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 with first quarter results showing an uplift in net income and revenue, while the company also 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).

Maverix 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.

And on July 6, Maverix updated on news from its royalty assets, which, it said, augured well for organic growth, including Karora Resources Inc’s (TSE:KRR) (OTCMKTS:KRRGF) (FRA:5RN1) plans to double output at the Beta Hunt mine in Australia.

At Beta Hunt, Maverix holds a 4.75% gold royalty and 1.5% nickel net smelter royalty (NSR).  Due to increased throughput, the production capacity at Beta Hunt is expected to double from the current rate of around 75,000 to 85,000 tonnes per month (tpm) to 160,000 to 170,000 tpm by the end of 2024, noted Maverix.

Elsewhere, at the Enchi gold project in Ghana, where Maverix holds a 2% NSR, Newcore Gold (CVE:NCAU) (OTCMKTS:NCAUF) (FRA:PI8) announced an updated preliminary economic assessment (PEA), showing an open pit, heap leach operation producing an average of around 90,000 ounces of gold per year over 11 years, generating an after-tax net present value at a 5% discount rate of US$212 million.

Meanwhile, at the Koné project in Ivory Coast, where Maverix holds a 2% NSR, Montage Gold Corp (CVE:MAU) (OTCMKTS:MAUTF) announced a PEA , which outlined an 11 million tonne per annum operation with an average annual production of 205,000 ounces of gold, generating an after-tax net present value at a 5% discount rate of US$652 million.

Also on the asset front, on June 29 this year, Maverix  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.

And 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. Maverix realized 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:

On July 7, 2021, broker Stifel GMP repeated a ‘Buy’ on Maverix and lifted the target price to C$8.50 a share, from C$8.25 previously, highlighting that the planned production growth at the Beta Hunt mine in Australia will boost the value of the company and its royalty there.

Analysts now forecast the Beta Hunt royalty will provide 7,900 gold-equivalent ounces (GEOs) in 2024 and 8,100 GEOs in 2025, boosting Stifel’s prior 2024 revenue GEO estimates for Maverix by almost 10% to nearly 34,000 ounces.

“Updates on advanced exploration projects highlight the potential to boost revenue GEOs in the mid-to-longer term. Over the medium term, we see potential for attributable revenue GEOs growing to between 40-50k,” added the analysts.

Stifel also noted that both Montage Gold Corp’s (CVE:MAU) (OTCMKTS:MAUTF) Koné project (Maverix has a 2% NSR) and Newcore Gold Ltd’s (CVE:NCAU) (OTCMKTS:NCAUF) (FRA:PI8) Enchi project (Maverix holds a 2% NSR) had completed their respective preliminary economic assessments (PEAs).

“As the two West African projects continue to be de-risked, their ongoing progress highlights that MMX’s royalties on these two assets can boost mid-term attributable GEOs,” said analysts.

“We estimate that once in production, Koné and Enchi can add approximately 7,000 GEOs to MMX’s account. We value Koné and Enchi royalties at approximately $65M,” they added.

What the boss says:

“Recently, there have been several announcements related to assets where we hold a royalty interest, which bode well for our future organic growth,” said Dan O’Flaherty, CEO of Maverix, in the company’s most recent announcement.

“In particular, the planned expansion to double production at Beta Hunt and the results of a preliminary economic assessment at Koné highlight the potential to add significant revenue and attributable gold equivalent ounces for Maverix in the near-term, at no additional cost.”

Contact giles at [email protected]

Story by ProactiveInvestors