Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American) got a nice surprise in Q3/22, the first payment from its 2% net smelter return (NSR) royalty on production from Agnico-Eagle's El Realito gold mine, reported Haywood Securities analyst Kerry Smith in a Nov. 11 research note. This resulted in a 12% production beat during the quarter and Haywood then raising its 2022 production estimate for the company.
Following the Q3/22 results, Haywood maintained its Buy rating and CA$10 per share target price on the royalty and streaming company, currently trading at about CA$6.90 per share.
"We recommend investors accumulate shares at current levels," Smith wrote.
Help from El Realito
The analyst reviewed Metalla's Q3/22 results. The Alberta-based mining firm received a total of 714 gold equivalent ounces (GEOs) during the quarter, exceeding Haywood's forecast of 637 GEOs.
This included 143 GEOs, or US$0.3 million (US$0.3M), from the El Realito mine that came on stream earlier than expected, Smith noted. El Realito GEOs helped make up for Wharf and COSE's misses during the quarter.
Metalla's first payment from Agnico Eagle on the El Realito royalty was for US$0.3 million (US$0.3M). It was "a pleasant surprise as Agnico Eagle does not break out the expected production from El Realito and modelling is difficult for this royalty," wrote Smith.
Given Metalla will regularly receive GEOs from El Realito, Haywood increased its full-year 2022 forecast of total attributable GEOs to 2,695 from 2,594, Smith indicated. This amount falls within Metalla's guidance for the year of between 2,500 and 3,500 GEOs.
Revenue falls short
As for Q3/22 revenue, Smith wrote, it was a slight miss, coming in at US$656,000 versus Haywood's forecast of US$785,000. This was due to the realized gold price being US$23 ounce lower than the London Metal Exchange average for the quarter.
During Q3/22, Metalla generated US$0.01 of cash flow per share, equal to Haywood and the Street's forecasts. Coming out of Q3/22, Metalla had ~US$3.3M in cash.
Asset changing hands
Also noteworthy, Smith indicated, the owner of Wasamac, a mining project on which Metalla has a 1.5% NSR royalty, is changing. The current owner is Yamana, but Pan American Silver is acquiring Yamana, and Agnico Eagle is acquiring Wasamac.
"We expect Wasamac to become an important royalty holding for Metalla going forward, along with their 1.35% NSR on the Gosselin deposit, owned by IAMGOLD," Smith wrote.
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Disclosures For Haywood Capital Markets, Metalla Royalty & Streaming Ltd., November 11, 2022
Analyst Certification: I, Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Important Disclosures:
Of the companies included in the report the following Important Disclosures apply: None.
