Orogen Transaction Closes, as Big Success
Contributed Opinion

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Orogen Royalties Inc., Or Royalties Inc., Barrick Mng Corp., Fortuna Mining Corp., Altius Minerals Corp., Franco-Nevada Corp., Midland Exploration Inc., Lara Exploration Ltd., and Fox Riv Res Corp. 
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Orogen Royalties Inc. (OGN:TSXV; OGNRF:OTCQX) said the transaction with Triple Flag closed on Wednesday, with shareholders receiving cash, Triple Flag shares, and shares in the spinoff, also called Orogen Royalties.

The Toronto symbol remains the same, though there will be a new OTC symbol. For each share of "old" Orogen held, you will receive:

• 0.02901 shares of Triple Flag (TFPM. Toronto)
• CA$0.74687 cash
• 0.25 of a "new" Orogen (spin off shares).

The shares and cash should be received in accounts in the next couple of days, depending on your brokerage.

Orogen Was a Big Win

We have two tranches of Orogen on our recommended table. Assuming everything was sold, our returns are thus:

• Purchased 8/12/18 at CA$1.06, gain 100.11% or 99.54% in U.S. dollar terms.
• Purchased 1/27/20 at CA$0.32, gain 544.09% or 541.01% in U.S. dollar terms.

However, since we will keep both the Triple Flag shares and the Orogen spin-off, we will allocate our cost basis proportionately. We will allocate most of the cash (0.68) to Orogen, but not all (to avoid a negative cost basis).

Orogen Spin Out Has Cash Flow and Potential

The "new" Orogen has a strong balance sheet with CA$17 million in cash and no debt, and cash flow from its Ermitano royalty ($2.1 million in Q1). It has generative alliances with BHP, Altius, and Triple Flag, as well as seven active option agreements and 28 royalties. It expects over $40 million of partner-funded exploration work, including nine drill programs, this year, plus another $3 million in project generation.

We like the "new" Orogen and will definitely want to add to our position. However, for various technical reasons (including that the shares have not yet been received in accounts, so any selling was in effect shorting), I do not think July 11 trading was an accurate reflection of the market. Let's wait to see how it trades in the coming days.

For now, if it trades below $1.25, it can be bought by anyone to anxious to wait.

Royal Gold Acquires Sandstorm for Growth and Diversification

Royal Gold Inc. (RGLD:NASDAQ) agreed to acquire Sandstorm Royalties in an allshare deal at a 17% premium. Royal is also buying the Sandstorm spin-off, Horizon Copper. The most important of Sandstorm's assets are royalties or streams on Equinox's Greenstone, Ivanhoe's Platreef — two assets ramping up — as well as the non-producing Hot Maden in Turkey. Royal struck at the right time! Royal shareholders would own about 77% of the combined entity.

The deal is marginally accretive on an NAV-basis, though dilutive on other metrics. However, it does diversify Royal's royalty base; increase near-term cash flow; and improve the balance sheet. The combined company will have 80 cash-flowing assets, with gold representing about 75% of total revenues, as well as 300 non-cash flowing. Most importantly, the concentration of major assets will ease, with Mt Milligan declining from over 20% of NAV to 16%, and other assets dropping to less than 10% of the combined company NAV.

Soft Earnings Report, and Opportunity To Buy

Separately, the company reported its second-quarter stream results, which represent about 70% of total production. Streaming sales were weaker than expected, while end-of-quarter inventories declined as well. Performance was weak in many of Royal's major streaming assets. Full financial results will come in early August.

Not unexpectedly, the initial market reaction was negative, with the share price down 11%. For those who do not own Royal, this gives us another opportunity to buy. One could buy Sandstorm (SAND.NY, 9.86) at a slight discount to the implied merger price ($9.99), but the discount is not worth the risk of the transaction failing for whatever reason. It is possible that there will be some selling by Sandstorm shareholders after the deal closes, as usual, but other factors, including possibly a higher gold price, will more than offset that.

So, while I would not chase the RGLD stock price, nor would I wait for meaningfully lower prices.

Or See Record Revenue and Stronger Balance Sheet

OR Royalties (OR:TSX; OR:NYSE) announced record quarterly revenue for the second quarter amid the rising gold price; the results were broadly in line with expectations. It continued to reduce debt during the quarter, now with net cash at quarter end of almost CA$14 million, after $40 million was paid on its credit line during the quarter and another $10 million this quarter. Earlier, it increased its credit facility and converted it to a U.S. dollar line; the $650 million line (with an accordion of $200 million) has only $25 million currently drawn.

Trading at another all-time high, OR is no longer at a large discount to peers (lower p/book and higher p/cash flow than FNV and WPM, and higher on both metrics than RGLD and TFPM); there is a meaningful takeover premium in the stock price now, I believe.

Hold.

From Bad To Worse for Barrick in Mali

Barrick Mining Corp. (ABX:TSX; B:NYSE) objected to the restart of operations at its LouloGounkoto in Mali, after nearly six months, under the court-appointed administrator. Before the dispute started nearly two years ago, the mine complex contributed about 15% of Barrick's revenue, and 8% of NAV.

The government also stole more stockpiled gold from Barrick, without notice, valued at about $117 million. International arbitration against the junta, whose leader just granted himself permanent power, is currently underway.

Barrick remains undervalued relative to other major gold miners, even after removing Loulo-Gounkoto altogether, but it comes with higher geopolitical risk.

Buy.

Fortuna Sees a Strong Quarter

Fortuna Mining Corp. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) announced it had produced just over 71,000 ounces of gold equivalent in the second quarter, a tad above estimates, and the company reiterated its full-year guidance with a strong second half expected. In particular, production at its Séguéla mine were strong.

Hold.

Altius Report Gains in Portfolio While Waiting for Transaction

Altius Minerals Corp. (ALS:TSX) reported an increase in value for its project-generation portfolio, at $87.3 million, up from $72.4 million, even after "modest" sales of nearly $300,000.

The gain in value was driven largely by Altius'16% holding in Orogen Royalties.

The market is awaiting news on the disposition of Altius' 1.5% royalty on the Arthur Deposit (formerly Expanded Silicon), with speculation that the entire company could be acquired.

Continue to accumulate.

TOP BUYS this week, in addition to above, include Nestle SA (NESN:VX; NSRGY:OTC), Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), Midland Exploration Inc. (MD:TSX.V), Lara Exploration Ltd. (LRA:TSX.V), and Fox River Resources Corp. (FOX:CSE).