Altius Receives Split Arbitration Decision

Source: Adrian Day 01/21/2025

The long-awaited arbitration decision on Altius Silicon royalties was received last week, which also saw Barrick finally lose its patience with the government of Mali and issue an ultimatum. With this, Global Analyst Adrian Day looks at these and other developments, as well as look at golds resilience in the face of a strong U.S. jobs report.

Altius Minerals Corp. (ALS:TSX.V) announced that it had received a long-awaited decision on the arbitration over its royalty on the Silicon gold district, but the ruling was not conclusive. It was a split decision with much left undecided.

Crucially, the arbitrators ruled that Altius holds a royalty on the entirety of the Area of Interest immediately surrounding the Silicon and Merlin deposits, but it also ruled that Altius had no royalty of nearby deposits in the district, including North Bullfrog and Motherlode.

These and other lands, acquired by AngloGold Ashanti Ltd. (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) from third parties, were staked before the royalty agreement, and excluded on that basis. The arbitration panel did not rule on hundreds of other claims, giving the parties (Altius and AngloGold) 60 days to come to an agreement. If the parties can not agree on these claims, then the panel will decide (a full year after the arbitration hearing).

Sales Process May Proceed

Although Altius did not receive everything it sought, the most important ruling is that its royalties over the area of interest around Silicon and Merlin are valid.

This land includes extensive drilling to the west as well as to the northeast, where mineralization is known to exist. Although Altius has made no announcement to this effect, it may be that, given its royalty on the key part of the district has been confirmed and that the unresolved land contains no known resources — and an acquirer is unlikely to want to pay much, if anything, for these claims — the company may proceed with its process to get final bids from interested parties.

The stock, which had been moving up, responded positively to the partial arbitration decision, closing at a new high since the end of 2007. Altius is a core holding for us, and, as we have discussed, it remains undervalued.

However, unless you do not own any, I would wait for a pullback to add to positions.

Royalty Decision Boosts Orogen

Orogen Royalties Inc. (OGN:TSX.V), though not a party to Altius’ arbitration, nonetheless responded to the arbitration decision, on the basis that a transaction on its own Silicon royalty may be closer.

Separately, Orogen announced earlier in the week that it was one of eight companies selected by BHP to participate in its generative exploration program in western North America out of “hundreds” of applicants.

BHP will provide a grant to fund the program.

Continue to buy

Barrick Gets Tough Over Mali Dispute

Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) ramped up its dispute with the government of Mali over its Loulo-Gounkoto mine, giving it an ultimatum to resolve issues, or threatening to suspend operations at the mine. The mine has been restricted from shipping gold for almost a month now and Barrick said last week that if the issues were not resolved within a week, it would suspend operations.

That week ends tomorrow. This is a particularly tough stance by Barrick which has typically preferred to deal with government disputes by quiet negotiation. It has also initiated international arbitration.

At the same time, Barrick said it would continue efforts to reach an agreement with the government to resolve all outstanding disputes and increase the state’s share of revenues. Barrick disputes Mali’s claims that it has evaded previous taxes due. Meanwhile, local Barrick employees remain in jail.

The Mine Is Significant to Barrick, Not Yet Discounted in Stock Price

The mine represents about 19% of Barrick’s NAV and had been expected to contribute 14% of the company’s production this year. It is one of Barrick’s lowest-cost mines, so its suspension would also raise company-wide costs.

Barrick stock has underperformed the index this year as the issue has come to a head. There is always the risk of further underperformance if the mine is suspended or the government takes further hostile action. The underperformance that we have already seen does not fully account for the loss of the mine. However, Barrick stock remains undervalued on an asset basis, notwithstanding the high political risk of many of those assets.

We will watch for any volatility in the weeks ahead and look for opportunities to add to positions.

Osisko Meets Full-Year Guidance

Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) announced preliminary deliveries and revenues in line with estimates near the mid-point of revised guidance. Revenues were up 39% on the last quarter, but that is partly because of an inventory carryover as well as the weaker Canadian dollar.

The company said its deals are more difficult to transact though it was working on half-a-dozen deals, most of which are seeking more comprehensive transactions to include equity and debt in addition to royalties.

The company ended the year with CA$85 million after paying down CA$136 million on its credit facility. It has over half a billion of available liquidity. Osisko has well outperformed the XAU over the past year with a valuation now close to its peers (though well below the valuation of the “big three.”)

We are holding.

Government Aids Fox River on Project Research

Fox River Resources Corp. (FOX:CNSX) said that it was collaborating with CanmetMINING on two laboratory research projects, testing for the extraction of niobium from Fox’s phosphate.

Canmet is a government research organization aimed at advancing the development of Canada’s critical minerals sector.

If successful, this would significantly increase the economics of Fox’s Martison phosphate deposit.

Continue to buy.

BEST BUYS this week, in addition to the above, include Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE), Nestle SA (NESN:VX; NSRGY:OTC), Midland Exploration Inc. (MD:TSX.V), Kingsmen Creatives Ltd. (KMEN:SI), Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), and Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American).

GOLD SHOWS ITS RESILIENCE. In the face of a strong jobs report, which reinforces the unlikelihood of another rate cut at the Federal Reserve’s next meeting at the end of the month, gold moved up Friday, at much at $30 before closing at $2689.76, up $22.

Gold was already moving up ahead of the jobs report to a one-month high. This is yet another illustration that the gold price is being driven by Asia and not North America. Both Asia and Europe have seen strong inflows into gold ETFs over the past month, while North America saw only modest net inflows, with most days seeing ongoing outflows. Indeed, every day since just before Christmas, GLD, the largest gold ETF, has seen further outflows. And it’s not only investors following this pattern. The Peoples Bank of China, after pausing its gold purchases for six straight months, has been a buyer again for the last two months as it continues to reduce its holdings of U.S. Treasuries. Today, the bank holds $760 billion in Treasuries; a decade ago it held $1.3 trillion.

The reasons people have been buying remain

As we have written before and pointed out in many recent interviews, the reasons for various constituencies to buy gold have not changed with the U.S. election or other factors. Central banks still want to diversify away from the dollar in the face of dollar weaponization. (Threats to impost 100% tariffs on goods from any country that moves away from the use of the dollar, do nothing to assuage such concerns; au contraire.)

Chinese consumers are still concerned about their economy, particularly real estate (with home foreclosures rising dramatically), and the safety of the banking system. And wealthy families in Asia and the Middle East, as well as increasingly in Europe, are still concerned about global debt.

The jobs picture is not as strong as the report suggests

In North America, with the narrative that the economy remains strong and inflation subdued, there is little interest in gold. But the narrative is wrong. Although Friday’s jobs report was indeed strong, with 256,000 new jobs, of which 223,000 were in private sector — well above expectations — there are caveats.

First, the earlier ADP report showed only 122,000 new private sector jobs; one of them is not correct. Continuing claims moved up to a three-year high. It is taking longer to find a job, almost 24 weeks, the highest since early 2022.

And lastly, of course, we know there will be revisions to the Bureau of Labor Statistics report, and for the last two years, only three months have seen (minor) upward revisions, while the rest were revised downwards.

The initial BLS reports are becoming less reliable (or “increasingly difficult to interpret,” as Fed Governor Michelle Bowman put it somewhat diplomatically), so I take Friday’s report with a pinch of salt. And there are other indications that the economy is slowing, as corporate bankruptcies hit their highest level since the aftermath of the global financial crisis well over a decade ago.

A slowing economy and stubborn inflation — along with a stock market that appears to be rolling over (the peak was more than a month ago) — will soon lead more Americans to turn to gold.

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Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Altius Minerals Corp., Barrick Gold Corp., Orogen Royalties Inc., Osisko Gold Royalties Ltd., Fox Riv Res Corp., Midland Exploration Inc., Fortuna Mining Corp, and Metalla Royalty & Streaming.
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

( Companies Mentioned: ALS:TSX.V, ABX:TSX; GOLD:NYSE, FOX:CNSX, OGN:TSX.V, OR:TSX; OR:NYSE, )

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