Day: January 10, 2024

Expensive Companions & Associates,

For the fourth quarter 2023, Ace River Capital Companions, L.P. (the “Fund”) returned 4.44%. Over the identical interval, the S&P 500 (SPX) and Russel 2000 (RTY) Indexes returned 11.7% and 14%, respectively. With full yr for the fund -28.61% vs 24% for S&P 500 and 15.9%

Technique

My aim is to keep up a concentrated portfolio of small and micro-cap firms with distinctive benefits and progress potential inside their respective industries. The goal is to carry them for the long run. Discovering such firms requires important effort and time. As a result of shortage of appropriate alternatives, constraints on time and sources, and alternative prices, I’ll take substantial positions within the firms that meet my standards and cross my danger/reward evaluation. I don’t subscribe to vast diversification and solely analysis and observe a restricted variety of firms deeply. I cannot spend a lot time on an organization if I’m unwilling to take a considerable place and have the conviction so as to add to that place on weak spot. This strategy requires numerous analysis and endurance. There will probably be lengthy intervals of inactivity with few trades, and I’ll not often maintain greater than 5 firms at a time. I’ll usually goal to have one brief place. The brief place will normally goal a a lot bigger firm than the small and micro-cap firms held as lengthy positions. This technique accepts short-term volatility in pursuit of upper, long-term, tax-efficient returns.

Prime Place

The fund’s high place is RCI Hospitality (RICK). RICK is the one publicly traded proprietor of grownup nightclubs within the US. Presently they personal 56 golf equipment throughout 13 states and a further 13 sports-bar eating places with the “Bombshells” idea that has lately begun franchising. With few municipalities issuing new grownup leisure licenses these companies perform as native monopolies with wonderful unit economics. With the development of two Colorado casinos underway, the lengthy runway of grownup evening membership acquisition targets, the expansion potential and spin off worth of the Bombshells idea and at last the potential upside of the “admireMe” OnlyFans sort web site, I anticipate this to stay my high place for the foreseeable future.

New Place

I’ve been exploring firms concerned in metals and mining, hoping to search out a chance. I consider I discovered an organization that matches with the technique and appears to be an ideal match for the fund in Vox Royalty Corp (VOXR).

Vox Royalty Corp operates within the different financing area of mining royalties. Mining royalties are versatile agreements the place an organization like Vox will present a one-time cost for a share of future income produced. These are usually long-term initiatives and royalty contracts can change arms earlier than the contract begins producing income.

That is engaging as an uneven danger/reward tied to commodity costs since Vox has a hard and fast price and preliminary funding however will revenue extra as costs rise or operations turn into more and more environment friendly with lots of the contracts.

Vox has a proprietary database of data on 8500+ current royalties.

Vox Database (Firm Presentation)

This asset has already proven to be invaluable with an IP licensing settlement lately introduced.

“TORONTO, CANADA – October 25, 2023 – Vox Royalty Corp. (TSX: VOXR) (NASDAQ: VOXR) (“Vox” or the “Firm”), a returns targeted mining royalty firm, is happy to announce that it has entered into an Mental Property (“IP”) Licensing Settlement (the “IP Licensing Settlement”) with non-public funding group, Perpetual Royalty IP Holdings LLC (“Perpetual RoyaltyCo”), to probably unlock worth from a non-core subset of royalties inside Vox’s proprietary world royalty database. Below the IP Licensing Settlement, Vox grants Perpetual RoyaltyCo entry to the coal royalties in Vox’s proprietary royalty database (however not some other commodities).”

” On the profitable closing of related coal royalty transactions, Perpetual RoyaltyCo can pay Vox a money transaction charge of as much as 3.0% of the asset acquisition value, together with any future earn out funds or contingent funds related to any relevant coal royalty belongings acquired. “

This gives a further income and upside with no capital requirement. This database ought to enable Vox to cherry choose alternatives. I additionally anticipate Vox to develop relationships inside the area and help firms with construction/creation of royalty contracts for financing and be able to take motion and effectively allocate capital long run.

A have a look at the phases and places of every royalty.

Vox Royalties (Firm Presentation) – 2023 Steerage

I’ve initiated a place and like this enterprise mannequin. I consider mining royalty contracts provide a chance to seize upside in commodity costs with much less danger than making an attempt to determine or choose a particular mining firm. These contracts and the mining trade/commodity costs usually ought to profit from the push in direction of electrical autos along with inflation or financial enlargement. Investing in Vox may additionally present some recession safety with its publicity to gold costs. With the corporate presently paying a 2.65% dividend, I’m completely happy to start out constructing a place as new mines come on-line.

Fund Positions – In Order of Portfolio Weight

[[RICK]], [[DSHK]], [[VOXR]], [[HZO]]

Thanks for studying. Please attain out for any motive.

Nicholas D’Agnillo

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IMPORTANT DISCLOSURES

In Common: This letter is for informational functions solely and is meant to supply an outline of the funding technique and efficiency of Ace River Capital Companions, L.P. The contents of this letter shouldn’t be construed as funding, authorized, tax, or different skilled recommendation.

No Supply to Buy or Promote Securities: This letter doesn’t represent a suggestion to promote or a solicitation of a suggestion to buy any safety or funding product. Any such provide or solicitation might solely be made by the use of supply of a confidential non-public providing memorandum.

No Tax, Authorized, Accounting or Funding Recommendation: The contents of this letter aren’t supposed to be, and shouldn’t be construed as, tax, authorized, accounting or funding recommendation. Potential traders ought to seek the advice of with their very own advisors as to the tax, authorized, accounting or funding penalties of an funding in any product described on this letter.

Efficiency Data: The efficiency info offered on this letter is predicated on inner calculations and is topic to revision. Efficiency outcomes might differ relying on the timing of investments and disinvestments, in addition to different market circumstances.

Previous Efficiency: Previous efficiency will not be a assure of future outcomes. Several types of investments contain various levels of danger, and there might be no assurance that any particular funding will both be appropriate or worthwhile for an investor’s portfolio.

Threat of Loss: All investments contain danger and there might be no assurance that any funding technique will probably be profitable. The worth of an funding might fluctuate, and an investor might not get again the quantity invested. Adjustments in financial, political or different market circumstances, in addition to issuer-specific occasions, might have a fabric influence on the worth of a safety or a portfolio.

Portfolio Tips/Development: The portfolio development and funding tips for Ace River Capital Companions, L.P. are primarily based on a proprietary funding course of that seeks to determine undervalued securities and maximize returns whereas minimizing danger. The portfolio is actively managed and could also be modified at any time with out discover to replicate adjustments in market circumstances or the supervisor’s evaluation of particular person safety or market prospects.

Index Efficiency: The efficiency info offered on this letter could also be in comparison with a benchmark index for functions of illustration. The benchmark index will not be supposed to characterize the efficiency of any funding product and doesn’t replicate the bills related to the administration of an precise portfolio.

Logos, Commerce Names, Logos and Copyrights: All logos, commerce names, emblems, and copyrights referred to on this letter are the property of their respective house owners.

Confidentiality/Distribution of the Letter: The knowledge contained on this letter has been obtained from sources believed to be dependable, however its accuracy will not be assured. This letter and its contents are confidential and supposed solely for the recipient. It might not be reproduced or redistributed with out the prior consent of Ace River Capital Companions, L.P.”

Editor’s Word: This text discusses a number of securities that don’t commerce on a serious U.S. alternate. Please concentrate on the dangers related to these shares.