Glenn Mullan, Chairman of Abitibi Royalties $RZZ is here.
Recent share price: $2.49
Shares outstanding: 11 million
Market capitalization: $27.2 million
Cash balance: $2 million
Marketable securities: $26 million (paying $400,000+ in dividends each year)
* All figures approximate
What Glenn's saying:
- Abitibi has low overhead and a goal of decreasing shares outstanding through buybacks.
- Yamana ($YRI) and Agnico Eagle’s ($AEM) Canadian Malartic gold mine is the largest in Canada (550k oz Au production annually and 16-year mine life) with exceptional community support. Mr. Mullan lives about 20 minutes away in Val D’or.
- Mullan’s Golden Valley Mines ($GZZ.V) staked a significant area adjacent to Canadian Malartic in 2006 and spun out its interest to Abitibi Royalties in 2011.
- in 2014, Ian Ball, a young mining executive with close ties to Rob McEwen, joined as the company’s president. McEwen has an approximate 8.7% interest in the company. Ball subsequently became CEO in 2015.
- The Yamana-Agnico Eagle JV that operates Canadian Malartic is hosting an analyst tour later this month. Mullan is optimistic the joint venture will release exploration results from the newly discovered Odyssey Zone, which Abitibi holds a 3% NSR royalty on, prior to the site tour (while he makes no guarantees of this)
- Material from Odyssey appears to be 2 g/t gold versus an average of about 1 grams in the current mine. Plus, the results are over significant 40-60 metre widths. Canadian Malartic’s 55,000 ton per day mill has an insatiable appetite for ore, and Mullan is optimistic Odyssey could host 1 million ounces of gold or more. There is no other brownfield exploration taking place at the mine.
- Odyssey will see $3-4 million in exploration this year according to an April news release. Mullan expects the exploration and development of the discovery to play out over 3-5 years.
- The Canadian Malartic JV is serious about Odyssey, having converted Abitibi’s 30% free carried interest into a 3% NSR and issuing $35 million worth of stock in March 2015.
- Abitibi’s royalties on the Canadian Malartic camp, excluding any material from Odyssey, cover an area with approximately 400,000 ounces of gold which will start in approximately 2 years and run for 3 years.
- Glenn previously took Canadian Royalties’ Nunavik nickel project from discovery through to production. Though he never sold his stake, Glenn lost control of the company to a Chinese group. The control losing lesson caused him to spin out the Canadian Malartic assets from Golden Valley Mines for a 51% stake in Newco (Abitibi Royalties). “Anyone who wants to take over Abitibi will have to come through Golden Valley’s front door,” Mr. Mullan said. Mullan is also Golden Valley’s CEO.
- Abitibi is looking to grow its royalty portfolio and is evaluating royalties at all stages, from grassroots - Mr. Mullan’s specialty - to the more advanced stages, including production. The company will consider royalties in any commodity.
- One of the CEO.CA readers asked about a success fee paid to members of Abitibi’s management of about $3.5 million. Mullan explained nobody at the company received compensation from 2011-2014. The fee was comparable to what a financial adviser would have received for structuring the $35-million 3% NSR deal with Agnico Eagle and Yamana. The fee will only be paid out of cash flow when the company has the capacity to pay it, and can’t be paid out of financing proceeds.
- Mullan would prefer to sell Abitibi’s marketable securities to raise cash to acquire royalties rather than issue shares.
- Abitibi is trying to cultivate a shareholder base with faith in management. “Survival is the key to success in mining,” Mullan said.
Abitibi’s long-term vision, according to the May 2015 Shareholders Letter):
- Share structure: It has a small number of shares outstanding. Investors who purchase shares become partners in the business. They are also treated like partners.
- Per share value: The company generates meaningful cash flow on a per share basis.
- Physical gold: The company takes a portion of its royalty income in gold bullion, which would continue to grow each quarter. This should also defer tax.
- A goal of share buybacks, a strategy few mining companies follow.
- Exploration: Provides exposure to exciting discoveries.
- Growing the business: Continually builds its royalty portfolio through cash flow or other creative means.
What the market will be focused on:
- Exploration results from Odyssey
- Leverage to gold price
- New royalties
How to get more information:
- $RZZ on TSX-Venture Exchange
- http://www.abitibiroyalties.com/investors/presentations/RZZ-1-Sept-2015.pdf
- http://www.abitibiroyalties.com/
- info@abitibiroyalties.com
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