Olive Resource Capital Posts 25% Returns YTD as Portfolio Exits Validate Investment Approach

• Fund up approximately 25% year-to-date in 2026, following 160% gains in 2025, driven primarily by precious metals holdings including Omai, Arizona Sonoran, and West Point Gold
• Hudbay agreed to acquire the copper developer for approximately $9.35 per share in an all-stock transaction during PDAC week, delivering a significant multiple on the fund's investment
• Fund realised approximately 4x returns on its Sailfish position after the company sold its Spring Valley royalty, with initial purchases around $1.00 and exit around $4.00
• Mining conference drew 42,000 registrants an all-time high with increased deal flow, new project ideas, and improved sentiment across the sector
• Recent weakness driven by Middle East conflict and softer economic data from China and U.S., prompting the fund to maintain 10% cash position for opportunistic buying

Samuel Pelaez, President & CEO, and Derek Macpherson, Executive Chair, at Olive Resource Capital discussed significant portfolio developments following the industry's flagship PDAC conference in Toronto. With the fund maintaining strong performance momentum up approximately 25% year-to-date after delivering 160% returns in 2025, Derek and Sam addressed two major exits, market volatility stemming from geopolitical tensions, and their strategy for capital redeployment in an increasingly selective environment.

Portfolio Performance Maintains Strong Momentum

The fund's 2026 performance has been largely driven by the same positions that generated substantial returns in the previous year. Precious metals holdings continue to lead the portfolio, with positions in Omai, Arizona Sonoran, and West Point Gold representing the primary value drivers. Derek and Sam noted that while precious metals remain the dominant theme, they anticipate a potential rotation toward copper later in the year as commodity leadership evolves.

Energy exposure has also begun contributing to performance, though to a lesser degree than metals. The investment team emphasised that their portfolio positioning remains well-aligned with the market forces currently driving the mining sector, with a focus on companies demonstrating operational progress and fundamental value creation rather than pure commodity price exposure.

Arizona Sonoran Acquisition: Copper Exit Validates Thesis

The fund's largest news item centered on the announced acquisition of Arizona Sonoran by Hudbay, disclosed during PDAC week. The all-stock transaction valued Arizona Sonoran at approximately $9.35 per share at announcement, representing roughly a $2.00 premium from when the managers last discussed the position publicly. While subsequent market weakness eroded some of that premium, the transaction still represents a substantial multiple on the fund's cost basis.

Derek and Sam emphasised their long-standing familiarity with the Arizona Sonoran story, having known the project since its private company stage and building their position opportunistically over time. Sam noted: The team "literally did everything they said they were going to do," including maximising the resource and resolving the complex Newton joint venture.

The resolution of the Nuton joint venture proved critical to unlocking acquisition interest, as the managers had discussed in previous episodes. With that obstacle removed, the path to a takeover became significantly clearer, ultimately resulting in the Hudbay transaction. The managers commended Arizona Sonoran's management team for executing on all stated objectives in a timely manner, creating a clear path to value realisation for shareholders.

This marks the third significant exit for the Arizona Sonoran executive team, suggesting strong prospects for future funding of their next venture. However, the sale leaves the fund seeking a replacement copper name for portfolio exposure, an active priority given their view that copper may assume commodity leadership later in 2026.

Sailfish Royalties: Four-Times Return on Royalty Sale

The second major portfolio exit involved Sailfish Royalties, a position the fund had held for over a year. The investment thesis centered on the Spring Valley royalty being undervalued relative to the company's other assets and cash-flowing properties. As Spring Valley development news became more public, the expected re-rating materialised.

The fund built its position with initial purchases around $1.00 per share and accumulated through approximately $1.50. When Sailfish received an offer to sell the Spring Valley royalty and announced the transaction, the stock traded to $4.40, creating approximately 400% returns over roughly two years, a strong result for a lower-risk royalty investment.

Derek and Sam highlighted that while Sailfish management will likely redeploy the cash proceeds intelligently, the core thesis had been realised, making it an appropriate time to exit and reallocate capital elsewhere. The sale was of a specific asset rather than the entire company, but for the fund's purposes, the value crystallisation warranted taking profits and moving on.

Record PDAC Attendance Signals Sector Transformation

The annual PDAC mining conference in Toronto drew remarkable attention this year, with approximately 42,000 registrants representing an all-time high. This significant increase from the historical 20,000-30,000 range signals a meaningful sentiment shift in the mining sector. Hotels across Toronto were fully booked, and meeting spaces at major hotels were described as "completely rammed with people."

For the first time, Derek Macpherson's exploration company, Westpoinnt Gold, operated a booth at the conference. The team reported substantial traffic beyond typical vendor solicitations, indicating genuine investor and industry interest.

Beyond attendance metrics, Derek and Sam emphasised the quality of new investment ideas emerging at the conference. Rather than simply recycled projects or old stories repackaged, they encountered genuinely new concepts: brand new companies with fresh projects, companies that had transformed through new acquisitions, or existing projects advanced sufficiently through additional work to represent materially different opportunities.

Sam noted there was "a completely new story out of nowhere" under evaluation and "some of the stories that started off well last year" were presenting second iterations with meaningful progress. The presence of well-funded companies actively drilling and generating results creates fundamental catalysts beyond pure commodity price movements, offering more substantial re-rating opportunities.

The managers identified a silver opportunity that caught their attention, along with several existing portfolio positions they plan to increase. They indicated they would discuss these names publicly only after building positions, given liquidity constraints in certain securities.

Geopolitical Tensions Drive Near-Term Market Weakness

The positive momentum from PDAC has been tempered by significant market volatility in early March. Military actions involving the United States, Israel, and Iran have created substantial uncertainty, with retaliatory responses affecting multiple Middle Eastern countries. This geopolitical instability has been compounded by weaker economic data from both China, which downgraded its 2026 growth outlook, and the United States, where February economic indicators came in softer than January trends.

These developments have triggered a flight to liquidity, with investors moving toward safe-haven assets. Gold initially rallied on these tensions but subsequently gave back some gains. The fund's holdings experienced drawdowns of 10-15% in some positions over a matter of days, though not reaching full correction territory.

Derek and Sam emphasised an important principle: mining equities remain equities first. During major political events triggering flights to liquidity, mining stocks will decline alongside broader markets regardless of underlying commodity fundamentals. Derek explained, when there's a flight to liquidity from major political events, mining names "will go down with the broader market" because "mining equities are still equities."

Strategic Capital Deployment During Volatility

In response to the volatility, the fund raised capital prior to the market weakness based on seasonal trading models. Derek and Sam noted that the period between the BMO conference and PDAC historically presents opportune timing for profit-taking, particularly within the favourable Q1-Q2 seasonal period for commodity trades.

The fund currently maintains approximately 10% cash, providing flexibility for opportunistic purchases during the pullback. The managers have been actively buying back shares in one of their holdings (Olive), with these insider trades visible in public disclosures. They are also re-evaluating names that had previously "gotten away" from them on valuation, viewing the pullback as a potential entry opportunity if long-term theses remain intact.

Despite near-term uncertainty, the managers maintained their positive full-year outlook for the global economy and commodity markets, absent a major deterioration in Middle East conflicts. They noted that 2026 is a midterm election year in the United States, suggesting political incentives for intervention to support markets, whether through Federal Reserve rate cuts or other policy measures.

The current volatility also impacts corporate activity timelines. Companies needing to raise capital face more challenging market conditions despite the generally positive funding environment over the past six months. Merger and acquisition activity may also slow temporarily, as volatility makes it more difficult to establish appropriate premiums over recent trading ranges.

Key Takeaways

Olive Resource Capital has successfully executed on two significant investment theses through the Arizona Sonoran and Sailfish Royalties exits, validating their investment process and stock selection methodology. Both situations involved multi-year holdings where management teams delivered on stated objectives, creating substantial value for shareholders. The fund now faces the constructive challenge of redeploying capital from these successful exits into new opportunities.

The record PDAC attendance and emergence of genuinely new investment ideas suggests the mining sector may be entering a more sustainable bull market phase, characterised by active exploration, well-funded companies, and fundamental catalysts beyond pure commodity price speculation. However, near-term geopolitical and economic uncertainties have introduced volatility that creates both risk and opportunity.

The fund's decision to maintain meaningful cash reserves and their willingness to add to positions during weakness reflects a balanced approach acknowledging near-term uncertainty while maintaining conviction in medium-term commodity market fundamentals. Their emphasis on balance sheet quality and operational progress over pure commodity leverage positions them to navigate the current environment while participating in the sector's positive momentum when volatility subsides.

TL;DR: 

Olive Resource Capital delivered a strong 2026 start (+25% YTD) driven by precious metals holdings before recent geopolitical volatility. Two major exit validated investment approaches: Arizona Sonoran acquired by Hudbay for significant multiple on cost basis, and Sailfish Royalties position exited at 4x returns after Spring Valley royalties sale. Record 42,000 attendees at PDAC signals sector momentum with genuine new deal flow emerging. Fund maintains 10% cash to deploy opportunistically during current pullback while maintaining positive full-year commodity market outlook.

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