Maverix Metals delivering consistent profits from its high-quality portfolio of precious metal royalties

• A pure gold play royalty investment
• A global portfolio and experienced management
• Low overheads and track record of growth

What Maverix Metals does:

Maverix Metals Inc (CVE:MMX) is a rapidly growing gold royalty and streaming firm with high margins and growing free cashflow.

In return for making an upfront payment, Maverix receives a royalty on the underlying precious metal sold by an 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.

Since being founded in 2016 by chairman Geoff Burns and CEO Daniel O’Flaherty, Vancouver-based Maverix, with a market cap of around US$760 million, now has 121 royalties and streams, 13 of which are paying. Its assets lie throughout Australia and the Americas.

How is it doing:

Maverix Metals entered 2021 with a strong financial wind at its back. 

Its first quarter results showed an uplift in net income and revenue and the royalty company announced a 25% increase to the dividend.

Net income for the three months to end-March was US$14.7 million, up from US$860,000 in Q1 2020, on total revenue of US$13 million, up 41% from US$9.2 million a year earlier.

Gold equivalent ounces sold in the three months was 7,302, up from 5,871 in Q1 2020 and the cash flow from operating activities was US$13.4 million (Q1 2020: US$4.8 million).

The board approved a quarterly dividend of $0.0125 per share to be paid in June, 2021. This was a 25% increase from the previous dividend of $0.01 per share, noted Maverix.

Maverix has set its 2021 guidance for attributable gold equivalent ounces to be between 27,000 to 30,0001 for 2021 at around a 90% cash margin with about 99% of expected revenue derived from gold and silver.

On the asset front, on June 29 this year, the company announced the acquisition of a portfolio of six royalties from Latin America-focused Pan American Silver Corp (TSE:PAAS) (NASDAQ:PAAS) (FRA:PA2).

The six royalties include the Fenn-Gib royalty, a 1% – 2.5% net smelter return (NSR) royalty on a portion of the Fenn-Gib gold project in Ontario, operated by Mayfair Gold Corp (CVE:MFG) (OTCMKTS:MFGCF) (FRA:9M5). Maverix is also acquiring three separate royalties related to Fenn-Gib.

Maverix will also acquire a 3% NSR royalty on a portion of the silver and zinc Recuperada project located in Huancavelica, Peru and a 1% NSR royalty on the advanced exploration-stage Juby gold project operated by Aris Gold Corporation in Ontario.

In February this year, major Agnico Eagle Mines became the owner of Hope Bay following its acquisition of TMAC Resources Inc and announced plans to continue mining the Doris deposit. Agnico expects quarterly production of between 18,000 to 20,000 ounces of gold, with a significant exploration program planned for this year.

Maverix and Agnico completed the buyback of 1.5% of the NSR royalty that Maverix owns on the Hope Bay mine.

Maverix received a cash payment of $50 million from Agnico on February 12. Maverix retains a 1% net smelter return (NSR) royalty on the Hope Bay mine, which is not subject to any further reductions.

Elsewhere, at the Moss mine in Arizona, Maverix said that Northern Vertex Mining Corp completed the previously-announced business combination with Eclipse Gold Mining Corp.

Under the terms of the deal, Maverix sold 19,511,041 shares of Northern Vertex and received net proceeds of approximately C$9.8 million, realizing a gain on the sale of nearly C$2 million.

Inflection points:

• Further acquisitions of royalties/streams
• Gold and precious metals price moves
• More royalty partner news

What the broker says:

Following news of the acquisition of a small portfolio of precious metals royalties from Pan American Silver, broker Canaccord repeated a ‘Buy’ stance on the  Maverix stock and a C$8.25 price target (current price: C$5.33).

“The portfolio includes six royalties and adds future optionality to MMX’s overall asset portfolio which now contains 121 royalty and stream assets (13 currently paying and a number at an advanced development stage),” said analysts in a note.

What the boss says:

“We are happy to have completed the purchase of this gold-focused royalty portfolio from Pan American Silver, our most tenured strategic shareholder. This acquisition adds future option value to our overall asset portfolio which now boasts 121 royalty and stream assets, 13 of which are currently paying and a number of which are on advanced stage projects,” said Ryan McIntyre, president of Maverix in the company’s most recent announcement.

Contact giles at [email protected]

Story by ProactiveInvestors