A company called Nations Royalty is currently visiting northern Ontario in the hopes of partnering with royalty-holding First Nations in the region.
The Indigenous company started trading on the TSX Venture Exchange last year, after buying Nisga’a Nation’s different mining royalties in several British Columbia projects.
First Nations typically have benefits agreements in place with mining companies that operate in their territories, and these often include mining royalties – a regular payment that the mining company commits to making to the First Nation, based on the mine’s production or net profit.
Nations Royalty wants to pool together the royalties of different First Nations across the country as a way to attract investors, lower risks and create revenue streams for its Indigenous owners and shareholders.
Company needs more partners to grow
Like other royalty business models, though, the company will only be able to grow if more First Nations exchange their royalties for a stake in the company.
Nation Royalty’s Vice-President of Corporate Development, Kody Penner, is in Timmins to pitch the idea to communities there.
“The more that we’re able to bring into Nations Royalty, the less risky it becomes,” he said.
“That’s what other mining royalties have done, we want to follow the exact same business model but in the Indigenous space.”
He says the company has been touring Canada over the past few months to find partners.
“It takes time to build trust with different groups,” said Penner.
“Chiefs and councils have a million things to think about… then we come to the reserve talking about this mining royalty model, it takes time to communicate the value of it.”
A “mutual fund” type of model that helps diversify finances
Converting mining royalties for stocks in a company could be a big ask for some communities who rely on the mining revenues to run government functions.
Penner says, however, the reliance on mining revenues is precisely why a mining royalty model might be advantageous because it’s a diversification tool.
“The whole point of the model is to own many,” he explained.
To illustrate that, Penner describes what could happen to the royalties of a First Nation if there was to be a mining disaster and production stopped.
“Their payments would go to zero. So now they are sitting on an environmental disaster and the payments aren’t coming in. We are offering to diversify all those future payments.”
Nations Royalty’s stock is currently trading at 50 cents, down from the 92 cents it sold for back in June when it became a publicly traded company.
The company says the slight price slump can be explained by some of the uncertainty that comes with being the first company to try pooling First Nation royalties together under one roof.
“The market is wondering: What’s going to happen next? Who are they going to partner with? Can Indigenous people run a company and do this? There’s a lot of question marks.”
Penner hopes that having a new partner to buy into the company will lead to a reevaluation of the stock.
In the meantime, he says the company isn’t at a place where it can give dividends to its shareholders.
