EX-99.2 3 tm2215266d1_ex99-2.htm EXHIBIT 99.2

Exhibit 99.2

 

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

MARCH 31, 2022 AND 2021

 

(Unaudited)

 

 

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Financial Position

(in thousands of United States dollars - unaudited)

 

   March 31, 2022   December 31, 2021 
Assets          
Current assets          
Cash and cash equivalents  $10,907   $17,059 
Accounts receivable   9,793    7,889 
Prepaid gold interests (Note 5)   11,800    7,618 
Investments (Note 6)   3,292    2,689 
Prepaid expenses and other   656    1,000 
Total current assets   36,448    36,255 
           
Non-current assets          
Royalty, stream and other interests (Note 3 and 4)   316,716    314,907 
Prepaid gold interests (Note 5)   40,221    40,084 
Deferred financing costs and other   1,201    1,289 
Total assets  $394,586   $392,535 
           
Liabilities          
Current liabilities          
Trade and other payables  $2,035   $2,910 
Total current liabilities   2,035    2,910 
           
Non-current liabilities          
Credit facility (Note 7)   12,500    12,500 
Deferred tax liability (Note 13)   6,297    5,311 
Total liabilities   20,832    20,721 
           
Equity          
Capital and reserves          
Share capital (Note 8a)   338,204    336,801 
Reserves   10,065    10,008 
Accumulated other comprehensive (loss) income   (932)   274 
Retained earnings   26,417    24,731 
Total equity   373,754    371,814 
Total liabilities and equity  $394,586   $392,535 

 

Contractual Obligations (Note 16)

Subsequent Events (Note 17)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

ON BEHALF OF THE BOARD:
 
“signed”         Geoff Burns, Director         “signed”         Dan O’Flaherty, Director  

 

  2

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(in thousands of United States dollars, except for per share and share data - unaudited)

 
   Three months ended 
   March 31 
   2022   2021 
Royalty revenue (Note 14)  $6,866   $6,883 
Sales (Note 14)   7,788    6,197 
Total revenue   14,654    13,080 
           
Cost of sales, excluding depletion   (4,669)   (1,629)
Depletion (Note 4)   (3,394)   (3,539)
Total cost of sales   (8,063)   (5,168)
Gross profit   6,591    7,912 
           
Administration expenses (Note 9)   (1,641)   (1,415)
Project evaluation expenses (Note 9)    (931)   (1,095)
Change in fair value of prepaid gold interests (Note 5)   1,519    - 
Income from operations   5,538    5,402 
           
Other income and expenses          
Gain on royalty transactions (Note 3b)   -    10,983 
Gain on conversion of debenture (Note 3b)   -    2,410 
Foreign exchange gain (loss)   145    (44)
Other (expense) income   (64)   46 
Finance expense   (309)   (294)
Income before income taxes   5,310    18,503 
           
Income tax expense (Note 13)   (1,787)   (3,734)
Net income  $3,523   $14,769 
           
Earnings per share (Note 10)          
Basic earnings per share  $0.02   $0.10 
Diluted earnings per share  $0.02   $0.10 
           
Weighted average number of common shares outstanding:          
Basic   146,898,689    140,775,953 
Diluted   149,348,007    147,054,535 
           
Other Comprehensive Income          
Net income  $3,523   $14,769 
Item that will not be subsequently re-classified to net income:          
Changes in fair value of investments, net of tax (Note 6)   (1,206)   (1,398)
Comprehensive income  $2,317   $13,371 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.  

 

  3

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Cash Flows

(in thousands of United States dollars - unaudited)

 

   Three months ended 
   March 31 
   2022   2021 
Operating activities          
Net income  $3,523   $14,769 
           
Non-cash cost of sales related to prepaid gold interests (Note 5)   3,199    - 
Depletion and amortization   3,408    3,576 
Share-based compensation   484    344 
Change in fair value of prepaid gold interests (Note 5)   (1,518)   - 
Gain on royalty transactions (Note 3b)   -    (10,983)
Gain on conversion of debenture (Note 3b)   -    (2,410)
Foreign exchange (gain) loss and other   (106)   200 
Finance expense   309    294 
Income tax expense   1,787    3,734 
Withholding and income taxes paid   (537)   (526)
Changes in non-cash working capital (Note 11)   (2,530)   4,481 
Net cash provided by operating activities  $8,019   $13,479 
           
Investing activities          
Acquisition of royalty, stream and other interests (Note 3 and 4)   (5,033)   (82)
Acquisition of prepaid gold interest (Note 5)   (6,000)   - 
Proceeds from buy back of royalty interest and other   -    49,500 
Acquisition of investments (Note 6)   (2,034)   - 
Proceeds from disposal of equity investments (Note 6)   -    11,186 
Net cash (used in) provided by investing activities  $(13,067)  $60,604 
           
Financing activities          
Repayment of credit facility (Note 7)   -    (32,000)
Financing costs and interest paid   (244)   (234)
Dividends paid (Note 8e)   (1,837)   (1,408)
Proceeds from exercise of stock options (Note 8b and 8c)   976    1,128 
Net cash used in financing activities  $(1,105)  $(32,514)
           
Effect of exchange rate changes on cash and cash equivalents   1    (26)
(Decrease) increase in cash and cash equivalents   (6,152)   41,543 
Cash and cash equivalents at the beginning of the period   17,059    7,760 
Cash and cash equivalents  $10,907   $49,303 

 

Supplemental cash flow information (Note 11)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

  4

 

 

Maverix Metals Inc.

Condensed Interim Consolidated Statements of Changes in Equity

(in thousands of United States dollars, except for number of shares - unaudited)  

 

   Issued
shares		  

Share
capital

$

  

Share

warrant

reserve

$

  

Share

option

reserve

$

  

Accumulated
other
comprehensive
(loss) income

$

  

Retained
earnings

$

  

Total

equity

$

 
As at December 31, 2021   146,720,355    336,801    5,094    4,914    274    24,731    371,814 
Total comprehensive income   -    -    -    -    (1,206)   3,523    2,317 
Dividend declared (Note 8e)   -    -    -    -    -    (1,837)   (1,837)
Shares issued for options exercised (Note 8c)   470,678    1,327    -    (351)   -    -    976 
Share-based compensation   15,361    76    -    408    -    -    484 
As at March 31, 2022   147,206,394    338,204    5,094    4,971    (932)   26,417    373,754 
                                    
As at December 31, 2020   140,488,309    318,530    6,609    4,045    4,326    7,479    340,989 
Total comprehensive income   -    -    -    -    (1,398)   14,769    13,371 
Dividend declared (Note 8e)   -    -    -    -    -    (1,408)   (1,408)
Shares issued for options exercised (Note 8c)   664,351    1,713    -    (585)   -    -    1,128 
Share-based compensation   1,026    5    -    339    -    -    344 
As at March 31, 2021   141,153,686    320,248    6,609    3,799    2,928    20,840    354,424 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

  5

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

1.NATURE OF OPERATIONS

 

Maverix Metals Inc. (“Maverix” or the “Company”) is incorporated and domiciled in Canada and its registered head office address is Suite 575, 510 Burrard Street, Vancouver, British Columbia, V6C 3A8, Canada. The Company’s common shares trade on the New York Stock Exchange American and Toronto Stock Exchange under the symbol “MMX”.

 

Maverix is a resource-based company that seeks to acquire and manage royalties and metal purchase agreements (a “Stream” or “Streams”) on projects that are in an advanced stage of development, on operating mines producing precious or other metals, or in some circumstances, exploration stage projects or other interests. Royalty interests (“Royalty” or “Royalties”) are non-operating interests in mining projects that provide Maverix with the right to a percentage of the gross revenue from the metals produced from the project (a “Gross Revenue Royalty” or “GRR”) or the net revenue after the deduction of specified costs (a “Net Smelter Returns Royalty” or “NSR” royalty). Under a Stream interest, Maverix makes an upfront payment to acquire the Stream and then receives the right to purchase, at a fixed or variable price per unit based on the spot price of the precious or other metal, a percentage of the life of mine production or a specified time period.

 

These unaudited condensed interim consolidated financial statements were approved and authorized for issue by the Board of Directors of the Company on May 12, 2022.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

a)Statement of Compliance

 

These unaudited condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”), applicable to preparation of interim financial statements including International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board. Accordingly, certain disclosures included in the annual financial statements prepared in accordance with IFRS have been condensed or omitted. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021 (the “2021 Annual Financial Statements”).

 

The accounting policies applied in the preparation of these unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s 2021 Annual Financial Statements. The Company’s interim results are not necessarily indicative of its results for a full year.

 

b)Basis of Preparation

 

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments, which are measured at fair value. The unaudited condensed interim consolidated financial statements are presented in United States dollars (“USD”), unless otherwise noted.

 

c)Estimation Uncertainty

 

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. The current and expected impacts on global commerce are anticipated to be far reaching. To date there has been significant volatility in the stock market and in the commodity and foreign exchange markets, restrictions on the conduct of business in many jurisdictions and the global movement of people and some goods has become restricted. In the current environment, estimates and assumptions about future production, commodity prices, exchange rates, discount rates, future capital expansion plans and associated production implications at the underlying mines and other interests in which the Company holds a royalty or stream interest are subject to greater variability than normal, which could significantly affect the valuation of our assets, both non-financial and financial.

 

  6

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

The conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, could have negative impacts on the underlying operator to continue operations of the Omolon hub where the Company owns a 2.5% GRR. As at March 31, 2022, the Company has not recorded any adjustments related to these previously described events.

 

3.ROYALTY TRANSACTIONS

 

a)During the Three Months Ended March 31, 2022

 

Acquisition of Gold Royalties in Nevada

 

In March 2022, the Company acquired three royalties on gold projects located in Nevada from an indirect, wholly owned subsidiary of Waterton Precious Metals Fund II Cayman, LP in exchange for a $5.0 million cash payment. The royalty package includes a 3.5% to 4% NSR royalty on the Lewis property owned by Gold Standard Ventures Corp. (“Gold Standard”) and two other royalties on exploration ground which either form part of or are adjacent to Gold Standard’s South Railroad project.

 

b)During the Three Months Ended March 31, 2021

 

Hope Bay

 

In August 2019, Maverix entered into an agreement to purchase an additional 1.5% NSR royalty on the Hope Bay mine in Nunavut, Canada, previously owned and operated by TMAC Resources Inc. (“TMAC”) for a cash payment of $40.0 million (the “Additional Royalty”). Under the Additional Royalty agreement, TMAC had the right to buy back the entire Additional Royalty for a cash payment of $50.0 million in the event of a change of control transaction of TMAC (as defined in the Additional Royalty agreement) that was announced prior to June 30, 2021. In February 2021, Agnico Eagle Mines Limited (“Agnico Eagle”) completed the acquisition of TMAC. Concurrent with the acquisition, Agnico Eagle provided notice to the Company and exercised the buyback right with respect to 1.5% of the total 2.5% NSR royalty the Company owned on the Hope Bay mine. As a result of the buy back, the Company received $50.0 million and recorded a gain on the buy back of the Hope Bay royalty interest of $11.0 million. The Company has retained a 1% NSR royalty on the Hope Bay mine that is not subject to any reductions.

 

Additional El Mochito Stream

 

In March 2021, Maverix converted all amounts outstanding under a $1.0 million convertible debenture into an additional 5% silver Stream on the operating El Mochito mine on the same terms as the existing El Mochito silver Stream (the “Additional Silver Stream”). The Company used a discounted cash flow model to determine the fair value of the Additional Silver Stream and recognized a $2.4 million gain on the conversion of the debenture. The discounted cash flow model used a discount rate of 10% and a silver price based on analyst metal price projections and management expectations.

 

  7

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

4.ROYALTY, STREAM AND OTHER INTERESTS

 

As at and for the three months ended March 31, 2022:

 

   Cost   Accumulated Depletion     
   Country  Opening   Additions/
(Disposals)		   Ending   Opening   Depletion   Ending   Carrying
Amount		 
      $   $   $   $   $   $   $ 
Beta Hunt  AUS   9,421    -    9,421    (5,477)   (86)   (5,563)   3,858 
Camino Rojo  MEX   40,195    -    40,195    (69)   (627)   (696)   39,499 
Cerro Blanco  GTM   16,069    -    16,069    -    -    -    16,069 
Cerro Casale  CHL   7,053    -    7,053    -    -    -    7,053 
Converse  USA   10,039    -    10,039    -    -    -    10,039 
DeLamar  USA   9,068    -    9,068    -    -    -    9,068 
El Mochito  HON   11,144    -    11,144    (4,054)   (232)   (4,286)   6,858 
Florida Canyon  USA   12,823    -    12,823    (3,709)   (169)   (3,878)   8,945 
Gemfield  USA   8,799    -    8,799    -    -    -    8,799 
Hope Bay  CAN   23,305    -    23,305    (2,508)   -    (2,508)   20,797 
Karma  BFA   20,080    -    20,080    (7,702)   (276)   (7,978)   12,102 
La Colorada  MEX   17,400    -    17,400    (5,287)   (190)   (5,477)   11,923 
McCoy-Cove  USA   18,553    -    18,553    -    -    -    18,553 
Moose River  CAN   3,700    -    3,700    (2,922)   (64)   (2,986)   714 
Moss  USA   20,283    -    20,283    (7,241)   (329)   (7,570)   12,713 
Mt Carlton  AUS   9,436    -    9,436    (8,270)   (120)   (8,390)   1,046 
Omolon  RUS   33,899    -    33,899    (9,795)   (692)   (10,487)   23,412 
Recuperada  PER   3,207    20    3,227    -    (270)   (270)   2,957 
San Jose  MEX   5,500    -    5,500    (3,827)   (143)   (3,970)   1,530 
Silvertip  CAN   4,340    -    4,340    (454)   -    (454)   3,886 
Vivien  AUS   3,301    -    3,301    (3,066)   (26)   (3,092)   209 
Other  Various   107,422    5,013    112,435    (15,749)   -    (15,749)   96,686 
Total(1)      395,037    5,033    400,070    (80,130)   (3,224)   (83,354)   316,716 

 

(1)Royalty, stream and other interests include non-depletable assets of $85.4 million and depletable assets of $231.3 million.

 

  8

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

As at and for the year ended December 31, 2021:

 

   Cost   Accumulated Depletion     
   Country  Opening   Additions/
(Disposals)		   Ending   Opening   Depletion   Inventory
Adjustment		   Disposals   Ending   Carrying
Amount		 
      $   $   $   $   $   $   $   $   $ 
Beta Hunt  AUS   9,421    -    9,421    (4,763)   (714)   -    -    (5,477)   3,944 
Camino Rojo  MEX   40,173    22    40,195    -    (69)   -    -    (69)   40,126 
Cerro Blanco  GTM   16,069    -    16,069    -    -    -    -    -    16,069 
Cerro Casale  CHL   7,053    -    7,053    -    -    -    -    -    7,053 
Converse  USA   10,039    -    10,039    -    -    -    -    -    10,039 
DeLamar  USA   9,068    -    9,068    -    -    -    -    -    9,068 
El Mochito  HON   7,734    3,410    11,144    (2,638)   (1,348)   (68)   -    (4,054)   7,090 
Florida Canyon  USA   12,823    -    12,823    (2,901)   (808)   -    -    (3,709)   9,114 
Gemfield  USA   8,799    -    8,799    -    -    -    -    -    8,799 
Hope Bay  CAN   63,324    (40,019)   23,305    (3,621)   (389)   -    1,502    (2,508)   20,797 
Karma  BFA   20,080    -    20,080    (6,054)   (1,648)   -    -    (7,702)   12,378 
La Colorada  MEX   17,400    -    17,400    (4,433)   (854)   -    -    (5,287)   12,113 
McCoy-Cove  USA   18,553    -    18,553    -    -    -    -    -    18,553 
Moose River  CAN   3,700    -    3,700    (2,387)   (535)   -    -    (2,922)   778 
Moss  USA   20,283    -    20,283    (5,097)   (1,993)   (151)   -    (7,241)   13,042 
Mt Carlton  AUS   9,436    -    9,436    (6,742)   (1,528)   -    -    (8,270)   1,166 
Omolon  RUS   10,093    23,806    33,899    (3,492)   (6,303)   -    -    (9,795)   24,104 
San Jose  MEX   5,500    -    5,500    (2,893)   (934)   -    -    (3,827)   1,673 
Silvertip  CAN   4,340    -    4,340    (454)   -    -    -    (454)   3,886 
Vivien  AUS   3,301    -    3,301    (2,847)   (219)   -    -    (3,066)   235 
Other  Various   100,769    9,860    110,629    (15,426)   (323)   -    -    (15,749)   94,880 
Total(1)      397,958    (2,921)   395,037    (63,748)   (17,665)   (219)   1,502    (80,130)   314,907 

 

(1)Royalty, stream and other interests include non-depletable assets of $80.3 million and depletable assets of $234.6 million.

 

5.PREPAID GOLD INTERESTS

 

In January 2022, the Company entered into a prepaid gold interest agreement with Elevation Gold Mining (“Elevation”). The Company made a cash payment of $6.0 million to Elevation and in return Elevation will provide the Company six quarterly deliveries of certain amounts of gold plus the equivalent amount of gold equal to $1.0 million beginning in March 2022. The Company will make ongoing cash payments equal to 5% of the spot gold price for each gold ounce delivered.

 

In September 2021, Maverix entered into an agreement with Auramet Capital Partners, L.P., a subsidiary of Auramet International LLC (“Auramet”), to acquire a prepaid gold interest and enter into a long-term strategic partnership. The Company made a cash payment of $50.0 million to acquire a gold interest that will deliver 1,250 ounces of gold plus an amount of gold that is equivalent to all dividends distributed by Auramet on 2% of its shares to Maverix per quarter. Maverix will make ongoing cash payments equal to 16% of the spot gold price for each gold ounce delivered. On and after ten years and 50,000 ounces of gold have been delivered to Maverix, Auramet shall have the option to terminate the stream for a cash payment of $5.0 million less certain cash flows related to the gold deliveries.

 

  9

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

The following table summarizes the prepaid gold interests as at March 31, 2022 and changes from the acquisition dates:

 

   Prepaid Gold
Interests		 
Opening Balance, September 2021  $50,103 
Gold deliveries   (3,711)
Change in fair value   1,310 
Balance at December 31, 2021   47,702 
Additions   6,000 
Gold deliveries   (3,199)
Change in fair value   1,518 
Balance at March 31, 2022   52,021 
Less: Current portion   (11,800)
Non-current portion  $40,221 

 

During the three months ended March 31, 2022, the Company recognized a gain of $1.5 million as a result of changes in the fair value of the prepaid gold interests ($nil for the comparable period in 2021). The non-cash partial settlement of the prepaid gold interests included in cost of sales for the three months ended March 31, 2022 is $3.2 million ($nil for the comparable period in 2021).

 

6.INVESTMENTS

 

As at and for the three months ended March 31, 2022:

 

  

Balance at

December 31,
2021

   Additions   Disposals   Fair Value
Adjustments		  

Balance at

March 31,
2022

 
Short-term investments:                                    
Common shares(1)  $2,678   $1,811   $-   $(1,430)  $3,059 
Warrants(2)   11    223    -    (1)   233 
Total investments  $2,689   $2,034   $-   $(1,431)  $3,292 

 

(1)Fair value adjustments recorded within Other comprehensive income.

(2)Fair value adjustments recorded within Net income.

 

During the three months ended March 31, 2022, the Company acquired $2.0 million worth of units of Elevation at a price of C$0.53 per unit. Each unit consisted of one common share and one common share purchase warrant of Elevation which entitles the holder to purchase one common share of Elevation at a price of C$0.70 per warrant for a period of 60 months from closing.

 

As at and for the year ended December 31, 2021:

 

  

Balance at

December 31,
2020

   Additions   Disposals   Fair Value
Adjustments		   Debenture
Conversion		  

Balance at

December 31,
2021

 
Short-term investments:                              
Common shares(1)  $18,190   $372   $(11,196)  $(4,688)  $-   $2,678 
Warrants(2)   48    21    -    (58)   -    11 
Total short-term investments  $18,238   $393   $(11,196)  $(4,746)  $-   $2,689 
                               
Non-current investment:                              
Convertible debenture(2)   $1,000   $-   $-   $2,410   $(3,410)  $- 
Total investments  $19,238   $393   $(11,196)  $(2,336)  $(3,410)  $2,689 

 

(1)Fair value adjustments recorded within Other comprehensive income.

(2)Fair value adjustments recorded within Net income.

 

As part of a financing conducted by a company Maverix had an investment in, Maverix agreed to exercise 19.5 million share purchase warrants at CAD$0.40 per common share and sell the underlying common shares received for CAD$0.50 per common share for total proceeds of $7.7 million (CAD$9.8 million) which closed in February 2021.

 

  10

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

7.CREDIT FACILITY

 

The following table summarizes the Company’s $160.0 million revolving credit facility (the “Credit Facility”) as at March 31, 2022 and changes during the three months then ended:

 

   Credit Facility 
Balance at December 31, 2020  $32,000 
Proceeds   23,500 
Repayment   (43,000)
Balance at December 31, 2021   12,500 
Proceeds   - 
Repayment   - 
Balance at March 31, 2022  $12,500 

 

Amortization of the deferred financing costs related to the Credit Facility for the three months ended March 31, 2022, and 2021 were $0.1 million and $0.1 million, respectively. As at March 31, 2022, the Company was in compliance with all of the covenants related to the Credit Facility.

 

8.SHARE CAPITAL

 

a)Authorized, Issued and Outstanding shares

 

The Company is authorized to issue an unlimited number of common shares without par value and preferred shares. No preferred shares have been issued.

 

b)Share Purchase Warrants

 

A summary of the Company’s outstanding warrants as at March 31, 2022 is presented below:

 

Number outstanding  Exercise Price   Expiry Date 
5,000,000  $3.28    June 29, 2023 

 

c)Share Purchase Options

 

The following table summarizes stock options which were outstanding and exercisable as at March 31, 2022 and 2021 and changes during the three months then ended:

 

  

Number of Options

Outstanding

   Weighted average
exercise price per option
(CAD$)		 
Balance at December 31, 2021   4,025,493   $         4.83 
Granted   954,792   $6.23 
Exercised   (470,678)  $2.80 
Balance at March 31, 2022   4,509,607   $5.34 
           

Options which have vested and are exercisable as at March 31, 2022

   2,988,105   $4.82 
           
Balance at December 31, 2020   4,068,884   $4.05 
Granted   827,565   $6.57 
Exercised   (664,351)  $2.18 
Balance at March 31, 2021   4,232,098   $4.84 

 

  11

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

A summary of the Company’s outstanding stock options as at March 31, 2022 is presented below:

 

Number outstanding 

Exercise Price

(CAD$)

   Expiry Date 
141,766  $2.80   April 28, 2022 
31,194  $2.80   May 30, 2022 
696,485  $3.30   May 31, 2023 
722,057  $5.18   April 3, 2024 
50,000  $6.48   August 9, 2024 
268,313  $5.83   December 12, 2024 
787,435  $5.17   March 10, 2025 
30,000  $6.54   June 24, 2025 
827,565  $6.57   March 26, 2026 
954,792  $6.23   March 22, 2027 
4,509,607         

 

The following are the weighted average assumptions used in the Black-Scholes Model to estimate the fair value of stock options granted for the three months ended March 31, 2022 and 2021:

 

   Three months ended 
   March 31 
   2022   2021 
Risk-free interest rate   2.1%    0.5% 
Expected volatility   43%    46% 
Expected life   3 years    3 years 
Expected dividend yield   1.0%    0.8% 

 

The weighted average common share price during the three months ended March 31, 2022 and 2021, were $4.75 and $5.21 per share at the time the options were exercised, respectively. The weighted average remaining contractual life of the options as at March 31, 2022 was 3.02 years (2021: 3.21 years).

 

d)Restricted Share Units (“RSUs”)

 

The following table summarizes RSUs which were outstanding as at March 31, 2022 and 2021 and changes during the three months then ended:

 

  

Number of RSUs

Outstanding

  

Weighted average fair
value per RSU

(CAD$)

 
Balance at December 31, 2021   345,146   $         6.37 
Granted   195,467   $6.23 
Balance at March 31, 2022   540,613   $6.32 
           
Balance at December 31, 2020   192,694   $5.72 
Granted   110,245   $6.57 
Balance at March 31, 2021   302,939   $6.03 

 

e)Dividends

 

During the three months ended March 31, 2022, the Board of Directors of the Company declared and paid a dividend of $0.0125 per common share ($0.01 per common share for the comparable period in 2021).

 

  12

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

9.OPERATING EXPENSES BY NATURE

 

   Three months ended 
   March 31 
   2022   2021 
Compensation and benefits  $1,478   $1,563 
Corporate administration   304    252 
Listing and filing fees   101    118 
Professional fees   191    196 
Amortization   14    37 
Operating expenses before share-based compensation   2,088    2,166 
Share-based compensation   484    344 
Total operating expenses  $2,572   $2,510 

 

10.EARNINGS PER SHARE

 

Basic and diluted earnings per share is calculated based on the following:

 

   Three months ended 
   March 31 
   2022   2021 
Net income  $3,523   $14,769 
Basic weighted average number of shares   146,898,689    140,775,953 
Basic earnings per share  $0.02   $0.10 
           
Effect of dilutive securities          
Warrants   1,443,138    4,642,579 
Stock options   858,433    1,543,112 
RSUs   147,747    92,891 
Diluted weighted average number of common shares   149,348,007    147,054,535 
Diluted earnings per share  $0.02   $0.10 

 

The following table lists the weighted average number of warrants, stock options and RSUs which were excluded from the computation of diluted earnings per share because the exercise prices plus the unamortized share-based compensation per share exceeded the average market value of the common shares during the three months ending March 31, 2022 and 2021 of $4.61 and $5.31, respectively.

 

   Three months ended 
   March 31 
   2022   2021 
Warrants   -    - 
Stock options   1,003,044    75,976 
RSUs   19,547    - 

 

  13

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

11.SUPPLEMENTAL CASH FLOW INFORMATION

 

   Three months ended 
   March 31 
Changes in non-cash working capital:  2022   2021 
Accounts receivable  $(1,808)  $5,194 
Prepaid expenses and other   177    196 
Trade and other payables   (899)   (76)
Deferred revenue   -    (833)
Changes in non-cash working capital  $(2,530)  $4,481 
           
Significant non-cash transactions:          
Conversion of debenture (Note 3b)  $-   $3,410 
           
Cash and cash equivalents at the end of the period:          
Cash at bank  $10,907   $49,303 

 

12.RELATED PARTY DISCLOSURES

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including any director of the Company. Compensation for key management personnel of the Company was as follows:

 

 

   Three months ended 
   March 31 
   2022   2021 
Compensation and benefits  $1,103   $1,473 
Share-based compensation   334    301 
Total compensation  $1,437   $1,774 

 

During the three months ended March 31, 2022 and 2021, the Company purchased $0.3 million and $0.7 million, respectively, of refined gold from Pan American Silver Corp. (“Pan American”) at a price of $650 per ounce purchased under its La Colorada gold Stream agreement (Note 16). As a consequence of its shareholding and other factors, Pan American is deemed to have significant influence over the Company.

 

13. INCOME TAXES

 

Income tax recognized in net income is comprised of the following:

 

   Three months ended 
   March 31 
   2022   2021 
Current tax expense  $588   $572 
Deferred tax expense   1,199    3,162 
Income tax expense  $1,787   $3,734 

 

  14

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

The income tax expense differs from the amount that would result from applying the federal and provincial income tax rates to the income before income taxes due to the following:

 

   Three months ended 
   March 31 
   2022   2021 
Income before income taxes  $5,310   $18,503 
Statutory tax rate   27%   27%
Expected income tax expense  $1,434   $4,996 
           
Increase (decrease) due to:          
Foreign tax rate differences   55    117 
Non-deductible expenses   110    92 
Withholding taxes   131    176 
Change in unrecognized temporary differences   64    42 
Recognition of temporary differences   (7)   (1,689)
Income tax expense  $1,787   $3,734 

  

Deferred tax liabilities

 

The following table summarizes the composition of the Company’s deferred tax liabilities:

 

   March 31, 2022   December 31, 2021 
Deferred tax liabilities          
Non-capital losses  $11,846   $12,006 
Investments and other   962    686 
Prepaid gold interests   (764)   (354)
Royalty, stream and other interests   (18,341)   (17,649)
Total deferred tax liabilities  $(6,297)  $(5,311)

 

  15

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

14.SEGMENT INFORMATION

 

For the three months ended March 31, 2022:

 

  

Primary

Product

  Royalty
revenue		   Sales   Costs of
sales,
excluding
depletion		   Depletion   Change in
fair value
of prepaid
gold
interests		   Income
before
taxes		   Cash from
(used in)
operations		 
      $   $   $   $   $   $   $ 
Auramet (USA)  Gold   -    2,451    (2,451)   -    1,382    1,382    2,058 
Beta Hunt (AUS)  Gold   1,491    -    -    (86)   -    1,405    1,347 
Camino Rojo (MEX)  Gold   784    -    -    (627)   -    157    83 
El Mochito (HON)  Silver   -    1,409    (328)   (276)   -    805    1,080 
Elevation (CAN)  Gold   -    1,202    (1,202)   -    137    137    1,141 
Florida Canyon (USA)  Gold   582    -    -    (169)   -    413    678 
Hope Bay (CAN)  Gold   1    -    -    -    -    1    142 
Karma (BFA)  Gold   468    -    -    (276)   -    192    568 
La Colorada (MEX)  Gold   -    978    (342)   (190)   -    446    637 
Moose River (CAN)  Gold   175    -    -    (64)   -    111    353 
Moss (USA)  Silver   -    1,748    (346)   (455)   -    947    1,403 
Mt Carlton (AUS)  Gold   658    -    -    (120)   -    538    785 
Omolon (RUS)  Gold   1,499    -    -    (692)   -    807    - 
Recuperada (PER)  Silver   334    -    -    (270)   -    64    - 
San Jose (MEX)  Silver   436    -    -    (143)   -    293    477 
Vivien (AUS)  Gold   355    -    -    (26)   -    329    433 
Other (Various)  Various   83    -    -    -    -    83    83 
Total segments      6,866    7,788    (4,669)   (3,394)   1,519    8,110    11,268 
Operating expenses      -    -    -    -    -    (2,572)   (2,934)
Foreign exchange      -    -    -    -    -    145    1 
Finance expense      -    -    -    -    -    (309)   - 
Income taxes paid      -    -    -    -    -    -    (537)
Other      -    -    -    -    -    (64)   221 
Total corporate      -    -    -    -    -    (2,800)   (3,249)
Consolidated total      6,866    7,788    (4,669)   (3,394)   1,519    5,310    8,019 

 

  16

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

For the three months ended March 31, 2021:

 

  

Primary

Product

  Royalty
revenue		   Sales   Costs of
sales,
excluding
depletion		   Depletion   Gain on buy
back of
royalty
interest		   Income
before
taxes		   Cash from
(used in)
operations		 
      $   $   $   $   $   $   $ 
Beta Hunt (AUS)  Gold   2,350    -    -    (158)   -    2,192    4,299 
El Mochito (HON)  Silver   -    2,218    (542)   (373)   -    1,303    1,676 
Florida Canyon (USA)  Gold   693    -    -    (191)   -    502    643 
Hope Bay (CAN)  Gold   370    -    -    (121)   10,983    11,232    3,138 
Karma (BFA)  Gold   677    -    -    (420)   -    257    682 
La Colorada (MEX)  Gold   -    1,785    (654)   (392)   -    739    1,131 
Moose River (CAN)  Gold   316    -    -    (138)   -    178    429 
Moss (USA)  Silver   -    2,194    (433)   (684)   -    1,077    1,761 
Mt Carlton (AUS)  Gold   374    -    -    (184)   -    190    767 
Omolon (RUS)  Gold   753    -    -    (509)   -    244    - 
San Jose (MEX)  Silver   622    -    -    (235)   -    387    574 
Vivien (AUS)  Gold   680    -    -    (87)   -    593    654 
Other (Various)  Various   48    -    -    (47)   -    1    47 
Total segments      6,883    6,197    (1,629)   (3,539)   10,983    18,895    15,801 
Operating expenses      -    -    -    -    -    (2,510)   (1,451)
Gain on conversion of debenture      -    -    -    -    -    2,410    - 
Foreign exchange loss and other      -    -    -    -    -    (42)   157 
Finance expense      -    -    -    -    -    (294)   (234)
Income taxes paid      -    -    -    -    -    -    (526)
Other      -    -    -    -    -    44    (268)
Total corporate      -    -    -    -    -    (392)   (2,322)
Consolidated total      6,883    6,197    (1,629)   (3,539)   10,983    18,503    13,479 

 

Non-current Assets by Geographical Region:

 

   March 31, 2022   December 31, 2021 
North America          
USA  $150,809   $146,245 
Mexico   63,051    64,012 
Canada   37,905    37,969 
South & Central America          
Guatemala   16,069    16,069 
Chile   10,073    10,073 
Peru   11,357    11,607 
Dominican Republic   5,160    5,160 
Honduras   6,858    7,090 
Argentina   3,200    3,200 
Other          
Russia   23,412    24,104 
Burkina Faso   12,232    12,508 
Australia   6,460    6,691 
Côte d’Ivoire   4,030    4,030 
Ghana   3,527    3,527 
Various   3,995    3,995 
Total(1)  $358,138   $356,280 

 

(1)Includes royalty, stream, and other interests (Note 4), prepaid gold interests (Note 5) and deferred financing costs and other.

 

  17

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

15.FINANCIAL RISK MANAGEMENT

 

The Company has exposure to a variety of financial risks from its use of financial instruments. This note presents information about the Company's exposure to each of these risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital.

 

Capital Risk Management

 

The Company’s primary objective when managing capital is to maximize returns for its shareholders by growing its asset base through accretive acquisitions of royalties, streams and other interests, while optimizing its capital structure by balancing debt and equity. At March 31, 2022, the capital structure of the Company consists of $373.8 million (December 31, 2021: $371.8 million) of total equity, comprising of share capital, reserves, accumulated other comprehensive (loss) income, and retained earnings, and $12.5 million (December 31, 2021: $12.5 million) drawn on the Company’s Credit Facility. The Company was not subject to any externally imposed capital requirements with the exception of complying with certain covenants under the Credit Facility (Note 7). The Company is in compliance with its debt covenants at March 31, 2022.

 

Credit Risk

 

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents and accounts receivables in the ordinary course of business. In order to mitigate its exposure to credit risk, the Company maintains its cash and cash equivalents in several high-quality financial institutions and closely monitors its accounts receivable balances. The Company’s accounts receivables are subject to the credit risk of the counterparties who own and operate the mines underlying Maverix’s royalty portfolio.

 

The conflict between Russia and Ukraine and any restrictive actions that have or may be taken in response thereto, such as sanctions, export and or currency controls, could have potential negative impacts on the Company’s ability to receive payments under its royalty interest in the Omolon hub in Russia that is operated by Polymetal International plc. At March 31, 2022, the Company’s accounts receivable related to its Omolon hub royalty interest is $4.4 million.

 

Currency Risk

 

Financial instruments that impact the Company’s net income due to currency fluctuations include cash and cash equivalents, accounts receivable, investments, and trade and other payables denominated in Canadian and Australian dollars. Based on the Company’s Canadian and Australian dollar denominated monetary assets and liabilities at March 31, 2022, a 10% increase (decrease) of the value of the Canadian and Australian dollar relative to the USD would increase (decrease) net income by $0.2 million and other comprehensive income by $0.3 million, respectively.

 

Liquidity Risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company’s approach to managing liquidity is to ensure it will have sufficient liquidity to meet liabilities when due. In managing liquidity risk, the Company takes into account anticipated cash flows from operations, holding of cash and cash equivalents, and the amount available under the Credit Facility. As at March 31, 2022, the Company had cash and cash equivalents of $10.9 million (December 31, 2021: $17.1 million) and working capital of $34.4 million (December 31, 2021: $33.3 million). In addition, at March 31, 2022, the Company had $147.5 million available under its Credit Facility (Note 7).

 

  18

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

Other Risks

 

The Company is exposed to equity price risk as a result of holding common shares in other mining companies with a combined fair market value as at March 31, 2022 of $3.1 million (December 31, 2021: $2.7 million) (Note 6). The equity prices of investments are impacted by various underlying factors including commodity prices and the volatility in global markets as a result of COVID-19 and the daily exchange traded volume of the equity may not be sufficient for the Company to liquidate its position in a short period of time without potentially affecting the market value of the equity. Based on the Company’s investments held as at March 31, 2022, a 10% increase (decrease) in the equity prices of these investments would increase (decrease) other comprehensive income by $0.3 million.

 

Fair Value Measurements

 

The fair value hierarchy establishes three levels to classify the inputs of valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Investments in common shares held that have direct listings on an exchange are classified as Level 1.

 

Level 2: Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

 

Level 3: Prices or valuation techniques that require inputs that are both significant to fair value measurement and unobservable (supported by little or no market activity).

 

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as at March 31, 2022 and December 31, 2021. In accordance with IFRS 13, Fair Value Measurements, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

   As at March 31, 2022   As at December 31, 2021 
   Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
Common shares  $3,059   $-   $-   $2,678   $-   $- 
Warrants   -    233    -    -    11    - 
Prepaid gold interests   -    -    52,021    -    -    47,702 
Total  $3,059   $233   $52,021   $2,678   $11   $47,702 

 

The fair value of the prepaid gold interests are determined using a discounted cash flow model with unobservable inputs. As a result, the fair value of the prepaid gold interests are designated as a Level 3 fair value measurement (Note 5).

 

  19

 

 

Maverix Metals Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Expressed in thousands of United States dollars, unless stated otherwise - unaudited)

 

16.CONTRACTUAL OBLIGATIONS

 

In connection with its Streams and prepaid gold interests, the Company has committed to purchase the following:

 

   Percent of life of mine
production or relevant
commodity		  

Per ounce cash payment:

Lesser of amount below and the then
prevailing market price

(unless otherwise noted)

 
Gold Stream interests          
La Bolsa   5%  $450 
La Colorada   100%  $650 
           
Silver Stream interests          
El Mochito   25%   25% of silver spot price 
Moss   100%(1)   20% of silver spot price 
           
Prepaid Gold Interests          
Auramet   1,250 ounces plus 2% of dividends paid(2) per quarter    16% of gold spot price 
Elevation   Gold equivalent of $1.0 million plus certain fixed amounts of gold per quarter(3)    5% of gold spot price 

 

(1)After 3.5 million ounces of silver are delivered, Maverix’s silver purchase entitlement will be 50% of the remaining life of mine silver production.

(2)Amount of gold that is the equivalent value to all dividends distributed by Auramet International LLC on 2% of its shares.

(3)Six quarterly deliveries ending in June 2023.

 

In connection with the acquisition of the Silvertip Royalty in 2017, the Company may issue an additional 1,400,000 common shares of the Company when the Silvertip mine achieves commercial production and a cumulative throughput of 400,000 tonnes of ore through the processing plant is achieved.

 

In connection with the acquisition of a portfolio of royalties from Newmont Corporation in October 2020, the Company agreed to make certain contingent cash payments of up to $15.0 million if certain production milestones at certain assets are achieved within five years of closing the acquisition.

 

In connection with increasing and expanding the royalty interest at Omolon, the Company agreed to make an additional $1.5 million cash payment upon sales of 1.2 million gold equivalent ounces.

 

17.SUBSEQUENT EVENTS

 

Quarterly Dividend Declared

 

On May 12, 2022, the Board of Directors of the Company declared a quarterly dividend of $0.0125 per common share payable on June 15, 2022, to shareholders of record as of the close of business on May 31, 2022.

 

Credit Facility Drawdown

 

Subsequent to March 31, 2022, the Company drew down $5.0 million from its Credit Facility leaving $142.5 million remaining available.

 

  20