July was the first positive month in the mining royalty and streaming sector in four months, with the average share price up 5.3% on the month. Around 68% of the sector experienced positive share price movement, giving investors in the space some much-needed relief.
The juniors have been the driving forces in the recovery, up an average of 9.4% in July, with the mid-tiers up an average of 1.5% and the large-tier up an average of 1.2%. The majors continued their negative trend, down an average of 3.1%.
The rise in the sector comes on the back of stronger markets across the board, with the S&P 500 having its strongest month since November 2020. The uptick in markets has been the result of better-than-expected earnings. However, expectations were so low after the first half of the year, that July has really been a case of the best of a bad bunch.
Inflation still remains an international issue and interest rates are continuing to rise. China’s economic data showed annualised growth of just 0.4% in the second quarter, which is the country’s worst economic performance since 1992, excluding when the Covid pandemic commenced in early-2020.
Given this, the July recovery in markets and the mining royalty sector could end up being more of a dead cat bounce than the start of something special.
A number of deals announced in July continue to confirm our expectations from the start of the year, that the mining royalty sector will continue to see ongoing consolidation in 2022. We would expect to see transitional activity continue to pick up in the second half of this year, as share prices decline to make smaller players more attractive to larger cashed-up rivals.
Majors
Royal Gold, Inc. (TSX:RGL) was the best performing major for the second month in a row, down 1.9% on the month (↓19.6% three months) following an update its Q2 2022 streaming sales and the announcement of a potential acquisition.
During the second quarter, Royal Gold sold 56,100 gold equivalent ounces (GEOs) during the three-month period ended June 30, 2022, and had approximately 28,800 GEOs in inventory. The cost of sales was approximately US$425 per GEO for the second quarter, which compares to US$401 per GEO in the first quarter.
Royal Gold also announced during the month that it had reached an agreement to acquire Great Bear Royalties Corp for C$6.65 per common share, which values Great Bear Royalties Corp at approximately C$199.5mln on a fully diluted basis.
Great Bear Royalties Corp owns a 2.0% net smelter return royalty on the Great Bear Project, located in the Red Lake District of Ontario, Canada, which is indirectly owned and operated by Kinross Gold Corporation (TSX:TSX:K).
As of June 30, 2022, Royal Gold owned interests on 185 properties on five continents, including interests in 41 producing mines and 19 development stage projects. Royal Gold’s results for the quarter ended June 30, 2022, were released after the market closes on August 3, 2022.
Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM) was the worst performing Major in July for the second month in a row, down 4.7% (↓22.4% 3-months). During the month, Wheaton reached an agreement with Hecla Mining Company (NYSE:HL) to terminate its silver stream on Alexco Resource Corp. (TSX:AXR)'s Keno Hill Silver District in the Yukon, Canada for US$135mln paid through the issue of shares in Hecla, giving Wheaton a 5.6% interest in the Company.
Wheaton will release its second-quarter results on August 11, 2022, after market close.
Large-Tiers
Osisko (TSX:OSK) Gold Royalties (TSX:OR) was the best performing Large-Tier this month, up 3.7% (↓13.5% 3-months), following the announcement of its preliminary Q2 2022 results. Osisko earned 22,240 GEOs during the second quarter of 2022, which is a record quarterly performance for the Company since its inception in 2014.
The Company expects this impressive performance to continue, as further increases in GEOs persist in the second half of the year as ramp-ups at Capstone Copper Corp.’s Mantos Mine and Victoria Gold Corp (TSX-V:VIT).’s Eagle Mine continue.
Osisko recorded preliminary revenues from royalties and streams of C$51.5mln, during the second quarter and preliminary cost of sales of C$3.7mln, resulting in an impressive record quarterly cash margin of 93%.
Osisko will provide full production and financial details with the release of its second quarter 2022 results on August 9th, 2022.
Sandstorm Gold (TSX:SSL) Ltd (TSX:SAND) was the worst performing Large-Tier during July, down 0.2% (↓14.0% three months), following the announcement of its preliminary Q2 2022 results. Sandstorm sold 19,200 GEOs and realised preliminary revenue of US$36.0mln during the three months ended June 30, 2022. The preliminary cost of sales for the period was US$5.3mln, resulting in cash operating margins of 85%.
The Company announced the closure of the US$425mln BaseCore Metals LP acquisition, which includes a portfolio of nine royalties and one stream. Sandstorm also provided an update that Institutional Shareholder Services Inc. and Glass, Lewis & Co., LLC, both leading independent proxy advisors, have recommended that the Company’s shareholders vote for the issuance of Sandstorm shares in connection with the acquisition of Nomad Royalty (TSX:NSR) Company Ltd.
Sandstorm will release its 2022 second-quarter results on August 11, 2022
Mid-Tiers
Anglo Pacific (LON:APF) Group PLC (LSE:APF, TSX:APY, OTC:AGPIF) was the best performing Mid-Tier last month, up 6.0% (↓17.2% three months), and announced the completion of the acquisition of a portfolio of royalties over advanced development stage copper and nickel projects from South32 Royalty Investments Pty Ltd for a fixed consideration of US$185 million with further contingent consideration of up to US$15mln.
The portfolio of royalties includes a 2.0% net smelter return (NSR) royalty on OZ Minerals Limited (ASX:OZL)’s West Musgrave Copper-Nickel Project; a 2.0% NSR royalty on Capstone Copper Corp.’s Santo Domingo Copper-Iron-Cobalt Project; a 1.5% realised value royalty on Cyprium Metals Limited’s Nifty Copper Mine; and a 5.0% NSR royalty on KGHM Polska Miedź S.A’s Carlota Copper Mine.
These royalties could potentially be contributing a total of between US$31 million and US$53mln to Anglo Pacific’s top line by 2024, potentially increasing the company’s annual revenue by between 36% and 62% by 2024. This makes it a very significant deal for Anglo Pacific.
Anglo Pacific also announced its second quarter results for 2022, where it achieved a record portfolio contribution of US$49.2mln, a fourth consecutive quarterly record and 13% higher than the previous record of US$43.6mln in Q1 2022. The Company expects Q2 2022 to be the strongest quarter of the year, with commodity prices trading off thus far in H2 2022.
Maverix Metals Inc (TSX:MMX). was the worst performing Mid-Tier this month, after being the best performer last month, down 1.8% during July (↓3.6% three months) with no news flow.
Juniors
Uranium Royalty Corp. was the best performing Junior and the best performing mining royalty company overall in July, up 28.3% on the month (↓11.0% 3-months), following the publication of its annual financial results for the year ended April 30, 2022.
As at April 30, 2022, the Company had approximately C$132mln in cash, marketable securities and physical uranium holding of 1,448,068 pounds U3O8. The net realisable value of its holdings has increased by approximately US$8mln since the balance sheet date.
The Company also recorded an increase in the fair value of its short-term investments of approximately C$16mln during the year ended April 30, 2022. The carrying value of the short-term investments was C$51.8mln as of April 30, 2022.
Elemental Royalties Corp (TSX-V:ELE). was the worst performing Junior during July, down 4.4% (↓19.7% three months) despite receiving its first gold deliveries from Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB), the owner of the Ming Copper-Gold Mine in Newfoundland, Canada.
The Company also expects inaugural revenue from Mercedes Gold Mine in Q3 2022, where Elemental has a 1% Net Smelter Return royalty, which is now payable.
Elemental is continuing to advance its merger with Altus Strategies PLC (AIM:ALS, TSX-V:ALTS, OTCQX:ALTUF).