Vintage stylized desert road. Mountains at the horizon.

Orogen Royalties: Follow the People

Could the recent offer for Corvus Gold been a boon for investors of Orogen Royalties?
Could the recent offer for Corvus Gold been a boon for investors of Orogen Royalties?

Follow the People First – The Money Will Follow Later

One of the most successful resource investors I know has a simple investment philosophy that has resulted in some very large (tens of millions and hundreds of millions large) “wins.”  

But how did he do it?

By finding the “right” people.  

This particular investor is what we now call an angel investor or a legacy investor. What he does very well is identifying companies that are defined by their people. Many other investors take this same approach but place their faith in people (and their investments in companies) who do not achieve the same degree of success.

Once the “right” people are in place, this deep-pocketed investor takes a 25% stake and then continues to fund and maintain his original position through pro-rata participation in any future financings. 

Years later, when the “$$$ billion buy-out” occurs, and a large operating company acquires the newly discovered multi-million-ounce gold asset, he monetizes his position.

In short, he isn’t trading the stock. He’s a real investor.

Perhaps some of the criteria used to pick which people to invest with can not be easily explained. But, for sure, a part of it is instinctual. It is that feeling you get when you feel the right things are going to happen.  

Besides all of the more clearly recognizable features of a successful company, there must be that “something extra.”  

This must be how the deep-pocketed investor feels when he puts in his first dollars. He’s comfortable knowing that this is the first step of a long journey that will require many more steps (and sustained financial commitment and support along the way), coupled with a very healthy degree of patience.  

Remember the old investment adage: “Money Grows on the Tree of Patience.”

Equedia readers have been treated to many “buy-outs,” which have turned into stellar gains. In fact, just last month, two companies we featured in the past have received acquisition offers. Millennial Lithium (TSX-V: ML), originally introduced back in 2016, was just offered a $353 million cash offer buy-out; Corvus Gold (TSX, NASDAQ: KOR), originally introduced back in 2012, received a cash offer buy-out of C$463 million.

More on Corvus in just a bit.

We may have identified another acquisition target: a small royalty company that is attracting the “right people.”

Today, Orogen Royalties Inc. (TSXV:OGN and OTCQX:OGNRF) announced the appointment of Mr. Justin Quigley to their Board of Directors. 

Here is a portion of the press release that provides a brief bio:

“Mr. Quigley is an internationally experienced business development executive with multi-commodity expertise in the natural resources sector. Most recently Justin was Vice President – Commercial for Rio Tinto Exploration (“RTX”) Americas, where he formed part of the RTX Americas Senior Leadership Team. Justin and his team delivered an impressive record of innovative and strategically sound commercial transactions exceeding US$2.5 billion in total combined value, including over US$220 million in various royalty sales. He also assisted as a Strategic Advisor to Rio Tinto’s business units on various transactions. Prior to this, Mr. Quigley was General Counsel and Commercial Director for RTX North America Region/Kennecott Minerals Company, where he managed the legal and commercial affairs of these and associated companies.”

Orogen is a relatively new company that formed from a merger of two prolific property generator companies: Evrim Resources and Renaissance Gold. The company has and will continue to create new gold royalties organically by selling gold properties for cash and retaining a Net Smelter Royalty (NSR). 

The company has a gold focus, including properties at various stages of exploration in Canada/USA/Mexico.

Now we see the addition of a senior executive who has the experience necessary to ensure that Orogen will be fairly valued in the event of another merger or takeover.

One of the Orogen’s important NSR’s is a 1% NSR on the Silicon gold project near Beatty, Nevada.

The project was brought into Orogen via Renaissance Gold, a co-contributor of properties and royalties. 

AngloGold Ashanti owns the Silicon gold property subject to the 1% NSR held by Orogen. Here is a property map from the Orogen website:

AngloGold Ashanti is looking to expand their presence in this important new developing gold trend by offering shareholders of Corvus Gold Inc. (TSX:KOR and NASDAQ:KOR) CAD $4.00 per share. The offer was made on July 13, 2021 as reported by Bloomberg:

AngloGold Ashanti Ltd. is seeking to consolidate its investment in Canadian exploration company Corvus Gold Inc. in a $370 million cash deal to develop deposits in Nevada.

The world’s No. 3 gold miner agreed to pay C$4 a share to buy stock it doesn’t already own in Corvus, which is searching for gold in Nevada. The offer represents a 23% premium to Monday’s closing price for the Vancouver-based explorer. AngloGold, which already owns 19.5% of Corvus, is pursuing the takeover as part of its strategy to grow reserves and build low-cost production, the Johannesburg-based firm said Tuesday in a statement.

“We have a unique opportunity to combine Corvus’ assets with our own — in the world’s top-ranked mining jurisdiction — to create a meaningful new production base for AngloGold Ashanti in the medium and longer term,” AngloGold interim chief executive officer Christine Ramon said in the statement.”

We followed the very same “Follow the People” technique to identify a strong investment idea. It is clear to us that AngloGold Ashanti likes what they see in this area of Nevada and are prepared to pay up to consolidate their holdings and become the dominant player in the district.

The timing of Orogen Royalties bringing on a “senior negotiator” confirms that the 1% NSR on the Silicon gold property is valuable and important. 

The “world’s No. 3 gold miner” might think so too – especially as they continue to drill and define what is shaping up to be a major gold system that is likely to host a multi-million gold inventory.

Here is a recent daily stock chart that shows that OGN is just starting to break back above its EMA (89), a good technical indicator that perhaps a further rise in price is on its way.

A break out above $0.40 would signal that the “overhead resistance” has been surpassed.

Summary & Windup

Good people tend to do good things in business. 

Success is not always a “happy accident.” We like the way that OGN is slowly and methodically building value by organically growing its NSR portfolio.  

The “downside” seems limited to the gold price and the future taxation policies of the State of Nevada. The upside is that the large property portfolio will continue to provide the impetus for further revaluations in the future.  

Patience is the key here.

-John Top, the technical trader

Disclosure: We own shares of Orogen Royalties.

Equedia
The Equedia Letter is Canada’s fastest growing and largest investment newsletter dedicated to revealing the truths about the stock market.