Metalla Cheap on Assets, With Long Duration Mines Ahead
Contributed Opinion

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Metalla Royalty & Streaming, Franco-Nevada Corp., Agnico Eagle Mines Ltd., Wheaton Precious Metals, Pan American Silver Corp., Fortuna Mining Corp., Triple Flag Precious Metals, Altius Minerals Corp., Orogen Royalties Inc., Midland Exploration Inc., and Lara Exploration Ltd.
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: None. My company has purchased stocks mentioned in this article for my management clients: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American) reported first-quarter results ever-so-slightly below some estimates, largely because of lower deliverables from the Endeavor Mine in Australia.

The company reiterated its full-year guidance, however, emphasizing again that its production would be back-end weighted due to mine ramp ups. The balance sheet improved slightly, with increased cash of $10 million, against $12.3 drawn on its credit facility. G&A costs are expected to be a little lower this year than last.

In what could be a major development for Metalla's near-term revenue growth, IAMGOLD Corp. (IMG:TSX; IAG:NYSE)said it would release a study in the fourth quarter outlining an enlarged Côté pit to encompass the adjacent Gosselin deposit, over which most of Metalla's royalty lays, thus bring forward revenue.

Look at Long-Term Growth Assets, Rather than Current Revenue

As we have emphasized many times, our thesis on Metalla depends not on current or even near-term cash flow but on royalties on large-scale, long-duration assets that are not scheduled to commence production for several years, including most notably Taca-Taca as well as Gosselin, Vizcachitas, NuevaUnion, plus Castle Mountain, and Wasamac. These assets are not receiving appropriate value in the NAV assessments by brokerage firms (that focus on discount future cash flow), and even less so in the market.

Metalla is selling well under one times a proper NAV, and that is why we are accumulating it consistently. As current mines (such as Tocantinzinho) reach full production levels, and new mines (such as Amalgamated Kirkland) come on stream (with initial revenue as early at this quarter), plus these large projects get closer to production, your opportunity to buy Metalla as a discount will disappear.

New Director, and Tether Ups Its Stake Again

Two other recent developments are noteworthy. First, Tether amended its 13D filing to show an 11% stake in Metalla. It previous reported at the end of March a 10% holding. As a 13D filer, indicating a possible intention to use its shareholding to influence the company (rather than a passive investment, Tether must update its filing with every one percentage point move in its holdings. We have discussed the ramifications and possible outcomes of this stake previously.

However, unless Tether decided to sell its stake–which seems highly unlikely–but rather continues to steady purchase shares, then at minimum, their involvement gives us downside protection.

Separately, Sandeep Singh, former CEO of Osisko Royalties, has been nominated for the board at next month's meeting. He will bring not only two decades of experience in the mining and particularly royalty sector, as well as deep capital markets experience, but also a strength and independence that will help the company. We urge you strongly to vote in favor on your proxy.

At today's price, Metalla is a steal for any investor with even a modicum of patience.

First-Quarter Gold Company Results Were Strong

Not surprisingly, given the higher commodity prices, gold and resource companies reported record revenues for the first quarter. The gold price averged $4,875, up from $4,135 the prior quarter, while the average silver price jumped from $55.20 to over $84. Many companies also reported higher production and growth ahead; many had pre-released production, meaning the financial results released over the past two weeks were largely as expected. Most reiterated guidance, which many stated would be weighted to the second half of the year. For most, costs remained under control, though many warned of higher costs ahead.

We see a tug-of-war between bearish short-term factors, including continuation of the war in Iran with its high oil price and a new focus on controlling inflation among major central banks, and bullish longer-term factors. These latter include ongoing buying from central banks (up again in the first quarter) and Tether amid concern about global fiscal deficits. Because of this, and given we already are well exposed to gold stocks, we are being somewhat cautious in new buying, though the underinvested can buy.

Franco's Royalty Ounces Up, as It Eyes Major Acquisitions

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) saw increased GEOs in the first quarter (up 8% year on year), as well as, of course, higher realized prices, leading to another record quarter. Higher oil prices at the end of the quarter helped.

During the quarter, it closed three meaningful transactions, including $250 million royalty on i-80's Nevada assets. CEO Paul Brink, however, strongly hinted that the company is also looking at much larger transactions. Franco closed the quarter with available liquidity of $3.4 billion, including $715 million in cash and $1.1 billion in equities, the vast majority of which were part of royalty or stream transactions.

Is Cobre Panama Discounted in Stock Price?

Although Franco sports multiples that appear high, it is trading now closer to the low end of its historical range. Its price-to-cash flow multiple, for example, stands at 25 times, relative to its 10-year low of 20 times, and high of 46 times. The market is expecting the Cobre Panama stream to resume, so there is some risk if the restart is delayed, but clearly, looking at valuation, it is not in the stock price now. At current prices, it would represent about 18% of NAV, so there is a meaningful upside potential when it restarts.

David Harquail stepped down as chairman and will be named Chair Emeritus alongside Pierre Lassonde. He served as CEO for 13 years, and prior to that, headed the Redstone base metals subsidiary of Franco. His place as chairman will be taken by Tom Albanese, who has been a board member for 13 years after stepping down as CEO of Rio Tinto.

We continue to assert that if one could only own one gold stock, Franco would be the one. It is a core holding for us, with strong management, a solid balance sheet, and broad diversification in both revenue sources and non-producing assets. It can be bought here.

Strong Quarter at Barrick but Execution Risks Ahead

Barrick Mining Corp. (ABX:TSX; B:NYSE) results were no significant surprise, since partners, notably Newmont Corp. (NEM:NYSE; NGT:TSX; NEM:ASX), had already reported on many of its key assets. Production, however, was meaningfully higher than previous expectations and guidance, with costs lower than prior quarters (AISC at $1,708). Barrick maintained its new dividend policy (50% of free cash flow) and announced a new $3 billion buyback share program.

The company reiterated its goal of an IPO of its North American assets by year end, and though it said it was working with Newmont (its joint venture partner on most of these assets), it asserted a right to proceed unilaterally.

We are concerned that the IPO will not have an easy path, and may not even daylight the value as Barrick is anticipating given such a small portion of the assets will be separately listed while Barrick will retain control.

Hold.

Agnico Executes Well and Increases Investment Pace

Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) reported more-or-less as expected, reiterating backend weighted full-year guidance. The company ended the quarter with $3.1 billion cash and $200,000 in debt, after repurchasing $150 million in shares. It plans additional buybacks to negate the dilutive effect of its acquisition of Rupert (see Bulletin 1007).

The company indicated it intends to continue to grow, saying it would invest over $10 billion in its Ontario properties by the end of the decade. A decision on Hope Bay in Nunavut is expected by the end of the month, while it is advancing the San Nicolas project in Mexico.

Agnico is the gold-standard of mining companies, with top management, strong operations, low political risk, and a deep pipeline. The stock has dopped from a February high over $252, and can be bought here.

Pan American Increases Silver Profile

Pan American Silver Corp. (PAAS:TSX; PAAS:NYSE) reported as expected and reiterated guidance, though capex will be larger now that the La Colorada Skarn deposit has been given the go-ahead, albeit on a somewhat reduced scale (see Bulletin 1004).

The project, which will represent about 5% of company NAV, promises significant cash flow as well as meaningfully increasing the company's silver exposure.

Overall costs were low, with the silver mines AISC just $6.63, though benefitting from gold by-product at those mines. For the gold mines, AISC was $1,851, inline with expectations. The company is now targeting $700 million in share purchases over the coming year, dramatically up from the $25 million repurchased in the first quarter.

Hold.

Fortuna Continues to Execute

Fortuna Mining Corp. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) reported production in line with expectations, but with pre-tax costs lower than expected. Cash increased at quarter end to almost $666 million following the repurchase of $24.5 million worth of shares.

Fortuna is our favorite intermediate producer, with strong, disciplined management, a rock solid balance sheet, strong operations with built-in growth, yet it continues to trade at a discount to peers.

It is a Strong Buy here.

Wheaton Had Strong Quarter, With Manageable Debt

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) reported better-than-expected production, led by Salobo and Antamina. It reiterated its full-year and five-year guidance (50% growth by 2030).

It ended the quarter with $2.2 billion in cash and no debt, but following quarter end, made $4.5 billion in stream payments, overwhelming for the new Antamina stream, so is now in a net debt position. However, with free cash flow of over $700 million in the first quarter, Wheaton can look to pay this down comfortably.

Hold.

Royal Had Mixed Results as It Pays Down Debt

Royal Gold Inc. (RGLD:NASDAQ) had a mixed quarter, with earnings broadly in line, though a capital call on the Hod Maden project in Turkey led to a free cash flow miss. It is tracking well on its guidance. After using its credit facility for the large Kansanshi acquisition last summer, Royal continues to pay down debt, repaying $375 million year to date. It announced a $500 million share repurchase program, following a large increase in shares following the Sandstorm acquisition last summer; the company said this would be used opportunistically.

Royal has strong management, a little more willing to pay up than some other large royalty companies, but with more leverage to higher prices than others. There is growth in the pipeline, with guidance for 2030 GEOs just shy of 500,000 ounces, but potential for upside.

Royal is trading at a lower valuation than the other large royalty companies, and can be bought here, particularly if you do not own it.

OR Had Strong Quarter, With Upside Ahead

OR Royalties (OR:TSX; OR:NYSE) reported earnings above expectations after pre-reporting GEO sales. It ended the quarter with $95 million in cash and an undrawn credit facility of $650 million, though last month a new $168 million acquisition was financed from the credit facility. It bought back $13 million in shares in the first quarter and boosted is dividend (by 18%).

Separately, Malaysian miner Boroo entered into a 90-day exclusivity period with regard to a potential purchase of the former Eagle Gold Mine in the Yukon, which was closed after a heap-leach failure. OR has a 5% royalty of the mine, now representing about 1% of its NAV. If the sale goes ahead, the mine could be restarted before the end of the decade. It is somewhat surprising that a larger, or Canadian firm did not purchase the mine, though if it goes ahead it is nothing but upside for OR.

We like OR for its disciplined management and built-in growth. If you do not own, you can take an initial position now.

Strong Quarter for Triple Flag

Triple Flag Precious Metals Corp. (TFPM:TSX; TFPM:NYSE) reported financials as expected after pre-releasing GEOs for a strong quarter.

Costs were down, as the company re-iterated its full-year guidance.

It ended the quarter with $144 million in cash and an undrawn $700 million revolver, so is in a strong position for new acquisitions.

Hold.

Altius Shows Strong Growth Potential Ahead

Altius Minerals Corp. (ALS:TSX)reported financials slightly higher than expected, mostly due to interest and investment income, after pre-releasing royalty revenue (see Bulletin 1007). Iron ore revenue was down, but that is because of large-scale capital expenditures, reinvesting in mines that had been subject to underinvestment.

The company ended the quarter with C$128 million in cash and long-term debt of C$87 million after another small ($2 million) reduction in debt. It also holds about $220 million in equity, two-thirds of it shares of Labrador Iron Ore Trust, which, though not for intended for sale, does strengthen the balance sheet. The company stepped up its share buybacks, repurchasing almost C$10 million in shares. After the quarter ended, it received an anticipated distribution of US$30.5 million in connection with its acquisition of Lithium Royalty Corp.

Embedded Growth in Copper, Renewables, Potash and Gold

In comments on the quarterly analyst call as well as the AGM, CEO Brian Dalton said that revenue growth was embedded in the company's current assets, looking at revenues to more than double by 2030 based on current commodity prices. Among other sectors with strong growth ahead, the renewable business "was at the launch point" due to increased demand from power from the U.S. with increased opportunities for late-stage development assets due to less competition from financing sources.

Dalton said that although the company was looking at many opportunities, "if we have to sit on cash for a while, we have done it before."

Altius is a core holding for us, bringing broad exposure to the commodities complex, top disciplined management, a good balance sheet, and plenty of upside leverage on top of dependable cash flow.

If you do not own it, you can take an initial position at this price, down from a high earlier in the month over $57.

Revenue Up for Orogen, Despite Lower Royalty Ounces

Orogen Royalties Inc. (OGN:TSXV; OGNNF:OTC) reported full-year net income of $7.1 million, up 60% from 2024, despite royalty ounces falling 16%. Royalty revenue was still up over 20% due to higher commodity prices, while prospect generation activities brought in $3 million, more than double the prior year.

Separately, Orogen named Chad Wells to its board of directors. This is a strong addition. Chad, formerly in charge of the PG portfolio at Altius, bringd years of experience across various resources and in the junior space.

Buy.

Ares Differentiates Itself From Other BDCs

Ares Capital Corp. (ARCC:NASDAQ) demonstrated again why it is the BDC of choice. Although earnings were down, as was the NAV and the overall credit ratings in the portfolio, it was all by modest levels. Earnings fell mostly because of lower market interest rates and narrower spreads. Ares continues to more than earn its dividend, with spillover income equivalent to nearly three quarters of dividend payments, while its non-accruals are well below its own historical level as well as the BDC average. It has low leverage of 1.1 times, with $6 billion available for new investments.

Are Software Companies at Risk?

Given widespread concern about the potential negative effects of AI on the software industry, Ares commissioned an independent study to assess the potential effects on its portfolio companies. It found the risk was relatively limited, with 85% of exposure "low risk" and only 0.3% of the software portfolio at "high risk". This study followed a similar in-depth look at every company in the portfolio to access the potential impact of tariffs. CEO Kort Schnabel noted that Ares had done a lot of work on companies in its portfolio and had been very transparent.

Schnabel noted that discussions with potential borrowers had picked up again, and spreads started to widen as there was less competition right now. He did not venture how long this improved situation might last, but emphasized that Ares was in a very strong position to make investments.

With a yield over 10% and a small discount to book, Ares is trading at its lowest valuations since the depths of covid, and before that the Great Financial Crisis.

For investors looking for above-average income for the long-term, Ares is a solid choice.

TOP BUYS this week, in addition to the above, include Midland Exploration Inc. (MD:TSX.V), and Lara Exploration Ltd. (LRA:TSX.V).