Sailfish Royalty (FISH) - Dividends, Share Buybacks & More M&A

Sailfish Royalty Corp. is a precious metals royalty and streaming company based in the Americas focused on imminent cash flow. The company has 2 main assets in its portfolio, the San Albino Gold Mine in North Nicaragua and the Spring Valley Gold Project in Pershing County, Nevada. 

We met with Cesar Gonzalez Co-founder, CEO, and Director, Sailfish Royalty. He previously served as the Director and Vice President of Corporate Development at Marlin Gold Mining Ltd. He also serves as the Vice President of Corporate Development at Mako Mining, the Executive Chairman at Bonterra Resources Inc., and as a consultant at Wexford Capital LP. His educational credentials include a B.S. in Business Administration from the University of Southern California. 

Company Overview 

Sailfish Royalty is a British Virgin Islands-based precious metals royalty and streaming company founded in 2014. The company is listed on the Toronto Stock Exchange (TSX-V: FISH) and the OTC Markets (OTCQX: SROYF). Western Standard Metals USA, Inc., and Terraco Gold Corp. are the company's subsidiaries. 

The company has a streaming royalty on a very high-grade open-pit mine in Nicaragua called the Albino Gold Mine. This site is currently under production and is generating a healthy cash flow. The company has another royalty called the Spring Valley Project in Nevada, a 3% NSR (Net Smelter Return) on a very large undeveloped gold project.

The company recently divested its Nevada asset and is in the process of declaring a dividend. The company's shareholders recently purchased a large number of their company shares through an NCIB. 

In the past decade, the company has built two mines, one in Mexico, and the other one in Nicaragua. Over the years, the company has been involved in purchasing mines, exploration projects, and royalty along with building mines and offloading royalties. They have previously funded exploration projects in Quebec, West Australia, and Mexico. 

Sailfish Royalty funded a heavy exploration project in Nicaragua along with production from the mine and through the funding from this project, the company has acquired additional royalties. 

The Tocantinzinho Deal 

Sailfish Royalty recently closed the royalty transfer transaction where the company moved its 2.75% NSR on the Tocantinzinho gold project in Brazil to Osisko Gold Royalties Ltd. for $10M. This project was previously under operation by Eldorado Gold Corp. that is now being operated by G Mining Services, a junior mining company. 

G Mining acquired the entire asset through a structured deal for $20M in cash along with a 19.9% position for Eldorado with an additional $60M in deferred cash based on a production decision. Sailfish Royalty sold their 1.5% NSR for $19M. 

This royalty was sold in 2 parts, the first one being $9M and the second one at $10M. The company was able to pay off its debt from the capital raised through this deal. They currently hold $13M in cash reserves and are generating cash flow from their San Albino asset. Once the company's debt was cleared, they focused on buying back shares from the market. 

This buyback of shares was driven by the decision to pay dividends to the shareholders. A formal dividend payback policy is scheduled to be announced in the near future. 

M&A Considerations 

At the start of 2021, Sailfish Royalty was looking for an M&A (Merger and Acquisition). The company's current market cap is under the $500M range. They intend to develop a diversified portfolio. The transactions at Tocantinzinho with Metalla and Osisko Gold Royalties are a part of their planned M&A strategy. 

Sailfish Royalties' preferred merger would be a similarly-sized company with common challenges and aligned goals. Preceding the sale of the Tocantinzinho royalty, the company plans to build back its portfolio through consolidation.

Planned Dividends 

Sailfish Royalty is planning to pay dividends amounting to $1M on a quarterly basis. Since the dividends are being paid out on a per-share basis, the company is looking to meet its projected payback target. 

This amounts to $4M dividends paid on a yearly basis or 5% dividends paid, significantly higher than the majority of royalty companies. The company is currently assessing incoming opportunities in the next 1-2 quarters and offering a dividend based on a transaction that will offer a near-term cash flow. 

Sailfish Royalty isn't phased by the pressure of paying high dividends. They are open to taking steps to add assets and develop a stronger cash yield to support their payback strategy. 

Share Allocation 

Sailfish Royalty was founded in 2014 by Cesar Gonzalez and Akiba Leisman as a mining company. Over time, the duo saw opportunities in the royalties and streaming sector, which led to the acquisition of Tocantinzinho in exchange for cash and shares. The company also bought Terraco Gold Corp., leading to the acquisition of the Spring Valley royalty. Sailfish Royalty went public in 2018. 

The company has 6.8M active shares which were used towards acquiring these assets. In the past 2 years, the company has been consistently buying back shares at a low price. 

The company is looking to break the mold that only the high market cap companies pay dividends. The company is open to a potential merger to form a larger company instead of selling it for cash. They are looking to generate a cash flow stream from their Spring Valley Gold Project. 

Sailfish Royalty is looking to grow the company into a sustainable, large, liquid, diverse royalty company that offers excellent investment opportunities over time

A New Silver-Focused Company

Sailfish Royalty is planning to establish Swordfish, a silver-focused company comprising the Gavilanes Silver Property, a low-sulphidation epithermal deposit located in Durango, Mexico. They plan to take this operating asset and push it as a separate vehicle while retaining a part of stocks. The stocks will be pushed out to the shareholders over time. Paolo Lostritto, the current Vice President of Corporate Development at Sailfish Royalty will be appointed as the CEO of this new company.

Swordfish will also comprise the Commonwealth Silver and Gold Project located in Cochise County, Arizona. This asset is under private ownership of Wexford and a resource update will be announced once the company goes public. They are currently awaiting regulatory approval. 

The Gavilanes Silver Property has two 43-101 reports in place, recently updated and released. As per the resource update, the presence of discrete modeling and mineralized zones lead to an increase in overall grades. The deposit features 85% silver along with lead, zinc, copper, and gold. The company is currently focused on silver veins at the deposit. Sailfish Royalty is seeking exchange approval for the ongoing transaction at the Gavilanes property. 

The San Albino Gold Project 

The company's San Albino Gold Project is currently generating a monthly cash flow of $150,000. There are 2 components of this project, the first is a 3% NSR equivalent stream spread across a 3.5 square kilometer area that is a part of the broader district. Sailfish Royalty and Mako Mining are carrying out exploration in this area. 

The mill capacity at the Nicaragua site is rated at 1,000 t/day. The company is looking to scale up its production to 500t/day. Based on the gold price, the company is close to generating a cash flow at San Albino that would further support the planned dividends. The company is also looking to backfill the dividend with its cash reserves. 

The San Albino Asset in Nicaragua features a series of stacked veins at a dip of 30⁰-35⁰. This area was historically mined in the 1900s as a stamp mill operation. The topography of this land is a pyramid-shaped open-pit mine. As the operation progresses, the site will begin to take the shape of an open pit. The company is looking to add significant ounces from this deposit. This deposit has the potential for a 250,000oz supply with huge margins as a result of mining efficiency and high grades. 

The Los Conchitas Project 

Mako Mining's Los Conchitas area will serve as the second production center for Sailfish Royalty. This area covers 2% NSR and is scheduled to come online around the same time as the San Albino Gold Project. The Los Conchitas is largely unexplored. The company recently discovered a 1Moz resource at the site which provides an estimated mine life of 10+ years. 

Since the company has limited employees and the co-founders do not draw a cash salary, the dividend considerations seem highly likely. The bonuses received by the management are fully utilized towards exercising options. This results in additional buyback of shares which are reinvested into the company. 

To find out more, go to the Sailfish Royalty Website