Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) announced that Vale's Salobo III expansion had passed its first-phase completion test, in line with Wheaton's previous guidance, triggering a payment of $370 million. The Salobo expansion is expected to increase throughput to 36 Mtpa by the end of 2024, up from 24 Mtpa before the expansion.
At that point, Wheaton will make another payment, estimated at $163 million, depending on the timing. Salobo represents just over 40% of Wheaton's operating NAV. Wheaton can fund these payments readily, ending the quarter with $834 million in cash as well as $2 billion on an undrawn credit facility. The stock is up nearly 25% since the beginning of October bottom in gold.
Panama Goes From Bad To Worse for Franco
Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) received more bad news from First Quantum, which said it was suspending operations at its Cobre Panama mine, the source of a stream that is Franco's largest asset. This is in response to a blockade at the mine's nearby port, which the government authorities are doing nothing to end.
Separately, the Supreme Court of Panama said that the court will set from November 24 and will remain in session until it has issued a ruling on two lawsuits asserting that the mine's contract is unconstitutional. In many ways, a suspension is the worst-case for Franco. In the event of the mine being shut down by government order or nationalized, Franco would likely make some recovery in international arbitration, though that would not be quick.
This suspension will hit Franco's revenue; it already updated its guidance after First Quantum began to reduce operations.
The Share Price Collapse Removes All Value for Stream
Franco stock is down about 15% since the last day of October when the new phase of this ongoing farce started with the government announcing it would put its contract to a referendum. Since Cobre Panama represents about 15% of Franco's NAV — more of its revenues — Franco's shares have essentially lost the entire value of Cobre Panama.
FNV may have been overvalued prior to this (or not), but wiping out the entire value of the asset is an overblown reaction. Peers are up since then, Wheaton by about 8%, so Franco's loss is even greater. Notwithstanding that, any further deterioration in the situation would likely weigh further on Franco's stock price. However, we think this is a great opportunity to buy a mining blue chip for those who do not own it.
More Changes at the Top of Osisko
Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) announced that founder Sean Roosen has resigned from the board just two weeks after moving from executive chairman to chairman emeritus. He will focus his time as CEO of Osisko Development. Sean Roosen's role and the broader Osisko strategic direction in supporting its various spin-offs has been a controversial topic for years and was one of the conflicts that led to former CEO Sandeep Singh's departure back in July.
We find it odd that, though Mr. Roosen remained as executive chairman after former CEO Sandeep Singh departed when the new CEO took over, he was moved (demoted?) and now, just two weeks later, resigned. We have no special insight, only speculation. At least the company, in announcing the change, remembered to thank Mr. Roosen for his "many contributions." This latest move may bring some stability to the board and management and suggests the separation of Osisko from its offspring will continue. The shares reacted well to this latest news (though they remain well below where they were before Mr. Singh was fired.)
We are holding.
New Property for Orogen
Orogen Royalties Inc. (OGN:TSX.V) has acquired by staking the Hot Tip Gold Project in central Nevada near Tonopah, which they suggest is a district-scale target with similarities to AngloGold's Motherlode deposit in the Silicon-Merlin district (on which Orogen holds a royalty). The staking was done under the Orogen-Altius generative exploration alliance.
We anticipate that Orogen will continue with its business model and seek a partner, but given the high potential, it may take its time to find a well-funded interested party.
TOP BUYS this week, in addition to the above, include Hutchison Port Holdings Trust (HPHT:Singapore), Altius Minerals Corp. (ALS:TSX.V), Midland Exploration Inc. (MD:TSX.V), andLara Exploration Ltd. (LRA:TSX.V).
SEE YOU IN VANCOUVER. On January 21st and 22nd, I'll be speaking at the annual Vancouver Resource Investment Conference with keynote speakers Rick Rule, Ross Beaty, Brent Cook, and Grant Williams, plus dozens of company CEOs. I look forward to seeing some of you there.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Franco-Nevada Corp., Osisko Gold Royalties Ltd., Orogen Royalties Inc., Altius Minerals Corp., Midland Exploration Inc., and Lara Exploration Ltd.
- 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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