Provides investors with significant leverage to precious metals prices and exploration potential
A portfolio of 80 royalties and streams across 16 countries
What Maverix Metals does
Maverix Metals Inc (CVE:MMX) is a rapidly growing gold royalty and streaming company with high margins and growing free cash flow.
Royalty companies have long held an important role in the mining sector. Developing a mine to start producing gold or other precious metals is expensive and time-consuming. So, the royalty company serves as a financier to help fund the construction of, or expansion of existing mines and can even finance earlier stage exploration projects.
In return for making an upfront payment, Maverix receives a royalty on the underlying precious metal sold by the operator, or in the case of a precious metal stream, the right to purchase an agreed-upon amount of gold, silver or other precious metal, at a significant discount to the spot commodity price.
Such agreements provide Maverix (and its shareholders) with exposure to precious metals price rises and the exploration upside of the mine or project without any additional capital outlay, while also fixing the ongoing costs of acquiring precious metals in the case of a stream.
Founded in 2016 by Chairman Geoff Burns and CEO Daniel O’Flaherty, Maverix’s aim is to build an attractive royalty and streaming portfolio.
In just over two years Maverix has acquired three major royalty portfolios from senior mining companies and now holds 80 royalties and streams across 16 countries, of which 13 of the underlying mines are currently producing. They are throughout Australia and the Americas, including a number in Mexico.
How is it doing?
A game-changing deal for the firm was struck in June, 2018 with a purchase agreement with the major Newmont Mining Corp (NYSE:NEM) - one of the globe's biggest gold diggers, which meant it got its hands on 51 royalties in 11 different countries and received total proceeds of US$17 million in cash from the right of first refusal exercises.
As at June 30 this year, Maverix had a market cap of US$470 million. The same month, the firm revealed a big step in increasing its the investor base - namely moving up to the big boards after its shares were approved for listing on both the NYSE American and Toronto Stock Exchange. And in August, it increased its royalty interest in a world-class gold camp in Canada, namely the Hope Bay mine in Nunavut, owned and operated by TMAC Resources Inc (TSE:TMR).
Maverix currently owns an existing 1% net smelter royalty (NSR) on the mine but acquired a further 1.5% NSR (additional royalty) with effect from August 1 this year for a cash payment of US$40 million, bringing it up to a combined 2.5% NSR.
The deal immediately increased Maverix's attributable gold equivalent production per share and raises its net asset value and cash flow per share.
Second quarter numbers show good growth
On August 14, its second quarter report for the three months to June 30 showed continued growth, with increases in production, revenue and net income.
The total attributable gold equivalent ounces produced rose to 6,425 in the quarter (2018: 4,975) and the gold attributable ounces sold were 5,359 versus 5,002 in 2018, the average realized gold price per gold equivalent ounce sold was C$1,744 compared to C$1,690 in 2018.
That led to net income for the three months of C$819,000, compared to a loss of C$458,000 in the same period a year earlier, while total revenue was C$9.3million compared to C$8.4million in the second quarter of 2018.
Maverix told investors it was well positioned to achieve its guidance of attributable gold equivalent production sold of between 22,500 and 24,500 ounces for 2019, due to the fact that many of the assets where it holds interests continue to ramp up production. The quarter also saw the group increase its revolving credit facility with CIBC and National Bank to US$75 million.
What the CEO said:
We have to give credit to the underlying operators that are doing a fantastic job ramping up the operations at various assets, where we have underlying royalties on," Dan O'Flaherty, the company's CEO, recently told Proactive Investors.
On the increased credit facility, he noted: "We see a lot of activity in the gold and silver sector right now for us to deploy that capital and we're excited with the direction the company's going."