Metalla gains another cash flowing royalty.
The portfolio of 4 assets, includes the Endeavour Silver Stream, a 2% NSR on the Joaquin Project,
a 1.5% NSR on the Zaruma Gold Mine and a 1.5% NSR on the Puchuldiza Project. Adding two producing assets, and opening the company to 4 different countries,
Australia, Argentina, Ecuador and Chile.
• Endeavour Silver Stream: Owned by Cobar Operations Pty Ltd (a wholly-owned subsidiary of CBH Resources Ltd.) in 2016, its zinc,
lead and silver Cobar underground mine located in north-central New South Wales, Australia produced ~200,000 oz Ag. Based on the mine plan over
the next 24 months, 987,500 oz Ag is expected to be produced, generating US$2.5 million in cash flow for the balance of 2017, US$3.8-US4.2 million
at an average of US$17 per oz Ag before taxes in 2018. Through the transaction, Metalla would gain the right to buy 100% of silver production up
to 20.0 million oz Ag for an operating cost contribution of US$1/oz of payable Ag.
• Joaquin Project: The project is located in the Santa Cruz province of southern Argentina, hosting an M&I resource of 65.2
million oz Ag and 61k oz Au (15.7M tonnes @ 128.9 g/t Ag and 0.12 g/t Au). The project was recently acquired by Pan American Silver Corp. (TSX:PAAS)
from Coeur, which was originally announced in January 2017. Metalla will gain a 2% NSR royalty on the project.
• Zaruma Gold Mine: The mine is Dynasty Metals and Mining Inc.’s (TSXV:DMM) flagship project located in the Zaruma-Portovelo Mining
District of southern Ecuador. Mining is currently underway on a small-scale basis, as the company recently restructured. Metalla will earn a 1.5%
NSR from the mine, which previously produced 72,430 oz Au and 152,292 oz Ag (2012-2014).
Metalla valuation not reflective of potential.
• Puchuldiza Project: The 6,349 ha concession located in Chile is wholly owned by Regulus Resources Inc. (TSXV:REG). Metalla will
earn a 1.5% NSR royalty on the project, which hosts an inferred resource estimate of 686k oz Au (30.07M tonnes @ 0.71 g/t Au).
Coeur to own 19.9% of Metalla. Metalla and Coeur have entered into a Share and Asset Purchase Agreement, whereby Metalla will
acquire a portfolio of assets comprised of 3 royalties and 1 stream from Coeur for a total payment valued at US$13 million. The transaction includes
two components, common shares issued by Metalla to Coeur as well as an unsecured convertible debenture for the remaining amount owed. Subsequent
to the transaction, Coeur will earn a 19.9% stake in Metalla based on the 30-day VWAP, and the convertible debenture will convert automatically
into common shares upon future financings to secure Coeur’s position at 19.9% (until fully converted or paid).
Based on this acquisition, we believe the proforma company is likely to generate annual
EBITDA of C$4.7-5.4 million. This implies that Metalla, between 8.8-10.1x 2018e EBITDA which compares to royalty peers at 16.3x. This suggests to us
that Metalla is poised for significant re-rating and we highlight that this valuation does not account for value of the Hoyle Pond royalty, its other
pre-production assets or its ability to rapidly grow its portfolio with similar small streams. We view this transaction positively, as it highlights
the company’s growth strategy, and provides additional cash flow for the company.
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
Red Cloud Klondike Strike Inc.
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Priced as of prior trading day's market close, EST (unless otherwise noted).
All values in USD unless otherwise noted.
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Company Specific Disclosure Details
Metalla Royalty & Streaming Ltd. - CSE:MTA - 2, 4
Coeur Mining Inc. - NYSE:CDE - None
Pan American Silver Corp. - TSX:PAAS - None
Dynasty Metals and Mining Inc. - TSXV:DMM - None
Regulus Resources Inc. - TSXV:REG - None
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