The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
North of 60 Mining News – June 27, 2024
Core from drilling through bonanza grade gold at Newmont's Brucejack mine, an operating gold mine that is immediately generating revenue for Nations Royalty.
Ascot Resources pours the first gold from commissioning its Premier mine in the traditional territory of the Nisga'a Nation.
Seabridge Gold geologists investigate a highly mineralized area of KSM, a world-class Northern B.C. mine project that hosts 47.3 million oz of gold, 7.3 billion lb of copper, 160 million oz of silver, and 385 million lb of molybdenum in reserves.
The June 20 listing of Nations Royalty as an investment company on the TSX Venture Exchange was a milestone that will likely forever change the mining landscape in Canada and beyond.
Born out of the vision of mining magnate Frank Giustra, a First Nations-to-mining bridge brought to the table by lifelong Northern British Columbia resident and mining executive Rob McLeod, and a portfolio of top-tier mineral royalties deposited by the Nisga'a Nation, Nations Royalty is the world's first Indigenous-owned metals royalty company.
"I am honored to collaborate with the Nisga'a and other First Nations in establishing this essential new company," Giustra said upon the February introduction of Nations Royalty. "Almost two decades ago, I played a role in developing the metals streaming concept as a co-founder of Wheaton Precious Metals and I see Nations Royalty as a vitally important successor to this concept."
The idea behind Nations Royalty is to provide an investment vehicle that allows Canadian First Nations to bring forward and diversify the value of royalties and other financial incentives they are holding under benefits agreements with mining and other resource companies hoping to do business in their traditional territories.
"Nations Royalty's vision presents a unique opportunity for the Nisga'a Nation, other First Nations and Indigenous groups, and investors to access a portfolio encompassing precious and critical metal mines, oil and gas ventures, and renewable energy projects," says Eva Clayton, president of Nisga'a Lisims Government, a forward-thinking administration based on traditional culture and values of the Nisga'a Nation.
Indigenous groups have the option to sell their royalties to Nations for cash or exchange them for Nations shares and received dividends paid out by the royalty company.
"Royalty companies have been the crown jewel of the mining space over the past two decades; we have the first-mover advantage and look forward to creating significant value for all investors in Nations Royalty," said McLeod, who is serving as interim CEO of Nations Royalty.
Nations is already generating revenue from the royalties deposited into the newly formed company by Nisga'a Nation, whose territory covers the southern third of B.C.'s famed Golden Triangle.
The five royalties contributed by Nisga'a are from top-tier mining projects within its region providing Nations with a net asset value (NAV) of $214 million (C$293 million). This is not a long-term value proposition – one of the mines is already in operation and generating gold royalties, a second is expected to reach commercial production in the coming weeks, and two others are slated to reach commercial production by 2030.
Here is a rundown of the assets Nations currently holds royalties on:
• Brucejack – A high-grade gold mine about 35 miles north of Stewart, B.C., that began production in 2017 and is operated by Newmont Corp., the largest gold mining company in the world. This mine is expected to produce around 310,000 ounces of gold and generate nearly US$4 million (C$5.5 million) in revenue for Nations this year. With 3.1 million oz gold and 12.8 million oz silver in reserves, as well as enormous district-scale resource growth potential, Brucejack is expected to contribute royalties to Nations for decades.
• Premier and Red Mountain – This pair of gold-silver mine assets represent two royalties provided to Nisga'a under separate benefits agreements. Ore from both properties about 15 miles (25 kilometers) from Stewart will be processed through a mill at Premier. Ascot Resources Ltd. began commissioning the mill earlier this year and poured the first gold from Premier ore in April. The mill is expected to reach commercial production in the coming weeks and is forecast to contribute roughly $6 million (C$8.2 million) in revenue for Nations in 2025. Based on current reserves, the Premier and Red Mountain mines are expected to produce roughly 1.1 million oz of gold and 3 million oz of silver over the first eight years of operations.
• Kitsault – This project hosts a high-grade molybdenum deposit being advanced by New Moly LLC. Located on a large and fully permitted brownfield site with considerable past mining activity and basic infrastructure, Kitsault is currently slated to begin production around the end of the decade. This operation is forecast to produce approximately 25 million pounds of molybdenum per year for 16 years. This operation could contribute roughly $5 million ($6.9 million) in annual revenue for Nations beginning in 2025.
• KSM – By far the biggest prize of the Nisga'a royalties deposited into Nations is KSM, a world-class mine project about 40 miles (65 kilometers) north of Stewart. Being developed by Seabridge Gold Inc., KSM is slated to produce more than 1 million oz of gold, 3 million oz of silver, 178 million lb of copper, and 4.2 million lb of molybdenum annually for 33 years. This operation only includes about 25% of the resources outlined so far at KSM. This mine is currently expected to begin operations around the end of the decade and by 2032 begin generating more than $30 million (C$41 million) in revenue per year for Nations.
Based on current mine projections and street consensus metal price estimates, royalties from these four operations alone are forecast to generate between US$8 million (C$11 million) and $21 million (C$29 million) in revenue for Nations from 2025 to 2031. With the addition of KSM, this revenue is estimated to jump to around $52 million (C$71 million) in 2032.
"Nisga'a have always been leaders," said McLeod. "Now, they are the founders of the largest majority indigenous-owned public company in Canada."
Seabridge Gold geologists investigate a highly mineralized area of KSM, a world-class Northern B.C. mine project that hosts 47.3 million oz of gold, 7.3 billion lb of copper, 160 million oz of silver, and 385 million lb of molybdenum in reserves.
Nisga'a Nation received 111.1 million Nations shares in exchange for the five royalties. These shares and options held by Nations Royalty principals have been deposited into value security escrow subject to staged releases over the next three years.
Nations' shares exchanged for other royalties will similarly be held in escrow.
In conjunction with its listing on the TSX Venture Exchange, Nations raised C$10 million through the issuance of 11.1 million shares at C90 cents per share. In addition, Nations issued 10 million stock options exercisable into shares at C90 cents per share to directors, officers, consultants and employees of the royalty company, as well as certain charitable organizations.
As a result, Nations Royalty debuted with 144.73 million shares and outstanding for a market capitalization of C$130.3 million (US$95 million). With this representing only about 47% of its US$214 million (C$293 million) NAV, the royalty company sees plenty of room to market cap growth. If Nations was valued similarly to royalty companies in its peer group, which have an average market cap at 71% of NAV, the First Nations-owned royalty company would trade for around C$1.38 per share and have a market cap of around C$199 million (US$145 million).
Of the 144.7 million Nation shares listed, 132.9 million are held in escrow.
As a result of depositing the first five royalties, Nisga'a Nation owns a 76.8% interest in Nations Royalty. Giustra's Fiore Group and Nations management own 15.6% of the now publicly traded royalty company. Investors that participated in the inaugural financing own the remaining 7.6% of the First Nations-owned company.
Nations Royalty board of directors consists of Collier Azak, Edward Clayton, and Debra Febril from the Nisga'a Nation; Saga Williams from the Curve Lake First Nation in Ontario; and Alex Morrison, a longtime mining executive who previously served as the chief financial officer for Franco Nevada, an international gold royalty company.
In addition to McLeod, Nations' management team includes Derrick Pattenden, a Mohawk from the Bay of Quinte in Ontario, as chief investment officer; Tony Robinson from the Nisga'a Nation as chief financial officer; Derek Teeven, a senior mining executive renowned for Indigenous and local community inclusion, as interim vice president of partnerships; and Kody Penner, an impressive young mining business leader from the Tahltan Nation in Northern B.C., as vice president of corporate development.
With the framework and startup team in place and public listing complete, Nations Royalty is advancing as a first mover in bundling royalties, income and commodity streams, and annual benefit payment entitlements from resource projects across Canada into an investment vehicle that provides shareholders with the growth and value potential that comes with ownership of a publicly traded royalty company.
"With guidance from renowned mining entrepreneur, Frank Giustra, our ambition is to grow Nations Royalty into one of the top global royalty companies," said Eva Clayton.
While the five Northern B.C. royalties in its portfolio provide immediate revenue and outstanding growth potential, Nations is looking to scale up near-term revenue streams, which will translate to large shareholder dividends.
Ascot Resources pours the first gold from commissioning its Premier mine in the traditional territory of the Nisga'a Nation.
To accomplish this, the First Nations-owned royalty company is prioritizing near-term acquisitions on increasing the proportion on royalties from producing assets. Currently, 40% of the royalties held are from producing mines, Nations would like to get that up to at least 50%, with the balance providing a growth pipeline.
The company is also looking to further diversify its portfolio by including income streams from renewable energy projects. The current portfolio is split pretty evenly between precious and base metals. Nations sees renewables carrying as much weight in its commodity profile as either of the metal groups.
The addition of renewable energy to its portfolio is expected to further enhance Nation's ESG credentials.
Because the royalties in its portfolio are from benefits agreements negotiated with First Nations, and consider their concerns, these assets have inherent environmental, social, and guidance foundations. The addition of clean energy revenues is expected to make the royalties all the more attractive to ESG-focused investors.
Indigenous groups will have the option to sell all or a portion of their royalties to Nations for cash or in exchange for shares of the highly compelling metals and clean energy royalty company.
With wider participation, Nations' vision is to become the leading Indigenous-owned public company in Canada.
"I believe that Nations Royalty will be as impactful to the mining and royalty space as when we founded Wheaton Precious Metals and introduced the concept of metals streaming in 2004," said Giustra.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
Reader Comments(0)