During August, the downtrend in the mining royalty and streaming sector continued. As we predicted in our previous round-up, the positive movement in July was more of a dead cat bounce, than the start of something special.
The average share price for a mining royalty and streamlining company during August was down 3.1%, which means the average share price for a mining royalty and streaming business, since the start of the year, is down 17.1%, removing one outlier from the data.
During August, 71% of companies in the sector experienced negative or neutral share price movements. The Majors were the worst performing subset of the sector, down 20.3%, while the Large Tiers were down 12.3% and the Mid Tiers were down 7.9%. The Juniors were down 7.7%, removing one outlier from the dataset.
It's not just the royalty space that is struggling, negative pressure continues to be felt across the board by markets as the Dow finished August down 4.1%, while the Nasdaq and S&P posted monthly losses of 4.6% and 4.2%, respectively. Interest rates are expected to continue to rise in both the US and Europe as governments seek to combat the sustained inflationary environment.
Majors
Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM) was the best performing Major during August, down 6.1% (↓15.7% 3-months) after it reported its second quarter results for 2022. During the second quarter, Wheaton sold 170,371 gold equivalent ounces (GEOs), taking them to a total of 336,436 GEOs for the first half of the year, which is 3.5% lower than the same period last year.
This generated over US$300 million in revenue and US$206 million in operating cash flow for the second quarter, which totals US$610 million in revenue and US$417 million in operating cash flow for the first half of the year, 6.8% lower than last year.
Wheaton also declared a third quarterly cash dividend for 2022 of US$0.15 per share, in line with previous quarters. As of June 30 2022, Wheaton had a cash balance of US$449 million and no debt.
During the month Wheaton also entered into a definitive agreement with Glencore PLC (LSE:GLEN) to terminate Wheaton’s silver stream on the Yauliyacu Mine, located in Peru for a cash payment of US$150 million, to help facilitate Glencore’s sale of the mine.
Royal Gold, Inc. (TSX:RGL) was the worst performing Major after being the best performer for the previous two months, down 12.3% on the month (↓18.7% 3-months). Royal Gold also reported its second quarter results for the year, producing 78,300 GEOs during the quarter, which takes them to a total of 164,000 GEOs for the first half of the year.
Royal Gold generated over US$146 million in revenue and US$120 million in operating cash flow during the second quarter, which totals US$309 million in revenue and US$221 million in operating cash flow for the first half of the year, 3.8% higher than the same period last year.
The Company declared a fourth quarterly cash dividend for 2022 of US$0.35 per share, in line with previous quarters. Royal Gold ends the period debt free, with cash of US$280.6 million and total liquidity of approximately US$1.3 billion.
During August, Royal Gold also acquired a sliding-scale gross royalty on an area including the Cortez Mine operational area and the Fourmile development project, both located in Nevada for US$525 million from a subsidiary of Rio Tinto European Holdings Limited. The area within the Cortez Complex is owned or controlled by Nevada Gold Mines LLC, a joint venture between Barrick Gold Corporation and Newmont Corporation.
Royal Gold expects this new royalty to begin paying in the third or fourth quarter of 2022, with the first revenue recognized during the fourth quarter of 2022 or the first quarter of 2023. Given the uncertainness regarding the timing of revenue recognition from this royalty, it has not updated its previously issued guidance for sales of 315,000 to 340,000 GEOs.
Large-Tiers
Labrador Iron Ore Royalty Corp was the best performing Large Tier during August, up 3.1% (↓10.7% 3-months), following the publication of its second-quarter results. During Q2 2022, the Company generated revenue of C$65.9 million, which was down from C$78.8 million in the second quarter of 2021. The adjusted cash flow per share for the period was C$0.88 per share, which was 52% lower than in the same period in 2021, as a result of lower royalty revenues and dividends received.
The lower operational performance compared to 2021 was a direct result of the decline in the iron ore price during 2022, compared to the record levels experienced in 2021, predominantly as a result of lower steel production. Global steel production decreased 5% in the second quarter of 2022 when compared to the second quarter of 2021, as supply chain disruptions impacted the demand for steel and higher energy prices negatively affected steel producer margins.
Osisko Gold Royalties (TSX:OR) was the worst performing Large-Tier this month after being the best performer the previous month, down 7.5% (↓14.3% 3-months). In August, Osisko announced its Q2 2022 results, which saw GEO production increase 10.2% to 22,243, compared to 20,178 in Q1 2021. Revenue for the period was US$64.0 million up 10.5% from US$57.9 million in Q1 2021.
Cash flows from operating activities totalled -US$0.2 million, which may have unnerved investors when compared to US$30.9 million in Q2 2022. The difference is largely due to non-cash items such as a change in the fair value of financial assets and liabilities( -US$12.1 million), loss in deemed disposal of associate (-US$11.8 million) and foreign exchange loss (-9.2 million).
Osisko expects its GEO deliveries to continue to climb steadily in the second half of the year. The Company declared a third quarter 2022 dividend of C$0.055 per common share.
Mid-Tiers
Anglo Pacific Group PLC (LSE:APF, TSX:APY, OTC:AGPIF)'s was the best-performing Mid-Tier last month for the second month in a row, up 5.0% (↑3.5% 3-months), after achieving a record portfolio contribution in H1 2022. Anglo’s portfolio contribution of C$92.8 million for H1 2022, was a staggering 303% higher than H1 2021 (C$23.0 million) and amazingly 8.4% higher than the whole of FY 2021 (C$85.6 million). Cash flow from operating activities increased by 353.9% to C$80.8 million in H1 2022 from C$17.8 million in H1 2021.
The Company also announced its plans to rename the Company to reflect the evolution of its portfolio of assets, from which 90% of its contribution is expected to come from future-facing commodities by 2026. An update on this is expected in the coming weeks. Next quarterly dividend payment is 1.75p per share.
Maverix Metals Inc (TSX:MMX). was the worst performing Mid-Tier this month for the second month in a row, down 22.0% during August (↓22.6% 3-months) following the publication of its Q2 2022 results.
During the second quarter, the company reported GEO sales of 7,649 and revenue of US$14.2 million down slightly from US$14.3 million in Q2 2021. The second quarter results were impacted by the effect of internal sanctions against Russia on the Omolon Mine, operated by Polymetal International PLC (LSE:POLY), where Maverix has a 2.5% gross revenue royalty.
Given the ongoing uncertainty relating to the Omolon royalty, Maverix has decided to exclude all Omolon GEOs from its guidance for the second half of the year and has, as a result, lowered its full-year guidance by between 11.4% and 12.5%, to 28,000 to 31,000 GEOs from 32,000 to 35,000 GEOs.
Maverix declared a quarterly cash dividend of US$0.0125 per common share.
Juniors
Morien Resources (TSX-V:MOX) was the best performing Junior and overall mining royalty and streaming company during August, up 19.3% on the month (↑138.6% 3-months), despite no news flow.
Empress Royalty Corp (TSX-V:EMPR, OTCQB:EMPYF). also performed strongly, up 6.5% (↑11.4% 3-months), ) with investors perhaps excited about the recently completed first gold pour, and the prospect of regular cash flow from, the Manica Gold Mine, located in Mozambique. Empress owns a 3.375% gold royalty over the mine, which takes the Company to a total of three cash-flowing investments, which are projected to generate significant revenue in the coming years.
Electric Royalties Ltd (TSX-V:ELEC, OTC:ELECF) was the worst performing Junior during July, down 14.3% (↓19.7% 3-months) after the termination of the agreement to sell 1% of its existing 1.5% Net Smelter Royalty on the Seymour Lake Lithium Deposit, located in Ontario, Canada, to Lithium Royalty Corp.
Lithium Royalty Corp. was unwilling to waive certain conditions to closing set out in the agreement and as a result, Electric Royalties will retain its 1.5% NSR on the Seymour Lake Lithium Deposit.
While this initially may seem a negative development, Electric Royalties points out that the resource estimate at Seymour Lake recently doubled, the price of lithium carbonate has neared all-time highs in China of more than $70,000 a tonne, and the property owner has just raised A$55 million to further develop the Project, all of which adds value to Electric Royalties interest in the project.