Precious Metals Royalty And Streaming Companies: The January Report

Precious metals royalty and streaming companies represent a very interesting sub-industry of the precious metals mining industry. They provide some leverage to the growing metals prices, similar to the typical mining companies; however, they are less risky in comparison to them. Their incomes are derived from royalty and streaming agreements. Under a metal streaming agreement, the streaming company provides an upfront payment to acquire the right to future deliveries of a predefined percentage of metal production of a mining operation.

The streaming company also pays some ongoing payments that are usually well below the market price of the metal. They can be set as a fixed sum (e.g., $300/toz gold) or as a percentage (e.g., 20% of the prevailing gold price), or a combination of both (e.g., the lower of a) $300/toz gold and b) 20% of the prevailing gold price). The royalties usually apply to a small fraction of the mining project production (usually 1-3%), and they are not connected with ongoing payments. They can have various forms, but the most common is a small percentage of the net smelter return (“NSR”). The NSR is calculated as revenues from the sale of the mined products minus transportation and refining costs.

To better track the overall performance of the whole sub-industry, I created a capitalization-weighted index (the Precious Metals Royalty and Streaming Index) consisting of 11 companies (in June 2020, expanded to 15). Later, based on the inquiries of readers, I also introduced an equal-weighted version of the index. Until March 2021, both indices included the same companies and were calculated back to January 2019.

However, some major changes occurred in April 2021. Due to the boom of the royalty and streaming industry and the emergence of many new companies, the indices experienced two major changes. First of all, the market capitalization-weighted index was modified to include only the 5 biggest companies: Franco-Nevada (FNV), Wheaton Precious Metals (WPM), Royal Gold (RGLD), Osisko Gold Royalties (OR), and Sandstorm Gold (SAND). The combined weight of these 5 companies on the old index was around 95%, therefore, the small companies had only a negligible impact on their performance. The values of the index were re-calculated back to January 2019, and between January 2019 and March 2021, the difference in the overall performance of the old and the new index was only 2.29 percentage points. The second change is related to the equally weighted index that was expanded to 20 companies.

The previous editions of the monthly report can be found here: May 2019, June 2019, July 2019, August 2019, September 2019, October 2019, November 2019, December 2019, January 2020, February 2020, March 2020, April 2020, May 2020, June 2020, July 2020, August 2020, September 2020, October 2020, November 2020, December 2020, January 2021, February 2021, March 2021, April 2021, May 2021, June 2021, July 2021, August 2021, September 2021 (extended), October 2021 (extended), November 2021 (extended), December 2021 (extended), January 2022 (extended), February 2022 (extended), March 2022 (extended), April 2022 (extended), May 2022 (extended), June 2022, June 2022 (extended), July 2022, July 2022 (extended), August 2022, August 2022 (extended), September 2022, September 2022 (extended), October 2022, October 2022 (extended), November 2022, November 2022 (extended), December 2022, December 2022 (extended), January 2023 (extended).

There were no big changes in the ranking of the precious metals R&S companies by market capitalization. Only Triple Flag Precious Metals (TFPM) jumped over Osisko Gold Royalties, as its market capitalization grow rapidly due to the acquisition of Maverix Metals. And EMX Royalty (EMX) outgrew Metalla Royalty & Streaming (MTA), but only by less than $4 million. The biggest of the companies remains Franco-Nevada with a market capitalization of more than $28 billion, and the smallest of them is Star Royalties (OTCQX:STRFF), with a market capitalization of less than $23 million.

In General, the precious metals R&S companies did well in January. Out of 17 companies, 11 experienced a share price growth. The strongest one was experienced by Wheaton Precious Metals. Its share price grew by more than 17%. Surprisingly, the company didn’t make any news releases since November. At the opposite end of the performance chart is situated Empress Royalty (OTCQX:EMPYF), whose share price declined by 20% in January. Despite the positive fact that its shares started trading at OTCQX.

The gold price did very well in January. The share price of the SPDR Gold Trust ETF (GLD) grew by 5.76%. And although the iShares Silver Trust ETF (SLV) lost 0.86%, the precious metals R&S companies did very well. The Precious Metals R&S Index increased by 11.47%, mainly due to the great performance of Wheaton and Royal Gold. The Precious Metals R&S Equally Weighted Index didn’t do so well, growing only by 3.76%. This is not too impressive when compared to the VanEck Vectors Gold Miners ETF (GDX) which grew by 11.72%, or the VanEck Vectors Junior Gold Miners ETF (GDXJ) which grew by 9.26%.

The January News

The news flow remained relatively poor in January. There were only several small deals, and the majority of news focused only on reporting of preliminary Q4 sales and revenues. The situation should change in late February, when some of the companies should report their Q4 financial results (although the main wave will arrive only in March).

Franco-Nevada (FNV) increased the quarterly dividend from $0.32 to $0.34 per share. The next one will be paid on March 30 to shareholders of record as of March 16. Franco-Nevada also announced that under its dividend reinvestment plan, the discount was increased from 1% to 3%., and that the Q4 financial results will be released on March 15, after the market close.

The company also informed its shareholders that First Quantum Minerals (OTCPK:FQVLF) is prepared to reach a fair agreement with the government of Panama, regarding the Cobre Panama mine.

Royal Gold (RGLD) agreed to pay $204.1 million for additional royalties on Barrick Gold’s (GOLD) and Newmont’s (NEM) Cortez Gold Complex. The newly acquired royalties include a 0.24% Gross Royalty that covers the Pipeline and Crossroads deposits, and a 0.45% Gross Royalty that covers the Cortez Hills, Goldrush, Fourmile, and Robertson deposits.

The company also announced that its Q4 sales amounted to approximately 63,100 toz of gold equivalent (46,000 toz gold, 706,600 toz silver, 4.4 million lb copper). Royal Gold will release its Q4 financial results on February 15, after the market close.

Triple Flag Precious Metals reported Q4 sales of 25,428 toz of gold equivalent (50% silver, 44% gold, 6% other). The total 2022 sales amounted to 84,571 toz of gold equivalent (53% gold, 40% silver, 7% other). The revenues amounted to $43.9 million and $151.9 million respectively. Triple Flag will release its Q4 financial results on February 21, after the market close. On January 19, Triple Flag Precious Metals completed the Maverix Metals acquisition. Triple Flag issued 45.1 million new shares and paid $86.7 million.

Osisko Gold Royalties reported preliminary Q4 attributable production of 25,023 toz of gold equivalent. The total 2022 volume amounted to 89,367 toz of gold equivalent. The preliminary revenues amounted to C$61.9 million ($46.3 million) and C$217.8 million ($162.9 million) respectively. The company held cash of C$90.5 million ($67.7 million) as of the end of 2022. The Q4 financial results will be released on February 23, after the market close.

Sandstorm Gold announced that it sold approximately 21,800 of gold equivalent in Q4. The preliminary revenues equal $38.4 million. The overall 2022 sales amounted to approximately 82,400 toz of gold equivalent, which compares very favorably to 67,548 toz of gold equivalent in 2021.

EMX Royalty announced that AbraSilver (OTCQX:ABBRF) keeps on delivering good exploration results from the Diablillos project (EMX holds a 1% NSR royalty). The drilling is focusing on the JAC target now. JAC is located to the southwest of the Oculto deposit, where a resource of 109 million toz silver and 1.3 million toa gold was published only recently. The resource estimate for the JAC zone should be prepared around the middle of this year.

Trident Royalties (OTCPK:TDTRF) announced that after the oral hearing regarding the appeal of the issuance of the Record of Decision for the Thacker Pass lithium project, the Nevada District Court announced that no additional hearings or briefings are required. The final decision is expected over the coming months. After the end of January, on February 7, Lithium Americas (LAC), the owner of Thacker Pass, received a favorable ruling from the court.

On January 31, Trident announced that its royalty portfolio generated $3.5 million in Q4, and $13.8 million during the whole of 2022. As of January 27, Trident held cash of $21.8 million, and it expects to receive proceeds of $15.8 million for the sale of some pre-production gold royalties to Franco-Nevada soon.

Vox Royalty (VOXR) reported that it recorded preliminary revenues of $2.1 million in Q4. The total 2022 preliminary revenues amount to $9.7 million which is over the 2022 guidance of $7.8-9.4 million.

Orogen Royalties (OTCQX:OGNRF) acquired, by staking, the Celts epithermal gold-silver project in Nevada. The company also sold the Cuprite Gold Project to StrikePoint Gold (OTCQB:STKXF) for 6,428,571 shares (worth $450,000), and a 3% NSR royalty. However, based due to the terms of the generative alliance with Altius Minerals (OTCPK:ATUSF), only 50% of the proceeds is attributable to Orogen.

Sailfish Royalty (OTCQX:SROYF) announced the discovery of new high-grade gold veins at its 100%-owned Gavilanes project. The best results include 30 g/t gold and 190 g/t silver over 1 meter, or 10.12 g/t gold and 16 g/t silver over 2.2 meters.

The company also announced that Mako Mining (OTCQX:MAKOF) reported record Q4 sales of 9,956 toz gold and 16,268 toz silver. Sailfish owns an effective 3% NSR royalty on Mako’s San Albino mine.

Empress Royalty (OTCQX:EMPYF) announced that its shares were promoted from the OTCQB to the OTCQX market segment. The ticker remained EMPYF.

Star Royalties reported preliminary Q4 revenues of $305,000.

The February Outlook

February hasn’t been positive for the precious metals R&S industry so far, as the gold price declined from $1,950/toz to $1,870/toz. This was reflected also in the decline of share prices. The gold and silver prices will be the main driving forces also in the near future. Only in late February, the attention will shift to the earnings season.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.