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What To Do with a Crown Jewel?
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Adrian Day Global Analyst Adrian Day reviews year-end financials from the last of his companies to report, as well as looks at other news. Since both of these companies both core holdings for him had previously pre-announced certain metrics, financial results came in as expected.

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE)) reported fourth-quarter and full-year financials mostly as expected, having already released operating results. Cash flow for the year was over $750 million. The company made eight acquisitions, totaling over $1 billion in commitments, in 2023. After making a scheduled payment of $370 million for Salobo III in the fourth quarter, it closed the year with cash of $547 million, no debt, and $2 billion available on its credit facility.

Wheaton also, unusually for it, made several small royalty acquisitions, though these typically include rights over any future streams undertaken by the companies. Its acquisitions were royalties and streams on geographically diverse projects, including South Africa, Northern Ireland, and Australia.

Largest Asset Will See Low Production This Year

Salobo III is on track towards full production by the end of the year. As previously reported, however, Salobo operator Vale is expecting grades to decline in the coming period, leading Wheaton to lower its production guidance for this year. The company did, however, add that they expect grades to come back up as the mine enters Phases 5 and 6, four or five years out.

Salobo is Wheaton's largest asset by far, representing over 40% of the company's net asset value once Salobo III is at full capacity (and assuming no other new streams). The company changed its dividend policy to a pressive dividend rather than the former policy based on free cash flow. Under the former policy, the last dividend was 15 cents and had been flat for a couple of years. The new dividend is 15.5 cents, and CEO Randy Smallwood said the company was committed to an increase each year.

Wheaton Is a Core Holding

With a rock-solid balance sheet and innovative management focused on high-quality assets, Wheaton is a core holding.

However, since the stock has run up from $39 over the past three weeks and guidance for the coming year is soft, we'll hold now and wait for a pullback.

Altius Has Many Irons in the Fire for Long-Term Growth

Altius Minerals Corp. (ALS:TSX.V)  reported financials as expected after pre-releasing royalty revenue. It was no surprise that royalty revenue for the fourth quarter and the year was lower than for 2022 — we have discussed this previously — but fourth-quarter revenue was higher than expected. And royalty revenue is expected to increase modestly this year on the back of increased revenue from the royalty company as well as the Chapada copper mine, offsetting the loss of thermal coal revenues.

Altius has several potential sources of income in the coming years in addition to its ongoing royalty revenue. Champion is seeking a partner for its Kami iron-ore deposit on which Altius holds a royalty, while a decision on its takings lawsuit against the Province of Alberta over its coal royalty is pending.

What To Do with a Crown Jewel?

Altius also holds a 1.5% royalty over the Silicon and Merlin deposits in AngloGold's Beatty Mining District project in southern Nevada; an arbitration hearing is scheduled for next month to determine if its royalty extends to the whole of the project. CEO Brian Dalton said the company had not yet reached a decision on whether to keep or swap the royalty and would do so sometime this year.

The company has been exploring swapping it for non-precious metals royalties to realize a higher value from a gold royalty company than it would realize within its own portfolio, although "realistically," Dalton said, a swap would have to include some cash. There do not appear to be sufficient large, high-quality assets within major gold royalty companies that could be swapped.

The alternative is to keep the gold royalty, and Dalton said, "Honestly, we don't know which way it's going to go." He did, however, in response to a question (from me), suggest that spinning off the asset into Altius Gold Royalties was now unlikely. The company has $131 million cash (but $118 million of that is held by Altius Renewable, which it consolidates).

After paying down some debt and repurchasing 239,100 shares during the quarter, it ended with $112 million in debt. Though the level of debt relative to its "own" cash is high, it generates strong cash flow and has a number of equity holdings on its balance sheet, including Altius Renewable ($149 million), in Labrador Iron Ore Royalty ($119 million), in Lithium Royalty ($41 million), and another $45 million in its project generation equity portfolio. It also has $94 million available on its credit facility.

Altius is a long-time core holding for us, with broad exposure to most resources (other than oil a gas), long-life assets, strong optionality in the portfolio, and one of the most innovative and disciplined management teams out there. We have included Altius as a "Top Buy" for most weeks since October.

Given the run-up in the stock from just over $16 a month ago, we will hold for now.

A New Discovery and New Earn-in for Fortuna

Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) had no sooner held its earnings call than it announced the discovery of a new prospect, called Kingfisher, at its Séguéla mine, the fourth in a series of new discoveries there over the past two years. Drilling will resume in the second quarter.

Fortuna had indicated on its call that Séguéla was a focus for its global exploration spending this year. Separately, it has optioned a gold project in Sonora, Mexico, from Riverside. To earn in to the Cecilia project, Fortuna has work commitments of $500,000 per year for the next four years, with a final spend of $1.75 million, plus some payments to Riverside.

The re-rating of Fortuna's stock, which we discussed following their results (see Bulletin #902), has begun, with the stock up over 30% this month. We would wait for a pullback to add to positions, though for investors who do not own, it can be bought.

New Feasibility for Vista While Market Waits for Bid

Vista Gold Corp. (VGZ:NYSE.MKT; VGZ:TSX) announced an updated feasibility study for its Mt. Todd Project in Australia. The study updates project economics since the earlier study two years ago that launched an M&A process. In the updated study, the after-tax Net Present Value (at a 5% discount) has increased to $1.13 million at a $1,800 gold price, while both capex and costs have also increased to $1.03 bullion and $913, respectively.

There are no surprises in the study, with CEO Fred Earnest commenting that "project economics are approximately the same…(as) reported two years ago." Earnest said that the company continues to focus on "achieving a transaction to maximize shareholder value."

While the new study is a reminder of the value of Mt. Todd, one analyst commented that "what Vista Gold needs is a large-cap partner or outright takeover bid; it does not need another economic study." I am reminded of Hamlet: "If it be now, 'tis not to come." Or maybe "the readiness is all." The sale of a royalty to Wheaton gave Vista much-needed breathing room to continue the process without another equity raise. It is using the royalty proceeds to complete the updated feasibility, to continue the evaluation of a smaller-scale development strategy, and to continue exploration drilling between two deposits. The sharp move in the stock price since the end of February — up 62% — demonstrates the stock's leverage to higher gold prices.


TOP BUYS this week, in addition to any above, include Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), Barrick Gold Corp. (ABX:TSX; GOLD:NYSE), and Barrick Gold Corp. (ABX:TSX; GOLD:NYSE). We are holding off adding too many gold stocks this week, like last, given the strong moves.

UPCOMING EVENTS As I head off to Zurich later this afternoon for the SMI conference, I'd like to remind you about the next On the Move webinar on Wednesday 27th, at 7 pm (Eastern). Co-hosted by Rich Checkan of ASI and yours truly, our special guest will be Lobo Tiggre, editor of The Independent Speculator. Among other topics, we plan to discuss junior mining stocks, silver, and uranium. The webinar is complimentary, but you must register, which you can do here.

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Important Disclosures:

  1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Altius Minerals Corp., Fortuna Silver Mines Inc., Franco-Nevada Corp., Barrick Gold Corp., Wheaton Precious Metals Corp, and Midland Exploration Inc.
  2. 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.
  3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found  below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy. 
  4.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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Adrian Day Disclosures

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

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