April saw a massive fall in the mining royalty and streaming, with the average share price down 5.2%.
Any hopes of a May recovery were quickly shelved as the negative pressure on share prices not only continued, it accelerated with the average share price falling by a massive 7.9% during May. This is the biggest one month fall in mining royalty and streaming companies' share prices since we started collecting this data in September 2020.
During May-22 a staggering 92% of mining royalty and streaming companies experienced negative share price movements.
All subsets of the sector continued to show negative price movements in May, the least-worst subset was the Large-Tiers, down 5.6% on average. The Mid-Tiers were down 7.0% on average, Majors were down 8.2%, and the Large-Tiers were down 8.7%.
May is traditionally a bad month for markets, as suggested by the adage "Sell in May and go away", but this May appears to be more significant and perhaps signalling that we are now in bear market territory. The S&P 500 was down nearly 19% from an all-time high in early January, while the Dow Jones Industrial Average reached an eight-week losing stretch, its longest downtrend in nearly a 100-years.
Higher inflation and slower growth are now the consensus view but we appear to be far from the bottom. Given this negative economic setting, we wouldn’t expect to see signs of a recovery in the mining royalty and streaming sector during June.
Majors
Franco-Nevada Corporation (TSX:FNV) was the best performing Major this month for the second month in a row, down 5.2% (↓2.8% 3-months) despite publishing strong first quarter (Q1) 2022 results.
Total gold equivalent ounces (GEOs) for the quarter were up 2% on the same period last year, at 178,614, while revenue was up 10% to US$338.8 million. Net income totalled US$177.2 million, which is up 6% on the first quarter of 2021.
Earnings before interest and tax (EBIT) margin remains strong at 84.6% and its general & administration (G&A) expenses are less than 3% of revenue. Franco has no debt and US$1.7 billion of available capital for potential acquisitions, it remains on track to achieve its guidance for the year.
Royal Gold, Inc. (TSX:RGL) was the worst-performing Major for the second month in a row during May, down 13.3% on the month (↓7.1% 3-months), despite a stark improvement in the business compared to Q1 2021.
Royal Gold’s total GEOs for the quarter were up 9% on the same period last year, at 86,500. Revenue totalled US$162.4 million, up 14% compared to Q1 2021. Net income totalled US$65.7 million, which is an impressive 22% higher than the same period the previous year.
The company’s EBIT margins totalled 81% and it paid a quarterly dividend of US$0.35 per share, a 17% increase over the prior year. Royal Gold has a strong balance sheet and is debt-free, with cash of US$183.7 million and total liquidity of over US$1.2 billion. Guidance for 2022 remains unchanged.
Large-Tiers
Sandstorm Gold Ltd (TSX:SAND) was the best performing Large-Tier during May, up 4.1% (↓5.3% 3-months); again the shares of this company also fell despite a positive Q1 2022 operational results and some transformational corporate developments.
Total GEOs for the quarter were up 7.4% on the same period last year, at 18,741, while revenue was up 14% to US$35.4 million, a record for the company. Net income totalled US$9.1 million, which is up 82% on the first quarter of 2021.
Sandstorm is current undertaking two acquisitions and one divestment, which will transform the company over the coming months.
The two acquisitions, totalling US$1.1 billion, include the acquisition of Nomad Royalty (TSX:NSR) Company and the acquisition of a portfolio of royalty assets from BaseCore Metals LP. The Nomad acquisition and BaseCore deals are expected to close in the second half of 2022 and by the third quarter of 2022, respectively.
The US$65 million divestment, involves the creation of a new royalty company, Sandbox Royalties Corp. Rosedale Resources Ltd will acquire a portfolio of royalties from Equinox Gold (TSX:EQX) for consideration of US$28.4 million in common shares of Rosedale and a portfolio of royalties from Sandstorm for consideration of US$32.1 million in common shares of Rosedale and US$32.9 million in a promissory note convertible into common shares of Rosedale. Upon closing, Rosedale intends to change its corporate name to Sandbox Royalties Corp.
Sandbox will have exposure to a range of resource royalties including gold, silver, copper, zinc, graphite and uranium, immediate cash flow from producing royalties, a strong treasury and significant leverage to strengthening metal prices and resource growth.
Sandstorm and Equinox Gold will hold a 34% and 30% basic interest, respectively, in Sandbox, providing the opportunity to participate in and facilitate the future growth of Sandbox.
On closing of the transaction, Sandbox will hold a portfolio of 23 metals royalties across a range of assets and jurisdictions, including the existing royalties held by Rosedale. Post-completion of the transaction, Sandbox intends to seek a public listing on a Canadian stock exchange.
Osisko Gold Royalties (TSX:OR) was the worst-performing Large-Tier, down 6.6% (↓8.4% 3-months), reflecting investors' disappointment regarding the company’s Q1 2022 results, compared with the general bear market hit the company’s share price hard this month.
Total GEOs for the quarter were down 8.6% on the same period last year, at 18,251, while revenue was down 11.2% to US$59.4 million. Adjusted net income totalled US$2.2 million, which is 87.7% down on the first quarter of 2021. Cash margin remained strong at 94%.
Osisko’s GEOs are expected to increase over the course of the year as seasonality impacts dissipate and ramp-ups progress at various assets.
Mid-Tiers
Nomad Royalty Company Ltd was the best performing Mid-Tier for the second month in a row, down 1.0% on the month (↑23.8% 3-months), as the friendly acquisition by Sandstorm Gold continues.
Anglo Pacific Group PLC (LSE:APF, TSX:APY, OTC:AGPIF)'s was the worst-performing Mid-Tier this month, down 16.0% (↑10.9% 3-months) on the back of no significant news flow.
Altius Minerals Corporation (TSX:ALS) was down 8.0% on the month (↓10.4% 3-months) even though total revenue was up an impressive 54.9% to C$27.1 million, largely due to higher realised commodity prices. Net income totalled C$12.5 million, which is 5.9% up on the first quarter of 2021. Cash and cash equivalents totalled C$121.3 million, compared to C$100 million at the end of 2021.
Juniors
EMX Royalty Corporation was the best performing Junior and the best performing mining royalty company overall this month, up 2.0% on the month (↓14.1% 3-months). EMX also reported its Q1 2022 results, highlights of which include, total revenue of C$3.4 million and a loss from operations of C$4.4 million. The company plans to give production guidance for 2022 later this year.
Cash and cash equivalents totalled C$45.0 million with long-term investments and loans receivable valued at C$30.5 million and loans payable of C$59.2 million. The company plans to strengthen its balance sheet this year by looking to retire portions of its long-term debt, continuing to evaluate equity markets (including the filing of a shelf prospectus), and the ongoing monetisation of its marketable securities.
EMX’s royalty and mineral property portfolio consists of over 272 properties in North America, Europe, Turkey, Latin America and Australia. The company’s portfolio is comprised of the following:
5 producing royalties
9 advanced royalties
155 exploration royalties
103 royalty generation properties
Nova Royalty Corp. (TSX-V:NOVR) was the worst-performing Junior for the second month in a row, down 21.9% (↓29.5% 3-months). The company reported Q1 2022 revenue of C$0.7 million with a net loss before tax of C$1.8 million.
Nova also entered into a purchase agreement with private parties to acquire a portion of an existing royalty on the Josemaria Copper-Gold-Silver Project, located in San Juan, Argentina. Josemaria is owned by Lundin Mining Corporation (TSX:LUN) and is one of the most advanced large-scale copper development projects in the Americas, with a construction decision expected in the second half of 2022.