"We expect that our revenues will look completely different by 2022 as both Elk Gold and Copperstone will be in production and we are working on several deals that will be cash-flowing by then."

Alex Pernin

CEO & DIRECTOR, STAR ROYALTIES

October 20, 2021

Can you introduce Star Royalties and describe its focus and portfolio of royalty and streaming assets?

Star Royalties is a new public precious metals royalty and streaming company, but has an experienced team which rejoined forces in 2019 to build the company with a unified vision focusing on building a portfolio of high quality, low risk, low cost, cash flowing assets. We IPO’d in February 2021 (TSXV:STRR) and we are also trading in the US on the OTCQX under STRFF. Since inception, Star Royalties has raised funds accumulating to C$44 million. We currently have seven assets: one is a gold stream and six are royalties. The company has 85% of its portfolio weight in gold and 99% in tier one jurisdictions such as Canada, the US and Australia. Approximately 99% of our weight is in producing or near-producing assets.

Our primary assets are a US$18 million gold stream on Arizona Gold Corp’s Copperstone project and a US$11 million 2% NSR royalty on Gold Mountain Mining Corp’s Elk Gold project. Copperstone is a fully permitted, past-producing gold mine in Arizona run by a team of experienced underground mine operators with production startup in 2022. Elk Gold is also a past-producing gold mine in British Columbia commencing production with first cash flow in Q4 2021. Both assets are high-grade and demonstrate excellent wealth creation potential.

Which factors contributed to the company’s 46% increase in revenue in Q2 2021 (compared to Q1)?

The only asset we did not underwrite was the Keysbrook royalty, which is a mineral sands mine in Australia that we acquired in October 2020 from a large private equity group, RCF. This is currently our revenue-generating asset, and Q1 2021 was our first real quarter of revenue which increased by 46% in Q2 due to the operational outperformance and better than expected prices for leucoxene – an alteration product of titanium-bearing minerals. We expect that our revenues will look completely different by 2022 as both Elk Gold and Copperstone will be in production and we are working on several deals that will be cash-flowing by then.

Can you elaborate on the royalty acquired on carbon offset credits for the Elizabeth Metis Settlement (the “EMS Forest project”) in Alberta, Canada?

In July 2021, Star Royalties announced a new royalty with Elizabeth Metis Settlement (EMS) where we acquired a 13.5% gross revenue royalty on EMS’ revenue share from the creation and sale of carbon offset credits from their forested lands. However, this was not our first carbon credit deal, as we created the first-of-its-kind carbon credit royalty in May 2020 on another First Nation’s forested lands in Ontario.

From a business perspective, the EMS Forest project is very exciting for us as it is a pure-green, ESG-focused investment where we are literary investing in allowing a forest to grow to generate carbon credits. The business model is massively scalable and there is no shortage of opportunities. Importantly, this is equally attractive from an economic perspective – we are seeing superior financial metrics with green deals compared to precious metals deals, for instance.

As a primarily precious metals royalty and streaming company, how will Star Royalties market the green side of the business?

When we started the company, we had an investment mandate, which is still in place, of 80% precious metal assets and 20% green assets. However, due to the growth of the green side of the business, we will establish a separate vehicle, Green Star Royalties, which will still fall under the Star umbrella. The growth of this stand-alone green investment entity will promote our first-mover advantage and better position us for improved equity and debt cost of capital to fund our precious metals deals.

Considering the underperformance of PM stocks in the last 12 months, surely it is an ideal time for royalty and streaming companies to do deals with developers looking to move into production?

Now is an opportune time for underwriting and providing capital to the industry. Star Royalties is trying to provide a new form of competitively priced financing, mainly focused on the smaller end of the sector that has been capital-starved for many years. As equity valuations are currently depressed, there is no shortage of smart capital deployment opportunities, with many developers and producers looking at royalties and streaming opportunities, as they do not want to dilute at these levels. Star Royalties intends to be active and we have a number of near-term cash producing deals in the pipeline for 2022.

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