Maverix Metals Inc. (TSX, NYSE: MMX) - A Different Kind of Buzz, by @CruxInvestor

Interview with Dan O’Flaherty, CEO of Maverix Metals Inc. (TSX, NYSE: MMX).

Royalties: a way to make mining-level returns without mining-level risks?

O'Flaherty certainly believes so. He is the CEO of Maverix Metals Inc., an emerging precious metals royalty and streaming company listed on the TSX and NYSE.

One of the main areas of volatility in mining is in the mining process itself: just what will come out of the ground? Gold royalties companies offer much of the leverage to precious metals prices and exposure to exploration and expansion potential, but without the risks and costs associated with mining programs.

Royalty companies are a unique category of investment and are a top-line revenue-based model. A gold royalty is a contract that gives royalty companies the right to a percentage of gold production or revenue in exchange for an upfront payment; they have the right to purchase gold at a significant discount to the current gold price and can create a deal to purchase gold at a set price regardless of gold spot price.

Maverix Metals has a wide portfolio of over 100 royalty deals. Each royalty and stream is tailored to the individual needs of each transaction. The terms and conditions are variable in the contract. Maverix tries to maximise exposure to areas of influence, by ensuring they have access to a significant landmass, because deposits may grow over time. An example of one of their royalties is on RNC's Beta Hunt mine, where they have the capacity to negotiate specific rates on individual constituent metals: they can tailor the % revenue they take from nickel and gold separately, based on their own requirements.

14 are generating revenue for Maverix right now, while some are arrangements with earlier stage ventures. This is a solid mix of immediate cash flow with long-term potential. Another reassuring fact is that not a single one of Maverix Metals' assets produces more than 15% of their cash flow.

O'Flaherty himself has vast experience in the financial sector, but what about mining experience? The remainder of the team has experience that could be considered more specific, with decades of mining experience between them.

Maverix Metals has clearly impressed the institutional investor crowd, with large stakes being taken by powerhouses like Kinross Gold Corporation, Pan American Silver Corp. (a day 1 shareholder) and Newmont Corporation. A significant proportion of Maverix is owned by a few investors. Could this be a problem for liquidity? O'Flaherty insists otherwise. 2019 has seen more of a focus on retail investors after moving to the TSX. They expect liquidity to increase as additional shares get "into the flow." 10% of the company is owned by insiders: another encouraging stat.

The business strategy is to pick up below the radar assets that are too small to attract the focus of larger royalties companies. Maverix has ownership of some 50 assets: some good, some bad. There is no holding cost for royalties: they run for the life-of-mine and don’t expire.

Maverix is focusing on precious metals for now. Revenue per share has seen added value, and per-share metrics across the board have increased. Remuneration is determined by the per-share metrics, but we were unable to get a specific figure. Maverix Metals started the year with a share price of CA$4.66, but ended the year at CA$7.04. Today, they sit at CA$6.78 and a market cap of CA$732.21M.

Maverix Metals' core assets (80+%) are in safe, stable jurisdictions, thus avoiding geopolitical risks and enhancing their appeal to investors. Maverix has negligible overheads and a high margin, courtesy of no mining costs. They have significant capital reserves to make additional acquisitions and continue building up their portfolio.

The cost of sourcing capital is much lower for a royalty company than for a mining company. In terms of a time-lapse, all transactions thus far have been in production at the time of investment.

Interview highlights: