loss and fair value through other comprehensive income, which are stated at their fair value. In addition, these consolidated financial
statements have been prepared using the accrual basis of accounting except for cash flow information.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the accounts of EMX Royalty Corp., the parent company, and its controlled subsidiaries, after the
elimination of all significant intercompany balances and transactions.
Subsidiaries
Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the
investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Company until the date on which control ceases.
The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company
transactions, balances and unrealized gains or losses on transactions are eliminated. The Company’s principal operating subsidiaries are as follows:
Functional and Reporting Currency
The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency for the Company
and its subsidiaries is the Canadian dollar except the functional currency of the operations of Bullion Monarch which is the US dollar. The functional
currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign
Exchange Rates.
61
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
64/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Translation of transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation
where items are re-measured. Monetary assets and liabilities denominated in foreign currencies are re-measured at the rate of exchange at each financial
position date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.
On translation of the entities whose functional currency is other than the Canadian dollar, revenues and expenses are translated at the exchange rates
approximating those in effect on the date of the transactions. Assets and liabilities are translated at the rate of exchange at the reporting date. Exchange
gains and losses, including results of re-translation, are recorded in the foreign currency translation reserve.
Accounting Standards Adopted During the Year
Revenue recognition
Effective January 1, 2018, the Company has adopted IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). IFRS 15 replaces all previous
revenue recognition standards, including IAS 18, Revenue, and related interpretations. The standard sets out the requirements for recognizing revenue.
Specifically, the new standard introduces a comprehensive framework with the general principle being that an entity recognizes revenue to depict the
transfer of promised goods and services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. The standard introduces more prescriptive guidance than was included in previous standards and may result in changes to the timing
of revenue for certain types of revenues. The new standard will also result in enhanced disclosures about revenue that would result in an entity
providing comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts
with customers. As of January 1, 2018, the Company has adopted IFRS 15 on a full retrospective basis and as such, has revised its revenue recognition
policy based on the requirements of IFRS 15. Management has concluded that, based on its current operations, the adoption of IFRS 15 had no
significant impact on the Company’s consolidated financial statements.
The Company earns revenue from royalty agreements and are based upon amounts contractually due pursuant to the underlying royalty agreements. For
royalty agreements paid in cash or in kind, revenue recognition will depend on the related agreement. Revenue is measured at the fair value of the
consideration received or receivable when management can reliably estimate the amount pursuant to the terms of the royalty or other interest
agreements. In some instances, the Company will not have access to sufficient information to make a reasonable estimate of revenue and, accordingly,
revenue recognition is deferred until management can make a reasonable estimate. Royalty revenue may be subject to adjustment upon final settlement
of estimated metal prices, weights, and assays. Adjustments to revenue from metal prices are recorded monthly and other adjustments are recorded on
final settlement and are offset against revenue when incurred.
Financial instruments
Effective January 1, 2018, the Company adopted IFRS 9 – Financial Instruments (“IFRS 9”) which replaced IAS 39 – Financial Instruments:
Recognition and Measurement (“IAS 39”). IFRS 9 provides a revised model for recognition and measurement of financial instruments and a single,
forward-looking “expected loss” impairment model. IFRS 9 also includes significant changes to hedge accounting. The standard is effective for annual
periods beginning on or after January 1, 2018. The Company adopted the standard retrospectively without restatement. As a result of the adoption of
IFRS 9, the Company reclassified $740,685 from accumulated other comprehensive income (loss) to deficit on January 1, 2018 related to the
reclassification of certain previously recognized available-for-sale marketable securities to fair value through profit or loss. The Company has also
made an irrevocable election to present in other comprehensive income (loss) subsequent changes in the fair value of certain available-for-sale
marketable securities classified as strategic investments.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it eliminates the
previous IAS 39 categories for financial assets of held to maturity, loans and receivables, and available-for-sale.
Under IFRS 9, on initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at amortized cost, fair
value through other comprehensive income (“FVOCI”), or fair value through profit or loss (“FVTPL”). The classification of financial assets is
generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured
at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are
expensed. All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL.
62
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
65/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated, and instead the hybrid financial
instrument as a whole is assessed for classification. On initial recognition of an equity instrument that is not held for trading, the Company may
irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (loss). This election is made on an
investment-by-investment basis.
The classification determines the method by which the financial assets are carried on the consolidated statement of financial position subsequent to
initial recognition and how changes in value are recorded. The following accounting policies apply to the subsequent measurement of financial assets.
a)
b)
c)
Financial assets at FVTPL - These assets are subsequently measured at fair value. Net gains and losses, including any interest or
dividend income, are recognized in profit or loss.
Financial assets at amortized cost - These assets are subsequently measured at amortized cost using the effective interest method. The
amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in
profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Financial assets at FVOCI - These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss
unless the dividend clearly represents a recovery of part of the cost of the investment. Gains or losses recognized on the sale of the
equity investment are recognized in other comprehensive income (loss) and are never reclassified to profit or loss.
Financial liabilities are designated as either fair value through profit or loss, or other financial liabilities. All financial liabilities are classified and
subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial
liabilities are carried on the consolidated statement of financial position subsequent to inception and how changes in value are recorded. Other financial
liabilities are carried on the consolidated statement of financial position at amortized cost.
The Company completed an assessment of its financial instruments as at January 1, 2018. The following table shows the new classification under IFRS
9 and the original classification under IAS 39:
IFRS 9 introduces a new three-stage expected credit loss model for calculating impairment for financial assets. IFRS 9 no longer requires a triggering
event to have occurred before credit losses are recognized. An entity is required to recognize expected credit losses when financial instruments are
initially recognized and to update the amount of expected credit losses recognized at each reporting date to reflect changes in the credit risk of the
financial instruments. In addition, IFRS 9 requires additional disclosure requirements about expected credit losses and credit risk. There was no
adjustment relating to the implementation of the expected credit loss model for the Company’s trade or settlement receivables.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease
can be objectively related to an event occurring after the impairment was recognized.
63
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
66/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Derivative contracts are recognized at fair value on initial recognition. Subsequently, derivatives are remeasured at their fair value. The method of
recognizing any resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being
hedged:
a.
b.
c.
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with
any changes in the fair values of the hedged assets or liabilities that are attributable to the hedged risk.
The effective portions of changes in the fair values of derivatives that are designated and qualify as cash-flow hedges are recognized in
equity. The gain or loss relating to any ineffective portion is recognized immediately in profit or loss.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in profit or
loss.
Amounts accumulated in the hedge reserve are recycled in the consolidated statement of loss in the periods when the hedged items will affect profit or
loss (for instance when the forecast sale that is hedged takes place). If a forecast transaction that is hedged results in the recognition of a non-financial
asset (for example, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are included in the initial measurement of the
cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing
in the hedge reserve at that time remains in the reserve and is recognized when the forecast transaction is ultimately recognized in the consolidated
statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive
income is immediately transferred to the consolidated statement of income (loss).
The Company has not designated any derivative contracts as hedges and therefore has not applied hedge accounting in these consolidated financial
statements.
Convertible Notes Receivable
Convertible notes receivable are hybrid financial assets that consist of a note receivable component and a separate equity conversion component.
Derivatives embedded in contracts are never separated, and instead the notes receivable is disclosed as single financial instrument.
Interest income on the notes receivable is based on the annualized effective rate of interest taking into account all income expected to be earned on
maturity are recognized through profit and loss as interest income.
Investments in Associated Companies
The Company accounts for its long-term investments in affiliated companies over which it has significant influence using the equity basis of
accounting, whereby the investment is initially recorded at cost, adjusted to recognize the Company’s share of earnings or losses and reduced by
dividends received.
The Company assesses its equity investments for impairment if there is objective evidence of impairment as a result of one or more events that occurred
after the initial recognition of the equity investment and that the event or events has an impact on the estimated future cash flow of the investment that
can be reliably estimated. Objective evidence of impairment of equity investments includes:
Significant financial difficulty of the associated companies;
Becoming probable that the associated companies will enter bankruptcy or other financial reorganization; or,
National or local economic conditions that correlate with defaults of the associated companies.
Exploration and evaluation assets and exploration expenditures
Acquisition costs for exploration and evaluation assets, net of recoveries, are capitalized on a property-by-property basis. Acquisition costs include cash
consideration and the value of common shares, issued for exploration and evaluation assets pursuant to the terms of the agreement. Exploration
expenditures, net of recoveries, are charged to operations as incurred.
64
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
67/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
After a property is determined by management to be commercially feasible, an impairment test is conducted and subsequent development expenditures
on the property will be capitalized.
When there is little prospect of further work on a property being carried out by the Company or its partners, when a property is abandoned, or when the
capitalized costs are no longer considered recoverable, the related property costs are written down to management’s estimate of their net recoverable
amount. The costs related to a property from which there is production, together with the costs of production equipment, will be depleted and amortized
using the unit-of-production method.
An exploration and evaluation asset acquired under an option agreement, where payments are made at the sole discretion of the Company, is capitalized
at the time of payment. Option payments received are treated as a reduction of the carrying value of the related acquisition cost for the mineral property
until the payments are in excess of acquisition costs, at which time they are then credited to profit or loss. Option payments are at the discretion of the
optionee and, accordingly, are accounted for when receipt is reasonably assured.
Royalty interests
Royalty interests in mineral properties include acquired royalty interests in production stage and exploration stage properties. In accordance with IAS 38
Intangible Assets, the cost of acquired royalty interests in mineral properties is capitalized as intangible assets.
Acquisition costs of production stage royalty interests are depleted using the units of production method over the life of the related mineral property,
which is calculated using estimated reserves. Acquisition costs of royalty interests on exploration stage mineral properties, where there are no estimated
reserves, are not amortized. At such time as the associated exploration stage mineral interests are converted to estimated reserves, the cost basis is
amortized over the remaining life of the mineral property, using the estimated reserves. The carrying values of exploration stage mineral interests are
evaluated for impairment at such time as information becomes available indicating that production will not occur in the future.
Goodwill
Goodwill represents the excess of the price paid for the acquisition of a consolidated entity over the fair value of the net identifiable tangible and
intangible assets and liabilities acquired in a business combination. Goodwill is allocated to the cash generating unit to which it relates.
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment. Impairment is determined by
assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount.
Property and equipment
Property and equipment is recorded at cost. Buildings are depreciated using a 5 year straightline method. Equipment is depreciated over its estimated
useful life using the declining balance method at a rate of 20% per annum. Depreciation on equipment used directly on exploration projects is included
in exploration expenditures for that mineral property.
Decommissioning liabilities
Decommissioning liabilities are recognized for the expected obligations related to the retirement of long-lived tangible assets that arise from the
acquisition, construction, development or normal operation of such assets. A decommissioning liability is recognized in the period in which it is
incurred and when a reasonable estimate of the fair value of the liability can be made with a corresponding decommissioning cost recognized by
increasing the carrying amount of the related long-lived asset. The decommissioning cost is subsequently allocated in a rational and systematic method
over the underlying asset’s useful life. The initial fair value of the liability is accreted, by charges to profit or loss, to its estimated future value.
Environmental disturbance restoration
During the operating life of an asset, events such as infractions of environmental laws or regulations may occur. These events are not related to the
normal operation of the asset and are referred to as environmental disturbance restoration provisions. The costs associated with these provisions are
accrued and charged to profit or loss in the period in which the event giving rise to the liability occurs. Any subsequent adjustments to these provisions
due to changes in estimates are also charged to profit or loss in the period of adjustment. These costs are not capitalized as part of the long-lived assets’
carrying value.
65
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
68/156
4/2/2019
Impairment of assets
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year. The Company
assesses its cash generating units annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, an
estimate of the recoverable amount is made, which is the higher of the fair value less costs to sell and value in use. The determination of the recoverable
amount for value in use requires the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements,
exploration potential and future operating performance. Fair value is determined as the amount that would be obtained from the sale of the asset in an
arm’s length transaction between knowledgeable and willing parties.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank deposits and short-term, highly liquid investments that are readily convertible to known amounts
of cash.
Share-based payments
Share-based payments include option and stock grants granted to directors, employees and non-employees. The Company accounts for share-based
compensation using a fair value based method with respect to all share-based payments measured and recognized, to directors, employees and non-
employees. For directors and employees, the fair value of the options and stock grants is measured at the date of grant. For non-employees, the fair
value of the options and stock are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is
determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. For
directors, employees and non-employees, the fair value of the options and stock grants is accrued and charged to operations, with the offsetting credit to
share based payment reserve for options, and commitment to issue shares for stock grants over the vesting period. If and when the stock options are
exercised, the applicable amounts are transferred from share-based payment reserve to share capital. When the stock grants are issued, the applicable
fair value is transferred from commitment to issue shares to share capital. Option based compensation awards are calculated using the Black-Scholes
option pricing model while stock grants are valued at the fair value on the date of grant.
The Company has granted certain employees and non-employees restricted share units (“RSUs”) to be settled in shares of the Company. The fair value
of the estimated number of RSUs that will eventually vest, determined at the date of grant, is recognized as share-based compensation expense over the
vesting period, with a corresponding amount recorded as equity. The fair value of the RSUs is estimated using the market value of the underlying shares
as well as assumptions related to the market and non-market conditions at the grant date.
Income taxes
Income tax expense consists of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items
recognized directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is calculated providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable income nor loss. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the temporary difference
can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
66
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
69/156
4/2/2019
Income (loss) per share
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Company presents basic earnings (loss) per share data for its common shares, calculated by dividing the income (loss) attributable to equity holders
of the Company by the weighted average number of common shares issued and outstanding during the period. Diluted earnings per share is calculated
by adjusting the earnings attributable to equity holders and the weighted average number of common shares outstanding for the effects of all potentially
dilutive common shares. The calculation of diluted earnings per share assumes that the proceeds to be received on the exercise of dilutive share options
and warrants are used to repurchase common shares at the average market price during the period. In periods where a loss is reported, diluted loss per
share is the same as basic loss per share as the effects of potentially dilutive common shares would be anti-dilutive.
Existing stock options and share purchase warrants are not included in the income (loss) per share computation of diluted income (loss) per share if
inclusion would be anti-dilutive. For the years presented in which the inclusion of stock options and warrants would be anti-dilutive, the basic and
diluted losses per share are the same.
Valuation of equity units issued in private placements
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The
residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less
easily measurable component.
The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at
their fair value, as determined by the closing quoted bid price on the day prior to the issuance date. The balance, if any, was allocated to the attached
warrants. Any fair value attributed to the warrants is recorded in reserves.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as the Chief
Executive Officer.
Accounting Pronouncements not yet Effective
IFRS 16 Leases was issued by the IASB in January 2016 (effective January 1, 2019) and has not yet been adopted by the Company. IFRS 16 provides a
single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the
underlying asset has a low value.
The Company is currently evaluating the impact the new and amended standard is expected to have on its financial statements and does not expect any
material changes. The Company predominately uses third party services which provide for any possible leases but does lease office space, and if the
limited exception criteria are not met, rent expense is to be removed and replaced by amortization and finance expense related to the leased office space
and respective lease liability.
Critical Accounting Judgments and Significant Estimates and Uncertainties
The preparation of the consolidated financial statements requires management to make judgments and estimates and form assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the periods presented
therein. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, royalty revenues and expenses.
Management bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable under the
circumstances. Actual results may differ from these estimates under different assumptions and conditions.
The Company has identified the following critical accounting policies in which significant judgments, estimates and assumptions are made and where
actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial
position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the
consolidated financial statements.
a) Royalty interest and related depletion
67
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
70/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
In accordance with the Company’s accounting policy, royalty interests are evaluated on a periodic basis to determine whether there are any indications
of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss recognized to the extent that
carrying amount exceeds recoverable amount. The recoverable amount of a royalty asset is measured at the higher of fair value less costs to sell and
value in use. The determination of fair value and value in use requires management to make estimates and assumptions about expected production and
sales volumes, the proportion of areas subject to royalty rights, commodity prices (considering current and historical prices, price trends and related
factors), and reserves. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility that changes in circumstances
will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the
assets may be further impaired or the impairment charge reduced with the impact recorded in profit or loss.
b) Goodwill
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment. Impairment is determined by
assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount. The assessment of the
recoverable amount used in the goodwill impairment analysis is subject to similar judgments and estimates as described above for property and
equipment and royalty interests.
c) Exploration and Evaluation Assets
Recorded costs of exploration and evaluation assets are not intended to reflect present or future values of exploration and evaluation assets. The
recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing knowledge, that a change in future conditions
could require a material change in the recognized amount.
d) Taxation
The Company’s accounting policy for taxation requires management’s judgment as to the types of arrangements considered to be a tax on income in
contrast to an operating cost. Judgment is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognized on the
statement of financial position.
Deferred tax assets, including those arising from unused tax losses, capital losses and temporary differences, are recognized only where it is considered
probable that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from
temporary differences caused principally by the expected royalty revenues generated by the royalty property are recognized unless expected offsetting
tax losses are sufficient to offset the taxable income and therefore, taxable income is not expected to occur in the foreseeable future. Assumptions about
the generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and
sales volumes, commodity prices, and reserves. Judgments are also required about the application of income tax legislation in foreign jurisdictions.
These judgments and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations,
which may impact the amount of deferred tax assets and deferred tax liabilities recognized on the statement of financial position and the amount of
other tax losses and temporary differences not yet recognized. In such circumstances, some or the entire carrying amount of recognized deferred tax
assets and liabilities may require adjustment, resulting in a corresponding credit or charge to profit or loss.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated
financial statements include, but are not limited to, the following:
a) Functional Currencies
The functional currency of each of the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates.
Determination of the functional currency may involve certain judgments to determine the primary economic environment and the Company reconsiders
the functional currency of its entities if there is a change in events and conditions, which determined the primary economic environment.
b) Classification of investments as subsidiaries, joint ventures, associated company and portfolio investments
Classification of investments requires judgement as to whether the Company controls, has joint control of or significant influence over the strategic
financial and operating decisions relating to the activity of the investee. In assessing the level of control or influence that the Company has over an
investment, management considers ownership percentages, board representation as well as other relevant provisions in shareholder agreements. If an
investor holds 20% or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly
demonstrated that this is not the case. Conversely, if the investor holds less than 20% of the voting power of the investee, it is presumed that the
investor does not have significant influence, unless such influence can be clearly demonstrated.
68
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
71/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
5.B. Liquidity and Capital Resources
The Company considers items included in shareholders’ equity as capital. The Company’s objective when managing capital is to safeguard the
Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.
As at December 31, 2018, the Company had working capital of $88,902,976 (2017 - $6,535,893; 2016 - $6,002,318). The Company has sufficient
working capital for the next 12 months. The Company has continuing royalty income that will vary depending on royalty ounces received, the price of
gold, and foreign exchange rates on US royalty payments. The Company manages the capital structure and makes adjustments in light of changes in
economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue
new shares through public and/or private placements, sell assets, or return capital to shareholders.
Sprott Private Resource Lending (Collector), LP– US$5,000,000
In May of 2018, the Company entered into a credit facility agreement with Sprott providing the Company with a US$ 5,000,000 senior secured credit
facility (“Credit Facility”). The loan made under the Credit Facility would have matured on May 2, 2019 and carried an annual interest rate of 12%,
payable monthly. In consideration of the Credit Facility, EMX paid to Sprott a fee of US$100,000, and legal fees of $69,402. The Credit Facility was
covered by a general security agreement against the Company’s assets. The loan was fully repaid in November 2018 from distributions received from
IGC.
In October 2018 EMX’s former investment in associated entity, IGC notified EMX that the sale of the Malmyzh project for US$200 million has closed.
For its 39% interest in IGC at the time of sale transaction, on a fully diluted basis, the Company has received its initial cash distribution of $84,246,645.
A second cash distribution to the Company of $5,243,291 (US$4 million) is expected within 12 months from the initial sale date upon the remaining
funds being released from escrow pending any warranty claims.
Operating Activities
Cash used in operations was $5,955,848 for the year ended December 31, 2018 (2017 - $3,441,424; 2016 - $5,315,543) and represents expenditures
primarily on mineral property exploration and general and administrative expense for both periods, offset by royalty income received in the year.
Financing Activities
The total cash used by financings during the year ended December 31, 2018 was $69,008 (2017 – cash provided of 6,992,928; cash provided by 2016 -
$127,800). The proceeds in the current period were comprised of loan proceeds of $6,298,166 and loan repayments of $6,553,274 including fees and
interest from a US$5,000,000 credit facility with Sprott, and $186,000 from the exercise of stock options. During the comparative year ended
December 31, 2017, the Company received a net of $6,907,228 from the proceeds of a private placement net of costs, and $85,700 (2016 - $127,800)
from the exercise of stock options.
Investing Activities
During the year ended December 31, 2018, the Company generated $84,970,039 (2017 – used $3,391,319) from investing activities. Some of the
significant cash investment activities during the year ended December 31, 2018 include:
-
-
-
-
-
The receipt of cash distributions totalling $84,246,645 from its investment in IGC (2017 - $Nil) related to the IGC sale of Malmyzh.
The Company receiving net repayments of $25,084,851 including loan fees of $717,537 (US$550,000) related to a credit facility with
IGC for $23,268,241 (US$18,500,000) loaned to IGC in support of the Malmyzh sale.
The Company receiving loan proceeds of $23,268,241 and made loan repayments of $24,367,314 including fees and interest from a
US$18,500,000 credit facility.
The Company receiving $456,301 as repayment of a US$300,000 loan and related interest to IGC.
The Company purchasing equity in IGC in the amount $1,781,642 (2017 - $2,059,631).
69
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
72/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
-
-
-
The Company receiving annual option payments of US$100,000 (2017 – US$100,000) from Kennecott related to the Superior West
property, and US$75,000 (2017 – US$75,000) from Mason Resources related to the Yerington property.
The Company advancing $Nil (2017 - $1,005,277) to an associated company pursuant to a convertible loan agreement.
The company also receiving $1,084,980 (2017 - $139,365) from the sale of marketable securities.
5.C. Research and Development, Patents and Licenses, etc.
See subtopic “Exploration Expenditures” under “Item 5.A., Operating Results”.
5.D. Trend Information
See “Property Overview” under “Item 5, Operating and Financial Review and Prospects”, and “Other” under “Item 5.A., Operating Results”.
5.E. Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
5.F Tabular Disclosure of Contractual Obligations
The Company has no Contractual Obligations.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES 6.A. Directors and Senior Management
Directors and Senior Management
(1)
(2)
(3)
Member of Audit Committee
Member of the Compensation Committee
Member of Corporate Governance Committee
David M. Cole (President, CEO and Director)
Mr. Cole has over 30 years of industry experience, coming to EMX Royalty Corp. in 2003 from Newmont Mining Company. At Newmont, he held a
number of management and senior geologic positions, gaining extensive global experience as a project, mine, and generative exploration geologist in
Nevada, Southeast Asia, South America, Europe, and Central Asia. Mr. Cole's success as part of Newmont's exploration team includes contributions at
the world class Carlin Trend, Yanacocha, and Minahasa mines. Subsequently, he established and managed Newmont's exploration programs in Turkey
while also identifying early-stage acquisition targets in Eastern Europe. Mr. Cole specializes in developing new exploration ideas and opportunities,
based upon solid technical expertise coupled with a keen business sense. He studied under Dr. Tommy Thompson at Colorado State University, earning
an M.S. in Geology.
70
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
73/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Michael D. Winn (Director and Chairman)
Mr. Winn is President of Seabord Capital Corp., which provides investment analysis and financial services to companies operating in the energy and
mining sectors. He is also President of Seabord Services Corp., a Canadian company that provides management, administrative, and regulatory services
to private and public mining companies. Prior to starting Seabord Capital in January 2013, Mr. Winn was President of Terrasearch Inc. (1997 to 2012) a
predecessor company to Seabord Capital. He also worked as an analyst for Global Resource Investments Ltd. (1993 to 1997) where he specialized in
the evaluation of emerging oil and gas and mining companies. Mr. Winn has worked in the oil and gas industry since 1983 and the mining industry
since 1992, and is currently a director and officer of several companies operating in Canada, Latin America, Europe and Africa. Mr. Winn received a
B.Sc. in Geology from the University of Southern California.
Brian Bayley (Director)
Mr. Bayley is currently the President of Earlston Management Corp., formerly Ionic Management Corp. (private management company) since
December 1996. From June 2003 to July 2013, Mr. Bayley was director of Quest Capital Corp. (a predecessor company to Sprott Resource Lending
Corp.), a publicly traded resource lending company listed on the TSX and NYSE American. Mr. Bayley was also the Resource Lending Advisor from
September 2010 to June 2013, President and Chief Executive Officer from May 2009 to September 2010, Co-chairman from January 2008 to May
2009, Chief Executive Officer from June 2003 to March 2008, and President from June 2003 to January 2008. Mr. Bayley is also a director and officer
of several other public companies and holds an MBA from Queen’s University.
Brian Levet (Director)
Mr. Levet draws on over 35 years of diversified executive and management experience in mineral exploration, project startup, and mine development
and operations. He began his career with Rio Tinto Rhodesia and Zimbabwe Iron and Steel Company. The majority of Mr. Levet's career was with
Newmont Mining Company, most recently as the Group Executive for Worldwide Exploration, and after 27 years of service he announced his
retirement in early 2011. His distinguished career has been built upon a track record of team-oriented discovery success, with a number of these
discoveries currently in production. He is recognized within the mining industry for exploration expertise and team leadership that resulted in a number
of major discoveries, including the Batu Hijau and Elang copper-gold deposits in Indonesia, the North Lanut gold deposit in North Sulawesi, Indonesia,
the McPhillamys gold deposit in New South Wales, Australia, as well as playing a significant role in the identification of Yanacocha as a world-class
gold mining camp. Mr. Levet has a B.Sc. in Geology from the University of London.
Larry Okada (Director)
Larry Okada is a semi-retired CPA, CA professional accountant in British Columbia and Alberta, as well as a Certified Public Accountant in
Washington State. He has been in public practice with Deloitte's, his own firm, and PwC for over 35 years. For more than 30 years, the majority of Mr.
Okada's clients have been public mining companies listed on the TSX-V. Larry currently sits on a committee with the Institute of Chartered
Accountants of British Columbia. As an independent director, Mr. Okada's extensive experience in accounting, finance, and corporate governance will
further strengthen the Company's Board of Directors in these key areas.
Christina Cepeliauskas (Chief Financial Officer)
Ms. Cepeliauskas is a CPA, CGA professional accountant with more than 20 years of financial accounting and treasury experience in the mineral
exploration and mining industry. She also has her ICD.D designation from the Institute of Corporate Directors. She is currently the Chief Financial
Officer of EMX Royalty Corp. and Reservoir Capital Corp. and was formerly a Director and Chairperson of the Audit Committee of Revelo Resources
Corp. Ms. Cepeliauskas also holds the volunteer position of Chair of the Governance Committee of Fraserside Community Services Society, an
organization committed to helping people overcome challenges.
Lori Pavle (Corporate Secretary)
Ms. Pavle has over 25 years of public company administration predominantly in the resource sector. She has served as Corporate Secretary for several
publicly traded companies including Bayfield Ventures Corp., Cypress Development Corp., Aben Resources Ltd., Skyharbour Resources Ltd., Gold
Reach Resources Ltd., Cuba Ventures Corp. and International Samuel Exploration Corp. Prior to this, she worked for several years at Hunter Dickinson
Inc. as Treasury Manager. Ms.
71
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
74/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Pavle gained her early knowledge working as a paralegal for legal firms specializing in the practice area of corporate and securities law.
The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or
until a successor is duly elected, unless the office is vacated in accordance with the Articles/ByLaws of the Company.
No Director and/or Senior Management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any
court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any Company of which he
is a Director and/or Senior Management, to engage in the securities business or in the sale of a particular security or temporarily or permanently
restraining or enjoining any such person or any Company of which he is an officer or director from engaging in or continuing any
conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a
security or any aspect of the securities business or of theft or of any felony.
There are no family relationships between any two or more Directors or Senior Management.
There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above
was selected as a director or member of senior management.
6.B. Compensation
The following table contains a summary of the compensation paid to the Directors and NEOs during the last three financial years.
Summary Compensation Table
72
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
75/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
(1)
(2)
(3)
(4)
(5)
For officers and employees in the United States, the Company pays 4% of the annual salary each year to the officer or employees’ 401(k)
retirement plan effective January 1, 2012.
RSUs granted under the Company’s RSU Plan. The vesting date and payout date for RSUs is January 1, 2020, for the 2017 RSU’s and January
1, 2021, for the 2018 RSU’s subject to performance criteria.
This amount was a strategic investment success bonus awarded for the successful completion of the IG Copper LLC transaction. (Refer to the
section below entitled “ Strategic Investment Success Bonus”) for further details.
Pursuant to a Management Services Agreement between the Company and Seabord Services Corp. (“Seabord”), Ms. Cepeliauskas’
remuneration is paid by Seabord.
Ms. Segovia resigned as Corporate Secretary on October 12, 2018; Ms Pavle was appointed Corporate Secretary on November 26, 2018.
Strategic Investment Success Bonus
The Board awarded discretionary bonuses to EMX’s management and staff in respect of their seven years of effort to monetize the Company’s
investment in IG Copper LLC (“IGC”). Their efforts included:
(1)
(2)
(3)
(4)
(5)
(6)
identification of the investment opportunity;
providing significant technical oversight towards the discovery of a world class copper deposit at Malmyzh;
raising the capital necessary to advance Malmyzh despite challenging markets and jurisdictional risks;
coordinating the sales effort for Malmyzh over a period of several years;
managing an exit with Freeport, including arranging an US$18.5 million bridge loan, which led to a greater return for all of IGC’s
shareholders, not the least of which was EMX 40% shareholding; and
assisting IGC with the successful sale of Malmyzh to a wholly owned subsidiary of Russian Copper Company (“RCC”) in October for
US$200 million.
Prior to the Malmyzh sales transaction, the Company’s management had developed a bonus plan for strategic investments whereby 7.5% of the after-
tax profits of an individual investment could be paid as a bonus to management and staff. As part of the bonus calculation, the Company’s cost basis
was increased annually by 10% to reflect the time value of the investment.
The strategic investment bonus calculation, along with management’s recommended allocation of bonuses, was then submitted to the Compensation
Committee for its review. The Compensation Committee is comprised of three independent directors. The Committee met several times over the past
four months, both with management and independently of management, as part of the approval process. The Committee recommended the US$3.8
million bonus pool and allocation to the Company’s Board. The independent members of the Board unanimously approved the bonus pool and
allocation with Dave Cole and Michael Winn abstaining from voting.
The Board awarded the bonuses to the Company’s Chairman, management and staff.
The following Stock Options were granted to directors and NEOs during the fiscal year ended December 31, 2018:
73
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
76/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The following RSUs were granted to NEOs during the fiscal year ended December 31, 2018;
Outstanding Share-Based and Option-Based Awards
The following table sets out all option-based and share-based awards outstanding for each Director and NEO as at December 31, 2018.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
74
77/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
(1)
(2)
(3)
The closing price of the Company’s common shares on the TSX-V on December 31, 2018 was $1.51.
RSUs granted under the Company’s RSU Plan on August 28, 2017. The vesting date and payout date for RSUs granted on August 28,
2017, is January 1, 2020,, subject to performance criteria.
RSUs granted under the Company’s RSU Plan on August 27, 2018. The vesting date and payout date for RSUs granted on August 27,
2018 is January 1, 2021,, subject to performance criteria.
Director Compensation.
The fees payable to the independent directors of the Company are for their services as directors and as members of committees of the Board as follows:
Board or
Committee Name
Board of Directors
Annual Retainer
($)
24,000
Meeting Stipend
($)
Nil
Per diem fees
($)
Nil
Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of
the Board of Directors.
Change of Control Remuneration.
Chief Executive Officer
The Company is a party to an employment agreement with David M. Cole, President and CEO of the Company, effective June 1, 2017. Under the
agreement, Mr. Cole receives US$ 325,000 per year. The agreement may be terminated by the Company without reason by written notice and a lump
sum payment equal to 24 months of salary and benefits and all unvested stock options and grants. Mr. Cole may terminate the agreement for any reason
upon two months’ notice to the Company during which time he will continue to receive his usual remuneration and benefits.
75
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
78/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
If Mr. Cole’s agreement is terminated or his duties and responsibilities are materially changed within 6 months following a change in control of the
Company, he is entitled to receive a lump sum payment equal to 24 months of his salary and benefits and all unvested stock options and grants.
Other Executive Officers
The Company has not entered into another employment or consulting contracts with its other Executive Officers.
For the purposes of this section, the following terms have the following meanings:
“Change of control” means an event occurring after the effective date of this agreement pursuant to which:
a)
b)
c)
a merger, amalgamation, arrangement, consolidation, reorganization or transfer takes place in which securities of EMX possessing more
than 50% of the total combined voting power of the EMX’s outstanding voting securities, respectively, are acquired by a person or
persons (other than one or more members of the EMX Group) different from the person holding those voting securities immediately
prior to such event, and the composition of the Board of Directors of EMX or following such event is such that their directors prior to
the transaction constitute less than 50% of the Board membership following the event;
any person (other than a member of the EMX Group), or any combination of persons (none of which is a member of the EMX Group)
acting jointly or in concert by virtue of an agreement, arrangement, commitment or understanding acquires, directly or indirectly, 50% or
more of the voting rights attached to all outstanding voting securities or the right to appoint a majority of the directors of EMX ; or
EMX sells, transfers or otherwise disposes of all or substantially all of its assets, except that no Change of Control will be deemed to
occur if such sale or disposition is made to a member of the EMX Group.
“Termination of Employment” means any voluntary, involuntary or coerced resignation, retirement or other termination of employment of any
Covered Employee directly or indirectly resulting from a Change of Control and includes the occurrence of any of the following events after a Change
of Control, if the Covered Employee does not consent thereto:
(a)
(b)
(c)
(d)
(e)
a material change in office held or employment;
a material change in the nature or scope of duties;
a reduction in remuneration;
a withdrawal of benefits or privileges of employment; or
exclusion from any incentive compensation plans in which the Covered Employee was a participant.
Pension/Retirement Benefits. For the officers and employees in the United States, the Company pays 4% of the annual salary each year to the officer or
employees’ 401(k) retirement plan effective January 1, 2012.
6.C. Board Practices
6.C.1. Terms of Office.
Refer to Item 6.A.1.
6.C.2. Directors’ Service Contracts.
Not applicable.
6.C.3. Board of Director Committees.
The Company has an Audit Committee, which recommends to the Board of Directors the engagement of the independent auditors of the Company and
reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional
services furnished by the independent auditors to the Company.
76
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
79/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The current members of the Audit Committee are: Brian Bayley, Brian Levet and Larry Okada (Chairman). The Audit Committee met four times during
Fiscal year 2018.
Compensation Committee: The Compensation Committee is responsible for the review of all compensation paid (including stock options granted under
the Option Plan and RSU’s issued under the RSU Plan. by the Company to the Board, officers and employees of the Company and any subsidiaries, to
report to the Board on the results of those reviews and to make recommendations to the Board for adjustments to such compensation. The current
members of the Compensation Committee are: Brian Levet (Chairman), Brian Bayley and Larry Okada.
Corporate Governance Committee: The Corporate Governance Committee is responsible for advising the Board of the appropriate corporate
governance procedures that should be followed by the Company and the Board and monitoring whether they comply with such procedures. The current
members of the Corporate Governance Committee are: Michael Winn (Chairman), Brian Bayley and Larry Okada.
The Corporate Governance Committee evaluates the effectiveness of the Board and its committees. To facilitate this evaluation, each committee will
conduct an annual assessment of its performance, consisting of a review of its Charter, the performance of the committee as a whole and will submit a
Committee Annual Report to the Corporate Governance Committee, including recommendations. In addition, the Board will conduct an annual review
of its performance.
6.D. Employees/ Consultants
As of December 31, 2018, EMX had 39 employees and consultants working at various locations throughout the world.
As of March 26, 2019, the Chief Financial Officer, Corporate Secretary, Controller, Payroll & Benefits Administrator and Accounts Payable are all
based in Vancouver, Canada. The President & CEO, Chief Legal Officer, Chief Geologist, General Manager of Exploration, Investor Relations Director,
General Manager of Corporate Development, Manager of Project Marketing, two geologists and a senior administrative assistant are all based in the
Company’s office in Littleton, Colorado through the Company’s wholly-owned subsidiary, EMX USA. There are eight employees located in Arizona
including seven geologists and one office manager. The Company has one consultant in Haiti, one consultant in Australia, 2 consultants in Turkey and 3
consultants in Scandinavia.
See Item 6 – Directors, Senior Management & Employees for a description of their job responsibilities.
6.E. Share Ownership
The table below lists, as of March 26, 2019, Directors and Senior Management who beneficially own the Company's voting securities, consisting solely
of Common Shares, and the amount of the Company's voting securities owned by the Directors and Senior Management as a group.
77
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
80/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Shareholdings of Directors and Senior Management
Shareholdings of 5% Shareholders
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Based on 80,911,155 shares outstanding as of March 26, 2019.
Of these shares, 1,365,015 are represented by currently exercisable share purchase options, warrants and RSUs.
Of these shares, 557,100 are represented by currently exercisable share purchase options and warrants.
Of these shares, 480,000 are represented by currently exercisable share purchase options and RSUs.
Of these shares, 350,000 are represented by currently exercisable share purchase options.
Share purchase options.
Of these shares, 305,000 are represented by currently exercisable share purchase options and warrants.
Of these shares, nil are represented by currently exercisable share purchase options.
Stock Option Plan.
The Board established the Option Plan to attract and motivate the directors, officers and employees of the Company (and any of its subsidiaries),
employees of any management company and consultants to the Company (collectively the “Optionees”) and thereby advance the Company’s interests
by providing them an opportunity to acquire an equity interest in the Company through the exercise of stock options granted to them under the Option
Plan.
Pursuant to the Option Plan, the Board, based on the recommendation of the Compensation Committee, may grant options to Optionees in
consideration of them providing their services to the Company or a subsidiary. The number of Common Shares subject to each option is determined by
the Board within the guidelines established by the Option Plan. The options enable the Optionees to purchase Common Shares at a price fixed pursuant
to such guidelines. The options are exercisable by the Optionee giving the Company notice and payment of the exercise price for the number of
Common Shares to be acquired.
The Option Plan authorizes the Board to grant stock options to the Optionees on the following terms:
1.
2.
3.
The number of Common Shares subject to issuance pursuant to outstanding options, in the aggregate, cannot exceed 10% of the outstanding
Common Shares.
The number of Common Shares subject to issuance upon the exercise of options granted under the Option Plan by one Optionee or all Optionees
providing investor relations services is subject to the following limitations
(a)
no Optionee can be granted options during a 12 month period to purchase more than
(i)
5% of the issued Common Shares unless disinterested Shareholder approval has been obtained (such approval has not been
sought), or
(ii)
2% of the issued Common Shares, if the Optionee is a consultant, and
(b)
the aggregate number of Common Shares subject to options held by all Optionees providing investor relations services cannot exceed
2% in the aggregate.
Unless the Option Plan has been approved by disinterested Shareholders (such approval has not been obtained), options granted under the
Option Plan, together with all of the Company’s previously established and outstanding stock options, stock option plans, employee stock
purchase plans or any other compensation or incentive mechanisms involving the issuance or potential issuance of Common Shares, shall not
result, at any time, in
78
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
81/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
(a)
(b)
(c)
the number of Common Shares reserved for issuance pursuant to stock options granted to insiders exceeding 10% of the outstanding
Common Shares at the time of granting,
the grant to insiders, within a one year period, of options to purchase that number of Common Shares exceeding 10% of the outstanding
Common Shares, or
the issuance to any one insider and such insider’s associates, within a one year period, of Common Shares totaling in excess of 5% of the
outstanding Common Shares.
The exercise price of the options cannot be set at less than the greater of $0.10 per Common Share and the closing trading price of the Common
Shares on the day before the granting of the stock options. If the Optionee is subject to the tax laws of the United States of America and owns
(determined in accordance with such laws) greater than 10% of the Common Shares, the exercise price shall be at least 110% of the price
established as aforesaid.
The options may be exercisable for up to 10 years.
There are not any vesting requirements unless the Optionee is a consultant providing investor relations services to the Company, in which case
the options must vest over at least 12 months with no more than one-quarter vesting in any three month period. However, the Board may impose
additional vesting requirements and, subject to obtaining any required approval from the Exchange, may authorize all unvested options to vest
immediately. If there is a potential “change of control” of the Company due to a take-over bid being made for the Company or a similar event,
all unvested options, subject to obtaining any required approval from the Exchange, shall vest immediately.
The options can only be exercised by the Optionee (to the extent they have already vested) for so long as the Optionee is a director, officer or
employee of, or consultant to, the Company or any subsidiary or is an employee of the Company’s management Company and within a period
thereafter not exceeding the earlier of:
(a)
(b)
the original expiry date;
90 days after ceasing to be a director, officer or employee of, or consultant at the request of the Board or for the benefit of another
director or officer to, the Company unless the Optionee is subject to the tax laws of the United States of America, in which case the
option will terminate on the earlier of the 90th day and the third month after the Optionee ceased to be an officer or employee; and
(c)
if the Optionee dies, within one year from the Optionee’s death.
If the Optionee is terminated “for cause”, involuntarily removed or resigns (other than at the request of the Board or for the benefit of another
director or officer) from any such positions, the option will terminate concurrently.
The options are not assignable except to a wholly-owned holding company. If the option qualifies as an “incentive stock option” under the
United States Internal Revenue Code, the option is not assignable to a holding company.
No financial assistance is available to Optionees under the Option Plan.
Any amendments to outstanding stock options are subject to the approval of the TSX-V and NYSE American and, if required by either
exchange or the Option Plan, of the Shareholders of the Company, possibly with only “disinterested Shareholders” being entitled to vote.
Disinterested Shareholder approval must be obtained for the reduction of the exercise price of options (including the cancellation and re-
issuance of options within a one year period so as to effectively reduce the exercise price) of options held by insiders of the Company. The
amendment to an outstanding stock option will also require the consent of the Optionee.
4.
5.
6.
7.
8.
9.
10.
11.
Any amendments to the Option Plan are subject to the approval of the TSX-V and NYSE American and, if required by either exchange or the
Option Plan, of the Shareholders of the Company, possibly with only “disinterested Shareholders” being entitled to vote.
No options have been granted under the Option Plan which are subject to Shareholder approval. The Option Plan does not permit stock options to be
transformed into stock appreciation rights.
79
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
82/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Outstanding Stock Options
Total for all Officers and Directors
Total for all Employees and Consultants
Total for all Officers, Directors, Employees and Consultants
2,345,000
3,912,400
6,257,400
RSU Plan
The RSU Plan was adopted by the Board for the same reasons as it adopted the Option Plan set out above.
The RSU Plan provides that RSUs may be granted by the Board, based on the advice of the Compensation Committee, to officers, directors and
employees of, and consultants to, the Corporation (“Eligible Persons”) as a discretionary payment in consideration for significant contributions to the
short-term (one year or less) and long-term (one to three years) successes of the Corporation. The Board may, in its sole discretion, set vesting
conditions on RSUs granted to Eligible Persons, which conditions will be primarily based on the performance criteria set by the Compensation
Committee.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
80
83/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The aggregate maximum number of Common Shares reserved for issuance under the RSU Plan in combination with the aggregate number of Common
Shares issuable under all of the Corporation’s other equity incentive plans in existence from time to time, including the Option Plan, shall not exceed
10% of the issued and outstanding Common Shares.
In addition, the RSU Plan provides that the number of Common Shares which may be issuable under the RSU Plan and all of the Corporation's other
previously established or proposed share compensation arrangements, including the Option Plan, within a 12 month period, to:
(a)
(b)
(c)
any one Eligible Person shall not exceed 5% of the total number of issued and outstanding Common Shares on the date of the grant on a non-
diluted basis;
Insiders as a group within a 12 month period shall not exceed 10% of the total number of issued and outstanding Common Shares on a non-
diluted basis; and
any one consultant, or Eligible Person engaged in providing investor relations services to the Corporation, shall not exceed 2% in the aggregate
of the total number of issued and outstanding Common Shares on the date of the grant on a non-diluted basis.
Unless redeemed earlier in accordance with the RSU Plan, the RSUs of each Eligible Person will be redeemed on or within 30 days after the RSU
Payment Date (as defined below) for cash or Common Shares, as determined by the Board, for an amount equal to the Fair Market Value (the closing
market price of the Common Shares on the TSX-V on the day prior to redemption) of an RSU, less applicable withholding taxes, and as increased or
decreased by a “performance factor” determined by the Board in its sole discretion. The “RSU Payment Date” in respect of any RSU means a date not
later than December 15th of the third year following the year in which such RSU was granted to the Eligible Person, unless (i) an earlier date has been
approved by the Board as the RSU Payment Date in respect of such RSU, or (ii) there is a “Change of Control” of the Corporation (as defined in the
RSU Plan), the RSU Plan is terminated or upon an Eligible Person’s death or termination of employment.
Under the RSU Plan, the Board may from time to time amend or revise the terms of the RSU Plan or may discontinue the RSU Plan at any time.
Subject to receipt of requisite disinterested Shareholder, TSX-V and NYSE American approvals, the Board may make amendments to the RSU Plan to
change the maximum number of Common Shares issuable under the RSU Plan,
change the method of calculation of the redemption of RSUs held by Eligible Persons, and
provide an extension to the term for the redemption of RSUs held by Eligible Persons.
All other amendments to the RSU Plan may be made by the Board without obtaining shareholder approval.
If an Eligible Person ceases to be an Eligible Person for any reason (excluding death), all of the Eligible Person’s RSUs which have vested at the time
of such cessation shall be redeemed for cash or Common Shares and the remainder shall be cancelled. No amount shall be paid by the Corporation to
the Eligible Person in respect of the RSUs so cancelled. If an Eligible Person ceases to be an Eligible Person due to death, any of the Eligible Person’s
RSUs which would otherwise vest within the next year following the date of death shall be redeemed for cash or Common Shares as determined by the
Board.
In the event of a Change of Control, then the Corporation may redeem, subject to prior approval of the TSX-V and NYSE American, all of the RSUs
granted to the Eligible Persons and outstanding under the RSU Plan for that number of Common Shares equal to the number of RSUs then held by the
Eligible Persons. If the employment of an Eligible Person is terminated within six months following a Change of Control, all RSUs held by such
Eligible Person shall become vested and be redeemed for cash or Common Shares.
Stock Grant Program.
The Board created the Incentive Stock Grant Program for the benefit of key officers and directors of the Company in 2010. The grants have a two-year
vesting period.
The purpose of the Stock Grant Program is as follows. Firstly, to reward and provide an incentive to such persons for the ongoing efforts towards the
continuing successes and goals of the Company as many of its successes directly result from their very significant efforts. Secondly, to provide such
persons with a long-term incentive to remain with the Company. Finally, from time to time, the Company may provide additional compensation in the
form of stock grants as part of annual salaries.
81
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
84/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The Stock Grant Program provides that, following the approval of the independent members of the Compensation Committee, up to 300,000 Common
Shares may be awarded in each year. The Common Shares awarded will vest and be issued in three separate tranches over a two year period – on the
date of grant, and on the first and second anniversaries of the initial grant. None of the 300,000 Common Shares not awarded in one year can be rolled
over or awarded in subsequent years. If the recipient ceases to be a director or officer of the Company before the relevant anniversary, he or she will not
be entitled to receive any further Common Shares under the Stock Grant Program, including Common Shares previously awarded for issuance on such
anniversary.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major Shareholders.
7.A.1.a. Holdings By Major Shareholders.
The Company is aware of one person who beneficially own 5% or more of the Registrant's voting securities. The table below lists as of March 8, 2019,
persons and/or companies holding 5% or more beneficial interest in the Common Shares.
(1)
Based on 80,911,155 shares outstanding as of March 26, 2019.
7.A.1.b. Significant Changes in Major Shareholders’ Holdings .
Not applicable.
7.A.1.c. Different Voting Rights.
The Company’s major shareholders do not have different voting rights.
7.A.2. Canadian Share Ownership.
On March 26, 2019, the Company’s shareholders’ list showed 80,911,155 common shares outstanding and 268 registered shareholders. The Company
has researched the indirect holdings by depository institutions and other financial institutions estimates that there are 17 “holders of record" resident in
Canada representing 39,382,954 Common Shares, 251 “holders of record" resident in the USA representing 41,109,932 Common Shares, and 34
“holders of record” resident internationally representing 388,269 Common Shares.
The Company is a foreign private issuer for its current fiscal year. As of the last business day of the Company’s second fiscal quarter, the majority of
the Company’s executive officers and directors were not US citizens or residents, the majority of the Company’s assets are not in the United States, and
the Company is administered principally in Canada. The Company’s major shareholders in common shares have the same voting rights as other holders
of common shares. The Company is not directly or indirectly owned or controlled by another corporation, a foreign government or any other natural or
legal persons severally or jointly. There are no arrangements known to the Company which may result in a change of control of the Company.
7.A.3. Control of the Company
The Company is a publicly owned Canadian Company, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents.
The Company is not controlled by any foreign government or other person(s) except as described in Item 4.A., “History and Growth of the Company”,
and Item 6.E., “Share Ownership”.
82
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
85/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
7.A.4. Change of Control of Company Arrangements.
Not applicable.
7.B. Related Party Transactions
The aggregate value of transactions and outstanding balances relating to key management personnel and directors were as follows:
(1) Directors fees include US$5,000 per month and a US$1,000,000 discretionary bonus paid to the Company’s non-Executive Chairman, who does not
receive the fees paid to the other independent director’s.
Seabord Services Corp. (“Seabord”) is a management services company controlled by the Chairman of the Board of Directors of the Company. Seabord
provides a Chief Financial Officer, a Corporate Secretary, accounting and administration staff, and office space to the Company. The Chief Financial
Officer and Corporate Secretary are employees of Seabord and are not paid directly by the Company.
Shareholder Loans
Not applicable.
Amounts Owing to Senior Management/Directors
Included in accounts payable and accrued liabilities at December 31, 2018 is $3,365,005 (2017 - $30,744; 2016 - $23,472) owed to key management
personnel and other related parties. Included in amounts due to related parties for the year ended December 31, 2018 was $3,339,365 for discretionary
success bonuses paid in fiscal 2019.
Other than as disclosed above, there have been no transactions since December 31, 2018, or proposed transactions, which have materially affected or
will materially affect the Company in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or
any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the
transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.
83
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
86/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Other Related Party Transactions
In October 2017, the Company issued a note receivable to Revelo Resources Corp. (TSX-V: RVL), a related party by way of a common director for the
principal amount of $400,000. The note was due on December 31, 2017, together with accrued interest at a rate of 1% per month and a bonus of
$20,000. As at December 31, 2018, the balance owed to the Company pursuant to the note was $477,973 (2017 - $429,973) including accrued interest
and bonus fee. The Company is re - negotiating the terms of repayment.
Other than as disclosed above, there have been no transactions or loans between the Company and (a) enterprises that directly or indirectly through one
or more intermediaries, control or are controlled by, or are under common control with, the company; (b) associates; (c) individuals owning, directly or
indirectly, an interest in the voting power of the Company giving them significant influence over the Company, and close members of any such
individual’s family; (d) key management personnel and close members of such individuals’ families; and (e) enterprises substantially owned or
controlled, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.
7.C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
8.A. Consolidated Statements and Other Financial Information
The Company's financial statements are stated in Canadian Dollars and are prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
See ‘‘Item 18. Financial Statements’’ for our Annual Audited Consolidated Financial Statements, related notes and other financial information filed
with this annual report on Form 20-F.
8.A.7. Legal/Arbitration Proceedings
The Directors and the management of the Company do not know of any material active or pending, legal proceedings; nor is the Company involved as
a plaintiff in any material proceeding or pending litigation.
8.A.8. Dividends.
The Company has not declared or paid any dividends on our Common Shares. Our current business plan requires that for the foreseeable future, any
future earnings be reinvested to finance the growth and development of our business. We do not intend to pay cash dividends on the Common Shares in
the foreseeable future. We will not declare or pay any dividends until such time as our cash flow exceeds our capital requirements and will depend
upon, among other things, conditions then existing including earnings, financial condition, restrictions in financing arrangements, business
opportunities and conditions and other factors, or our Board determines that our shareholders could make better use of the cash.
8.B. Significant Changes
There have been no significant changes to the Company’s financial condition since the end of the fiscal year.
ITEM 9. THE OFFER AND LISTING
9.A. Common Share Trading Information
The Common Shares began trading on the TSX-V on November 23, 2003 and the Common Shares began trading on the NYSE American on January
30, 2012. The trading symbol is “EMX” for both exchanges.
84
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
87/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
ITEM 10. ADDITIONAL INFORMATION
10.A. Share Capital
Not applicable.
10.B. Memorandum and Articles of Association
New British Columbia Corporations Act
Background
Effective March 29, 2004, the Business Corporations Act (British Columbia) (the “New Act”) replaced the previous Company Act (British Columbia)
(the “Old Act”). As a consequence, all British Columbia companies are now governed by the New Act. The New Act is intended to modernize and
streamline company law in British Columbia.
Objects and Purposes
The Articles of EMX place no restrictions upon the type of business that the Company may engage in.
Disclosure of Interest of Directors,
Part 17 of the Articles
17.1 A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction
into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer
under or as a result of the contract or transaction only if and the extent provided in the Business Corporations Act.
17.2 A director who holds a disclosable interest in a contract into which the Company has entered or proposes to enter is not entitled to vote on any
directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which
case any or all of those directors may vote on such resolution.
17.3 A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is
present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether
or not the director votes on any or all of the resolutions considered at the meeting.
17.4 A director of senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the
creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and
extent of the conflict as required by the Business Corporations Act.
17.5 A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to their office of
director for a period and on the terms (as to remuneration or otherwise)that the directors may determine.
17.6 No director or intended director is disqualified by their office from contracting with the Company either with regard to the holding or any office
or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf
of the Company in which a director is in any way interested is liable to be voided for that reason.
17.7 A director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as
auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were
not a director or officer.
17.8 A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be
interested as a shareholder or otherwise, and the director or officer is not accountable to the Company for any remuneration or other benefits received
by them as director, officer or employee of, or from their interest in, such other person.
85
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
88/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Powers and Duties of Directors
Part 16 of the Articles
16.1 The directors must, subject to the Articles, manage or supervise the management of the business and affairs of the Company and have the
authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by the Articles, required to be exercised by the
shareholders of the Company.
16.2 The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the
attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the
directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or
fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends)and for such period,
and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for
the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the director to
sub-delegate all or any of the powers, authorities and discretions for the time being vested in them.
Borrowing Powers of Directors,
Part 8 of the Articles
8.1. The directors, if authorized by the directors, may:
(1) borrow money in such manner and amount, on the security, from the sources and upon the terms and conditions as they consider
appropriate;
(2) issue bonds, debentures, and other debt obligations either outright or as security for any liability or obligation of the Company or any
other person and at such discounts or premiums and on such other terms as they consider appropriate;
(3) guarantee the repayment of money by any other persons or the performance of any obligation of any other person; and
(4) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any
part of the present and future assets and undertaking of the Company.
Remuneration of Directors
Part 13 of the Articles
13.5 The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If they so decide,
the remuneration, if any, of the directors will be determined by the shareholders. That remuneration may be in addition to any salary or other
remuneration paid to any officer of employee of the Company as such, who is also a director.
13.6 The Company must reimburse each director for the reasonable expenses they may incur in and about the business of the Company.
13.7 If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of
a director, or if any director is otherwise specially occupied in or about the Company’s business, they may be paid remuneration fixed by the directors,
or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other
remuneration that they may be entitled to receive.
13.8 Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on
retirement to any director who has held any salaried office or place of profit with the Company or to their spouse or dependants and may make
contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.
Required Ownership of Capital by Directors
Part 13 of the Articles
86
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
89/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
13.4. A director is not required to hold a share in the capital of the Company as qualification for their office but must be qualified as required by the
Business Corporations Act to become, act or continue to act as a director.
Dividend Rights
Part 22 of the Articles
22.2 The directors may from time to time declare and authorize payment of such dividends as they may deem advisable.
Special Rights and Restrictions
Part 9 and 10 of the Articles
9.2 The Company may by ordinary resolution:
(1) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, unless
any of those shares have been issued in which case the Company may do so only be special resolution; or
(2) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, unless any of those shares have
been issued in which case the Company may do so only be ordinary resolution.
Rules pertaining to annual general and special general meetings of shareholders are described in Sections Ten of the Company’s Articles. These rules
are summarized as follows:
10.1 The Company must, unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, hold its first
annual general meeting following incorporation, amalgamation or continuation within 18 months after the date on which it was incorporated or
otherwise created and recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months
after the last annual reference date at such time and place as may be determined by the directors; and
10.2 If all the shareholders entitled to vote at an annual general meeting consent by unanimous resolution under the Business Corporations Act to all
of the business required to be transacted at that annual general meeting, the meeting is deemed to have been held on the date of the unanimous
resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select the Company’s annual reference date a date that
would be appropriate for the holding of the applicable annual general meeting.
10.3 The directors may, whenever they think fit, call a meeting of shareholders to be held in British Columbia, Calgary, Alberta or Toronto, Ontario
or at such other location as may be approved by the Registrar of Companies at such time and place as may be determined by the directors.
10.4 The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided by these Articles, or in
such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been give or not), to each
shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the
following number of days before the meeting:
(1) if and for so long the Company is a public company, 21 days;
(2) otherwise, 10 days.
10.5 The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders.
The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned
by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is
held by fewer than:
(1) if and for so long as the Company is a public company, 21 days;
(2) otherwise, 10 days.
If no record date is set, it is 5:00 p.m. on the business day immediately preceding the first date on which the notice is sent or, if no notice is sent, the
beginning of the meeting.
87
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
90/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
10.6 The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The
record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by
shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5:00 p.m. on the day
immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.
10.7 The accidental omission to send notice of any meetings to, or the non-receipt of any notice by, any of the persons entitled to notice does not
invalidate any proceedings at that meeting. Any person entitled to notice of such meeting of shareholders may, in writing or otherwise, waive or reduce
the period of notice of such meeting.
10.8 If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:
(1) state the general nature of the special business; and
(2) if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of
effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by
shareholders:
(a)
at the Company’ records office, or at such other reasonably accessible location in British Columbia as is specified in such notice;
and
(b)
during statutory business hours o any one or more specified days before the day set for the holding of the meeting.
Proceedings at Meetings of Shareholders
Part 11 of the Articles
11.1 At a meeting of shareholders, the following business is special business:
(1)
at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct
of or voting at the meeting;
(2)
at an annual general meeting, all business is special business except for the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
business relating to the conduct or voting at the meeting;
consideration of any financial statements of the Company presented to the meeting;
consideration of any reports of the directors or auditor;
the setting or changing of the number of directors;
the election or appointment of directors;
the appointment of an auditor;
the setting of the remuneration of the auditor;
business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; and
any other business under which, under these Articles or the Business Corporations Act, may be transacted at a meeting of
shareholders without prior notice of the business being given to the shareholders.
11.2 The majority of votes required for the Company to pass a special resolution at a meeting of shareholders are two-thirds of the votes cast on the
resolution.
11.3 Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a
meeting of shareholders is two shareholders present in person or represented by proxy.
11.4 If there is only one shareholder entitled to vote at a meeting of shareholders:
(1)
(2)
the quorum of one person who is, or who represents by proxy, that shareholder; and
that shareholder, present in person or by proxy, may constitute the meeting.
11.5 The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, auditor of the Company
and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of
shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder
entitled to vote at the meeting.
88
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
91/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
11.6 No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of
shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present
throughout the meeting.
11.7 If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:
(1)
(2)
in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and
in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and
place.
11.8 If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within one-half hour from the time
set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and
vote at the meeting constitute a quorum.
11.9 The following individuals are entitled to preside as chair at a meeting of shareholders:
(1)
(2)
the chair of the board, if any; or
if the chair of the board is absent or unwilling to act as chair of the meeting, the first of the following individuals to agree to act as chair:
the president, if any.
11.10 If, at any meeting of shareholders, the chair of the board or president are not present within 15 minutes after the time set for holding the
meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have
advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, one of the chief executive officer, the
chief financial officer, a vice-president, the secretary or the Company’s legal counsel may act as chair of the meeting and, failing them, the directors
present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose of if no
director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person at the meeting to chair
the meeting.
11.11 The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to
place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment
took place.
11.12 It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at any adjourned meeting of shareholders
except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.
11.13 Every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the
result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by
proxy.
11.14 The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of
hands or the poll, as the case may be, and that decision must be entered into the minutes of the meeting. A declaration of the chair that a resolution is
carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without
proof of the number or proportion of the votes recorded in favor of or against the resolution.
11.15 No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any
meeting of shareholders is entitled to propose or second a motion.
11.16 In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting
vote in addition to the vote or votes to which the chair may be entitled as a shareholder.
11.17 Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:
(1)
the poll must be taken:
89
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
92/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
(a)
(b)
at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and
in the manner, at the time and at the place that the chair of the meeting directs;
(2)
(3)
the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and
the demand for the poll may be withdrawn by the person who demanded it.
11.18 A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.
11.19 In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and
their determination made in good faith is final and conclusive.
11.20 On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.
11.21 No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.
11.22 The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for
the transaction of any business other than the question on which a poll had been demanded.
11.23 The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the
meeting at its records office, and, during that period, makes them available for inspection during normal business hours by any shareholder or proxy
holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.
Votes of Shareholders
Part 12 of the Articles
12.1 Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:
on a vote by a show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote;
and
on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and
held by that shareholder and may exercise that vote either in person or by proxy.
(1)
(2)
Other Issues
Neither the Company’s articles nor British Columbia law permit: staggered terms for Directors; cumulative voting; shareholder approval of corporate
matter by written consent; the adoption of various “poison pill” measures precluding shareholders from realizing a potential premium over the market
value of their shares. Neither the Company’s articles nor British Columbia law require retirement or non-retirement of directors under an age limit
requirement.
There are no limitations on the rights to own securities.
There is no provision of the Company’s articles that would have an effect of delaying, deferring or preventing a change in control of the Company and
that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries).
Shareholder ownership must be disclosed to the British Columbia Securities Commission and the TSX-V by any shareholder who owns more than 10%
of the Company’s common stock.
10.C. Material Contracts
Pursuant to a management service agreement dated February 13, 2014 as amended December 1, 2015 and February 12, 2018 between the Company and
Seabord Services Corp. of Suite 501, 543 Granville Street, Vancouver, British Columbia, the Corporation pays $37,000 per month to Seabord in
consideration of Seabord providing the services of the CFO and Corporate Secretary and office, reception, secretarial, accounting and corporate records
services to the Company. The Chief Financial Officer and Corporate Secretary are employees of Seabord and are not paid directly by the Company.
90
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
93/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Seabord is a private company wholly-owned by Michael D. Winn, the Chairman and director of the Company.
10.D. Exchange Controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company
to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and
other payments to non-resident holders of the Company’s securities, except as discussed in Item 10, ”Taxation" below.
Restrictions on Share Ownership by Non-Canadians - There are no limitations under the laws of Canada or in the organizing documents of the
Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval
by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The threshold for acquisitions of control
is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian" generally means an individual who is not a
Canadian citizen, or a Company, partnership, trust or joint venture that is ultimately controlled by non-Canadians.
10.E. Taxation
Canadian Federal Income Tax Considerations
The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Company (a
"U.S. Holder") who deals at arm's length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act
(Canada) (the "Act") and the Canada – United States Income Tax Convention (the "Treaty"), is at all relevant times resident in the United States, is not
and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada.
Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.
Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or
deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a Company that beneficially
owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such
as qualifying pension funds and charities.
In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at
any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the
Company was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm's
length, and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the
Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral
deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such
resources, certain other rights in respect of natural resources situated in Canada and shares of a Company the value of whose shares is derived
principally from real property situated in Canada.
The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and
other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign Company, such as the Company, will be treated as a
passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets
(by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was a passive
foreign investment company as at December 31, 2018.
Dividends
A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax
treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as
amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend
on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a
company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount
of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld
amount directly to the Receiver General for Canada for the account of the Holder.
91
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
94/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Disposition of Common Shares
A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain
(or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act. Generally, a common
share of a public Company will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the
Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years
preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The Canadian Venture Exchange is a prescribed
stock exchange under the Tax Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that
was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of
the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the
common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period
preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the
disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when
he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the
capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct
three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the
year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the
three preceding years or any subsequent year.
Certain United States Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising
from and relating to the acquisition, ownership, and disposition of common shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax
considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of common shares. In addition,
this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income
tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary
is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not
address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the
acquisition, ownership, and disposition of common shares. Except as specifically set forth below, this summary does not discuss applicable tax
reporting requirements. Each U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.
No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the "IRS") has been requested, or will be obtained, regarding the
U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares. This summary is not binding on the IRS, and
the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the
authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the
positions taken in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (whether final, temporary, or proposed),
published rulings of the IRS, published administrative positions of the IRS, the Treaty, and U.S. court decisions that are applicable and, in each case, as
in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and
adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax
considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed
legislation that, if enacted, could be applied on a retroactive or prospective basis.
92
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
95/156
4/2/2019
U.S. Holders
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of common shares that is for U.S. federal income tax purposes:
an individual who is a citizen or resident of the U.S.;
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the U.S., any state
thereof or the District of Columbia;
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial
decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
Non-U.S. Holders
For purposes of this summary, a "non-U.S. Holder" is a beneficial owner of common shares that is not a U.S. Holder or is a partnership. This summary
does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and relating to the acquisition, ownership, and disposition
of common shares. Accordingly, a non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum,
U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences (including the potential application of and operation of any income tax
treaties) relating to the acquisition, ownership, and disposition of common shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the
Code, including, but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or
other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment
companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a
"functional currency" other than the U.S. dollar; (e) own common shares as part of a straddle, hedging transaction, conversion transaction, constructive
sale, or other arrangement involving more than one position; (f) acquired common shares in connection with the exercise of employee stock options or
otherwise as compensation for services; (g) hold common shares other than as a capital asset within the meaning of Section 1221 of the Code
(generally, property held for investment purposes); (h) are required to accelerate the recognition of any item of gross income with respect to Securities
as a result of such income being recognized on an applicable financial statement; or (i) own or have owned (directly, indirectly, or by attribution) 10%
or more of the total combined voting power or value of the outstanding shares of EMX . This summary also does not address the U.S. federal income
tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or
will be a resident or deemed to be a resident in Canada for purposes of the Act; (c) persons that use or hold, will use or hold, or that are or will be
deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute "taxable
Canadian property" under the Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Treaty. U.S. Holders that are
subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax
advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences
relating to the acquisition, ownership and disposition of common shares.
If an entity or arrangement that is classified as a partnership (or "pass-through" entity) for U.S. federal income tax purposes holds common shares, the
U.S. federal income tax consequences to such partnership and the partners (or owners) of such partnership generally will depend on the activities of the
partnership and the status of such partners (or owners). This summary does not address the tax consequences to any such partnership or partner (or
owner). Partners (or owners) of entities or arrangements that are classified as partnerships for U.S. federal income tax purposes should consult their
own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of
common shares.
93
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
96/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Passive Foreign Investment Company Rules
If EMX were to constitute a "passive foreign investment company" (a “PFIC”), as defined below, within the meaning of Section 1297 of the Code, for
any year during a U.S. Holder’s holding period, then certain different and potentially adverse rules will affect the U.S. federal income tax consequences
to a U.S. Holder resulting from the acquisition, ownership and disposition of common shares. In addition, in any year in which EMX is classified as a
PFIC, such holder will be required to file an annual report with the IRS containing such information as Treasury Regulations or other IRS guidance
may require. A failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S.
Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement
to file an IRS Form 8621.
PFIC Status of EMX
EMX generally will be a PFIC if, for a tax year, (a) 75% or more of the gross income of EMX is passive income (the "income test"), or (b) 50% or
more of the value of EMX ’s assets either produce passive income or are held for the production of passive income, based on the quarterly average of
the fair market value of such assets (the "asset test"). "Gross income" generally includes all sales revenues less the cost of goods sold, plus income from
investments and from incidental or outside operations or sources, and "passive income" generally includes, for example, dividends, interest, certain
rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.
Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign
corporation’s commodities are stock in trade of such foreign corporation or other property of a kind which would properly be included in inventory of
such foreign corporation, or property held by such foreign corporation primarily for sale to customers in the ordinary course of business and certain
other requirements are satisfied.
For purposes of the PFIC income test and asset test described above, if EMX owns, directly or indirectly, 25% or more of the total value of the
outstanding shares of another corporation, EMX will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b)
received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test
described above, and assuming certain other requirements are met, "passive income" does not include certain interest, dividends, rents, or royalties that
are received or accrued by EMX from certain "related persons" (as defined in Section 954(d)(3) of the Code), to the extent such items are properly
allocable to the income of such related person that is not passive income.
EMX currently expects that it will be classified as a passive foreign investment company (“PFIC”) for the tax year ending December 31, 2018 and
expects to be a PFIC in future tax years. No opinion of legal counsel or ruling from the IRS concerning the status of EMX as a PFIC has been obtained
or is currently planned to be requested. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the
application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC
for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with
certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by EMX
concerning its PFIC status. Each U.S. Holder should consult its own tax advisor regarding the PFIC status of EMX .
Default PFIC Rules Under Section 1291 of the Code
If EMX is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of common shares will
depend on whether such U.S. Holder makes an election to treat EMX as a "qualified electing fund", or "QEF", under Section 1295 of the Code, or a
"QEF Election", or a mark-to-market election under Section 1296 of the Code, or a "Mark-to-Market Election". A U.S. Holder that does not make
either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a "Non-Electing U.S. Holder".
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to, (a) any gain recognized on the sale or other taxable
disposition of common shares, and (b) any excess distribution received on common shares. A distribution generally will be an "excess distribution" to
the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions
received during the three preceding tax years (or during a U.S. Holder’s holding period for common shares, if shorter).
Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of common shares and any "excess distribution" received
on common shares must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective common shares. The amount
of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity
became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at
the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year,
calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid
as "personal interest", which is not deductible.
94
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
97/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
If EMX is a PFIC for any tax year during which a Non-Electing U.S. Holder holds common shares, EMX will continue to be treated as a PFIC with
respect to such Non-Electing U.S. Holder, regardless of whether EMX ceases to be a PFIC in one or more subsequent tax years. A Non-Electing U.S.
Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed
above), but not loss, as if such common shares were sold on the last day of the last tax year for which EMX was a PFIC.
QEF Election
A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which its holding period of its common shares begins generally
will not be subject to the rules of Section 1291 of the Code discussed above with respect to its common shares. A U.S. Holder that makes a timely and
effective QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of, (a) the net capital gain of EMX, which will be
taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of EMX, which will be taxed as ordinary income to such U.S. Holder.
Generally, "net capital gain" is the excess of (i) net long-term capital gain over (ii) net short-term capital loss, and "ordinary earnings" are the excess of
(i) "earnings and profits" over (ii) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts
for each tax year in which EMX is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by EMX. However, for any
tax year in which EMX is a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any income inclusions as
a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such U.S. Holder may, subject to certain limitations,
elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any
such interest paid will be treated as "personal interest", which is not deductible.
A U.S. Holder that makes a timely and effective QEF Election with respect to EMX generally, (a) may receive a tax-free distribution from EMX to the
extent that such distribution represents "earnings and profits" of EMX that were previously included in income by the U.S. Holder because of such QEF
Election, and (b) will adjust such U.S. Holder’s tax basis in common shares to reflect the amount included in income or allowed as a tax-free
distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the
sale or other taxable disposition of common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF
Election is timely. A QEF Election will be treated as "timely" if such QEF Election is made for the first year in the U.S. Holder’s holding period for
common shares in which EMX was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the
time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election for the
first year in the U.S. Holder’s holding period for common shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a
subsequent year if such U.S. Holder also makes a "purging" election to recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above) as if such common shares were sold for their fair market value on the day the QEF Election is effective.
A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is
invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year,
EMX ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which EMX is not a
PFIC. Accordingly, if EMX becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to
the QEF rules described above during any subsequent tax year in which EMX qualifies as a PFIC.
For each tax year that EMX qualifies as a PFIC, EMX intends to: (a) make available to U.S. Holders, upon their written request, a “PFIC Annual
Information Statement” as described in Treasury Regulation Section 1.1295 -1(g) (or any successor Treasury Regulation) and (b) upon written request,
use commercially reasonable efforts to provide all additional information that such U.S. Holder is required to obtain in connection with maintaining
such QEF Election with regard to EMX. EMX may elect to provide such information on its website, www.EMXRoyalty.com. Each U.S. Holder should
consult its own tax advisor regarding the availability of, and procedure for making, a QEF Election.
95
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
98/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed U.S.
federal income tax return. However, if EMX does not provide the required information with regard to EMX, U.S. Holders will not be able to make a
QEF Election for such entity and will continue to be subject to the rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S.
Holders with respect to the taxation of gains and excess distributions.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the common shares are marketable stock. Common shares generally will be "marketable
stock" if the common shares are regularly traded on, (a) a national securities exchange that is registered with the SEC, (b) the national market system
established pursuant to section 11A of the U.S. Exchange Act, or (c) a foreign securities exchange that is regulated or supervised by a governmental
authority of the country in which the market is located, provided that, (i) such foreign exchange has trading volume, listing, financial disclosure, and
meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange,
ensure that such requirements are actually enforced, and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If EMX’s common
shares are traded on such a qualified exchange or other market, the common shares generally will be "regularly traded" for any calendar year during
which common shares are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.
A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the rules of Section 1291 of the
Code discussed above with respect to such common shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first
tax year of such U.S. Holder’s holding period for common shares or such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of
the Code discussed above will apply to certain dispositions of, and distributions on, common shares.
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which EMX is a PFIC, an amount equal to
the excess, if any, of (i) the fair market value of common shares, as of the close of such tax year over (ii) such U.S. Holder’s tax basis in such common
shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S.
Holder’s adjusted tax basis in common shares, over (ii) the fair market value of such common shares (but only to the extent of the net amount of
previously included income as a result of the Mark-to-Market Election for prior tax years).
A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in common shares to reflect the amount
included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of
common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any,
of (i) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (ii) the amount allowed as a deduction
because of such Mark-to-Market Election for prior tax years).
A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed U.S. federal income tax return. A Mark-to-
Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless common shares cease to
be "marketable stock" or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisor regarding the availability
of, and procedure for making, a Mark-to-Market Election.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder
that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of common shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. Holder may
vary based on the manner in which common shares are transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if EMX is a PFIC, regardless of whether such U.S. Holder makes a QEF
Election. For example under Section 1298(b)(6) of the Code, a U.S. Holder that uses common shares as security for a loan will, except as may be
provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.
Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules,
foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to
distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with their own tax advisor
regarding the availability of the foreign tax credit with respect to distributions by a PFIC.
96
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
99/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The PFIC rules are complex, and each U.S. Holder should consult its own tax advisor regarding the PFIC rules and how the PFIC rules may affect the
U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.
Ownership and Disposition of Common Shares
The following discussion is subject to the rules described above under the heading "Passive Foreign Investment Company Rules".
Distributions on Common Shares
Subject to the PFIC rules discussed above, a U.S. Holder that receives a distribution, including a constructive distribution, with respect to common
shares will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax
withheld from such distribution) to the extent of the current or accumulated "earnings and profits" of EMX, as computed for U.S. federal income tax
purposes. A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates if EMX is a PFIC. To the extent that a distribution exceeds
the current and accumulated "earnings and profits" of EMX, such distribution will be treated first as a tax-free return of capital to the extent of a U.S.
Holder's tax basis in common shares and thereafter as gain from the sale or exchange of such common shares. See "Sale or Other Taxable Disposition
of Common Shares" below. However, EMX may not maintain the calculations of earnings and profits in accordance with U.S. federal income tax
principles, and each U.S. Holder should therefore assume that any distribution by EMX with respect to common shares will constitute ordinary
dividend income. Dividends received on common shares generally will not be eligible for the "dividends received deduction". Subject to applicable
limitations and provided EMX is eligible for the benefits of the Treaty, dividends paid by EMX to non-corporate U.S. Holders, including individuals,
generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other
conditions are satisfied, including that EMX not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules
are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules discussed above, upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize capital
gain or loss in an amount equal to the difference between the amount of cash plus the fair market value of any property received and such U.S. Holder's
tax basis in such common shares sold or otherwise disposed of. Subject to the PFIC rules discussed above, gain or loss recognized on such sale or other
disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, common shares have been held for more than
one year.
Preferential tax rates apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates
for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.
Additional Considerations
Additional Tax on Passive Income
Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of
their "net investment income", which includes dividends on the common shares and net gains from the disposition of the common shares. Further,
excess distributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above, and mark-to-market inclusions and
deductions are all included in the calculation of net investment income.
Treasury Regulations provide, subject to the election described in the following paragraph, that solely for purposes of this additional tax, that
distributions of previously taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax.
Additionally, to determine the amount of any capital gain from the sale or other taxable disposition of common shares that will be subject to the
additional tax on net investment income, a U.S. Holder who has made a QEF Election will be required to recalculate its basis in the common shares
excluding QEF basis adjustments.
97
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
100/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in a PFIC for which a QEF Election has been
made and which is held in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF income
inclusions and on gains calculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts should consult
their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of the common shares.
Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of common shares,
generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of
whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S.
dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a
foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax
credit purposes. Different rules apply to U.S. Holders who use the accrual method. Each U.S. Holder should consult its own U.S. tax advisors regarding
the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to
dividends paid on common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such
Canadian income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a
deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign
taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S.
Holder’s U.S. federal income tax liability that such U.S. Holder’s "foreign source" taxable income bears to such U.S. Holder’s worldwide taxable
income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either "foreign
source" or "U.S. source". Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized
on the sale of stock of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an
applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with respect to common shares
that is treated as a "dividend" may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a
reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income.
The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their
investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on
individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified
foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by
a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or
counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their
common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial.
U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns, including the requirement to file an
IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition
of, common shares will generally be subject to information reporting and backup withholding tax, at the rate of 24%, if a U.S. Holder, (a) fails to
furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer
identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax,
or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has
not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these
information reporting and backup withholding rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit
against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a
timely manner.
98
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
101/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may
apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess
a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement.
Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
10.F. Dividends and Paying Agents
Not applicable.
10.G. Statement by Experts
Not applicable.
10.H. Documents on Display
Copies of the documents referenced in this annual report are available at the Company’s office located at Suite 501, 543 Granville Street, Vancouver,
British Columbia, Canada.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Credit Risk
The Company is exposed to credit risk by holding cash and cash equivalents and receivables. This risk is minimized by holding a significant portion of
the funds in Canadian banks. The Company’s exposure with respect to its receivables is primarily related to royalty streams, recovery of exploration
evaluation costs, and convertible promissory notes.
Interest Rate Risk
The Company is exposed to interest rate risk because of fluctuating interest rates. Management believes the interest rate risk is low given interest rates
on promissory notes is fixed and the current low global interest rate environment. Fluctuations in market rates is not expected to have a significant
impact on the Company’s operations due to the short term to maturity and no penalty cashable feature of its cash equivalents.
Market Risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities and other company investments.
The Company has no control over these fluctuations and does not hedge its investments. Based on the December 31, 2018 portfolio values, a 10%
increase or decrease in effective market values would increase or decrease net shareholders’ equity by approximately $150,000.
Liquidity Risk
Liquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. The Company manages this risk by careful
management of its working capital to ensure the Company’s expenditures will not exceed available resources.
Commodity Risk
The Company’s royalty revenues are derived from a royalty interest and are based on the extraction and sale of precious and base minerals and metals.
Factors beyond the control of the Company may affect the marketability of metals discovered. Metal prices have historically fluctuated widely.
Consequently, the economic viability of the Company’s royalty interests cannot be accurately predicted and may be adversely affected by fluctuations
in mineral prices.
Currency Risk
99
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
102/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the
entity’s functional currency. The Company operates in Canada, Turkey, Sweden, Australia and the U.S.A. The Company funds cash calls to its
subsidiary companies outside of Canada in US dollars and a portion of its expenditures are also incurred in local currencies.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
PART II
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that
material information related to the Company, including its consolidated subsidiaries, is made known to senior management, including the Chief
Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others within those entities on a timely basis so that appropriate decisions can
be made regarding public disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our
Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e)) under the Exchange Act) as of December 31, 2018. The CEO and CFO concluded that the disclosure controls and procedures as of
December 31, 2018 were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms,
and (ii) accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as
defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information prepared by the Company for external purposes
is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with GAAP. The Board of Directors is
responsible for ensuring that management fulfills its responsibilities. The Audit Committee fulfills its role of ensuring the integrity of the reported
information through its review of the interim and annual financial statements. Management reviewed the results of their assessment with the Company’s
Audit Committee.
Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all possible misstatements or
frauds. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control - Integrated
Framework (2013), which is a suitable, recognized control framework established by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such
internal control over financial reporting is effective as of December 31, 2018.
100
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
103/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
Limitations on the Effectiveness of Controls
The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all errors
and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design
will succeed achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
As a non-accelerated filer, the Company is not required to provide the registered public accounting firm’s attestation report on management’s
assessment of the Company’s internal control over financial reporting.
Changes in Internal Controls Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting that occurred during the period covered by this Form 20-F, that has
materially affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The Company’s Board has determined that Messrs. Levet, Bayley and Okada qualify as audit committee financial experts (as defined in Item 407(d)(5)
of Regulation S-K under the U.S. Exchange Act), are financially sophisticated (as determined in accordance with Section 803B(2)(iii) of the NYSE
American Company Guide), and are independent (as determined under U.S. Exchange Act Rule 10A-3 and Section 803A of the NYSE American
Company Guide).
ITEM 16B. CODE OF ETHICS
The Board of Directors of the Company has responsibility for the stewardship of the Company including responsibility for strategic planning,
identification of the principal risks of the Company’s business and implementation of appropriate systems to manage these risks, succession planning
(including appointing, training and monitoring senior management), communications with investors and the financial community and the integrity of
the Company’s internal control and management information systems. To facilitate meeting this responsibility, the Board of Directors seeks to foster a
culture of ethical conduct by striving to ensure the Company carries out its business in line with high business and moral standards and applicable legal
and financial requirements. In that regard, the Board has:
adopted a written Code of Business Conduct and Ethics (the “Code”) for its directors, officers, employees and consultants and a written Code of
Business Conduct and Ethics for its CEO and Senior Financial Officers.
established a whistleblower policy which details complaint procedures for financial concerns.
Copies of the Code are available without charge to any person upon request from the Company’s CFO at www.EMXRoyalty.com or at the Company’s
headquarters at Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8.
The Board must also comply with the conflict of interest provisions of the British Columbia Business Corporations Act, as well as the relevant
securities regulatory instruments, in order to ensure that directors exercise independent judgment in considering transactions and agreements in respect
of which a director or Executive Officer has a material interest.
101
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
104/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table discloses the fees billed to the Company by its external auditor during the last two financial years.
Financial Year Ending
December 31, 2018
December 31, 2017
Audit Fees (1)
$115,000
$117,000
Audit-Related Fees (2)
$4,000
0
Tax Fees (3)
0
0
All Other Fees
0
0
(1)
(2)
The aggregate fees billed by the Company’s auditor for audit fees.
The aggregate fees billed for assurance and related services by the Company’s auditor that are reasonably related to the performance of
the audit or review of the Company’s financial statements and are not disclosed in the ‘Audit Fees’ column. These fees are related to the
auditor’s reviews of the Company’s Form 20F and the Company’s first quarter interim financial statements in relation to the compliance
and conversion to International Financial Reporting Standards.
(3)
The aggregate fees billed for professional services rendered by the Company’s auditor for tax compliance, tax advice, and tax planning.
The audit committee has established policies and procedures that are intended to control the services provided by the Company’s external auditors and
to monitor their continuing independence. Under these policies, no services may be undertaken by the auditors, unless the engagement is specifically
approved by the audit committee or the services are included within a category which has been pre-approved by the audit committee. The maximum
charge for services is established by the audit committee when the specific engagement is approved or the category of services pre-approved.
Management is required to notify the audit committee of the nature and value of pre-approved services undertaken.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECFURITIES BY THE COMPANY/AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
The Common Shares are listed on the NYSE American and the TSX-V. Under the rules of the NYSE American, listed companies are generally required
to have a majority of their Board of Directors independent as defined by the NYSE American Company Guide Rules. Currently, as permitted under
applicable Canadian regulations, the Company’s Board consists of 5 directors, of which 3 are considered to be independent.
Other than in the composition of the Board of Directors as described above, in the opinion of management the Company’s corporate governance
practices do not differ in any significant way from those required of U.S. domestic companies listed on the NYSE American.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
PART III
102
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
105/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
ITEM 18. FINANCIAL STATEMENTS
The Company's financial statements are stated in Canadian Dollars and are prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
This Form 20-FAnnual Report contains the audited consolidated financial statements of the Company for the fiscal years ended December 31, 2018,
2017 and 2016 with the Report of Independent Registered Public Accounting Firm, comprised of:
a)
b)
c)
d)
e)
Consolidated Statements of Financial Position at December 31, 2018, 2017 and 2016.
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2018, 2017 and 2016.
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016.
Consolidated Statements of Shareholders Equity for the years ended December 31, 2018, 2017 and 2016.
Notes to Consolidated Financial Statements
ITEM 19. EXHIBITS
1.1
1.2
4.1
6. B
6. C
8.1
12.1
12.2
13.1
13.2
15.1
15.2
15.4
101.
Articles of EMX Royalty Corporation (formerly Eurasian Minerals Inc.) – Incorporated by reference to Exhibit 99.1 to Form 6-K filed on
July 16, 2014.
Certificate of Change of Name and Notice of Articles dated July 19, 2017 – Previously filed with the SEC on Form 6-K on July 19, 2017.
Services Agreement between the Company and Seabord Services Corp., dated December 1, 2015 - Previously filed with the SEC on Form
20-F Annual Report on April 30, 2015.
Employment Agreement with David Cole dated June 1, 2017.
Stock Option Plan.
List of Significant Subsidiaries - Included under Item 4.C, Organizational Structure.
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a)
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
Consent of Qualified Person – Eric P. Jensen
Consent of Qualified Person - Dean D. Turner
Audit Committee Charter
XBRL Interactive Data Files
103
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
106/156
4/2/2019
SIGNATURES
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to
sign this Annual Report on its behalf.
EMX ROYALTY CORPORATION
/s/ Christina Cepeliauskas
Christina Cepeliauskas
Chief Financial Officer
DATED: April 1, 2019
104
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
107/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
December 31, 2018
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
108/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
EMX Royalty Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of EMX Royalty Corp. (the “Company”), as of December 31, 2018
and 2017, and the related consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity, and cash flows for the years
ended December 31, 2018, 2017, and 2016, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of EMX Royalty Corp. as of December 31, 2018 and 2017, and the
results of its operations and its cash flows for the years ended December 31, 2018, 2017, and 2016 in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
We have served as the Company’s auditor since 2002.
Vancouver, Canada
March 26, 2019
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
109/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
ASSETS
Current
Cash and cash equivalents
Investments (Note 3)
Trade and settlement receivables, and other assets (Note 4)
Prepaid expenses
Total current assets
Non-current
Restricted cash (Note 5,8)
Property and equipment (Note 6)
Note receivable (Note 7)
Investment in an associated company (Note 8)
Strategic investments (Note 3)
Exploration and evaluation assets (Note 9)
Royalty interest (Note 10)
Reclamation bonds (Note 11)
Goodwill (Note 12)
Deferred income tax asset (Note 18)
Other assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 16)
Advances from joint venture partners (Note 13)
Total current liabilities
Non-current
Deferred income tax liability (Note 18)
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Capital stock (Note 14)
Commitment to issue shares (Note 14)
Reserves
Deficit
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
Nature of operations and going concern (Note 1)
Events subsequent to the reporting date (Note 22)
Approved on behalf of the Board of Directors on March 26, 2019
December 31, 2018
December 31, 2017
86,175,331 $
1,536,036
7,506,316
32,123
95,249,806
618,525
465,539
477,973
-
32,738
1,612,901
14,346,403
443,599
-
1,604,038
-
19,601,716
114,851,522 $
5,731,161 $
615,669
6,346,830
-
6,346,830
125,231,209
-
24,797,941
(41,524,458)
108,504,692
114,851,522 $
3,533,611
1,139,447
3,376,411
45,194
8,094,663
771,434
450,278
429,973
7,578,989
2,199,199
1,841,966
21,943,743
515,748
1,820,307
-
104,484
37,656,121
45,750,784
749,865
808,905
1,558,770
1,820,307
3,379,077
124,062,091
23,825
22,668,535
(104,382,744)
42,371,707
45,750,784
$
$
$
$
Signed:
“David M Cole”
Director
Signed:
“Larry Okada”
Director
The accompanying notes are an integral part of these consolidated financial statements.
Page 1
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
110/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Expressed in Canadian Dollars)
ROYALTY INCOME (Note 10)
Cost of sales
Gold tax
Depletion (Note 10)
Net royalty income (loss)
EXPLORATION EXPENDITURES (Note 9)
Less: recoveries
Net exploration expenditures
GENERAL AND ADMINISTRATIVE EXPENSES
Administrative and office
Depreciation (Note 6)
Investor relations and shareholder information
Professional fees
Salaries and consultants (Note 15)
Share-based payments (Note 14 and 15)
Transfer agent and filing fees
Travel
Total general and administrative expenses
Year ended
December 31, 2018
Year ended
December 31, 2017
Year ended
December 31, 2016
$
2,131,947 $
2,857,927 $
2,227,322
(92,012)
(1,732,270)
307,665
8,141,668
(2,192,574)
5,949,094
835,104
-
529,351
308,636
1,157,591
1,031,751
174,344
102,721
4,139,498
(120,618)
(2,282,276)
455,033
6,334,119
(1,863,045)
4,471,074
724,519
28,622
389,222
664,295
1,023,831
676,054
168,445
90,041
3,765,029
(111,366)
(2,163,221)
(47,265)
6,415,533
(1,415,574)
4,999,959
721,645
114,489
274,966
510,533
894,166
467,939
165,040
71,561
3,220,339
Loss from operations
(9,780,927)
(7,781,070)
(8,267,563)
Change in fair value of fair value throught profit or loss assets (Note 3 and
4)
Gains (losses) in an associated company, net of dilution gains (losses) and
loss on derecognition (Note 8)
Interest and finance charges, net of settlement gains (losses)
Gain on acquisition and sale of exploration and evaluation assets
Foreign exchange (loss) gain
Realized gain (loss) on sale of investments
Writedown of goodwill (Note 12)
Impairment of royalty interest (Note 10)
Discretionary success bonuses (Note 15 and 16)
Gain on derecognition and sale of property and equipment
Income (loss) before income taxes
Deferred income tax recovery (Note 18)
Income (loss) for the year
Basic earnings (loss) per share
Diluted earnings (loss) per share
$
$
$
(1,831,833)
80,310,549
484,918
346,529
3,482,540
(217,462)
(1,879,356)
(7,256,340)
(5,224,284)
-
58,434,334
3,683,267
84,892
(559,873)
(491,005)
284,027
1,305,237
(659,473)
83,345
(2,709,239)
-
-
-
(9,883,286)
2,489,902
(312,934)
137,228
6,834,999
(159,862)
(287,204)
(1,518,328)
-
-
10,723
(4,122,814)
1,439,332
62,117,601 $
(7,393,384) $
(2,683,482)
0.78 $
0.77 $
(0.09) $
(0.09) $
(0.04)
(0.04)
73,874,415
73,874,415
Weighted average no. of shares outstanding - basic (Note 17)
Weighted average no. of shares outstanding - diluted (Note 17)
79,979,320
80,653,474
78,002,082
78,002,082
The accompanying notes are an integral part of these consolidated financial statements.
Page 2
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
111/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Expressed in Canadian Dollars)
Year ended
December 31, 2018
Year ended
December 31, 2017
Year ended
December 31, 2016
Income (loss) for the year
Other comprehensive income (loss)
Change in fair value of available-for-sale investments
Permanent loss on financial instruments
Currency translation adjustment
Comprehensive income (loss) for the year
$
$
62,117,601 $
(7,393,384) $
(2,683,482)
(49,108)
-
1,208,463
609,733
-
(1,424,814)
88,515
697,675
(862,335)
63,276,956 $
(8,208,465) $
(2,759,627)
The accompanying notes are an integral part of these consolidated financial statements.
Page 3
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
112/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
Year ended
December 31, 2018
Year ended
December 31, 2017
Year ended
December 31, 2016
$
Cash flows from operating activities
Income (loss) for the year
Items not affecting operating activities:
Interest income received
Unrealized foreign exchange effect on cash and cash equivalents
Items not affecting cash:
Change in fair value of fair value throught profit or loss assets
Interest and finance charges, net of settlement gains (losses)
Share - based payments
Deferred income tax recovery
Depreciation
Depletion
Impairment of royalty interest
Writedown of goodwill
Realized (gain) loss on sale of investments
Gain on acquisition and sale of exploration and evaluation assets, net
of derecognition of equipment
Gains (losses) in an associated company, net of dilution gains (losses)
and loss on derecognition
Shares received from operating partners included in exploration recoveries
Unrealized foreign exchange (gain) loss
Changes in non-cash working capital items (Note 21)
Total cash used in operating activities
Cash flows from investing activities
Acquisition and sale of exploration and evaluation assets, net of option
payments received
Distributions from investments, net
Proceeds from credit facility and loan repayments received
Repayment of credit facility and loan distributions
Interest received on cash and cash equivalents
Notes receivable
Proceeds from sale of fair value through profit and loss investments,
Proceeds on available for sale financial instruments
Purchase of investments in associated companies
Restricted cash
Purchase and sale of property and equipment, net
Reclamation bonds
Total cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from Sprott facility
Repayment of Sprott credit facility
Proceeds received from private placement, net of share issue costs
Proceeds from exercise of options
Total cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents, beginning
Cash and cash equivalents, ending
Supplemental disclosure with respect to cash flows (Note 21)
$
62,117,601 $
(7,393,384) $
(2,683,482)
(210,667)
(3,696,537)
1,831,833
(274,251)
1,820,724
(3,683,267)
11,736
1,732,270
7,256,340
1,879,356
217,462
(254,261)
(173,740)
(84,892)
(286,867)
1,415,639
(2,489,902)
39,344
2,282,276
-
2,709,239
(83,345)
(5,590)
(71,562)
559,873
(131,148)
970,796
(1,439,332)
136,200
2,163,221
-
1,518,328
287,204
(397,254)
(1,335,003)
(6,845,722)
(80,310,549)
-
(332,295)
(12,037,498)
6,081,650
(5,955,848)
229,065
84,246,645
48,809,393
(48,027,130)
210,667
-
1,084,980
-
(1,781,642)
152,909
(26,997)
72,149
84,970,039
6,298,166
(6,553,274)
-
186,100
(69,008)
3,696,537
82,641,720
3,533,611
86,175,331 $
491,005
(810,521)
597
(5,973,815)
2,532,391
(3,441,424)
161,048
-
-
-
86,543
(1,405,277)
139,365
-
(2,059,631)
(412,262)
(24,784)
123,679
(3,391,319)
-
-
6,907,228
85,700
6,992,928
173,740
333,925
3,199,686
3,533,611 $
312,934
(134,738)
(67,249)
(5,430,267)
114,724
(5,315,543)
3,005,280
-
-
-
5,590
(542,622)
130,737
17,375
-
(89,402)
(16,999)
171,307
2,681,266
-
-
-
127,800
127,800
71,562
(2,434,915)
5,634,601
3,199,686
The accompanying notes are an integral part of these consolidated financial statements.
Page 4
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
113/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Expressed in Canadian Dollars)
Number of
common
shares
Capital stock
Commitment
to issue
shares
Share-based
payments
Reserves
Accumulated other
comprehensive gain
(loss)
Deficit
Total
79,725,187
-
$
124,062,091
-
$
23,825
-
$
13,434,466
-
$
9,234,069
(740,685)
$ (104,382,744)
740,685
$
42,371,707
-
381,321
226,047
192,500
-
-
-
-
-
-
602,487
290,277
186,100
90,254
-
-
-
-
-
-
(23,825)
-
1,572,242
-
-
-
-
-
-
-
-
(90,254)
(17,970)
246,718
-
-
-
-
-
-
-
-
-
1,208,463
(49,108)
-
-
-
-
-
-
-
-
-
62,117,601
602,487
1,838,694
186,100
-
(17,970)
246,718
1,208,463
(49,108)
62,117,601
Balance as at December 31, 2017
Adoption of IFRS 9 (Note 2)
Shares issued pursuant to a loan
agreement
Share-based payments
Shares issued for exercise of stock
options
Reclass of reserves for exercise of
options
Reclass of reserves for options
forfeited
Equity investment share-based
payments
Foreign currency translation
adjustment
Change in fair value of financial
instruments
Income for the year
Balance as at December 31, 2018
80,525,055
$
125,231,209
$
-
$
15,145,202
$
9,652,739
$
(41,524,458)
$
108,504,692
Balance as at December 31, 2016
Shares issued for exercise of stock
options
Shares issued for private placement
Finder's fees in units
Share-based payments
Share issuance costs in units
Share issuance costs in cash
Reclass of reserves for exercise of
options
Foreign currency translation
adjustment
Change in fair value of financial
instruments
Loss for the year
Number of
common
shares
Capital stock
Commitment
to issue
shares
Share-based
payments
Reserves
Accumulated other
comprehensive gain
(loss)
Deficit
Total
74,089,710
$
117,504,585
$
-
$
11,607,230
$
10,049,150
$
(96,989,360)
$
42,171,605
75,000
5,000,000
246,604
313,873
-
-
-
-
-
-
85,700
6,200,000
305,789
358,490
(345,246)
(92,772)
45,545
-
-
-
-
-
-
23,825
-
-
-
-
-
-
-
800,000
39,457
1,033,324
-
-
(45,545)
-
-
-
-
-
-
-
-
-
-
(1,424,814)
609,733
-
-
-
-
-
-
-
-
-
-
(7,393,384)
85,700
7,000,000
345,246
1,415,639
(345,246)
(92,772)
-
(1,424,814)
609,733
(7,393,384)
Balance as at December 31, 2017
79,725,187
$
124,062,091
$
23,825
$
13,434,466
$
9,234,069
$ (104,382,744)
$
42,371,707
The accompanying notes are an integral part of these consolidated financial statements.
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
114/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Expressed in Canadian Dollars)
Balance as at December 31, 2015
Shares issued for acquisition of a
royalty interest
Shares issued as incentive stock
grants
Shares issued from exercise of
options
Equity investment share-based
payments
Commitment to issue shares
Reclassification of fair value of
options exercised
Foreign currency translation
adjustment
Change in fair value of financial
instruments
Permanent loss on financial
instruments
Loss for the year
Number of
common
shares
Capital stock
Commitment
to issue
shares
Share-based
payments
Accumulated other
comprehensive gain
(loss)
Deficit
Total
Reserves
73,534,710
$
117,000,052
$
139,138
$
10,362,229
$
10,125,295
$
(94,305,878)
$
43,320,836
250,000
140,000
165,000
-
-
-
-
-
-
-
145,000
166,600
127,800
-
-
65,133
-
-
-
-
(166,600)
-
-
27,462
-
-
-
-
-
366,800
943,334
(65,133)
-
-
-
-
-
-
-
-
-
(862,335)
88,515
697,675
-
-
-
-
-
-
-
-
-
-
(2,683,482)
145,000
-
127,800
366,800
970,796
-
(862,335)
88,515
697,675
(2,683,482)
Balance as at December 31, 2016
74,089,710
$
117,504,585
$
-
$
11,607,230
$
10,049,150
$
(96,989,360)
$
42,171,605
The accompanying notes are an integral part of these consolidated financial statements.
Page 6
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
115/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
1. NATURE OF OPERATIONS AND GOING CONCERN
EMX Royalty Corporation (the “Company” or “EMX”), together with its subsidiaries operates as a royalty and prospect generator engaged in the
exploring for, and generating royalties from, metals and minerals properties. The Company’s royalty and exploration portfolio mainly consists of
properties in North America, Turkey, Europe, Haiti, Australia, and New Zealand. The Company’s common shares are listed on the TSX Venture
Exchange (“TSX-V”) and the NYSE American under the symbol of “EMX”. The Company’s head office is located at 501 - 543 Granville Street,
Vancouver, British Columbia, Canada V6C 1X8.
These consolidated financial statements have been prepared using International Financial Reporting Standards (“IFRS”) applicable to a going concern,
which assumes that the Company will be able to realize its assets, discharge its liabilities and continue in operation for the following twelve months.
In October 2018 EMX’s associated Company, IG Copper LLC (“IGC”) completed the sale of the Malmyzh project (“Malmyzh”) to Russian Copper
Company (“RCC”) for US$200 million. Of this amount, US$190 million was released from escrow, with the remaining US$10 million to be held in
escrow and released subject to certain conditions over 12 months following the date of sale. The initial cash distribution to EMX by IGC of US$65
million was received by the Company in October 2018. A second cash distribution to EMX of up to US$4 million will be completed upon the
remaining funds being released from escrow.
Management believes with the distribution received as part of the sale of Malmyzh, it will have sufficient working capital to undertake its current
business and the budgets associated with those plans for the next twelve months and the foreseeable future.
Some of the Company’s activities for exploration and evaluation assets are located in emerging nations and, consequently, may be subject to a higher
level of risk compared to other developed countries. Operations, the status of mineral property rights and the recoverability of investments in emerging
nations can be affected by changing economic, legal, regulatory and political situations.
At the date of these consolidated financial statements, the Company has not identified a known body of commercial grade mineral on any of its
exploration and evaluation assets. The ability of the Company to realize the costs it has incurred to date on these exploration and evaluation assets is
dependent upon the Company identifying a commercial mineral body, to finance its development costs and to resolve any environmental, regulatory or
other constraints which may hinder the successful development of the exploration and evaluation assets.
These consolidated financial statements of the Company are presented in Canadian dollars unless otherwise noted, which is the functional currency of
the parent company and its subsidiaries except as to Bullion Monarch Mining, Inc. (“BULM”), the holder of a royalty income stream whose functional
currency is the United States (“US”) dollar.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
These consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board
(“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as fair value through
profit or loss and fair value through other comprehensive income, which are stated at their fair value. In addition, these consolidated financial
statements have been prepared using the accrual basis of accounting except for cash flow information.
Page 7
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
116/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the accounts of EMX Royalty Corp., the parent company, and its controlled subsidiaries, after the
elimination of all significant intercompany balances and transactions.
Subsidiaries
Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the
investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Company until the date on which control ceases.
The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company
transactions, balances and unrealized gains or losses on transactions are eliminated. The Company’s principal operating subsidiaries are as follows:
Name
Bullion Monarch Mining, Inc
EMX (USA) Services Corp.
Bronco Creek Exploration Inc.
Eurasia Madencilik Ltd. Sirketi
Azur Madencilik Ltd. Sirketi
Trab Madencilik Ltd. Sirketi
Eurasian Minerals Cooperatief U.A.
Eurasian Minerals Sweden AB
Viad Royalties AB
Waikato Gold Limited
Functional and Reporting Currency
Place of Incorporation
Utah, USA
Nevada, USA
Arizona, USA
Turkey
Turkey
Turkey
Netherlands
Sweden
Sweden
New Zealand
Ownership Percentage
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency for the Company
and its subsidiaries is the Canadian dollar except the functional currency of the operations of Bullion Monarch which is the US dollar. The functional
currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign
Exchange Rates.
Translation of transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation
where items are re-measured. Monetary assets and liabilities denominated in foreign currencies are re-measured at the rate of exchange at each financial
position date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.
On translation of the entities whose functional currency is other than the Canadian dollar, revenues and expenses are translated at the exchange rates
approximating those in effect on the date of the transactions. Assets and liabilities are translated at the rate of exchange at the reporting date. Exchange
gains and losses, including results of re-translation, are recorded in the foreign currency translation reserve.
Page 8
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
117/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Standards Adopted During the Year
Revenue recognition
Effective January 1, 2018, the Company has adopted IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). IFRS 15 replaces all previous
revenue recognition standards, including IAS 18, Revenue, and related interpretations. The standard sets out the requirements for recognizing revenue.
Specifically, the new standard introduces a comprehensive framework with the general principle being that an entity recognizes revenue to depict the
transfer of promised goods and services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. The standard introduces more prescriptive guidance than was included in previous standards and may result in changes to the timing
of revenue for certain types of revenues. The new standard will also result in enhanced disclosures about revenue that would result in an entity
providing comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts
with customers. As of January 1, 2018, the Company has adopted IFRS 15 on a full retrospective basis and as such, has revised its revenue recognition
policy based on the requirements of IFRS 15. Management has concluded that, based on its current operations, the adoption of IFRS 15 had no
significant impact on the Company’s consolidated financial statements.
The Company earns revenue from royalty agreements and are based upon amounts contractually due pursuant to the underlying royalty agreements. For
royalty agreements paid in cash or in kind, revenue recognition will depend on the related agreement. Revenue is measured at the fair value of the
consideration received or receivable when management can reliably estimate the amount pursuant to the terms of the royalty or other interest
agreements. In some instances, the Company will not have access to sufficient information to make a reasonable estimate of revenue and, accordingly,
revenue recognition is deferred until management can make a reasonable estimate. Royalty revenue may be subject to adjustment upon final settlement
of estimated metal prices, weights, and assays. Adjustments to revenue from metal prices are recorded monthly and other adjustments are recorded on
final settlement and are offset against revenue when incurred.
Financial instruments
Effective January 1, 2018, the Company adopted IFRS 9 – Financial Instruments (“IFRS 9”) which replaced IAS 39 – Financial Instruments:
Recognition and Measurement (“IAS 39”). IFRS 9 provides a revised model for recognition and measurement of financial instruments and a single,
forward-looking “expected loss” impairment model. IFRS 9 also includes significant changes to hedge accounting. The standard is effective for annual
periods beginning on or after January 1, 2018. The Company adopted the standard retrospectively without restatement. As a result of the adoption of
IFRS 9, the Company reclassified $740,685 from accumulated other comprehensive income (loss) to deficit on January 1, 2018 related to the
reclassification of certain previously recognized available-for-sale marketable securities to fair value through profit or loss. The Company has also
made an irrevocable election to present in other comprehensive income (loss) subsequent changes in the fair value of certain available-for-sale
marketable securities classified as strategic investments.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it eliminates the
previous IAS 39 categories for financial assets of held to maturity, loans and receivables, and available-for-sale.
Under IFRS 9, on initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at amortized cost, fair
value through other comprehensive income (“FVOCI”), or fair value through profit or loss (“FVTPL”). The classification of financial assets is
generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured
at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are
expensed. All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL.
Page 9
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
118/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated, and instead the hybrid financial
instrument as a whole is assessed for classification. On initial recognition of an equity instrument that is not held for trading, the Company may
irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (loss). This election is made on an
investment-by-investment basis.
The classification determines the method by which the financial assets are carried on the consolidated statement of financial position subsequent to
initial recognition and how changes in value are recorded. The following accounting policies apply to the subsequent measurement of financial assets.
a)
b)
c)
Financial assets at FVTPL - These assets are subsequently measured at fair value. Net gains and losses, including any interest or
dividend income, are recognized in profit or loss.
Financial assets at amortized cost - These assets are subsequently measured at amortized cost using the effective interest method. The
amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in
profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Financial assets at FVOCI - These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss
unless the dividend clearly represents a recovery of part of the cost of the investment. Gains or losses recognized on the sale of the
equity investment are recognized in other comprehensive income (loss) and are never reclassified to profit or loss.
Financial liabilities are designated as either fair value through profit or loss, or other financial liabilities. All financial liabilities are classified and
subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial
liabilities are carried on the consolidated statement of financial position subsequent to inception and how changes in value are recorded. Other financial
liabilities are carried on the consolidated statement of financial position at amortized cost.
The Company completed an assessment of its financial instruments as at January 1, 2018. The following table shows the new classification under IFRS
9 and the original classification under IAS 39:
Financial assets
Cash and cash equivalents
Investments
Trade receivables
Settlement receivables
Restricted cash
Reclamation bonds
Notes receivable
Strategic investments
Financial liabilities
Promissory notes payable
Accounts payable and accrued liabilities
Advances from joint venture partners
New (IFRS 9)
Original (IAS 39)
Amortized cost
FVTPL
Amortized cost
FVTPL
Amortized cost
Amortized cost
Amortized cost
FVTOCI
Amortized cost
Amortized cost
Amortized cost
Loans and receivables
FVTPL
Loans and receivables
FVTPL
Loans and receivables
Loans and receivables
Loans and receivables
Available -for-sale
Other financial Liabilities
Other financial Liabilities
Other financial Liabilities
Page 10
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
119/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
IFRS 9 introduces a new three-stage expected credit loss model for calculating impairment for financial assets. IFRS 9 no longer requires a triggering
event to have occurred before credit losses are recognized. An entity is required to recognize expected credit losses when financial instruments are
initially recognized and to update the amount of expected credit losses recognized at each reporting date to reflect changes in the credit risk of the
financial instruments. In addition, IFRS 9 requires additional disclosure requirements about expected credit losses and credit risk. There was no
adjustment relating to the implementation of the expected credit loss model for the Company’s trade or settlement receivables.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease
can be objectively related to an event occurring after the impairment was recognized.
Derivative contracts are recognized at fair value on initial recognition. Subsequently, derivatives are remeasured at their fair value. The method of
recognizing any resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being
hedged:
a.
b.
c.
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with
any changes in the fair values of the hedged assets or liabilities that are attributable to the hedged risk.
The effective portions of changes in the fair values of derivatives that are designated and qualify as cash-flow hedges are recognized in
equity. The gain or loss relating to any ineffective portion is recognized immediately in profit or loss.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in profit or
loss.
Amounts accumulated in the hedge reserve are recycled in the consolidated statement of loss in the periods when the hedged items will affect profit or
loss (for instance when the forecast sale that is hedged takes place). If a forecast transaction that is hedged results in the recognition of a non-financial
asset (for example, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are included in the initial measurement of the
cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing
in the hedge reserve at that time remains in the reserve and is recognized when the forecast transaction is ultimately recognized in the consolidated
statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive
income is immediately transferred to the consolidated statement of income (loss).
The Company has not designated any derivative contracts as hedges and therefore has not applied hedge accounting in these consolidated financial
statements.
Convertible Notes Receivable
Convertible notes receivable are hybrid financial assets that consist of a note receivable component and a separate equity conversion component.
Derivatives embedded in contracts are never separated, and instead the notes receivable is disclosed as single financial instrument.
Interest income on the notes receivable is based on the annualized effective rate of interest taking into account all income expected to be earned on
maturity are recognized through profit and loss as interest income.
Page 11
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
120/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in Associated Companies
The Company accounts for its long-term investments in affiliated companies over which it has significant influence using the equity basis of
accounting, whereby the investment is initially recorded at cost, adjusted to recognize the Company’s share of earnings or losses and reduced by
dividends received.
The Company assesses its equity investments for impairment if there is objective evidence of impairment as a result of one or more events that occurred
after the initial recognition of the equity investment and that the event or events has an impact on the estimated future cash flow of the investment that
can be reliably estimated. Objective evidence of impairment of equity investments includes:
Significant financial difficulty of the associated companies;
Becoming probable that the associated companies will enter bankruptcy or other financial reorganization; or,
National or local economic conditions that correlate with defaults of the associated companies.
Exploration and evaluation assets and exploration expenditures
Acquisition costs for exploration and evaluation assets, net of recoveries, are capitalized on a property-by-property basis. Acquisition costs include cash
consideration and the value of common shares, issued for exploration and evaluation assets pursuant to the terms of the agreement. Exploration
expenditures, net of recoveries, are charged to operations as incurred. After a property is determined by management to be commercially feasible, an
impairment test is conducted and subsequent development expenditures on the property will be capitalized.
When there is little prospect of further work on a property being carried out by the Company or its partners, when a property is abandoned, or when the
capitalized costs are no longer considered recoverable, the related property costs are written down to management’s estimate of their net recoverable
amount. The costs related to a property from which there is production, together with the costs of production equipment, will be depleted and amortized
using the unit-of-production method.
An exploration and evaluation asset acquired under an option agreement, where payments are made at the sole discretion of the Company, is capitalized
at the time of payment. Option payments received are treated as a reduction of the carrying value of the related acquisition cost for the mineral property
until the payments are in excess of acquisition costs, at which time they are then credited to profit or loss. Option payments are at the discretion of the
optionee and, accordingly, are accounted for when receipt is reasonably assured.
Royalty interests
Royalty interests in mineral properties include acquired royalty interests in production stage and exploration stage properties. In accordance with IAS
38 Intangible Assets, the cost of acquired royalty interests in mineral properties is capitalized as intangible assets.
Acquisition costs of production stage royalty interests are depleted using the units of production method over the life of the related mineral property,
which is calculated using estimated reserves. Acquisition costs of royalty interests on exploration stage mineral properties, where there are no estimated
reserves, are not amortized. At such time as the associated exploration stage mineral interests are converted to estimated reserves, the cost basis is
amortized over the remaining life of the mineral property, using the estimated reserves. The carrying values of exploration stage mineral interests are
evaluated for impairment at such time as information becomes available indicating that production will not occur in the future.
Page 12
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
121/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill
Goodwill represents the excess of the price paid for the acquisition of a consolidated entity over the fair value of the net identifiable tangible and
intangible assets and liabilities acquired in a business combination. Goodwill is allocated to the cash generating unit to which it relates.
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment. Impairment is determined by
assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount.
Property and equipment
Property and equipment is recorded at cost. Buildings are depreciated using a 5 year straightline method. Equipment is depreciated over its estimated
useful life using the declining balance method at a rate of 20% per annum. Depreciation on equipment used directly on exploration projects is included
in exploration expenditures for that mineral property.
Decommissioning liabilities
Decommissioning liabilities are recognized for the expected obligations related to the retirement of long-lived tangible assets that arise from the
acquisition, construction, development or normal operation of such assets. A decommissioning liability is recognized in the period in which it is
incurred and when a reasonable estimate of the fair value of the liability can be made with a corresponding decommissioning cost recognized by
increasing the carrying amount of the related long-lived asset. The decommissioning cost is subsequently allocated in a rational and systematic method
over the underlying asset’s useful life. The initial fair value of the liability is accreted, by charges to profit or loss, to its estimated future value.
Environmental disturbance restoration
During the operating life of an asset, events such as infractions of environmental laws or regulations may occur. These events are not related to the
normal operation of the asset and are referred to as environmental disturbance restoration provisions. The costs associated with these provisions are
accrued and charged to profit or loss in the period in which the event giving rise to the liability occurs. Any subsequent adjustments to these provisions
due to changes in estimates are also charged to profit or loss in the period of adjustment. These costs are not capitalized as part of the long-lived assets’
carrying value.
Impairment of assets
Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year. The Company
assesses its cash generating units annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, an
estimate of the recoverable amount is made, which is the higher of the fair value less costs to sell and value in use. The determination of the recoverable
amount for value in use requires the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements,
exploration potential and future operating performance. Fair value is determined as the amount that would be obtained from the sale of the asset in an
arm’s length transaction between knowledgeable and willing parties.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank deposits and short-term, highly liquid investments that are readily convertible to known amounts
of cash.
Page 13
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
122/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share-based payments
Share-based payments include option and stock grants granted to directors, employees and non-employees. The Company accounts for share-based
compensation using a fair value based method with respect to all share-based payments measured and recognized, to directors, employees and non-
employees. For directors and employees, the fair value of the options and stock grants is measured at the date of grant. For non-employees, the fair
value of the options and stock are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is
determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. For
directors, employees and non-employees, the fair value of the options and stock grants is accrued and charged to operations, with the offsetting credit to
share based payment reserve for options, and commitment to issue shares for stock grants over the vesting period. If and when the stock options are
exercised, the applicable amounts are transferred from share-based payment reserve to share capital. When the stock grants are issued, the applicable
fair value is transferred from commitment to issue shares to share capital. Option based compensation awards are calculated using the Black-Scholes
option pricing model while stock grants are valued at the fair value on the date of grant.
The Company has granted certain employees and non-employess restricted share units (“RSUs”) to be settled in shares of the Company. The fair value
of the estimated number of RSUs that will eventually vest, determined at the date of grant, is recognized as share-based compensation expense over the
vesting period, with a corresponding amount recorded as equity. The fair value of the RSUs is estimated using the market value of the underlying shares
as well as assumptions related to the market and non-market conditions at the grant date.
Income taxes
Income tax expense consists of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items
recognized directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is calculated providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable income nor loss. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realized simultaneously. A deferred tax asset is recognized to the extent that it is probable that future taxable income will be
available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.
Income (loss) per share
The Company presents basic earnings (loss) per share data for its common shares, calculated by dividing the income (loss) attributable to equity holders
of the Company by the weighted average number of common shares issued and outstanding during the period. Diluted earnings per share is calculated
by adjusting the earnings attributable to equity holders and the weighted average number of common shares outstanding for the effects of all potentially
dilutive common shares. The calculation of diluted earnings per share assumes that the proceeds to be received on the exercise of dilutive share options
and warrants are used to repurchase common shares at the average market price during the period. In periods where a loss is reported, diluted loss per
share is the same as basic loss per share as the effects of potentially dilutive common shares would be anti-dilutive.
Page 14
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
123/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income (loss) per share (Continued)
Existing stock options and share purchase warrants are not included in the income (loss) per share computation of diluted income (loss) per share if
inclusion would be anti-dilutive. For the years presented in which the inclusion of stock options and warrants would be anti-dilutive, the basic and
diluted losses per share are the same.
Valuation of equity units issued in private placements
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The
residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less
easily measurable component.
The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at
their fair value, as determined by the closing quoted bid price on the day prior to the issuance date. The balance, if any, was allocated to the attached
warrants. Any fair value attributed to the warrants is recorded in reserves.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as the Chief
Executive Officer.
Accounting Pronouncements not yet Effective
IFRS 16 Leases was issued by the IASB in January 2016 (effective January 1, 2019) and has not yet been adopted by the Company. IFRS 16 provides a
single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the
underlying asset has a low value.
The Company is currently evaluating the impact the new and amended standard is expected to have on its financial statements and does not expect any
material changes. The Company predominately uses third party services which provide for any possible leases but does lease office space, and if the
limited exception criteria are not met, rent expense is to be removed and replaced by amortization and finance expense related to the leased office space
and respective lease liability.
Critical Accounting Judgments and Significant Estimates and Uncertainties
The preparation of the consolidated financial statements requires management to make judgments and estimates and form assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the periods presented
therein. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, royalty revenues and expenses.
Management bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable under the
circumstances. Actual results may differ from these estimates under different assumptions and conditions.
The Company has identified the following critical accounting policies in which significant judgments, estimates and assumptions are made and where
actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial
position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the
consolidated financial statements.
Page 15
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
124/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
a) Royalty interest and related depletion
In accordance with the Company’s accounting policy, royalty interests are evaluated on a periodic basis to determine whether there are any indications
of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss recognized to the extent that
carrying amount exceeds recoverable amount. The recoverable amount of a royalty asset is measured at the higher of fair value less costs to sell and
value in use. The determination of fair value and value in use requires management to make estimates and assumptions about expected production and
sales volumes, the proportion of areas subject to royalty rights, commodity prices (considering current and historical prices, price trends and related
factors), and reserves. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility that changes in circumstances
will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the
assets may be further impaired or the impairment charge reduced with the impact recorded in profit or loss.
b) Goodwill
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment. Impairment is determined by
assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount. The assessment of the
recoverable amount used in the goodwill impairment analysis is subject to similar judgments and estimates as described above for property and
equipment and royalty interests.
c) Exploration and Evaluation Assets
Recorded costs of exploration and evaluation assets are not intended to reflect present or future values of exploration and evaluation assets. The
recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing knowledge, that a change in future conditions
could require a material change in the recognized amount.
d) Taxation
The Company’s accounting policy for taxation requires management’s judgment as to the types of arrangements considered to be a tax on income in
contrast to an operating cost. Judgment is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognized on the
statement of financial position.
Deferred tax assets, including those arising from unused tax losses, capital losses and temporary differences, are recognized only where it is considered
probable that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from
temporary differences caused principally by the expected royalty revenues generated by the royalty property are recognized unless expected offsetting
tax losses are sufficient to offset the taxable income and therefore, taxable income is not expected to occur in the foreseeable future. Assumptions about
the generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and
sales volumes, commodity prices, and reserves. Judgments are also required about the application of income tax legislation in foreign jurisdictions.
These judgments and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations,
which may impact the amount of deferred tax assets and deferred tax liabilities recognized on the statement of financial position and the amount of
other tax losses and temporary differences not yet recognized. In such circumstances, some or the entire carrying amount of recognized deferred tax
assets and liabilities may require adjustment, resulting in a corresponding credit or charge to profit or loss.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated
financial statements include, but are not limited to, the following:
Page 16
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
125/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
a) Functional Currencies
The functional currency of each of the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates.
Determination of the functional currency may involve certain judgments to determine the primary economic environment and the Company reconsiders
the functional currency of its entities if there is a change in events and conditions, which determined the primary economic environment.
b) Classification of investments as subsidiaries, joint ventures, associated company and portfolio investments
Classification of investments requires judgement as to whether the Company controls, has joint control of or significant influence over the strategic
financial and operating decisions relating to the activity of the investee. In assessing the level of control or influence that the Company has over an
investment, management considers ownership percentages, board representation as well as other relevant provisions in shareholder agreements. If an
investor holds 20% or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly
demonstrated that this is not the case. Conversely, if the investor holds less than 20% of the voting power of the investee, it is presumed that the
investor does not have significant influence, unless such influence can be clearly demonstrated.
3. INVESTMENTS
At December 31, 2018 and December 31, 2017, the Company had the following investments:
December 31, 2018
Fair value through profit or loss
Marketable securities
Private company investments
Total fair value through profit or loss
Fair value through other comprehensive income
Marketable securities
Total investments
December 31, 2017
Fair value through profit or loss
Marketable securities
Total fair value through profit or loss
Fair value through other comprehensive income
Marketable securities
Total investments
December 31, 2016
Fair value through profit or loss
Marketable securities
Total fair value through profit or loss
Fair value through other comprehensive income
Marketable securities
Total investments
Cost
Accumulated
unrealized loss
1,682,327 $
911,477
2,593,804
(1,057,768) $
-
(1,057,768)
Fair value
624,559
911,477
1,536,036
910,473
3,504,277 $
(877,735)
(1,935,503) $
32,738
1,568,774
Cost
Accumulated
unrealized loss
2,396,251 $
2,396,251
(1,256,804) $
(1,256,804)
2,287,141
4,683,392 $
(87,942)
(1,344,746) $
Cost
Accumulated
unrealized loss
1,641,751 $
1,641,751
(1,378,995) $
(1,378,995)
910,473
2,552,224 $
(697,675)
(2,076,670) $
Fair value
1,139,447
1,139,447
2,199,199
3,338,646
Fair value
262,756
262,756
212,798
475,554
$
$
$
$
$
$
Page 17
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
126/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
3. INVESTMENTS (Continued)
As a result of the adoption of IFRS 9 (Note 2), $1,376,667 and $740,685 previously recorded in cost and accumulated unrealized loss respectively and
was previously classified as available-for-sale as at December 31, 2017 was reclassified to FVTPL as at January 1, 2018. This resulted in the
reclassification of $740,685 in other comprehensive income to opening deficit.
Included in investments for the year ended December 31, 2018 is $911,477 being the fair value of an investment in IG Copper LLC (“IGC”) previously
recorded as an investment in an associated entity (Note 8).
During the year ended December 31, 2018, the Company recorded a loss of $Nil (2017 - $Nil, 2016 - $697,675) related to the permanent impairment of
certain available-for-sale marketable securities. The Company had sustained significant unrealized losses for which there was no expectation of reversal
in the forseable future.
4. RECEIVABLES
The Company’s receivables are related to distributions expected from investments, sale of foreign subsidiaries, royalty receivable, goods and services
tax and harmonized sales taxes receivable from government taxation authorities, and recovery of exploration expenditures from exploration partners.
As at December 31, 2018 amd 2017, the current receivables were as follows:
Category
Distribution receivable from an investment in an associated entity (Note 8)
Sale of Akarca
Loan fees
Royalty income receivable
Refundable taxes
Recoverable exploration expenditures and advances
Other
As at December 31, 2018
December 31, 2018
5,450,764 $
902,991
187,395
144,931
175,605
264,434
380,196
7,506,316 $
December 31, 2017
-
2,447,595
-
258,223
151,163
270,547
248,883
3,376,411
$
$
Included in the change in value through profit or loss assets is $104,788 (2017 - $37,299, 2016 - $120,900) related to the Akarca receivable balance as a
result of the derivative components of the receivable balance being the expected gold price to be realized.
The carrying amounts of the Company’s current receivables are denominated in the following currencies:
Currency
Canadian Dollars
US Dollars
Turkish Lira
Swedish Krona
Other
As at December 31, 2018
5. RESTRICTED CASH
December 31, 2018
483,547 $
6,933,819
6,833
71,519
10,598
7,506,316 $
December 31, 2017
280,925
3,040,347
24,535
29,575
1,029
3,376,411
$
$
At December 31, 2018, the Company classified $618,525 (2017 - $771,434) as restricted cash. This amount is comprised of $196,273 (2017 -
$179,502) held as collateral for its corporate credit cards, $86,330 (2017 - $Nil) held in trust to be used to offset loan fees, and $335,922 (2017 -
$$591,932) cash held by wholly-owned subsidiaries of the Company whose full amount is for use and credit to the Company’s exploration venture
partners in the USA, Sweden, Norway, and Finland pursuant to expenditure requirements for ongoing option agreements.
Page 18
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
127/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
6. PROPERTY AND EQUIPMENT
During the year ended December 31, 2018 depreciation of $11,736 (2017 - $10,722, 2016 - $21,711) has been included in exploration expenditures.
Computer
Field
Office
Vehicles
Building
Land
Total
Cost
As at December 31, 2015
Additions
Disposals and derecognition
As at December 31, 2016
Additions
Disposals and derecognition
As at December 31, 2017
Additions
As at December 31, 2018
Accumulated depreciation
As at December 31, 2015
Additions
Disposals and derecognition
As at December 31, 2016
Additions
Disposals and derecognition
As at December 31, 2017
Additions
As at December 31, 2018
Net book value
As at December 31, 2017
As at December 31, 2018
7. NOTE RECEIVABLE
$
$
$
$
99,694 $
10,549
-
110,243
-
-
110,243
-
110,243
154,113 $
6,450
(79,630)
80,933
-
(20,756)
60,177
26,997
87,174
99,694
7,438
-
107,132
3,111
-
110,243
-
110,243 $
113,331
12,601
(70,444)
55,488
7,104
(13,890)
48,702
10,894
59,596 $
4,746 $
-
(2,365)
2,381
-
-
2,381
-
2,381
4,134
-
(1,753)
2,381
-
-
2,381
-
2,381 $
47,417 $
578,508 $
-
(47,417)
-
-
-
-
-
-
-
-
578,508
20,447
-
598,955
-
598,955
414,526 $ 1,299,004
16,999
(129,412)
1,186,591
24,784
(20,756)
1,190,619
26,997
1,217,616
-
-
414,526
4,337
-
418,863
-
418,863
32,989
671
(33,660)
-
-
-
-
-
- $
434,396
115,490
-
549,886
29,129
-
579,015
842
579,857 $
-
-
-
-
-
-
-
-
- $
684,544
136,200
(105,857)
714,887
39,344
(13,890)
740,341
11,736
752,077
- $
- $
11,475 $
27,578 $
- $
- $
- $
- $
19,940 $
19,098 $
418,863 $
418,863 $
450,278
465,539
On October 16, 2017, the Company issued a note receivable to Revelo Resources Corp. (TSX-V: RVL), a related party by way of a common director
for the principal amount of $400,000. The note was due on December 31, 2017, together with accrued interest at a rate of 1% per month and a bonus of
$20,000. As at December 31, 2018, the balance owed to the Company pursuant to the note was $477,973 (2017 - $429,973) including accrued interest
and bonus fee. The Company continues discussions with RVL on options for repayment of the outstanding balance.
8. INVESTMENT IN AN ASSOCIATED COMPANY
During the year ended December 31, 2018, the Company derecognized a 39.99% equity investment in IGC and reallocated the fair value of the
remaining investment to FVTPL (Note 3).
On December 12, 2018, IGC underwent a recapitalization in which the Company did not participate and its investment was diluted to 19.9% and
derecognized its investment in IGC as an associated entity. Prior to the derecognition of IGC as an investment in an associated entity, including the
conversion of convertible notes and related interest due from IGC, cash purchases of shares including the exercise of warrants, and loan fees received in
shares, the Company had invested an aggregate of US$13,136,977 towards its investment (December 31, 2017 - US$11,354,977). At December 31,
2018, the Company’s equity investment including dilution gains or losses, less its share of accumulated equity gains and losses, and any distributions
received was $Nil (December 31, 2017 - $7,578,989).
Page 19
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
128/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
8. INVESTMENT IN AN ASSOCIATED COMPANY (Continued)
The changes in the investment in IGC for the years ended December 31, 2018 and 2017 are as follows:
Balance - December 31, 2016
Additional investments in IGC
Dilution gain
Share of equity loss
Balance - December 31, 2017
Additional investments in IGC
Dilution loss
Share of equity income
Equity investment share based payments
Distributions received
Loss on derecognition of an investment in associated entity
Derecognized as an investment in associated entity
Balance - December 31, 2018
IGC
4,992,823
3,077,171
503,543
(994,548)
7,578,989
2,265,157
(577,963)
98,919,337
246,718
(89,489,936)
(18,030,825)
(911,477)
-
$
As at December 31, 2018 and 2017, IGC’s aggregate assets, aggregate liabilities and net income (loss) for the year ended are as follows:
IGC
Aggregate assets
Aggregate liabilities
Income (loss) for the year
The Company's ownership %
The Company's share of income (loss) for the year
December 31, 2018
N/A $
N/A
N/A
19.9%
98,919,337
December 31, 2017
6,127,735
(1,108,694)
(2,713,490)
41%
(994,548)
The Company holds a 19.9% interest in IGC, has a minority position on the Board of IGC, and does not control operational decisions. The Company’s
judgment is that it does not have control or significant influence of IGC, and accordingly accounting for the remaining investment in IGC as FVTPL is
appropriate.
IGC – Sale of Malmyzh
On October 10, 2018, the Company was notified by IGC that the sale of the Malmyzh project to RCC for US$200 million had closed. Of this amount,
US$190 million was released from escrow, with the remaining US$10 million to be held in escrow and released subject to certain conditions over the
next 12 months. IGC distributed the net sale proceeds to membership unit holders by way of a combination of share-buy back and dividends. For its
39.99% interest in IGC the Company received its initial cash distribution of $84,246,645. A second cash distribution to the Company of $5,450,764
(US$4 million) has been accrued as a receivable (Note 4) pending release from escrow.
Credit Facilities
In support of the sale of Malmyzh, on September 27, 2018, EMX borrowed US$18.5 million from Sprott Private Resource Lending (Collector), LP
(“Sprott”) and then loaned the US$18.5 million to IGC.
Sprott Private Resource Lending (Collector), LP – US$18,500,000
The loan made under the Sprott credit facility had a maturity date of January 31, 2019 and carried an annual interest rate of 12%, payable monthly. In
connection with the Sprott loan, EMX issued 381,321 common shares valued at $602,487 (US$465,212) or $1.58 per share, paid cash fees of
US$550,000, and legal fees of US$194,224.
Page 20
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
129/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
8. INVESTMENT IN AN ASSOCIATED COMPANY (Continued)
Credit Facilities (Continued)
During the year ended December 31, 2018, using an annual effective interest rate of 30.83%, the Company recorded interest expense of $271,921
(US$208,296). The loan was fully repaid on October 12, 2018 upon receipt of the distribution from IGC and the Company recorded a loss of
$1,481,950 from the early settlement. Included in restricted cash and due to EMX is $86,330 in funds held in trust as part of the Sprott agreement.
IG Copper LLC – US$18,500,000
Concurrent with the Sprott credit facility for US$18,500,000, on September 27, 2018 EMX loaned US$18,500,000 to IGC to facilitate the Malmyzh
property sale. The terms of the arrangement were identical to the Sprott loan to EMX. As such, in connection with the EMX Loan, IGC issued to EMX
37,000 membership units in IGC at US$10/membership unit, reimbursed EMX for fees, interest payments, and reimbursement of all legal costs. IGC
further agreed to pay EMX an additional fee of US$550,000.
During the year ended December 31, 2018, using an annual effective interest rate of 38.64%, the Company recorded interest income of $332,078
(US$254,377). The loan was fully repaid on October 12, 2018 by IGC from the proceeds received from the sale of Malmyzh and the Company recorded
a gain of $2,014,950 from the early settlement.
During the year ended December 31, 2018, the Company loaned IGC US$300,000 with no specific terms of repayment, to be settled from proceeds
from the sale of Malmyzh. The loan was fully repaid on October 15, 2018 including $63,926 (US$49,000) in interest.
9. EXPLORATION AND EVALUATION ASSETS
Acquisition Costs
At December 31, 2018 and December 31, 2017, the Company has capitalized the following acquisition costs on its exploration and evaluation assets:
Region
Sweden
Turkey
United States
of America
Total
Properties
Various
Viad royalties
Alankoy
Trab
Superior West, Arizona
Yerington, Nevada
December 31, 2018
$
16,671 $
421,084
153,960
78,587
736,341
206,258
1,612,901 $
December 31, 2017
16,671
421,084
153,960
78,587
867,096
304,568
1,841,966
$
During the year ended December 31, 2018, the Company received a $130,756 (US$100,000) annual option payment related to an exploration and
option to purchase agreement for the Superior West project with Kennecott Exploration Company (“Kennecott”). The Company also received the
annual option payment related to an option agreement with Mason Resources Corp (“Mason”) for $98,310 (US$75,000) and applied against the
Yerington project.
During the year ended December 31, 2017, the Company received a $133,383 (US$100,000) annual option payment related to an exploration and
option to purchase agreement for the Superior West project with Kennecott. The Company also received the annual option payment related to an option
agreement with Mason for $88,527 (US$75,000) and applied against the Yerington project. Also during the year ended December 31, 2017, the
Company sold the wholly owned Australian subsidiary that held the Koonenberry licences in Australia. As part of the sale, the Company transferred the
ownership of the Koonenberry property which had a capitalized cost of $81,124.
Page 21
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
130/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
During the year ended Dececmber 31, 2016, the Company received a $129,820 (US$100,000) annual option payment related to an exploration and
option to purchase agreement for the Superior West project with Kennecott applied against the Superior West capitalized costs. Also during the year
ended December 31, 2016, the Company sold its Sisorta project in Turkey and all capitalized costs were recovered.
Sweden and Norway Licenses
The Company holds certain exploration permits in Sweden and Norway. There are no specific spending commitments on the Swedish licenses and
permits.
On February 14, 2017, the Company completed an agreement to sell certain wholly owned subsidiaries in Sweden to Boreal Metals Corp. (“BMC”)
(TSX-V: BMX), a British Columbia corporation. Pursuant to the agreement BMC acquired two wholly-owned subsidiaries of the Company that control
the Gumsberg and Adak exploration assets in Sweden and the Tynset and Burfjord assets in Norway. In exchange for the transfer of its wholly-owned
subsidiary Iekelvare AB, which owns the Gumsberg and Adak properties, and its entire interest in its wholly-owned subsidiary EMX Exploration
Scandinavia AB, which owns the Tynset and Burfjord properties BMC completed the following:
BMC issued 1,713,390 common shares to EMX representing a 19.9% equity ownership in BMC. BMC had the continuing obligation to issue
additional shares of BMC to EMX to maintain its 19.9% interest in BMC, at no additional cost to EMX, until BMC raised CAD $5,000,000 in
equity (completed). EMX now has the right to participate pro-rata in future financings at its own cost to maintain its 19.9% interest in BMC.
BMC also agreed to reimburse SEK 550,000 ($81,996, received) to the Company for license fees related to the Adak license.
As part of the agreement, EMX will receive an uncapped 3% NSR royalty on each of the properties. Within five years of the closing date, BMC
has the right to buy down up to 1% of the royalty on any given project by paying EMX US$2,500,000 in cash and shares of BMC. Such buy
down is project specific.
Additionally, EMX will receive annual advance royalty (“AAR”) payments of US$20,000 for each of the properties commencing on the second
anniversary of the closing, with each AAR payment increasing by US$5,000 per year until reaching US$60,000 per year, except that BMC may
forgo AAR payments on two of the four properties in years two and three.
EMX will also receive a 0.5% NSR royalty on any new mineral exploration projects generated by BMC in Sweden or Norway, excluding
projects acquired from a third party containing a mineral resource or reserve or an existing mining operation. These royalties are not capped and
not subject to a buy down.
As part of the agreement, EMX also has the right to nominate one seat on the Board of Directors of BMC.
Pursuant to the sale agreement, the Company received 1,713,390 shares of BMC on signing, valued at $0.05 per share or $85,670, and paid a
US$12,000 ($15,862) finders fee. Subsequent to signing, pursuant to equity and private placements completed by BMC, BMC issued EMX a further
7,492,492 shares to EMX valued at $1,290,998. EMX recorded a total gain on sale of $1,393,224 in fiscal 2017.
Modum Project
In January 2018, the Company amended the sale agreement with BMC noted above to include the Modum project in Norway in exchange for an
additional 1,324,181 common shares of BMC (received in March 2018) valued at $397,254 or $0.30 per share and is included in gain on acquisition
and sale of exploration and evaluation assets.
The Company sold 5,000,000 shares of BMC during the year and as at December 31, 2018 holds 5,530,063 shares of BMC representing approximately
a 9.4% interest. Subsequent to the year ended December 31, 2018, the Company participated in a private placement of BMC acquiring an additional
1,995,672 shares of BMC bringing EMX’s interest to 9.9%.
Page 22
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
131/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Sweden and Norway Licenses (Continued)
Slättberg Project
In December 2017, the Company executed an option agreement subsequently amended for the sale of the Slättberg licenses in Sweden to Sienna
Resources Inc. (“Sienna”) (TSX-V: SIE). As part of the agreement, Sienna can earn a 100% interest in the project by completing the following: Ik,
On signing the agreement, Sienna issued EMX 3,000,000 common shares (received) of Sienna stock valued at $750,000.
As a condition to the exercise of the option, Sienna must undertake work commitments of at least $750,000 on the project, including drilling of
at least 750 meters.
Upon exercise of the option, issue to EMX an additional 3,000,000 common shares of Sienna, and EMX will receive a 3% NSR royalty on the
project.
After exercise of the option, Sienna will use commercially reasonable efforts to raise $3,000,000 for development of the project and other
activities. Once Sienna has raised that amount, Sienna will issue an additional 4,000,000 common shares to EMX. Thereafter, EMX will have
the right to participate pro-rata in future financings at its own cost to maintain its interest in Sienna.
Within six years of the execution of the agreement, Sienna may purchase 0.5% of the NSR royalty for $1,500,000, leaving EMX with a 2.5%
NSR royalty.
Guldgruvan Cobalt Project
In February 2018, the Company closed a definitive agreement for the sale of the Guldgruvan cobalt project to Boreal Energy Metals Corporation
(“BEMC”), a subsidiary of BMC in southern Norway.
In exchange for the transfer of its Guldgruvan exploration licence to BEMC, BEMC issued to EMX 2,979,798 common shares of BEMC representing a
5.9% equity ownership in BEMC.
EMX will retain a 3% NSR royalty on the project, of which 1% may be purchased by BEMC on or before the fifth anniversary of the closing date in
0.5% increments for a total of US$2,500,000 in cash and common shares of BEMC stock. EMX will also receive AAR payments, with an initial
US$20,000 payment, commencing on the second anniversary of the closing, with each subsequent AAR payment increasing by US$5,000 per year until
reaching US$60,000 per year.
Njuggtraskliden and Mjovattnet Projects
In April 2018, EMX executed another agreement with BEMC to sell the Njuggträskliden and Mjövattnet projects in Sweden.
At closing, BEMC issued to EMX 2,020,202 common shares representing a 4% equity ownership in BEMC, bringing EMX’s aggregate interest to
9.9% of BEMC’s issued and outstanding shares. BEMC has the continuing obligation to issue additional shares of BEMC to EMX to maintain its
aggregate 9.9% interest in BEMC, at no additional cost to EMX, until BEMC has raised $3,000,000 in equity. Thereafter, EMX will have the right to
participate pro-rata in future financings at its own cost to maintain its 9.9% interest in BEMC.
EMX will receive an uncapped 3% NSR royalty on each of the projects. Within five years of the closing date, BEMC has the right to buy down up to
1% of the royalty owed to EMX by paying EMX US$2,500,000 in cash and shares of BEMC for each project. For each project, EMX will also receive
AAR payments, with an initial US$20,000 payment, commencing on the second anniversary of the closing, with each subsequent AAR payment
increasing by US$5,000 per year until reaching US$60,000 per year. EMX will be also be reimbursed approximately US$37,000 for its acquisition
costs and previous expenditures on the projects.
Page 23
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
132/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Sweden and Norway Licenses (Continued)
Riddarhyttan Project
In April 2018, the Company executed an option agreement with South32 Limited ("South32") for the Riddarhyttan project in Sweden. Pursuant to the
agreement, South32 can earn a 100% interest in the project by: (a) making option and cash payments that total US$200,000, (b) making a one-time
option exercise payment of US$500,000, and (c) completing US$5,000,000 of exploration work on the project within five years of the execution date.
Upon exercise of the option, EMX will retain a 3% NSR royalty, 0.75% of which may be purchased by South32 for US$1,900,000 within five years of
executing the agreement.
After exercising the option, AAR payments of 50,000 pounds of copper or the cash equivalent will be due to EMX, but will be deductible from future
royalty payments. The AAR may be repurchased by South 32 for US$2,500,000. In addition, South32 will make milestone payments of: (a) 350,000
pounds of copper (or the cash equivalent) upon publication of a maiden resource on the project, and (b) 750,000 pounds of copper (or the cash
equivalent) upon delivery of a feasibility study.
United States
Cathedral Well, Nevada
In June 2014, the Company signed an exploration and option agreement through its wholly-owned subsidiary BCE, with Ely Gold and Minerals Inc.
(“Ely Gold”) (TSX Venture: ELY) to earn a 100% interest in the Cathedral Well project by paying EMX a total of US$100,000 over three years after
which the Company will retain a 2.5% NSR royalty, inclusive of an underlying 0.5% NSR royalty. Ely Gold completed their earn-in for the property in
November of 2016 through a trade with EMX, whereby a subsidiary of Ely Gold executed a quit claim deed for certain mining claims adjacent to
EMX’s Spring Canyon property in Nevada in lieu of its last US$25,000 option payment. In December 2016, Ely Gold announced it had optioned the
property to Colorado Resources Ltd. (TSX-V: CXO).
Subsequent to December 31, 2018, the Company received the 2018 AMR payment of 20 ounces of gold from Ely Gold to keep the agreement in good
standing.
Hardshell Skarn, Arizona
The Company holds a 100% interest in the Hardshell Skarn property comprised of certain unpatented federal lode mining claims.
In October 2015, the Company signed an exploration and option agreement through its wholly-owned subsidiary FOBC LLC, with Arizona Mining Inc,
to earn a 100% interest in the project by paying the Company a total of US$85,000 as follows: US$25,000 (received) upon execution of the agreement
and US$60,000 (received) over the following three years. In 2017, Arizona Mining earned a 100% interest in the project under the agreement by
accelerating and completing the required US$85,000 in cash payments. The Company retains a 2% NSR. AAR payments of US$5,000 commence on
the first anniversary of the exercise of the option. After commencement of commercial production, the Company is due payments of US$5,000 or the
royalty coming due that year, whichever is greater.
Greenwood Peak, Arizona
In November 2017, EMX executed an option agreement with a wholly owned subsidiary of Antofagasta plc (“Antofagasta”) (LSE: Anto) whereby
Antofagasta can earn a 100% interest in the Greenwood Peak project by: a) reimbursing EMX’s acquisition costs and making annual option payments,
together totaling US$630,000 ($30,000 received), and b) completing US$4,500,000 in work expenditures within the five year option period.
Page 24
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
133/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
United States (Continued)
Greenwood Peak, Arizona (Continued)
Antofagasta terminated its option to acquire the interest in the property in August, 2018 and the Company subsequently dropped the property.
Copper Springs, Arizona
On February 25, 2017, through BCE, the Company executed an option agreement for Copper Springs with Anglo American Exploration (USA), Inc.
(“Anglo American”). Anglo American can earn a 100% interest in the project by: a) reimbursing holding and permitting costs and making annual
option payments, together totaling US$447,000 ($132,000 received), and b) completing US$5,000,000 in exploration expenditures before the fifth
anniversary of the agreement. Upon exercise of the option, Anglo American will pay EMX an additional US$110,000 and EMX will retain a 2% NSR
royalty on the project. The royalty is not capped or purchasable, except over two parcels of Arizona State Land where Anglo American can buy a 0.5%
NSR royalty from EMX for US$2,000,000. After exercise of the option, annual advanced minimum royalty (“AMR”) payments and milestone
payments will be due to EMX.
Copper King, Arizona
In October 2016, the Company, through BCE, entered into an option agreement to sell the Copper King property for a combination of cash payments
and work commitments. The agreement grants Kennecott the option to acquire a 100% interest in the property. Pursuant to the agreement, Kennecott
can earn a 100% interest in the project by (a) reimbursing holding costs and making option payments, together totaling US$504,314 (US$79,314
received), and (b) completing US$4,000,000 in exploration expenditures before the fifth anniversary of the agreement. Upon exercise of the option
EMX will retain a 2% NSR royalty on the project which is not capped or purchasable.
After exercise of the option, AMR payments and milestone payments will be due to EMX.
Subsequent to the year ended December 31, 2018, the Company received a US$50,000 option payment.
Buckhorn Creek Property, Arizona
In February 2018, the Company executed an option agreement with Kennecott whereby Kennecott can earn a 100% interest in the project by: a) making
annual option payments totaling US$550,000, and b) completing US$4,500,000 in exploration expenditures before the fifth anniversary of the
agreement. Upon exercise of the option, EMX will retain a 2% NSR royalty on the project which is not capped or purchasable. After exercise of the
option, annual advance minimum payments and milestone payments will be due to EMX. The Company also received US$30,000 ($38,615) as an
execution payment to the agreement.
Superior West, Arizona
The Company holds a 100% interest in the mineral rights comprised of certain federal unpatented mining claims, located on Tonto National Forest
lands and unpatented federal mining claims under option.
On May 4, 2015, the Company entered into an exploration and option to purchase agreement, through its wholly owned subsidiary BCE, for the
Superior West project with Kennecott. Pursuant to the agreement, Kennecott can earn a 100% interest in the project by making a cash payment upon
execution of the agreement of US$149,187 (received), and thereafter completing US$5,500,000 in exploration expenditures and paying annual option
payments totaling US$1,000,000 (US$100,000 received in March 2016, US$100,000 received in January 2017, and US$100,000 received in March
2018 ) before the fifth anniversary of the agreement. For the execution payment, US$50,000 ($52,500) was applied against the Superior West
capitalized costs, and the balance of US$99,187 was a direct reimbursement to the Company for holding costs to maintain the property in good
standing. Upon exercise of the option EMX will retain a 2% NSR royalty on the properties. Kennecott has the right to buy down 1% of the NSR royalty
from underlying claim holders by payment of US$4,000,000 to EMX.
Page 25
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
134/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
United States (continued)
Superior West, Arizona (continued)
Kennecott has maintained or exceeded any minimum requirements for expenditures on the project and the agreement remains in good standing.
Mineral Hill, Wyoming
In October 2016, the Company, through its wholly-owned subsidiary BCE, entered into an option agreement with Coeur Explorations, Inc., a subsidiary
of Coeur Mining, Inc. (NYSE: CDE) (“Coeur”) to acquire a 100% interest in the property. The Company’s Mineral Hill project is held under a pooling
agreement with a private group, Mineral Hill L.P. (“MHL”), with all proceeds split 50:50, except for the sale of surface rights associated with several
patented mining claims.
Pursuant to the agreement, Coeur may acquire a 100% interest in the property by a) making yearly option payments, beginning upon execution of the
agreement, totaling US$435,000 (US$10,000 received upon execution, US$15,000 received in October 2017), b) making exploration expenditures
totaling US$1,550,000 on or before the fifth anniversary of the agreement, and c) paying US$250,000 upon exercise of the option.
On October 19, 2018, EMX received notice that Coeur was terminating its option to acquire the property.
Ophir, Utah
In October 2016, the Company completed the sale of five patented mining claims comprising its Ophir property in Utah, through its wholly owned
subsidiary Bullion Monarch Mining Inc., to Kennecott. The terms of the sale include a cash payment of US$75,000 (received) to EMX at closing, with
the Company retaining a 2% NSR royalty on the property.
Yerington West, Nevada
The Yerington West property is comprised of certain unpatented federal mining claims located on lands administered by the Bureau of Land
Management (“BLM”). Yerington West is under an option agreement, dated September 24, 2009 originally with Entrée Gold Inc. ("Entrée"), and then
with Mason (TSX: MNR) as a result of a 2017 "spin out" whereby Entrée transferred the Ann Mason project, which includes EMX's Yerington West
property, into Mason. On December 19, 2018 Hudbay Minerals Inc. (“Hudbay”) announced the acquisition of Mason which includes EMX’s Yerington
West property.
Under the agreement, Hudbay can earn up to an 80% interest in the project by a) incurring expenditures of $1,000,000, making cash payments of
$140,000, and issuing 85,000 shares within three years (completed by Entrée), b) making aggregate advance royalty payments totaling $375,000, being
US$50,000 per year between the fifth and seventh anniversaries (received), and $75,000 per year between the eighth and tenth anniversaries ($75,000
received during the year ended Dececmber 31, 2018); and (c) delivering a feasibility study before the tenth anniversary of the agreement. Under the
agreement, once the earn-in has been completed, EMX can convert its interest to a 2.5% NSR. Hudbay has the option to buy down 1.5% of the NSR for
US$4,500,000.
Page 26
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
135/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
United States (continued)
Regional Strategic Alliance with South32
In November 2018, the Company, through its wholly-owned subsidiary BCE, entered into an agreement with South32 USA Exploration Inc,
(“South32”), a wholly-owned subsidiary of South32 Limited. Pursuant to the agreement, which has an initial term of two years, South32 will fund
EMX $800,000 per year to generate new prospects to be considered for acquisition as well as to fund the labor portion of work programs on early-stage
projects, Alliance Exploration Projects (“AEP”). In addition, South32 will provide a minimum of $200,000 per year for new acquisition funding.
South32 selected the Jasper Canyon, Sleeping Beauty, Dragon’s Tail, Lomitas Negras, and Midnight Juniper properties as the initial AEP’s for
advancement under the alliance.
As projects advance, the Company will propose certain projects be selected as Designated Projects (“DP”). DP’s will advance under separate option
agreements whereby South32 can earn a 100% interest in the project by making option payments totaling $525,000 and completing $5,000,000 in
exploration expenditures over a five year period.
Upon exercise of the option, EMX will retain a 2% NSR royalty on the project which is not capped or purchasable. After exercise of the option, annual
advance minimum payments and milestone payments will be due to EMX.
Various
The Company holds interests acquired by staking in several jurisdictions including Utah, Nevada, Arizona, Colorado and Wyoming.
Australia exploration licenses
The Company’s Australian properties are comprised of contiguous exploration licenses along the Koonenberry gold belt in New South Wales,
Australia. The Australian properties are acquired either directly through staking or through agreements with license holders.
Koonenberry Property
In February 2014, the Company signed an exploration and option agreement with North Queensland Mining Pty Ltd. (“NQM”), a privately-held
Australian company, giving NQM the right to acquire the Company’s Koonenberry exploration licenses in New South Wales, Australia. NQM will bear
responsibility of satisfying all existing work commitments and honoring all underlying property agreements during the term of the agreement. NQM
has the option to earn a 100% interest in the EMX subsidiary that holds the licenses, with EMX retaining a 3% production royalty.
In 2017, Koonenberry Gold Pty Ltd. (“KNB”) completed the earn-in requirements under the exploration and option Agreement between NQM and the
Company, and elected to acquire EMX’s Koonenberry exploration licenses. KNB, a private Australian company, is the successor in interest to NQM
under the agreement. The Company transferred its wholly-owned subsidiary, EMX Exploration Pty Ltd, the holder of the Koonenberry licenses, to
KNB. EMX retains a 3% royalty on all future production from the Koonenberry licenses. As a result of the transaction, all of EMX’s interests in the
Koonenberry gold project were converted to royalties. As a result of the sale, in the year ended December 31, 2017 the Company recorded a loss of
$87,987 being the capitalized costs of the Koonenberry property and field equipment with a book value of $6,866 transferred to KNB at the time of
sale.
Page 27
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
136/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Australia exploration licenses (Continued)
Kimberley Copper Project
The Kimberley Copper Project consists of two exploration licences, in Western Australia. On September 24, 2018 and amended in November 2018, the
Company executed a share purchase agreement to sell the Kimberley Copper Project to Enfield Exploration Corporation (‘Enfield”). Pursuant to the
agreement, Enfield will issue to EMX 500,000 shares and committed to raising US$1,000,000 for an initial drill test no later than March 31, 2019.
Enfield also agreed to grant EMX with a graduated NSR royalty on the property, make AAR payments and issue an additional 1,750,000 shares upon
achievement of certain milestones.
New Zealand exploration licenses
In September 2014, and amended in December 2015 the Company signed an option agreement with Land & Mineral Limited (“L&M”), a privately-
held Australian company, giving L&M the right to acquire Hauraki Gold Ltd. (“Hauraki”), the wholly-owned EMX subsidiary that controls the
Neavesville gold-silver property located in the Hauraki goldfield of New Zealand’s North Island. The purchase and sale agreement included an
execution payment of $100,000 ($50,000 received on signing in 2015, and $50,000 received in May 2016, being the balance of the execution payment)
and a series of anniversary and milestone payments equal to a certain amount of troy ounces of gold. Pursuant to the agreement, In September 2016, the
Company received a $129,562 payment equivalent to a required payment of 75 troy ounces of gold.
In September 2018, the Company received notice from L&M and its parent company E2 Metals of their intention to terminate the agreement.
Subsequently, EMX elected not to exercise its right to take back the project or the shares of Hauraki. The agreement was effectively terminated in
October 2018.
Turkey
The Company has acquired numerous exploration licenses in Turkey for which there are no specific spending commitments.
Akarca Property
Effective July 29, 2016, the Company entered into a share purchase agreement for the sale of AES Madencilik A.S. (“AES”), the wholly-owned EMX
subsidiary that controls the Akarca gold-silver project in western Turkey, to Çiftay snaat Taahhüt ve Ticaret A.S. ("Çiftay"), a privately owned Turkish
company.
The terms of the sale provide payments to EMX as summarized below (gold payments can be made as gold bullion or the cash equivalent):
US$2,000,000 cash payment ($2,630,760) to EMX upon closing of the sale (received);
500 ounces of gold every six months commencing February 2, 2017 up to a cumulative total of 7,000 ounces of gold. The Company received
payments of US$601,825 and US$634,825 during the year ended December 31, 2017, and US$655,525 and US$608,114 during the year ended
December 31, 2018, each representing the equivalent of 500 ounces of gold. The payments have been credited against accounts receivable.
Receipt of these payments leaves a pre-production total of 5,000 ounces of gold (or the cash equivalent) to be paid to EMX;
7,000 ounces of gold within 30 days after the commencement of commercial production from the Property provided that prior gold payments
will be credited against this payment;
250 ounces of gold upon production of 100,000 ounces of gold from the Property;
250 ounces of gold upon production of an aggregate of 500,000 ounces of gold from the Property;
Page 28
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
137/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Turkey (continued)
Akarca Property (Continued)
•
•
A sliding-scale royalty in the amount of the following percentages of production returns after certain deductions (“Royalty”) for ore
mined from the Property:
o
o
For gold production: 1.0% on the first 100,000 ounces of gold; 2.0% on the next 400,000 ounces of gold; 3.0% on all gold
production in excess of 500,000 ounces produced from the Property, and;
For all production other than gold production: 3.0%.
The Royalty is uncapped and cannot be bought out or reduced.
In addition, Çiftay must conduct a drilling program of at least 3,000 meters on the Property during each 12-month period commencing on August 5,
2016 until commencement of commercial production.
Pursuant to the agreement, Çiftay has guaranteed the future payments of 2,500 ounces of gold, or cash equivalent. As at December 31, 2018, the
Company has recorded a receivable of $902,991 (including $167,427 of accreted interest income) related to the remaining guaranteed payment. The
Company used a long term gold price of US$1,325 per ounce and due to the short term nature of the remaining guaranteed payments, a discount rate of
0%.
The sale of AES resulted in a gain of $6,683,560, resulting from proceeds of $6,737,452, less the net assets of AES of $53,892 which is included in the
gain on acquisition and sale of exploration and evaluation assets for the year ended December 31, 2016.
Sisorta Property
Effective July 1, 2016, the Company entered into a share purchase agreement for the sale of EBX Madencilik A.S. (“EBX”), a wholly-owned
subsidiary that controlled the Sisorta gold property in Turkey, to Bahar Madencilik Sinayi ve Ticaret Ltd Sti ("Bahar"), a privately owned Turkish
company.
The agreement provides for Bahar's staged payments to EMX as summarized below:
US$250,000 cash payment ($332,969) to EMX upon closing of the sale (received).
Annual cash payments of US$125,000 (received) beginning on July 1, 2017 until commencement of commercial production from the Property.
3.5% of production returns after certain deductions (“NSR Payment") for ore mined from the property that is processed on-site (increased to 5%
if the ore is processed off-site).
The advance cash payments will be credited at a rate of 80% against the NSR Payment payable after commercial production commences.
The NSR Payment is uncapped and cannot be bought out or reduced.
Pursuant to the sale of Sisorta, during the year ended December 31, 2016, the Company paid a finders fee of US$48,740 ($63,549) and recorded a gain
on the sale of EBX of $86,041 which is included in the gain (loss) on acquisition and sale of exploration and evaluation assets. The future annual cash
payments are not accrued as there is no guarantee of payment, and the shares of EBX could be returned if the payments are not made.
Balya Property
EMX holds an uncapped 4% NSR royalty that it retained from the sale of the property to Dedeman Madencilik San ve Tic. A.S. ("Dedeman"), a
privately owned Turkish company, in 2006. During the year ended December 31, 2018, the Company received the 2017 annual royalty payment
totalling US$121,075 less applicable taxes of US$18,469. The AMR’s and net royalty payments have been included in Royalty income.
Page 29
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
138/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Turkey (continued)
Alankoy Property – Black Sea Copper & Gold Agreement
On November 23, 2015, the Company signed an Exploration and Option Agreement with Black Sea Copper & Gold Corp. (“Black Sea”), a privately-
held British Columbia corporation, for the Alankoy copper-gold property in northwestern Turkey, whereby Black Sea has the option to acquire the
Company’s subsidiaries that hold the Alankoy project, with the Company retaining a 3% production royalty. To do so, Black Sea paid US$25,000
(received $35,408 in January 2016) upon signing and must incur certain exploration expenditure milestones.
In February 2017, the Company received notification that 0955767 B.C Ltd (formerly Black Sea) was terminating the Alankoy agreement and paid
US$16,439 to EMX for reimbursement of costs. EMX has regained 100% control of the project.
Golcuk Transfer and Royalty Agreement
On July 17, 2012, amended on January 29, 2013, and November 8, 2016, the Company entered into an agreement with Pasinex Resources Limited
(“PRL”) to transfer a 100% interest in the Golcuk property in exchange for PRL issuing shares to the Company as follows,
500,000 PRL shares on the initial issuance date (received during the year ended December 31, 2013 and valued at $27,500 or $0.055 per share);
An additional 500,000 PRL shares on or before the first anniversary of the initial issuance date (received during the year ended December 31,
2014 and valued at $25,000 or $0.05 per share);
An additional 1,000,000 PRL shares on or before the second anniversary of the initial issuance date (received in February 2015 and valued at
$115,000 or $0.115 per share); and,
An additional 1,000,000 PRL Shares on or before the third anniversary of the initial issuance date (received in February 2016 and valued at
$55,000 or $0.055 per share).
In addition to the transfer of shares, PRL will then pay the Company a 2.9% NSR royalty from production. PRL may pay the first minimum royalty
payment by delivering 664,483 common shares in the capital of PRL to EMX on or before November 30, 2016 (received valued at $79,738). PRL has
the option of purchasing 0.9% of the royalty for US$1,000,000 prior to the 6th anniversary of the effective date of the agreement. In 2017 EMX
received 224,150 shares of PRL and US$49,204 in cash for the advance royalty payment due in September 2017.
Tumad Agreement - Trab-23
The Trab-23 property is located in northeast Turkey. In February 2013 Tumad Madencilik San.Ve TIC, A.S. (“Tumad”), executed an option agreement
(the “Trab-23 Agreement”) to acquire Trab-23 from the Company. The Trab-23 Agreement provides an upfront transfer of the two licenses to Tumad,
in-ground spending requirements, a revenue stream of annual earn-in and pre-production payments, and a revenue stream based upon production.
Tumad's payment and drill requirements have not been met and Tumad terminated the agreement in 2017, and has returned the property to 100% EMX
control.
Page 30
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
139/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Turkey (continued)
Aktutan Property
EMX has a royalty interest in the Aktutan polymetallic project sold to Dedeman in 2007 for considerations that include a 4% uncapped NSR and AAR
payments. During the year ended December 31, 2017, EMX received two advanced royalty payments on its Aktutan property for $261,473
(US$200,000) from Dedeman. The 2018 AAR payment has been amended and is due by March 31, 2019.
Page 31
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
140/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Exploration Expenditures
During the year ended December 31, 2018, the Company incurred the following exploration expenditures by projects, which were expensed as
incurred:
Scandinavia
Kennecott
Exploration
Anglo
American
USA
Antofagasta
South 32
$
Administration Cost
Assays
Drilling / Trenching
Land and Legal
Logistics
Personnel
Property Cost
Professional Services
Share Based Payments
Technical Studies
Travel
Total Expenditures
Recoveries
Operator Fees
Option Payments & Shares Received
Other Property Income
Total Recoveries
142,212 $
58,853
-
110,466
572,789
736,017
150,476
21,976
222,860
539,080
173,315
2,728,044
(1,194,456)
(68,911)
-
(13,667)
(1,277,034)
Net Expenditures
$
1,451,010 $
166 $
-
3,369
-
3,891
33,839
9,764
-
-
3,602
-
54,631
(41,590)
(4,160)
(168,450)
-
(214,200)
)
$
(159,569
- $
-
-
-
-
1,105
16,512
-
-
-
23
17,640
(16,842)
-
(51,831)
-
(68,673)
)
$
(51,033
During the year ended December 31, 2018, the Company:
621 $
1,374
286,199
-
40,864
56,141
1,296
-
-
-
-
281 $
-
-
-
27,855
75,704
25,763
131
-
14,244
1,306
386,495 145,284
(414,942) (386,569)
(8,605)
(28,631)
-
(12,141)
(3,253)
(455,714) (398,427)
-
Turkey
Total
34,313
-
185,568
123,578
35,687
289,568
185,568
196,188
Other
USA
237,631 $ 238,699 $ 145,471 $
15,153
-
25,386
-
1,745,051 1,911,840 113,473
13,372
11,416 164,294
62,638
73,143
15,965
3,663,982 4,268,032 628,895
-
-
-
-
-
(638,153)
(41,396)
(220,281)
(15,393)
(915,223)
221,790
-
-
-
221,790
690,686
11,285
460,414
770
174,686
460,414
18,616
176,015
744,021
Australia
and New
Zealand
Other
Total
645 $
-
-
2,846
-
28,814 $
-
-
18,153
4,092
555,841
109,693
289,568
342,419
773,069
121,785 11,887 2,895,002
960,176
-
52,307
240,450
27,463 15,301
788,973
31,394 11,667
786,312
133,572 21,901
29,315
400,165
5,555
446,895 69,802 8,141,668
- (1,832,609)
(110,307)
-
(220,281)
-
-
(29,377)
- (2,192,574)
-
-
-
(317)
(317)
(69,219) $ (253,143) $ 3,885,772 $ 3,352,809 $
$ 446,578 $ 69,802 $ 5,949,094
628,895
Recovered or accrued $1,194,456 in exploration expenditures and $68,911 in operator fees from BMC and South32 related to activities in
Sweden;
Received a $38,874 (US$30,000) execution payment related to an exploration and option to purchase agreement for the Buckhorn Creek project
with Kennecott;
Received a $64,790 (US$50,000) anniversary payment related to an exploration and option to purchase agreement for the Buckhorn Creek
project with Kennecott,
Received a $64,790 (US$50,000) anniversary payment related to an exploration and option to purchase agreement for the Copper King project
with Kennecott, and
Received a $51,832 (US$40,000) anniversary payment related to an exploration and option to purchase agreement for the Copper Springs
project with Anglo American.
Page 32
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
141/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
During the year ended December 31, 2017, the Company incurred the following exploration expenditures by projects, which were expensed as
incurred:
USA
Asia Pacific
Scandinavia
Kennecott
Exploration
Anglo
American
$
Administration Cost
Assays
Drilling / Trenching
Land and Legal
Logistics
Personnel
Property Cost
Professional Services
Share Based Payments
Technical Studies
Travel
Total Expenditures
Recoveries
Operator Fees
Option Payments & Shares Received
Other Property Income
Total Recoveries
Net Expenditures
$
67,159 $
24,972
13,509
73,870
26,040
566,367
347,792
77,768
111,887
17,921
118,904
1,446,189
(239,088)
-
(750,000)
-
(989,088)
457,101 $
Other
Total
Other
USA
185,833 $ 186,199 $ 65,877 $ 40,765 $ 10,669 $ 51,434 $
New
Zealand
Other
Total
Total
Turkey
6,073 $
-
-
3,511
-
6,031
89,142
198,126
187,423
13,758
89,512
198,126
201,917
292 $
-
-
-
6,168
18,052
39,396
-
-
-
-
63,908
(167,690)
940
-
23,062
1,379
1,593,930 1,647,547 175,649
27,130
93,506
52,362
-
11,584
3,751,377 3,878,815 451,489
376,742
74 $
39,670
7,727
103,021
370
323,437
-
229,336
8,326
2,554,447
35,565
1,344,906
363
277,449
-
739,585
-
97,224
10,370
248,302
735
6,334,119
63,530
(721,968)
(69,812)
(29,770)
(7,451)
(1,047,560)
(64,901)
(63,747)
(2,090)
(144,254)
(1,863,045)
(80,724) $ (104,496) $ 3,397,103 $ 3,211,883 $ 307,825 $ 36,949 $ 268,625 $ 305,574 $ 188,691 $ 4,471,074
-
-
15,334
-
13,606 106,659
25,238
3,965
72,497
-
28,456
5,318
34,506
-
1,567
6,844
68,732 300,203
(26,434)
-
-
(5,349)
(31,783)
-
-
9,534
-
44,619
-
27,180
64,993
31,873
4,419
188,691
-
-
-
-
-
-
-
18,845
-
120,265
29,203
72,497
33,774
34,506
8,411
368,935
(403,530)
(29,770)
(175,234) (122,326)
(58,398)
(666,932) (143,664)
(166,028)
(22,319)
(110,333)
(55,594)
(354,274)
940,781
6,498
476,569
12,924
104,984
901,022
6,498
476,569
2,554
104,249
-
-
(714)
(168,404)
(5,349)
(63,361)
(58,012)
(31,578)
(31,578)
(21,338)
-
-
-
-
-
-
-
During the year ended December 31, 2017, the Company:
Received or accrued $239,088 in expenditures recovered from BMC in Sweden;
Received 3,000,000 common shares of Sienna valued at $750,000;
Received a $65,368 (US$50,000) option payment related to an exploration and option to purchase agreement for the Copper King project with
Kennecott;
Received as part of the Copper Springs option agreement with Anglo American, US$82,000 ($106,436) as reimbursement of previously paid
land holding costs; and
Recorded an option payment from Pasinex pursuant to a property agreement on the Company’s Golcuk property for the equivalent to 75 ounces
of gold in the form of $61,805 (US$49,204) cash and 224,150 shares of Pasinex valued at $60,521
Page 33
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
142/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
9. EXPLORATION AND EVALUATION ASSETS (Continued)
During the year ended December 31, 2016, the Company incurred the following exploration expenditures by projects, which were expensed as
incurred:
USA
Turkey
Asia Pacific
$
Administration Cost
Assays
Drilling / Trenching
Land and Legal
Logistics
Personnel
Property Cost
Professional Services
Share Based Payments
Technical Studies
Travel
Total Expenditures
Recoveries
Operator Fees
Option Payments *
Other Property Income
Total Recoveries
Net Expenditures
$
Scandinavia
Kennecott
Exploration
37,498 $
8,596
76,687
48,632
14,535
195,223
165,640
135,527
40,285
106,093
63,571
892,287
-
-
-
-
-
892,287 $
109 $
845
314,972
-
57,164
118,679
2,677
-
-
42,666
-
537,112
(555,217)
(56,271)
(24,720)
(9,720)
(645,928)
(108,816) $
Desert
Star
Resources
Total
Total
Total
Other
Other
Other
Akarca
New
Zealand
Other
USA
157,106 $ 157,240 $ 27,055 $ 92,397 $ 119,452 $
676
44,283
39,603
13,810
297,586
154,526
61,577
32,805
38,383
16,310
726,614
(43,550)
-
-
-
(43,550)
Total
350,580
16,752
450,712
495,388
178,066
2,581,230
964,543
252,690
502,857
384,634
238,081
6,415,533
(721,319)
(57,534)
(501,232)
(135,489)
(1,415,574)
622 $ 2,563,528 $ 2,455,334 $ 683,064 $ 473,028 $ 1,156,092 $ (167,773) $ 178,345 $ 10,572 $ 485,674 $ 4,999,959
9,520 $ 11,740 $ 24,650 $
-
-
23,778
9,155
99,751
84,449
2,268
17,673
11,397
6,861
267,072
(48,781)
-
(180,476)
(27,243)
(256,500)
2,220 $
-
-
-
-
-
37,230
496
-
-
-
39,946
-
-
(180,476)
(27,243)
(207,719)
6,635
91
182,160
70,590
1,420,907
485,365
13,664
295,008
16,107
103,478
2,751,111
(21,938)
-
(125,890)
(39,755)
(187,583)
7,480
315,063
182,160
129,576
1,552,262
527,502
13,664
295,008
58,773
103,478
3,342,206
(628,988)
(57,534)
(150,610)
(49,740)
(886,872)
676
58,962
200,434
19,518
562,113
186,952
83,606
101,825
44,927
47,789
1,426,254
(43,550)
-
(170,146)
(56,466)
(270,162)
-
14,679
160,831
5,708
264,527
32,426
22,029
69,020
6,544
31,479
699,640
-
-
(170,146)
(56,466)
(226,612)
-
-
40,384
5,282
171,881
-
17,625
48,066
163,444
16,382
487,714
-
-
-
(2,040)
(2,040)
-
-
23,778
9,155
99,751
47,219
1,772
17,673
11,397
6,861
227,126
(48,781)
-
-
-
(48,781)
25 $
-
-
-
1,822
12,676
39,460
-
-
-
-
53,983
(51,833)
(1,263)
-
(265)
(53,361)
*The Company received a $129,820 (US$100,000) annual option payment related to an exploration and option to purchase agreement for the Superior
West project with Kennecott applied as to $105,100 to the Superior West capitalized costs, and $24,720 to exploration recoveries.
Significant components of “Other” total exploration expenditures for the year ended December 31, 2016 were Haiti - $148,455; Austria - $48,767; and
other general exploration costs in Europe totalling - $146,159.
Page 34
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
143/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
10. ROYALTY INTERESTS
Changes in royalty interest for the years ended December 31, 2018, 2017 and 2016:
Balance as at December 31, 2015
Adjusted for:
Acquisition
Depletion
Cumulative translation adjustments
Balance as at December 31, 2016
Adjusted for:
Depletion
Cumulative translation adjustments
Balance as at December 31, 2017
Adjusted for:
Depletion
Impairment of royalty interest
Cumulative translation adjustments
Balance as at December 31, 2018
Carlin Trend Royalty Claim Block
$
$
$
$
28,798,980
145,000
(2,163,221)
(949,607)
25,831,152
(2,282,276)
(1,605,133)
21,943,743
(1,732,270)
(7,256,340)
1,391,270
14,346,403
The Company holds an interest in the Carlin Trend Royalty Claim Block in Nevada which includes the following royalty properties:
-
-
-
Leeville Mine: Located in Eureka County, Nevada, the Company is receiving a continuing 1% gross smelter return royalty (“GSRR”).
East Ore Body Mine: Located in Eureka County, Nevada, the property is currently being mined and the Company is receiving a
continuing 1% GSRR.
North Pipeline: Located in Lander County, Nevada. Should the property become producing, the Company will receive a production
royalty of US$0.50 per yard of ore processed or 4% of net profit, whichever is greater.
During the year ended December 31, 2018 $2,131,947 (2017 - $2,857,927, 2016 - $2,227,322) in royalty income was included in operations offset by a
5% direct gold tax and depletion which is applied only against the Carlin Trend Royalty Claim Block components of royalty income.
Impairment of Non-Current Assets
The Company’s policy for accounting for impairment of non-current assets is to use the higher of the estimates of fair value less cost of disposal of
these assets or value in use. The Company uses valuation techniques that require significant judgments and assumptions, including those with respect to
future production levels, future metal prices and discount rates.
Non-current assets are tested for impairment when events or changes in circumstances suggest that the carrying amount may not be recoverable. The
Company continuously reviews the production of gold from the Carlin Trend Royalty Claim Block, expected long term gold prices to be realized,
foreign exchange, and interest rates. As a result, periodically the Company revises its estimated annual gold production over the expected mine life and
adjusts its long term gold price.
As a result of an update to the estimated future royalty ounces expected from the Leeville royalty, the Company re-evaluated the carrying value of the
royalty. As a result of this review, the Company recorded an impairment charge of $7,256,340 (2017 - $Nil, 2016 - $Nil). The recoverable amount of
$14,346,403 was determined using a discounted cash flow model in estimating the fair value less costs of disposal. Key assumptions used in the cash
flow forecast were: an 11 year mine life, a long term gold price of US$1,302 and a 5% discount rate.
Page 35
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
144/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
11. RECLAMATION BONDS
Reclamation bonds are held as security towards future exploration work and the related future potential cost of reclamation of the Company’s land and
unproven mineral interests. Once reclamation of the properties is complete, the bonds will be returned to the Company.
Sweden - various properties
Turkey - various properties
U.S.A - various properties
Total
12. GOODWILL
December 31, 2018
12,493 $
6,123
424,983
443,599 $
December 31, 2017
12,625
5,669
497,454
515,748
$
$
The Company’s goodwill represents the excess of the purchase price paid during fiscal 2012 for the acquisition of Bullion Monarch Mining Inc. over
the fair value of the net identifiable tangible and intangible assets and liabilities acquired.
Changes in goodwill for the years ended December 31, 2018, 2017 and 2016:
Balance as at December 31, 2015
Adjusted for:
Impairment charge
Cumulative translation adjustments
Balance as at December 31, 2016
Adjusted for:
Impairment charge
Cumulative translation adjustments
Balance as at December 31, 2017
Adjusted for:
Impairment charge
Cumulative translation adjustments
Balance as at December 31, 2018
$
$
$
$
6,501,886
(1,518,328)
(230,234)
4,753,324
(2,709,239)
(223,778)
1,820,307
(1,879,356)
59,049
-
The Company applies a one-step approach to determine if the Carlin Trend Royalty Claim Block and the related assets within the same Cash
Generating Unit (“CGU”) are impaired (Note 10). The impairment loss is the amount by which the CGU’s carrying amount exceeds its recoverable
amount. Goodwill has been written down in conjunction with the decline of $1,879,356 (2017 - $2,709,239, 2016 - $1,518,328) of the related deferred
income tax liability.
13. ADVANCES FROM JOINT VENTURE PARTNERS
Advances from joint venture partners relate to unspent funds received pursuant to approved exploration programs by the Company and its joint venture
partners. The Company’s advances from joint venture partners consist of the following:
U.S.A.
Sweden
Total
December 31, 2018
456,226 $
159,443
615,669 $
December 31, 2017
808,905
-
808,905
$
$
Page 36
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
145/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
14. CAPITAL STOCK
Authorized
As at December 31, 2018, the authorized share capital of the Company was an unlimited number of common and preferred shares without par value.
Common Shares
During the year ended December 31, 2018, the Company:
Issued 21,084 shares valued at $23,825 pursuant to an employment and consulting agreement of which the full amount has been included in
exploration expenditures for the year ended December 31, 2017 and recorded as a commitment to issue shares.
Issued 204,963 shares valued at $266,452 pursuant to an incentive stock grant program to employees of the Company of which $166,476 has
been included in exploration expenditures.
Issued 192,500 shares valued at $186,100 pursuant to the exercise of stock options.
Issued 381,321 shares valued at $602,487 or $1.58 per share pursuant to a credit facility (Note 8).
During the year ended December 31, 2017, the Company:
Completed a non-brokered private placement raising $7,000,000 by the issuance of 5,000,000 units at a price of $1.40 per Unit. Each Unit was
comprised of one common share and one-half of one non-transferable common share purchase warrant. Each whole warrant entitles the holder
to purchase an additional common share for $2.00 until April 12, 2019.
The Company paid finder’s fees totaling $356,986. Included in this amount was 246,604 Units (6% of the Units sold to investors introduced by
finders) valued at $345,246 and $11,740 in cash. The Units paid as finders fees included the same terms as the private placement Units.
Pursuant to the Company’s accounting policy, the gross proceeds of the private placement were allocated using a residual value method with
respect to the measurement of shares and warrants issued as private placement units. This resulted in $6,200,000 recorded as share capital and
$800,000 being allocated to reserves. For the finder’s fees paid in Units, $305,789 was allocated to share capital and $39,457 being allocated to
reserves.
Issued 75,000 (2016 - 165,000; 2015 - Nil) shares valued at $85,700 (2016 - $127,800; 2015 - $Nil) pursuant to the exercise of stock options.
Issued 68,873 shares valued at $79,190 pursuant to employment and consulting agreements, of which the full amount has been included in
exploration expenditures. Included in commitment to issue shares is $23,825 for accruals in exploration expenditures for shares approved to be
issued pursuant to an employment and consulting agreement for shares issued in January 2018.
Issued 245,000 (2016 - 140,000; 2015 – 163,000) shares valued at $279,300 (2016 - $166,600; 2015 – $233,950) pursuant to an incentive stock
grant program to employees of the Company. The shares issued for 2016 and 2015 were applied against commitment to issue shares as they
related to prior period accruals.
Issued Nil (2016 - 250,000; 2015 – Nil) shares valued at $Nil (2016 - $145,000; 2015 - $Nil) pursuant to a purchase agreement for the Maggie
Creek and Afgan royalties.
Page 37
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
146/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
14. CAPITAL STOCK (Continued)
Stock Options
The Company adopted a stock option plan (the “Plan”) pursuant to the policies of the TSX-V. The maximum number of shares that may be reserved for
issuance under the plan is limited to 10% of the issued common shares of the Company at any time. The vesting terms are determined at the time of the
grant, subject to the terms of the plan.
During the year ended December 31, 2018, 2017 and 2016 , the change in stock options outstanding is as follows:
Balance as at December 31, 2015
Granted
Exercised
Expired
Balance as at December 31, 2016
Granted
Exercised
Forfeited
Balance as at December 31, 2017
Granted
Exercised
Forfeited
Balance as at December 31, 2018
Number of options exercisable as at December 31, 2018
Number
5,428,500 $
1,277,500
(165,000)
(1,729,500)
4,811,500
1,472,500
(75,000)
(961,500)
5,247,500
1,810,000
(192,500)
(122,500)
6,742,500 $
6,730,000 $
Weighted Average
Exercise Price
1.67
1.30
0.77
2.66
1.24
1.20
1.14
1.97
1.10
1.32
0.97
1.10
1.16
1.16
The following table summarizes information about the stock options which were outstanding and exercisable at December 31, 2018:
Date Granted
Number of Options
Exercisable
Exercise Price $
Expiry Date
April 25, 2014
December 22, 2014
June 8, 2015
October 18, 2016
August 28, 2017
July 20, 2018*
September 20, 2018
November 28, 2018
December 14,2018
Total
1,167,500
60,000
1,065,000
1,200,000
1,440,000
1,640,000
75,000
75,000
20,000
6,742,500
1,167,500
60,000
1,065,000
1,200,000
1,440,000
1,627,500
75,000
75,000
20,000
6,730,000
1.20
0.87
0.66
1.30
1.20
1.30
1.42
1.57
1.42
April 25, 2019
December 22, 2019
June 8, 2020
October 18, 2021
August 28, 2022
July 20, 2023
September 20, 2023
November 28, 2023
December 14, 2023
*25,000 Options granted for investor relations services vest 25% every 3 months from the date of grant.
The weighted average remaining useful life of exercisable stock options is 2.80 years (2017 – 3.10 years).
Page 38
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
147/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
14. CAPITAL STOCK (Continued)
Restricted share units
In 2017, the Company introduced a long-term restricted share unit plan (“RSUs”). The RSUs entitle employees, directors, or officers to common shares
of the Company upon vesting based on vesting terms determined by the Company’s Board of Directors at the time of grant.
Expiry Date
December 31, 2019
December 31, 2020
Share-based Payments
December 31, 2017
312,500
-
Granted
-
312,500
Vested
-
-
Expired/Cancelled
-
-
December 31, 2018
312,500
312,500
During the year ended December 31, 2018, the Company recorded aggregate share-based payments of $1,820,724 (2017 - $1,415,639, 2016 -
$970,796) as they relate to the fair value of stock options granted or vested during the period and the fair value of incentive stock grants. Share-based
payments for the years ended December 31, 2018 , 2017 and 2016 are allocated to expense accounts as follow:
Year ended December 31, 2018
Shares issued for services
RSU's vested
Fair value of stock options granted
Year ended December 31, 2017
Shares issued for services
Commitment to issue shares
RSU's vested
Fair value of stock options granted
Year ended December 31, 2016
Commitment to issue shares
Fair value of stock options granted
General and
Administrative
Expenses
99,975 $
164,313
767,463
1,031,751 $
General and
Administrative
Expenses
85,500 $
-
27,575
562,979
676,054 $
General and
Administrative
Expenses
27,462 $
440,477
467,939 $
$
$
$
$
$
$
Exploration
Expenditures
166,477 $
-
622,496
788,973 $
Exploration
Expenditures
272,990 $
23,825
-
442,770
739,585 $
Exploration
Expenditures
- $
502,857
502,857 $
Total
266,452
164,313
1,389,959
1,820,724
Total
358,490
23,825
27,575
1,005,749
1,415,639
Total
27,462
943,334
970,796
The weighted average fair value of the stock options granted during the year ended December 31, 2018 was $0.78 per stock option (2017 - $0.70, 2016-
$0.74) . The fair value of stock options granted was estimated using the Black-Scholes option pricing model with weighted average assumptions as
follows:
Risk free interest rate
Expected life (years)
Expected volatility
Dividend yield
Year ended
December 31, 2018
2.09%
5
69.93%
-
Year ended
December 31, 2017
1.53%
5
70.81%
-
Year ended
December 31, 2016
0.73%
5
69.80%
-
Page 39
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
148/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
14. CAPITAL STOCK (Continued)
Warrants
During the year ended December 31, 2018, 2017 and 2016 , the changes in warrants outstanding is as follow:
Balance as at December 31, 2016
Issued
Balance as at December 31, 2017 and 2018
Number
Weighted Average
Exercise Price
- $
2,623,306
2,623,306 $
-
2.00
2.00
The following table summarizes information about the warrants which were outstanding and exercisable at December 31, 2018:
Private placement, April 12, 2017
Finders warrants, April 12, 2017
Total
15. RELATED PARTY TRANSACTIONS
Number of Warrants
Exercise Price
Expiry Date
2,500,004 $
123,302 $
2,623,306
2.00
2.00
April 12, 2019
April 12, 2019
The aggregate value of transactions and outstanding balances relating to key management personnel were as follows:
For the year ended December 31, 2018
Management
Outside directors *
Seabord Services Corp.
Total
For the year ended December 31, 2017
Management
Outside directors *
Seabord Services Corp.
Total
For the year ended December 31, 2016
Management
Outside directors *
Seabord Services Corp.
Total
Salary or Fees
2,692,782 $
1,512,752
433,971
4,639,505 $
Salary or Fees
733,244 $
149,882
357,600
1,240,726 $
Salary or Fees
803,033 $
151,228
357,600
1,311,861 $
$
$
$
$
$
$
Share-based
Payments
570,455 $
248,399
-
818,854 $
Share-based
Payments
361,865 $
226,614
-
588,479 $
Share-based
Payments
215,933 $
167,534
-
383,467 $
Total
3,263,237
1,761,151
433,971
5,458,359
Total
1,095,109
376,496
357,600
1,829,205
Total
1,018,966
318,762
357,600
1,695,328
* Directors fees include US$5,000 per month and a US$1,000,000 discretionary bonus (Note 16) paid to the Company’s non-Executive Chairman, who
does not receive the fees paid to the other independent directors.
Seabord Services Corp. (“Seabord”) is a management services company controlled by the Chairman of the Board of Directors of the Company. Seabord
provides a Chief Financial Officer, a Corporate Secretary, accounting and administration staff, and office space to the Company. The Chief Financial
Officer and Corporate Secretary are employees of Seabord and are not paid directly by the Company.
Page 40
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
149/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
15. RELATED PARTY TRANSACTIONS (Continued)
Included in accounts payable and accrued liabilities at December 31, 2018 and 2017 are as follows:
Related Party Assets and Liabilities
Amounts due to:
David M. Cole, President and CEO
Christina Cepeliauskas, CFO
Jan Steiert, Chief Legal Officer
Directors
Seabord Services Corp.
Service or Term
December 31, 2018
December 31, 2017
Salary and bonus accrual
Bonus and expense reimbursement
Salary and bonus accrual
Fees and bonus accruals
Expense reimbursement
$
$
1,501,003 $
238,425
238,526
1,387,413
(362)
3,365,005 $
7,177
-
23
23,852
(307)
30,744
Included in amounts due to related parties for the year ended December 31, 2018 was $3,339,365 for dicrestionary success bonuses paid in fiscal 2019
(Note 16).
16. DISCRETIONARY BONUSES
Discretionary bonuses were awarded to management and staff totaling $5,224,284 in respect of their seven years of effort to monetize the Company’s
investment in IGC. Prior to the Malmyzh sales transaction, EMX’s management had developed a bonus plan for strategic investments whereby a
percentage of the after-tax profits of an individual investment could be paid as a bonus.
17. NET INCOME (LOSS) PER SHARE
Net income (loss) per share, calculated on a basic and diluted basis, is as follows:
Year ended
December 31, 2018
December 31, 2017
December 31, 2016
Net income (loss)
Weighted average number of common shares outstanding - basic
Dilutive effect of stock options and warrants outstanding
Weighted average number of common shares outstanding - diluted
Basic earnings (loss) per share
Diluted earnings (loss) per share
18. INCOME TAXES
Deferred Income Tax Asset and Liability
$
$
$
62,117,601 $
79,979,320
674,154
80,653,474
0.78 $
0.77 $
(7,393,384) $
78,002,082
-
78,002,082
(0.09) $
(0.09) $
(2,683,482)
73,874,415
-
73,874,415
(0.04)
(0.04)
The tax effects of temporary differences between amounts recorded in the Company’s accounts and the corresponding amounts as computed for income
tax purposes gives rise to deferred tax assets and liabilities as follows:
Royalty interest
Tax loss carryforwards
Other
Total
December 31, 2018
$
December 31, 2017
(1,689,673) $
3,203,640
90,071
1,604,038 $
(4,159,013) $
2,261,886
76,820.00
(1,820,307) $
December 31, 2016
(8,090,497)
3,212,368
124,805
(4,753,324)
$
Page 41
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
150/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
18. INCOME TAXES (Continued)
As at December 31, 2018, no deferred tax assets are recognized on the following temporary differences as it is not probable that sufficient future
taxable profit will be available to realize such assets:
Tax loss carryforwards
Exploration and evaluation assets
Other
$
47,199,000 $
595,000
19,192,000
42,094,000 $
1,485,000
10,425,000
December 31, 2018
December 31, 2017
December 31, 2016
39,318,000
2,137,000
11,371,000
Expiry Date Range
2019-2038
No expiry
No expiry
Income Tax Expense
Current tax expense
Deferred tax recovery
December 31, 2018
$ -
(3,683,267)
$ (3,683,267)
December 31, 2017
$ -
(2,489,902)
$ (2,489,902)
December 31, 2016
$ -
(1,439,332)
$ (1,439,332)
The provision for income taxes differs from the amount calculated using the Canadian federal and provincial statutory income tax rates of 27.00%
(2017 – 27%; 2016 – 26%) as follows:
Expected income tax (recovery)
Effect of lower tax rates in foreign jurisdictions
Permanent differences
Change in unrecognized deductible temporary differences and other
Foreign exchange
Total
$
$
15,777,270 $
(22,238,500)
1,332,325
1,627,494
(181,856)
(3,683,267) $
(2,569,654) $
(1,534,592)
1,007,427
260,595
346,322
(2,489,902) $
December 31, 2018
December 31, 2017
December 31, 2016
(886,149)
(474,971)
1,010,562
(1,428,442)
339,668
(1,439,332)
19. SEGMENTED INFORMATION
The Company operates within the resource industry. At December 31, 2018 and 2017, the Company had equipment and exploration and evaluation
assets located geographically as follows:
EXPLORATION AND EVALUATION ASSETS
Sweden
Turkey
U.S.A
Total
PROPERTY AND EQUIPMENT
Sweden
U.S.A
Total
December 31, 2018
437,755 $
232,547
942,599
1,612,901 $
December 31, 2018
30,519 $
435,020
465,539 $
December 31, 2017
437,755
232,547
1,171,664
1,841,966
December 31, 2017
26,159
424,119
450,278
$
$
$
$
The Company’s royalty interest, goodwill, deferred income tax liability and royalty income and depletion are from a CGU located in the U.S.A, except
for a $200,000 royalty interest held in Serbia.
20. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS
The Company considers items included in shareholders’ equity as capital. The Company’s objective when managing capital is to safeguard the
Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.
Page 42
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
151/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
20. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS (Continued)
As at December 31, 2018, the Company had working capital of $88,902,976 ( December 31, 2017 - $6,535,893). The Company has continuing royalty
income that will vary depending on royalty ounces received, the price of gold, and foreign exchange rates on US royalty payments. The Company
manages the capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Company may issue new shares through public and/or private placements, sell assets, or return
capital to shareholders.
Sprott Private Resource Lending (Collector), LP– US$5,000,000
In May of 2018, the Company entered into a credit facility agreement with Sprott providing the Company with a US$ 5,000,000 senior secured credit
facility (“Credit Facility”). The loan made under the Credit Facility would have matured on May 2, 2019 and carried an annual interest rate of 12%,
payable monthly. In consideration of the Credit Facility, EMX paid to Sprott a fee of US$100,000, and legal fees of $69,402. The Credit Facility is
covered by a general security agreement against the Company’s assets. Using an annual effective interest rate of 15.36%, the Company recorded
interest expense of $495,578 (US$ 380,789), and made $394,775 in payments including interest and principal. The loan was fully repaid in November
2018 and the Company recorded a loss on early settlement of $102,681 (US$78,370).
In October 2018 EMX’s former investment in associated entity, IGC (Note 8) notified EMX that the sale of the Malmyzh project for US$200 million
has closed. For its 39.99% interest in IGC at the time of sale transaction on a fully diluted basis, the Company has received its initial cash distribution
of $84,246,645. A second cash distribution to the Company of $5,450,764 (US$4 million) is expected within 12 months from the initial sale date upon
the remaining funds being released from escrow pending any warranty claims.
Fair Value
The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are
observable. The three levels of the fair value hierarchy are as follows:
Level 1: inputs represent quoted prices in active markets for identical assets or liabilities. Active markets are those in which transactions occur
in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: inputs other than quoted prices that are observable, either directly or indirectly. Level 2 valuations are based on inputs, including
quoted forward prices for commodities, market interest rates, and volatility factors, which can be observed or corroborated in the market place.
Level 3: inputs that are less observable, unavoidable or where the observable data does not support the majority of the instruments’ fair value.
As at December 31, 2018, there were no changes in the levels in comparison to December 31, 2017. Financial instruments measured at fair value on the
statement of financial position are summarized in levels of the fair value hierarchy as follows:
Assets
Investments
Strategic Investments
Settlement receivables
Total
$
$
Level 1
624,559 $
32,738
-
657,297 $
Level 2
- $
-
902,991
902,991 $
Level 3
911,477 $
-
-
911,477 $
Total
1,536,036
32,738
902,991
2,471,765
The carrying value of receivables (excluding settlement receivables), accounts payable and accrued liabilities, advances from joint venture partners, and
note payable approximate their fair value because of the short-term nature of these instruments.
Settlement receivables, including both long and current portions relate to the sale of certain Turkish subsidiaries were valued using a pricing model
which require a variety of inputs, such as expected gold prices and foreign exchange rates. These receivables are valued using observable market
commodity prices and thereby classified within Level 2 of the fair value hierarchy.
Page 43
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
152/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
20. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS (Continued)
The Company’s investment in IGC does not have a quoted market price in an active market and the Company has assessed a fair value of the
investment based on IGC’s unobservable net assets. As a result, the fair value is classified within Level 3 of the fair value hierarchy.
The process of estimating the fair value of IGC is based on inherent measurement uncertainties and is based on techniques and assumptions that
emphasize both qualitative and quantitative information. There is no reasonable quantitative basis to estimate the potential effect of changing the
assumptions to reasonably possible alternative assumptions on the estimated fair value of the investment.
The Company’s financial instruments are exposed to certain financial risks, including credit risk, interest rate risk, market risk, liquidity risk and
currency risk.
Credit Risk
The Company is exposed to credit risk by holding cash and cash equivalents and receivables. This risk is minimized by holding a significant portion of
the funds in Canadian banks. The Company’s exposure with respect to its receivables is primarily related to royalty streams, recovery of exploration
evaluation costs, and the sale of assets.
Interest Rate Risk
The Company is exposed to interest rate risk because of fluctuating interest rates. Management believes the interest rate risk is low given interest rates
on promissory notes is fixed and the current low global interest rate environment. Fluctuation in market rates is not expected to have a significant
impact on the Company’s operations due to the short term to maturity and no penalty cashable feature of its cash equivalents.
Market Risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities and other company investments.
The Company has no control over these fluctuations and does not hedge its investments. Based on the December 31, 2018 portfolio values, a 10%
increase or decrease in effective market values would increase or decrease net shareholders’ equity by approximately $150,000.
Liquidity Risk
Liquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. The Company manages this risk by careful
management of its working capital to ensure the Company’s expenditures will not exceed available resources.
Commodity Risk
The Company’s royalty revenues are derived from a royalty interest and are based on the extraction and sale of precious and base minerals and metals.
Factors beyond the control of the Company may affect the marketability of metals discovered. Metal prices have historically fluctuated widely.
Consequently, the economic viability of the Company’s royalty interests cannot be accurately predicted and may be adversely affected by fluctuations
in mineral prices.
Currency Risk
Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the
entity’s functional currency. The Company operates in Canada, Turkey, Sweden, Australia, Norway, and the U.S.A. The Company funds cash calls to
its subsidiary companies outside of Canada in US dollars and a portion of its expenditures are also incurred in local currencies.
Page 44
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
153/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
20. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS (Continued)
The exposure of the Company’s cash and cash equivalents, restricted cash, receivables, convertible notes receivable, loans receivable, accounts payable
and accrued liabilities, and loans payable to foreign exchange risk as at December 31, 2018 is as follows:
Accounts
Cash and cash equivalents
Restricted cash
Trade receivables
Settlement recceivables
Accounts payable and accrued liabilities
Advances from joint venture partners
Net exposure
Canadian dollar equivalent
US dollars
62,065,449
390,457
4,449,430
662,500
(3,932,765)
(334,721)
63,300,351
86,278,758
$
$
$
The balances noted above reflect the US dollar balances held within the parent company and any wholly owned subsidiaries. Balances denominated in
another currency other than the functional currency held in foreign operations are considered immaterial. Based on the above net exposure as at
December 31, 2018, and assuming that all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the US
dollar would result in an increase/decrease of approximately $8,600,000 in the Company’s pre-tax profit or loss.
21. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Cash
Short-term deposits
Total
The short-term deposits are used as collateral for the Company’s credit cards.
Changes in non-cash working capital
December 31, 2018
85,979,058 $
196,273
86,175,331 $
December 31, 2017
3,354,109
179,502
3,533,611
$
$
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Advances from joint venture partners
Year ended
December 31, 2018
$
Year ended
December 31, 2017
1,280,519 $
13,071
4,981,296
(193,236)
6,081,650 $
$
Year ended
December 31, 2016
(6,343)
3,848
(86,317)
203,536
114,724
1,908,945 $
(16,698)
172,600
467,544
2,532,391 $
The significant non-cash investing and financing transactions during the year ended December 31, 2018 included:
a.
b.
c.
Recorded a loss through accumulated other comprehensive income of $49,108 related to the fair value adjustments on FVTPL
investments;
Adjusted reserves and investment in associated companies for $246,718 related to share-based payments made by an associated
company;
Adjusted non-current assets and liabilities for $1,208,463 related to cumulative translation adjustments (“CTA”), of which $1,391,270
relates to CTA gain on royalty interest, $59,049 relates to CTA gain on goodwill, $258,922 relates to a CTA loss on deferred tax liability
and $17,066 relates to CTA gain in the net assets of a subsidiary with a functional currency different from the presentation currency;
Page 45
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
154/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
21. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Continued)
d.
e.
f.
g.
h.
Included in the investment in IGC is $483,515 (US$370,000) for the value of shares received from IGC as part of a loan fee (Note 8);
Reclass of $90,254 from reserves to share capital for options exercised;
Reclass of $23,825 from commitment to issue shares to share capital for shares issued during the period;
Issued 381,321 shares valued at $602,487 or $1.58 per share pursuant to a credit facility (Note 8); and
Reclass of $911,477 from Investment in an associated entity to FVTPL related to the derecognition of IGC as an associated entity (Note
4 and 8).
The significant non-cash investing and financing transactions during the year ended December 31, 2017 included:
a.
b.
c.
d.
e.
Recorded a gain through accumulated other comprehensive income of $609,733 related to the fair value adjustments on AFS financial
instruments;
Adjusted non-current assets and liabilities for $1,424,814 related to CTA, of which $1,605,133 relates to CTA loss on royalty interest,
$223,778 relates to CTA loss on goodwill, $443,115 relates to a CTA gain on deferred tax liability and $39,018 relates to CTA loss in the
net assets of a subsidiary with a functional currency different from the presentation currency;
Reclass of reserves on exercise of options for $45,545;
Recorded the movement of $1,017,540 from a convertible loan to an investment in associated company upon conversion of the loan
(Note 8); and
Recorded through reserves $39,457 related to the value of warrants issued as finders fees as part of a private placement (Note 14).
The significant non-cash investing and financing transactions during the year ended December 31, 2016 included:
a.
b.
c.
d.
e.
Recorded a gain through accumulated other comprehensive income of $88,515 related to the fair value adjustments on AFS financial
instruments;
Issuance of 140,000 incentive stock grants valued at $166,600 applied to commitment to issue shares;
Adjusted reserves and investment in associated companies for $366,800 related to share-based payments made by an associated
company;
Adjusted non-current assets and liabilities for $862,335 related to CTA, of which $949,607 relates to CTA loss on royalty interest,
$230,234 relates to CTA loss on goodwill, $309,230 relates to a CTA gain on deferred tax liability and $8,276 relates to CTA gain in the
net assets of a subsidiary with a functional currency different from the presentation currency; and
Recorded the movement of $1,605,466 from a convertible loan to an investment in associated company upon conversion of the loan
(Note 8).
22. EVENTS SUBSEQUENT TO THE REPORTING DATE
Subsequent to the year ended December 31, 2018,
a)
b)
The Company acquired 4,808,770 common shares of Norra Metals Corp. ("Norra") (TSX-V: NORA), representing a 9.9% equity stake
in Norra pursuant to the sale of the Bleikvassli, Sagvoll and Meråker projects in Norway, and the Bastuträsk project in Sweden. The
Company will retain a 3% NSR royalty on the projects. EMX has also been granted a 1% NSR royalty on Norra’s Pyramid project in
British Columbia.
The Company executed an exploration and option agreement for the Røstvangen property and Vakkerlien property in Norway with
Playfair Mining Ltd. ("Playfair") (TSX-V: PLY). The agreement provides EMX with immediate share equity in Playfair, and upon
Playfair's completion of the option terms and other consideration, a 9.9% interest in Playfair, a 3% NSR royalty on the projects, and
advance royalty payments. Pursuant to the agreement, Playfair can
Page 46
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
155/156
4/2/2019
EMX Royalty Corporation - Form 20-F - Filed by newsfilecorp.com
EMX ROYALTY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2018
22. EVENTS SUBSEQUENT TO THE REPORTING DATE (Continued)
earn a 100% interest in the project by the issuance of 3,000,000 common shares to EMX and performance of certain work during the
option period.
c)
The Company received total proceeds of $554,520 from the exercise of 475,100 stock options.
Page 47
https://www.sec.gov/Archives/edgar/data/1285786/000106299319001504/form20f.htm
156/156