Maverix Metals Inc.

Record Revenue and Quarterly Dividend: Maverix Metals Inc. (TSX: MMX) is a precious metals royalty and streaming company. As on 24 August 2020, the market capitalization of the company stood at ~CAD 729.04 million.

Quarterly Performance (For the Period Ended 30 June 2020): During the quarter ended 30 June 2020, the company reported record revenue of USD 11 million, a significant increase of 57% on the 2Q19, demonstrating the strength and diversity of its asset portfolio despite being affected by the impacts of the COVID-19 pandemic. In the same time span, the company reported record cash flow from operating activities, excluding changes in non-cash working capital of USD 8.5 million. During the quarter, the company sold 6,412 ounces of gold at an average cash cost per attributable gold of USD 139. In the same time span, the company reported a record net income of USD 3.1 million and received USD 15.6 million in cash proceeds from the Pan American Silver warrant exercise. The decent financial and operational performance enabled the Board to declare a cash dividend of USD 0.01 per share, which will be paid on 15 September 2020.

Quarterly Performance Highlights (Source: Company Reports)

Key Risks: The company is susceptible to a variety of risks, including risks related to international operations, government and environmental regulation, delays in mine construction and operations, actual results of mining and current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined; accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties or interruptions in operations; problems inherent to the marketability of gold and other metals, etc.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company continue pursue opportunities to grow its portfolio and increase shareholder value. As per TSX, the stock of MMX is trading on the average 52-week trading levels and retains potential for further growth. The stock of MMX gave a negative return of 17.51% in the past three months and a negative return of 13.11% in the past one month. We have valued the stock using the EV/Sales multiple based illustrative relative valuation approach and have arrived at a target upside of lower double digit (in percentage terms). Considering the current trading levels, decent returns in the past three months, key risks and decent financial and operational performance, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 5.69, down by 0.18% on 24 August 2020.

MMX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Osisko Gold Royalties Ltd

Osisko Acquires an Additional 15% Ownership in a Canadian Precious Metal Royalty Portfolio: Osisko Gold Royalties Ltd (TSX: OR) is engaged in acquiring and managing precious metal and other royalties and similar interests in Canada and other parts of the world. As on 24 August 2020, the market capitalization of the company stood at ~CAD 2.53 billion. The company has entered into a definitive agreement to acquire the outstanding 15% ownership in a portfolio of Canadian precious metals royalties held by the Caisse de dépôt et placement du Québec for a cash consideration of CAD 12.5 million. This transaction will add immediate cash flow on premium assets and shows the quality of the partnership between Osisko and the Caisse.

Quarterly Performance (For the Period Ended 30 June 2020): During the quarter ended 30 June 2020, the company reported a decline in revenues to CAD 28.7 million from CAD 33.8 million in the pcp. Despite the impacts of the COVID‑19 pandemic, the business model of the company remains strong and the rising gold price helped to partially offset the closures. During the quarter, net earnings were CAD 13.0 million, up from net loss of CAD 6.5 million. In the same time span, the company generated CAD 15.4 million from cash flow from operations and reported a cash operating margin of 95% from royalty and stream interests. During the quarter, the company reported a cash balance of CAD 202.0 million and up to CAD 400.0 million under the credit facility.

Quarterly Financial Highlights (Source: Company Reports)

Key Risks: The company is susceptible to a variety of risks including the uncertainties related to the COVID-19 impacts, the influence of political or economic factors including fluctuations in the prices of the commodities and in value of the CAD relative to the USD, continued availability of capital and financing and general economic, market or business conditions; regulations and regulatory changes in national and local government, including permitting and licensing regimes and taxation policies, etc.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company has provided guidance for the six months ended 31 December 2020 and expects to report royalty interest in between 24,800 and 26,250 and stream interests of between 8,000 and 8,450. As per TSX, the stock of OR is moving towards its 52-weeks’ high level. The stock of OR gave a return of 7.12% in the past three months. We have valued the stock using the EV/Sales multiple based illustrative relative valuation approach and have arrived at a target upside of lower double digit (in percentage terms). Considering the current trading levels, decent returns in the past three months, key risks and decent financial and operational performance, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 15.23, up by 0.20% on 24 August 2020.

OR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.