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Nomad Royalty Company aiming for strong organic portfolio growth in 2021

Snapshot

The company purchases rights to a percentage of the gold or silver produced from a mine for its life

Nomad Royalty -

Quick facts: Nomad Royalty

Price: 1.02 CAD

TSX:NSR
Market: TSX
Market Cap: $575.81 m
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  • A new generation royalty firm
  • Generating strong free cash flow
  • Already has dividend policy

What Nomad Nomad Royalty does:

Nomad Royalty Company Ltd (TSE:NSR) (OTCQX:NSRXF) called itself a "new generation" royalty firm when its shares began trading on the Toronto Stock Exchange in May last year. 

The group purchases rights to a percentage of the gold or silver produced from a mine for its life.

The Montreal-based firm began trading in Toronto after a reverse takeover, which saw it acquire the royalty portfolio of Yamana Gold and streaming assets from Orion Resource Partners, via two vend-in deals.

Nomad acquired six stream and gold loan assets from the Orion Group for US$268 million and three royalties and a contingent payment on the start of commercial production of one project from the Yamana Group for US$65 million.

In total, the company now holds a portfolio of 14 royalty, stream, and gold loan assets, of which six are on currently producing mines.

The company is focused on already producing assets or highly de-risked ones. It aims to have the lowest G&A (general and administrative) costs in the sector.

Nomad plans to grow and diversify its low-cost production profile through the acquisition of additional producing and near-term producing gold and silver streams and royalties.

How is it doing:

On February 18 this year, the company said it expects to generate strong free cash flow in 2021 from organic portfolio growth as it reported a big jump in net income and revenue for the year just gone.

For the 12 months to December 30, 2020, the royalty group posted net income of US$20.1 million, up from US$2 million in 2019. Revenue came in at US$26.8 million for the year, up from US$17.4 million in 2019.

Gold equivalent ounces sold (GEOs) was reported at 14,870 ounces, up from 12,233 ounces in 2019.

The group also reported a strong fourth quarter, which saw its net income rise to US$11.3 million, up from US$1.5 million in the fourth quarter, 2019. It ended the year with US$22.5 million in cash.

Among Nomad's operational highlights last year was that it completed the acquisition of Coral Gold Resources Ltd, the owner of a sliding-scale 1% to 2.25% net smelter royalty (NSR) royalty on Nevada Gold Mines' Robertson project in Nevada, US for cash of US$1.9 million and issued around 39.9 million Nomad shares.

It also completed the acquisition of a 0.21% NSR royalty on the Blackwater Gold project located in British Columbia, Canada for a total of $1.8 million cash and over 1.5 million company shares.

At its royalty assets now, Nomad noted that Northern Vertex was conducting an aggressive exploration program at the Moss mine in Australia with three drill rigs onsite to expand the resource in a bid to extend the mine life and test district scale targets.

At the Troilus Gold royalty in Quebec, Troilus earlier in 2021 reported positive results on the Southwest zone, including a 200-metre step-out hole, which intersected high-grade gold-bearing mineralization between 50m and 450m from surface, and located outside of the NI 43-101 mineral resource envelope and the open pit proposed in the August 2020 Preliminary Economic Assessment (PEA).

In January 2021, the company said it had acquired a 0.21% net smelter return (NSR) royalty on the near 'shovel-ready' Blackwater gold project in British Columbia for around US$3 million in cash and shares.

The property is owned and operated by Artemis Gold (CVE:ARTG) and a Definitive Feasibility Study (DFS) is currently underway and scheduled for release in the middle of this year, with a construction start planned for the second quarter of 2022, and anticipated production earmarked for 2024.

The initial capital needed for the first phase - the first five years of a 23 year mine life - was pegged by the Pre-Feasibility Study (PFS) at C$592 million, with average annual gold output of 248,000 ounces at all-in-sustaining-costs (AISC) of US$508 an ounce.

Inflection points:

  • More royalty/ stream acquisitions
  • Precious metal price moves
  • Next set of financial results

What the broker says:

On February 19, 2021, in a note to clients following the group's 2Q results, analysts at Stifel GMP maintained their 'Buy' rating and C$2.00 target price on Nomad Royalty.

They said: "After pre-reporting Q4 gold and silver deliveries (2.75k oz gold and 64.6k oz silver – or approx. 3.6k GEOs sold), and preliminary revenue of $6.8M, Nomad's quarterly financial results came broadly in-line. In its inception year, Nomad reported attributable 17.5k GEOs sold for total revenue of $29.9M. We are currently forecasting 21.8k GEOs in 2021 (that is a 24% growth in attributable revenue GEOs). Note that Nomad has not provided 2021 guidance."

The analysts concluded: "Nomad, as an emerging small-cap company, offers investors the opportunity to participate in the re-rate of the stock. We expect that as NSR builds a track record of performance and continues to grow its core revenue-generating portfolio, it should justify correspondingly higher valuation multiples. NSR trades at a spot P/NAV of approx. 1.0x P/NAV (vs. senior and intermediate peer average of 1.8x and 1.2x, respectively)."

What the boss says:

CEO Vincent Metcalfe spoke to Proactive in January this year, and said the main aim was to continue to expand the company's diversified asset portfolio in 2021.

"The only concentration we want in our portfolio is concentration on gold and silver exposure but apart from that, it's bringing that lower risk type profile to our investors but at the same time they are able to capture that gold price and silver price increase and also get paid a dividend at the same time," he said.

Contact the author at giles@proactiveinvestors.com

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Nomad Royalty makes another acquisition picking up a royalty on the...

Nomad Royalty (TSE: NSR- OTCQX: NSRXF) CEO Vincent Metcalfe joined Steve Darling from Proactive with news the company has completed a royalty agreement on the Blackwater Gold Project which is located In British Columbia. Metcalfe shares with Proactive what the company liked about the project...

on 12/1/21

5 min read