In an Aug. 20 report, analyst Nicolas Dion reported that Cormark Securities initiated coverage on precious metals royalty and streaming firm Nomad Royalty Company Ltd. (NSR:TSX; NSRXF:OTCQX), with a Buy rating and a CA$2.20 per share target price. The current share price is about CA$1.33.
"As the portfolio scales up, we believe Nomad could rerate closer to its more senior peers," added Dion.
The analyst explained the genesis of Nomad. Early in 2020, the three co-founders, Vincent Metcalfe, Joseph de la Plante and Elif Levesque, formed the company through a reverse takeover and vend-in of two royalty and streaming portfolios, one from Orion Mine Finance and one from Yamana. Today, Orion owns 77% of Nomad shares, and Yamana owns 13%. Nomad went public in May and subsequently acquired a 1% net smelter returns (NSR) royalty on the past-producing Troilus gold mine in Quebec. Nomad only invests in precious metals.
Dion presented five key highlights of Nomad.
The Montreal-based company is already generating cash flow. This is coming from its paying assets, Bonikro, Gualcamayo, RDM, Mercedes/South Arturo and the Premier gold loan, which account for 35% of its net asset value (NAV). Another two assets, comprising 41% of NAV, are slated to begin production in 2021: Blyvoor and Woodlawn. Other assets, including Troilus and Suruca, which make up 23% of NAV, are expected to come online over the next five years.
"At spot prices, we expect $19 million in 2020 free cash flow and $31 million in 2021 free cash flow (before investments)," noted Dion.
Nomad is considering a dividend of about CA$0.02 per year, which would be the highest among its peers.
"The already strong free cash flow generation would more than support this," commented Dion.
Nomad's executive team bring to the company, from their time at Osisko Royalties, experience in the royalty and streaming space. One of their goals is to reduce general and administrative expense to $4–5 million per year, which would be one of the lowest in its peer group.
The company has a strong balance sheet, with $12 million in cash, no debt except the $10 million it owes Yamana and a $50 million revolving credit facility that it can increase to $75 million.
"Nomad is well positioned to compete on royalty/stream transactions," Dion noted.
Nomad has three major drivers of upside for shareholders, the analyst noted. One is multiple expansion as the company grows via acquisitions or projects advancing to production. Another is NAV growth through new deals and their inherent optionality. The third is higher precious metals prices.
The report noted that potential stock moving events to watch for with Nomad are completion of the Blyvoor preliminary economic assessment due out in H2/20, operational updates concerning various projects and additional royalty/stream acquisitions.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Cormark Securities, Nomad Royalty Company Ltd., August 20, 2020
I, Nicholas Dion, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company(ies) and its (their) securities. I also certify that I have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
The Disclosure Statement Chart for Nomad Royalty can be found on the website.