Orogen's Silicon Royalty Continues To Grow

Source: Adrian Day 03/03/2025

Three more large gold and silver companies reported, all with good fourth-quarter results, though softer-than-expected guidance for the coming year. Global Analyst Adrian Day discusses below, as well as developments at other companies, including a new resource estimate at Orogen’s Silicon-Merlin royalty deposit.

Orogen Royalties Inc. (OGN:TSX.V) reported a 34% increase in the gold resource with higher average grades at the Merlin Deposit, over which it holds a 1% royalty. AngloGold Ashanti Ltd. (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE), owner of the project, said last week that Merlin now has an inferred resource of 12.1 million ounces, in addition to the unchanged 4.2 million ounces at nearby Silicon. AngloGold said the recent drilling, with “several exciting intercepts,” in addition to increasing the resource, had provided “vastly improved knowledge” of the deposit.

Although the resource increase is positive news, there was little details of where the drilling took place, how much was new in-fill drilling, and how much drilling out to the west of the main deposit. Anglo did, however, say that some recent drilling to the east had seen “encouraging visual samples”. Anglo is working on an initial Pre-Feasibility Study, scheduled for the second-half of this year. It is planning on spending $50 million on the entire district this year and another $200 million in 2026 as development of the initial North Bullfrog mine at the northwest end of the district (and outside of Orogen’s royalty area) gets underway.

Now that Anglo’s expected resource update is out, both Orogen and Altius, which also has a royalty (of 1.5%) covering the Expanded Silicon Project, can begin to entertain offers to buy the royalties.

Continue to buy Orogen.

Pan American Meets Guidance With Record Gold Output

Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) reported fourth-quarter and annual results more-or-less as expected after already releasing its production. Lower production meant higher per-unit costs, though silver costs were higher than the lower production alone would account for. (At less than $20 per ounce All-In Sustaining Costs are still competitive.)

Gold output for the year hit a new record. Guidance for this year was also in-line, with production expected to decline (gold output by 14%) and correspondingly higher per-unit costs. This may be conservative guidance, with most analysts looking for the company to come in at the high end of its guidance range. The company is expecting the second half of the year to be stronger than the first, with the fourth quarter the strongest of all. This has long been the pattern for Pan American.

CEO Michael Steinmann emphasized that the company had “a rigorous focus on controlling costs” so it could maintain margins in the higher price environment. The company has repurchased 2.6 million of shares over the past year, since its share buyback program was introduced, including 900,000 shares this year.

Optimism on Escobal Mine, Though No Timeline

Steinmann noted that the government of Guatemala had not yet published a timeline for the conclusions on consultations and eventual restart of the large Escobal mine, but he pushed back on suggestions that there was a “stalemate.”

Overall the tone seemed more positive than previously, even without specific new hard information. He did indicate that the company was ready to restart the mine once permission was granted, and would expecting “strong” production within a quarter or two and a full ramp-up over a year or so. Pan American is our top miner for silver exposure.

Management is strong, fiscally conservative, and disciplined, while the balance sheet is solid, with $863 million in cash (including $417 million in proceeds from a property sale) as well as $750 million available on its undrawn credit facility. Debt, at low interested rates, came with the Yamana transaction. The company has three large projects currently not in production — La Colorada Skarn, Escobal, and Navidad — which provide high, long-life organic potential.

We are holding here but will be buyers again.

Another Record at Osisko, Though Growth May Slow

Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) reported quarterly and annual financials in line after already announcing production and revenue. It was the seventh consecutive year of increased cash flow per share. The company looks ahead to further growth in GoldEquivalent Ounces (GEOs) this year, though at a slower pace than previously expected; it had already reduced expectations for the year.

The company provided a 5-year outlook, with growth of 50% in its GEOs, but its assumptions on future mine start ups are conservative, due to permitting delays; it also excludes any contribution from the currently closed Eagle Mine. The balance sheet is good, with $59 million in cash against a $94 million balance of its debt facility. It had been aggressively paying down its debt last year before drawing on it for new royalties. It is on track to be debt free later this year (absent new acquisitions).

We like Osisko, which now has 21 producing assets, with most in Canada and other Tier One jurisdictions and 93% from precious metals (67% gold). No new mines are expected to come on stream this year. Largely because of sequencing at its largest asset, Malartic, as well as the Mantos Blancos mine, which has experienced some ramp-up of issues, Osisko expected the first quarter of the year to be its weakest, followed by the second; the second half of the year is expected to generate around 55% of its annual GEOs. The broadening of the producing asset base reduces the risk, while there is optionality from a future restart of the Eagle Mine. New management has done a solid job after the turmoil in the executive suite nearly two years ago now.

Osisko is a Buy.

Wheaton Has Strong Quarter, With Improved Long-Term Guidance

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) reported higher-than-expected fourth quarter production, enabling it to achieve the top end of its full-year guidance. Its largest assets, Salobo, had a strong performance, driving the results.

It expects this year’s production to be up about 10%, with most of the growth coming from new projects, while existing large-scale mines will be stable. It also provided positive five- and 10-year guidance, with production at the end of the five-year period estimated to be 40% higher than last year.

After a strong move in the stock this year — up 26% before a decline on Friday — we are holding for now.

Barrick Has New Agreement With Mali, Report Says

Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) has reached an agreement with the Mali government in its dispute over the currently suspended Loulo-Gounkoto mine, according to a report from Reuters.

The report says that Barrick has already signed the new agreement, though it is still awaiting the government’s formal approval. Under the agreement, Barrick will pay the government $436 million to secure the release of imprisoned workers and confiscated gold. Barrick has declined to comment on the report.

Hold.

TOP BUYS this week, in addition to above, include Altius Minerals Corp. (ALS:TSX.V), Lara Exploration Ltd. (LRA:TSX.V), Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American), and Fox River Resources Corp. (FOX:CNSX).

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Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Orogen Royalties Inc., Pan American Silver Corp., Osisko Gold Royalties Ltd., Barrick Gold Corp., Altius Minerals Corp., Lara Exploration Ltd., Fortuna Silver Mines Inc., Metalla Royalty & Streaming Ltd., and Fox River Resources Corp.
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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Adrian Day Disclosures

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

( Companies Mentioned: ABX:TSX; GOLD:NYSE, OGN:TSX.V, OR:TSX; OR:NYSE, PAAS:TSX; PAAS:NASDAQ, WPM:TSX; WPM:NYSE, )

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