Metalla Royalty Offers Growth and Value in Precious Metals and Copper in Over 100 Assets in Americas

• Metalla Royalty is an emerging precious metals and copper-focused royalty company with over 100 assets, mainly in the Americas.
• The company is currently getting back to business after a big merger in 2023 with Nova Royalty, selectively looking at larger, more transformational transactions but is not in a rush.
• Metalla's portfolio includes 5 producing assets delivering around 3,500 gold equivalent ounces per year currently, with more assets coming online that should take production to 15,000 ounces/year over the next 5 years.
• Key royalties include Tocantinzinho (2Moz gold deposit), Garrison/Cote (with 1.9Moz indicated gold resource), and several promising copper projects. The company sees optionality in assets that can deliver strong long-term cash flows.
• As assets advance, Metalla expects to initiate a capital return strategy in late 2025, likely starting with a dividend that can increase for many years. Share buybacks are also an option at the current low valuation.

Company Overview: Precious Metals and Copper Portfolio

Metalla Royalty & Streaming Ltd (TSXV:MTA) presents an attractive opportunity for investors seeking exposure to precious metals and copper. As an emerging royalty and streaming company, Metalla offers robust growth potential and downside protection compared to traditional mining investments. With a diversified portfolio of over 100 royalties and streams mainly in the Americas, Metalla is positioned to benefit from rising metals prices while insulated from rising costs.

Building a Solid Portfolio

Metalla has spent the past several years assembling an impressive portfolio of royalties on high-quality assets. This patient, opportunistic approach allowed Metalla to build a strong foundation of royalties at accretive prices during the bull market of 2016-2018. While the market has shifted since then, these assets continue to advance and increase in value, forming the core of Metalla's portfolio.

Interview with President & CEO Brett Heath

Current Production and Near-Term Growth

Metalla currently has five producing assets delivering approximately 3,500 gold equivalent ounces per year. These assets provide a stable base of cash flow to support the company's ongoing growth initiatives.

Over the next five years, Metalla forecasts annual production rising to around 15,000 gold equivalent ounces as three additional assets come online. This includes the Tocantinzinho royalty in Brazil, which will be a key cash flow driver once the large 2 million-ounce deposit reaches production shortly.

In the words of CEO Brett Heath:

"When you look at kind of what this business will look like in three years, four years, five years from now, you've got an asset base and NPV of around $700 million potentially. You've got production that's going to go from the $6-8 million range today to about $30 million assuming $2,000 gold."

This highly visible growth profile distinguishes Metalla from its royalty and streaming peers. With several assets advancing towards production decisions, investors can look forward to a step-change in cash flow and value creation over the next few years.

Copper Exposure and Long-Term Optionality

In addition to precious metals, Metalla offers significant exposure to copper through royalties on several world-class development projects. The 2022 merger with Nova Royalty brought flagship copper assets into the portfolio, including the NuevaUnion project in Chile.

These copper assets are earlier stage but provide long-term optionality on a metal poised to benefit from the global transition to clean energy.

Heath commented: "The great part about Nova was that we don't need to go out and look for any more copper. We've got some of the best copper exposure from the best development assets across the Americas."

While acknowledging that copper mines take many years to be built, Heath sees enormous option value in these royalties longer-term: "I don't know it's going to take a little bit of time for that to play out. I don't think any of these big companies build these mines at $3 or even $4 copper. I think they're going to need a $5 handle likely to build these mines... But once they get into production, it's as far as you can see."

Capital Returns on the Horizon

As Metalla's portfolio matures and cash flow increases, the company plans to implement a capital returns strategy starting in late 2025. Heath outlined the two key components investors can anticipate:

"The obvious routes are dividends and buybacks. A lot of that will be a function of where the share price trades. If the shares are at a very attractive valuation, we're going to want to use that excess capital to buy back stock. If the shares go back up to what's reasonable, then we'll kick-start a dividend. The business will be in a position in 2025 to probably kick-start that and increase it every single year for the next probably decade."

This provides a clear path to shareholder returns and signals management's confidence in the underlying cash flow growth of the asset base. By opportunistically allocating capital between dividends and buybacks, Metalla can maximize value creation for investors.

An Attractive Valuation

Despite its strong portfolio and growth profile, Metalla currently trades at a depressed valuation of around 0.4x consensus NAV. This is significantly below the 1.5-2x multiples the company previously commanded and where larger royalty peers trade.

Heath attributes this discount to a changed market environment but sees substantial rerating potential as cash flow improves:

"It's going to swing back the other direction... I think there'll be a lot of leverage within also the rising metal price environment."

In essence, Metalla offers the upside potential of a high-growth royalty company at the valuation of an earlier-stage firm. For investors constructive on precious metals and copper prices, this represents an attractive entry point to gain exposure to a cash-flowing vehicle with a pipeline of development assets.

Metalla Royalty presents a timely opportunity to invest in a growing precious metals and copper royalty company. Having assembled an attractive portfolio of cash-flowing and development assets in top-tier jurisdictions, Metalla is now poised to deliver significant organic growth over the coming years.

With a proven management team, a clear path to shareholder returns, and a depressed valuation, Metalla stands out as a compelling investment in a challenging market. As its portfolio continues to advance and metal prices cooperate, Metalla offers substantial upside potential with the downside protection of a royalty model.

The Investment Thesis for Metalla Royalty

• Metalla offers exposure to rising precious metals and copper prices through a diverse, cash-flowing royalty and streaming portfolio
• Near-term production growth to 15,000 gold equivalent ounces per year by 2028 as key development assets reach production
• Significant copper optionality through royalties on world-class assets in the Americas
• Proven management team with a track record of accretive royalty acquisitions and strong per-share value creation
• Capital return strategy of dividends and buybacks to commence in late 2025, providing a clear path to shareholder returns
• Attractive valuation at 0.4x NAV with substantial re-rating potential as assets deliver organic growth

Actionable Advice

• Invest in Metalla to gain portfolio exposure to precious metals and copper through a diverse royalty and streaming model
• Use the current depressed valuation to build a position ahead of upcoming catalysts and planned commencement of capital returns
• Monitor the progress of key development assets like Tocantinzinho and Cote/Garrison for the next leg of growth
• Hold Metalla as a long-term investment to participate in attractive organic growth and potential M&A upside while collecting a future dividend

Macro Thematic Analysis

The current macro environment provides a compelling backdrop for investing in precious metals and copper exposure. Persistently high inflation, geopolitical tensions, and the global energy transition are all supportive of higher metals prices in the medium to long term.

Central banks around the world have been aggressively raising interest rates to combat inflation, but these efforts have yet to definitively succeed. Investors are seeking safe haven assets like gold and silver to protect their purchasing power in this inflationary environment.

The ongoing war in Ukraine has also increased the appeal of precious metals. Gold tends to outperform during periods of geopolitical uncertainty as investors flock to hard assets. With no clear end to the conflict in sight, this dynamic could fuel further upside in gold and silver.

Longer-term, the global shift towards cleaner energy sources is a major driver for copper demand. Electric vehicles, renewable energy infrastructure, and upgraded electrical grids all consume large amounts of copper. Supply, meanwhile, is constrained due to years of underinvestment and declining grades at existing mines. This sets the stage for a structural deficit in the copper market over the next decade.