December 2022 saw the mining royalty and streaming sector continue the positive movement experienced in October and November, with the average share price marginally rising 1.4%, and 48% of the sector experiencing positive share price movements.
The Mid-Tiers were the best performing subset of the sector during December, up 4.7%. The Juniors and Large-Tiers also finished the month slightly up, 1.7% and 0.5%, respectively. The Majors were the only subset to see the average share price fall in December, down 2.0%.
For the year, the average share price of mining royalty and streaming companies was also marginally up by 1.5%, which is not enough to counter the massive inflation experienced during 2022 and suggests a decrease in the year-on-year true value of the sector. Since the start of the year, 40% of companies have experienced positive share price movements. Of those nine companies (excluding one outlier) the average share price rise was just 17.4%, while the average fall in share prices by the other 60% of the market was 22.4%.
The Mid-Tiers were the best performing subset of the mining royalty and streaming sector during 2022 and the only subset to finish in positive territory, up 13.9% on average. This compares to the Majors, which were down an average of 1.0% for the year, the Large Tiers, which were down an average of 0.2%, and the Juniors, which finished the year down 16.6% on the year (excluding one outlier).
Majors
Royal Gold, Inc. (TSX:RGL) was the best performing Major, up 0.3% on the month (↑20.1% 3-months) despite no news flow. Around 14 analysts are reported as covering Royal Gold at present, 60% of those analysts rate the company as HOLD and 27% rate the company as BUY.
Franco-Nevada Corporation (TSX:FNV) was the worst performing Major for the third month in a row, down 6.6% on the month (↑14.2% 3-months) following the news that the Government of Panama’s directed various ministries to prepare for a suspension of operations at the Cobre Panama Mine. Franco owns a fixed payment and floating payment stream over the mine as a result of a US$1.36 billion investment.
The majority owner and operator of the project, First Quantum Minerals (TSX:FQM), failed to reach an agreement regarding increasing its royalty payments to the Panamanian Government and it was ordered by the Government to close the mine as a result. First Quantum has taken steps under domestic legal proceedings in Panama and international arbitration as a precautionary measure. While operations at the Mine have been unaffected to date, any sort of prolonged delay could have a material impact of Franco’s financial performance.
Large-Tiers
Triple Flag Precious Metals (TSX:TFPM) was the best performing Large-Tier this month, up 9.6% (↑5.8% 3-months). During the month, Triple Flag entered into a definitive agreement for the acquisition of a A$10 million gross revenue return and US$80 million gold and silver stream on the Prieska Copper‐Zinc Mine with Orion Minerals Ltd (ASX:ORN, JSE:ORN).
Orion’s 2020 feasibility study defined a 11.5‐year life of mine, producing 226 kt and 680 kt of copper and zinc in concentrate, respectively, over the life of mine. At the fixed ratios for the stream agreement, this would entail life‐of‐mine payable gold of 81.2 koz and payable silver of 4,915.9 koz, of which 84% would be delivered to Triple Flag under the Stream.
In addition to the Prieska acquisition, Triple Flag also announced the acquisition of up to a 2.5% net smelter returns (NSR) royalty on the Thunder Bay North Project, located in Northern Ontario, Canada, for up to an aggregate of C$15 million.
The Thunder Bay North Project is owned by Clean Air Metals Inc (TSX-V:AIR, OTCQB:CLRMF). A Preliminary Economic Assessment completed in December 2021 defined a 10-year life of mine, producing 2,886 koz PtEq.
Osisko Gold Royalties (TSX:OR) was the worst performing Large-Tier, down 4.3% on the month (↑18.6% 3-months), despite the revision of a binding agreement with Metals Acquisition Corp. with respect to the purchase of a 100% silver stream on the producing CSA Mine, located in New South Wales, Australia.
Under the terms of the revised silver stream agreement, the upfront cash payment payable by Osisko has been reduced from US$90 million to US$75 million. In conjunction with the Silver Stream, Osisko has agreed to subscribe for US$15 million in equity of Metals Acquisition Corp. as part of its concurrent equity financing. Between 2019-2021, annual payable silver production from the mine averaged ~431 koz, or ~5,700 gold equivalent ounces annually.
Mid-Tiers
Maverix Metals Inc (TSX:MMX) was the best performing Mid-Tier this month, up 8.1% (↑39.7% 3-months) as it continued to advance its acquisition by Triple Flag Precious Metals (TSX:TFPM) Corp. for total consideration of US$606 million. Maverix will be holding a special meeting of the Maverix shareholders on January 12, 2023 to seek shareholder approval for the transaction.
Altius Minerals Corporation (TSX:ALS) was the worst performing Mid-Tier this month, up 1.1% (↑14.7% 3-months) despite closing a C$31.5 million bought deal public offering at a price of C$9.00 per share. The company used C$21 million from the offering to fund Altius Renewable Royalties 50% of the acquisition price for Great Bay Renewables’ Titan Solar royalty investment.
Juniors
Sailfish Royalty Corp was the best performing Junior this month and the best performing mining royalty and streaming company over all during December, up 59.4% on the month (↑19.6% 3-months) after the company declared a fourth quarterly cash dividend for 2022 of US$0.0125 per common share that will be payable on January 16, 2023.
Uranium Royalty Corp was the worst performing junior and royalty and streaming company for the second month in a row, down 17.1% on the month (↑2.2% 3-months) despite no news flow, as the uranium price hit a four-month low of US$48.3/lbs dragging uranium focused mining stocks down across the board.
2022’s Winners and Losers
Trident Royalties PLC (AIM:TRR) was the best performing mining royalty and streaming company of 2022 overall and the best performing junior, up 37.9%, while Gold Royalty Corp (NYSE-A:GROY) was the worst performing company of 2022 overall and the worst performing junior, down 52.5% on the year.
Royal Gold, Inc. (TSX:RGL) was the best performing Major of 2022 after being the worst performing Major in 2021, up 7.1% on the year, while Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM) was the worst performing Major of 2022, down 9.0%.
Triple Flag Precious Metals (TSX:TFPM) was the best performing Large-Tier of 2022, up 18.9% on the year, while Sandstorm Gold Ltd (TSX:SAND) was the worst performing Large-Tier for the second year in a row, down 15.2%.
Altius Minerals Corporation (TSX:ALS) was the best performing Mid-Tier of 2022 for the second year in a row, up 25.2% on the year, while Maverix Metals Inc (TSX:MMX) was the worst performing Mid-Tier for the second year in a row despite finishing the year up 7.3%.
Empress Royalty Corp (TSX-V:EMPR, OTCQB:EMPYF) deserves an honourable mention for being the second-best performing mining royalty and streaming company of 2022, up 31.1%.
Key Themes for 2023
Last year we highlighted rising inflation as our key theme for 2022, and we would expect to see this continue for at least the first half of 2023 and perhaps for the whole year, as energy cost rises continue to form an important component of global inflation.
Recession is unfortunately likely to be another important theme for 2023 as well, with the UK already in recession and the US and other countries looking likely to follow.
2022 saw the mining royalty and streaming sector largely remain flat, up just 1.5%, and we suspect that 2023 might be a more painful year for the sector with negative sentiment to the sector increasing.
At the start of 2022, we announced we expected to see an uptick in consolidation in the mining royalty and streaming sector, following its rapid growth in component companies during 2020 and 2021. This thesis was correct with some major transactions including:
- Sandstorm Gold Ltd (TSX:SAND) completing the acquisition of Nomad Royalty (TSX:NSR) Company Ltd. in August 2022 for US$590 million and the acquisition of BaseCore Metals LP for total consideration of US$525 million in July 2022.
- Triple Flag Precious Metals Corp. announced in November 2022 that it plans to acquire Maverix Metals Inc (TSX:MMX) in a transaction that valued Maverix at US$606 million.
- Royal Gold acquired Great Bear Royalties Corp. in September 2022 at a valuation of approximately C$199.5 million on a fully diluted basis.
- Elemental Royalties (TSXV: ELE) and Altus Strategies plc closed a merger in August 2022 to form Elemental Altus Royalties Corp (TSX-V:ELE).
Given the low market valuation of most of the sector, combined with the high-cash positions of many of the sectors leading players, we would expect to see transactional activity continue in to 2023 with further consolidation our main thesis for the sector in 2023.