Most Twitter fights are stupid and the stakes are nothing. Over in the mintwit corner of the cesspool now known as X, we have a Twitter fight that’s been going on for two months now and the stakes are everything.
As a microcap royalty investor, TNR Gold has been on my watchlist for years. It always appeared optically cheap, but was a quick pass without a catalyst. Even an unsolicited tender offer from Lithium Royalty Corp. back in 2023 – quickly dropped after TNR management refused to engage – wasn’t enough to move the stock out of its trading range.
Enter the Koala, now known to the wider world as mining investor Jon Christian Evensen.
Evensen has been buying TNR shares in the open market since at least June, when his Twitter posts about the company began with a call for shareholders to vote against every director and their options package at the annual general meeting.
TNR CEO Kirill Klip has been running the company for almost 20 years. He responded by revealing Evensen as the Koala, accusing him of harassment and referring him to law enforcement.
The full tit-for-tat is available here and here for completists.
The prize
One thing both sides agree on: TNR’s assets are worth significantly more than the current $18-million (CAD) market cap. This is what they’re fighting over:
- 90% stake in the Shotgun gold exploration project in Alaska.
- 90% stake in a 1.5% NSR royalty on the Mariana lithium project in Argentina. Mariana is operated by Gangfeng Lithium. Gangfeng has the right to repurchase up to 1.0% of that NSR royalty for CAD$1-million, which they will exercise shortly with Mariana going into production.
- 90% stake in a 0.4% NSR royalty on the Los Azules copper project in Argentina operated by McEwen Mining. According to the PEA, Los Azules is expected to produce more than 320 million pounds of copper cathode annually over a 27-year mine life. A feasibility study will be released shortly.
The 90% part is important (more on this below). Klip told me the other 10% of these assets are owned by a private investor who is not a TNR shareholder. So for example, when Gangfeng exercises its NSR buy down, TNR should receive $900,000, and the minority stakeholder receives $100,000, reducing TNR’s share of the royalty to 0.45% NSR and the stakeholder’s to 0.05% NSR.
Differing plans
Having spoken to both sides, I’d summarize their go-forward plans as follows:
Management
- Put Shotgun into a separate corporate vehicle called AmeriGold and negotiate a joint venture with a major gold mining company. The idea is to have the partner thoroughly drill out Shotgun without TNR putting any money into it.
- Buyout the 10% stakeholder in TNR’s assets. This would be financed using the money from the Gangfeng buydown of the Mariana royalty and the imminent cash flow from production.
- Pursue whatever strategic priorities make sense after the first two points are completed and as laid out in their May release.
Koala
- No spending or strategic focus on Shotgun. Based on my conversations with Evensen, I don’t believe he’d want to spend cash or shares consolidating ownership of the property.
- Cash burn slashed to the bare minimum to keep the listing, books and royalties in good standing. Specifically that means no cash compensation for management.
- Pursue one of two pathways forward: “run the company for cash generation and pay dividends out as Los Azules and Mariana operate or merge into another royalty company and remove the G&A of being an independent company.”
More on that 10% stakeholder
Klip confirmed to me the terms of the buyout are subject to negotiation – in other words there is no set purchase price for consolidating ownership of Shotgun and the royalty assets. But simple math (10 divided by 90) would suggest a maximum purchase price equivalent to 11.1% of TNR’s market cap.
No backing down
Klip and the Koala have not spoken to each other, with no plans to (I offered to connect them). Klip referred to Evensen as a “total scumbag” in our conversation and he believes Evensen is working as part of a group – including Lithium Royalty Corp – to execute a crawling hostile takeover of the company. I’ll quote directly from Klip’s email to avoid any misrepresentation.
Acting in concert, they have orchestrated the spreading of disinformation about our company, disparaging our management, and manipulating our shares in the marketplace in order to accumulate a significant stake.
Their clear intent was to obstruct our team’s strategic plan and prevent us from realising maximum value for all TNR Gold shareholders, ultimately aiming to seize control of our valuable royalty portfolio.
I am pleased to report that their efforts have been unsuccessful.
Evensen says he started this campaign alone with disgruntled shareholders reaching out to him only after he went public.
“Several current and potential shareholders have reached out encouraging me to press forward on this. After all, pretty sure if you add up all the trading volume that has happened over C$0.08/share in the past couple years, the majority of that was purchases by me, and the biggest seller at those levels was probably Kirill exercising his options.”
Now that Klip has doxxed him, Evensen insists he’s not going anywhere.
“Kirill is either going to make me a pile of money or I’m going to have his job.”
The verdict
The royalty value is self evident with imminent catalysts to re-rate the stock. That said, I’ll be steering clear. Given the buyout of that 10% stakeholder could be done with any or all of cash, TNR shares and debt – I’m worried the buyout could be used as a backdoor poison pill to influence a future proxy battle or frustrate a tender offer.
You don’t go into those hills without bringing a fresh supply of body bags. For those of us without a personal stake in the outcome, it seems easier to jump on board after the last man standing is revealed.
