Metalla Royalty and Streaming – A Market Outlook, 2 Key Asset Updates And Growth Outlook
Brett Heath, President and CEO of Metalla Royalty and Streaming (TSX:MTA – NYSE:MTA) joins me to share his insights on the precious metals market when it comes to the stocks as well as provide a couple key asset updates and a growth outlook over the next few years.
Starting with macro comments on the metals sector we discuss sentiment for both retail and larger institutions. I also have Brett outline the environment for deal making as most PM stocks dropped in 2021.
Moving on to the key asset updates, we focus on the Cote-Gosselin Royalty (being run by IAMGOLD) and the Tocantinzinho Royalty (run by G Mining Ventures). Both assets had news consisting of either drill results or a Feasibility Study released recently. This ties into the internal growth outlook for the Company where a number of current royalty assets will be moving into production over the next 5 years.
If you have any questions for Brett please email me at Fleck@kereport.com.
Click here to visit the Metalla website and read over the Corporate Presentation.
Hi Wolfster – Most of the larger Royalty companies do pay a small dividend, but they aren’t as zesty as the ones found in the oil and gas sectors or consumer staples. I believe the largest royalty is from Nomad with 2% yield. Investors are constantly pressing companies about dividends, but is that why they really invest in PM stocks? There are just other sectors that offer attractive dividends if that is what animates investors.
Personally, while dividends are nice (and I have a handful of dividend paying PM stocks), I’d much rather personally see the companies plow extra free cash flow into either acquiring more accretive royalties (or if they are mining stocks put the money into drilling or development) or in share buy backs to tighten up the number of shares.
Sailfish gives 4% dividend + buys back their own shares
Good point Thomas, I knew Sailfish paid a dividend, but I forgot it was that high and I’ve been a shareholder with them for a while, but honestly rarely read my statements with all the dividends on them.
Your comment had me go an check and I see that Sailfish paid me a 4.2% dividend, and Nomad’s was actually 2.5%. Sandstorm paid a 1% dividend and Maverix paid a 1.2% dividend. It doesn’t appear the other royalty companies I hold pay dividends… yet.
Outside of royalty companies, but still in the realm of PM mining stocks, I’m getting a nice 4% dividend from Jaguar Mining, a 2.3% dividend from Sierra Metals, a 1.5% from Alamos Gold, a .8% from Silvercorp, and a .3% from Hecla. Before I off-loaded Kinross last year it was paying a 2% dividend as well.
Strangely, my best dividend yield in January came from the pot stocks with (POTX) Global X Cannabis ETF paying a 4.9% yield. I didn’t even realize until now it paid one. Haha!
Sailfish dividends policy and their buy backs are great
I didn’t buy into Sailfish, because their cash is mainly coming from one asset and this in Nicaragua
The resource is also relatively small
Yeah, I’m well aware of the San Albino project in Nicaragua as Mako Mining is a KE Report sponsor, and we have Akiba Leisman on the show regularly to get updates on how that project is continuing to grow after just getting into production the middle of last year. While the official resource is still admittedly small, there is massive exploration and expansion upside, and plans to double the mining throughput over the next year or so, and then grow it more from there the year after.
Just a little history here, I was a shareholder of Marlin Gold back in 2016 and 2017 and exited when they spun their royalty portfolio out to form Sailfish Royalty, and just kept my chips in that vehicle for a while. Then, when it looked like Marlin Gold was beaten down pretty low, I got back in figuring they’d need to do something with their assets, or make a new acquisition. They shortly thereafter announced their merging with Golden Reign to form Mako Mining. This made a lot of sense to me to combine the 2 companies, and at that time the streaming deal was altered with their sister company Sailfish Royalty to facilitate a fair deal for all parties.
Also one of the key royalties that Sailfish held was the one on El Dorado’s Tocantinzinho Gold Project which they then sold to Metalla Royaty & Osisko Gold Royalties Ltd to Fully Monetize the NSR for Sailfish Royalty. That was a good transaction for all parties as Sailfish did well flipping their investment on Tocantinzinho for a big return, and Metalla and Osisko are now happy about the project moving forward with G Mining (as Brett outlined in the interview posted above with Cory).
Currently with Sailfish Royalty, aside from the cashflowing and growing NSR on San Albino with Mako Mining, the real cornerstone assets are the Spring Valley NSR and Moonlight NSR in Nevada, currently held by Waterton. Waterton are predatory asset hoarders, and typically pick up assets from distressed companies, and then hold them to offload them to solid operators when the time is right. So in talking with the CEO of Sailfish, Caesar Gonzalez, he mentioned to us that the big catalyst for the company would be when Waterton finally gets a solid operator to take over the Spring Valley/Moonlight project in Nevada to move it into development and production. Right now the royalty isn’t getting the valuation it deserves because it’s with a holding company instead of a mining company, but when that does eventually get picked up by a company, then the value will be unlocked and Sailfish could trade many multiples higher.
Sailfish also has 2 net smelter royalties on the La Cigarra property held by Kootenay Silver, and the El Compass project held by Endeavour Silver.
Sailfish Royalty Corp – An Introduction To The Key Assets And Value Drivers
Korelin Economics Report – December 10, 2021
Paolo Lostritto, Vice President of Corporate Development for Sailfish Royalty Corp (TSX.V: FISH – OTC: SROYF), joins us to overview the Company’s origin, key royalty assets, background on the management team, key financials, and growth drivers moving forward.
Mako Mining – The 2022 Exploration, Development, and Production Growth Strategy
Korelin Economics Report – January 4, 2022
Akiba Leisman, President and CEO of Mako Mining (TSX.V:MKO – OTCQB:MAKOF), joins us to outline the Company exploration, development, and production growth strategy for 2022 at the San Albino Gold Mine in northern Nicaragua. The company declared commercial production on July 1, 2021 and has now ramped up the mill to the planned 500 tpd throughput, and is also exploring and developing the nearby Los Conchitas property to supplement the mill feed to grow it to 1000 tpd by the end of the year.
Thanks for the background infos Ex
Waterton is some kind of red flag -:)
Are there any companies that still doing business with Waterton, after their history?
Waterton is definitely a red flag if they are lending money to a company, as they’ve done some shady things in the past to pressure companies into insolvency so they scoop up the assets. If a company is receiving funds from Waterton, I won’t touch them moving forward.
However, on the opposite side of the equation, Waterton is very good at sourcing good operators for their projects when they want to unload their assets to competent mining companies. So many companies pick up exploration, development, or near-production assets from Waterton and they are usually well vetted. So in this case, on the Spring Valley and Moonlight project in Nevada, I believe Waterton is currently shopping those assets around, and when a competent company is found, that will put those assets in the hands of a good mining company, and that will unlock value for Sailfish on them, where as currently, they are receiving little value from the market, because it is a unknown. The historic reserves there are quite impressive, so it will be a massive project for whoever takes it on, and it will be a key cornerstone asset for Sailfish once the market wakes up to how massive it is.
Personally, I was thinking I-80 Gold Corp may make a good suitor, as they’ve successfully launched a development and production company by picking up some assets from Waterton in Nevada, and cutting deals with Barrick/Newmont in the area to get that Lone Tree process facility. They’ve got their hands full with growth at present, but considering their good working relationship with Waterton for picking up assets from them, and considering they are Nevada focused, they’d make a good suitor. Of course the JV Nevada Gold Mines with Barrick/Newmont would also make a good suitor for Spring Valley/Moonlight.
As Rick Rule likes to ask – “What is the unanswered question you are trying to answer?”
In this case that question is – “Which mining company will buy that Spring Valley/Moonlight project from Waterton?”
Why I don’t like many of the royalty companies, are low dividends and the large number of options
I think SSL got lot of criticism in different forums because of this
SSL is not alone here. WPM is probably one of the best managed royalty companies. I still not like to buy it, because of the many options. Management make millions each year with their options.
Nomad is one of the few exceptions. They give high dividends and buy their own shares in the open market
Again, I didn’t get into any of the royalty stocks for dividends, but rather slow and steady growth over time to their leverage to the underlying metals off their streams or the net smelter royalties on solid projects. As they grow, I want to see them make more transactions and grow their baskets of royalties, or occasionally do share buybacks to tighten up the shares outstanding. The dividends on top are a nice to have but not a need to have.
In addition, 2 of my royalty plays were acquired last year (Ely Gold and Golden Valley) by Gold Royalty Corp for nice premiums, and a 3rd Elemental Royalties is in the middle of a hostile bid offer from Gold Royalty Corp, where the outcome is still uncertain, but more likely not to pan out. Still the shares ran up higher on the news, and I was able to trim some back into that initial strength, just in case they sell off if the deal falls through. If ELE does sell back off post deal collapse, then I’ll buy back the position I trimmed.
My best performer for the year was actually Vox Royalty, which was well-deserved as they had some of the best revenue growth and largest increase in new cash-flowing royalties, and I also had a good 39% pop in my initial Orogen Royalties shares right after acquiring it so I sold it into that strength. I’m looking for any weakness to add that back.
I just got back into Metalla Royalty and Empress royalty at the end of last year since they looked really beaten down, and at a more attractive valuation levels than where they had traded in early 2021 (or even late 2020 for MTA).
Would actually prefer buy backs over dividends
But if management gives themselves large amounts of options, makes millions on them and at the same time only offers small dividends is not shareholder friendly in my view
I have then the feeling these companies only have the purpose to create millions for the management.
Management and shareholders should both profit. Dividends or buy backs are a better way than options.
Yeah, share buybacks are more attractive to me as an investor than dividends, but then again, there are a lot of larger funds or family offices that prefer dividends, so there could be an argument made for both incentives to attract different types of investors.
As for the company managements compensation, yes, in some of the larger companies like Franco, Royal, Wheaton, Osisko, and Sandstorm, there are some larger executive payouts, but those pale in comparison to the revenues and free cashflows being generated on long life assets that will pay out the next 10-20 years in many cases. This is the real reason to be invested in royalty companies, as the assets will pay out for long periods of time, and most believe the metals prices will continue to rise over that period of time, or at least for different cycles within that time period. In addition all the royalty companies have a pipeline of development and exploration assets that are currently getting no value, that will daylight more value over time as they go into production, and that is free upside for current shareholders to realize down the road. I try to keep the main thing… the main thing… and longer-term value creation from a pipeline of growth over a diversified basket of projects and operators is the appeal with royalty companies.
Hey Ex, EXcellent reading your posts. Thanks for all your information that seems to come so easily from you. DT
Much appreciated DT. Always happy to share any info tumbling around in my head with the KER crew.
I agree with the person asking companies about dividends. All this talk by companies like Metalla but they should pay shareholders for holding their stock, I don’t care for share buy backs. When companies make a ton of money there is no good reason not to pay dividends how ever you slice it, unless they are weak and what we are doing owning them?
The one question I always have with a royalty company is with regards to a dividend