CIBCEQUITY RESEARCH
December 8, 2021 Earnings Update
NOMAD ROYALTY COMPANY LTD
Adds High-quality, Long-life Asset With Platreef Gold Stream
Our Conclusion
Nomad Royalty announced a gold stream on the Platreef PGM project in South Africa that is being developed by Ivanhoe Mines Ltd (owns 64%). Nomad, as part of a $200M gold stream co-investment with Orion Mine Finance, is to pay a total of $75M for an initial 37.5% stream on gold production from Platreef, reduced to 30% after 131,250 oz has been delivered until an aggregate of 256,980 oz has been delivered, at which time the stream will be reduced to 5% of payable gold production. We see this as a positive update for Nomad as it adds another long-life, high-quality asset to its portfolio, further reducing the company's concentration risk by diversifying its future cash flows. We estimate Nomad paid 0.5x P/NAV for the stream at spot prices and 0.6x P/NAV on our long-term gold price assumption of $1,650/oz. We calculate an NPV of $131M and IRR of 10%. The Platreef Gold Stream represents 22% of our NAV and we expect it to be funded through the remainder of the revolving credit facility and cash flow. This transaction also highlights the key partnership Nomad has with Orion. After model updates for the Platreef transaction our NAVPS increased from $5.57 to $6.56, resulting in an increase in our price target to C$12.50, from
C$12.00 previously.
Key Points
Transaction Highlights:
Nomad is to pay a total of $75M for a 37.5% stream on gold
production from Platreef until a total 131,250 oz has been delivered.
Thereafter it will be reduced to 30% until an aggregate of 256,980oz
has been delivered, then further reduced to 5% of payable gold
production.
The gold stream will be based on all recovered gold from Platreef,
subject to an 80% payability. We expect Platreef to contribute ~2.1k
GEOs starting in 2024 for Phase 1, increasing to ~11.4k GEOs for
Phase 2 in 2030.
Nomad will make cash payments of the lower of the spot gold or
$100/oz for each ounce of gold delivered under the stream for the
first 256,980oz, and 80% of spot gold for each ounce of gold
delivered thereafter.
About Platreef: The Platreef Project hosts an underground deposit of
platinum-group, nickel, copper and gold mineralization on the Bushveld
Igneous Complex in Limpopo Province, located approximately 280km
northeast of Johannesburg. With this transaction the project is now fully financed to production, expected to commence in 2024. As per the 2020 Technical Report, Platreef is expected to produce ~7koz of gold per annum for first six years, followed by 38koz of gold per annum up until the end of mine life for total LOM gold production of 961koz.