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Thursday, March 02, 2017 Derek Macpherson

MMX's Guidance Suggests Strong Cash Flow in 2017


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Maverix Metals Inc. (TSXV:MMX) provided guidance for its attributable gold production in 2017, the company’s first full year of operations. The company is guiding for net royalty revenues of C$17.5-20.0 million, based on a US$1,225/oz Au price and annual production of 13.4-15.0k oz AuEq. The majority of the revenue, or 93%, is driven by gold sales with the balance coming from silver (5%) and nickel (2%) sales. Based on general and administrative expenses expected to amount to 13-14% of net revenues and the company’s current cash position, we believe the company is able to acquire additional small to medium sized streams and royalties. Although Maverix has growth potential in our view, we note that Maverix currently trades at a discount to peers on a P/NAV and 2017e EV/EBITDA basis.


Guidance suggests strong cash flow in 2017. The company is guiding for net royalty revenues of C$17.5-20.0 million (based on US$1,225/oz Au) in 2017. Based on forecasted general and administrative expenses of C$2.5 million, this suggests EBITDA of C$15.0-17.5 million in 2017. Gold sales are the primary revenue driver, accounting for ~93%, with the balance coming from silver (5%) and nickel (2%) sales. The most significant contribution to Maverix’s revenue is expected to derive from RNC Mineral’s (TSX:RNX) Beta Hunt mine in Australia on which Maverix bought additional royalties earlier in Q1 2017 as we discussed in a previous post.
 
Valuation not fully reflective of growth potential. Maverix current enterprise value (EV) is sitting at ~C$206 million, which implies an EV/EBITDA of ~11.8x-13.7x (based on 2017 guidance), which is at a discount to royalty peers that trade at 17.5x (2017e EV/EBITDA). Maverix also trades on a discount on a P/NAV basis, or 0.92x vs. peers at 1.35x NAV. In our view, this valuation is not fully reflective of the company’s growth potential, both when considering its development stage royalties and ability to do accretive acquisitions.


Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
 
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Company Specific Disclosure Details
Maverix Metals Inc - TSXV:MMX - 2,4
RNC Mineral Corp - TSX:RNX  - 2,4
Pan American Silver Corp - TSX:PAA, NasdaqGS:PAAS - None
Gold Fields Ltd - JSE:GFI - None

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