Sailfish Royalty (FISH) - Unconventional, Selective & Pro-consolidation

February 23 2021, 08:27 GMT

Sailfish Royalty

  • Shares Outstanding: 75.6M
  • Share price C$1.12 (16.02.2021)
  • Market Cap: C$85M

Sailfish is a precious metals royalty & streaming company. Within Sailfish’s portfolio are 2 cornerstone assets on advanced-stage projects in the Americas: a gold stream equivalent to a 3% NSR on the San Albino gold project (~3.5 sq. km) and a 2% NSR on the rest of the area (~134.5 sq. km) surrounding San Albino in northern Nicaragua; and an up to 3.5% NSR on the Tocantinzinho gold project in the prolific Tapajos district of northern Brazil. The acquisition of Terraco Gold Corp. adds a potential cornerstone asset: an up to 3% NSR on the multi-million ounce Spring Valley gold project in Pershing County, Nevada.

We met with Cesar Gonzalez, CEO of Sailfish Royalty for a run-through of the company and to discuss their plans going forward.

Company Overview

Sailfish Royalty Corp owns Royalties in the Americas.  They have Royalties in Nicaragua, Brazil, Nevada and Mexico, and also have a Silver property in the prolific San Dimas district in Mexico in the State of Durango. Sailfish Royalty (FISH) - Unconventional, Selective & Pro-consolidation

The model for most Royalty companies is to keep buying to develop size and scale for the company but Sailfish has created a confined portfolio.  They started in 2014 as a private company inside of a mining company called Marlin Gold, which is now called Mako Mining.  But they have been very selective about what they’ve acquired.  Their primary backer is Wexford Capital, and have only gone after transactions they knew Wexford would back them on. It is worth noting that both Directors are former Wexford Capital employees and continue to serve as consultants to Wexford. So, they haven’t grown as quickly as some of their peers, but "have grown smartly".

There are lots of junior Royalty companies that are publicly traded today and Gonzalez believes that if these companies were to consolidate, that could actually create value.  He says some of these portfolios have hit their limits in terms of the value of the projects and assets, and if they worked together as a vehicle that investors could get behind providing liquidity and diversification, they could create value that way. The blending of different quality assets could be a case of the sum of parts is greater than individual parts. There is something to that.

Sailfish Royalty (FISH) - Unconventional, Selective & Pro-consolidation

The Business Model & History: Approach & End Goal

Sailfish was officially traded in January, 2018 when the company had 3 employees. They have 4 employees today and don't plan on adding any more until the company has a stable source of cash flow, and they don’t pay themselves through Sailfish Royalty either, choosing to be remunerated by Wexford Capital and taking a consultant fee instead.

They have however been compensated by Sailfish Royalty with Options, which Gonzalez says changes their perspective on how to run the company.  If there’s a good acquisition to be done, they will take a look, and if somebody wants to acquire them, then they are open to discussion.

El Compas Project

The ideal partner for Sailfish Royalty would be another Royalty company that has current cash flow, but doesn’t have the longer-dated prospects that Sailfish has. In their portfolio, they have a small Royalty that pays out of Mexico called El Compas and they have San Albino, which is Mako’s project in Nicaragua which is soon to be producing Gold in small amounts, but will be ramping up.  So, that gives the company a modicum of cash flow, which they are expecting to ramp up in March, April. 

Beyond that, they have 2 Royalties on large projects; 1 in Brazil, 1 in Nevada, that are owned by operators El Dorado and Waterton that have not made production decisions. 

The Tocantinzinho Project

The Tocantinzinho project in Brazil is owned by El Dorado, has a full Feasibility Study (FS) and is permitted, but El Dorado has indicated that they want to sell the project and not build it themselves.  So Sailfish is waiting for a sale to go through on that project and the build to start.  It would give some clarity on the timeline to production, and the all important cashflow. 

Spring Valley Project

Spring Valley is a 5Moz deposit in Pershing County, one of the largest, undeveloped Gold projects in Nevada owned by a private equity firm from Toronto called Waterton. As they’re private, they don’t have to put up press releases about a new drill hole or a PFS or permits that they’ve received, which has created some uncertainty around the timing and value of that Royalty. 

A 3% on a 5Moz deposit in Nevada, at today’s Gold prices, assuming this was fully ramped up, should create more than USD$10M a year Royalty net of taxes.  The perfect partner would be somebody with current cash flow that needs to backfill and show growth over a longer-term period by adding the Sailfish Royalties to their portfolio.Sailfish Royalty (FISH) - Unconventional, Selective & Pro-consolidation

San Albino Gold Stream: Timeline, Ramp Up, & Expectations

San Albino is producing Gold already and the second phase is to actually hit commercial production which is expected in early Q2/21, which is exciting for Sailfish Royalty as San Albino will be their first real Royalty to generate enough cash flow to cover the G&A and to start to consistently buy back their shares.  The company is on their second buyback to enable them to return cash to their shareholders. In Canada, they’re called NCIBs, Normal-Course Issuer Bids.  The first one was 2.8M shares between June and July of ’19 and ’20, and the second one enables them to buy up to 3M shares, and they are now 1.8M shares into that. With the cashflow from San Albino, they will be able to do a third one and then possibly a fourth until they get the share price to where it needs to be. 

The expectation is that San Albino will be able to produce 30,000oz this year, and Sailfish will get the equivalent of 3% NSR on that, no tax, traded as an active income in the British Virgin Islands.  So, that's about 900oz which in today’s Gold prices, will be a useful contribution. On an annualised basis, Mako Mining are aiming for a 40,000oz to 50,000oz a year mine for at least the next 3 years on the San Albino open pit only.Sailfish Royalty (FISH) - Unconventional, Selective & Pro-consolidation

Gavilanes Silver Property: Plans & Options

Sailfish Royalty has the Gavilanes Silver property which has been in the background, but with current Silver prices now in the USD$27 range, they think now is the time to be moving the project forward. They are working on a new 43-101 to update the historic 43-101 on Gavilanes.  When they acquired Gavilanes in 2017, it was missing an important concession that they have since acquired from SilverCrest, so they have 11 concessions now.  It is 13,500 Hectares, and has about 47 drill holes which is only about 9,600m of drilling.  But in that limited drilling, they were able to put together a Resource showing about 34Moz AgEq with the majority of it being Silver. 

25kms to the West is the San Dimas Tayoltita mine which is operated by First Majestic. That mine has been in continuous operation for decades and produces Gold and Silver at some of the highest grades in Mexico.  Gavilanes is 25kms to the East in the same district with a big land package which requires a lot more exploration. Once the updated 43-101 report is complete in March, the property needs to be sold to a company that has a real exploration budget and a team to prioritise and give the project it’s full attention.Sailfish Royalty (FISH) - Unconventional, Selective & Pro-consolidation

Timeline for Value Creation & Shareholder Returns  

Sailfish Royalty has control over the timing of the Gavilanes project and another project that they’re hoping to combine with it, which is a silver and gold project in Arizona called Commonwealth.  They are working on both 43-101 Resource updates at the same time and are hoping to get them out by March 2021, which will enable firmer plans with regards to the spin-out. Sailfish aims to continue buying back their shares with the excess cash that they have.

It was great to have a run-through of the plans going forward and it makes sense. We look forward to seeing how things progress with San Albino and cash flow wise, we hope they can get those other projects over the line.  

To find out more, go to Sailfish Royalty's Website.

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