According to Shaun Usmar, CEO of Triple Flag Precious Metals, mine developers are struggling to raise equity, which presents an opportunity for royalty and streaming companies. Usmar stated that in 2020, there was a lot of capital deployed but few cash-generating assets, resulting in low returns. This trend has continued into 2023. Usmar believes that royalty and streaming companies are a great way to contribute capital to the sector during this time of limited risk capital availability. However, he also emphasizes the importance of carefully assessing the risks to avoid overburdening the asset.
Usmar highlights that there is more deal flow opportunity in the sector than there is capital available. He suggests that the fragmented gold sector needs to be consolidated in order to remain relevant. Usmar sees this as an interesting moment in time for the industry, with ample opportunities on the horizon. He also mentions that rational competition exists among royalty and streaming companies, particularly at the big end, where they have the balance sheet to compete. Overall, Usmar believes that royalty and streaming companies can play a key role in providing much-needed capital to the struggling mining sector.
In conclusion, due to the challenges faced by mine developers in raising equity, royalty and streaming companies have emerged as key players in providing capital to the mining sector. Usmar sees this as both an opportunity and a challenge, urging caution in avoiding overburdening assets. Despite the availability of deal flow opportunities, there is a lack of capital in the sector. Usmar suggests that the fragmented gold sector should undergo consolidation to remain relevant. Overall, he views the current state of the industry as an interesting moment with significant potential on the horizon.