Nations Royalty is a Canadian-listed royalty company with two value drivers, neither of which the market is pricing in. The first is a royalty on KSM, one of the largest undeveloped gold and copper deposits in the world. A new joint venture partner, which management expects could be announced this year, would in our view act as a material re-rating catalyst for this royalty alone. The second is a strategy with no precedent in the sector: the consolidation of indigenous royalty payments across Canada into a single vehicle. The total addressable market for such payments in Canada, excluding oil and gas, is approximately USD300m per year.
The stock has no sell-side coverage. One of the co-founders of Wheaton Precious Metals remains a key shareholder and has stated publicly that Nations Royalty could prove as consequential as founding Wheaton. The market, in our view, has yet to price either driver.
In our base case at $4,300/oz gold, assuming a new KSM partnership is announced this year, we estimate 167% upside to the current share price. At 25% market share of Canadian indigenous royalties and $9,000/oz gold, the upside in our model is…
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