An early stage natural resources royalty play

POSTED ON January 13, 2015 BY James Fraser
CATEGORY Morien Resources,

Donkin Headland (Image: Morien Resources)

Morien Resources (MOX.V) is an emerging junior mining royalty stock led by CEO John Budreski. This morning Morien signed a definite agreement to sell a 25% interest in the Donklin coal project for cash and a royalty on future production.

The Donkin coal project was the signature asset of Morien and when/if it goes into production will generate depending on the coal price and estimated $4.6 - $5.7 million a year annually in royalties.

The Donkin project is now 100% owned by Kameron Collieries ULC who acquired the other 75% off of Glencore in early December. Glencore had estimated a CAPEX of $300 million which would have meant Morien would have been responsible for $75 million (25%).

The deal also includes cash considerations of $5.5 million payable as follows

$2 million on closing
$2 million on or before second anniversary date of closing
$1,5 million or or before third anniversary date of closing

With a $12.5 million market cap the dilution and or debt on the company would have been enormous. Management felt the deal was the prudent thing to do and recommends shareholders approve the transaction.

Once the deal closes Morien will have ~$4.5 million in cash to find other royalties and properties.

Other royalties in the portfolio include:

A 1.5% NSR royalty on the Yellow Giant project of Banks Island Gold (BOZ.V)
A royalty on the Black Point Marine aggregate project of Vulcan Materials

Management is top notch being led by CEO John Budreski. John has extensive experience in the royalty space being on the boards of both Sandstorm Gold and Alaris Royalty.

Royalty companies have outperformed in the commodities space no matter if the market is in a bull or bear market. If you look at the compounded annual rate of return on royalty companies it is tough to beat. The business model is very sound and proven.

The chance to get in on an early stage royalty project is compelling but investors need to know it will still be years before cash comes in from the Donkin royalty or the Black Point project.

Symbol: MOX.V

Share price: $0.21
Shares outstanding: 59.9 M
Market cap: $12.5 M

Read: Morien firms up deal to sell 25% interest in Donkin

Video: BNN Interview Andrew Bell and CEO John Budreski

I have no position in any of the stocks mentioned. This is not investment advice. All facts are to be verified by reader.As always please do your own due diligence

James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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One thought on “An early stage natural resources royalty play”

Matthew says:

January 13, 2015 at 9:03 am

Others to consider (in the metals space) are Eurasian, Mirasol, Millrock, Lara, Sandstorm, Almaden and Altius.

All solid for their own reasons, yet speculative for other reasons. However, as the above article states, the business model is sound and proven!

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An early stage natural resources royalty play

One thought on “An early stage natural resources royalty play”

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