Nations Royalty Corp.
Not the usual Gold Royalty.
published: 27 Feb. 2025
Market cap: ~77M$
EV: ~70M$
(All currency in $CAD unless otherwise stated)
Overview
Canadian company established in 2024 and majority-owned by the Nisga’a First Nation (77% ownership).
Nations Royalty pursues a strategy of acquiring mineral royalty streams from the Impact and Benefit Agreements (IBA) indigenous Canadian nations sign with mining companies for the resource extraction on their land’s boundaries.
The company is managed by First Nations executives, with Robert Mcleod as current CEO, a person who has a family-background of relationship with the Nisga’a Nation.
Within advisors and directors of the company are Frank Giustra, CEO of Fiore Group (~15% ownership in Nations Royalty), a successful Canadian entrepreneur who has an established track record of building natural resource companies, and Alex Morrison, former CFO of Franco Nevada, the leading international royalty company.
Royalty agreements
Nations Royalty seeks to engage with indigenous First Nations, in Canada, but also in Australia and New Zealand, and acquire the royalty interests these nations have signed with mining companies, in exchange to cash or equity in Nations Royalty corp.
These transactions allow indigenous communities to 1) Receive upfront cash for immediate purposes. Like for example starting a housing program or financing a public building like a school or medical facility. Or 2) become Nations Royalty shareholders, having access to a larger proprietary royalty pool, and benefiting from future dividend payments and asset price appreciation. Other rights, apart from the royalty interests, that are included into IBAs should remain with the indigenous communities.
Company presentation
Note: IBAs are a negotiated agreement between indigenous communities and mining companies. In this case, royalty streams are not a mandatory, government- regulated payment, but rather a free agreement between private parties. Trough IBAs, Nations Royalty benefits from ‘Mineral Tax Royalties’ (MRT, 93% of royalty mix) instead of the most common ‘Net Smelter Royalty’ (NSR, 7% of royalty mix). This royalty is a percentage of the mineral taxes (not the same as income taxes), which are paid without accounting for operational costs, while the NSR accounts for smelting and other expenses.
Net Asset Value
As of February 2025, Nations Royalty is a very small company with only one producing royalty. Moreover, this producing royalty accounts for a small fraction of its Net Asset Value (NAV). The important asset this company owns is a royalty (11% of mineral tax payable) from a developing-stage project called Kerr-Sulphurets-Mitchell (KSM) Project, located in British Columbia and currently operated by Seabridge Gold (SEA.TO).
This is a huge gold-silver-copper-molybdenum project representing a monumental venture in the mining industry. As for the 2022 Project Economic Assessment (PEA) released by Seabridge, the metal production during a 33-year Life-of-Mine (LOM) will be a massive 14.3 million ounces (Moz) of gold, 68 Moz of silver, 14 Mbl of Copper and 13.8 Mbl of Molybdenum.
Seabridge Gold PEA 2022.
Nations Royalty’s expectations are that KSM starts-up sometime in 2029 and achieve peak royalty payments around 2032.
Furthermore, the company owns a 20%-25% of mineral tax payable royalty for the Premier and Red Mountain Gold projects from Ascot Resources (AOT.TO). Premier commenced commercial production in September 2024 while Nations Royalty expects Red Mountain to start-up in 2027.
The last project in the pipeline is a fully permitted brownfield Molybdenum deposit with a sliding scale percentage of net smelter returns.
Overall, Nations Royalty expects to add from these projects a combined $63M of royalty revenue by 2032.
Company presentation
This looks very good, but I think there are some important risks derived from these assets.
Material Risks
Until here, everything said is provided by the company’s releases and website. It looks promising. KSM is a massive project that will 10x revenue for Nations Royalty, but this is still a paper project, and I don’t want to get fooled by presentation slides.
If done, it’s a game-changer for the gold mining industry. But my most concern here is the CAPEX figure that Seabridge Gold released in the 2022 PFS. Although cash-costs and AISC (costs per ounce) are very low compared to other major Canadian gold projects due to the high credits from copper, silver and molybdenum, initial CAPEX for building the mine stands at US$6.4B.
The mine deposit is in a very remote area with no direct access to roads or processing infrastructure. Seabridge is a mid-tier producer that lacks the cash to build this project, so they are looking for a partner or to sell it. Anyhow, some unplanned event that increases CAPEX could blow out the whole project.
2022 PFS establishes a 5-year build phase, but a remote 195.000 tpd open-pit with a long tunnel for ore transportation and all the tailing facilities isn’t a plug-and-play job and it could go longer than the 5 years planned…or it just could never start.
Seabridge KSM technical report
As for the Premier project, Ascot halted operations in September 2024 due to investment issues and plans to re-open in July 2025. Besides, Nations Royalty expects Red Mountain, also owned by Ascot, to start-up in 2027. But Red Mountain is a secondary asset, not so big as Premier, and Ascot wanted to finance it with the Premier operating cash flow. If Premier doesn’t start, Red Mountain’s timeline will be influenced.
Conclusion
These factors mentioned increase the uncertainty about the royalty streams, and the slide above with the projected royalty revenues could be overoptimistic. For sure, management knows the reality of the KSM project and have better knowledge than a poor lonely guy like me, but I must assume that gold on a technical project isn’t the same as gold on the miners’ hands, so I will keep following Nations Royalty but with no rush to build a position.
Even so, this company has a nice mission of empowering First Nations. If they build a strong network, underpinned with a seasoned management team, this story could become real one day.