Maverix Metals delivering consistent profits from its high-quality portfolio of precious metal royalties

A pure gold play royalty investment A global portfolio and experienced management Low overheads and track record of growth What Maverix Metals does: Maverix Metals Inc is a rapidly growing gold royalty and streaming firm with high margins and growing free cash flow.  In return for making an upfront payment, Maverix receives a royalty on the underlying precious metal sold by an operator, or in the case of a precious metal stream, the right to purchase an agreed-upon amount of gold, silver or other precious metal, at a significant discount to the spot commodity price. Such agreements provide Maverix, and its shareholders, with exposure to precious metals price rises and the exploration upside of the mine or project without any additional capital outlay, while also fixing the ongoing costs of acquiring precious metals in the case of a stream. Since being founded in 2016 by chairman Geoff Burns and CEO Daniel O’Flaherty, Vancouver-based Maverix, with a market cap of around US$760 million, now has 121 royalties and streams, 13 of which are paying. Its assets lie throughout Australia and the Americas. How is it doing: A robust asset portfolio is propelling Maverix towards a very strong 2021 financial year. Maverix set its 2021 guidance for attributable gold equivalent ounces to be between 27,000 to 30,0001 for 2021 at around a 90% cash margin with about 99% of expected revenue derived from gold and silver. The group saw its total revenue increase to US$14.3 million during its second quarter as its royalty portfolio continued to improve. The 2Q figure was up from the $11 million it delivered in the same quarter in 2020, a 30.4% increase. The firm also posted net income of US$3.7 million or $0.03 per share, also higher than the $3 million figure ($0.03 per share) it saw in the same period a year earlier. Maverix sold 7,880 gold equivalent ounces (GEOs) at an average cash cost of US$197 for a cash operating margin of 89% or US$1,619 per gold equivalent ounce. In July, Maverix updated on news from its royalty assets, which, it said, augured well for organic growth, including Karora Resources Inc's (TSE:KRR) (OTCMKTS:KRRGF) (FRA:5RN1) plans to double output at the Beta Hunt mine in Australia. At Beta Hunt, Maverix holds a 4.75% gold royalty and 1.5% nickel net smelter royalty (NSR).  Due to increased throughput, the production capacity at Beta Hunt is expected to double from the current rate of around 75,000 to 85,000 tonnes per month (tpm) to 160,000 to 170,000 tpm by the end of 2024, noted Maverix. Elsewhere, at the Enchi gold project in Ghana, where Maverix holds a 2% NSR, Newcore Gold (TSX-V:NCAU, FRA:PI8, OTCQX:NCAUF) Ltd (CVE:NCAU) (OTCMKTS:NCAUF) (FRA:PI8) announced an updated preliminary economic assessment (PEA), showing an open pit, heap leach operation producing an average of around 90,000 ounces of gold per year over 11 years, generating an after-tax net present value at a 5% discount rate of US$212 million. Meanwhile, at the Koné project in Ivory Coast, where Maverix holds a 2% NSR, Montage Gold Corp (CVE:MAU) (OTCMKTS:MAUTF) announced a PEA , which outlined an 11 million tonne per annum operation with an average annual production of 205,000 ounces of gold, generating an after-tax net present value at a 5% discount rate of US$652 million. Also on the asset front, on June 29 this year, Maverix announced the acquisition of a portfolio of six royalties from Latin America-focused Pan American Silver Corp (TSE:PAAS) (NASDAQ:PAAS) (FRA:PA2). The six royalties include the Fenn-Gib royalty, a 1% - 2.5% NSR royalty on a portion of the Fenn-Gib gold project in Ontario, operated by Mayfair Gold Corp (CVE:MFG) (OTCMKTS:MFGCF) (FRA:9M5). Maverix is also acquiring three separate royalties related to Fenn-Gib. Maverix will also acquire a 3% NSR royalty on a portion of the silver and zinc Recuperada project located in Huancavelica, Peru and a 1% NSR royalty on the advanced exploration-stage Juby gold project operated by Aris Gold Corporation in Ontario. And in February this year, major Agnico Eagle Mines Ltd (TSX:AEM) (NYSE:AEM) (TSE:AEM) (FRA:AE9) became the owner of Hope Bay following its acquisition of TMAC Resources Inc and announced plans to continue mining the Doris deposit. Agnico expects quarterly production of between 18,000 to 20,000 ounces of gold, with a significant exploration program planned for this year. Maverix and Agnico completed the buyback of 1.5% of the NSR royalty that Maverix owns on the Hope Bay mine. Maverix received a cash payment of $50 million from Agnico on February 12. Maverix retains a 1% NSR royalty on the Hope Bay mine, which is not subject to any further reductions. Elsewhere, at the Moss mine in Arizona, Maverix said that Northern Vertex Mining Corp (TSX-V:NEE) (CVE:NEE) (OTCMKTS:NHVCF) (FRA:54N) completed the previously-announced business combination with Eclipse Gold Mining Corp. Maverix realized a gain on the sale of nearly C$2 million. Inflection points: Further acquisitions of royalties/streams Gold and precious metals price moves More royalty partner news What the broker says: In an August 12 note, broker Stifel GMP repeated a 'Buy' on Maverix and reiterated the target price at C$8.50 a share after the group’s 2Q results beat expectations. The research firm noted 2Q revenue of $14.3 million from 7,900 GEOs sold ahead of its forecast of $12.8 million from 7,000 GEOs. “Compared to our estimates, Beta Hunt and El Mochito did better than we expected — both benefiting from strong operational performance,” analysts at Stifel wrote. “La Colorada was lower than we were forecasting given ventilation constraints impacting mining rates. The mine has addressed the issue and higher production is anticipated in the second-half of the year. We also forecast higher GEOs from Omolon in 2H.” Stifel reaffirmed its 2021 guidance of 27,000 to 30,000 GEOs, noting Maverix is well positioned to achieve these expectations. “As a whole, we have seen excellent performance from their portfolio (even last year, despite the pandemic, revenue GEOs grew by 20% YoY). MMX has been showing steady, YoY revenue GEO growth since inception in mid-2016 with a portfolio that has been cementing a track record of performance.” What the boss says: Maverix CEO Dan O’Flaherty hailed a “strong second quarter” highlighted by the Pan American acquisition, which strengthens its asset base to a 121 precious metals royalties and streams. “We are well on track to achieve our 2021 guidance of 27,000 to 30,000 GEOs and look forward to continued growth as we remain debt free with the entire $120 million available under our credit facility, while also holding approximately $50 million in cash at the end of the quarter,” O’Flaherty said in a statement accompanying the results. “A number of assets where we hold a royalty interest have recently had significant positive developments and we are confident that we will continue to expand through organic growth and new acquisitions that will increase shareholder value." Contact Angela at angela@proactiveinvestors.com Follow her on Twitter @AHarmantas