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Sunday, January 15, 2017 Derek Macpherson

RCKS Drilling Deeper Lunch Features Three Royalty Companies


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Last week, Red Cloud Klondike Strike Inc. (RCKS) hosted another installment as part of our Drilling Deeper lunch series, this time featuring three companies that own and are unlocking royalty value in unique ways. The presenting companies were AuRico Metals Inc (TSX:AMI), Marlin Gold Mining Ltd (TSXV:MLN) and Maverix Metals Inc (TSXV:MMX). We believe all three presenters have the potential to unlock value for investors through each company’s royalty and streaming assets.


AuRico Metals Inc (TSX:AMI) is a unique combination of a precious metals royalty company and a late-stage development company. It currently owns five producing royalties in stable jurisdictions, including a 1.5% NSR on Alamos Gold’s (TSX:AGI) Young-Davidson mine in Ontario and a 2% NSR on Kirkland Lake Gold’s (TSX:KL) Fosterville mine in Australia. AuRico reported record royalty revenues in Q3 2016 and has guided for 2016e royalty revenues of US$7.7- 8.1M. Last month, AuRico announced a definitive agreement to acquire Kiska Metals (TSXV:KSK) for a total consideration of ~C$9.6 million, which would add six new royalties and six early stage projects to its portfolio. AuRico also wholly owns an advanced stage gold-silver-copper project in British Columbia, Kemess. AuRico’s current valuation implies that the market gives Kemess minimal value which suggests to us that with the completion of the Environmental Assessment (Q1 2017), followed by the mine permit (H2 2017), AuRico should be positioned to decouple its royalty and development assets in 2017, and unlock value for shareholders.

Marlin Gold Mining Ltd (TSXV: MLN) owns a producing gold mine, a silver-gold development project along with multiple royalty interests, including a stream on Golden Reign's (TSXV:GRR) San Albino project in Nicaragua. In addition, Marlin owns a 1.5% NSR royalty on Endeavour Silver’s (TSX:EDR) El Compas property and a 1% NSR on a portion of Kootenay Silver’s (TSXV:KTN) La Cigarra project, both located in Mexico. Marlin’s La Trindad gold mine in Mexico has transitioned into a high-grade zone resulting in meaningful free cash flow (RCKS estimate US$17-19M per quarter) allowing it to fund exploration, development activities and potentially acquire other projects or royalties. It is Marlin’s intention that once it’s wholly owned royalty subsidiary Sailfish has visibility to cash flow, either via permits being received by San Albino or the acquisition of a producing royalty, the company plans to monetize Sailfish for shareholders, either via spin-off or sale.

Maverix Metals Inc (TSXV:MMX) is a recently created pure play royalty company. The company was created by the carve-out of Pan American Silver’s (TSX:PAA) royalty assets and recently acquired a royalty package from Gold Fields (JSE:GFI). Maverix now has seven cash-flowing royalties that are expected to bring in over 12koz of gold-equivalent production in 2017. These royalty holdings are highlighted by a 2.5% NSR on Evolution Mining’s (ASX:EVN) Mt. Carlton gold mine in Australia, a 6% GRR (gross revenue royalty) on the gold produced from RNC Mineral’s (TSX:RNX) Beta Hunt mine in Australia, a 100% gold stream on Pan American’s polymetallic La Colorada mine in Mexico, and a 3.5% NSR on Ramelius Resources’ (ASX:RMS) Vivien mine in Australia. Complementing the operating assets are 19 non-producing streams and royalties, five of which are at an advanced stage assets. Maverix is aggressively pursuing future acquisitions in the precious metals space to provide growth beyond its organic development pipeline.

Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
 
Red Cloud Klondike Strike Inc.
79 Wellington St. W. Suite 1630, PO Box 148
Toronto ON, M5K 1H1
 
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Red Cloud Klondike Strike Inc. is registered as an Exempt Market Dealer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, and the Yukon. Part of Red Cloud Klondike Strike Inc.'s business is to connect mining companies with suitable investors that qualify under available regulatory exemptions (the "Red Cloud KS Business"). Red Cloud Klondike Strike Inc., its affiliates and associates, and their respective officers, directors, representatives, researchers and members of their families (collectively, "Red Cloud KS") may hold positions in the companies mentioned in this publication and may buy or sell, or buy and sell their securities or securities of the same class on the market or otherwise. Additionally, Red Cloud KS may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
Red Cloud KS has prepared this publication for general information purposes only, NOT as part of the Red Cloud KS Business. This document should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided by Red Cloud KS for the purposes of this publication has been derived from sources believed to be accurate, but cannot be guaranteed. Opinions or analysis contained in this publication may be subject to change and Red Cloud KS does not undertake to advise the reader of such changes. This publication does NOT take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud KS will not treat recipients of this publication as customers or clients by virtue of having viewed this report.

Company Specific Disclosure Details
AuRico Metals Inc - TSXV: AMI - 1,2
Marlin Gold Mining Ltd - TSXV:MLN - 1,2,3,4
Maverix Metals Inc - TSXV:MMX - 2,4
Alamos Gold Inc - TSX:AGI - None
Kirkland Lake Gold Ltd - TSX:KL - None
Kiska Metals Corp - TSXV:KSK - None
Golden Reign Resources - TSXV:GRR - 4
Endeavour Silver Corp  - TSX:EDR - None
Kootnay Silver Inc  - TSXV:KTN - None
Pan American Silver Corp - TSX:PAA - None
Gold Fields Ltd - JSE:GFI - None
Evolution Mining Ltd - ASX:EVN - None
RNC Minerals Corp - TSX:RNX - 2,4
Ramelius Resources Ltd - ASX:RMS - None

1)  A member of Red Cloud KS team has visited/viewed material operations of the issuer.
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3)  In the last 12 months, Red Cloud KS has received compensation for investment banking services.
4)  Red Cloud KS or a member of the Red Cloud KS team or household, has a long position in the shares and/or the options of the subject issuer.
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7)  A member of Red Cloud KS team or a member’s household serves as a Director or Officer or Advisory Board Member of the subject issuer.





 

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