Resource World Magazine

48 www.resourceworld.com a u g u s t / s e p t e m b e r 2 0 1 6 Maverix Metals the timing is right – new emerging metal streamer by Andrew Nelson, Davidson & Company LLP Resource focused royalty and streaming companies benefit from a superior business model in the mining industry offering above- average returns with reduced risk. Streamers enjoy asset diversity, fixed operating and capital costs, commodity price upside, explo- ration and development upside which all translate into reliable free cash flow and industry leading margins. Just look the stream Silver Wheaton purchased from Lundin Mining in 2004 on the Zinkgruvan Mine in Sweden which enti- tles Silver Wheaton to purchase silver for US $4.27/oz while the metal trades above US $20/oz. For Silver Wheaton, this stream in 2015 alone brought in nearly US $30 million from approximately 2 million silver ounces streamed. Lundin Mining handsomely benefited from this transaction too, selling the stream for US $78 million to Silver Wheaton while it paid US $101 million to acquire Zinkgruvan from Rio Tinto in 2004. The deal was a win-win for both parties but due to the streaming business model, Silver Wheaton has returned 1,559% to shareholders from their 2004 IPO to the market close on July 6, 2016. Streaming has become an attractive source of financing with over $10 billion of streaming transactions completed in the past five years. Traditional mining companies have become increas- ingly receptive to streaming financings with deals in 2015 including, but not limited to Teck Resources, Glencore, and Yamana Gold. Right now, former Pan American Silver President and CEO, Geoff Burns, and veteran investment banker, Daniel O'Flaherty, are looking to take advantage of the favourable timing in the space. The opportunity they see is the market valuing precious metals streaming companies at higher multiples when compared to traditional miners and developers. Burns has over 30 years of experience in the precious metals mining industry and previously served as the President and CEO of Pan American from May 2004 until his retirement at the end of 2015. During his tenure, Pan American increased silver produc- tion from 7.5 million ounces to over 26 million ounces annually, to become the second largest primary silver producer in the world. During his career, he has led or been part of numerous capital market transactions raising in excess of $1.2 billion in equity, debt and convertible debt. O'Flaherty has over 10 years of investment banking and executive officer experience. He was a director in the investment banking team of Scotia Capital in Vancouver focused exclusively on metals and mining. Over the past ten years, O'Flaherty has been directly involved in more than $20 billion of successful mining transactions, which has provided him with a network of key players in the industry. He also acts as a Director of Anthem United Inc., and prior to that was the Executive Vice President of Corporate Development of Esperanza Resources, which was sold to Alamos Gold for $90 million in 2013. In July, Maverix Metals completed a reverse take-over trans- action to acquire a package of 13 royalties and precious metal streams from Pan American Silver Corp. [PAA-TSX; PAAS- NASDAQ] and MacMillan Minerals. The newly formed company will be headed by Burns, Chairman, and O' Flaherty will act as President and CEO. Maverix Metals [MMX-TSXV] will be their investment vehicle, the newest precious metal streaming and roy- alty company. Chairman Burns said "I am truly excited about the future pros- pects for Maverix. The portfolio of royalties and metal streams that has been assembled provides a solid, cash generating founda- tion to build upon. The timing is right and the vehicle is right." The company will immediately be cash flow positive from existing streams and royalties coupled with a healthy balance sheet with CDN $5 million cash and no debt to pursue additional opportunities. Management believes the portfolio contains attrac- tive leverage to both gold and silver prices from operating mines, and other royalties and streams on development stage assets in Mexico, Canada, Peru, and Argentina. Key assets in the portfolio will include the La Colorada Mine gold stream which will provide 100% of the gold produced from Pan American's operating La Colorada silver mine in Mexico, less a fixed price of US $650/oz for the life of the mine. The mine produced 2,630 ounces of by-product gold in 2015, and has production guidance of 2,700-2,900 gold ounces for 2016. The mine is currently undergoing a major US $80 million expansion of both the mine and processing facilities, which are expected to increase gold production to over 4,000 ounces per year by 2018. Maverix will enjoy a 1.5% NSR (net smelter royalty) on all metal sales from the Taviche Oeste concession at Fortuna Silver the processing plant at pan American Silver's La Colorada silver mine in mexico. photo courtesy pan American Silver Corp. miNiNg

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