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How To Get Exposure to the Silver Boom

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Experts point to heightening global demand for silver and say the pressure to find more will only increase. Read to see why these royalty companies may be a good exposure to the upside with less risk.

Experts point to heightening global demand for silver and say the pressure to find more will only increase.

It's the most conductive element in nature and important to the green energy transition as it's used to coat electrical contacts in computers, phones, cars, and appliances. It's also an important element in solar technology.

Silver spot prices rose to a new all-time high of US$32.43 per ounce on May 20 and have continued to hover around US$30 since. The price was US$31.17 on Friday.

Asset manager Chen Lin of What is Chen Buying? What is Chen Selling? noted that the Chinese language itself reflects the significance of the metal: the term for "bank" directly translates to "silver trading depot."

Because of the metal's safe-haven characteristics, the weaking U.S. dollar, and the persistent need for industrial applications, Chen said silver in 2024 has "emerged as one of the top-performing commodities, surging by more than 30% and outpacing even gold."

"Industry experts suggest that this silver rally is just the beginning, citing minimal technical resistance between the US$30/oz and US$50/oz price levels," Chen wrote on June 19. "Based on these observations, I anticipate that silver will surpass the US$50/oz threshold during this cycle and subsequently stabilize within the US$30-US$50/oz range for the foreseeable future."

According to the Silver Institute's World Silver Survey, global demand for silver "massively exceeded" supply last year, a deficit that is expected to extend into a fourth consecutive year in 2024.

Mordor Intelligence noted that the white metal is expected to register a compound annual growth rate (CAGR) of more than 5% between 2024 and 2029.

"An increase in the demand for new technological products is expected to help the market expand in the future," Mordor analysts wrote. According to a U.S. Geological Survey report, "27% of the silver produced in the United States was being utilized in electrical and electronic applications."

There are several royalty and streaming companies, both public and private, that offer exposure to any big silver gains without having to invest directly in more risky explorers. Only one offers exposure to only silver, however.

Metalla Royalty & Streaming Ltd.

Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American) said it is a precious and base metals royalty and streaming company with a focus on gold, silver, and copper royalties and streams.

streetwise book logoStreetwise Ownership Overview*

Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American)

*Share Structure as of 5/28/2024

It "provides shareholders with leveraged metal exposure through a diversified and growing portfolio of royalties and streams," the company said. "Our strong foundation of current and future cash-generating asset base, combined with an experienced team, gives Metalla a path to become one of the leading gold, silver, and copper companies for the next commodities cycle."

It has at least five producing royalties in North America and Africa, according to its website, and dozens of others under development or being explored in North America and South America.

Last month, the company announced strong financial results for Q1 2024, reporting revenue of US$1.3 million and an adjusted EBITDA of US$0.1 million. Key developments include increased production at La Encantada, El Realito, and Wharf. Notably, First Majestic discovered a significant water resource at La Encantada, which is expected to improve throughput rates by Q3 2024.

Additionally, IAMGOLD Corp. (IMG:TSX; IAG:NYSE) achieved the first gold pour at Côté, with commercial production anticipated by Q3 2024. First Quantum Minerals Ltd. (FM:TSX; FQM:LSE) expects to receive Environmental and Social Impact Assessment approval for Taca Taca this year, facilitating project advancement for Metalla moving forward.

In 2021, Metalla Royalty & Streaming Ltd. strengthened its portfolio by acquiring a 1.35% net smelter return (NSR) royalty on the Côté Gold Project and the Gosselin project, both owned by IAMGOLD and Sumitomo Metal Mining Co. Ltd. (STMNF:OTCPK)

According to Reuters, 4.03% of the company is held by management and insiders. Chief Executive Officer Brett Heath has 3.54%.

About 9.51% is with strategic investor Beedie Investments Ltd., and 12.48% is with institutional investors. Van Eck Associates Corp. has 4.92%, and Euro Pacific Asset Management LLC has 4.4%.

Its market cap is CA$264.41 million, with 91.5 million shares outstanding and 79.11 million free-floating. It trades in a 52-week range of CA$4.87 and CA$2.32.

Franco-Nevada Corp.

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) bills itself as the "leading gold-focused royalty and streaming company with the largest and most diversified portfolio of cashflow producing assets."

streetwise book logoStreetwise Ownership Overview*

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE)

*Share Structure as of 7/8/2024

Its business model provides investors with gold price and exploration optionality while limiting exposure to cost inflation. Franco-Nevada noted it is debt-free and uses its free cash flow to expand its portfolio and pay dividends, including a quarterly dividend of US$0.36 per share paid on June 27 (an increase of 5.88%).

Franco-Nevada noted in its quarterly results for Q1 2024 in May that it had US$2.3 billion in available capital as of March 31 and an operating cash flow of US$178.6 million in the first quarter.

It said it was rated the No. 1 precious metals company and top gold company by Sustainalytics, AA by MSCI, and Prime by ISS ESG.

"Our diversified portfolio performed well, and production for the quarter met expectations," said Chief Executive Officer Paul Brink. "Elevated gold prices translated directly into some of our highest ever margins."

According to Reuters, about 0.71% of the company is owned by insiders and management, and about 82.36% is held by institutions. The rest is retail.

Top shareholders include BlackRock Advisors LLC with 7.11%, MFS Investment Management with 5.74%, Van Eck Associates Corp. with 4.41%, Fidelity Management & Research Co. with 4.39%, and Fidelity Investments Canada ULC with 3.9%.

Its market cap is US$23.59 billion with 192.31 million shares outstanding. It trades in a 52-week range of US$149.06 and US$102.29.

Silver Crown Royalties Inc.

Silver Crown Royalties Inc. is currently private but announced it has closed on a previously announced offering of subscription receipts and completed an amalgamation with 1287412 B.C. Ltd.

The resulting company, which will continue as Silver Crown Royalties Inc., has filed its initial listing statement with Cboe Canada Inc. to list its common shares on Cboe sometime in Q3.

"This is an exciting time for Silver Crown and its shareholders as we look to unlock value from our silver royalty portfolio as a public company," said Silver Crown Chief Executive Officer Peter Bures. "We believe a positive re-rate is possible, which will benefit our shareholders once Silver Crown starts trading amongst its peer group."

Silver Crown Royalties issued 7,408,600 subscription receipts at a price of CA$0.50 per subscription receipt for gross proceeds of CA$3,704,300, the company said. Each subscription receipt was converted into a unit of Silver Crown on June 28, 2024. Each unit consists of one common share in the capital of Silver Crown and one common share purchase warrant.

In accordance with the terms of the amalgamation agreement with 1287412 B.C., the security holders of both companies became security holders of the one company that is a reporting issuer in British Columbia and Alberta.

Each outstanding common share and warrant was exchanged on a 20-for-1 basis for common shares and warrants of Silver Crown Royalties; and each outstanding 1287412 B.C. share was exchanged on a 53.5-to-1 basis for common shares of Silver Crown.

Public companies comparable to the new Silver Crown include Metalla Royalty & Streaming Ltd. and Franco Nevada Corp. But Bures has said no other royalty company focuses on a single metal like silver.

Silver Crown noted it "aims to minimize the economic impact on mining projects while maximizing returns for shareholders" and "presently has two sources of revenues and continues to build on this foundation, targeting additional operational silver-producing projects."

'We Just Take the Silver'

The company said it is looking all over the world for projects that have silver as a byproduct, aiming to monetize the silver value of those operations for both partners and shareholders. Companies contracted must deliver certain amounts of silver for Silver Crown to get involved.

"Other royalty companies simply buy a royalty and kind of hope that it goes into production, or it starts paying," the CEO Bures has said. “There's a minimum obligation that the vendor has to us that they have to deliver as long as they're operating. So that's one big difference."

In addition to the amalgamation with 1287412 B.C., Silver Crown said it is also undertaking a subsequent financing at a price of CA$10 per unit for gross proceeds of up to CA$1.5 million. Each subsequent offering unit consists of one common share and one warrant of the company. Each whole resulting issuer warrant entitles the holder to purchase an additional common share at a price of CA$16 for a period of three years from the closing of the offering. All securities issued in this offering will be subject to a standard four-month hold.

In addition to offering exposure to a single mineral, the company said its agreements are mutually beneficial with companies, allowing them to create value from byproduct and co-product minerals.

"We just take the silver," Bures said.

And the minimum delivery obligations and operational and exploration success milestones in agreements protect investors, the company said.

The company has already issued several rounds of pre-IPO placements, with management participating in a 3.3 million share founder round issue at 5 cents in May 2022 and management and partners further participating in the 20-cent and the current 40-cent rounds.

It is currently targeting a CA$5 million raise with the IPO.

The company has said about 6% of it is owned by institutions, about 30% management, and the rest is retail, including close relationships and brokers.

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Important Disclosures:

  1. Silver Crown Royalties Inc. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
  2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Silver Crown Royalties Inc., Franco-Nevada Corp., and Metalla Royalty & Streaming 
  3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
  4. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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