Scully Royalty Ltd.

Scully Royalty Ltd. is a junior iron royalty and streaming company headquartered in Shanghai, China, operating primarily in Canada. Key assets include Scully. Portfolio composition includes 1 cash-flowing royalty. The business model combines this core royalty interest with a merchant banking segment that provides specialty financial services and commits proprietary capital to undervalued assets. This dual focus creates fluctuating financial results, influenced by both commodity cycle volatility and the uncertain timing of transaction completions in its financial services division. The enterprise specializes in markets not adequately served by traditional finance sources, with an emphasis on solutions for small and medium-sized enterprises. Competition is faced from a wide range of entities, including investment and commercial banks, private equity firms, hedge funds, and other mineral royalty companies, many of which possess substantially greater capital and resources. The company's business is subject to counterparty risks, particularly the performance of the third-party operator of the property underlying its royalty interest, over which it has no decision-making power or operational control. The inherent nature of the business does not produce predictable earnings, a characteristic shaped by both its royalty and merchant banking activities.

Strategic focus centers on reducing the discount between the company's market price and its net book value per share. A primary initiative to achieve this is the rationalization of non-core and underperforming assets, a process initiated in 2024 to simplify the corporate structure, decrease operational complexity, and concentrate management attention on the core royalty asset. An agreement was entered into to facilitate this divestment. The organization also prioritizes shareholder returns through a formal cash dividend policy, which was resumed in December 2024 following a review of the entity's financial position and operating results. The declaration and payment of future dividends are contingent upon royalty payments received and the financial condition of the underlying asset's operator. In managing its treasury, the group actively seeks opportunities to enhance yields on liquid assets by investing in various term deposits and short-term government securities, a decision made in 2024 to increase interest income while maintaining a prudent risk profile and access to liquidity facilities.

Executive leadership includes an Executive Chairman with experience in corporate finance and restructuring, and a President, CEO, and CFO who is a Chartered Financial Analyst with prior experience at a capital management firm. The board of directors is comprised of 5 members, 3 of whom are independent non-management directors. Board oversight is structured through 2 primary committees: an Audit Committee and a combined Compensation, Nominating and Governance Committee, both consisting of the 3 independent directors. The board has determined that 1 director qualifies as an audit committee financial expert. The governance framework is defined by written charters for its committees and a formal Code of Business Conduct and Ethics, which includes an insider trading policy applicable to all directors, officers, and employees. As an entity listed on the NYSE, the organization notes specific differences in its governance practices compared to U.S. domestic issuers, such as the structure of non-management director meetings and requirements for shareholder approval of material revisions to equity compensation plans.

The organization has implemented a cybersecurity risk management program designed to protect critical systems and information. This program includes risk assessments to identify material threats, an information technology team responsible for managing security controls and incident response, and cybersecurity awareness training for employees and directors. A formal cybersecurity incident response plan outlines procedures for addressing security events. The board of directors provides oversight of risk management processes, delegating authority to the Audit Committee to review exposures related to data privacy and cybersecurity. The Chief Financial Officer is responsible for overseeing cybersecurity processes at the management level, with regular reviews of risk areas conducted with the board. The company's Code of Business Conduct and Ethics requires compliance with all applicable laws, rules, and regulations in the jurisdictions where it operates and establishes policies for fair dealing with customers, suppliers, competitors, and employees. The code also mandates the protection and proper use of company assets and the maintenance of confidential information.

A significant structural change was initiated in 2024 with the board's approval of a plan to rationalize various underperforming and non-core assets from its "All Other" segment. The company entered into an agreement for this divestiture, and the related assets and liabilities were classified as held for sale as of December 31, 2024. The operator of the property underlying the company's core royalty interest, Tacora Resources Inc., emerged from CCAA proceedings in September 2024 under a new ownership consortium of well-capitalized investors, including Cargill, Millstreet Capital Management, and O'Brien Staley Partners. The company's material operational subsidiaries include Merkanti Holding plc., a 99.96% owned entity in its Merchant Banking segment, and 1178936 B.C. Ltd., a wholly-owned entity. As of April 2025, 2 major shareholders were known to beneficially own over 5% of the common shares: the Peter Kellogg group held approximately 35.7%, and entities associated with the late Lloyd Miller, III held approximately 13.6%.