At first glance, it looks like September put an end to the massive summer selling, as the average share price of mining and streaming royalty companies rose 0.6%, but this contradicts the fact that 70% of the industry experienced negative price movements during the month. September was a month in which the many fallers were matched by a few big winners.
The large number of stock price declines were not exclusive to the mining royalty industry, with Wall Street recording its worst month since the start of the COVID-19 pandemic, with the S&P 500 down 4.8% for the month.
Investors fear that the political stalemate in the United States over the debt ceiling could lead to government debt default. These fears were echoed by US Treasury Secretary Janet Yellen, who warned of potential economic disaster if the US Congress does not raise the debt ceiling. Current estimates determine that the US Treasury will run out of liquidity in October of this year, and global markets are holding a sharp edge.
The Majors were the worst performing subset in the industry this month, averaging 13.9%. The Large Third Parties are doing a little better, down 13.0% on average. Mid-Tiers were down 6.4% while Juniors were the only subset to end the month in positive territory, up 8.4%.
Franco-Nevada Corporation is the best performing Major, in relative terms, down 10.9% over the month (↓ 10.5% 3 months). The company went ex-divi on September 14, which may be responsible for at least part of this month’s downfall.
Wheaton Precious Metals Corp was the worst performing major, down 16.6% on the month (↓ 14.7% at 3 months) as investors looked uncomfortable with the company’s Investor Day on September 22.
Osisko Gold Royalties was the best performing large group, down 8.1% in September (↓ 18.0% over three months), after reporting spending C $ 18.5 million between January and August 2021, to buy back 1,267,666 common shares. The buyback policy represents the opinion of the board that the intrinsic value of the Company is not properly reflected in the price of its common shares. Through a combination of buybacks and dividends, Osisko has now returned over C $ 35 million to shareholders this year.
Labrador Iron Ore Royalty Corp, was the worst performing large company this month, down 20.0% on the month (↓ 25.0% over 3 months) despite declaring a cash dividend quarterly of $ 2.10 per share, an increase of 20% from the previous quarter. and an increase of 367% over the same period last year.
A dramatic 25% drop in the price of iron ore is likely to have had a significant impact on Labrador’s share price as its main assets are a 15.10% stake in Iron Ore Company of Canada and a 7% gross overriding royalty and a 10 cents per tonne commission royalty on all iron ore products manufactured, sold and shipped by the Iron Ore Company of Canada.
Nomad Royalty Company Ltd was the worst performing mid-segment in September, down 14.8% (↓ 21.0% at 3 months). The closure of a US $ 125 million revolving line of credit, with an option to increase to US $ 150 million, appears to have already been considered by investors and the company appears to have been pulled down by negative market development.
Maverix Metals Inc was the best performing Mid-Tier, down 2.8% on the month (↓ 17.1% at 3 months). Maverix has made exciting progress on two fronts this month, first increasing its revolving credit facility from $ 40 million to $ 160 million. Second, the acquisition of a US $ 50 million gold stream from Auramet Capital Partners, LP, one of the world’s largest physical dealers in precious metals.
Morien Resources was the best-performing and top-performing junior mining and streaming royalty company for the second consecutive month, up 103.8% (↑ 202.9% year-over-year), despite the second month without a stream information.
Uranium Royalty Corp also performed well this month, up 24.7% (↑ 18.4% at 3 months), after contracting for three additional cash purchases totaling 300,000 pounds of U3O8 at a average cost of US $ 38.17 per pound of U3O8.
Upon completion of these deliveries, the Company will hold 648,068 pounds of U3O8 at a weighted average cost of US $ 33.10 per pound. Based on a spot price of US $ 45.00 per pound, the Company recognized an increase of US $ 7.7 million in the net realizable value of its physical holdings of uranium. With C $ 80 million in cash, marketable securities and physical uranium, the company is well positioned for the months to come.
Empress Royalty Corp. was the worst performing junior this month, down 20.8% (↓ 26.0% at 3 months). The share price performance is surprising as the Company has just increased its stake in the producing Sierra Antapite gold mine, located in Peru. An additional investment of US $ 2.5 million for see’s Empress increases its flow on the project to 3.375% from 2.25% and the company expects to generate significant revenue next year. Empress is also currently in talks with several financial groups to provide a loan facility, after ceasing discussions with Accendo Banco regarding possible debt financing.