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Morien Resources: Burgeoning Royalty Play Or Taking Private Target?

May 13, 2015 5:20 AM ETMorien Resources Corp. (APMCF)
Dan Stringer profile picture
Dan Stringer


  • APMCF owns several resource royalty streams with one already generating cashflow.
  • APMCF has a large cash balance with several contracted milestone payments to come.
  • Aggressive share purchases by both insiders and the company make for an interesting takeover speculation.


Morien Resources Corp. (OTCPK:APMCF or MOX on the TSX Venture Exchange) is a micro-cap Canadian Royalty company. Spun out originally from Erdene Royalty Development Corp. in late 2012, Morien has monetized most of the resource assets that were on its balance sheet, culminating with the sale of its 25% interest in the Donkin Coal project to the Cline Group, who had already acquired the other 75% from Glencore.

As terms of the sale, Morien will receive $5.5 million in cash and a production royalty on sales from the Donkin Project in the form of a gross royalty of 2% on the first 500,000 tonnes of coal sales per calendar quarter and 4% on any tonnage thereafter from the Donkin Project. It has already received the first $2m installment, with another $2m in February 2017 and the final $1.5m in February 2018. Both these payments advance if Donkin goes into production earlier.

Morien estimates on page 11 of its corporate presentation (sourced from a 2011 technical report), that this should generate between $4.6 and $6.7m in royalties annually, once the Project goes into production. This is currently planned to be in 2016 with full production by 2018. Assuming the lower rate, discounting at 10% with a 30-year life with no cashflows until 2018, this projects to be a discounted value at approximately $28m; at the higher rate, it is over $40m.

Morien also has a royalty interest on a Black Point aggregate project for which it estimates an annual value of $250 to $750K, commencing between 2018 and 2021. This is some distance in the future and with an undefined timetable for production makes it difficult to value; I have assumed $250,000 per annum, starting in 2018, also at 10% giving a discounted value of $1.7m. However, using the higher amount of $750,000 per annum gives this stream a value of $5.1m.

This article was written by

Dan Stringer profile picture
I am interested in small capitalized companies with a high optionality to the upside compared to the relative downside risk. I am grounded in a value based approach but will also explore special and short situations. I am a trained CPA and continue to practice in industry.Warning: my twitter account is very random but will have a lot of economic and business items sprinkled with Green Bay Packer comments.

Analyst’s Disclosure: The author is long APMCF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

All amounts are denoted in CAD$

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