Monday Notebook: Value Hive Interview
Talked metals, my distressed preferred share play and more. Beaver Creek 2025.
In this issue …
Value Hive Interview
Portfolio updates
Beaver Creek 2025
Value Hive Podcast
Before heading out to enjoy the long weekend, I chatted with Brandon Beylo from Value Hive. Have a listen wherever you happen to get your podcasts.
Spotify
Apple
We talked about …
Minera Alamos, how the Copperstone mine restart in Arizona significantly de-risks a company held hostage by Mexican permits, and broken microcap Star Royalties accidentally transforming into a potential multi-bagger because of it.
The Comstock value proposition. The path and potential pitfalls on the way to $20 per share.
My distressed preferred share buy is revealed, and why I think it’s the fulcrum security for a valuable set of assets.
The art of squatting on illiquid positions.
Artificial Intelligence and the future of equity analysis.
The difference between the Toronto Maple Leafs and Washington Capitals as portfolio managers.
Learning from failure
I mentioned having dinner with Eddie Lampert to learn from his failures at Sears Holdings. Since Eddie isn’t breaking bread with me anytime soon, I also talked about Bill Ackman’s postmortems as valuable learning tools. Here are some of those videos and there are others related specifically to Herbalife, Gotham Capital and Target.
The failed investment in JCPenney.
Valeant Pharmaceuticals and rebuilding after total loss.
Keys to long term success.
Portfolio Updates
The latest MJG Capital shareholder letter details Star Royalties total failure to execute since inception and calls for the company to liquidate.
Ultimately, Star has made three big bets as a company – the US$10.63 million royalty purchase at the Elk Gold Mine, the US$9 million paid for a 4% life-of-mine gold stream at the Copperstone Gold Mine, and the US$10.6 million deployed into CarbonNOW via Green Star – with each of these having gone awry.
Given this reality, it is becoming increasingly apparent that shareholders would be best served by a full sale of the business (likely in two separate transactions given the different pools of potential buyers for the mineral and carbon credit royalty/streaming interests).
Should the company go this route, Star shareholders will almost certainly be able to recoup an amount greater than the current C$0.22 share price.
I agree with Geiger on the botched execution and bad capital allocation, which is why all my purchases happened mostly in the teens and low 20s. If it comes, I’d prefer liquidation after progress is made at Copperstone to bolster the underlying value of the 4% stream and allow Star’s Minera Alamos shares to increase in value. Alternatively, I would take MAI shares as a special dividend on a 1:10 basis.
With cash in hand from recent asset sales, TomaGold will start drilling on properties optioned from Chibougamau Independent Mines. Note that CBG retains a 2% gross metal royalty on the claims. It also owns a royalty on Cerrado Gold’s Mt. Sorcier iron deposit.
Summit Royalty will go public through a reverse takeover of Eagle Royalties, closing the book on this special situation. I’ll sell as soon as the deal closes and liquidity comes into the stock. This outcome has been telegraphed for almost a year by management at Eagle Plains Resources, the controlling shareholder and prospect generator that spun out Eagle Royalties to surface the value of its organically generated NSRs. Eagle Plains is preparing to spin out its Osprey Power clean power prospect generator - and doesn’t like to have two public spincos trading at the same time.
Kingfisher Metals is beginning its 2025 drill campaign.
I don’t usually buy explorecos, but Kingfisher spoke to me because they’ve consolidated a large land package and have the expertise and access to capital to see it through, unlike Golden Ridge Resources. I don’t know if it’ll work, but I like the setup and it’s sized appropriately.
I’m told mineral rights in Newfoundland are being returned the province. Companies that owned the claims weren’t doing any work because they don’t have any money. I’m hoping Vulcan Minerals picks up valuable claims on the cheap while the build out of the Great Atlantic salt mine continues.
This tweet is most likely responsible for last week’s extreme move in Royalty Management Holding Corporation.
If you believe the chromatography technology has value, then AREC is correct and this is still a bargain price. The capital structure is set to improve in March when 9.1-million out of the money warrants ($11.50 strike price) expire worthless. That should help RMCO screen better. In the meantime, the environmental services business finances the corporate overhead, the dividend and share buybacks.
With the surge in Triple Flag’s share price, Orogen is now trading above $2. This means we’re eventually getting the Orogen spinout for free based on a purchase prices ranging from $1.73 to $1.77. That’s about what the Triple Flag share consideration is now worth.
Beaver Creek 2025
Thanks to some cajoling from a friend, I’ll be attending the Beaver Creek Precious Metals Summit this September. If you’ll be there and would like to meet up, just reply to this email. My goal is to leave the conference totally wired because I had coffee with as many people as possible.