The second quarter of 2024 brought mixed results for major resource companies, particularly those involved in gold and silver. While most experienced higher revenues and cash flows, largely due to the elevated gold price, some companies faced challenges with costs and unexpected setbacks. This reinforces the adage, coined by Robert Friedland, that ‘Murphy works overtime in the mining business.’
Wheaton Precious Metals Corp. (WPM): A Strong Performer
Wheaton Precious Metals Corp. (WPM) stands out as an exception, delivering a strong quarter with no significant issues. Production exceeded expectations, driven by strong performance at its largest asset, Salobo, and other key mines like Peñasquito and Antamina. While sales were slightly lower, this was attributed to timing differences between production and sales. Wheaton’s strong performance is fueled by its robust pipeline for new deals, including a significant royalty on Ivanhoe’s Platreef, which is set to become one of the world’s largest platinum producers. The company has a solid balance sheet with ample cash reserves and plans to continue expanding its portfolio, aiming to increase production from 550,000 to 620,000 GEOs this year to over 850,000 by 2029.
Royal Gold Inc. (RGLD): Meeting Guidance with Strong Revenues
Royal Gold Inc. (RGLD) reported positive quarterly financials, exceeding expectations even after pre-releasing its streaming sales. Revenue rose by 17% compared to the previous quarter, primarily driven by higher metal prices and increased copper sales. The company is on track to meet its unchanged guidance and is now net cash positive with a strong free cash flow. Royal Gold recently acquired additional royalties on B2Gold’s Back River project, further solidifying its position in the market.
Osisko Gold Royalties Ltd. (OR): Lowering Guidance Due to Mine Suspension
Osisko Gold Royalties Ltd. (OR) experienced a more challenging quarter. While the second quarter was in line with guidance, the company lowered its full-year guidance due to a heap leach failure at the Eagle Mine in the Yukon, forcing its suspension. This resulted in a full impairment on the royalty held on the mine, as there is no clear timeline for its restart. Additionally, delays in the ramp-up of a new royalty asset, Mantos Blancos, contributed to the lower-than-expected second half. Despite these setbacks, Osisko boasts a strong political risk profile and a new CEO who is proving to be capable and focused.
Altius Minerals Corp. (ATUSF): Financials as Expected
Altius Minerals Corp. (ATUSF) reported quarterly financials that were more or less in line with expectations. With a diversified portfolio, the company experienced both gains and losses in various segments. Notably, the renewables division saw one new project come online with several more in the pipeline. A major development for Altius is the disposition of its royalty on AngloGold’s Silicon-Merlin deposit in Nevada. The deposit continues to show promising results, with exceptional assay results from infill drilling. A Pre-Feasibility Study on Merlin is expected to be completed by late 2025. Altius is actively seeking bids for its royalty, exploring options like selling or swapping for base metals royalties.
Pan American Silver Corp. (PAAS): Mixed Quarter with Production Challenges
Pan American Silver Corp. (PAAS) had a mixed quarter with slightly lower production and higher overall costs. Ongoing issues at two mines, La Colorado and Dolores, impacted production. However, the company saw record cash flow from operations driven by higher metal prices. Pan American is looking forward to improvements at La Colorada with the completion of a new ventilation system and expects production to be weighted towards the fourth quarter. The company also maintains its potential for restarting the Escobal mine, despite delays.
Fortuna Silver Mines Inc. (FSM): Revenue Disappointments
Fortuna Silver Mines Inc. (FSM) reported revenue slightly lower than expected and higher costs. All-in sustaining costs (AISC) increased due to higher power costs, planned maintenance, and higher per-ounce costs at the San Jose mine, which is nearing the end of its reserve life. However, these challenges are temporary, and Fortuna is on track to meet its full-year guidance. The company continues to explore alternatives for the San Jose mine, including closing it or putting it on care and maintenance pending further exploration. Fortuna also strengthened its balance sheet with a convertible issue, allowing it to fully repay its credit facility and reduce its interest rate.
Overall, the second quarter presented a mixed bag for resource companies, with some companies thriving while others faced unexpected hurdles. This underlines the challenging nature of the mining industry and the importance of strong management, a diversified portfolio, and a solid balance sheet for navigating these complexities. The future for these companies remains positive, with continued growth and innovation on the horizon.
