VIDEO: Five Easy Questions Ep 4 – Nomad Royalty (NSR.T) CIO and director, Joseph de la Plante, explains the blue sky of royalty streaming

Nomad Royalty Company (NSR.T) is a Canadian-based royalty and stream play with an extensive portfolio. Nomad offer ups a de-risked business model that appeals to experienced mining investors who want the joy of exploration and development with less of the capital and geological risk. The company’s approach also successfully bridges the technical knowledge gap between a generalized investor and the mining sector. The crazy thing is, not many people know what royalty and stream companies are and why they are good contenders for stable and diversified investment portfolio.

As such, Equity Guru’s own, Maddy Grace, took time to speak with Nomad founder, CIO and director, Joseph de la Plante to find out what a royalty and stream company is, what it does and how it does it. Tune in!

Transcript:

Maddy Grace

Nomad Royalty (NSR.T) is a Canadian royalty and streaming company with an international portfolio of 14 royalty stream and gold loan assets, six of which are currently producing mines. A diversified risk profile, best in class dividends and an experienced management team are just a few aspects of what drive Nomad’s attractive valuation as it grows its low-cost production profile through the acquisition of additional streams and royalties. If none of that made any sense to you. You are in the right place. Hi, I’m Maddy Grace. This is Five Easy Questions breaking down the public market for new investors. Today I’m speaking with Nomad Royalty founder, chief investment officer and director Joseph de la Plante for a lay person translation of the market, company and its leadership. Thank you so much for being here with us, Joseph.

Joseph de la Plante

Hi Maddy, thanks for having me.

Maddy Grace

I will just jump right in. What is a royalty streaming company and how is it different from a mining company?

Joseph de la Plante

So our royalty and streaming company is essentially a type of company that exists in the precious metals space, and we differ from operators in the sense that we don’t own any mines. What we own is contracts on mines, where we get to receive a percentage of the mine’s metal production, typically gold and silver, for the duration of the mine. And so what that allows us to do is have a tremendous amount of cash flow and a revenue within a very small platform At Nomad we’re actually only six employees. But we were able to generate 30 million dollars in revenues last year because of this business model that’s been tremendously powerful in generating a growing bottom line for investors, because once we make our initial investment, we have no further investment to make over the course of our contracts. And so everything that happens at the mines, the exploration and expansions, we get all the benefit of without necessarily having to invest any further.

Maddy Grace

OK, this is not my purview. So I’m just going to really dumb it down for me personally. Basically, you just don’t have to get your hands dirty in the physical mines. You just provide the funds in exchange for a future payoff.

Joseph de la Plante

That is correct. So we enter into financing agreements, we receive these metal strings, we’re actively trading gold and silver every day, but we have no hands in the operations. We don’t, you know, we don’t have a say in how they’re run. That’s left to the operators. Really we’re more of a financial company. And the nice thing too as a royalty company is we have a portfolio. So as an investor, you don’t have to go and pick and choose which exploration company you want to invest in or which producer to invest in. You can rely on us because we do all the due diligence on every single opportunity and you get to buy our portfolio and our picks and really avoid that whole job yourself. And so that’s why we’re there.

Maddy Grace

Well, brilliant, that’s how I would do it. What is the difference between owning a dividend stock and a growth stock?

Joseph de la Plante

So there’s a certain philosophy about how we run and grow our businesses. I guess the idea generally is that if you’re a company that’s growing, you want to make sure you keep all your cash to dedicate into your operations, because that’s in principle why your investors are buying your shares. The flip side of that is a dividend stock is something we can consider to be more mature, where there’s a good amount of cash flow and there’s an ability to return some of that through to the shareholders to get an extra yield. On top of the appreciation in the share price. The royalty companies are actually an interesting combination of the both, because even though we are companies that are meant to grow over time, we have such high amounts of operating margins and cash flow, we can actually do both. And we at Nomad, we’re quite dedicated to having a very high dividend yield. We actually have the highest dividend yield in the royalty space and even I’d say the mining industry as a whole, we have, we’re in the top 15 dividend payers if you look at companies that are two hundred and fifty million dollars and greater. So royalty companies kind of give you the best of both worlds. And that’s why it’s a great way to invest in gold and silver.

Maddy Grace

Nice. All right. What is a commodity supercycle and are we in one now?

Joseph de la Plante

So we think of the value of gold and silver space and the commodity space in general as something that’s cyclical and that reflects general macroeconomic trends around the growth in the economy and what that translates into in terms of supply for new materials. And I include gold and silver in there because largely, you know, the thinking around investing in gold and silver is as a reaction to what’s happening in the greater economy, where oftentimes investors look for that inflation hedge in their portfolio or that portfolio insurance. You know, we strongly think that we’re at the beginning of a new cycle for gold. The pandemic has only exacerbated a lot of the different financial crises that we see across the world and a general trend towards more debt for governments and more printing of paper money. And so, you know, all of the factors that we’ve been tracking over the last 10 years keep piling up and adding up. You know that’s the negative yielding. For us, this lays the perfect groundwork for a prolonged run in the commodity price and so Nomad, we’re entering into the royalty of space at the right time. We’ve already seen a tremendous growth in the commodity price since we listed the business. So there’s tons of value already in our portfolio, but we see lots of value out there as well as we look for new assets.

Maddy Grace

How important is jurisdiction in considering a mining stock?

Joseph de la Plante

It’s very important, and the key reason is that, you know, contrary to a lot of different businesses where you have sometimes a choice on where you build a plant or where you want to make your products, the mining business, we don’t choose where the mines are. And once we invest our capital, it’s invested and we cannot move it. So it’s important to understand what the environment is for mining in the jurisdictions where you’re invested. You know, obviously avoiding areas that have a history of expropriation of mining companies and foreign investment. And I think the thing is too to recognize is there’s no perfect jurisdiction and these investments are for the most part, and mine can run from 30 to 60 years. And so even the best jurisdictions over that time horizon will have ups and downs in terms of their policies for mining and their incentives for mining. So I think a good approach is to look at a balanced, diversified portfolio where you can have some exposure to the best mining jurisdictions, some exposure to some jurisdictions that have a history of mining, but are perhaps not considered to be tier one jurisdictions. And overall, what you’ll find is that you’ll be sheltered largely from, you know, changing dynamics in any given jurisdiction.

Maddy Grace

And last of the five questions, what are Nomad’s ESG guidelines?

Joseph de la Plante

So, ESG is obviously a very important topic when it comes to mining. You know, you’re considering the fact that a mine is a dynamic operation within, you know, its own environment, within its local communities. So what we do when we invest is we dig quite deep in terms of, you know, the practices in relation to the environment, how the mine manages water and tailings and the relationship with the community. Is it a positive relationship? Do they have the ability to work with their community and hire locally to include some of the local the local people into the operation? And overall have a very positive relationship and positive impact on things like education and the overall quality of life for the people working at the mine and for for the people around the mine? So it’s high on our list when we invest in terms of the criteria, we have pretty stringent criteria. And I think overall the mining industry is doing a good job of putting in place new practices, perhaps not new practices, but increasing practices on the ESG front. And it’s becoming a big topic for investors as well. So nice to see the mining industry react accordingly. And I can certainly say as a royalty company, as an investor in the space, we definitely want to have an impact on this front.

Maddy Grace

Oh, I love that. So good to hear. OK, I just have a really quick rapid fire round. Are you ready?

Joseph de la Plante

Yeah

Maddy Grace

Tea or coffee?

Joseph de la Plante

Coffee

Maddy Grace

Good call. What is the first thing you do in the morning?

Joseph de la Plante

Get my kids out of bed and make them a bowl of cereal for breakfast.

Maddy Grace

What is your favorite sport to watch?

Joseph de la Plante

I am Canadian, and the answer to that has to be hockey, therefore.

Maddy Grace

What is your favorite sport to play?

Joseph de la Plante

Well, that’s that’s a tie between hockey and I also am a big rock climber, I own a rock climbing business with my family. So something that I was born into and I still enjoy to this day.

Maddy Grace

OK, favorite book.

Joseph de la Plante

Well, that’s that’s a challenging one. Well, I can say that, you know, of late, some of the good reads other than the books that I read to my children. What would be a good one? Never Rest on Your Oars which is the story of how tech was built. Perhaps a recommendation for the readers interested in learning about the history of mining and some of the entrepreneurs. That’s a very good one.

Maddy Grace

Awesome. Cat or dog?

Joseph de la Plante

Dog.

Maddy Grace

Value investor or a day trader?

Joseph de la Plante

Value, by far.

Maddy Grace

Suit and tie or casual

Joseph de la Plante

Casual.

Maddy Grace

If you had a thousand dollars to invest, what company would it be? Not your own.

Joseph de la Plante

That’s hard because I’ve mostly ever made money investing in my own companies.

Maddy Grace

That’s a good thing.

Joseph de la Plante

Listen, I think there’s there’s a lot of interest in new ventures out there. Certainly have my eye on a couple. I am quite interested in the EV space and what’s happening in that side. I’ve recently invested in a company called QuantumScape, which is a new battery technology business. So following that one closely, is one of many that I follow and we’ll see what happens.

Maddy Grace

And finally, last question, special request from my coworker. Where does gold close at the end of the year?

Joseph de la Plante

That’s a great question, and it’s something that we spent a lot of time studying and trying to understand in which direction we’re heading. We saw an interesting spike last year going over 2000 dollars an ounce for gold, which was the first time in history, really. Our view is that we’re going to be testing that again this year and we should be closing. You know, I guess conservatively between 2000 and 2500 an ounce, if not more.