Will Thomson (Massif Capital): Clean Tech Royalties (CVW) and Commodity Exposure Deep Dive

Episode Summary

Executive Summary: The conversation centers on how geopolitics—especially Iran—has made commodity markets more volatile and harder to analyze, prompting a shift toward longer-term thinking and better information management. The guest also details how AI tools are being used to organize research and improve decision-making, then discusses a new sustainable royalties company (CVW) and a broader framework for evaluating commodity producers by isolating commodity exposure, convexity, and company-specific residuals.

Main Topics: Geopolitics and commodity volatility (Priority: 5/5): The guest argues that Iran-related events and broader geopolitical conflict are now persistent inputs into commodity pricing, creating recurring volatility in oil, gas, and related natural-resource assets. Research workflow and AI-assisted knowledge management (Priority: 5/5): A detailed discussion of using Obsidian, Claude Code, markdown files, tagging, and automated summaries to organize documents, reduce noise, and create accountability around what was actually read and studied. Portfolio discipline during macro shocks (Priority: 4/5): The guest explains that as a long-term holder, he usually ignores short-term event-driven volatility unless it changes the long-term thesis, and uses reading/writing blocks to avoid getting trapped in terminal-driven noise. CVW Sustainable Royalties investment case (Priority: 5/5): The guest outlines a new royalties model focused on financing industrial sustainability projects and taking perpetual revenue royalties, with examples in asphalt shingles recycling and automated ice production. Commodity exposure and factor-model research (Priority: 5/5): The guest describes a custom factor model that separates equity risk, currency risk, commodity risk, and commodity convexity to test how much commodity prices really explain stock returns. Portfolio construction and negative convexity (Priority: 4/5): The discussion concludes that many commodity producers have poor convexity and that too many small positions can worsen portfolio behavior, making concentration in a few best ideas preferable.

Key Arguments: Geopolitical events are no longer occasional shocks; they should be treated as a more persistent variable in commodity pricing. Commodity fungibility is not just physical; it depends on transport, processing, financing, and legal permissions, all of which are fragmenting. For a long-term investor, most event-driven volatility should be ignored unless it changes the underlying thesis. AI is most useful for automating execution tasks like tagging, summarizing, and organizing research—not for replacing judgment. A smaller, well-curated research library is more useful than a giant folder of unread PDFs. CVW’s model is attractive because it finances the “valley of death” between pilot and industrial scale in sustainable industrial processes. Royalties can be valued with NAV on existing assets, while future royalties and tailings technology provide embedded optionality. Commodity producers often have much less commodity exposure than investors assume, and company-specific factors can dominate returns. Many miners exhibit negative convexity: they fall hard when commodities drop but do not fully participate when commodities rise. Too many small positions in the same commodity can create hidden portfolio concentration and worsen downside behavior.

Data Points: Portfolio focus during conflict: One month of reduced company research - Guest said he spent much of the month reading about Iran and related geopolitics instead of company work. CVW fundraising: C$100 million - Fairfax Financial matched the original C$50 million raise, bringing total capital to C$100 million. CVW market capitalization: C$226 million - Guest cited the company’s approximate market cap while discussing valuation and optionality. CVW pipeline: ~C$500 million - Estimated pipeline of potential industrial royalty projects. Target royalty deployment: 2 to 3 royalties per year - Guest expects the company to deploy capital into multiple royalties annually. Typical royalty size: C$15 million to C$20 million each - Estimated size of each new royalty investment. Target annualized yield: 12% to 15% - Expected yield on new royalty deployments, consistent with the first two deals. Titanium recovery potential: 84% of U.S. titanium demand - Guest said the oil sands tailings technology could theoretically recover enough titanium to cover most U.S. demand if widely deployed. Recoverable value estimate: C$5 billion per year - CVW estimates value from increased oil production and other recoverables in oil sands tailings. Dividend yield: 14% to 15% - Guest referenced European/Norwegian energy names with high dividend yields. Time horizon for analysis: 36 months - Primary period used in the commodity exposure study. Shorter test windows: 30 days and 60 days - Guest also ran the model on shorter periods to compare commodity significance. Ice market structure: About 2 major players - Used as an example of a fragmented, inefficient supply chain that could benefit from localized automated production.

Pivotal Quotes: "geopolitics needs to be a more persistent variable baked into the price of commodities" — Guest: Core thesis on how markets should price oil, gas, and related commodities going forward. "my research folder is my thinking" — Guest: Explaining why AI should support organization and retrieval, not replace original analysis. "when the commodity goes down they get slaughtered and when it goes up they do okay" — Guest: Describing the negative convexity often seen in commodity producers.

Implications: Investors should expect geopolitics to remain a structural driver of commodity volatility, use AI to sharpen—not replace—research, and focus on company-specific execution and portfolio convexity rather than assuming commodity beta will do the work.