Metalla And Nova Combine To Build The Next Intermediate Royalty Company

11 September 2023

Metalla Royalty & Streaming Ltd. (TSXV: MTA) (NYSE American: MTA) and Nova Royalty Corp. (TSXV: NOVR) (OTCQB: NOVRF) have announced an arrangement agreement dated September 7, 2023, for Metalla to acquire all of the outstanding common shares of Nova. This acquisition, conducted through a plan of arrangement, positions the merged entity as a leading emerging intermediate royalty company.

Key Highlights and Strategic Rationale for the Combination:

  1. Enhanced Scale and Growth: The combined company will have a portfolio of 105 high-quality royalties and streams, with the potential for sustainable growth supported by top-tier operators in the mining sector.

  2. Strategic Positioning: The merger strategically positions the combined company as a peer-leading royalty company in terms of scale and capital markets profile, which is expected to enhance trading liquidity and attract institutional investor support.

  3. Attractive Risk Profile and Asset Quality: The majority of assets are located in tier-one jurisdictions, including Canada, the U.S., Australia, and Latin America. The top ten assets, based on consensus net asset value (NAV), have an average mine life of 20 years and an average operator market capitalization of $13 billion.

  4. Strengthened Balance Sheet: Beedie Capital, a strategic partner, will commit to an equity investment of C$15 million and increase Metalla's existing convertible loan facility to C$50 million, providing approximately $35 million in available liquidity to support value-enhancing growth.

  5. Immediate Cash Flow: The acquisition will result in immediate cash flow from the producing Aranzazu royalty, with additional royalties (Tocantinzinho, Côté, and Amalgamated Kirkland) expected to commence cash flow in 2024.

  6. Inflation Protection: The combined company will have exposure to gold, silver, and copper, creating a balanced blend of monetary, strategic, and inflation-resilient metals.

  7. Cost Synergies: Anticipated annual cost savings of $2.5 million through the optimization and integration of general and administrative expenses.

  8. Enhanced Liquidity: The combined company may be included in multiple clean metals/energy transition ETFs, indexes, and mutual funds due to increased market capitalization and the addition of high-quality copper royalties.

This merger is expected to be accretive on a NAV-per-share basis and aligns with both companies' strategic goals. Both Metalla and Nova share a focus on building a high-quality, sustainable royalty and streaming company based on top-tier assets in excellent mining jurisdictions, operated by reputable and responsible operators. The merged company is anticipated to benefit from strong growth in cash flows, resulting from a high-margin, high-growth, inflation-resistant, and diversified portfolio.

Brett Heath, President and CEO of Metalla, emphasized the transformative nature of this merger, which is expected to establish the company as an intermediate royalty leader. The combined company aims to deliver superior long-term value to shareholders through high-quality growth supported by top-tier mining operators.

Hashim Ahmed, Interim CEO of Nova, expressed excitement about the merger, noting that it represents a significant value creation opportunity for Nova shareholders. In addition to an attractive premium, Nova shareholders will gain increased scale, a stronger balance sheet, improved short- and near-term cash flow, enhanced trading liquidity, and continued participation in the growth of Nova's assets.

David Bell, Managing Director at Beedie Capital, highlighted the common strategy of both Metalla and Nova, focusing on acquiring top-quality royalties across the development curve. He believes that the merger amplifies the growth opportunity and portfolio diversity, allowing for broader reach and the ability to execute accretive acquisitions that will compound growth.

This merger is expected to create a unique and strong player in the royalty and streaming space, with exposure to both precious and base metals in top-tier mining jurisdictions.