RE: Wheaton, Franco,..5 Feb 2022 16:12
An example of where this is evident is through comparing Elemental Royalties and Metalla Royalty. Both are precious metals royalty companies. Elemental has cashflow from 80% of its assets. It's income is circa $10m per year, with a market cap of circa $100m. What it lacks though is a pipeline. Whilst it enjoys cashflow today, those ounces aren't being replaced and, at the moment, it's difficult to see where future growth comes from outside of what's in the limited pipeline already. Compare that to Metalla, where they've got circa $2m revenue at very best, from a small % of their total portfolio, but they have a stellar pipeline of future growth and optionality from royalties on assets operated by the likes of Newmont, Agnico, Barrick etc. Metalla's market cap is circa $275m. From my (and most other value investors) point of view is that Elemental is the better value. But it's always been the case in the PM royalty space that future growth and optionality carries a premium.
I'm not saying that APF should just go and buy royalties over any assets they can find. What I'd like to see are royalties over some earlier stage assets that look like they're going to be producing mines in the future. Orion picking up a a 2.25% NSR on HZM's Araguaia project, or their 2% on HZM's Vermelho. Both likely to go into production later this decade. Both royalties bought by Orion for circa $25m. Something along those lines, across the spectrum of commodities/stages of development. That's what I'd like to see, and I think the market would react very favourably too.
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