Olive Resource Capital Reports Exceptional 151% Return Ahead of 2026 M&A Cycle

• Olive Resource Capital reported 151% return after all fees and expenses for 2025, significantly outperforming commodity benchmarks while maintaining only 50% precious metals exposure
• December 2025 assets rose over 11%, driven by strategic deployment starting mid-November into year-end commodity strength
• Stock price increased 240% during 2025, closing the discount to NAV from approximately 40% to an estimated 60-70% of net asset value
• Management anticipates increased merger and acquisition activity in 2026 as gold producers generate record free cash flow with Q4 average prices exceeding $4,200/oz
• Key holdings K92 Mining and Ivanhoe Mines announced strong Q4 production and expansion funding, while Arizona Sonoran is negotiating to end joint venture encumbrances

Olive Resource Capital released its December 2025 investment update on January 12, 2026, detailing exceptional performance for the fourth quarter and full year 2025. In their latest discussion, Derek Macpherson, Executive Chairman and Samuel Pelaez, President & CEO, announced the fund's 151% annual return, portfolio positioning, and outlook for 2026 as commodity producers prepare to report strong fourth-quarter results. The discussion provides insight into Olive's investment strategy, portfolio holdings, and expectations for increased merger and acquisition activity in the natural resources sector.

Exceptional 2025 Performance

Olive Resource Capital delivered record returns in 2025, with assets appreciating 151% after all expenses and fees. This performance significantly exceeded relevant benchmarks across gold, energy, and copper sectors. December alone contributed over 11% returns, capping a strong fourth quarter that benefited from strategic deployment decisions made in mid-November.

The fund's diversified approach proved advantageous, as Pelaez noted they achieved returns comparable to top-performing gold funds despite maintaining only 50% precious metals weighting in the portfolio. The outperformance stemmed from effective stock selection across multiple commodity subsectors, demonstrating the value of Olive's research-driven investment process.

Pelaez also emphasised that the strong investment performance translated directly to shareholder value, with the stock price increasing 240% during 2025. This appreciation helped narrow the discount to net asset value (NAV), a key metric for closed-end funds and resource-focused investment vehicles.

Closing the Discount to NAV

The relationship between investment performance and share price appreciation represents a critical dynamic for Olive shareholders. Macpherson explained that the fund began 2025 trading at approximately 40% of net asset value - a substantial discount that created opportunity for investors but also reflected market skepticism about the resource sector.

Strong investment performance enabled the fund to close the gap, with shares estimated to be trading at 60-70% of NAV by year-end. This compression of the discount provides validation of the investment strategy while still leaving meaningful upside potential if the share price continues converging toward full NAV.

The narrowing discount phenomenon typically occurs when resource-focused investment vehicles demonstrate consistent outperformance, attracting both existing shareholders to hold and new investors to allocate capital. For Olive, the 2023-2024 portfolio repositioning efforts appear to be delivering the intended results, creating a foundation for potential continued discount compression in 2026.

Q4 Production and Earnings Expectations

The discussion highlighted favorable commodity price dynamics entering Q4 earnings season. Macpherson noted that average gold prices in the fourth quarter reached the $4,100-4,300 range, representing approximately $500 per ounce increase over Q3's already strong $3,700-3,800 average. This price appreciation directly impacts producer profitability and free cash flow generation.

Gold producers already generated record free cash flow in Q3, and the additional $500 per ounce in Q4 will produce another quarter of record results, according to Macpherson's analysis. This cash generation creates the financial capacity for increased shareholder returns, balance sheet strengthening, and acquisition activity.

Pelaez emphasised that higher commodity prices in Q4 applied across multiple sectors, benefiting gold, silver, and increasingly copper producers. The combination of elevated prices and relatively stable or declining energy costs - with oil prices down for three consecutive years - has expanded operating margins significantly. This margin expansion becomes particularly visible when companies report Q4 results, potentially attracting generalist investors who screen for improving financial metrics.

Valuation Gap and Generalist Interest

Macpherson provided analysis suggesting meaningful valuation disparity between precious metals producers and broader equity markets. He calculated that gold producers trade at approximately 7-12 times trailing twelve-month earnings, while the S&P 500 trades at 13-14 times. While trailing metrics don't fully capture the impact of recent gold price appreciation, the valuation gap suggests room for multiple expansion as generalist investors recognise improving fundamentals.

The anticipated rotation follows a predictable pattern: as gold prices appreciate and major producers re-rate toward market multiples, capital flows into developers and earlier-stage companies. Olive's portfolio positioning across the development spectrum aims to capture this cascade effect, with exposure to producing companies, developers, and exploration-stage assets.

M&A Outlook for 2026

Both executives expressed expectations for increased merger and acquisition activity in 2026, driven by substantial cash accumulation at major producers. Pelaez noted some disappointment with 2025 M&A volume despite favorable conditions, suggesting deals may have been delayed rather than cancelled.

Macpherson characterised major producers as having money that needs deployment, with M&A representing the primary outlet alongside shareholder returns. He described M&A activity as creating "greed" in the market, where premium takeouts inspire investors to identify similar companies that might attract acquirers. This psychology often accelerates during active M&A cycles, benefiting portfolios positioned in potential targets.

The discussion identified Olive's portfolio as containing multiple names fitting typical acquisition profiles - mid-tier producers with growth potential, developers advancing toward production decisions, and exploration companies with significant discoveries. The executives acknowledged that predicting specific targets remains difficult, but expressed confidence that portfolio holdings would benefit from an active M&A environment.

K92 Mining: Consistent Execution

They're doing exactly what they said they would do and they're doing it better.

K92 Mining's Q4 and full-year 2025 production results received particular attention as an example of consistent operational execution. The company produced 47,000 ounces in 2025 at 8 grams per tonne gold, meeting guidance ranges while advancing multiple expansion phases simultaneously.

Macpherson characterised K92's disclosure as "bordering on boring" due to consistent delivery against stated objectives - a quality that attracts investors seeking predictable growth. The company funded its expansion internally through cash flow, eliminating dilution risk while advancing phase two completion, phase three construction, and initial phase four development.

Macpherson drew comparisons to Dundee Precious Metals, which has delivered on guidance for eleven consecutive years, suggesting K92 is establishing similar credibility with a shorter operational history. The original processing plant will become available for additional feed once phase three commissioning completes, providing another growth vector. For mid-tier producers, this combination of reliable execution and visible organic growth creates valuation premiums and potential acquisition interest.

Ivanhoe Mines: World-Class Asset Portfolio

Ivanhoe Mines announced full funding for phase two expansion at its Platreef PGM project in South Africa, targeting 450,000 ounces of platinum group metals equivalent production by late 2027. The project ultimately targets over one million ounces annually by 2031, which would establish it as the world's largest primary PGM operation.

Pelaez identified Ivanhoe as potentially having "the greatest upside" among large-cap resource companies for 2026, citing three simultaneous growth vectors: the Kamoa-Kakula copper complex in Democratic Republic of Congo targeting third-largest global copper production; the Kipushi zinc mine ramping to fifth or sixth-largest global zinc production; and Platreef's transformation into the dominant PGM asset.

The executives dismissed concerns about Platreef production overwhelming palladium and platinum markets, noting both metals trade in roughly one-million-ounce annual deficits. Macpherson suggested the phased production increases would largely fill demand gaps rather than create oversupply, while Pelaez added that Platreef's cost advantages would likely displace higher-cost South African production from aging operations.

With copper prices reaching record levels during the podcast recording, the Kamoa-Kakula asset provides additional leverage to commodity price strength beyond the PGM focus. The combination of multiple world-class assets under development positions Ivanhoe uniquely among diversified miners.

Arizona Sonoran: Removing Encumbrances

Arizona Sonoran Copper Company's negotiation to terminate its joint venture option agreement with Newmont subsidiary Nuton received discussion as a potentially significant catalyst. The original agreement granted Newmont rights to earn into the Cactus project if their proprietary sulfide processing technology materially improved project economics.

Macpherson explained that the buy-in price had become significantly higher than Arizona Sonoran's market valuation, making Newmont exercise unlikely and creating motivation to renegotiate. More importantly, the existing agreement created impediments to potential acquisition of Arizona Sonoran by preventing clean title transfer.

Eliminating the option agreement "clears the deck for a takeout," with potential acquirers including Rio Tinto, Hudbay Minerals, and other mid-tier copper companies, according to Macpherson. The pattern of removing encumbrances - Arizona Sonoran also repurchased royalty interests previously - suggests management is preparing the asset for strategic alternatives as copper markets strengthen.

Market Positioning and Outlook

The discussion concluded with acknowledgment that gold and copper were both trading at or near record highs during the recording. This price strength supports the thesis that Q4 earnings will demonstrate exceptional profitability, attracting incremental capital allocation to the resource sector.

Olive's portfolio construction emphasises companies with funded organic growth profiles, consistent operational execution, and positioning in supply-constrained commodities. The 2023-2024 repositioning efforts established this framework, and 2025 results validated the approach. The executives expressed confidence about maintaining performance momentum into 2026, supported by favorable commodity fundamentals, improving company-level execution, and potential M&A catalysts.

Key Takeaways

Olive Resource Capital's 151% return in 2025 demonstrates the potential for active management and strategic positioning in resource equities during favorable commodity cycles. The fund's performance compressed its discount to NAV while still leaving meaningful upside if shares continue converging toward full asset value. Looking ahead to 2026, management expects strong Q4 earnings across portfolio holdings to attract generalist investor interest, while substantial free cash flow generation at major producers should accelerate M&A activity. 

Holdings like K92 Mining and Ivanhoe Mines exemplify Olive's preference for operational execution and funded organic growth, while situations like Arizona Sonoran removing strategic encumbrances create potential catalysts. The combination of record commodity prices, expanding margins due to lower energy costs, and valuation discounts versus broader equity markets suggests continued favorable conditions for specialised resource investors.

TL;DR

Olive Resource Capital delivered 151% returns in 2025, compressing its discount to NAV from 40% to 60-70% through strong stock selection across commodities. Management expects robust Q4 earnings from gold producers benefiting from $4,100+ average prices to attract generalist investors and fuel M&A activity in 2026. Key holdings K92 and Ivanhoe demonstrate the funded organic growth and operational execution that characterise the portfolio's positioning.

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