Nickel’s main application is in the production of stainless steel. As a result, the majority of nickel is consumed by construction and industry, but also in everyday home cookware, etc., explains Peter Krauth, editor of Gold Resource Investor — and a participant in the MoneyShow July 13-15 Virtual Expo. Register here for free.
Exiting the COVID-19 pandemic, combined with huge, coordinated stimulus spending on infrastructure and a shift towards the Green Economy suggests robust and sustained demand for nickel.
Even if the next several months prove to be soft for nickel, I expect that to be a temporary breather. Looking out towards later this year and beyond, nickel seems poised to keep climbing, pushing nickel investments steadily north.
Nova Royalty (OTC: NOVRF) (Toronto: NOVR) is somewhat of a rarity in the metals and mining space. It’s a royalty company, but it’s focused on base metals.
The vast majority of especially larger royalty companies are heavily precious metals weighted. At a market cap of $260 million, it’s certainly small relative to many of its peers. But I love the royalty business model for the tremendous upside potential it offers, while dramatically limiting downside risk.
I also like Nova in particular because they are unique in focusing on base metals, and they’ve already secured royalties on some world class assets in both the copper and nickel space, focusing on the most basic building blocks of clean energy.
NOVR was founded in 2018, and was taken public in 2020. Already, the company holds 5 royalties on top development assets in copper and nickel operated by leading mining companies, including Teck Resources (TECK), Newmont Corp. (NEM), First Quantum (Toronto: FM) and Rio Tinto (RIO).
Management is constantly searching for and reviewing new potential royalties to acquire and add to its stable. This acts to further de-risk the portfolio, while adding the potential for producing and near-production opportunities for near-term cash flow and commodity price exposure, as well as additional long-term upside from exploration assets.
The capital structure is very tight, with just 75 million shares outstanding, and 80 million fully diluted. Cash is currently near $3 million, with additional available liquidity of $20 million capital facility from Beedie Capital. Major shareholders include Beedie, Adrian Day Asset Management, and Stephens Investment Management.
What makes Nova different are focus and size. The focus is on copper and nickel, which should see strong bull markets keep pushing prices higher. The size is with respect to its cornerstone assets, all of which boast considerable scale.
The opportunity comes from the company’s stage. At a $250M market cap, Nova is still on the smaller side. But existing assets, combined with their upside potential, plus growth from new acquisitions means Nova offers big leverage to copper and nickel. I think Nova could well rise 50% from current levels over the next 12 months.
