Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) reported another strong quarter, boosted by the gold price, of course, but with production up; free cash flow was $1.2 billion, above expectations.
The company ended the quarter with net cash of $2.16 billion, after repurchasing another $150 million in shares (at an average $149 per share).
All-in sustaining costs (AISC), at $1,373/oz, were higher, but primarily because the higher gold price is driving higher royalty payments.
Critical Minerals Division Established
Agnico said it had set up a new critical minerals subsidiary to hold its $80 million in such investments. It will be funded with $50 million in cash and a small three-man team. Agnico has, for several years, been looking at the critical minerals area, is known to have discussed joint ventures with a major U.S. automobile company, and has been asked by the Canadian government to lead Canada's development of such mines.
It is known to have several investments, including in Canada Nickel, but also in earlier-stage exploration companies focused on the more exotic critical minerals. It has been debated what approach to take. The unit, called Avenir, could eventually be spun out into a separate public company.
Buy if you are underweight the sector and do not own Agnico; otherwise hold.
Metalla Adds To Key Côté Royalty
Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American) purchased the remaining 0.15% of a Côté/Gosselin royalty for CA$3.4 million. This acquisition increases Metalla's royalty to 1.5%. When it purchased the earlier portion of the royalty in 2021, it was granted a right of first refusal on the remainder of the royalty. Metalla's royalty covers about 6% of the Côté deposit and all of the adjoining Gosselin. IAMGOLD, the owner and operator, achieved commercial production on a year ago on Côté with the original plan to mine out that deposit before moving on to Gosselin.
Now a study is underway to integrate Gosselin into a combined mine plan, with 45,000 metres of drilling at Gosselin this year. This royalty represents about 25% of Metalla's NAV. Separately, the operator of its latest cash-flowing royalty, Endeavor, suspended operations temporarily after a fatal accident. The mine restarted operations at the end of the second quarter. There is expected to be solid revenue in the 3rd quarter, but the 4th quarter may be a little light due to the mining pause. I am a little surprised that Metall's stock did not respond positively to the news that Tether had become a 5.5% shareholder, though that corresponded with weakness in gold and the gold stocks generally.
Metalla is a Strong Buy.
Wheaton Has Record Quarter as It Buys Major New Stream
Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) announced another record quarter with production higher than estimates, supported by ramp-ups at new mines, and "firmly on track" to meet its full-year guidance. It ended the quarter with $1.2 billion in cash and no debt, though with post-quarter commitments of about $1 billion for recent transactions, including $670 million for a major new stream on Waterton's Spring Valley project in Nevada.
The payment will be made in stages as the mine is developed. Wheaton will purchase 8% of the gold until it receives 300,000 ounces, and then 6% for the mine of the life. Production is expected in the first-half of 2028. Analyst estimates of the rate of return vary considerably, with most calculating 5% or 6% IRR, while CEO Randy Smallwood said that, given the strong exploration upside, they expect it to be significantly higher. Wheaton's last major deal, $400 million to enable a private group to buy Hemlo, is estimated to have a 6.5% return, while other recent major transactions, Franco's $1 billion Côté royalty and Royal's Kansanshi stream, were in the 2% range.
Wheaton remains a core holding for us, and can be bought now if you do not own it.
Franco Has Better-Than-Expected Quarter With Additions
Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) beat earnings expectations, helped by sales of stockpiled concentrates from Cobre Panama as well as initial deliveries from its new massive Côté royalty (see Bulletin #964). Franco received just over 11,000 ounces from the Cobre sale, with another 1,000 or so expected this quarter. This will see Franco achieve the top end of its full-year production guidance. Oil and gas revenues were down, and converted into gold-equivalent hurt even more. Franco ended the quarter with $237 million in cash and no debt, paying down its revolver, which it tapped into for the Arthur royalty acquisition from Altius. This is after the company spent nearly $300 million acquiring new stream and royalty interests, offset by $84 million in sales of equity investments.
Sentiment in Panama Shifts in Favor of Mine Reopen
Sentiment in Panama is shifting towards reopening the mine, which represented almost 20% of Franco's revenues before it was shut down. The jobs and tax revenue that the mine represented are increasingly hurting the economy and livelihoods. The government wants additional concessions from operator First Quantum, if only to appease those opposed to the mine; it has already said that the government must own the land and the minerals under any new agreement.
It is unclear how much First Quantum can concede in order to get the mine reopened. It will certainly want some guarantees before putting large amounts of capital back into the mine. Franco, however, as stream holder is not involved directly in these negotiations.
We are holding Franco as a core position. It can be bought here if you do not already own.
Royal Beats Expectations, With Sandstorm Addition Ahead
Royal Gold Inc. (RGLD:NASDAQ) reported financial results slightly above estimates after pre-reporting streaming sales as royalty sales beat expectations. The company has $173 million in cash and $1.23 billion in debt following the acquisition of Sandstorm and affiliate Horizon Copper, which closed late last month (see Bulletin #985).
The company expects to repay this from cash flow within two years at current metals prices.
As outlined in our last write-up, Royal is undervalued relative to other large royalty companies and is a Buy.
Or Reports in Line and Debt Free, With Messy Financials
OR Royalties (OR:TSX; OR:NYSE) had a solid quarter, in line with estimates, though financials were a little messy due a small impairment, deferred taxes, and a deemed gain from the deconsolidation of Osisko Development.
GEO results had been pre-released. Guidance for the year was reiterated; it is tracking at the low end of its production guidance. It ended the quarter debt-free after repaying $35 million of the credit facility and $57 million in cash. Another $49 million was received after the quarter ended in connection with the MAC Copper transaction.
Hold.
Triple Flag Has Solid Quarter
Triple Flag Precious Metals Corp. (TFPM:TSX; TFPM:NYSE) reported a solid third quarter, with record cash flow, a little above estimates, with costs a little lower, after pre-releasing production.
The company reiterated its full-year guidance, with GEOs estimated above the mid-point, while G&A costs are expected to exceed the high end. The company ended the quarter with almost $9 million in cash and $13 million drawn on its debt facility after repaying $80 million during the quarter.
Hold.
Fortuna Has Strong Quarter, and Continues Exploration
Fortuna Mining Corp. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) reported third-quarter results in line with expectations after pre-releasing production, with AISC up modestly to $1,987/oz and free cash flow increasing 28% to $73 million.
The company ended the quarter with net cash of $266 million. Separately, Fortuna released additional drill results on its prospective Sunbird deposit at the Séguéla mine. Fortuna has initiated an underground study with five rigs that continue to drill at the project.
Buy if you are underweight sector and do not own; otherwise hold.
Gladstone Increases Income and Asset Value
Gladstone Investment Corp. (GAIN: NASDAQ) reported a strong quarter, with Net Investment Income up, fully covering the dividend, along with a better-than-4% 4% increase in the Net Asset Value. It has spillover income equivalent to $1.50 per share, so it is in a strong position to support any temporary imbalance of income and the dividend.
The balance sheet is strong, after it raised another $31 million on its "ATM" program; leverage is a low 103%. Gladstone owns 28 operating companies and sees a "very healthy pipeline" of deals in a competitive and active M&A environment, with the investment run rate ahead of last year.
After one company returned to accrual status, Gladstone now has three companies on non-accrual, representing 3.9% of the portfolio at cost. Gladstone, unlike most Business Development Companies, has a significant amount of its NAV in equity.
Its yield based on its regular monthly distribution, from interest income on loans (as well as origination fees and other miscellaneous income), is currently 6.9%. The monthly distribution of 8 cents has not changed in three years. Net gains from its equity is paid in special distributions, but these can be highly variable (54 cents in June, 70 cents last October, and 88 cents at the end of 2023).
We are holding.
Lara, Even Better Than Project Study Suggests
ERRATA In my report (Bulletin #985) on the Planalto project of Lara Exploration Ltd. (LRA:TSX.V), I mentioned that the company had its Bifox project up for sale (proceeds from which could fund the next stages of the project development). This is not the case. Lara, a shareholder in Bifox, said its shares are not "up for sale," though could be sold.
The team is led by CEO Simon Ingram (and not Ingraham, as I wrote last time). The project's economics are strong. The NPV of the Planalto project is twice the market cap of the company using the base case in the PEA, but closer to four times the market cap using current market prices. As Sprott Capital commented in a report, "This will be a mine."
The economics are strong, the project is simple, and the permitting is likely straightforward. One reader asked whether the permitting, which may take a year or more, would be a deterrent to any acquisition offers. In short, the permitting process is likely to be straightforward with no particular red flags to delay it. But permitting anywhere does take time. Some companies like to see permits in place before they acquire a project, but that is not necessarily the case. In short, I do not think permitting is a concern at Planalto.
Lara remains a Buy.
TOP BUYS this week, in addition to above, include Midland Exploration Inc. (MD:TSX.V) and Fox River Resources Corp. (FOX:CSE).
| Want to be the first to know about interesting Gold investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Agnico Eagle Mines Ltd., Metalla Royalty & Streaming Ltd., Franco-Nevada Corp., OR Royalties, Triple Flag, Fortuna Mining Corp., Lara Exploration Ltd., Midland Exploration Inc., and Fox River Resources Corp.
- Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: None. My company has purchased stocks mentioned in this article for my management clients: All. I determined which companies would be included in this article based on my research and understanding of the sector.
- Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
- This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
For additional disclosures, please click here.
Adrian Day Disclosures
Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.
