Quebecers lost their dream first streak in Lafleur-Lemaire-Shutt more than 40 years ago. At the start of a week full of memories, three young entrepreneurs also proved themselves winners.
Posted on May 4
Vincent Metcalfe, Joseph de la Plante and Elif Levesque founded Royalties Nomad in February 2020, then raised $483 million in two years. These days, they just accepted an offer to buy Vancouver’s Sandstorm, which their team estimates at 755 million.
The retail shareholder that participated in the IPO paid $9 for his stake and will receive the equivalent of $11.57 (based on Sandstorm’s closing price April 29) after the acquisition.
The return obtained on paper is 29% in two years, not counting the current dividend yield, which is more than 1% annually. Since the transaction is done via stock exchange, the shareholder benefits from asset renewal, which avoids inducing taxable capital gains.
The terms of the deal are to exchange 1.21 shares of Sandstorm for every share of Nomad. That price represents a premium of 21% over Friday’s closing price and 34% over Nomad’s 20-day average stock price. So he became a shareholder in a company with a market value of C$2.7 billion.
Pay first, collect later
As the name suggests, Nomad is a mining proprietary company. This company is similar to a financial company that specializes in mining. It provides financing to mining companies so that they can carry out their projects in exchange for subsequent payments. There are two possible tools: Kings or Metal Flux.
Under royalty financing, Nomad receives, in return for the paid-in capital, a percentage of the future value of the precious metals to be mined from the land. Under the flow of minerals, paid-in capital gives the right to a quantity or a percentage of future production at a predetermined preferential price.
The acquirer Sandstorm is also a proprietary company. The deal, which includes a third party: Basecore, is expected to close in the second half of the year, after receiving regulatory approval.
The new sandstorm will eventually rise to 4And Ranking of gold ownership companies, ahead of Osisko Gold Royalties, in Montreal, but behind Franco-Nevada, co-founded by Pierre Lasonde, Wheaton Precious Metals, and Royal Gold.
“Nomad shareholders will become part of the fastest growing mid-tier metals and equity firm with production expected to increase by 40% between 2022 and 2024 and 73% between 2022 and 2025,” wrote Trevor Turnbull, financial analyst at Scotia Capital.
Nomad holds 20 royalties, 8 of which are already revenue-generating. Royalties or other streams will start generating revenue by 2025.
Our portfolio has the longest life of the mines in the industry, approximately 18 years. This is very attractive to the acquirer, as he is buying the assets that will contribute to his own portfolio in the long run.
Vincent Metcalfe, CEO of Nomad Royalties
The main Nomad origin consists of two mineral streams from the Greenstone deposit in Ontario.
Mr. Metcalf, 38, explains that he sold his company to expand the platform in order to look forward to valuations like the Franco Nevada leader. The convergence with Sandstorm, to use reality show language, happened last March during the BMO Mining Conference in Florida.
On a pro forma basis, Nomad shareholders will own 28% of the new Sandstorm, historical shareholders of the buyer will control 67% of the new entity and Basecore shareholders, 5%.
The downside of the deal: Montreal check out Nomad’s head office, located at Windsor Station, rue des Canadiens-de-Montréal, a stone’s throw from the Temple of Hockey.
Mr. Metcalf, a former financial analyst at BMO and former USESCO, will leave the company in the wake of his deal. His employment contract provides for compensation in the event of departure after a change of authority. He and his colleagues became somewhat unrestricted free agents.
“The idea is to keep the team together and look to build something new. We are still young. We still have a lot of energy. We are not ready to go south or play golf.
He mentions metals necessary for transport electrification such as lithium and copper as a potential object for his next project. “Nomad is our first Stanley Cup,” says Metcalf. He wants to win over others, like The Glorious of the 1970s.