Lithium Royalty Corp. plans $150-million IPO to boost investment in mines – The Globe and Mail
Five-year-old Lithium Royalty Corp. is going public with a planned $150-million-plus stock sale, raising money to fund the mines that feed a rapidly growing battery industry.
Lithium Royalty filed the paperwork on Wednesday for an initial public offering on the Toronto Stock Exchange, after tapping institutional investors for approximately $130-million and profitably investing in 27 projects.
Despite a recent selloff in lithium stocks, driven by falling prices, Lithium Royalty expects to raise at least $150-million, according to investment banking sources. The Globe and Mail agreed not to name these sources because they are not authorized to speak at this stage in the IPO process. The offering would qualify as one of the five largest IPOs on the TSX in the past year, a dry period for public market debuts.
Royalty companies finance mining or oil and gas projects in return for a share of future revenue. The concept has proven its merits across economic cycles, creating public companies such as Franco-Nevada Corp. FNV-T, which was launched in 1983 and has a $33.5-billion market capitalization, and the oil patch’s PrairieSky Royalty Ltd., valued at $5.3-billion and founded 10 years ago.
Toronto-based Lithium Royalty plans to use cash from its IPO to increase the size and pace of its investments in lithium mines, according to its prospectus. Right now, the company holds royalty agreements on 27 projects in seven countries, investing an average of $4.5-million in each mine.
Two Lithium Royalty mines, both in Australia, are producing. Four properties, in Argentina, Brazil and British Columbia, are under construction. The remaining projects are still in the development stage. Royalties typically continue after a mine changes hands, a critical factor in a consolidating sector. Lithium Royalty helped fund a Neo Lithium Corp. project in Argentina and will still collect payments after China’s Zijin Mining Group Ltd. acquired the company.
Lithium Royalty earned net income of $10.2-million on its investments in the first nine months of 2022, compared with $5-million in the same period the previous year.
The company plans to focus on investing in North American hard-rock lithium mines, including projects in Quebec, to meet automakers’ demands for shorter, reliable supply chains. Chinese producers dominate the lithium market. In its regulatory filings, the company said: “Battery supply chains are growing increasingly localized and we believe that battery metal resources in North America will grow in strategic importance.”
Ottawa approves new Quebec lithium mine, as Canada doubles down on efforts to challenge Chinese dominance
In January, General Motors Co. invested US$650-million in TSX-listed Lithium Americas Corp. to help develop a US$2-billion mine in Nevada. Last year, Stellantis NV, another major global automaker, took an equity stake in an Australian lithium producer.
Lithium prices have been volatile over the past 12 months, down approximately 30 per cent since peaking in November, in part on concerns about demand from Chinese battery makers. However, analysts say the sector’s long-term growth prospects are strong, owing to demand for batteries that power electric vehicles and renewable power storage facilities.
“The year ahead could be sloppy for the spot lithium market,” analyst Ben Isaacson at Bank of Nova Scotia said in a recent report. “Beyond 2024, we are stumped as to where supply will come from to satisfy demand.”
The International Energy Agency forecast demand for lithium will grow by 30 per cent annually over the next decade, outstripping growth in the market for other minerals critical to a decarbonized economy, such as nickel and copper.
The founders of Lithium Royalty have more than a decade of experience and relationships in the sector. Chief executive officer Ernie Ortiz oversaw investments in lithium and battery technologies for fund manager Tide Point Capital Management in Greenwich, Conn., prior to launching the company in 2018. He is a member of the London Metal Exchange’s lithium advisory committee.
Toronto-based Waratah Capital Advisors CEO Blair Levinsky and former GMP Securities LP mining banker Mark Welling co-founded Lithium Royalty, along with Mr. Ortiz. Waratan oversees $4-billion in client assets and Mr. Levinsky runs the firm’s global electrification and decarbonization fund.
St. John’s-based Altius Minerals Corp., which also owns mine royalties, was also an early backer. In 2021, Lithium Royalty raised US$71-million from institutions, including New York-based private equity fund Riverstone Holdings LLC.
Investment banks Canaccord Genuity Corp. and Citigroup are leading Lithium Royalty’s IPO, along with TD Securities Inc., Cormark Securities Inc., National Bank Financial Inc., BMO Nesbitt Burns Inc., Scotia Capital Inc., Raymond James Ltd. and Red Cloud Securities Inc. Law firm Davies Ward Phillips & Vineberg LLP is advising the company, while Blake, Cassels & Graydon LLP is the investment banks’ counsel.
18 Mutual Funds with Clearly Defined Investment Processess – The Globe and Mail
What are we looking for?
Top-rated mutual funds with top-rated investment processes.
When investors look at the performance of mutual funds, they are likely looking for something simple – are those performance numbers positive or negative? Considering why those numbers are positive or negative is also important. Why a fund performs a certain way can be the direct result of its investment philosophy and process. An understanding of these components can help investors better gauge if performance results are expected given the goal and method applied. This can be particularly helpful during periods of volatility, such as the one we have experienced since the collapse of Silicon Valley Bank earlier this month. A strong investment process is well-defined and consistently executed, and generally able to withstand short-term market shocks and reward investors over the long term.
A fund’s investment process can be nuanced. To help guide investors, Morningstar’s manager research team assigns ratings to Canadian funds and ETFs that include an explicit component focused on understanding their investment philosophy and process. We refer to this component as the “Process” pillar and rate each asset manager as either Low, Below Average, Average, Above Average or High, depending on the efficacy of their practices. To highlight a few great mutual funds available to Canadians with top-rated investment processes, I used Morningstar Direct to screen more than 3,400 Canadian-domiciled mutual funds and ETFs to find a selection of options to consider. The criteria include:
- A Morningstar Quantitative or Analyst Process Pillar rating of High, indicating the fund has a clearly defined investment process and performance objective that is repeatable and implemented effectively.
- A Morningstar star rating of five stars. The star rating is an objective look back at a fund’s after-fee, risk-adjusted returns relative to the category to which the fund belongs. Though the measure is backward-looking, Morningstar’s research shows that over time and on aggregate, five-star funds continue to outperform four-star funds, three-star funds, etc., after receiving the rating.
- A top quintile category rank month-to-date indicating the funds selected have outperformed their peers since March 1, 2023.
*Data as of March 23, 2023
What we found
The list above highlights funds from 13 different mutual fund categories (as defined by the Canadian Investment Fund Standards Committee) from six different asset managers, indicating strong processes are not confined to a specific asset class or investment style. Although not explicitly screened for, each of these funds also earned a Bronze, Silver or Gold Morningstar Analyst or Quantitative Rating indicating a forward-looking view of the fund’s ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over a full market cycle. Every fund on the list has delivered, with all but two ranking in the top decile of their respective categories over the past five years.
Note that the management expense ratios listed here are reflective of the f-share class. In the table, f-class (also known as fee-based share classes) shares exclude the cost of advice and are held in fee-based accounts where the adviser charges separately for advice.
This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.
Danielle LeClair, MFin, is director of manager research, Canada for Morningstar Research Inc.
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For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio
Fee competition in the exchange-traded fund business is driving down the cost of investing to new lows.
A simple little ETF strategy I call the Freedom .08 Portfolio proves it. Some previous names for this portfolio included Freedom 0.15 and Freedom 0.11. The numbers are based on the aggregate management expense ratio for the portfolio, which has fallen ever lower through the years. That’s how we get to Freedom .08 in early 2023. That’s 8 cents in fees for every $100 you have invested.
Here’s how the Freedom .08 Portfolio is put together using a 70:30 asset mix of stocks and bonds.:
-30 per cent in the Desjardins Canadian Universe Bond Index ETF (DCU-T): The MER for this fund is 0.08 per cent, which is at the low end for aggregate bond ETFs covering the broad Canadian market for government and corporate bonds. It tracks the Solactive Canadian Bond Universe total return Index, which is a relative newcomer to the Canadian market. You can compare returns to competitors using the bond fund installment of the 2023 Globe and Mail ETF Buyer’s Guide, but they’re very similar to more established indexes.
-30 per cent in the iShares Core S&P/TSX Capped Composite Index ETF (XIC-T): The MER for this fund is 0.06 per cent and the underlying index is the ultimate benchmark for Canadian stocks.
-20 per cent in the Franklin International Equity Index ETF (FLUR-NE): The MER here is 0.1 per cent, which is strikingly low for the international equity category. That’s markets outside North America, by the way. Solactive is again the index provider. In doing your research, compare returns against international equity ETFs tracking the more traditional MSCI EAFE index.
-20 per cent in the Vanguard S&P 500 Index ETF (VFV-T): The MER is 0.09 per cent and the index is one you know and love, the S&P 500.
ETFs trade like stocks, which means you’ll need a digital brokerage account to build a portfolio. For extreme frugal investing, consider the zero-commission brokers Wealthsimple, National Bank Direct Brokerage, and Desjardins Online Investing. CI Direct Trading and Questrade offer ETF purchases at no cost, but you pay the usual commission to sell.
A final point of comparison for the Freedom 0.08 Portfolio is a popular kind of exchange-trade fund called the asset allocation fund. You can buy these fully diversified portfolios with MERs of 0.2 to 0.24 per cent.
— Rob Carrick, personal finance columnist
This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.
Stocks to ponder
Bombardier Inc. (BBD-B-T) The plane maker is generating cash, paying down debt and raising its financial targets. Investors are paying attention, too: The share price has rallied more than 250 per cent over the past eight months. David Berman asks: Has the stock become relevant again?
WELL Health Technologies Corp. (WELL-T) After this health-care company reported record quarterly financial results last week, the share price rallied nearly 16 per cent on high volume. Analysts believe this positive price momentum will continue. The average one-year target price implies a 61 per cent potential gain for the stock. Jennifer Dowty takes a look at the investment case.
Banking woes, Fed keep investors on edge in nervous stock market
Investors are settling in for a long slog in the U.S. stock market in coming months, braced for more tumult in the banking sector and worries over how the Federal Reserve’s tightening will ripple through the economy. As David Randall of Reuters reports, many worry that other nasty surprises are lurking as the rapid series of interest rate hikes the Fed has delivered over the past year dry up cheap money and widen fissures in the economy.
Grocery REITs are a safe harbour in the market storm
Feeling gouged by high grocery prices? Bummed out by bank runs? Sick of stock market volatility? With inflation and rising interest rates creating turmoil in the economy and financial markets, these are tough times to be a consumer – or an investor. John Heinzl is here to offer some help by profiling some real estate investment trusts in the grocery sector. The goal: put some of that grocery money back in your pocket while enabling you to sleep better even as markets gyrate.
Throw caution to the wind with the Free Cash portfolio
It’s time to catch up on the value stock race. Norman Rothery pitted 14 popular measures of value against each other in the U.S. market. Each measure was used to form a tracking portfolio containing the cheapest 10 per cent of the stocks in the S&P 500 index based on that measure. The 14 tracking portfolios were equally weighted and rebalanced annually. So far, the trend favours investors who keep an eye on debt while hunting for bargains.
Read more from Norman Rothery: Portfolios for Value and Dividend Investors
Canadian bank stocks may not be quite as special as we think
Canadians are used to thinking of bank stocks as a safe, nearly guaranteed way to bet the market. They may want to think again. As Ian McGugan tell us, investors would be wise then to consider the prospect of a future in which Canadian banks no longer churn out market-beating results with clockwork regularity.
Strength in megacap stocks masks broader U.S. market woes
Investors are relying on an old strategy to navigate the current tumult in asset prices: buying shares of the massive U.S. companies that led markets higher for years. Shares of the top five companies by market value — Apple , Microsoft, Alphabet, Amazon and Nvidia — have gained between 4.5% and 12% since March 8, when troubles at Silicon Valley Bank set off banking system worries. In that period, the S&P 500 has fallen 0.5%. Lewis Krauskopf of Reuters tells us more.
Others (for subscribers)
Monday’s analyst upgrades and downgrades
Where investors put their money in this year’s RRSP season
How to play the demand for microprocessors as chatbots, robots and EVs disrupt sectors
Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis.
Ask Globe Investor
Question: Harvest Healthcare Leaders has units that trade in U.S. dollars on the TSX. For tax purposes, is the income considered foreign income or Canadian? For example, can donations to registered charities in the U.S. be deducted against the income from HHL.U? – Michael K.
Answer: Only a small amount (9.26 per cent) of the income from this ETF was classified as foreign income in 2022, according to the Harvest Funds website. Most of the distributions (about 94 per cent) are treated as return of capital. So, you won’t get much help here for U.S. charitable contributions.
–Gordon Pape (Send questions to firstname.lastname@example.org and write Globe Question in the subject line.)
What’s up in the days ahead
Bond markets are suggesting interest rate cuts loom for this summer in both Canada and the U.S. But central bankers are dropping few hints. Who should we believe? Veteran bond fund manager Tom Czitron will provide some insight.
Online investment fraud increasing in Manitoba
Manitobans are being warned about the rise in fraudulent online investment websites, which have exploited some Manitobans out of more than $200,000.
During the Manitoba Securities Commission’s (MSC) ongoing investigation into cryptocurrency fraud, the agency uncovered 66 victims in Manitoba who were scammed through 34 separate online platforms. These Manitobans had transferred money to offshore crypto exchanges based in Lithuania and Bulgaria.
According to Jason Roy, MSC senior investigator, the initial investments were smaller amounts of money as the fraudsters know if they ask for too much money right off the bat, then people are more likely to decline the offer.
“They start with these small amounts and then show you fake trading results and get you excited about putting more money in,” he said in an interview with CTV Morning Live on Monday.
The victims’ losses ranged from $306 to $206,000, with the total losses coming to $710,000.
Roy said there are likely a lot more investment fraud victims in Manitoba, but they may feel too embarrassed to report what happened to them.
“Really, only five to 10 per cent of victims actually report being victimized,” he said.
For those who come across an online investment website, there are certain things to look out for to ensure it is legitimate. Roy recommends ensuring that you are dealing with a company that is registered to do business in Canada. Checking a company’s registration can be done online.
Other common attributes of the investment fraud websites uncovered in the MSC investigation include:
- Targeting victims on social media;
- Promoting cryptocurrency or Forex trading;
- Promising an unreasonably high or quick return on investment;
- Victims being unable to withdraw their initial investment or fake returns;
- Operating offshore, but telling investors they have offices in Canada;
- Requesting investors to convert funds to cryptocurrency; and
- Getting investors to provide remote access to their computers or phones.
Those who are solicited by a fake trading website, which can appear to be legitimate, are asked to report the incident by calling 1-855-372-8362.
– With files from CTV’s Katherine Dow.
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