Miranda Gold Corp. (MAD:TSX.V, 0.055 x 0.06) has seen much news recently. First, Ken Cunningham resigned as chairman, and leaves the board. He was the long-time CEO (since 2003), reviving Miranda, before turning over the CEO role to Joseph Hebert (long-time chief geologist at Miranda) last year. It can be difficult for a new CEO to have a former CEO as chairman. Although I have known and respected Ken a long time, his stepping down now allows the CEO a clearer focus forward.
There have also been personnel issues in Colombia, with the local exploration manager among those let go. This upheaval put the company back several months in its plans, in my view.
Slow progress
At present, Miranda has one project in the county under option, with IAMGOLD Corp. (IMG:TSX; IAG:NYSE) earning an interest in the Antares project, as announced in March. Since then, the company has acquired more projects in the country (including the prospective Mallama, on which Miranda is conducting some exploration work itself). It is seeking to find partners from some of these projects, and such agreements have been slow to develop; one possibility would be on property Miranda owns adjacent to Continental Gold Inc.'s (CNL:TSX; CGOOF:OTCQX) advanced Gramalote project; Newmont Mining Corp. (NEM:NYSE) recently acquired 20% of Continental, and would be a logical partner in the adjacent land. (This is speculation on my part.)
Separately, Miranda has sold its interest in the Gold Torrent project in Alaska. Its interest dropped from 30% to 14% when Miranda declined a cash call; now, the remaining interest has been sold to partner Gold Torrent Inc. (GTOR:OTCQB) for $1 million over two years. This is a good deal, not because of the sale price, but because Miranda now has no further financial obligation—costs, over which Miranda has no control, have more than doubled from original estimates—while retaining royalties. The mine could start production in early 2019.
Equity raise ahead?
Revenue from this mine, however, will not be soon enough to prevent the company having to go back to market to raise more equity (unless a near-term innovative deal—or a sale of one of the royalties—can be consummated). Currently, Miranda has less than $1 million in cash, good for about six months, not long enough for Gold Torrent revenue to start. With the stock at $0.055, it will not be easy to raise money on other than dilutive terms. For this reason, we are holding, but not yet buying, Miranda.
Altius fires on (nearly) all cylinders
Altius Minerals Corp. (ALS:TSX.V, 14.64) continues to shine. Its latest quarterly financial report, released in the last few days, shows revenue of $18 million, up from $15.3 million in the last quarter and $10 million a year ago. EBITDA and earnings were up comparatively. The increase is due both to increased production volumes and improved prices across the portfolio.
The balance sheet remains strong, with $29 million in cash and $103 million in publicly traded securities (including a holding in high-yielding Labrador Iron Ore Royalty Corp. [LIF.UN:TSX]), plus about $67 million available credit. Altius recently drew down the final $50 million on the arrangement with Fairfax Financial Holdings Ltd., and CEO Brian Dalton said the company still sees good opportunities, and expects to spend that money on new deals.
Because of its strong liquidity position, the company has increased its dividend, and plans to move more aggressively to pay down its debt. In fact, Dalton said the goal is to "obliterate" the debt.
Diversified portfolio with growth ahead
Currently, Altius has about 52 projects with royalties, currently being advanced by partners. It has holdings in 23 publicly traded equities that can be used to generate royalties or as a source of funds.
Inside the portfolio, the company has been increasing exposure to iron ore (including the passive investment in Labrador Royalty) as the market recovers and eastern Canada's product trades at a premium on global markets. Dalton said there was room for this exposure to grow, pointing to Altius' 3% royalty on Alderon Iron Ore Corp. (IRON:TSX), which, were it in production, would generate as much as $30 million a year to Altius. Once again, Altius has been a long-term, countercyclical investor.
Exploration land about to be monetized
In addition, it holds 1.7 million hectares of exploration land around the world, in Canada, the U.S., Chile, Ireland, Finland and Australia, which it has been accumulating in recent years on the downturn in commodity prices. It is now actively looking to harvest some of this, with traditional joint-venture earn-in deals, as well as sponsoring public companies. In my mind, this is a relatively overlooked part of Altius' value.
Following the launch of the zinc company Adventus, Altius has announced a new copper company (Watusi). It is contributing its Chilean projects; there is a schedule for work commitments for Watusi to acquire the properties, while Altius will hold shares in the new company and royalties on the properties. Watusi will resume trading following a definitive agreement.
As usual, we are reluctant to chase a stock, up from $11.50 a month ago and $10 in June. Altius has traditionally been a reasonably volatile stock, offering opportunities to buy on dips. However, if money is burning a hole in your pocket, we would far rather pay up for such quality than put money into most of the stuff trading on Toronto and elsewhere at "depressed" prices.
Best Buys
Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE; 10.83); Vista Gold Corp. (VGZ:NYSE.MKT / VGZ:TSX; 0.645); Midland Exploration Inc. (MD:TSX.V; 0.85 x 0.88)—a dip into the 80s despite continuing good news on several projects is a buying opportunity that may not last; Franco-Nevada Corp. (FNV:TSX; FNV:NYSE; 75.99)—good buy if you do not own; and Ares Capital Corp. (ARCC:NASDAQ; 15.80, 9.6% yield)—down on follow-through from selling after its dividend payment (silly, but it happens).
New Tax Bill
No doubt, the tax bill moving through Congress is on balance better than the current tax regime. But not by much. The promised barnstormer tax cuts and a simpler system have evaporated in the face of special interests and vote bribery. Lower taxes? Those earning between $158,000 and $424,000—a large part of the tax-paying public—will see their tax rates increase from between 28% and 33% to 35%, and this is before taking into account lower deductions available to earners in those ranges. As for the simpler "postcard filing" promised, that's just a fraud. Reducing (not eliminating) various deductions and scaling them by gross income does not make tax preparation simpler; on the contrary, it makes it more complex and continues to promote wasteful tax reduction planning. Similarly, tinkering with the Alternative Minimum Tax (ATM) makes nothing simpler. If my accountant still has to calculate my tax twice—one the regular way and again using the ATM—it doesn't really matter if fewer people wind up using ATM. The way to make tax preparation simpler is to eliminate various deductions, eliminate the ATM, and slash rates sufficiently so that trying to minimize taxes is no longer a prime concern. Me? I think when a government takes over a third of one's earnings (and that's before Social Security and other taxes, and before state income taxes) it is more like theft than a tithe.
Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."
Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Altius Minerals, Osisko Gold Royalties, Franco-Nevada, Ares Capital. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Altius Minerals, Miranda Gold, Osisko Gold Royalties, Franco-Nevada, Ares Capital, Vista Gold and Midland Exploration. I determined which companies would be included in this article based on my research and understanding of the sector.
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