November has seen the largest one-month rise in the mining royalty and streaming sector since December 2020, with the average share price for the sector up by 10.5%, and an astounding 88% of the sector experiencing positive share price movements.
The Majors were the best performing subset of the sector, up an average of 18.6%, with the Large-Tiers close behind, up an average of 13.9%. The Mid-Tiers were up an average of 9.4% and the Juniors were the worst performing subset of the sector, up 7.8%.
November continued to build on the positive trajectory seen by global markets in October, with stocks having their biggest rally since October 2020, after lower-than-expected consumer price (CPI) data in the US. Investors are betting that US Fed will soon slow the monetary policy tightening measures as inflation slows.
However, one would urge cation and cite Chris Waller, the Fed Governor, who suggested that markets are misjudging the significance the CPI data and that the US central bank still has a long way to go on interest rate hikes.
Mining royalty and streaming share prices are at very elevated levels, up 1.1% since the start of the year, and the October-November rise means that they are now even further from pricing in the high levels of inflation we expect to see moving forward. We suspect October-November has been a Bear Market Rally and that there is more pain to come for the sector.
Majors
Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM) was the top performing Major during November, up 19.4% (↑28.0% 3-months) following the publication of its 2022 third quarter results. During the year to date the Company has sold 475,259 gold equivalent ounces (GEOs), which is down 4.7% from the same period last year.
Revenue for the year to date totalled US$829.0 million, which is down 10.2% on the same period last year, with operating cash flow totalling US$571.4 million, down 12.1% on last year. Lower metal prices combined with the mining of lower-grade materials and other operational issues at many of the mines Wheaton has interests in, resulted in the Company posting lower numbers compared to the previous year.
Franco-Nevada Corporation (TSX:FNV) was the worst performing Major, up a still impressive 18.2% (↑21.6% 3-months) after it also published its third quarter 2022 results. So far this year the Company has sold 546,074 GEOs, which is in line with the same period last year. Revenue for year to date totalled US$995.3 million, up 2% on the same period last year and operating cash flow totalled US$720.2 million, up 6.5% on the previous year. Franco reiterated that it remains on-track to meet full year guidance for FY22.
Franco has also updated its board of directors with Jacques Perron joining the board. Mr Perron currently serves as a director of Centerra Gold Inc and was previously President and Chief Executive Officer of Pretium Resources, Thompson Creek Metals Company Inc (TSX:TCM, NYSE:TC). and St Andrew Goldfields Ltd (TSX:SAS).
Interestingly, Franco notes that given the weaker gold price environment it has seen an increase in demand for royalty and stream financing, and has just acquired a royalty on Argonaut Gold’s Magino Project, located in Ontario.
Large-Tiers
Labrador Iron Ore Royalty Corp was the best performing Large-Tier, up 20.5% this month (↑16.5% 3-months), despite the third quarter 2022 results being negatively affected by lower iron ore prices. Royalty revenue for the quarter totalled C$63.5 million, down 14.4% compared to Q3 2021 Equity earnings from Iron Ore Company of Canada ("IOC") were $46.8 million down 22.6% compared to the third quarter of 2021. Net income per share for the third quarter of 2022 was $1.24 per share, which was a 24% decrease over the same period in 2021.
During the third quarter of 2022, iron ore prices further declined from the record levels experienced in 2021, predominantly as a result of lower global steel production. Iron ore prices look likely to continue to decline with the negative outlook for steel production continuing to put downward pressure on seaborne iron ore prices. In October 2022, the average price of the 65% Fe index fell to US$105 per tonne, which is still attractive from a historical perspective.
Sandstorm Gold Ltd (TSX:SAND) was the worst performing Large-Tier for the third month in a row, up 5.1% (↓8.1% 3-months), following the publication of its third quarter results. During the quarter, Sandstorm sold 22,606 GEOs, which up 45.7% the same period last year. Revenue for year to date totalled US$110.3 million, up 29.8% compared to the comparable period in 2021. Cash flows from operating activities totalled US$80.7 million, up 31.0% compared to the same period last year. Sandstorms figures have been bolstered by the acquisition of Nomad Royalty (TSX:NSR) Corp, which closed in July 2022.
Following the Nomad acquisition closure, Sandstorm has provided updated guidance of between 80,000 and 85,000 GEOs for 2022 with production forecast to increase to over 150,000 ounces in 2025.
Mid-Tiers
Maverix Metals Inc (TSX:MMX) was the best performing Mid-Tier this month, up 35.7%% (↑30.0% 3-months), after its announced Triple Flag Precious Metals (TSX:TFPM) Corp.’s plan to acquire all the issued and outstanding common shares of Maverix. Continuing the theme which we highlighted at the start of the year of ongoing consolidation of the mining royalty sector.
The transaction values Maverix at US$606 million and would give the combined business a market value of US2.2 billion and would create a new Large-Tier if the transaction closes.
The combined entity will have 228 assets, of which 29 will generate cash flow, with 93% of the portfolio comprising precious metals and 82% of the assets being located in the Americas and Australia. The acquisition is expected to increase Triple Flag’s GEOs production from 84,000 in 2021 to an average of over 140,000 over the next five years.
Ecora Resources PLC (LSE:ECOR, TSX:ECOR, OTCQX:ECRAF). (formerly Anglo Pacific Group PLC) was the worst performing Mid-Tier this month and the worst performing mining royalty and streaming company overall, down 10.6% (↓13.7% 3-months) on the back of no news flow during November.
Juniors
Uranium Royalty Corp was the best performing Junior last month, up 27.0% (↓7.2% 3-months) after an update for its fiscal second quarter. As at October 31, the Company had approximately C$142 million in cash, marketable securities and physical uranium holdings.
During the month, the Company also entered into an agreement with Anfield Energy Inc. (TSX-V:AEC, OTCQB:ANLDF) to acquire a portfolio of royalties on US projects for US$1.5 million. This portfolio comprised of: a 2% gross value royalty on portions of the San Rafael Project, located in Utah, operated by Western Uranium & Vanadium Corp; a 2 – 4% sliding scale gross value royalty on portions of the Whirlwind Project, located in Colorado and Utah, operated by Energy Fuels Inc. (TSX:EFR, NYSE-A:UUUU); and a 1% gross value royalty (on portions of the Energy Queen project, located in Utah, operated by Energy Fuels; and a 2 – 4% sliding scale royalty on portions of the Dewey Burdock Project located in South Dakota, operated by enCore Energy Corp.
Elemental Altus Royalties Corp (TSX-V:ELE). was the worst performing Junior, down 3.9% (↑3.4% 3-months) despite some impressive third quarter results. Revenue for the quarter totalled US$3.4 million, up approximately 81% from the same period last year. The Company’s balance sheet remains robust with US$11.2 million in cash and cash equivalents.
Following the completion of the merger with Altus, the Company has increased guidance for 2022 by to 6,400 to 7,000 GEOs, (4-12% on previous). This is expected to generate adjusted revenue of between US$11.5 million and US$12.5 million for 2022. Elemental Altus expects guidance to continue to materially improve in 2023, with preliminary estimates of over US$20 million of attributable adjusted revenue.