Dark Arts Of Royalties (thoroughly enjoyed this)
Articulated By Tshepo Magagane
Why we have to continue being more innovative in attracting and slicing capital into Mine Finance to solve this gordian-knot of lack of capital to unlock mining projects.
NB: Metals & Mining has a deluge of info – you have to be able to sieve and make sense of it – multiple commodities, so many different projects, on different continents / countries, different promoters…the esoteric nature of Mine Finance…and when you have to remember things such as “a mine is a hole with a liar on top” “nothing is produced, warehoused, distributed without steel”…
…you have to keep at it all the time to have an informed opinion – in high finance, a lot of grads hate it; every time you do some comps, model, precs; it is different…and you never stop learning – there is not a day a walk out of a meeting or call and have not learned or looked at something differently!
NB 2: Americas v African projects – Americans = 2 or even 3 royalties / African = zero royalties (few realise this – African projects are clean and Americas projects have been passed around a few times)
NB: Mining touches everything – so you have to properly understand other sectors whether autos, white goods, cap goods, yellow goods, shipping, bmat, etc – as Alan Greenspan said in Age of Turbulence “understand steel if you want to understand the economy”!
“grown from 1bn to 70bn and 65bn of that precious metals”
“top 3 speaks for 90% of market cap”
“other 27 companies fighting hard”
“US generalists investors / family offices / small cap investors”
“generalists looking for inflation hedge”
“20x revenues”
“change of ownership, rescoping fundamental size of project = 100x”
“acquisition finance for an asset that has been forgotten – not necessarily mine life extension”
“balance sheet repairs = highest IRR”
“when mineral rights tenements are found / sold”
“WMC always kept royalties in divestments”
“nsr + 10% price participation above USD600/oz of gold”
“royalty linked to the use of a drill database – if access led to a discovery, royalty”
“momentum of capital in North America…a slipstream”
“where is the largely pool of capital at the lowest cost”
“BHP sold back to Ivanhoe a royalty that would be doing USD40m pa for USD37m – can get a billion for that today – [discovery was coming along]…2% NSR on all of Oyu”😂😂
“stranded deposits that we can see eventually feeding adjacent mills”
“difficult to see how it comes in…but with intel and analysis from our team…path to 50-100x”
