In short: Shareholder, disclosed up front, and bought for two reasons he keeps separate. The commercial one: "I believe that they have a durable competitive advantage in the royalty space, which is to say greed" — an indigenous-run, indigenous-owned royalty company "won't have to participate in auctions. They can go out to communities that they have familiarity with and empathy with as opposed to sympathy with and create new royalties." The other: "there's a social mission at Nations Royalty that I'm very much attracted to." The structure — the Nisga'a Nation of northern BC vended its royalties and impact-benefit agreements into a public company — and the assets include KSM, Brucejack ("which by the way has caused Nations Royalty now to go not just cash flow positive but on a quarterly basis profitable") and Kitsault. Growth path: consolidate the Tahltan royalties, then "acquisition agreements with First Nations groups in the Abitibi, both in Ontario and Quebec." The slow variable is capacity, not willingness — "traditionally there hasn't been sufficient capacity among indigenous people to value and commercially transact on their royalties," and part of the mission is to build it. "Nobody else is doing the missionary work that Nations Royalty is doing today. I'm extremely proud of this team." He benchmarks it against "the other third tier royalty companies," not Wheaton.
Nations Royalty is a First Nations-led royalty company. It started when the Nisga'a Nation of northern British Columbia took the royalties and impact-benefit agreements it had negotiated over mines on its territory and put them into a publicly traded company, keeping control. Rule is a shareholder and says so before saying anything else.
His investment reason is a competitive one, and he names it bluntly — "greed." Royalty companies normally acquire royalties in auctions, where competing bidders drive the price up and the returns down. Nations Royalty can approach First Nations communities directly, as a company they own and run, and create new royalties without ever entering an auction. That is what he means by a "durable competitive advantage": not being better at bidding, but not having to bid.
The existing portfolio already works — royalties over the KSM, Brucejack and Kitsault properties, with Brucejack having pushed the company past cash-flow-positive to quarterly profitability. Growth means consolidating royalties held by the neighbouring Tahltan Nation and then reaching the Abitibi belt in Ontario and Quebec. The bottleneck is not appetite but expertise: valuing a royalty and negotiating its sale requires financial and technical staff most communities have not had, so part of the company's work is helping build that capacity first. Deals therefore take a long time — which is also why nobody else is competing for them. He is careful to size it correctly: compare it with other small, third-tier royalty companies, not with the giants.
32:09What are the chances of additional indigenous nations getting behind it? I think we should probably take a step back first and just explain Nations Royalty because it's very interesting. First Nations and Indigenous-led royalty company. — I need to disclose first I'm a shareholder of Nations Royalty. I did it both because I believe that they have a durable competitive advantage in the royalty space which is to say greed.
In short: His example of the one thing that excuses a high transaction velocity — a genuine structural advantage: "Nations Royalty as an example has a structural advantage. They're an Aboriginal controlled royalty company that is trying to make deals with Aboriginal communities in Canada. It makes sense that they would have a wall around their business. They would be able to out compete other royalty companies as a consequence of cultural familiarity and frankly ethnicity."
Nations Royalty exists to consolidate the royalty and benefit interests that Canadian Aboriginal communities hold over mines on their traditional territories. Rick uses it as his clean example of a structural advantage — the only thing that would make him comfortable with a royalty company doing more deals than its rivals.
His usual red flag is a company winning most of the auctions, because whoever wins most auctions is usually paying the most. But an Aboriginal-controlled company negotiating with Aboriginal communities isn't in that auction at all: "it makes sense that they would have a wall around their business. They would be able to out compete other royalty companies as a consequence of cultural familiarity and frankly ethnicity."
The general lesson travels well beyond mining: before you penalise a company for buying aggressively, ask whether it is competing for the same deals as everyone else. If it isn't, speed is an advantage rather than a warning.
44:16They would be able to out compete other royalty companies as a consequence of cultural familiarity and frankly ethnicity. That would be one example. A different example might be Alexandra Woodyer and her company Empress Royalty where they in effect become the royalty arm of Endeavour Financial and at least ostensibly could involve themselves in Endeavour's deal flow.
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