Close

Form 6-K MAVERIX METALS INC. For: Aug 12

August 12, 2022 7:02 AM EDT

Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUERPURSUANT TO RULE 13a-16 or 15d-16
UNDER THE
SECURITIES EXCHANGE ACT OF 1934

 

For the month of August, 2022

 

Commission File Number 001-38934

 

Maverix Metals Inc.
(Translation of registrant’s name into English)

 

Suite 575, 510 Burrard Street
Vancouver, British Columbia V6C 3A8
Canada
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

 

Form 20-F   ¨               Form 40-F   x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):¨

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):¨

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 12, 2022

 

  MAVERIX METALS INC.
   
  By: /s/ C. Warren Beil
    C. Warren Beil
    General Counsel

 

 

 

INDEX TO EXHIBITS

 

Exhibit
No.
  Description of Exhibit

99.1Management’s Discussion and Analysis for the three and six months ended June 30, 2022

99.2Unaudited condensed interim consolidated financial statements for the three and six months ended June 2022 and 2021

99.3Form 52-109F2 – Certification of Interim Filings Full Certificate – CEO

99.4Form 52-109F2 – Certification of Interim Filings Full Certificate – CFO

99.5News Release dated August 12, 2022

 

 

 

Exhibit 99.1 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

 

 

 

 

Date of Report: August 11, 2022

 

This Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the significant factors that have affected the performance of Maverix Metals Inc. and its subsidiaries (collectively “Maverix”, “we”, “us”, “our” or the “Company”) and such factors that may affect its future performance. This MD&A should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2022 and related notes thereto which have been prepared in accordance with International Financial Reporting Standards (“IFRS”), applicable to preparation of interim financial statements including International Accounting Standard 34-Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Readers are encouraged to consult the Company’s audited consolidated financial statements for the year ended December 31, 2021 and related notes thereto, which are available under Maverix’s profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov. All amounts are in U.S. dollars unless otherwise indicated.

 

Readers are cautioned that the MD&A contains forward-looking statements and that actual events may vary from management’s expectations. Readers are encouraged to read the “Forward-Looking Statements” at the end of this MD&A and to consult Maverix’s unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2022 and related notes thereto which are available on SEDAR at www.sedar.com and on Form 6-K filed with the United States Securities and Exchange Commission on EDGAR at www.sec.gov.

 

Additional information, including the primary risk factors affecting Maverix, are included on our Annual Information Form (“AIF”) and Form 40-F available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov, respectively. These documents contain descriptions of certain of Maverix’s royalty, stream and other interests, as well as a description of risk factors affecting the Company.

 

Table of Contents

 

Description of the Business 3
   
Highlights and Key Accomplishments 3
   
Adjusted Outlook for 2022 4
   
Portfolio of Royalty, Stream and Other Interests Owned by Maverix 4
   
Summary of Quarterly Results 10
   
Non-IFRS and Other Measures 16
   
Liquidity and Capital Resources 18
   
Outstanding Share Data 19
   
Off-Balance Sheet Arrangements 19
   
Related Party Transactions 20
   
Critical Accounting Judgements and Estimates 20
   
Financial Instruments 21
   
Disclosure Controls and Procedures 22
   
Internal Controls Over Financial Reporting 22
   
Forward-Looking Statements 23
   
Technical and Third-Party Information 24

 

 2

 

 

Description of the Business

 

Maverix is a resource-based company that seeks to acquire and manage royalties and metal purchase agreements (a “Stream” or “Streams”) on projects that are in an advanced stage of development or on operating mines producing precious or other metals. Royalty interests (“Royalty” or collectively, “Royalties”) are non-operating interests in mining projects that provide Maverix with the right to a percentage of the gross revenue from the metals produced from the project (a “Gross Revenue Royalty” or “GRR”) or the net revenue after the deduction of specified costs (a “Net Smelter Returns Royalty” or “NSR” royalty). Under a Stream interest, Maverix makes an upfront payment to acquire the Stream and then receives the right to purchase, at a fixed or variable price per unit based on the spot price of the precious or other metal, a percentage of the life of mine production or a specified time period.

 

The Company’s business strategy is to acquire existing Royalty and Stream interests, or to finance production, development, or in some circumstances, exploration stage projects in exchange for Royalty or Stream interests. In the ordinary course of business, Maverix engages in a continual review of opportunities to acquire existing Royalty or Stream interests, or to create new Royalties or Streams on operating mines, development projects and exploration projects. The Company currently has over 120 royalties, stream and other interests, of which 14 of the underlying interests are paying, excluding royalty payments from industrial minerals and power assets.

 

Highlights and Key Accomplishments

 

Financial and Operating:

 

·Gold Equivalent Ounces (“GEOs”) sold of 7,6491 and 15,3861 for the three and six months ended June 30, 2022 (2021: 7,8801 and 15,1821);
·Total revenue of $14.2 million and $28.9 million for the three and six months ended June 30, 2022 (2021: $14.3 million and $27.4 million);
·Operating cash flows of $8.0 million and $16.0 million for the three and six months ended June 30, 2022 (2021: $8.8 million and $22.3 million);
·Operating cash flows, excluding working capital changes, of $9.61 million and $20.11 million for the three and six months ended June 30, 2022 (2021: $9.31 million and $18.31 million);
·Cash operating margin of $1,6201 and $1,6621 per GEO for the three and six months ended June 30, 2022 (2021: $1,619 and $1,594);
·Average cash cost of $2361 and $2131 per GEO for the three and six months ended June 30, 2022 (2021: $197 and $210);
·Adjusted net income of $4.01 million $8.81 million for the three and six months ended June 30, 2022 (2021: $3.7 million and $8.7 million); and
·Net income of $2.8 million and $6.3 million for the three and six months ended June 30, 2022 (2021: $3.7 million and $18.5 million).

 

Acquisition of Gold Royalties in Nevada

 

In March 2022, the Company acquired three royalties on gold projects located in Nevada in exchange for a $5.0 million cash payment. The royalties include:

 

·A 3.5% to 4% NSR royalty on the Lewis property owned by Gold Standard Ventures Corp. (“Gold Standard”). The royalty ground covers 367 claims immediately adjacent to the high-quality Phoenix gold mine operated by Nevada Gold Mines, which is a joint venture between Barrick Gold Corporation and Newmont Corporation (“Newmont”);
·A 4% royalty on 105 claims, covering approximately 846 hectares, including the Dixie Creek prospect, which are currently leased by Gold Standard and form part of the South Railroad project land package; and
·A 4% royalty on two claims near Railroad prospect area, currently leased by Gold Standard, approximately seven kilometres north of the Pinion deposit on Gold Standard’s South Railroad project.

 

 

1 Refer to section on non-IFRS and other measures of this MD&A.

 

 3

 

 

Elevation Prepaid Gold Interest

 

In January 2022, the Company entered into a prepaid gold interest agreement with Elevation Gold Mining (“Elevation”). The Company made a cash payment of $6.0 million to Elevation and in return Elevation will provide the Company six quarterly deliveries of certain amounts of gold plus the equivalent amount of gold equal to $1.0 million beginning in March 2022 (the “Elevation Prepaid Gold Interest”). The Company will make ongoing cash payments equal to 5% of the spot gold price for each gold ounce delivered.

 

Quarterly Dividend Declared

 

On August 11, 2022, the Board of Directors of the Company declared a quarterly dividend of $0.0125 per common share payable on September 15, 2022 to shareholders of record as of the close of business on August 31, 2022.

 

Adjusted Outlook for 20221

 

Given the ongoing uncertainty relating to the Company’s Omolon royalty, Maverix is excluding attributable Omolon GEOs from its outlook for the second half of 2022. Excluding any contribution from the Omolon royalty in the second half, we expect 28,000 to 31,000 attributable GEOs2 for 2022, which compares to the previously announced outlook of 32,000 to 35,000 attributable GEOs2 for 2022, inclusive of the attributable GEOs from the Omolon royalty.

 

On July 21, 2022, Polymetal International plc (“Polymetal”) announced that production targets were achieved for the second quarter. In Q2, the Omolon mine produced approximately 43,000 ounces of gold and 100,000 ounces of silver. However, international sanctions against Russia continue to have a material impact on sales, procurement and logistics. Restrictions in the second quarter forced Polymetal to reduce shipments of gold creating a gap between sales and production. Maverix reports revenue and GEOs based on ounces sold and not produced and, therefore, recognized almost none of the approximately 1,100 attributable GEOs produced in the second quarter. Polymetal has noted the gap between sales and production will likely be closed in the third quarter as Polymetal ramps up export sales to various Asian markets, but the exact timing is difficult to judge. Polymetal has reiterated its production guidance for the year, however, it did note a risk of underperformance given persistent lockdowns in Asia. Maverix understands that proactive contingency planning has been initiated by Polymetal to maintain business continuity in the event of adverse developments, but no assurances can be made in this regard. The conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, have caused and could have further negative impacts on Polymetal’s ability to continue operation of Omolon and could further inhibit Polymetal’s ability to make payments to the Company. Maverix continues to work with Polymetal to effect payment of royalties from Omolon in a way that does not breach any relevant sanctions.

 

For more information, please refer to polymetalinternational.com and see the news releases dated July 21, 2022, June 23, 2022 and April 25, 2022.

 

Portfolio of Royalty, Stream and Other Interests Owned by Maverix

 

The Company owns over 120 Royalties, Streams and other interests. Maverix has 14 Royalties and Streams that are currently paying, including three in Australia, three in the United States, three in Mexico, two in Canada, and one in each of Honduras, Burkina Faso and Russia. In addition, the Company owns a number of Royalties and Streams on development and exploration/evaluation stage projects in North America, South America, and Australia, amongst others. The Company uses “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. We do not conduct mining operations on the properties in which we hold Royalty and Stream interests, and we are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties.

 

 

1 Statements made in this section contain forward-looking information. Reference should be made to the “Cautionary Statement on Forward-Looking Information” section at the end of this MD&A. For a description of material factors that could cause our actual results to differ materially from the forward-looking statements, please see the “Risk Factors” section in the most recent AIF and Form 40-F available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov, respectively.

2 Refer to section on non-IFRS and other measures of this MD&A. 

 

 4

 

 

Primary Properties:

 

The following table summarizes Maverix’s principal Stream and other interests:

 

Asset Location Operator Status MMX Attributable Production
or Relevant Commodity
MMX Purchase Price
Auramet USA Auramet Capital Partners, L.P. Paying 1,250 ounces plus 2% of dividends paid(1) per quarter 16% of gold spot price
El Mochito Honduras Kirungu Corporation Paying 25% of silver 25% of silver spot price
La Colorada Mexico Pan American Silver Corp. Paying 100% of gold Lesser of (i) US$650 per ounce and (ii) spot price
Moss USA Elevation Gold Mining Corporation Paying 100% of silver(2) 20% of silver spot price

 

(1) Amount of gold that is equivalent to all dividends distributed by Auramet International LLC on 2% of its shares.

(2) After 3.5 million ounces of silver are delivered, Maverix’s silver purchase entitlement will be 50% of the remaining life of mine silver production.

 

The following table summarizes Maverix’s principal Royalty interests:

 

Asset Location Operator Status Royalty Interest
Beta Hunt Australia Karora Resources Inc. Paying 3.25% GRR, and 1.5% NSR Royalties on all Gold production; and aggregate 1.5% NSR Royalties on all Nickel production
Camino Rojo Mexico Orla Mining Ltd. Paying 2.0% NSR Royalty(1) 
Cerro Blanco Guatemala Bluestone Resources Inc. Development 1.0% NSR Royalty
Converse USA Waterton Global Resource Management Development 5.0% NSR Royalty(2)
DeLamar USA Integra Resources Corp. Development 2.5% NSR Royalty(3)
Florida Canyon USA Argonaut Gold Inc. Paying 3.0% NSR Royalty
Goldfield USA Centerra Gold Inc. Development 5.0% NSR Royalty(4)
Hasbrouck USA West Vault Mining Inc. Development 1.25% NSR Royalty
Hope Bay Canada Agnico Eagle Mines Limited Development 1.0% NSR Royalty
Karma Burkina Faso Néré Mining Paying 2.0% NSR Royalty(5)
Kensington USA Coeur Mining, Inc. Operating 2.5% NSR Royalty(6)
Koné Côte d’Ivoire Montage Gold Corp. Development 2.0% NSR Royalty
McCoy-Cove USA i-80 Gold Corp. Development 3.5% NSR Royalty(7)
Moose River Canada St Barbara Limited Paying 1.0% NSR Royalty(8)
Mt Carlton Australia Navarre Minerals Limited Paying 2.5% NSR Royalty
Norte Abierto Chile

Barrick Gold Corporation

Newmont Corporation

Development 1.25% GRR(9)
Omolon Russia Polymetal International plc Paying 2.5% GRR
Railroad USA Gold Standard Ventures Corp. (10) Development 2.0% NSR Royalty(2)
San Jose Mexico Fortuna Silver Mines Inc. Paying 1.5% NSR Royalty(11)
Silvertip Canada Coeur Mining, Inc. Development 2.5% NSR Royalty
Vivien Australia Ramelius Resources Ltd. Paying 3.5% GRR

 

(1) Royalty is on oxide and transitional ore only.

(2) Royalty covers a portion of the existing mineral resource.

(3) NSR royalty covers a portion of the existing resource and decreases to a 1.0% NSR Royalty after CAD$10 million in royalties have been paid.

(4) Royalty applies to the Gemfield deposit.

(5) Royalty applies to 85.5% of total production.

(6) NSR royalty not payable until after a recoupment period.

(7) 2.0% of the NSR royalty only covers a portion of the deposit.

(8) Royalty applies to the Touquoy deposit.

(9) Royalty applies to 25% of gross revenues from all metals sold from Cerro Casale and Quebrada Seca. Payment commences after $10.0 million is payable under the agreement.

(10) In June 2022, Orla Mining Ltd. (“Orla”) and Gold Standard announced they had entered into a definitive agreement whereby Orla will acquire all of the issued and outstanding shares of Gold Standard.

(11) Royalty applies to the Taviche Oeste concessions.

 

 5

 

 

Portfolio Updates - Paying and Operating Assets:

 

Omolon (2.5% GRR)

 

Polymetal announced operations in Russia continue undisrupted and reiterated its full-year production guidance, with a risk of underperformance given persistent logistical constraints and the impact of sanctions. Sales of gold bullion from Russian mines to diverse Asian markets returned to regular schedule after a significant slowdown in April and May. Sales logistics continue to experience significant challenges due to certain restrictions and the impact of sanctions, leading to slower inventory turnover and higher costs. The gap between production and sales is likely to be closed during the third quarter as Polymetal ramps up export sales to various Asian markets, but the exact timing is difficult to judge.

 

Polymetal’s procurement initiatives continue to adapt to the current environment with orderly replacement of sanctioned equipment, consumables and supplies with alternatives from Russia, and other countries. Recently, Japan joined western countries and imposed additional sanctions against Russia prohibiting exports of industrial goods and technologies. The majority of existing contracts with foreign suppliers continue to be honoured and Polymetal maintains a significant inventory of critical consumables and spares.

 

Polymetal has stated that sanctions announced between March 9, 2022, and June 23, 2022, did not have a material impact on its business and it complies rigorously with all relevant legislation and is implementing comprehensive measures to observe all applicable international sanctions. Polymetal has cautioned the scope and impact of any new potential sanctions or counter sanctions are yet unknown and contingency planning has been initiated to maintain business continuity. Polymetal believes that targeted sanctions on the company remain unlikely but are not impossible.

 

For more information, please refer to polymetalinternational.com and see the news releases dated June 23, 2022, July 19, 2022, and July 21, 2022.

 

Camino Rojo (2% NSR)

 

Orla declared commercial production at its Camino Rojo oxide mine effective April 1, 2022, after a successful commissioning period which included the ramp up of mining and processing to sustained throughput levels. In the second quarter, Camino Rojo had record quarterly gold production of 25,672. Camino Rojo’s processing throughput for the quarter averaged 18,245 tonnes per day, exceeding nameplate capacity of 18,000 tonnes per day.

 

For more information, please refer to orlamining.com and see the news release dated July 11, 2022.

 

Beta Hunt (4.75% Gold Royalty + 1.5% Nickel Royalty)

 

Karora Resources Inc. (“Karora”) announced the drilling of the highest grade interval to date at Beta Hunt’s Larkin Zone, 29.8 grams per tonne (“g/t”) gold over 7.8 metres, as part of its ongoing underground diamond drill program at Beta Hunt. Results from the drilling program support and extend the mineralization already defined by the current Larkin mineral resource and provide strong encouragement for potential high-grade mineralization to continue at depth. Work on the second decline at Beta Hunt continues to track on budget, and ahead of schedule, with an expected completion date of Q1 2023.

 

Karora announced an updated nickel measured and indicated resource estimate for Beta Hunt that showed an increase of 22% to 19,600 tonnes of nickel and an increase in the nickel inferred resource of 52% to 13,200 tonnes of nickel. The significant addition includes the Maiden 50C Trend resource comprising a measured and indicated resource of 153,000 tonnes at 2.8% nickel for 4,300 tonnes of nickel and an inferred mineral resource of 124,000 tonnes at 3.1% nickel for 3,800 tonnes of nickel. The 50C Trend is part of the Gamma Block Nickel mineral resource which is defined over 800 metres of strike with potential to extend a further 1.8 kilometres to 2.6 kilometres along strike. The updated mineral resource will be used to support a preliminary economic assessment of expanded nickel production at Beta Hunt.

 

For more information, please refer to karoraresources.com and see the news releases dated July 19, 2022, July 14, 2022, and May 11, 2022

 

 6

 

 

Mt Carlton (2.5% NSR)

 

Navarre Minerals Limited (“Navarre”) announced further outstanding high-grade gold, silver and copper drilling intercepts at the Mt Carlton United (“MCU”) deposit. The latest drilling results include a highlight intercept of 2 metres at 99.1 g/t gold and add to the satellite deposits defined at Telstra Hill, Delta and BV7. The results from MCU further reinforce the outstanding prospectivity of the broader Mt Carlton area and support Navarre’s strategic objective of growing the mineral inventory and extending the mine life. While drilling continues in 2022 as part of an ongoing exploration program, Navarre anticipates these recent drilling results will inform an updated resource estimate for MCU, which is expected to be published in Q4 of this year.

 

For more information, please refer to navarre.com.au and see the news release dated July 25, 2022.

 

Recuperada (3.0% NSR)

 

On June 2, 2022, Silver X Mining Corp. (“Silver X”) announced the results of a new Technical Report for the Nueva Recuperada silver-polymetallic project (“Recuperada”) in Huancavelica, Peru. The report included an updated mineral resource estimate for Recuperada which almost tripled the size of the measured, indicated and inferred silver equivalent resource and provides Silver X with a clear road map to further expand production. Measured and indicated mineral resources now total 0.8 Mt at 118.5 g/t Ag, 2.85% Pb, and 2.16% Zn. Inferred mineral resources total 14.9 Mt at 162.65 g/t Ag, 2.54% Pb, and 2.50% Zn.

 

For more information, please refer to silverxmining.com and see the news release dated June 2, 2022.

 

Karma (2% NSR)

 

Endeavour Mining plc (“Endeavour”) announced that it had closed the sale of its 90% interest in its Karma mine to Néré Mining. Néré Mining is a Burkina Faso based consortium led by a board member of both Karma and a subsidiary of Endeavour that holds the mining license for the Endeavour Group’s Mana mine. In early June, mine operations were suspended to focus on securing the site following a security incident at the mine.

 

For more information, please refer to endeavourmining.com and see the news release dated March 11, 2022.

 

Significant Portfolio Updates - Development and Exploration Assets:

 

South Railroad (2% NSR)

 

Gold Standard and Orla announced they entered into a definitive agreement whereby Orla will acquire all of the issued and outstanding shares of Gold Standard. Gold Standard’s primary asset is the 100% owned South Railroad project located in the prolific Carlin trend in Nevada. Gold Standard previously released the results of a robust feasibility study on the South Railroad project which outlines a 10.5-year mine life with total gold production of over one million ounces and average gold production of 152,000 ounces over the first four years.

 

For more information, please refer to goldstandardv.com and see the news releases dated February 23, 2022, and June 13, 2022.

 

Hope Bay (1% NSR)

 

Agnico Eagle Mines Ltd. (“Agnico Eagle”) announced that drilling continued to ramp-up in Q2 2022, completing 30,761 metres (46,658 metres year to date) with three drill rigs now operating underground at Doris, three drill rigs targeting deep extension at Doris and a seventh drill rig operating at Madrid. Drill results continue to show excellent potential at Doris at depth highlighted by 12.2 g/t gold over 7.1 metres at 456 metres depth from BTD Connector and 20.9 g/t gold over 2.3 metres at 344 metres depth from BTD Extension. In 2022, Agnico Eagle originally expected to complete 80,000 metres of drilling in a $32.2 million exploration program that will include $17.9 million to develop new exploration drifts and 29,000 metres of underground drilling at the Doris deposit. On the back of the drilling success at Doris in the first half of 2022, Agnico Eagle is considering an increase to the exploration budget for the second half of 2022. Exploration is expected to continue through 2023 while a larger production scenario is being evaluated.

 

For more information, please refer to agnicoeagle.com and see the news releases dated February 23, 2022, and July 27, 2022.

 

 7

 

 

Gemfield (5% NSR)

 

Centerra Gold Inc. (“Centerra”) announced it completed the acquisition of the Goldfield District project (“Goldfield”) for $206.5 million. Goldfield is a conventional open-pit, heap leach project located in Esmeralda County, Nevada. Goldfield is comprised of three known deposits including the Gemfield, Goldfield Main, and McMahon deposits. The Gemfield deposit is fully permitted and shovel ready and was identified by Centerra as the first pit for potential development. In 2019, Waterton Global Resource Management, Inc. (“Waterton”) announced it was completing a feasibility study for the project with project average annual production in excess of 125,000 ounces of gold. Centerra expects to release an updated resource estimate in the first half of 2023 and an updated feasibility study thereafter.

 

For more information, please refer to centerragold.com and see the news releases dated February 22, 2022, and February 28, 2022.

 

Koné (2% NSR)

 

Montage Gold Corp. (“Montage”) announced the results of a definitive feasibility study (“DFS”) for the Koné gold project in Côte d’Ivoire including an after-tax net present value of $746 million and an internal rate of return of 35% at a $1,600 per ounce gold price. The DFS outlined a 14.8-year mine life with average annual gold production of 257,000 ounces in the first nine years and an average of 207,000 ounces over its mine life. The permitting process at Koné is well underway with all requisite approvals expected in the third quarter of 2022 and an advisor has been appointed to assist Montage in the raising of project finance for the development of the project.

 

For more information, please refer to montagegoldcorp.com and see the news releases dated February 14, 2022, and March 9, 2022.

 

Cerro Blanco (1% NSR)

 

Bluestone Resources Inc. (“Bluestone”) announced the results of a feasibility study on its flagship Cerro Blanco project in Guatemala. The feasibility study outlined a robust, high-grade operation with average annual production of 241,000 ounces of gold over the first 10 years of operation and an initial mine life of 14 years with additional opportunities to extend the mine life given the extensive exploration potential of the land package. Bluestone recently submitted the environmental permit amendment application for the change in mining method and based on current estimates Bluestone believes it will be possible to receive approval of the permit amendment by the end of the year, followed by a construction license and a forestry license.

 

For more information, please refer to bluestoneresources.ca and see the news releases dated February 22, 2022, and June 6, 2022.

 

Panton (2.0% NSR on Platinum Group Metals (“PGM”))

 

On June 21, 2022, Future Metals NL (“Future Metals”) announced an updated mineral resource estimate for the Panton PGM-Nickel project (“Panton”) of 5.0 million ounces of palladium, platinum and gold and 238 thousand tonnes of nickel, at a grade of 1.66 g/t palladium equivalent. The updated resource confirms the Panton deposit to be of a global scale and the second largest PGM deposit in Australia. Future Metals continues to progress the metallurgy work at Panton and are able to move towards a scoping study to make a preliminary assessment on the best path forward.

 

For more information, please refer to future-metals.com.au and see the news release dated June 21, 2022.

 

 8

 

 

McCoy-Cove (3.5% NSR)

 

i-80 Gold Corp. (“i-80”) announced that the underground, advanced-exploration, program at the McCoy-Cove project is progressing according to plan. The Cove mine portal has been collared and more than 300 metres of the decline has been constructed. The Phase 1 program will include the construction of an initial level with multiple drill bays to provide access for upgrading resources. Approximately 40,000 metres of underground definition and expansion drilling is anticipated to commence in Q4 2022 followed by a feasibility study anticipated to be completed in 2023.

 

For more information, please refer to i80gold.com and see the news release dated July 21, 2022.

 

DeLamar (2.5% NSR)

 

Integra Resources Corp. (“Integra”) announced a simplified strategy to advance the heap leach stage of the project into permitting and development on a standalone basis. Permitting work at DeLamar has been initiated and baseline study work is well underway to support the submittal of a Plan of Operations in H1 2023. Advancing the DeLamar gold-silver project towards permitting and development of the heap leach stage as a standalone mining operation is a lower cost, lower risk option, creating strong economic returns and rapid payback. Non-oxide milling expansion will continue to be optimized through further study work and can be pursued under the right market conditions.

 

For more information, please refer to integraresources.com and see the news release dated April 21, 2022.

 

Silvertip (2.5% NSR)

 

Coeur Mining Inc. (“Coeur”) announced that work has commenced to assess the economics of a potentially larger expansion and restart of the high-grade Silvertip property in British Columbia. The review is evaluating the potential to target a higher throughput to take advantage of the significant resource growth and on a timetable that would sequence an expansion and restart following completion and commissioning of the Rochester mine expansion. Results from this ongoing work are expected by the end of the year.

 

Coeur continues to generate positive results from ongoing exploration as highlighted by the silver, zinc and lead measured and indicated resources increasing year-over-year by approximately 51%, 33% and 44%, respectively. Silver, zinc and lead inferred resources also grew by 48%, 37% and 40%, respectively, during the same period. A total of approximately 102,275 metres were drilled in 2021 and up to seven core drill rigs were active during the fourth quarter (five on surface and two underground) focused on expansion drilling at southern portions and deeper extensions of the Southern Silver, Discovery South and Camp Creek zones. In 2022, Coeur plans to continue the resource growth program and follow up drilling activity on the newly discovered zones. Recently, surface and underground drilling led to the discovery of a new high-grade chimney west of the Camp Creek resource located at a shallower depth, called Camp Creek West.

 

Given the ongoing impressive drill results at Silvertip, Coeur plans to invest additional capital to accelerate activity during the second half of the year. For 2022, capital expenditures are now expected to be approximately $28-36 million (previously $18-24 million). The revised figures reflect increased underground development and infill drilling.

 

For more information, please refer to coeur.com and see the news releases dated February 16, 2022, April 28, 2022, and August 3, 2022.

 

 9

 

 

Summary of Quarterly Results

 

Quarter Ended

(in thousands of USD, except for GEO and per share amounts)

  June 30, 2022   March 31, 2022   December 31, 2021   September 30, 2021 
Statement of Income and Comprehensive Income                    
Royalty revenue  $5,623   $6,866   $12,031   $7,983 
Sales   8,574    7,788    4,454    5,675 
Total revenue   14,197    14,654    16,485    13,658 
Net income   2,755    3,523    2,766    2,829 
Basic earnings per share   0.02    0.02    0.02    0.02 
Diluted earnings per share  $0.02   $0.02   $0.02   $0.02 
                     
Cash flow from operating activities  $7,983   $8,019   $11,634   $9,278 
Dividends declared per share  $0.0125   $0.0125   $0.0125   $0.0125 
                     
Non-IFRS and Other Measures1                    
Adjusted net income  $4,038   $5,661   $3,734   $4,709 
Adjusted basic earnings per share  $0.03   $0.04   $0.03   $0.03 
Total GEOs sold   7,649    7,738    9,173    7,671 
Average realized gold price per GEO  $1,856   $1,894   $1,797   $1,780 
Average cash cost per GEO   236    190    100    164 
Cash operating margin per GEO   1,620    1,704    1,697    1,616 
Cash flow from operating activities, excluding changes in non-cash working capital  $9,596   $10,549   $13,017   $9,682 
                     
Statement of Financial Position                    
Total assets  $395,545   $394,586   $392,535   $400,550 
Total non-current liabilities  $19,687   $18,797   $17,811   $27,024 

 

Quarter Ended

(in thousands of USD, except for GEO and per share amounts)

  June 30, 2021   March 31, 2021   December 31, 2020   September 30, 2020 
Statement of Income and Comprehensive Income                    
Royalty revenue  $7,999   $6,883   $10,140   $8,689 
Sales   6,310    6,197    6,429    6,162 
Total revenue   14,309    13,080    16,569    14,851 
Net income   3,708    14,769    5,346    14,437 
Basic earnings per share   0.03    0.10    0.04    0.11 
Diluted earnings per share  $0.03   $0.10   $0.04   $0.11 
                     
Cash flow from operating activities  $8,813   $13,479   $7,746   $13,792 
Dividends declared per share  $0.0125   $0.01   $0.01   $0.01 
                     
Non-IFRS and Other Measures1                    
Adjusted net income  $3,739   $4,959   $6,282   $5,336 
Adjusted basic earnings per share  $0.03   $0.04   $0.05   $0.04 
Total GEOs sold   7,880    7,302    8,836    7,797 
Average realized gold price per GEO  $1,816   $1,791   $1,875   $1,905 
Average cash cost per GEO   197    223    184    195 
Cash operating margin per GEO   1,619    1,568    1,629    1,602 
Cash flow from operating activities, excluding changes in non-cash working capital  $9,313   $8,998   $11,474   $10,841 
                     
Statement of Financial Position                    
Total assets  $367,068   $362,047   $379,607   $325,396 
Total non-current liabilities  $3,134   $1,882   $32,000   $35,000 

 

 

1 Refer to section on non-IFRS and other measures of this MD&A.

 

 10

 

 

Changes in sales, net income and cash flow from operating activities from quarter to quarter are affected primarily by fluctuations in production at the underlying mines, the timing of shipments, changes in the price of commodities, as well as acquisitions of Royalties, Streams and prepaid gold and other interests and the commencement of operations of mines under construction. For more information, refer to the quarterly commentary below.

 

Three Months Ended June 30, 2022 Compared to the Three Months June 30, 2021

 

For the three months ended June 30, 2022, the Company had net income of $2.8 million and cash flow from operations of $8.0 million compared with net income and cash flow from operations of $3.7 million and $8.8 million for the three months ended June 30, 2021. The decrease in net income and cash flows were attributable to a combination of factors including:

 

·Decrease in revenue and cash flows of $1.9 million and $1.5 million from El Mochito due to lower silver grades currently being mined in addition to lower realized silver prices compared with the prior period;

 

·Decrease in revenue of $1.1 million at Beta Hunt primarily due to recognition of deferred revenue of $0.8 million during the three months ended June 30, 2021;

 

·Decrease in sales and cash flows of $0.9 million and $0.7 million, respectively, from the Moss mine due to the transition from the Phase 2 leach pad to the Phase 3 leach pad and lower silver grades currently being mined in the West Pit;

 

·Decrease in revenue and cash flows of $0.6 million and $2.9 million from Omolon as a result of restrictions in the second quarter which forced Polymetal to reduce shipments of gold creating a gap between sales and production discussed further above;

 

·Decrease in revenue and cash flow of $0.4 million and $0.4 million, respectively, from the Karma mine as operations were suspended at the beginning of June due to a security incident at the mine; and

 

·Net income was reduced in 2022 by non-cash cost of sales of $3.5 million due to the inventory received from the Company’s prepaid gold interests being recorded at fair value, with the difference between the fair value of the gold on the delivery date less the ongoing cost of purchasing the gold being recognized as a non-cash partial settlement of the prepaid gold interests. Cash flow from operations was reduced by $0.5 million from the cost of acquiring the gold under the Company’s prepaid gold interests.

 

Partially offset by:

 

·The Company entered into prepaid gold agreements with Auramet Capital Partners, L.P (“Auramet”) and Elevation in September 2021 and January 2022, respectively, which provided $4.0 million in sales and cash flows from operations of $3.5 million after deducting the cash cost of acquiring the gold. In addition, a $2.0 million gain on the change in fair value of the prepaid gold interests was recognized in net income for the three months ended June 30, 2022;

 

·Increase in revenue and cash flows of $1.0 million and $0.7 million from La Colorada as the mine experienced ventilation constraints which impacted development and mining rates during 2021;

 

·Increase in revenue and cash flows of $0.9 million and $0.8 million from the Camino Rojo mine which was ramping up production in the first quarter of 2022 and commercial production was declared effective April 1, 2022;

 

·Decrease in deferred income tax expense of $0.4 million due to smaller changes in temporary differences primarily related to Royalty, Stream and prepaid gold interests; and

 

·A 2% increase in the average realized gold price per GEO.

 

 11

 

 

For the three months ended June 30, 2022, the Company had total revenue of $14.2 million and GEOs of 7,6491 compared with total revenue of $14.3 million and GEOs of 7,8801 for the three months ended June 30, 2021.

 

The following table summarizes the Company’s total revenues and GEOs for the three months ended June 30, 2022 and 2021:

 

      Three months ended June 30, 2022   Three months ended June 30, 2021 
(in thousands of USD, except for GEO amounts)  Primary
Product
  Royalty
Revenue ($)
   Sales ($)   GEOs1   Royalty
Revenue ($)
   Sales ($)   GEOs1 
Auramet  Gold   -    2,861    1,571    -    -    - 
Beta Hunt  Gold   1,753    -    937    2,808    -    1,546 
Camino Rojo  Gold   945    -    506    -    -    - 
El Mochito  Silver   -    1,136    608    -    3,041    1,674 
El Peñón  Gold   35    -    19    -    -    - 
Elevation  Gold   -    1,184    653    -    -    - 
Florida Canyon  Gold   788    -    421    758    -    418 
Karma  Gold   369    -    198    774    -    427 
La Colorada  Gold   -    2,056    1,098    -    1,063    588 
Moose River  Gold   289    -    155    502    -    276 
Moss  Silver   -    1,337    714    -    2,206    1,214 
Mt Carlton  Gold   252    -    134    1,010    -    556 
Omolon  Gold   38    -    20    623    -    343 
Recuperada  Silver   93    -    49    -    -    - 
San Jose  Silver   504    -    269    643    -    354 
Vivien  Gold   518    -    277    473    -    260 
Other  Various   39    -    20    408    -    224 
Consolidated total      5,623    8,574    7,649    7,999    6,310    7,880 

 

Q2 2022 Total Revenue by Region Q2 2021 Total Revenue by Region
Chart, sunburst chart

Description automatically generated Chart, sunburst chart

Description automatically generated
Q2 2022 GEOs1 by Product Q2 2021 GEOs1 by Product
Chart, sunburst chart

Description automatically generated

 

 

1 Refer to section on non-IFRS and other measures of this MD&A.

2 Other includes revenues generated from mines located in Russia, Honduras, Chile, Peru and Burkina Faso. 

 

 12

 

 

Six Months Ended June 30, 2022 Compared to the Six Months June 30, 2021

 

For the six months ended June 30, 2022, the Company had net income of $6.3 million and cash flow from operations of $16.0 million compared with net income and cash flow from operations of $18.5 million and $22.3 million for the six months ended June 30, 2021. The decrease in net income and cash flows were attributable to a combination of factors including:

 

·During the six months ended June 30, 2021, an $11.0 million gain was recognized in net income related to the partial buyback of the Company’s Hope Bay royalty interest. Upon the buyback, there was also an increase in working capital of $2.5 million from the receipt of previously deferred royalty receivable amounts due which increased cash flow from operations;

 

·A one-time $2.4 million revaluation adjustment was recognized in net income during the six months ended June 30, 2021 from the conversion of a convertible debenture into an additional 5% silver Stream on the El Mochito mine;

 

·Decrease in revenue and cash flows of $1.9 million and $2.9 million at Beta Hunt due to royalty amendment completed in September 2020 which reduced the aggregate royalty from 7.5% to 4.75%. During the six months ended June 30, 2021, the Company received $2.5 million of cash flow associated with the remaining amounts that were owing under the Beta Hunt royalty amendment and revenue included the recognition of $1.7 million in deferred revenue related to the royalty amendment;

 

·Decrease in revenue and cash flows of $2.7 million and $2.1 million from El Mochito due to lower silver grades currently being mined in addition to lower silver prices compared with the prior period;

 

·Decrease in sales and cash flows of $1.3 million and $1.1 million, respectively, from the Moss mine due to the transition from the Phase 2 leach pad to the Phase 3 leach pad and lower silver grades currently being mined in the West Pit;

 

·Decrease in cash flows of $2.9 million from Omolon as a result of restrictions in the second quarter which forced Polymetal to reduce shipments of gold creating a gap between sales and production discussed further above;

 

·Decrease in revenue and cash flow of $0.6 million and $0.5 million, respectively, from the Karma mine as operations were suspended at the beginning of June due to a security incident at the mine; and

 

·Net income was reduced in 2022 by non-cash cost of sales of $6.7 million due to the inventory received from the Company’s prepaid gold interests being recorded at fair value, with the difference between the fair value of the gold on the delivery date less the ongoing cost of purchasing the gold being recognized as a non-cash partial settlement of the prepaid gold interests. Cash flow from operations was reduced by $1.0 million in 2022 from the cost of acquiring the gold under the Company’s prepaid gold interests.

 

Partially offset by:

 

·The Company entered into prepaid gold agreements with Auramet and Elevation in September 2021 and January 2022, respectively, which provided $7.7 million in sales and cash flows from operations of $6.7 million after deducting the cash cost of acquiring the gold. In addition, a $3.5 million gain on the change in fair value of the prepaid gold interests was recognized in net income for the six months ended June 30, 2022;

 

·Increase in revenue and cash flows of $1.7 million and $0.9 million from Camino Rojo mine which was ramping up production in the first quarter of 2022 and commercial production was declared effective April 1, 2022;

 

·Increase in revenue of $0.2 million from Omolon as a result of the Company increasing and expanding its effective interest to a 2.5% GRR that covers all licenses currently comprising the Omolon mine and timing of receipt of royalty income;

 

·Lower deferred income tax expense of $2.3 million due to the tax consequences associated with the partial buyback of the Hope Bay royalty interest and the conversion of the convertible debenture into an additional 5% silver Stream on the El Mochito mine during 2021; and

 

·A 4% increase in the average realized gold price per GEO.

 

 13

 

 

For the six months ended June 30, 2022, the Company had total revenue of $28.9 million and GEOs of 15,3861 compared with total revenue of $27.4 million and GEOs of 15,1821 for the six months ended June 30, 2021.

 

The following table summarizes the Company’s total revenues and GEOs for the six months ended June 30, 2022 and 2021:

 

      Six months ended June 30, 2022   Six months ended June 30, 2021 
(in thousands of USD, except for GEO amounts)  Primary
Product
  Royalty
Revenue ($)
   Sales ($)   GEOs1   Royalty
Revenue ($)
   Sales ($)   GEOs1 
Auramet  Gold   -    5,312    2,821    -    -    - 
Beta Hunt  Gold   3,244    -    1,731    5,158    -    2,856 
Camino Rojo  Gold   1,729    -    923    -    -    - 
El Mochito  Silver   -    2,545    1,358    -    5,259    2,910 
El Peñón  Gold   35    -    19    -    -    - 
Elevation  Gold   -    2,386    1,276    -    -    - 
Florida Canyon  Gold   1,370    -    731    1,451    -    804 
Karma  Gold   837    -    447    1,451    -    804 
La Colorada  Gold   -    3,034    1,623    -    2,848    1,594 
Moose River  Gold   464    -    248    818    -    452 
Moss  Silver   -    3,085    1,645    -    4,400    2,437 
Mt Carlton  Gold   910    -    485    1,384    -    765 
Omolon  Gold   1,537    -    819    1,376    -    763 
Recuperada  Silver   427    -    227    -    -    - 
San Jose  Silver   940    -    501    1,265    -    701 
Vivien  Gold   873    -    466    1,153    -    639 
Other  Various   123    -    66    826    -    457 
Consolidated total      12,489    16,362    15,386    14,882    12,507    15,182 

 

2022 YTD Total Revenue by Region 2021 YTD Total Revenue by Region
Chart, sunburst chart

Description automatically generated Chart, sunburst chart

Description automatically generated
2022 YTD GEOs1 by Product 2021 YTD GEOs1 by Product
Chart, sunburst chart

Description automatically generated Chart, sunburst chart

Description automatically generated

 

 

1 Refer to section on non-IFRS and other measures of this MD&A.

2 Other includes revenues generated from mines located in Russia, Honduras, Chile, Peru and Burkina Faso. 

 

 14

 

 

For the Three Months Ended June 30, 2022 Compared to Other Quarters Presented

 

When comparing net income of $2.8 million and cash flow from operations of $8.0 million for the three months ended June 30, 2022 with net income and operating cash flows for other quarters presented in the table of Summary of Quarterly Results above, the following items impact comparability of the analysis:

 

·Revenue and cash flows of $0.9 million and $0.8 million during the three months ended June 30, 2022 from Camino Rojo as the mine was ramping up production in the first quarter of 2022 and commercial production was declared effective April 1, 2022;

 

·The Company entered into prepaid gold agreements with Auramet and Elevation in September 2021 and January 2022, respectively, which have provided additional sales and cash flows from operations and non-cash changes in fair value adjustments since the dates of acquisition;

 

·In October 2021, the Company increased and expanded its effective interest to a 2.5% GRR that covers all licenses currently comprising the Omolon mine and received a one-time bonus royalty of $3.2 million based on the fourth quarter 2021 production at the Omolon mine;

 

·An $11.0 million gain recognized in net income during the three months ended March 31, 2021 for the partial buyback of the Hope Bay royalty interest;

 

·An increase in working capital of $2.5 million from previously deferred amounts for a portion of the Hope Bay royalty revenue and $2.5 million of the remaining amount owed under the Beta Hunt royalty amendment completed in September 2020 received during the three months ended March 31, 2021;

 

·A $2.4 million revaluation adjustment recognized during the three months ended March 31, 2021 from the conversion of the convertible debenture into an additional 5% silver Stream on the El Mochito mine;

 

·In September 2020, the company completed an amendment of our Beta Hunt royalty interest. As a result, the Company recognized a gain on the amendment of $9.3 million and current income tax expense and taxes paid of $4.3 million during the three months ended December 31, 2020 and deferred revenue of $5.0 million which was amortized into royalty revenue over approximately one and a half years ending in December 31, 2021; and

 

·The Company recognized an increase in net income of $2.9 million due to revaluation of warrants held during the three months ended December 31, 2020.

 

Change in Total Assets

 

Total assets increased by $1.0 million from March 31, 2022 to June 30, 2022 primarily resulting from accrued royalty income and sales during the period and a $2.0 million change in fair value of the Company’s prepaid gold interests. The increase in total assets was partially offset by depletion of the Company’s royalty, stream and other interests.

 

Total assets increased by $2.1 million from December 31, 2021 to March 31, 2022 primarily resulting from accrued royalty income and sales during the period and a $1.5 million change in fair value of the Company’s prepaid gold interests. The increase in total assets was partially offset by depletion of the Company’s royalty, stream and other interests.

 

Total assets decreased by $8.0 million from September 30, 2021 to December 31, 2021 primarily resulting from the $11.0 million repayment of the Company’s credit facility and depletion of the Company’s royalty, stream and other interests. The decrease in total assets was partially offset by royalty revenue and sales and the proceeds from the exercise of warrants.

 

Total assets increased by $33.5 million from June 30, 2021 to September 30, 2021 primarily resulting from the acquisition of the Auramet prepaid gold interest, which was financed by drawing $23.5 million on our credit facility and cash on hand and the proceeds from the exercise of warrants and options. The net increase in total assets from the acquisition of the Auramet prepaid gold interest was partially offset by the cash consideration paid from the Company’s cash on hand and depletion of the Company’s royalty, stream and other interests.

 

 15

 

 

Total assets increased by $5.0 million from March 31, 2021 to June 30, 2021 primarily resulting from the acquisition of a royalty portfolio from Pan American Silver Corp. (“Pan American”), which was financed by the issuance of common shares of the Company and a cash payment of $7.0 million. The net increase in total assets from the acquisition of the royalty portfolio from Pan American was partially offset by the cash consideration paid of $7.0 million and depletion of the Company’s royalty, stream and other interests.

 

Total assets decreased by $17.6 million from December 31, 2020 to March 31, 2021 primarily resulting from the $32.0 million repayment of the Company’s credit facility, the decrease in the Hope Bay royalty interest from the partial buyback, and depletion of the Company’s royalty, stream and other interests. The decrease in total assets was partially offset from the $50.0 million received from the partial buyback of the Hope Bay royalty interest.

 

Total assets increased by $54.2 million from September 30, 2020 to December 31, 2020 primarily resulting from the acquisition of a royalty portfolio from Newmont, which was financed by the issuance of common shares of the Company and a cash payment of $15.0 million. The net increase in total assets from the acquisition of the royalty portfolio from Newmont was partially offset by the cash consideration paid of $15.0 million, a $3.0 million repayment under the Company’s credit facility and depletion of the Company’s royalty, stream and other interests.

 

Non-IFRS and Other Measures

 

The Company has included, throughout this document, certain performance measures, including (i) adjusted net income and adjusted basic earnings per share, (ii) average realized gold price per GEO, (iii) average cash cost per GEO, (iv) cash operating margin per GEO, and (v) operating cash flows excluding changes in non-cash working capital. The presentation of these non-IFRS and other measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS and other measures do not have any standardized meaning prescribed by IFRS, and other companies may calculate these measures differently.

 

i.Adjusted net income and adjusted basic earnings per share are calculated by excluding the effects of the non-cash cost of sales related to the prepaid gold interests, non-cash change in fair value of the prepaid gold interests, gains/(losses) on sale or amendment of royalty and streams, gains/(losses) on conversion of debentures, other income/expenses, and impairment charges. The Company believes that in addition to measures prepared in accordance with IFRS, certain investors use this information to evaluate the results of the underlying business of the Company. Management believes that this is a useful measure of the Company’s performance because it adjusts for items which may not relate to or have a disproportionate effect on the period in which they are recognized, impact the comparability of our core operating results from period to period, are not always reflective of the underlying operating performance of our business and/or are not necessarily indicative of future operating results. The table below provides a reconciliation of net income to adjusted net income and presents adjusted earnings per share:

 

   Three months ended   Six months ended 
(in thousands of USD, except share and per share amounts)  June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021 
Net income  $2,755   $3,708   $6,278   $18,477 
Non-cash cost of sales – prepaid gold interests   3,523    -    6,722    - 
Change in fair value of prepaid gold interests   (1,990)   -    (3,508)   - 
Gain on royalty transactions   -    -    -    (10,983)
Gain on conversion of debenture   -    -    -    (2,410)
Other expense (income)   224    42    288    (4)
Effect of taxes on adjusting items   (474)   (11)   (946)   3,617 
Adjusted net income  $4,038   $3,739   $8,834   $8,697 
Divided by:                    
Basic weighted average number of common shares   147,323,143    141,223,815    147,112,088    141,001,121 
Equals:                    
Adjusted basic earnings per share  $0.03   $0.03   $0.06   $0.06 
                     

 

 16

 

 

ii.Average realized gold price per GEO is calculated by dividing the Company’s total revenue by the GEOs sold. The Company presents average realized gold price per GEO as it believes that certain investors use this information to evaluate the Company’s performance in comparison to other royalty and streaming companies in the precious metals mining industry that present results on a similar basis. The table below provides a reconciliation of average realized price per GEO:

 

   Three months ended   Six months ended 
(total revenue presented in thousands of USD)  June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021 
Total revenue  $14,197   $14,309   $28,851   $27,389 
Divided by:                    
GEOs sold1   7,649    7,880    15,386    15,182 
Equals:                    
Average realized gold price per GEO  $1,856   $1,816   $1,875   $1,804 
                     

 

iii.Average cash cost per GEO is calculated by dividing the Company’s cash cost of sales, excluding depletion less the non-cash cost of sales related to the prepaid gold interests, by the GEOs sold. The Company presents average cash cost per GEO as it believes that certain investors use this information to evaluate the Company’s performance in comparison to other royalty and streaming companies in the precious metals mining industry who present results on a similar basis. The table below provides a reconciliation of average cash cost per GEO:

 

   Three months ended   Six months ended 
(cost of sales presented in thousands of USD)  June 30, 2022    June 30, 2021    June 30, 2022    June 30, 2021 
Cash cost of sales is comprised of:                    
Cost of sales, excluding depletion  $5,329   $1,555   $9,998   $3,184 
Non-cash cost of sales – prepaid gold interests   (3,523)   -    (6,722)   - 
Cash cost of sales  $1,806   $1,555   $3,276   $3,184 
Divided by:                    
GEOs sold   7,649    7,880    15,386    15,182 
Equals:                    
Average cash cost per GEO  $236   $197   $213   $210 
                     

 

iv.Cash operating margin per GEO is calculated by subtracting the average cash cost per GEO from the average realized gold price per GEO. The Company presents cash operating margin as it believes that certain investors use this information to evaluate the Company’s performance in comparison to other royalty and streaming companies in the precious metals mining industry that present results on a similar basis. The table below provides a reconciliation of average realized gold price per GEO:

 

   Three months ended   Six months ended 
   June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021 
Average realized gold price per GEO  $1,856   $1,816   $1,875   $1,804 
Less:                    
Average cost per GEO   (236)   (197)   (213)   (210)
Equals:                    
Cash operating margin per GEO  $1,620   $1,619   $1,662   $1,594 
                     

 

 

1 The Company’s royalty revenue and silver sales are converted to a GEO basis by dividing the royalty revenue plus silver sales for a period by the average gold price based on the LBMA Gold Price PM Fix per ounce for the same respective period. Total GEOs sold includes the GEOs from the Company’s royalty revenue and silver sales plus the gold ounces sold from the Company’s gold Stream and prepaid gold interests. 

 

 17

 

 

v.Operating cash flows excluding changes in non-cash working capital is calculated by adding back the decrease or subtracting the increase in changes in non-cash working capital to or from cash provided by operating activities. The table below provides a reconciliation of operating cash flows to operating cash flows excluding changes in non-cash working capital:

 

   Three months ended   Six months ended 
   June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021 
Net cash provided by operating activities  $7,983   $8,813   $16,002   $22,292 
Changes in non-cash working capital   1,613    500    4,143    (3,981)
Equals:                    
Operating cash flows, excluding changes in non-cash working capital  $9,596   $9,313   $20,145   $18,311 
                     

 

Liquidity and Capital Resources

 

As at June 30, 2022, the Company had cash and cash equivalents of $17.1 million (December 31, 2021: $17.1 million) and working capital of $39.2 million (December 31, 2021: $33.3 million). As at June 30, 2022, the Company had $147.5 million available under its credit facility.

 

Cash flow from operations

 

For the six months ended June 30, 2022, cash flow from operations was $16.0 million, compared with $22.3 million for the six months ended June 30, 2021, with the decrease primarily attributable to the timing of receipt of royalty receivables related to the Omolon royalty. During the six months ended June 30, 2021, the Company received $2.5 million for previously deferred amounts for a portion of the Hope Bay royalty revenue and $2.5 million for the remaining amount owed under the Beta Hunt royalty amendment completed in September 2020.

 

Cash flow used in investing activities

 

For the six months ended June 30, 2022, the Company had net cash outflow of $13.1 million from investing activities primarily due to the acquisitions of the Elevation Prepaid Gold Interest for $6.0 million, the three royalties on gold projects located in Nevada for $5.0 million and $2.0 million of investments. For the six months ended June 30, 2021, the Company had net cash inflows of $53.5 million from investing activities primarily due to the proceeds received from the partial buyback of the Hope Bay royalty interest and the sale of 19.5 million common shares from the Company’s investment portfolio. The net cash inflows were partially offset by $7.0 million in cash consideration paid for the acquisition of a royalty portfolio from Pan American.

 

Cash flow used in financing activities

 

During the six months ended June 30, 2022, the Company had net cash outflows from financing activities of $2.9 million, which was primarily the result of dividend payments of $3.7 million and financing costs associated with our credit facility of $0.5 million. The net cash outflows were partially offset by proceeds from the exercise of stock options of $1.3 million. During the six months ended June 30, 2021, the Company had net cash outflows from financing activities of $34.3 million, which was primarily the result of Company repaying $32.0 million of its credit facility, dividend payments of $3.2 million and financing costs associated with our credit facility of $0.4 million. The net cash outflows were partially offset by proceeds received from the exercise of stock options.

 

Liquidity

 

We believe our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for general and administration and project evaluation costs and anticipated minimal capital expenditures for the foreseeable future. Our long-term capital requirements are primarily affected by our ongoing activities related to the acquisition or creation of Royalties, Streams, prepaid gold and other interests.

 

 18

 

 

The Company currently, and generally at any time, has acquisition opportunities in various stages of active review. In the event of the acquisition of one or more significant Royalties, Streams, prepaid gold and other interests, we may seek additional debt or equity financing as necessary.

 

Purchase Commitments:

 

In connection with its Streams and prepaid gold interests, the Company has committed to purchase the following:

 

   Percent of life of mine production or relevant commodity  

Per ounce cash payment: Lesser of amount below and the then prevailing market price (unless otherwise noted)

 
Gold Stream interests          
La Bolsa   5%    $450 
La Colorada   100%    $650 
           
Silver Stream interests          
El Mochito   25%    25% of silver spot price 
Moss   100%(1)    20% of silver spot price 
           
Prepaid gold interests          
Auramet   1,250 ounces plus 2% of dividends paid(2) per quarter    16% of gold spot price 
Elevation   Gold equivalent of $1.0 million plus certain fixed amounts of gold per quarter(3)    5% of gold spot price 

 

(1)After 3.5 million ounces of silver are delivered, Maverix’s silver purchase entitlement will be 50% of the remaining life of mine silver production.
(2)Amount of gold that is equivalent to the value of all dividends distributed by Auramet International LLC on 2% of its shares.
(3)Six quarterly deliveries ending in June 2023.

 

In connection with the acquisition of the Silvertip Royalty in 2017, the Company may issue an additional 1,400,000 common shares of the Company when the Silvertip mine achieves commercial production and a cumulative throughput of 400,000 tonnes of ore through the processing plant is achieved.

 

In connection with the acquisition of a portfolio of royalties from Newmont in October 2020, the Company agreed to make certain contingent cash payments of up to $15.0 million if certain production milestones at certain assets are achieved within five years of closing the acquisition.

 

In connection with increasing and expanding the royalty interest at Omolon, the Company agreed to make an additional $1.5 million cash payment upon sales of 1.2 million gold equivalent ounces.

 

Outstanding Share Data

 

As at August 11, 2022, the Company had 147,379,354 outstanding common shares, 4,336,647 outstanding share purchase options outstanding with a weighted average exercise price of CAD$5.44, 608,260 outstanding restricted share units, and 5,000,000 outstanding share purchase warrants with an exercise price of $3.28.

 

Off-Balance Sheet Arrangements

 

The Company does not utilize off-balance sheet arrangements.

 

 19

 

 

Related Party Transactions

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities, including any director of the Company. Compensation for key management personnel of the Company was as follows:

 

   Three months ended
June 30
   Six months ended
June 30
 
   2022   2021   2022   2021 
Compensation and benefits   $948   $945    $2,051   $2,418 
Share-based compensation   459    291    793    592 
Total compensation   $1,407   $1,236    $2,844   $3,010 

 

During the three months ended March 31, 2022, the Company purchased $0.3 million of refined gold from Pan American at a price of $650 per ounce purchased under its La Colorada gold Stream agreement. As of April 1, 2022, Pan American is no longer considered to have significant influence over the Company due to a change in its shareholdings of the Company and other factors.

 

Critical Accounting Judgements and Estimates

 

The preparation of the consolidated financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements. Estimates and assumptions are based on management’s best knowledge of the relevant facts and circumstances. However, actual results may differ from those estimates included in the consolidated financial statements.

 

The Company’s significant accounting policies and estimates are disclosed in Notes 2 and 3 of the annual consolidated financial statements for the year ended December 31, 2021, except as described in Note 2 of the condensed interim consolidated financial statements, as it relates to restricted share units. The following accounting policy has been updated as a result of the change in planned settlement to cash-settled awards.

 

Restricted share units (“RSUs”)

 

Under the restricted share unit plan (the “RSU Plan”), awards can be either cash or equity settled upon vesting at the discretion of the Board of Directors of the Company. The Board of Directors plans to settle all grants under the RSU Plan in cash on a prospective basis. Share-based compensation expense relating to cash-settled RSUs is accrued over the vesting period with the related obligation recorded as a restricted share unit liability which is included in trade and other payables. At the end of each reporting period, the expense and liability are adjusted for changes in the fair market value of Maverix common shares and the estimated number of awards that are expected to vest.

 

Estimation Uncertainty

 

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. The current and expected impacts on global commerce are anticipated to be far reaching. To date there has been significant volatility in the stock market and in the commodity and foreign exchange markets, restrictions on the conduct of business in many jurisdictions and the global movement of people and some goods has become restricted. In the current environment, estimates and assumptions about future production, commodity prices, exchange rates, discount rates, future capital expansion plans and associated production implications at the underlying mines and other interests in which the Company holds a royalty or stream interest are subject to greater variability than normal, which could significantly affect the valuation of our assets, both non-financial and financial.

 

The conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, have caused and could have further negative impacts on Polymetal’s ability to continue operation of the Omolon mine, where the Company owns a 2.5% GRR, and could further inhibit Polymetal’s ability to make payments to the Company. Maverix continues to work with Polymetal to effect payment of royalties from Omolon in a way that does not breach any relevant sanctions. At June 30, 2022, the carrying amounts related to the Company’s Omolon royalty interests and accounts receivable were $23.4 million and $4.4 million, respectively.

 

 20

 

 

Due to the conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, the Company has estimated the recoverable amount of its Omolon royalty interest during the three months ended June 30, 2022 and determined the recoverable amount is greater than the carrying value of $23.4 million. The recoverable amount was determined using a discounted cash flow model in estimating the fair value less cost of disposal. This is a level 3 measurement due to unobservable inputs in the discounted cash flow model. Key assumptions used in the cash flow forecast were: mine life of approximately five years, metal price forecasts by research analysts and management expectations and a 20% discount rate. The recoverable amount of the Omolon royalty interest is most sensitive to changes in metals prices and mine life. In isolation, a 10% decrease in metal prices would result in a reduction in the recoverable amount of approximately $2.9 million and a one-year reduction in mine life would result in a reduction in the recoverable amount of approximately $3.0 million, but in both scenarios the recoverable amount would still be greater than the carrying value of $23.4 million. The Company has determined there is no impairment at June 30, 2022, but the conflict and restrictive actions that may be taken in response thereto, such as sanctions, export and or currency controls are constantly evolving. Consequently, there remains a risk that future developments could result in a material adjustment to the carrying value in our royalty interest and receivable.

 

Financial Instruments

 

The Company has exposure to a variety of financial risks from its use of financial instruments. This section presents information about the Company's exposure to each of these risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital.

 

Capital Risk Management

 

The Company’s primary objective when managing capital is to maximize returns for its shareholders by growing its asset base through accretive acquisitions of royalties, streams and other interests, while optimizing its capital structure by balancing debt and equity. At June 30, 2022, the capital structure of the Company consists of $373.0 million (December 31, 2021: $371.8 million) of total equity, comprising share capital, reserves, accumulated other comprehensive income, and retained earnings, and $12.5 million (December 31, 2021: $12.5 million) drawn under the Company’s credit facility. The Company was not subject to any externally imposed capital requirements with the exception of complying with certain covenants under the credit facility. The Company is in compliance with its debt covenants as at June 30, 2022.

 

Credit Risk

 

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents and accounts receivables in the ordinary course of business. In order to mitigate its exposure to credit risk, the Company maintains its cash and cash equivalents in several high-quality financial institutions and closely monitors its accounts receivable balances. The Company’s accounts receivables are subject to the credit risk of the counterparties who own and operate the mines underlying Maverix’s royalty portfolio.

 

The conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, have caused and could have further potential negative impacts on the Company’s ability to receive payments under its royalty interest in the Omolon mine in Russia that is operated by Polymetal International plc. At June 30, 2022, the Company’s accounts receivable related to its Omolon royalty interest is $4.4 million.

 

Currency Risk

 

Financial instruments that affect the Company’s net income due to currency fluctuations include cash and cash equivalents, accounts receivable, investments, trade and other payables denominated in Canadian and Australian dollars. Based on the Company’s Canadian and Australian dollar denominated monetary assets and liabilities at June 30, 2022, a 10% increase (decrease) of the value of the Canadian and Australian dollar relative to the US dollar would increase (decrease) net income by $0.1 million and other comprehensive income by $0.1 million, respectively.

 

 21

 

 

Liquidity Risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company’s approach to managing liquidity is to ensure it will have sufficient liquidity to meet liabilities when due. In managing liquidity risk, the Company considers anticipated cash flows from operations, its holding of cash and cash equivalents and its revolving credit facility. As at June 30, 2022, the Company had cash and cash equivalents of $17.1 million (December 31, 2021: $17.1 million) and working capital of $39.2 million (December 31, 2021: $33.3 million). In addition, at June 30, 2022 the Company had $147.5 million available under its credit facility.

 

Other Risks

 

The Company is exposed to equity price risk as a result of holding common shares in other mining companies. The combined fair market value as at June 30, 2022 is $1.3 million (December 31, 2021: $2.7 million). The equity prices of investments are impacted by various underlying factors including commodity prices and the volatility in global markets as a result of COVID-19 and the daily exchange traded volume of the equity may not be sufficient for the Company to liquidate its position in a short period of time without potentially affecting the market value of the equity. Based on the Company’s investments held as at June 30, 2022, a 10% increase (decrease) in the equity prices of these investments would increase (decrease) other comprehensive income by $0.1 million.

 

Disclosure Controls and Procedures

 

Maverix’s disclosure controls and procedures (“DC&P”) are designed to provide reasonable assurance that material information relating to Maverix, including its consolidated subsidiaries, is made known to management by others within those entities, particularly during the period in which this report is prepared and that information required to be disclosed by Maverix in its annual filings, interim filings or other reported filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation. The Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”) have evaluated whether there were changes to the DC&P during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the DC&P. No such changes were identified through their evaluation.

 

Internal Controls Over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as such term is defined in National Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim Filings in Canada (“NI 52-109”) and under the Securities Exchange Act of 1934, as amended, in the United States. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with IFRS as issued by the IASB. The Company’s internal control over financial reporting includes:

 

·maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
·providing reasonable assurance that transactions are recorded as necessary for preparation of the consolidated financial statements in accordance with IFRS as issued by the IASB;
·providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
·providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis.

 

The Company’s internal control over financial reporting may not prevent or detect all misstatements because of inherent limitations. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.

 

 22

 

 

There were no changes to the Company’s internal controls over financial reporting during the three months ended June 30, 2022 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting or disclosure controls and procedures.

 

Limitation of Controls and Procedures

 

The CEO and CFO, in consultation with management, believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Forward-Looking Statements

 

This MD&A contains “forward-looking information” or "forward-looking statements" within the meaning of applicable securities legislation. Forward-looking information is provided as of the date of this MD&A and Maverix does not intend to and does not assume any obligation to update forward-looking information, except as required by applicable law. For this reason and the reasons set forth below, investors should not place undue reliance on forward-looking statements.

 

Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking information is based on reasonable assumptions that have been made by Maverix as at the date of such information and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Maverix to be materially different from those expressed or implied by such forward-looking information, including but not limited to: the impact of general business and economic conditions; the absence of control over mining operations from which Maverix will purchase precious metals or from which it will receive royalty or stream payments, and risks related to those mining operations, including risks related to international operations, government and environmental regulation, delays in mine construction and operations, actual results of mining and current exploration activities, conclusions of economic evaluations and changes in project parameters as plans are refined; problems related to the ability to market precious metals or other metals; industry conditions, including commodity price fluctuations, interest and exchange rate fluctuations; interpretation by government entities of tax laws or the implementation of new tax laws; the volatility of the stock market; competition; risks related to the Company’s dividend policy; epidemics, pandemics or other public health crises, including the global outbreak of the novel coronavirus (“COVID-19”), geopolitical events and other uncertainties, such as the conflict in Ukraine, and as well as those risk factors discussed in the section entitled “Risk Factors” in Maverix’s annual information form dated March 16, 2022 available at www.sedar.com.

 

Forward-looking information in this MD&A includes disclosure regarding royalty payments to be paid to Maverix by property owners or operators of mining projects pursuant to its Royalties, and gold and silver deliveries under its Streams, prepaid gold and other interests of Maverix, and the future outlook of Maverix. Forward-looking statements are based on a number of material assumptions, which management of Maverix believe to be reasonable, including, but not limited to, the continuation of mining operations in respect of which Maverix will receive Royalty payments or from which Maverix will purchase precious or other metals, that commodity prices will not experience a material adverse change, mining operations that underlie Royalties or Streams will operate in accordance with disclosed parameters and such other assumptions as may be set out herein.

 

 23

 

 

Maverix has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. Maverix undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on information currently available.

 

Technical and Third-Party Information

 

Brendan Pidcock, P.Eng., Vice President Technical Services for Maverix and a qualified person as defined under NI 43-101 has reviewed and approved the written scientific and technical disclosure contained in this document.

 

Except where otherwise stated, the disclosure in this MD&A relating to properties and operations in which Maverix holds Royalty, Stream or other interests is based on information publicly disclosed by the owners or operators of these properties and information/data available in the public domain as at the date hereof, and none of this information has been independently verified by Maverix. Specifically, as a Royalty or Stream holder, Maverix has limited, if any, access to properties on which it holds Royalties, Streams, or other interests in its asset portfolio. The Company may from time to time receive operating information from the owners and operators of the mining properties, which it is not permitted to disclose to the public. Maverix is dependent on, (i) the operators of the mining properties and their qualified persons to provide information to Maverix, or (ii) on publicly available information to prepare disclosure pertaining to properties and operations on the properties on which the Company holds Royalty, Stream or other interests, and generally has limited or no ability to independently verify such information. Although the Company does not have any knowledge that such information may not be accurate, there can be no assurance that such third-party information is complete or accurate. Some reported public information in respect of a mining property may relate to a larger property area than the area covered by Maverix’s Royalty, Stream or other interest. Maverix’s Royalty, Stream or other interests may cover less than 100% of a specific mining property and may only apply to a portion of the publicly reported mineral reserves, mineral resources and or production from a mining property.

 

 24

 

 

Exhibit 99.2

 

 

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2022 AND 2021

 

(Unaudited)

 

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Financial Position

(in thousands of United States dollars - unaudited)

 

   June 30, 2022   December 31, 2021 
Assets          
Current assets          
Cash and cash equivalents  $17,108   $17,059 
Accounts receivable   10,263    7,889 
Prepaid gold interests (Note 5)   11,769    7,618 
Investments (Note 6)   1,348    2,689 
Prepaid expenses and other   1,500    1,000 
Total current assets   41,988    36,255 
           
Non-current assets          
Royalty, stream and other interests (Note 3 and 4)   313,729    314,907 
Prepaid gold interests (Note 5)   38,719    40,084 
Deferred financing costs and other   1,109    1,289 
Total assets  $395,545   $392,535 
           
Liabilities          
Current liabilities          
Trade and other payables  $2,825   $2,910 
Total current liabilities   2,825    2,910 
           
Non-current liabilities          
Credit facility (Note 7)   12,500    12,500 
Deferred tax liability (Note 13)   7,187    5,311 
Total liabilities   22,512    20,721 
           
Equity          
Capital and reserves          
Share capital (Note 8a)   338,692    336,801 
Reserves   9,427    10,008 
Accumulated other comprehensive (loss) income   (2,417)   274 
Retained earnings   27,331    24,731 
Total equity   373,033    371,814 
Total liabilities and equity  $395,545   $392,535 

 

Contractual Obligations (Note 16)

Subsequent Events (Note 17)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

ON BEHALF OF THE BOARD:  

 

“signed”  Geoff Burns, Director  “signed”  Dan O’Flaherty, Director    

 

2

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(in thousands of United States dollars, except for per share and share data – unaudited)

 

   Three months ended   Six months ended 
   June 30   June 30 
   2022   2021   2022   2021 
Royalty revenue (Note 14)  $5,623   $7,999   $12,489   $14,882 
Sales (Note 14)   8,574    6,310    16,362    12,507 
Total revenue   14,197    14,309    28,851    27,389 
                     
Cost of sales, excluding depletion   (5,329)   (1,555)   (9,998)   (3,184)
Depletion (Note 4)   (3,037)   (3,920)   (6,431)   (7,459)
Total cost of sales   (8,366)   (5,475)   (16,429)   (10,643)
Gross profit   5,831    8,834    12,422    16,746 
                     
Administration expenses (Note 9)   (1,446)   (1,371)   (3,087)   (2,786)
Project evaluation expenses (Note 9)    (1,148)   (1,183)   (2,079)   (2,278)
Change in fair value of prepaid gold interests (Note 5)   1,990    -    3,509    - 
Income from operations   5,227    6,280    10,765    11,682 
                     
Other income and expenses                    
Gain on royalty transactions (Note 3b)   -    -    -    10,983 
Gain on conversion of debenture (Note 3b)   -    -    -    2,410 
Foreign exchange loss   (253)   (3)   (108)   (47)
Other (expense) income   (224)   (42)   (288)   4 
Finance expense   (350)   (220)   (659)   (514)
Income before income taxes   4,400    6,015    9,710    24,518 
                     
Income tax expense (Note 13)   (1,645)   (2,307)   (3,432)   (6,041)
Net income  $2,755   $3,708   $6,278   $18,477 
                     
Earnings per share (Note 10)                    
Basic earnings per share  $0.02   $0.03   $0.04   $0.13 
Diluted earnings per share  $0.02   $0.03   $0.04   $0.13 
                     
Weighted average number of common shares outstanding:                    
Basic   147,323,143    141,223,815    147,112,088    141,001,121 
Diluted   149,473,724    147,593,722    149,485,713    147,356,046 
                     
                     
Other comprehensive income                    
Net income  $2,755   $3,708   $6,278   $18,477 
Item that will not be subsequently re-classified to net income:                    
Changes in fair value of investments, net of tax (Note 6)   (1,485)   75    (2,691)   (1,323)
Comprehensive income  $1,270   $3,783   $3,587   $17,154 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.  

 

3

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Cash Flows  

(in thousands of United States dollars - unaudited)  

 

   Three months ended   Six months ended 
   June 30   June 30 
   2022   2021   2022   2021 
Operating activities                    
Net income for the period  $2,755   $3,708   $6,278   $18,477 
                     
Non-cash cost of sales related to prepaid gold interests (Note 5)   3,523    -    6,722    - 
Depletion and amortization   3,050    3,957    6,458    7,533 
Share-based compensation   441    426    925    770 
Change in fair value of prepaid gold interests (Note 5)   (1,990)   -    (3,508)   - 
Gain on royalty transactions (Note 3b)   -    -    -    (10,983)
Gain on conversion of debenture (Note 3b)   -    -    -    (2,410)
Foreign exchange loss and other   417    70    311    270 
Finance expense   350    220    659    514 
Income tax expense   1,645    2,307    3,432    6,041 
Withholding and income taxes paid   (595)   (1,375)   (1,132)   (1,901)
Changes in non-cash working capital (Note 11)   (1,613)   (500)   (4,143)   3,981 
Net cash provided by operating activities  $7,983   $8,813   $16,002   $22,292 
                     
Investing activities                    
Acquisition of royalty, stream and other interests (Note 3 and 4)   -    (7,063)   (5,033)   (7,145)
Acquisition of prepaid gold interest (Note 5)   -    -    (6,000)   - 
Proceeds from buy back of royalty interest and other (Note 3b)   -    -    -    49,500 
Acquisition of investments (Note 6)   -    -    (2,034)   - 
Proceeds from disposal of equity investments (Note 6)   -    -    -    11,186 
Net cash (used in) provided by investing activities  $-   $(7,063)  $(13,067)  $53,541 
                     
Financing activities                    
Proceeds from credit facility (Note 7)   5,000    -    5,000    - 
Repayment of credit facility (Note 7)   (5,000)   -    (5,000)   (32,000)
Financing costs and interest paid   (279)   (142)   (523)   (376)
Dividends paid (Note 8e)   (1,841)   (1,765)   (3,678)   (3,173)
Proceeds from exercise of stock options (Note 8c)   359    165    1,335    1,293 
Net cash used in financing activities  $(1,761)  $(1,742)  $(2,866)  $(34,256)
                     
Effect of exchange rate changes on cash and cash equivalents   (21)   (59)   (20)   (85)
Increase (decrease) in cash and cash equivalents   6,201    (51)   49    41,492 
Cash and cash equivalents at the beginning of the period   10,907    49,303    17,059    7,760 
Cash and cash equivalents  $17,108   $49,252   $17,108   $49,252 

 

Supplemental cash flow information (Note 11)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.   

 

4

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Changes in Equity

(in thousands of United States dollars, except for number of shares - unaudited)  

 

   Issued
shares
   Share
capital
$
   Share
warrant
reserve
$
   Share
option
reserve
$
   Accumulated
other
comprehensive
(loss) income
$
   Retained
earnings
$
   Total
equity
$
 
As at December 31, 2021   146,720,355    336,801    5,094    4,914    274    24,731    371,814 
Total comprehensive income   -    -    -    -    (2,691)   6,278    3,587 
Dividend declared (Note 8e)   -    -    -    -    -    (3,678)   (3,678)
Reclassification of restricted share units (Note 8d)   -    -    -    (820)   -    -    (820)
Shares issued for options exercised (Note 8c)   643,638    1,815    -    (480)   -    -    1,335 
Share-based compensation   15,361    76    -    719    -    -    795 
As at June 30, 2022   147,379,354    338,692    5,094    4,333    (2,417)   27,331    373,033 
                                    
As at December 31, 2020   140,488,309    318,530    6,609    4,045    4,326    7,479    340,989 
Total comprehensive income   -    -    -    -    (1,323)   18,477    17,154 
Dividend declared (Note 8e)   -    -    -    -    -    (3,173)   (3,173)
Shares issued for Royalty Portfolio (Note 3b)   491,071    2,738    -    -    -    -    2,738 
Shares issued for options exercised (Note 8c)   739,949    1,971    -    (678)   -    -    1,293 
Share-based compensation   1,026    5    -    765    -    -    770 
As at June 30, 2021   141,720,355    323,244    6,609    4,132    3,003    22,783    359,771 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

5

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

1.NATURE OF OPERATIONS

 

Maverix Metals Inc. (“Maverix” or the “Company”) is incorporated and domiciled in Canada and its registered head office address is Suite 575, 510 Burrard Street, Vancouver, British Columbia, V6C 3A8, Canada. The Company’s common shares trade on the New York Stock Exchange American and Toronto Stock Exchange under the symbol “MMX”.

 

Maverix is a resource-based company that seeks to acquire and manage royalties and metal purchase agreements (a “Stream” or “Streams”) on projects that are in an advanced stage of development, on operating mines producing precious or other metals, or in some circumstances, exploration stage projects or other interests. Royalty interests (“Royalty” or “Royalties”) are non-operating interests in mining projects that provide Maverix with the right to a percentage of the gross revenue from the metals produced from the project (a “Gross Revenue Royalty” or “GRR”) or the net revenue after the deduction of specified costs (a “Net Smelter Returns Royalty” or “NSR” royalty). Under a Stream interest, Maverix makes an upfront payment to acquire the Stream and then receives the right to purchase, at a fixed or variable price per unit based on the spot price of the precious or other metal, a percentage of the life of mine production or a specified time period.

 

These unaudited condensed interim consolidated financial statements were approved and authorized for issue by the Board of Directors of the Company on August 11, 2022.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

a)Statement of Compliance

 

These unaudited condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”), applicable to preparation of interim financial statements including International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board. Accordingly, certain disclosures included in the annual financial statements prepared in accordance with IFRS have been condensed or omitted. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021 (the “2021 Annual Financial Statements”).

 

The accounting policies applied in the preparation of these unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s 2021 Annual Financial Statements, with the exception of the amended accounting policy described in Note 2(d). The Company’s interim results are not necessarily indicative of its results for a full year.

 

b)Basis of Preparation

 

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments, which are measured at fair value. The unaudited condensed interim consolidated financial statements are presented in United States dollars (“USD”), unless otherwise noted.

 

c)Estimation Uncertainty

 

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. The current and expected impacts on global commerce are anticipated to be far reaching. To date there has been significant volatility in the stock market and in the commodity and foreign exchange markets, restrictions on the conduct of business in many jurisdictions and the global movement of people and some goods has become restricted. In the current environment, estimates and assumptions about future production, commodity prices, exchange rates, discount rates, future capital expansion plans and associated production implications at the underlying mines and other interests in which the Company holds a royalty or stream interest are subject to greater variability than normal, which could significantly affect the valuation of our assets, both non-financial and financial.

 

6

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

The conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, have caused and could have further negative impacts on the underlying operator to continue operations of the Omolon mine where the Company owns a 2.5% GRR. As at June 30, 2022, the Company has not recorded any adjustments related to these previously described events (Note 4 and 15).

 

d)Amended Accounting Policy

 

Restricted share units (RSUs)

 

Under the restricted share unit plan (the “RSU Plan”), awards can be either cash or equity settled upon vesting at the discretion of the Board of Directors of the Company. The Board of Directors plans to settle all grants under the RSU Plan in cash on a prospective basis. Share-based compensation expense relating to cash-settled RSUs is accrued over the vesting period with the related obligation recorded as a restricted share unit liability which is included in trade and other payables. At the end of each reporting period, the expense and liability are adjusted for changes in the fair market value of Maverix common shares and the estimated number of awards that are expected to vest.

 

3.ROYALTY TRANSACTIONS

 

a)During the Six Months Ended June 30, 2022

 

Acquisition of Gold Royalties in Nevada

 

In March 2022, the Company acquired three royalties on gold projects located in Nevada from an indirect, wholly owned subsidiary of Waterton Precious Metals Fund II Cayman, LP in exchange for a $5.0 million cash payment. The royalty package includes a 3.5% to 4% NSR royalty on the Lewis property owned by Gold Standard Ventures Corp. (“Gold Standard”) and two other royalties on exploration ground which either form part of or are adjacent to Gold Standard’s South Railroad project.

 

b)During the Six Months Ended June 30, 2021

 

Royalty Portfolio

 

In June 2021, the Company completed the Purchase and Sale Agreement entered into with Pan American Silver Corp. (“Pan American”) to acquire a portfolio of six royalties (the “Royalty Portfolio”). As consideration for the Royalty Portfolio, the Company issued 491,071 common shares and paid $7.0 million in cash.

 

The fair value of the Royalty Portfolio acquired was determined to be $9.8 million. The Company used comparable transactions for exploration or other assets to determine the fair value of the individual assets within the Royalty Portfolio. The excess of the fair value of the Royalty Portfolio of $9.8 million over the cash consideration paid of $7.0 million was allocated to the common shares.

 

The significant royalties acquired in the Royalty Portfolio include the 1.0%-2.5% NSR royalty on the Fenn-Gib gold project owned by Mayfair Gold Corp. and the 3.0% NSR royalty on the Recuperada project owned by Silver X Mining Corp. The Company also acquired four exploration stage royalties, of which, there are two in Canada and one in each of the United States and Mexico.

 

Hope Bay

 

In August 2019, Maverix entered into an agreement to purchase an additional 1.5% NSR royalty on the Hope Bay mine in Nunavut, Canada, previously owned and operated by TMAC Resources Inc. (“TMAC”) for a cash payment of $40.0 million (the “Additional Royalty”). Under the Additional Royalty agreement, TMAC had the right to buy back the entire Additional Royalty for a cash payment of $50.0 million in the event of a change of control transaction of TMAC (as defined in the Additional Royalty agreement) that was announced prior to June 30, 2021. In February 2021, Agnico Eagle Mines Limited (“Agnico Eagle”) completed the acquisition of TMAC. Concurrent with the acquisition, Agnico Eagle provided notice to the Company and exercised the buyback right with respect to 1.5% of the total 2.5% NSR royalty the Company owned on the Hope Bay mine. As a result of the buy back, the Company received $50.0 million and recorded a gain on the buy back of the Hope Bay royalty interest of $11.0 million. The Company has retained a 1% NSR royalty on the Hope Bay mine that is not subject to any reductions.

 

7

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

Additional El Mochito Stream

 

In March 2021, Maverix converted all amounts outstanding under a $1.0 million convertible debenture into an additional 5% silver Stream on the operating El Mochito mine on the same terms as the existing El Mochito silver Stream (the “Additional Silver Stream”). The Company used a discounted cash flow model to determine the fair value of the Additional Silver Stream and recognized a $2.4 million gain on the conversion of the debenture. The discounted cash flow model used a discount rate of 10% and a silver price based on analyst metal price projections and management expectations.

 

4.ROYALTY, STREAM AND OTHER INTERESTS

 

As at and for the six months ended June 30, 2022:

 

   Cost   Accumulated Depletion     
   Country  Opening   Additions/
(Disposals)
   Ending   Opening   Depletion   Ending   Carrying
Amount
 
      $   $   $   $   $   $   $ 
Beta Hunt  AUS   9,421    -    9,421    (5,477)   (192)   (5,669)   3,752 
Camino Rojo  MEX   40,195    -    40,195    (69)   (1,390)   (1,459)   38,736 
Cerro Blanco  GTM   16,069    -    16,069    -    -    -    16,069 
Cerro Casale  CHL   7,053    -    7,053    -    -    -    7,053 
Converse  USA   10,039    -    10,039    -    -    -    10,039 
DeLamar  USA   9,068    -    9,068    -    -    -    9,068 
El Mochito  HON   11,144    -    11,144    (4,054)   (492)   (4,546)   6,598 
El Peñón  CHL   442    -    442    -    (35)   (35)   407 
Florida Canyon  USA   12,823    -    12,823    (3,709)   (399)   (4,108)   8,715 
Gemfield  USA   8,799    -    8,799    -    -    -    8,799 
Hope Bay  CAN   23,305    -    23,305    (2,508)   -    (2,508)   20,797 
Karma  BFA   20,080    -    20,080    (7,702)   (493)   (8,195)   11,885 
La Colorada  MEX   17,400    -    17,400    (5,287)   (588)   (5,875)   11,525 
McCoy-Cove  USA   18,553    -    18,553    -    -    -    18,553 
Moose River  CAN   3,700    -    3,700    (2,922)   (165)   (3,087)   613 
Moss  USA   20,283    -    20,283    (7,241)   (720)   (7,961)   12,322 
Mt Carlton  AUS   9,436    -    9,436    (8,270)   (243)   (8,513)   923 
Omolon  RUS   33,899    -    33,899    (9,795)   (695)   (10,490)   23,409 
Recuperada  PER   3,207    20    3,227    -    (362)   (362)   2,865 
San Jose  MEX   5,500    -    5,500    (3,827)   (317)   (4,144)   1,356 
Silvertip  CAN   4,340    -    4,340    (454)   -    (454)   3,886 
Vivien  AUS   3,301    -    3,301    (3,066)   (63)   (3,129)   172 
Other  Various   106,980    5,013    111,993    (15,749)   (57)   (15,806)   96,187 
Total(1)      395,037    5,033    400,070    (80,130)   (6,211)   (86,341)   313,729 

 

(1)Royalty, stream and other interests include non-depletable assets of $84.9 million and depletable assets of $228.8 million.

 

8

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

Omolon

 

Due to the conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, the Company has estimated the recoverable amount of its Omolon royalty interest during the three months ended June 30, 2022 and determined the recoverable amount is greater than the carrying value of $23.4 million. The recoverable amount was determined using a discounted cash flow model in estimating the fair value less cost of disposal. This is a level 3 measurement due to unobservable inputs in the discounted cash flow model. Key assumptions used in the cash flow forecast were: mine life of approximately five years, metal price forecasts by research analysts and management expectations and a 20% discount rate. The recoverable amount of the Omolon royalty interest is most sensitive to changes in metals prices and mine life. In isolation, a 10% decrease in metal prices would result in a reduction in the recoverable amount of approximately $2.9 million and a one-year reduction in mine life would result in a reduction in the recoverable amount of approximately $3.0 million, but in both scenarios the recoverable amount would still be greater than the carrying value of $23.4 million. The Company has determined there is no impairment at June 30, 2022, but the conflict and restrictive actions that may be taken in response thereto, such as sanctions, export and or currency controls are constantly evolving. Consequently, there remains a risk that future developments could result in a material adjustment to the carrying value in our royalty interest and receivable.

 

As at and for the year ended December 31, 2021:

 

   Cost   Accumulated Depletion     
   Country  Opening   Additions/
(Disposals)
   Ending   Opening   Depletion   Inventory
Adjustment
   Disposals   Ending   Carrying
Amount
 
      $   $   $   $   $   $   $   $   $ 
Beta Hunt  AUS   9,421    -    9,421    (4,763)   (714)   -    -    (5,477)   3,944 
Camino Rojo  MEX   40,173    22    40,195    -    (69)   -    -    (69)   40,126 
Cerro Blanco  GTM   16,069    -    16,069    -    -    -    -    -    16,069 
Cerro Casale  CHL   7,053    -    7,053    -    -    -    -    -    7,053 
Converse  USA   10,039    -    10,039    -    -    -    -    -    10,039 
DeLamar  USA   9,068    -    9,068    -    -    -    -    -    9,068 
El Mochito  HON   7,734    3,410    11,144    (2,638)   (1,348)   (68)   -    (4,054)   7,090 
Florida Canyon  USA   12,823    -    12,823    (2,901)   (808)   -    -    (3,709)   9,114 
Gemfield  USA   8,799    -    8,799    -    -    -    -    -    8,799 
Hope Bay  CAN   63,324    (40,019)   23,305    (3,621)   (389)   -    1,502    (2,508)   20,797 
Karma  BFA   20,080    -    20,080    (6,054)   (1,648)   -    -    (7,702)   12,378 
La Colorada  MEX   17,400    -    17,400    (4,433)   (854)   -    -    (5,287)   12,113 
McCoy-Cove  USA   18,553    -    18,553    -    -    -    -    -    18,553 
Moose River  CAN   3,700    -    3,700    (2,387)   (535)   -    -    (2,922)   778 
Moss  USA   20,283    -    20,283    (5,097)   (1,993)   (151)   -    (7,241)   13,042 
Mt Carlton  AUS   9,436    -    9,436    (6,742)   (1,528)   -    -    (8,270)   1,166 
Omolon  RUS   10,093    23,806    33,899    (3,492)   (6,303)   -    -    (9,795)   24,104 
San Jose  MEX   5,500    -    5,500    (2,893)   (934)   -    -    (3,827)   1,673 
Silvertip  CAN   4,340    -    4,340    (454)   -    -    -    (454)   3,886 
Vivien  AUS   3,301    -    3,301    (2,847)   (219)   -    -    (3,066)   235 
Other  Various   100,769    9,860    110,629    (15,426)   (323)   -    -    (15,749)   94,880 
Total(1)      397,958    (2,921)   395,037    (63,748)   (17,665)   (219)   1,502    (80,130)   314,907 

 

(1)Royalty, stream and other interests include non-depletable assets of $80.3 million and depletable assets of $234.6 million.

 

9

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

5.PREPAID GOLD INTERESTS

 

In January 2022, the Company entered into a prepaid gold interest agreement with Elevation Gold Mining (“Elevation”). The Company made a cash payment of $6.0 million to Elevation and in return Elevation will provide the Company six quarterly deliveries of certain amounts of gold plus the equivalent amount of gold equal to $1.0 million beginning in March 2022. The Company will make ongoing cash payments equal to 5% of the spot gold price for each gold ounce delivered.

 

In September 2021, Maverix entered into an agreement with Auramet Capital Partners, L.P., a subsidiary of Auramet International LLC (“Auramet”), to acquire a prepaid gold interest and enter into a long-term strategic partnership. The Company made a cash payment of $50.0 million to acquire a gold interest that will deliver 1,250 ounces of gold plus an amount of gold that is equivalent to all dividends distributed by Auramet on 2% of its shares to Maverix per quarter. Maverix will make ongoing cash payments equal to 16% of the spot gold price for each gold ounce delivered. On and after ten years and 50,000 ounces of gold have been delivered to Maverix, Auramet shall have the option to terminate the stream for a cash payment of $5.0 million less certain cash flows related to the gold deliveries.

 

The following table summarizes the prepaid gold interests as at June 30, 2022 and changes from the acquisition dates:

 

   Prepaid Gold
Interests
 
Opening Balance, September 2021  $50,103 
Gold deliveries   (3,711)
Change in fair value   1,310 
Balance at December 31, 2021   47,702 
Additions   6,000 
Gold deliveries   (6,722)
Change in fair value   3,508 
Balance at June 30, 2022   50,488 
Less: Current portion   (11,769)
Non-current portion  $38,719 

 

During the three and six months ended June 30, 2022, the Company recognized a gain of $2.0 million and $3.5 million, respectively, as a result of changes in the fair value of the prepaid gold interests ($nil for the comparable periods in 2021). The non-cash partial settlement of the prepaid gold interests included in cost of sales for the three and six months ended June 30, 2022 is $3.5 million and $6.7 million, respectively ($nil for the comparable periods in 2021).

 

6.INVESTMENTS

 

As at and for the six months ended June 30, 2022:

 

   Balance at
December 31,
2021
   Additions   Disposals   Fair Value
Adjustments
   Balance at
June 30, 2022
 
Short-term investments:                         
Common shares(1)  $2,678   $1,811   $-   $(3,147)  $1,342 
Warrants(2)   11    223    -    (228)   6 
Total investments  $2,689   $2,034   $-   $(3,375)  $1,348 

 

(1)Fair value adjustments recorded within Other comprehensive income.
(2)Fair value adjustments recorded within Net income.

 

10

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

During the six months ended June 30, 2022, the Company acquired $2.0 million worth of units of Elevation at a price of CAD$0.53 per unit. Each unit consisted of one common share and one common share purchase warrant of Elevation which entitles the holder to purchase one common share of Elevation at a price of CAD$0.70 per warrant for a period of 60 months from closing.

 

As at and for the year ended December 31, 2021:

 

   Balance at
December 31,
2020
   Additions   Disposals   Fair Value
Adjustments
   Debenture
Conversion
   Balance at
December 31,
2021
 
Short-term investments:                              
Common shares(1)  $18,190   $372   $(11,196)  $(4,688)  $-   $2,678 
Warrants(2)   48    21    -    (58)   -    11 
Total short-term investments  $18,238   $393   $(11,196)  $(4,746)  $-   $2,689 
                               
Non-current investment:                              
Convertible debenture(2)   $1,000   $-   $-   $2,410   $(3,410)  $- 
Total investments  $19,238   $393   $(11,196)  $(2,336)  $(3,410)  $2,689 

 

(1)Fair value adjustments recorded within Other comprehensive income.
(2)Fair value adjustments recorded within Net income.

 

As part of a financing conducted by a company Maverix had an investment in, Maverix agreed to exercise 19.5 million share purchase warrants at CAD$0.40 per common share and sell the underlying common shares received for CAD$0.50 per common share for total proceeds of $7.7 million (CAD$9.8 million) which closed in February 2021.

 

7.CREDIT FACILITY

 

The following table summarizes the Company’s $160.0 million revolving credit facility (the “Credit Facility”) as at June 30, 2022 and changes during the six months then ended:

 

   Credit Facility 
Balance at December 31, 2020  $32,000 
Proceeds   23,500 
Repayment   (43,000)
Balance at December 31, 2021   12,500 
Proceeds   5,000 
Repayment   (5,000)
Balance at June 30, 2022  $12,500 

 

Amortization of the deferred financing costs related to the Credit Facility for the three and six months ended June 30, 2022, were $0.1 million and $0.2 million, respectively ($0.1 million and $0.2 million for the comparable periods in 2021). As at June 30, 2022, the Company was in compliance with all of the covenants related to the Credit Facility.

 

8.SHARE CAPITAL

 

a)Authorized, Issued and Outstanding shares

 

The Company is authorized to issue an unlimited number of common shares without par value and preferred shares. No preferred shares have been issued.

 

11

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

b)Share Purchase Warrants

 

A summary of the Company’s outstanding warrants as at June 30, 2022 is presented below:

 

Number outstanding  Exercise Price   Expiry Date
5,000,000  $3.28   June 29, 2023

 

c)Share Purchase Options

 

The following table summarizes stock options which were outstanding and exercisable as at June 30, 2022 and 2021 and changes during the six months then ended:

 

   Number of Options
Outstanding
   Weighted average
exercise price per option
(CAD$)
 
Balance at December 31, 2021   4,025,493   $4.83 
Granted   954,792   $6.23 
Exercised   (643,638)  $2.80 
Balance at June 30, 2022   4,336,647   $5.44 
           
Options which have vested and are exercisable as at June 30, 2022   2,815,145   $4.94 
           
Balance at December 31, 2020   4,068,884   $4.05 
Granted   827,565   $6.57 
Exercised   (739,949)  $2.44 
Forfeited   (131,007)  $5.17 
Balance at June 30, 2021   4,025,493   $4.83 

 

A summary of the Company’s outstanding stock options as at June 30, 2022 is presented below:

 

Number outstanding  Exercise Price
(CAD$)
   Expiry Date
696,485  $3.30   May 31, 2023
722,057  $5.18   April 3, 2024
50,000  $6.48   August 9, 2024
268,313  $5.83   December 12, 2024
787,435  $5.17   March 10, 2025
30,000  $6.54   June 24, 2025
827,565  $6.57   March 26, 2026
954,792  $6.23   March 22, 2027
4,336,647        

 

12

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

The following are the weighted average assumptions used in the Black-Scholes Model to estimate the fair value of stock options granted for the six months ended June 30, 2022 and 2021:

 

   Six months ended
June 30
 
   2022   2021 
Risk-free interest rate   2.1%    0.5% 
Expected volatility   43%    46%  
Expected life   3 years    3 years 
Expected dividend yield   1.0%    0.8% 

 

The weighted average common share price during the three and six months ended June 30, 2022 were $4.70 and $4.72 per share at the time the options were exercised, respectively ($5.60 and $5.25 per share for the comparable periods in 2021). The weighted average remaining contractual life of the options as at June 30, 2022 was 2.88 years (2021: 2.96 years).

 

  d)Restricted Share Units (“RSUs”)

 

Under the RSU Plan, awards can be either cash or equity settled upon vesting at the discretion of the Board of Directors of the Company. As the Company did not have a present obligation to settle in cash, the awards were treated as equity-settled instruments which were measured at fair value at the date of grant and recorded in reserves over the vesting period. The Board of Directors now plans to settle all grants under the RSU Plan in cash on a prospective basis. As a result of the change in settlement, $0.8 million was reclassified from reserves within total equity to a restricted share unit liability which is included in trade and other payables.

 

The following table summarizes RSUs which were outstanding as at June 30, 2022 and 2021 and changes during the six months then ended: