Sailfish Royalty Corp.'s (FISH:TSX.V; SROYF:OTC) royalty partner Solidus Resources LLC received approval from the U.S. Bureau of Land Management (BLM) to construct and operate the Spring Valley gold project in Pershing County, Nev., reported Ben Pirie, equity research analyst at Atrium Research, in a July 16 research note. "Given the advancement at Spring Valley, increased gold and silver prices and continued mergers and acquisitions in the sector," Atrium raised its target price on Sailfish 10%.
"The Spring Valley mine holds most of our valuation for Sailfish, and we are excited as the project continues to advance and derisk," Pirie wrote. "There is future upside as the mine's size and scale will likely be larger than the currently proposed mine plan."
28% Return Implied
Atrium's new target price on Sailfish is CA$2.75 per share, previously CA$2.50, noted Pirie. This derived from a higher, 1x net asset value (NAV) multiple, previously 0.9x, and the gold and silver prices, US$2,800 per ounce (US$2,800/oz) and US$30/oz, respectively.
At the time of the analyst's report, the gold and silver streaming and royalty company was trading at about CA$2.20 per share and 0.8x NAV, at a discount to small/mid-cap royalty firms at 1x NAV and large caps at 1.5x NAV. This is despite Sailfish offering an "industry leading" 3.1% dividend.
From the company's share price, the return to target represents 28%. Sailfish, with a US$116 million (US$116M) market cap, remains a Buy.
Major Derisking Event
Pirie pointed out that this final approval from the BLM greatly derisks Spring Valley. Now, Solidus, the operator, may construct, operate and maintain an open-pit gold mine, three waste rock facilities and a heap-leach facility at the property. The mine is expected to begin production in 2028 and ramp up to 349,000 ounces of gold (349 Koz of Au) per year.
Solidus still has to secure a definitive agreement for financing of Spring Valley. The company did receive, in mid-May, a letter of intent from the Export-Import Bank of the United States for the same, up to US$835M.
Solidus is the project operator. Waterton Global Resource Management is the owner.
Portfolio of Assets
Pirie noted the various royalties and streams Sailfish holds. On Spring Valley it has three nonsmelter return (NSR) royalties. The largest, up to 3%, is on the majority of the proposed open-pit mine project area. Each of the other two, one for 1.5%, the other 0.5%, is on a separate portion of the mine project area.
Also, Sailfish holds a stream equal to a 3% NSR on Mako Mining Corp.'s (MKO:TSX.V; MAKOF:OTCMKTS) San Albino mine in Nicaragua as well as a 2% NSR on the rest of the area surrounding it. Mako released its Q2/25 production recently, and numbers were consistent with Atrium's estimates, Pirie reported.
During the quarter, Mako produced 10.9 Koz of Au at San Albino versus Atrium's 11.5 Koz forecast. Silver production was 12.5 Koz compared to Atrium's 10.5 Koz estimate. Pirie described Mako's production as strong and noted that Atrium updated its model to reflect these results.
"While Mako's production has been quite volatile in the past, the last two quarters have been consistent and representative of what we expect going forward," added the analyst.
Additionally, Sailfish holds a 2% NSR on Mako's Las Conchitas mine in Nicaragua that attained steady state production in 2024. From its silver purchase agreement with Mako, Sailfish receives 13.5 Koz of silver per month from the miner.
Sailfish holds several other noncore royalties and 100% interest in the Gavilanes silver project in Durango State, Mexico.
Key Points About Co.
Along with Sailfish's royalties and streams on Spring Valley and San Albino, Atrium Research likes that the company's management is highly experienced in royalties and capital markets, Pirie wrote. Sailfish returns capital to shareholders via buybacks and dividends, while at the same time keeping down general and administrative expenses, another compelling aspect of its story. Sailfish's current 3.1% dividend yield is the highest among all mining royalty firms. Since June 2019, Sailfish has repurchased about 14 million shares.
Also of note, according to Pirie, is that Sailfish has a strong competitive advantage because Wexford Capital is a major shareholder at 62%. Management owns 4%.
What to Watch For
Upcoming catalysts for Sailfish include Solidus obtaining definitive project financing for Spring Valley and sometime in H2/25, making a construction decision on the project, reported Pirie. He also wrote that Spring Valley is a potential takeout target, the acquisition of which likely would be a significant stock-boosting event.
Recent M&A Activity
As for M&A in the royalty space, Pirie reported the latest development. Earlier this month, Royal Gold Inc. (RGLD:NASDAQ) announced its acquisitions of Sandstorm Gold Ltd. (SSL:TSX; SAND:NYSE.MKT) for about $3.5 billion worth of shares and Horizon Copper Corp. (HCU:TSX.V) for CA$196M in cash.
With the Sandstorm deal, shareholders would get 0.0625 of a Royal Gold share for each Sandstorm share, representing a 17% premium to the prior close. In the Horizon deal, shareholders would receive CA$2 per share, reflecting a 72% premium to the prior close.
These transactions will take Royal Gold's royalties and streams to 393 in total on various assets, including 80 generating revenue and 47 in the development stage.
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