Versamet Royalty | Dan O'Flaherty and Jimmy Connor

Key Concepts

• Royalty & Stream Companies: Businesses that provide upfront capital to mining companies in exchange for a percentage of future revenue (royalties) or a fixed amount of metal production (streams).
• Gold Equivalent Ounces (GEOs): A standardized measure of precious metal production, converting all metals to the equivalent amount of gold.
• Nameplate Capacity: The maximum production level a mine is designed to achieve.
• Contingent Consideration: Additional payments made based on the achievement of specific milestones, like increased throughput.
• Enterprise Value (EV): A measure of a company’s total value, often used in acquisitions.
• Net Asset Value (NAV): The theoretical value of a company’s assets, often used for valuation in the mining sector.

Verse Metals: A Detailed Overview

This discussion details Verse Metals (Versamat), a precious metals royalty and streaming company, its strategy, recent acquisitions, and future outlook. The conversation features Dan, co-founder of Mavericks Metals (acquired by Triple Flag in 2023) and now leading Verse.

Company Background & Shareholder Base

Verse Metals was initially spun out of Sandstorm Gold and Equinox Gold. Dan co-founded Mavericks Metals in 2016, building a portfolio that ultimately sold for approximately US$750 million. Verse aims to replicate this success by filling a gap in the market between larger royalty companies and smaller, riskier ventures.

The current shareholder base is notable for its high-profile investors:

• B2 Gold: Largest shareholder with 33% ownership, acquired through an all-share transaction including a portfolio of gold royalties.
• Tether & The Lundin Family: Each hold 12.7% independently, acquired from Royal Gold (who initially received the shares through Sandstorm). Tether is a significant holder of physical gold.
• Equinox Gold: Retains approximately 12% ownership.
• Insiders: Collectively hold over 10% of the company, demonstrating strong alignment with shareholder interests.

Portfolio Growth & Asset Highlights

Verse currently holds 28 royalties and is experiencing significant growth in gold equivalent ounce (GEO) production:

• 2024: 5,000 GEOs
• 2025 (Projected): 10,000 GEOs
• 2026 (Projected): 20,000 GEOs

Key assets driving this growth include:

• Greenstone (Northern Ontario, owned by Equinox Gold): Commercial production declared, currently ramping up to full nameplate capacity, expected in 2026.
• Blackwater (Canada): Also ramping up production, contributing to GEO growth.
• Kiaka Mine: Recently came online in June, adding to production.
• Rash Pan (Namibia): Undergoing an RP 2.0 expansion, expected to double throughput by 2027. Verse holds a significant silver stream on this asset.
• Santaorita (Nickel Mine): Potential for a long-life underground operation, contingent on successful evaluation.

Recent Acquisitions: Appion Assets

Verse acquired two cash-flowing assets from Appion for $125 million upfront, plus $45 million in contingent consideration tied to the underground expansion at Santaorita. These assets are:

• Rash Pan (Namibia): A producing zinc mine with a 55-year operating history and a significant silver stream for Verse.
• Santaorita (Open Pit Nickel Mine): Currently producing, with potential for a long-life underground operation that could yield over $10 million per year in royalty revenue well into the 2040s and 2050s.

Optionality & Future Potential

Verse emphasizes the optionality within its portfolio, encompassing both near-term growth and long-term potential. This includes:

• Expansion of Existing Production: Ramping up of Greenstone, Blackwater, and Rash Pan.
• Exploration & Development: Potential expansion at Kiaka and underground development at Santaorita.
• Royalty Interests in Early-Stage Assets: Hacket River, Prairie Creek, Mason, and Converse represent “call options” on various metals with no holding costs. Hacket River is highlighted as having significant upside potential with improved infrastructure.

Financial Position & Acquisition Strategy

Verse possesses strong financial flexibility:

• Credit Facilities: $180 million available, largely drawn to fund the Appion acquisition. Payback is projected to be less than three years at current cash flow.
• Supportive Shareholders: B2 Gold and Tether have demonstrated a willingness to invest in the mining and royalty/streaming sectors.

Verse’s “sweet spot” for acquisitions is in the $50-$100 million range, targeting deals that meaningfully impact Verse but may not be of significant interest to larger companies.

Competitive Advantages & Valuation

Dan identifies several factors differentiating Verse:

• Track Record: Proven success in building and growing a royalty portfolio, demonstrated by the Mavericks Metals experience.
• Size & Growth Potential: Verse is positioned in a “Goldilocks zone” – large enough for stability and diversification, yet small enough to achieve significant percentage growth. The Aquan transaction, adding 33% to GEOs for less than 20% of enterprise value, exemplifies this.
• Valuation Upside: Potential catalysts for increased valuation include a US listing, increased research coverage, improved liquidity, and index inclusion.

Lessons from Mavericks Metals

Dan emphasized the importance of asset quality as the key driver of success at Mavericks Metals. He plans to replicate this focus at Verse, prioritizing diversified, cash-flowing, precious metal assets. He also noted the importance of building an attractive vehicle to attract investors and potential M&A suitors.

2026 Focus & News Flow

Verse’s priorities for 2026 include:

• Continued Production Growth: Ramping up existing assets and expanding production.
• Strategic Acquisitions: Pursuing new, accretive acquisitions from a robust pipeline.
• Capital Markets Development: Focusing on a US listing to enhance liquidity, attract new shareholders, and increase the company’s profile.

This conversation highlights Verse Metals as a growing royalty and streaming company with a strong shareholder base, a diversified portfolio, and a clear strategy for future growth. The company’s focus on asset quality, optionality, and financial flexibility positions it well to capitalize on the rising gold and silver prices and deliver value to its shareholders.