New Indigenous-owned mining royalty company a first in Canada #CanadaFinance
CashNews.co
In June of this year, a new company called Nations Royalty Corp. began trading on the TSX Venture Exchange.
With minimum fanfare, the new company quietly hit a milestone on the road to Indigenous economic reconciliation in this country, becoming the only mining royalty company in the world that is majority-owned by Indigenous people.
Backed by billionaire Canadian mining financier Frank Giustra, Nations Royalty aims to lure investors with the promise of exposure to Indigenous-owned royalties, which company executives say is the last untapped pool in Canada.
But for the Nisga’a Nation — the self-governing B.C.-based First Nation that owns 77 per cent of the company — Nations Royalty is also a key part of the path to economic independence.
“One of the goals of our Nation is financial independence,” said Charles Morven, secretary-treasurer for the Nisga’a Nation.
“We still haven’t broken away from the Indian Act, like we would like to … We want to be accountable to ourselves. (Nations Royalty) will allow us to manage our own wealth, instead of relying on government funding.”
The concept of Nations Royalty is simple. Virtually all mining projects in Canada are located on Indigenous territory. For reasons that include legal requirements as well as corporate social responsibility, mining companies seeking licence to operate in a region typically sign “benefit agreements” with affected First Nations.
In most cases, these benefit agreements include royalties — a regular payment that the mining company commits to making to the First Nation based on the mine’s production or net profit.
By pooling multiple royalties into a single publicly-traded, dividend-paying company, Nations Royalty aims to give investors diversified exposure to the Canadian mining space and create a revenue stream for its Indigenous owners and shareholders.
“We do have a vision to build a top-five royalty company, and the path is there — because the number and scale of Indigenous royalties across Canada are very impressive,” said Nations Royalty CEO Rob McLeod.
Nations Royalty holds Nisga’a-owned royalties from five different mining projects within B.C.s “Golden Triangle” in its current portfolio. But McLeod said there are more than 400 individual benefit agreements between mining companies and First Nations across Canada.
He said the Nisga’a are currently seeking other First Nations royalty-holders to join them and become shareholders in the new venture.
Typically, mining royalty companies appeal to investors because they are less risky than investing in a single mining project.
And for the royalty-holders themselves — in this case, Indigenous royalty holders — royalty companies are a way to monetize royalty agreements that have been signed but aren’t generating any revenue yet, such as in cases where the mine has not yet entered production.
“Particularly for the Indigenous groups that might just have one mine on their lands … there’s a reason to be in the collective,” McLeod said.
Ken Coates, director of the Indigenous program at the Macdonald-Laurier Institute and a professor emeritus with the University of Saskatchewan, called the concept of Nations Royalty “interesting and original.”
He said he particularly admires the Nisga’a’s aim to reach out to other Indigenous groups in Canada to pool their resources and increase their economic heft through economies of scale.
“It’s a really good example of Indigenous collective enterprise,” he said.
In its final report released in 2015, Canada’s Truth and Reconciliation Commission defined the concept of “economic reconciliation,” saying Indigenous people, businesses, and communities must have the opportunity to fully participate in the Canadian economy.
Coates said as a country, we are not there yet — but as an Indigenous-owned investment vehicle trading on the TSX Venture Exchange, Nations Royalty shows how far we’ve come.
“In the 1970s and ’80s, if an Indigenous community bought a gas station in a small town, that was considered to be a major, major achievement,” Coates said.
“So it’s an amazing transition that we’ve gotten to this point.”
Nearly all members of the Nations Royalty’s board of directors and executive team are Indigenous.
McLeod, the CEO, is not, but said he will be an interim leader until one with a First Nations background can be found.
Morven, of the Nisga’a Nation, said in addition to building wealth, the Nisga’a want to use Nations Royalty to build up their financial capacity to access capital markets in the future. Shareholders will be able to use their blocks of stock as a securitized asset to access loans and invest in other projects, something Indigenous communities have struggled historically to do.
“We’ve seen that there is racism within the capital markets. One of the biggest royalty companies in the world, when we went to them to see if they would like to invest, they said we were a risk,” Morven said.
“So this is going to build the Nisga’a’s capacity to develop people with experience in the capital markets. We will not only build that financial capital, but we’ll also be building the capacity to be able to manage it ourselves in future.”
This report by The Canadian Press was first published Nov. 17, 2024.
