What do you think about Sandstorm? They did a bad allocation raising debt and shares but nowadays it looks like one of the Royalties with higher growth for the next years
I’ve been reviewing all the gold royalty companies with market caps below $1 billion and have plotted their revenues, EBITDA and EV here (https://ibb.co/Hrtc6W1). What are your thoughts on EMX?
It appears to have the highest growth and surprisingly, the lowest valuation by far while being almost free of debt taking into account short term investments. It's trading at roughly the same EV/EBITDA multiple as Sprott, one of Kuppy's favorite proxies for gold despite its much higher growth.
Yeah, it seems like half of its revenue comes from gold and a third from copper. It's a very interesting way to gain exposure to both metals. The companies operating the mines look rock solid and Franco-Nevada is backing them. It's definitely worth a deep dive. Thanks for your answer Alberto
Nice write-up. I noticed that you reinvested the proceeds from Orogen into Manolete Partners, which seems to be the idea you're most excited about.
Based on the new signed cases, as long as they're able to convert them into cash as well as they've managed to do so far, it seems like the business is already inflecting. Those profits should be reflected in the 2025 results, which is very interesting, especially considering that the stock can be bought at all-time lows.
When you say it's your top pick / largest position, do you mean that you've sized it up to around 10%?
Thanks again Alberto! I have recently started to take interest in this segment of the investing world, so I am pretty clueless on mine valuations. Your posts help me a lot to get some sense in it. I am wondering if you would write a post about how you come up with the (dcf) valuation inputs (or share one complete excel valuation) ... e.g. I am wondering how you come up with the costs. Do you go with some general per g/ounce/kg cost or is there some other way? I mean there are plenty of factors affecting the amount of the initial investment/opex/aftercosts. How one should think about these factors when making the calculation?
Hi Bigzoo. There are no capex or operational costs to the owner of a royalty. Yes, Im thinking of releasing my excel spreadsheets, but it may only be available to paid subscribers. If you have any other questions please let me know. I have put more info about the calculation in the report, hope it helps.
Thank you! Yes, I know royalty companies do not have those costs, I was just kinda referring back to an earlier writing when you when through some mines. So it would be interesting to see the valuation methodology of a not yet operating mine where you have some level of understanding of what is in the ground.
Good writeup Alberto! I like your quantitative methodology. I would like to point out that what you call 'fair value' is only total discounted net asset value, which is (especially so for royalty companies) an equation that changes over time as reserves are depleted, and in many cases, increased net of depletion. I heard from somewhere that the typical mine produces twice or three times as much metal than initially outlined in reserves, an upside royalty companies get to enjoy for free.
Many royalty companies also have vast portfolios full of early stage assets. It is therefore not surprising that the biggest and highest quality royalty firms typically enjoy multiples of 2x to discounted asset value, yet I would find it hard to argue they have an intrinsic -50% downside. Similarly I would not consider a $10M Enterprise Value miner with a single mine with a two year mine life with a $20M discounted net asset value intrinsically undervalued by a factor of 100%. In fact I would not even pay $10M for that hypothetical company as it would be uninvestable and essentially valueless without another asset they could leverage.
Quality and scale matters when considering multiples!
Agreed. As I said, I probably sold too early, I guess time will tell. Silicon and Merlin will probably grow in size however. Regarding their other properties, im only familiar with the ones operated by Heliostar, good management there. However, if you are buying a royalty firm for their many exploration royalties, I think you are better off buying the exploration firm itself. Hope it helps. Thank you for the comment, great input as always Juho
Nobody ever went broke taking profits, as the wise saying goes. I believe the smaller royalty companies tend to trade around 1x NAV so I think you made the right call. There's no shortage of opportunities in this market.
What do you think about Sandstorm? They did a bad allocation raising debt and shares but nowadays it looks like one of the Royalties with higher growth for the next years
As far as I know they depend a lot on their new asset in Turkey coming online. Something I dislike
I’ve been reviewing all the gold royalty companies with market caps below $1 billion and have plotted their revenues, EBITDA and EV here (https://ibb.co/Hrtc6W1). What are your thoughts on EMX?
It appears to have the highest growth and surprisingly, the lowest valuation by far while being almost free of debt taking into account short term investments. It's trading at roughly the same EV/EBITDA multiple as Sprott, one of Kuppy's favorite proxies for gold despite its much higher growth.
I haven’t fully analyzed it yet. But it seems interesting. Bear in mind a large proportion of their income comes from non gold royalties
Yeah, it seems like half of its revenue comes from gold and a third from copper. It's a very interesting way to gain exposure to both metals. The companies operating the mines look rock solid and Franco-Nevada is backing them. It's definitely worth a deep dive. Thanks for your answer Alberto
Another excellent article! Thanks for giving a clear overview of your process!
Thank you Jimmy
What is Aberto opinion on the Newfoundland gold rush and stock newfound gold symbol nfg
likely on the top 10 gold stock list for junior in Canada note not a royalty firm
I think price is too high for an exploration firm
What is Alberto opinion on Newfoundgold likely in the top 10 in gold companies in canada
Hi Alberto,
Nice write-up. I noticed that you reinvested the proceeds from Orogen into Manolete Partners, which seems to be the idea you're most excited about.
Based on the new signed cases, as long as they're able to convert them into cash as well as they've managed to do so far, it seems like the business is already inflecting. Those profits should be reflected in the 2025 results, which is very interesting, especially considering that the stock can be bought at all-time lows.
When you say it's your top pick / largest position, do you mean that you've sized it up to around 10%?
25% of my portfolio is in Manolete. Thank you for the comment John
interesante siempre tus informes alberto
Gracias Alejandro!!
Thanks again Alberto! I have recently started to take interest in this segment of the investing world, so I am pretty clueless on mine valuations. Your posts help me a lot to get some sense in it. I am wondering if you would write a post about how you come up with the (dcf) valuation inputs (or share one complete excel valuation) ... e.g. I am wondering how you come up with the costs. Do you go with some general per g/ounce/kg cost or is there some other way? I mean there are plenty of factors affecting the amount of the initial investment/opex/aftercosts. How one should think about these factors when making the calculation?
Hi Bigzoo. There are no capex or operational costs to the owner of a royalty. Yes, Im thinking of releasing my excel spreadsheets, but it may only be available to paid subscribers. If you have any other questions please let me know. I have put more info about the calculation in the report, hope it helps.
Thank you! Yes, I know royalty companies do not have those costs, I was just kinda referring back to an earlier writing when you when through some mines. So it would be interesting to see the valuation methodology of a not yet operating mine where you have some level of understanding of what is in the ground.
You mean my report on gold mining firms? My math was based on the economic reports of each gold project, I didn’t do calculations per se
Good writeup Alberto! I like your quantitative methodology. I would like to point out that what you call 'fair value' is only total discounted net asset value, which is (especially so for royalty companies) an equation that changes over time as reserves are depleted, and in many cases, increased net of depletion. I heard from somewhere that the typical mine produces twice or three times as much metal than initially outlined in reserves, an upside royalty companies get to enjoy for free.
Many royalty companies also have vast portfolios full of early stage assets. It is therefore not surprising that the biggest and highest quality royalty firms typically enjoy multiples of 2x to discounted asset value, yet I would find it hard to argue they have an intrinsic -50% downside. Similarly I would not consider a $10M Enterprise Value miner with a single mine with a two year mine life with a $20M discounted net asset value intrinsically undervalued by a factor of 100%. In fact I would not even pay $10M for that hypothetical company as it would be uninvestable and essentially valueless without another asset they could leverage.
Quality and scale matters when considering multiples!
Agreed. As I said, I probably sold too early, I guess time will tell. Silicon and Merlin will probably grow in size however. Regarding their other properties, im only familiar with the ones operated by Heliostar, good management there. However, if you are buying a royalty firm for their many exploration royalties, I think you are better off buying the exploration firm itself. Hope it helps. Thank you for the comment, great input as always Juho
Nobody ever went broke taking profits, as the wise saying goes. I believe the smaller royalty companies tend to trade around 1x NAV so I think you made the right call. There's no shortage of opportunities in this market.
Their EPS has dropped a lot recently which doesn’t look good to me