If You Invested in STAR ROYALTIES LTD (STRFF)

Star Royalties Ltd. (OTCQX: STRFF; TSXV: STRR) is a royalty and streaming company focused on precious metals and carbon credits. According to the company’s public disclosures, it structures royalties and streams on mining and nature-based carbon projects, giving investors exposure to gold and other precious metals prices as well as voluntary carbon credit prices. Star Royalties states that its objective is to provide wealth creation by originating accretive transactions with alignment between counterparties and shareholders.

A distinctive feature of Star Royalties’ business model is its emphasis on both traditional mining royalties and nature-based carbon offset projects. The company describes itself as a precious metals and carbon credit royalty and streaming company and notes that it has innovated what it calls the world’s first carbon credit royalties in forestry and regenerative agriculture. These carbon-focused investments are held through its pure-green joint venture, Green Star Royalties Ltd. (“Green Star”).

Business model and royalty focus

Star Royalties’ mining royalty portfolio includes interests in producing and development-stage assets. The company reports a 2% minerals royalty on the Keysbrook Mine, an open pit mineral sands mine (leucoxene and zircon) located south of Perth in Western Australia, which has been in operation since late 2015. Royalty revenues from Keysbrook are driven by mineral sands sales volumes, and the company’s news releases highlight that Keysbrook has been a key contributor to its recent royalty revenue.

In gold, Star Royalties has a gold stream on the Copperstone Gold Mine (“Copperstone”). The company has disclosed that its Copperstone gold stream was restructured into a flat 4% of gold produced for the duration of Copperstone’s life-of-mine, with Star Royalties making a cash payment equal to 25% of the spot gold price for each ounce delivered. The company has highlighted Copperstone’s economics and its own stream valuation in relation to Copperstone’s Preliminary Economic Assessment, and it has emphasized the potential for Copperstone’s development to add to its cash flow profile.

Star Royalties also discusses its exposure to the Elk Gold Mine through a royalty interest. Company updates describe Elk Gold as a project where the operator has been working on mine planning, operational improvements and financing initiatives aimed at longer-term production potential. Star Royalties’ management commentary in news releases notes that it monitors optimization efforts and site activities at Elk Gold.

Green Star Royalties joint venture and carbon credit exposure

Through Green Star Royalties Ltd., Star Royalties holds interests in nature-based carbon offset projects and other environmental investments. The company reports that Green Star operates as a joint venture between Star Royalties, Agnico Eagle Mines Limited, Cenovus Energy Inc., and certain members of Star Royalties’ and Green Star’s management teams and boards. Star Royalties states that it retains approximately 45.9% of Green Star’s common shares, while Agnico Eagle and Cenovus each hold approximately 25.9%, and the remaining portion is owned by management.

Green Star’s focus, as described in Star Royalties’ disclosures, is on premium North American nature-based carbon offset projects. The company reports that Green Star evaluates and invests in categories such as regenerative agriculture, improved forest management (IFM), reforestation, grasslands, biochar, and other nature-based solutions. Star Royalties notes that Green Star’s investment pipeline includes numerous opportunities at varying stages of development, with an emphasis on high-integrity projects in North America.

One of Green Star’s flagship investments is the CarbonNOW regenerative agriculture carbon farming program, developed in partnership with Locus Agricultural Solutions and Anew Climate. Star Royalties reports that Green Star has a 30% gross revenue royalty on CarbonNOW, with a royalty term of 20 years of carbon credit issuance. The program is described as being in the validation and verification process under Verra’s Methodology for Improved Agricultural Land Management (VM0042), with the goal of generating premium North American carbon credits from regenerative agricultural practices.

Another major Green Star investment disclosed by Star Royalties is a set of gross revenue royalties on a portfolio of Improved Forest Management projects developed by NativState LLC in the southeastern United States. The company states that these royalties are expected to deliver voluntary carbon offsets over a 20-year term, with a significant portion of the attributable carbon offsets anticipated in the early years of the royalty life. Star Royalties notes that these projects are registered or to be registered under the American Carbon Registry and that they are intended to support sustainable forest management and conservation outcomes.

Additional portfolio interests

Star Royalties also reports a 2.5% gross revenue royalty on MOBISMART, a private operating company that specializes in mobile solar power generation systems with integrated battery storage and diesel displacement capabilities. Company updates indicate that this royalty has begun generating cash flow and that MOBISMART’s products are being used in applications such as wind renewable energy measurement and telecom backup power.

Through Green Star, Star Royalties also discloses a 40.5% gross revenue royalty on carbon credits from forested lands in the Elizabeth Metis Settlement Forest project in Alberta, an IFM project being developed under a provincial compliance system. The company notes that this project is advancing through mapping, inventory and protocol processes in preparation for future carbon credit issuance.

Capital partners and strategic positioning

Star Royalties highlights that Cenovus Energy became a strategic investor in Green Star through a significant investment, joining Agnico Eagle as a cornerstone joint-venture partner. The company characterizes this as support for Green Star’s business model and its portfolio of North American nature-based carbon royalties. Star Royalties’ disclosures emphasize that proceeds from such strategic investments are intended to help Green Star execute on its pipeline of advanced-stage carbon offset opportunities.

Across both its mining and carbon portfolios, Star Royalties presents itself as focusing on royalty and streaming structures that can generate long-term exposure to underlying commodity and carbon credit prices. The company’s communications repeatedly underline its dual focus on precious metals and carbon credits and its use of royalties and streams rather than direct project operation.