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Royalty round-up, August 2021: Holiday season sees investors book gains

August was a particularly painful month for investors in mining royalty and streaming companies

Wheaton Precious Metals Corp -

August is normally a poor month for investors but it has been a particularly painful month for investors in mining royalty and streaming companies, with the average share price of companies within the sector down by 3.5% and over 81% of companies in the sector experienced negative share price movements.

Added to the traditional seasonal lull, strong inflation and the ongoing threat posed by the Delta COVID-19 variant, combined with uncertainty regarding the US FED’s tapering programme led investors to pocket some of this year’s earlier gains.

The Mid-Tier companies were the best performing subset of the mining royalty and streaming sector during August, down an average of 0.9% on the month. The Juniors were down an average of 1.4%, with the Majors down an average of 7.3% and the Large-Tiers down an agonising average of 11.4%.

Majors

Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM), was the best performing Major in relative terms not that this will console shareholders as the share price was still down 2.9% on the month (↓6.2% 3-months). Operationally investors in Wheaton can take some comfort as the H121 results were positive. Wheaton generated both record revenue and cash flow of US$655 million and US$449 million, respectively, and the company remains well on track to achieve 2021 guidance of 720,000 to 780,000 gold equivalent ounces. Wheaton also declared its fourth quarterly dividend increase in a row at US$0.15 per share, a 50% increase relative to Q220.

Franco-Nevada Corporation (TSX:FNV) also reported its H121 results but despite substantial improvements on the same period last year, investors seemed less than impressed, with the share price down 10.7% on the month (↓2.2% 3-months). Franco generated revenue of US$656 million during H121, up 32% on the same period last year and cash flow of US$469.5 million, up 36%. The company declared a quarterly dividend of US$0.30 per share.

Large-Tiers

Deterra Royalties Limited was the best performing Large-Tier during August, down 5.9%, (↑0.2% 3-months), following the publication of its FY21 results. During the year the company posted revenue of A$145.2 million and cash flow of A$82.2 million, which looks impressive for the company’s first year of trading. The Directors also declared a generous final dividend of 11.52 cents per share, which brings the total dividends declared for the period since demerger in November last year to 13.97 cents per share, which In line with Deterra’s dividend policy and represents 100 % of net profit after tax for that period.

Sandstorm Gold Ltd (TSX:SAND) was not only the worst-performing Large-Tier during August, but it was also the worst-performing mining royalty company overall, down 19.1% (↓27.1% 3-months). Investors reacted badly to the Q221 results despite the company achieving record attributable gold equivalent ounces of 18,004 ounces, up 65% on the same quarter last year. Revenue for the quarter totalled US$26.4 million, up 41% on Q220. The company even increased its guidance for the year to 62,000-69,000 attributable gold equivalent ounces from 55,000-62,000. Perhaps pushing back its target date for achieving 125,000 ounces of gold equivalent to 2025, from 2024, spooked investors, or perhaps it was just caught up in the August sell-off.

Mid-Tiers

Nomad Royalty (TSX:NSR) company Ltd was one of only five mining royalty and streaming companies, out of 27, to experience a positive share price movement this month. It was also the best performing Mid-Tier, up 5.9% (↓16.2% 3-months). Nomad had two key developments this month, firstly it announced its shares would shortly commence trading on the NYSE, and secondly, it secured commitments from the Bank of Nova Scotia (TSX:BNS), Canadian Imperial Bank of Commerce and the Royal Bank of Canada (TSX:RY) to increase its revolving credit facility to US$125 million with the option to increase it to US$150 million.

Altius Minerals Corporation (TSX:ALS) was the worst-performing Mid-Tier again this month, down 4.5% (↓8.3% 3-months) following the publication of its Q221 final results. Revenue for the second quarter totalled C$21.9 million (C$0.53 per share), compared C$17.8 million (C$0.43 per share) in Q121, an increase of 23% on Q121 and 68% year-on-year. Adjusted operating cash flow of C$5.8 million (C$0.14 per share) compares to C$8.8 million (C$0.21 per share) in Q1 2020 and C$13.4 million (C$0.32 per share) in Q2 2020. The lower adjusted operating cash flow during Q221 is due to the timing of corporate tax instalments, as well as working capital changes. Altius increased its regular quarterly dividend by 40% from $0.05 to $0.07 per common share in reflection of its long-term positive outlook for its business.

Juniors

Minnow, Morien Resources (TSX-V:MOX) was the best performing Junior and best-performing mining royalty and streaming company overall during August, up 51.4% (↑26.8% 3-months), despite no news flow.

Nova Royalty was the worst-performing Junior this month, down 16.8% (↓7.8% 3-months) despite a busy month for the company. Nova raised C$13.7 million and completed the acquisition of a 1.0% net smelter return royalty on the Aranzazu Copper Mine, owned by Aura Minerals Inc, for US$9.0 million, comprised of US$8.0 million in cash and US$1.0 million in common shares of Nova.

Empress Royalty Corp was down 2.6% this month (↓11.1% 3-months) despite achieving the huge milestone of generating the first revenue from its gold stream over the Sierra Antapite Gold Mine, located in Peru. The stream is on 4.5% of the payable gold production for the first 11,000 gold ounces and 1% thereafter for life-of-mine. The first tranche of US$5M has been funded, which provides Empress Royalty with 2.25% of the payable gold production. The final tranche is anticipated to be completed in the next couple of months. Empress also entered into an agreement with Accendo Banco, S.A., Institución de Banca Múltiple for the provision of a secured medium-term bridge loan facility of US$5.2 million, giving the company further financial resources that can be used to complete additional transactions.

Quick facts: Wheaton Precious Metals Corp

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Price: 2890 GBX

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