December saw the mining royalty and streaming sector once again move into positive territory, with the average share price up 1.1%, with 62% of the sector experiencing positive share price movements.
For the year, the average share price was up 10.6%, a nice return for anyone with wide exposure to the sector, but with 50% of companies experiencing positive share price movements, stock picking has been key for investors seeking above the market returns. Of that 50% of companies that had positive share price movements, the average share price gain was 39%, demonstrating the importance of quality and not quantity.
The Mid-Tiers were the best performing subset of the sector during December, up 4.5%, as share prices in this subset recovered after dipping in November. The Majors and Large-Tiers also performed strongly up 2.8% and 2.0, respectively. The Juniors were the only subset to see the average share price fall in December, down 0.4%.
Despite the December fall, the Juniors remained the best performing subset of the mining royalty and streaming sector during 2021, up 19.1% on average. This compares to the Majors, which were up an average of 4.0% for the year, the Large Tiers, which were the worst performing subset of the sector, down an average of 3.3% and the Mid-Tiers that were up 1.7% on the year.
December
Majors
Royal Gold, Inc. (TSX:RGL) was the best-performing major, up 5.2% on the month (↑10.2% 3-months) as the company began to step up its marketing events with a non-deal virtual roadshow. The company is also in the process of changing its year-end from 30 June to 31 December to bring it in line with the other majors in the mining royalty and streaming sector, allowing investors to assess its relative performance to peers in a much more streamlined way. Royal Gold now has interests in 190 properties on five continents, including interests in 44 producing mines and 16 development stage projects.
Franco-Nevada Corporation (TSX:FNV) was the worst-performing Major for the second month in a row, up 0.6% on the month (↑6.5% 3-months) despite no news flow. Franco has had a standout year, as the best performing Major, so shareholders will forgive the slower finish to the year.
Large-Tiers
Deterra Royalties Limited was the best performing Large-Tier for the second month in a row, up 3.9% during the month (↑17.8% 3-months) following the recovery in the iron price during December. Iron ore prices rose 19% during the month, to US$112.5/t. Deterra is one of just two mining royalty companies with significant exposure to the iron ore market, the other, Labrador Iron Ore Royalty Corp, also performed strongly in December, up 3.5% (↑6.6% 3-months).
Sandstorm Gold Ltd (TSX:SAND) was the worst-performing Large-Tier, up 0.2% on the month (↑7.6% 3-months), despite a slew of positive news flow, including announcing a maiden dividend of C$0.02 per share for Q122.
Sandstorm also announced it had agreed a US$60 million financing package with Bear Creek Mining to facilitate Bear Creek’s 100% acquisition of the producing Mercedes gold-silver mine in Mexico from Equinox Gold (TSX:EQX) Corp. The financing package includes a US$37.5 million gold stream, together with a US$22.5 million convertible debenture.
The company also closed the first tranche of its US$30 million Vatukoula stream and royalty agreement on the producing Vatukoula Mine, located in Fiji, where gold deliveries are expected to commence this month.
Mid-Tiers
Nomad Royalty (TSX:NSR) company Ltd was the best performing Mid-Tier this month, up 10.2% (↑27% 3-months) after closing the acquisition of a $75 million gold stream on Ivanhoe Mines’ Platreef PGM Project, located in Limpopo, South Africa.
Nomad is co-investing alongside mining private equity giant, Orion Mine Finance, as part of a $200 million gold stream. Initial production at Platreef is scheduled to commence in 2024 and the co-investors will receive 100% of payable gold production (37.5% to Nomad) until 350,000 ounces have been delivered (131,250 oz to Nomad), after which the stream will be reduced to 80% of payable gold production (30% to Nomad) until an aggregate of 685,280 ounces of gold have been delivered.
Nomad expects to announce its gold equivalent ounce (GEO) production guidance for the 2022 calendar year during Q122.
Maverix Metals Inc (TSX:MMX) was the worst-performing Mid-Tier this month, down 5.2% (↓2.5% 3-months) despite no news flow. The company increased its guidance during November to about 31,000 attributable GEOs for 2021, previously guidance was between 27,000 to 30,000 GEOs. This is impressive as it marks the fifth consecutive year of record attributable GEOs for the company.
Juniors
Elemental Royalties Corp (TSX-V:ELE) was the best performing Junior this month and the best performing mining royalty and streaming company overall during December, up 23.9% on the month (↑23.9% 3-months). This was following a proposed unsolicited all-share takeover bid for the company by Gold Royalty Corp (NYSE-A:GROY), which valued Elemental at a price of C$1.78/ per share, a 37% premium to the Elementals share price on the day the intention to make an unsolicited bid was announced. Elemental has recommended that shareholders reject the bid, if and when the bid commences.
Uranium Royalty Corp was the worst-performing junior and royalty and streaming company, down 14.6% on the month (↑1.8% 3-months) despite announcing that it has entered into a supply stream agreement with CGN Global Uranium Limited to purchase 500,000 pounds of U308 (ASX:UTO) from CGN delivered at Cameco from 2023 through 2025 at a weighted average price of $47.71 per pound.
CGN Global is the overseas nuclear fuel business platform of China General Nuclear Power Group, the world’s third-largest, and China’s biggest, nuclear power operator with 25 units in operation (28.26GWe installed capacity) and 6 units (7GWe installed capacity) under construction.
Uranium Royalty Corp also published its unaudited interim consolidated financial statements for the three and six months ended October 31, 2021, which highlighted a loss before tax of C$3.2 million for the first half of fiscal 2022 (H122). As at December 13, 2021, the company had about C$104 million in cash, marketable securities and physical uranium holdings.
2021’s Winners and Losers
Despite a minor setback in its share price in December 2021, Uranium Royalty Corp was the best performing mining royalty and streaming company of 2021 overall, and the best performing junior, up an impressive 213.7%. Metalla Royalty & Streaming Ltd (TSX-V:MTA) was the worst-performing company of 2021 overall and the worst performing junior, down 45.5% on the year.
Franco-Nevada Corporation was the best performing Major of 2021, up 10.3% on the year, while Royal Gold, Inc. was the worst-performing Major down 1.1%.
Labrador Iron Ore Royalty Corp was the best performing Large-Tier of 2021, up 15.1% on the year, while Sandstorm Gold Ltd was the worst performing Large-Tier, down 13.5%.
Altius Minerals Corporation (TSX:ALS) was the best performing Mid-Tier of 2021, up 29.6% on the year, while Maverix Metals Inc was the worst performing Mid-Tier, down 20.1%.
Key Themes for 2022
With rising inflation likely to be a key theme for 2022, both precious metals focused and diversified mining royalty companies are likely to benefit from higher metal prices during the year. Many companies have strong balance sheets with which to complete significant deals, but the crowded nature of the market means the majority of deals will be competitive, and as a result, expensive.
Given the rapid increase in the number of companies in the mining royalty sector in 2020 and 2021, the space is well overdue for a round of consolidation. Gold Royalty Corp has been a leader in this theme following the acquisition of Ely Gold Royalties in August 2021, Abitibi Royalties Inc (TSX-V:RZZ) and Golden Valley Mines and Royalties Ltd. in October and the unsolicited bid for Elemental Royalties in December 2021. These are the first deals, in what we expect to be a sustained period of stronger players purchasing smaller rivals to strengthen their portfolios.