I touched on Aztec Minerals chairman Brad Cooke's stock purchases in my first Patreon article. Mr. Cooke, 67, passed away recently, suddenly. I did not know Brad; reading all the tributes, I wish I had. The Endeavour Silver founder was a mentor to up-and-coming leaders in the industry. RIP Bradford Cooke.

By James Kwantes
Published first at Patreon.com/jameskwantes

Part 1 of 2

Resource investors risk getting boxed in even when they know what boxes to tick. And you know them:

  • High-quality asset (long-life, high-grade/low-cost);
  • Incentivized management with relevant track records of creating shareholder value;
  • Tight share structure, skin in the game;
  • Good relationships with local communities/stakeholders.

During periods of fund flows out of the sector, these attributes are neither rocket fuel for your junior mining portfolio nor a moat around your investment capital. There are exceptions, of course, and identifying them is the objective of my investment newsletter. But fighting tides for long enough can also destroy a portfolio.

Fresh thinking is important – in business, in relationships, for life, for investing. It’s one of the reasons I started this Patreon account: to shake things up with different types of value-added content.

Fresh thinking is equally critical in the resource investing game. One approach is to follow the (non-mining) money: invest alongside high-quality groups that don’t typically put money into the junior mining sector. Another is to invest early in companies with visionary leaders whose novel approaches and/or backgrounds position their companies strategically, in ways that meaningfully differentiate them from competitors.

Investors can go broke “fighting the tape.” And many mining executives fail to advance projects because they are inadvertently “fighting the future.” The present is much more comfortable. The most successful mining entrepreneurs move out of that comfort zone and embrace the future, the world that is taking shape.

Let’s look at three success stories in a sector where failure is the baseline.

Case study #1: Dan Myerson and Foran Mining (FOM-V)

Dan Myerson took over as executive chairman of VMS play Foran Mining on November 9, 2020 with the stock at a quarter. Foran plans to produce copper, zinc, gold and silver from several deposits, with a central mill, at its McIlvenna Bay project in Saskatchewan. Pierre Lassonde’s large stake was a selling point for Myerson.

A few things set the Foran executive chairman apart from your typical junior mining exec. Myerson is young – he only graduated in 2009 from Queensland University of Technology (MBA). And the bulk of his career has been with Glencore, the Swiss-based commodity trading giant. Myerson aligned himself with shareholders out of the gate. He takes no salary but was granted 6 million five-year stock options at 20 cents.

The goal of building Canada’s pioneer “carbon-neutral” mine first appeared in company disclosures on January 11, 2021 as part of a shares-only financing announcement. Foran’s plans include hydroelectric power, an electric fleet and the use of hempcrete rather than concrete.

“Carbon” and “green mining plays” have since become buzzwords – both in terms of the metals explored for and the methods used. It wasn’t the case back in January 2021.

Myerson’s time with Glencore – most recently as head of Canadian zinc operations – gave him a unique vantage point on the world’s best deposits and on the value of clean concentrate. Evidently, it also gave Myerson a sense of where the world is going. That’s away from fossil fuels, despite the energy dominoes set in motion by Russia’s invasion of Ukraine.

Two infusions of “non-mining money” have dramatically increased Foran’s odds of success:

  • May 25, 2021: A $100-million strategic equity investment by $17-billion insurance/holding company Fairfax Financial. Fairfax CEO Prem Watsa is an investment legend known as “Canada’s Warren Buffett.”
  • Aug. 8, 2022: A $200-million investment by the Ontario Teachers’ Pension Plan Board (term sheet). The OTPP is one of the world’s largest pension funds, with about $240 billion in assets.

Less than two years after Myerson took the helm, Foran shares have ten-bagged and held their value in a choppy market. Those options look like a forward-thinking move, too.

Case study #2: Michael O’Keeffe and Champion Iron (CIA-T)

Michael O’Keefe, executive chairman of Champion Iron, has to be one of Canada’s most highly accomplished and least well-known mining execs. It’s partly because he’s Australian, and it was the sale of an Australian junior that constituted his greatest score.

O’Keeffe’s Riversdale Mining started life as a $7-million junior company before securing untapped coking coal assets in Mozambique in 2003. The finish line was a staggering $4-billion takeover by Rio Tinto in 2011, at the top of the market.

A metallurgist, O’Keeffe started his career at Mount Isa Mines in Australia, one of the world’s largest mining complexes (copper and zinc, primarily). Metallurgy is key at Mount Isa, which produces metals from two separate mining processes. O’Keeffe spent 20 years at Mount Isa Mines, during which the company pioneered several proprietary mining technologies.

In 1995 O’Keeffe went to Glencore, where he was a managing director responsible for the company’s Australian acquisitions. As with Myerson, O’Keeffe’s Glencore years gave him a high-level view of global assets and the refining/concentrate business. (Glencore acquired the Mount Isa mine complex when it merged with Xstrata in 2013.)

After the Riversdale exit, O’Keeffe was appointed executive chairman of Toronto-listed Champion Iron Mines in early 2014 (later becoming CEO). The flagship iron ore project was Consolidated Fire Lake North in Quebec’s Labrador Trough.

O'Keeffe’s masterstroke was a fire-sale purchase. In late 2015 he plucked the nearby Bloom Lake iron ore mine and rail assets out of bankruptcy, after prior owner Cliffs went belly-up. Champion paid $10.5 million cash and assumed about $43 million in liabilities. Bloom Lake produces an extremely clean concentrate that fetches a premium on world markets. Champion recently commissioned a Phase 2 expansion project and reported record production (2.3M wet metric tonnes) for the quarter ending June 30.

O’Keeffe did it again earlier this year with Kami, a high-grade iron ore project just south of Bloom Lake. After owner Alderon Iron Ore defaulted on debt payments, Champion purchased Kami out of bankruptcy for $15 million cash and the purchase of $19.4 million in secured debt. The Kami purchase upsized Champion’s port capacity; an updated feasibility study is planned.

Champion’s share price reflects what O’Keeffe has accomplished. The stock was at 20 cents when he took over; it now trades at about $4.50 a share (after hitting highs above $7).

Case study #3: Brian Dalton and Altius Minerals (ALS-T)

Dalton started Altius Minerals, market cap sub-$1M, in 1997. The timing was fortuitous. 1997 was the year Michael de Guzman plunged from a helicopter, flattening both Bre-X and the near-term prospects of the junior exploration sector. Luckily, Dalton is a contrarian.

As investors and capital fled the space, the Altius CEO snapped up promising claims and did deals. Those long-term contrarian bets are paying literal and figurative dividends. Twenty-five years later, Altius is a $900-million company with a top-shelf royalty portfolio covering potash, copper, nickel and iron ore.

A long-term approach was key. In 2003, Altius bought 10% of the Voisey’s Bay 3% royalty interest for $13.6 million. By 2010 the company had collected $15M plus; in 2021 that royalty generated $2.3M.

Also in 2003, Altius and JV partner Fronteer Development Group discovered uranium at the Michelin project in Labrador. In 2006 that became a pubco called Aurora Energy Resources and Altius monetized its large position along the way, using proceeds to purchase royalties. (Aurora was bought by Paladin Energy for $261 million in 2011.)

Altius got caught in the climate change wars in 2015. The government accelerated a shutdown of coal-fired electricity generation, affecting Alberta power stations that were fed by thermal coal for which Altius had long-life royalties. Potential compensation is still before the courts.

Dalton pivoted to renewables, launching Altius Renewable Royalties in 2021 to capture royalties on long-life wind and solar assets in exchange for upfront capital. Altius Renewable’s first-mover status in the space was cemented by a 50-50 JV partnership with Apollo Global, the giant private equity fund. Altius Minerals owns 59% of Altius Renewable Royalties.

Non-mining money: Dalton landed a $100-million investment from Fairfax Financial way back in 2017. There’s also a Champion angle: Altius owns a 3% gross sales royalty on the Kami project and will also receive production payments once Kami is operational.

Disclosure: James Kwantes owns shares of Altius Minerals and Altius Renewable Royalties. He has no business relationship with any company mentioned in this article. His writing is supported by subscribers and patrons.