Weekend Notebook: Portfolio Updates
Orogen deal closes. Look-through value on Altius Minerals. One sale.
In this issue …
Triple Flag-Orogen deal closes
Selling RMCO
Other portfolio updates
Interesting links
Travel plans
My plan is to get these out on Sunday mornings. Sorry for the delay, although I did shoot an 89 which is not a repeatable trick for me.
Done deal
In the middle of the 2016 baseball season, the Chicago White Sox did a Chicago White Sox thing. They traded for 34-year-old starting pitcher James Shields from the San Diego Padres. Shields gave the White Sox innings, but not much else, as a loss of velocity and movement on his pitches left the fading veteran vulnerable to home runs. In exchange the Sox sent the Padres two young players, including 17-year-old prospect Fernando Tatis Junior. The Padres turned a salary dump into one of the game’s biggest stars - a trade that worked out beyond all expectations even as both teams knew Tatis could become a star.
The Altius Minerals version of the Shields-for-Tatis trade is their 2015 acquisition of Callinan Royalties, which netted them a royalty on Hudbay’s 777 mine (decommissioned as of 2022). They also received a 1% royalty on the Gunnison copper project, which Altius later increased to 1.625% with a $5 million payment. The Gunnison project still isn’t in production, and to be honest I didn’t know the now renamed Excelsior Mining still existed until I looked it up.
But Callinan Royalties was also involved in the creation of a 1.5% NSR royalty on the Silicon Project in Nevada. And after Altius acquired Callinan it inherited this 1.5% NSR, which is separate from a 1% NSR royalty that until this week was held by Orogen Royalties. With the closing of Triple Flag’s purchase of Orogen Royalties, the Altius royalty on Silicon has a comparable that puts its value somewhere between $500-$600-million.
Callinan is the Tatis-esque deal that’s worked out beyond any reasonable expectation. The Orogen deal makes Altius seem cheap at its current market cap of $1.28-billion.
Silicon 1.5% NSR: $550-million
Orogen spinout stake: $60-million
Alitus Renewables stake: $215-million. Altius Minerals owns 57% of ARR. This is a private company, so I came up with this number based on the approximately 30.87 million shares outstanding in December when it was taken over at $12/share. This should probably be valued higher.
Labrador Iron Ore Royalty shares: $101.6-million
All numbers CAD
We’re up to $926-million in value without factoring in Potash royalties that will last for decades, the Kami iron ore 3% NSR royalty, the El Domo 2% NSR royalty or any other high-value assets that don’t have a public market value. Altius will rerate with CEO Brian Dalton interested in monetizing his crown jewel. It’s time to buy back in.
Portfolio updates
I sold Royalty Management Holding Corporation this week. I’m booking a gain of ~30% on this position and walking away. Shares started moving once the company became NASDAQ-compliant, which was expected and part of the investment thesis. Then, controlling shareholder American Resource Corporation pumped the value of RMCO with this tweet. I didn’t love the promotional stuff coming out of the company’s Twitter/X account, like announcing new 52-week highs, but I wanted exposure to their chromatography technology for increasing recoveries of gold/silver/PGMs. It didn’t hurt that they were paying a dividend and buying back shares too.
But then RMCO announced plans to buy Bitcoin, first with their cash flow and eventually issuing new shares to keep going.
RMCO has access to over $50 million in registered securities and other investment mechanisms, enabling it to expand its balance sheet holdings in Bitcoin and other assets at an opportune valuation.
That’s a lot of dilution for $19-million market cap company and the stock dropped on the news. RMCO later clarified they wouldn’t issue shares until RMCO crossed $20, which is jumping the gun. They then started retweeting conspiracy theories about hedge funds shorting the stock. The whole thing is stupid and I’m out. Go buy Bitcoin with someone else’s money.
This is not to say I am against digital asset treasury companies. I am against DATCs when they trade above NAV and use my money to incinerate capital. I will be picking through the wreckage when the crypto cycle turns and these things are all trading at distressed valuations. After all, I made my bones buying my original position in Ether Capital for 40 cents.
Digital asset treasury companies, busted biotechs trading below cash - these are all the same trade.
Eagle Royalties remains halted after the announced RTO with Summit Royalties. We wait to liquidate and put our profits into new opportunities in a target-rich environment.
We’re also waiting on Metals X to see if they can actually consolidate ownership of the Renison tin mine. Greentech is recommending Metals X’s partial offer to shareholders. As a reminder, MLX is looking to buy 382.48 million Greentech shares, at HK$0.35. A Greentech subsidiary owns the other 50% of Renison.
Vulcan Minerals and Atlas Salt are showing signs of life.
Great Atlantic is fully permitted.
New SALT CEO doing the paid interview circuit with Crux.
And here’s an introduction to the salt market shared by Vulcan’s CEO.
Vulcan is presumably out doing grassroots exploration if it’s putting out primers.
So we can assume there’s an equity raise coming - a supposition but one that fits the available facts. Atlas may have permits and a plan, it doesn’t have money. We remain invested in Vulcan as the 3% royalty holder on Great Atlantic and majority shareholder of Atlas Salt.
Interesting links
Unfortunate that embedding tweets isn’t a thing. Some good stuff on the Twitter machine recently.
A warning about too much Artificial Intelligence.
Equities
PE portfolio companies are smaller, more leveraged, pay higher interest rates, and have lower margins than public companies.
When to leap with microcaps.
Some (in my opinion valid) warnings on Iris Energy, a former portfolio holding. It’s the capex raise required that’s the concern.
Rick Rule on valuing gold producers.
The origins of my aversion to hedge funds holding control blocks of public companies. Something to consider if you own Strathcona or MEG Energy these days.
Economy
The copper tariff is insane (paywalled). More importantly this specific tariff is counterproductive if the long-term goal is to bring manufacturing back to the United States. This is the logical endgame when you stop building things.
Commodities
They came to Congo with an offer from Washington: release three American prisoners on death row and, in return, Donald Trump will accept your minerals-for-security proposal. Two days later, they fled the country.
The surprising part of the International Energy Agency’s latest monthly outlook isn’t its demand forecast, which remains pessimistic, but rather what it says about how much oil an OPEC+ stalwart pumped last month.
Travel plans
August: Reno and Virginia City, Nevada for site visits. I also plan to clean out a Trader Joes.
September: Beaver Creek Mining Conference.
My Nevada trip is on a tight timeline, but if you’re in the area and want to meet up let me know. Particularly if you know where the good stuff is at Trader Joes. If you’ll be attending Beaver Creek this year, I’ll be there Monday to Thursday.