Rapidly growing royalty company with experienced management
Trades at a significant discount to peers despite recent outperformance
Has amassed portfolio of 45 royalties/streams across continents
What Metalla does:
Metalla Royalty & Streaming Ltd (CVE:MTA) (OTCMKTS:MTAFF) is aiming to leverage precious metal exposure by acquiring royalties and streams to build value for shareholders.
Buying a royalty means a company has the right to receive a percentage of mineral production from a mining operation, while streaming is the acquisition of all or a portion of a mine's production for both an upfront payment and a fixed price (or fixed percentage) per ounce of metal delivered.
Royalty companies have long been a key inhabitant of the mining sector. They can serve as a financier to help fund the construction of, or expansion of existing mines and can even finance earlier stage exploration projects.
Metalla is at an early stage of its growth but is rapidly expanding. The group's business strategy is to acquire third-party royalties on assets which are operated by major mining groups.
In only three years, it has acquired 45 royalties/streams over 15 transactions and deployed C$70 million of capital on assets that span the world. Two are production assets (namely, mines), 15 are development assets and 28 are exploration assets.
How is it doing:
Last month the group posted its results for the year to end May, which it described as a 'transformational' and busy year. Revenue from its royalty portfolio came in at nearly C$7.9 million, up from C$7.3 million in the 2018 fiscal year.
Metalla also paid a total dividend of C$1.8 million to shareholders during the 12-month period. The company raised nearly C$6.8 million in an oversubscribed public placing and entered into a C$12 million convertible debt facility with Beedie Capital.
The firm added key royalties on Agnico Eagle Mines Ltd’s Santa Gertrudis project, Pan American Silver Corp’s (NASDAQ:PAAS) Cap-Oueste Sur East project and two net smelter return (NSR) royalties on St Barbara Ltd’s Fifteen Mile Stream (FMS) project. It also bought a package of royalties or options from Alamos Gold, which includes royalties on Agnico Eagle's (NYSE:AEM) El Realito project.
In August, the firm completed its C$2 million acquisition of a new 3% NSR on St Barbara Ltd’s Fifteen Mile Stream project - on the Plenty deposit and the Seloam Brook prospect. The firm already held a 1% NSR on the project and the move consolidated its ownership.
Group revenue for fiscal 2019 came from its royalties on two producing mines and the firm says that two of its assets (bought during development stage) will be generating precious metal by the end of the year (both are being built by Pan American).
There are four further royalties following on behind which the firm believes will be producing in the next two to four years.
- More royalty acquisitions
- Production assets (royalties) coming onstream
- More exploration success and resource growth by firms, where it has royalties
What the boss says:
In October this year Metalla chief executive Brett Heath explained how investors had sometimes missed the significance of the firm's rapid acquisition of a number of assets and its laser-focused strategy.
Unlike peers in the sector, he says, the firm buys royalties from third parties, not directly from the operators, so it can leverage into the likes of majors like Pan American and Agnico Eagle. It also targets royalties that are in well-proven geological trends or near existing infrastructure of the big companies.
"As these bigger companies push these projects forward our portfolio's going to generate a significant amount of reserve growth as they do this," he said.
"It gives so much value because it almost allows the shareholders to have the benefit of a very material transaction every single year without any further capital outlay from the company," Heath added.