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Metalla Royalty & Streaming well positioned as it continues to leverage its large gold and silver portfolio

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  • Now has 62 royalties/streams
  • Greatest exposure to silver of any publicly-listed royalty company
  • Industry leading growth

What Metalla Royalty & Streaming Ltd does:

Metalla Royalty & Streaming Ltd (CVE:MTA) (NYSEAMERICAN:MTA) aims to leverage exposure to gold and silver by acquiring royalties and streams to build value.

Having 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.

Metalla is at an early stage of its growth but is rapidly expanding. Significantly, the group’s business strategy is to acquire third-party royalties on assets of the major miners with strong operational experience and balance sheets.

In just a few years, the group has acquired 62 royalties/streams over 20 transactions and deployed C$110 million of capital on assets that span the globe. It has a market cap of C$444 million.

The firm said it has completed more deals than peers since its inception in 2016 and outperformed them with a share price compound annual growth rate (CAGR) of 64%.

Significantly, it has also listed in New York, on the NYSE American exchange, to widen its US investor base and improve its access to capital.

How is it doing:

On March 16, the company revealed a further boost to its portfolio with the acquisition of a further accretive royalty on a large development project in Brazil, namely the CentroGold project, that covers over 2 million ounces of gold.

The deal is on an existing 1% to 2% net smelter return royalty (NSR) on OZ Minerals’ (ASX:OZL) (OTCMKTS:OZMLF) (FRA:OXR) CentroGold project from Jaguar Mining (TSE:JAG) for up to US$18M.

A recent pre-feasibility study on the asset outlined a seven-year life of mine with output in the first two years expected to average between 190,000 and 210,000 ounces of gold a year, with around 1.1 million ounces (Moz) in the first six years.

The announcement came hot on the heels of news that it had acquired a new royalty (0.76% gross value royalty interest) on the Tocantinzinho project owned by Eldorado Gold (NYSE:EGO) (TSE:ELD) via a royalty transfer agreement with Sailfish Royalty Corp (CVE:FISH) for US$9 million in cash.

In December, the group handily outlined key accomplishments of 2020, which included:

  • Metalla stock begins trading on the NYSE American stock exchange on January 8, 2020
  • Acquisition of a royalty on the Teck Resources (TSE:TECK) / Newmont (NYSE:NEM) NuevaUnion project on February 18, 2020
  • Acquisition of Cortez Trend royalties on Barrick Gold (NYSE:GOLD) / Newmont Nevada Gold Mines joint venture operation on April 27, 2020
  • Acquisition of royalty on Kirkland Lake Gold’s (NYSE:KL) Fosterville mine on July 27, 2020
  • Acquisition of 27.5% participation royalty from Morgan Stanley on Karora Resources’ (TSE:KRR) operating Higginsville Gold Operations on September 16, 2020
  • Acquisition of royalty on Minera Alamos’ (CVE:MAI) La Fortuna project on October 22, 2020
  • Acquisition of strategic portfolio of royalties in Nevada and Utah on November 4, 2020

This came alongside news that the company’s stock was added to the VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ) with effect from market close on December 18. Metalla said its shares were also added to the US Global GO GOLD and Precious Metal Miners ETF (NYSEARCA:‎GOAU) and the ETFMG Prime Junior Silver Miners ETF (NYSEARCA:SILJ).

“Listing on the NYSE American earlier this year, coupled with the increased scale of the company following a record year of transactions and 18 additional royalties, has significantly increased the company’s liquidity and market visibility. CEO Brett Heath had said.

“The GDXJ brings additional trading flexibility and exposure to the largest source of capital flows for junior precious metal equities with US$6.3 billion in net assets as we move into this next phase of the bull market.”

What the broker says::

In December last year, broker Roth Capital Partners started covering Metalla, which it said was growing value through acquisitions. Roth initiated coverage with a ‘Neutral’ stance and a US$10 share price target.

“Royalties merit a low discount rate and high multiple and are excellent assets to own, in our view. They are perpetual, not dischargeable in bankruptcy, do not have risk of operating cost and capex overruns associated with mining operations, yet provide upside exposure to gold, silver and other commodity prices and exploration,” said analyst Matthew Farwell.

The median market cap of the operators of Metalla’s Top 18 royalty assets is US$1.7 billion, and these notable firms include Coeur Mining (NYSE:CDE), Karora Resources (TSE:KRR), Pan American Silver (NASDAQ:PAAS), Agnico Eagle (NYSE:AEM) Yamana Gold (LON:AUY) and Teck Resources (NYSE: TECK), noted the analyst.

“Operators with financial strength reduce project timing risk, and we expect significant new revenue streams in 2024 when up to eight projects could come online. In addition to development, we expect operator exploration budgets to fund resource expansion at exploration properties,” he added.

He expects the group’s gold-equivalent ounces (GEOs) to grow 200% by 2024 as projects that are under development are brought online, and as reserves upon which the company generates royalties are mined.

“Our valuation analysis suggests the shares trade at 2.7x NAV and our $10.00 price target implies 2.34x NAV, which is appropriate given the strong history of adding value through accretive transactions over the past four years, in our opinion. Our NAV estimate is based on expectations of $1,700/oz gold and $20/oz silver from 2024 onward,” the broker added.

Inflection points:

  • More royalty acquisitions
  • Gold and silver price moves
  • Projects coming online

What the boss says:

CEO Brett Heath spoke to Proactive last September after the Karora Resources Higginsville deal and said: “When we look at transactions and we look at building this portfolio, we’ve got one goal in mind and that goal is to build the best vehicle for investors to play this gold and silver bull market – to get exposure to these commodities with the reduced risk, with the optionality but also the cashflow, that’s also an important fact that you need to have as a company.”     

Contact the author at [email protected]

Story by ProactiveInvestors


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