By analyst
By Frik Els
Sean Roosen, Chairman and CEO of Osisko Gold Royalties
Precious metal streaming and royalty companies are the envy of the industry.
The relative share price performance over a 10-year period of the largest gold streaming and royalty companies vs the top gold miners is eye-popping (and for those who picked the wrong crowd a decade ago probably eye-watering).
As if to prove that streaming is still where gold mining’s action is the sector saw a $1 billion deal close only three months ago
Investors love streamers for their (more) predictable cash flows, minimal GSA overheads, revenues per employee more associated with companies making iPhone apps and low risk profiles. Miners are attracted to streaming deals because it’s not dilutive like equity transaction and easy on balance sheets.
Clearly the kinds of returns shown on the graph will attract competitors and the field has become much more crowded – from micro and small caps like Metalla and Maverix to companies like Sandstorm bent on a billion dollar evaluation. Even the likes of Glencore is toying with the idea of spinning off a streaming company.
Centerra’s cash purchase of Aurico Metals at a healthy premium just this week shows a sprinkling of royalties may be the sugar on top juniors need to attract big players.
Franco Nevada’s 2007 debut still ranks as North America’s largest mining IPO ever. Royalty companies have also been involved in some of the biggest mining transaction of the past decade.
Franco Nevada set the bar high back in 2012 with its $1 billion deal with Inmet (now First Quantum) in Panama and Silver Wheaton (now Wheaton Precious Metals) followed up its $1.9 billion deal with Vale in 2013 with an $800m agreement with the Brazilian giant three years later.
For precious metals streamers the sweet spot is gold or silver byproduct from a base metal mine with a life counted in decades, but deals like that are few and far between.
That’s especially true with better times returning to mining and the majors’ deleveraging of the past few years mostly done. Bellwether Franco Nevada seemed to indicate that the era of mega deals with debt-laden majors for their byproducts may be over. The company is now singing the praises of oil & gas and has to look upstream for opportunity.
But as if to prove that streaming and royalties are still where the real gold mining action is the sector saw another $1 billion deal close only three months ago.
Osisko Gold Royalties was formed in 2014 with the sale of its Canadian Malartic mine – the country’s largest gold mine. In August the Montreal-based company closed a $1.125 billion deal for 74 streams, royalties and off-takes from private equity firm Orion Mine Finance. The transaction catapulted Osisko Gold Royalties into streaming’s top tier.
The companies that we incubated are worth three times what we were worth three years ago
MINING.com sat down with Sean Roosen, Chairman and CEO of Osisko Gold Royalties to find out what’s next for the company and for the precious metals streaming business as …read more
Source:: Infomine
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