Altius Minerals Corporation (ticker: ALS.TO) reported a decline in royalty revenue for the first quarter of 2024, with earnings slightly down from the previous year. The company's revenue was affected by lower coal and potash revenue, which was partially offset by growth in renewable royalty revenue. Despite the challenges, Altius Minerals announced an increase in its quarterly dividend and shared optimistic developments in its Renewable Royalties segment and updates on its various projects.
Key Takeaways
- Royalty revenue decreased to $17.4 million in Q1 2024 from $21.4 million in Q1 2023.
- Adjusted EBITDA margins were impacted by higher professional fees and lower coal and potash revenue.
- Renewable Royalties segment showed significant growth, with EBITDA margin increasing to 75% in Q1 2024 from 36% in the previous year.
- Adjusted operating cash flow increased to $5.5 million, up from $4.5 million in Q1 2023.
- Net earnings were $4.8 million ($0.10 per share), compared to $5.5 million ($0.11 per share) in Q1 2023.
- The quarterly dividend was raised to $0.09, a 12.5% increase from the previous dividend.
- Current liquidity includes $10.5 million in cash and $93 million in unused credit facilities.
Company Outlook
- Altius Minerals anticipates revenue growth from the Renewable Royalties segment with new projects like the Canyon Wind Project and the Angelo Solar project.
- The company holds a 2% Net Smelter Returns royalty on the Curipamba El Domo (NASDAQ:DOMO) project, which seems fully funded following the acquisition by Silver Corp.
Bearish Highlights
- The drop in royalty revenue was driven by declines in coal and potash revenue.
- Higher professional fees linked to silicon arbitration impacted EBITDA margins.
Bullish Highlights
- Renewable Royalty revenue growth is robust, with a significant increase in EBITDA margins.
- The company's strategic investments in the renewable energy sector are showing positive results despite weak equity valuations in the sector.
Misses
- The company missed last year's net earnings by $0.7 million.
Q&A Highlights
- The arbitration process for the Silicon project is binding, with a decision expected after final submissions on May 28.
- All options, including sale or retention, are being considered for the Silicon project.
- The Adventus loan receivable is not included in the reported $45.4 million but will provide additional cash following settlement.
Altius Minerals Corporation, facing a mix of challenges and opportunities, reported a decrease in royalty revenue for Q1 2024 but remains optimistic about its growth prospects, particularly in renewable energy. The company's strategic moves, including an increased dividend and active management of its project portfolio, are designed to navigate the current market conditions while positioning for future success.
InvestingPro Insights
Altius Minerals Corporation's decision to raise its quarterly dividend aligns with the broader strategy of returning value to shareholders. This move is particularly noteworthy considering the backdrop of its revenue challenges. According to InvestingPro Tips, the company's management has been aggressively buying back shares, which can be an indicator of their confidence in the company's value. Additionally, Altius has raised its dividend for four consecutive years, showcasing a commitment to consistent shareholder returns despite market fluctuations.
Examining the company's financial health, InvestingPro Data reveals that Altius Minerals Corporation operates with a moderate level of debt, which could provide flexibility in managing its capital structure amid varying market conditions. Moreover, the company has been successful in maintaining impressive gross profit margins, with the last twelve months as of Q1 2023 reporting a margin of 92.28%. This is a strong indicator of the company's ability to control costs and optimize its operations, which is crucial in the resource sector where prices can be volatile.
For readers interested in a deeper analysis, there are 12 additional InvestingPro Tips available for Altius Minerals Corporation, which can be accessed at https://www.investing.com/pro/ALS.TO. These tips offer insights into the company's earnings revisions, stock volatility, liquidity, and analyst predictions, among other metrics. For those considering an InvestingPro subscription, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable insights into Altius Minerals and other investment opportunities.
Full transcript - Altius Minerals Corp OTC (ATUSF) Q1 2024:
Operator: Good morning, ladies and gentlemen and welcome to the Altius Minerals Corporation Q1 2024 Conference Call and Webcast. At this time, all lines are in a listen-only. Following the presentation, we will conduct the question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, May 9, 2024. I would now like to turn the conference over to Stephanie Hussey, VP of Finance, who is substituting in for Ms. Flora Wood in Investor Relations. Please go ahead.
Stephanie Hussey: Thank you, and good morning, everybody. Welcome to our Q1 2024 conference call. Our press release and interim filings were released yesterday after the close and are available on our website. This event is being webcast live, and you'll be able to access a replay of this call, along with the presentation slides that have been added to our website at altiusminerals.com. Brian Dalton, CEO; and Ben Lewis, CFO, will speak on the call. The forward-looking statement on slide 2 applies to everything we say in our formal remarks and during our Q&A session. And with that, Ben will take you through the numbers.
Ben Lewis: Thank you, Stephanie, and good morning, everyone. Royalty revenue for Q1 2024 was $17.4 million compared to $21.4 million in Q1 2023. Revenue and adjusted EBITDA for the quarter were impacted by lower coal and potash revenue and partially offset by the growth of renewable royalty revenue, which we present on a consolidated 100% basis. The Minerals Royalty segment had an EBITDA margin of 75% in Q1 2024 compared to 86% in Q1 2023. The current quarter's margin was also impacted by higher professional fees associated with the silicon arbitration. The Renewable Royalties segment had an EBITDA margin of 75% and 36% for the current and prior year quarters, respectively, reflecting the growth in the renewable royalty revenue. Q1 2024 adjusted operating cash flow of $5.5 million compares to $4.5 million in Q1 of last year. The increase is largely reflective of lower cash taxes. Q1 2023 included foreign taxes paid of $903,000 to Chilean tax authorities in relation to the distribution of funds received in 2022. Net earnings of $4.8 million or $0.10 per share compared to net earnings of $5.5 million or $0.11 per share in Q1 of 2023. The Renewable Royalty segment included GBR's non-cash equity losses of $1.9 million related to early-stage development investments as well as $1.6 million in interest expense related to GBR's new credit facility. Net earnings for the quarter were also affected by the higher cost of sales on our Chapada Copper Stream . Q1 2024 adjusted net earnings of $0.70 per share is consistent with the first quarter of 2023 and includes adjustments for realized and unrealized gains associated with derivatives as well as foreign exchange revaluations. ARR reported its Q1 2024 results on May 2, and details can be found on ARR's website. ARR is expected to continue its trend of revenue growth with the Q1 commencement of operations at the Canyon Wind Project. We expect a near-term commencement at the El Sauz Wind Project and the recently acquired Angelo Solar project, which is expected to contribute revenue in Q4 of this year. I'll now turn to capital allocation and liquidity. During the quarter, we made our scheduled debt repayments of $2.1 million, a cash dividends of $3.6 million and issued 7,800 common shares under the corporation's dividend reinvestment plan. The corporation repurchased and canceled 429,000 shares under its Normal Course Issuer Bid for a total cost of $8.2 million during the quarter. The Board of Directors also approved a $0.09 quarterly dividend, an increase of 12.5% from the previous quarterly dividend. This dividend will be paid to shareholders of record on May 31 with a payment date of June 14. Our current liquidity consists of $10.5 million cash at the end of Q1 2024. And we have $93 million in unused revolver room on our credit facility. ARR held cash of US$67 million at the end of Q1. In addition, on May 2, Altius Minerals received $9.6 million from Adventus Mining Corp. on settlement of an outstanding loan receivable, all part of Adventus’s plan of arrangement with Silver Corp announced on April 25. We continue to hold a 2% Net Smelter Returns royalty on the Curipamba El Domo project, which with the acquisition by Silver Corp appears to be fully funded and awaiting a construction decision. And with that, I'll turn it over to Brian
Brian Dalton: Thank you, Ben, and thank you, everyone, for being with us today. Last quarter, we noted that the widely forecast looming supply-demand deficit in copper is no longer looming. It has begun. This seems to be gaining broader market recognition now with a meaningful price response delays. A couple of years ago, we would have said that current prices were getting close to incentivization. This is not the current case though, as the capital and operating cost increases in the industry over that time have pushed that bar significantly higher. The things are heading in the right direction. Lithium prices continue to show signs of stabilizing as higher cost production is sourced from the market and broader price discovery for the nascent commodity continues. The same can be said for nickel in some ways as the ability of new production from Indonesia to drive down the cost curve seems to be reaching its limits as near plan high-grading opportunities in that region have now exhausted themselves. Potash continues to show demand recovery at current price levels and to be reverting to its long-term global demand growth trend line. We also note that Mosaic continues to drive up capacity at Esterhazy through incremental investments and that operation can now bolstering the world's largest potash mine. As an offset to the end of coal royalties within our portfolio, ARR had another strong quarter with continuing ramp-up of renewable energy royalties both from existing investments as well as new investment deployments. The new investments have been able to utilize the non-dilutive debt facility that was put in place last year. This has been important given that equity valuations for the sector continue to be weak with the TSX Renewables Index now trading at one-third of the level of the data at the time of the ARR IPO just over three years ago now. To put this in context, if ARR performance is simply matched the relevant index since IPO would now be trading at less than $4 a share. But kudos to Frank and the team for that relative outperformance as they've successfully seized upon the long-term opportunities provided by the depressed conditions. It is also worth noting here that subsequent to the quarter, our appeal of our coal expropriation lawsuit was dismissed by the Alberta Court of Appeal despite the contrary guidance at the Supreme Court of Canada provided last year. In essence, it said that it did not want to uphold law that would cause governments to pay for private property expropriations while making regulatory decisions on environmental grounds. We never in this entire process ever objected to the right of government to make regulatory decisions for whatever reason a team fits, including an environment or climate change grounds. We merely argued that its decisions caused the effect of -- those decisions caused the effect of expropriation of pre-existing property rights and compensation was due, a position that NGO group spot strenuously against, including as interveners in our case. We believe still that the SEC decision agreed with our position, but apparently, the Alberta Court of Appeal felt that protecting the public purse was more important than protecting Canadian private property owners from uncompensated government taking. This is a sad day for the law on property rates in Canada, in our opinion, and one that should give all land owners and investors do pause. We still find it ironic that in the year that we made our investment in Alberta, it was deemed as the safest mining investment jurisdiction in the world by the Fraser Institute. Our only potential future course from here is to appeal to be heard by the Supreme Court of Canada. This is not a light decision by any means, however, and when we continue to deliberate on with our counsel. In iron ore, benchmark prices were very volatile, first declining significantly, but since rebounding nicely as steel margins show improvement. IOC had a better operational quarter after recent issues. We continue to invest strongly in refurbishment and growth initiatives. We talked about Champion’s positive study results for Kami during our last call. I won't repeat here other than to note that it continues to advance next milestones. We understand Champion and continue to be busy with efforts to partner the project and it has now registered the project environmental assessment materials. Silicon Wow. Subsequent to the quarter, we got a first look at AngloGold Ashanti’s current conceptual level mining plans for Merlin, for which we published a more than 9 million ounce maiden resource during the quarter, while noting continuing good growth potential. What really stood out on this is the potential impact on early years production rates that the higher-grade domains offer. These plans are realized upon, Merlin alone will represent one of, if not the largest gold mine by production rate in the world at its peak, incredible. This is before even considering the date the silicon deposit resource area and the ongoing exploration potential of this newly recognized world-class gold system and District. Also, subsequent to the quarter end, we completed the in-person hearing portion of our arbitration to determine the full geographic extent of our royalty rights in the Silicon district. Both sides are scheduled to file post-hearing briefs and reply by May 28, and then we will await the decision of the arbitrators. It should also be noted here to avoid any confusion that the vast majority of currently known resources at Merlin and all of the known resources at silicon are not in dispute. The arbitration deals with the broader district scale land holdings that AGA has consolidated. With that, I can turn it over to questions.
Operator: Thank you. [Operator Instructions] One moment for your first question. Your first question comes from Brian MacArthur with Raymond James. Please go ahead.
Brian MacArthur: Good morning and thank you for taking my question. Just following up on the last comment for silicon, which is obviously very exciting. Can you just go through how that process works after May 28. Is this something that can go on for years and get appealed or what's your understanding of how this resolution will happen because I guess then it probably impacts how you look at potentially creating value with this asset.
Brian Dalton: Yes. So the arbitration clause in the agreement is -- it's completed under international arbitration laws using BC as the base. The decision is binding. So really the only way to appeal a binding arbitration decision is if there's some material error in law. These are very professional arbitrators, I can't really speak to how long it will take them after receiving final submissions to make their decision, but they are -- again, it's a dedicated tribunal to this case. It will get their full attention.
Brian MacArthur: And given, as you mentioned, the high production rates in the early years potentially at silicon and I realize it's still preliminary. Is there any – have you changed your views about potentially looking at all options to monetize the value here, whether it be swapping, selling? Or is it just better to keep it now?
Brian Dalton: I think we're looking at it still pretty much the same. All options are definitely on the table. We'd be open to a sale, particularly if it involved, assets coming our way. But again, silicon, we said this before, is a deposit that ticks all the boxes that Altius looks for in terms of strong upside, continuing upside potential, large scale, good counterparty, long life, expandable. So we're also quite open to the idea of having what it looks like now is probably a very core part of our portfolio if we choose to maintain it.
Brian MacArthur: Thanks. And my last question just relates to the junior portfolio. Just a couple of questions. In that 45.4 million, maybe this is for Ben. I assume that's where the origin royalties position is? And then the second thing is the Adventus receivable in that 45 million or was that sitting somewhere outside? And my third question related to have Ben is just where does that Adventus loan receivables sit on the balance sheet now?
Ben Lewis: Yes. The Adventus loan receivables not included in that. And your first question, I think you were asking about Origin shares. So the origin shares are included in that. And yes, I can't recall exactly when we exercised those awards. I think it may have been after quarter end, but -- so just the value of the warrants would be in there at the quarter end.
Brian MacArthur: Right. That's what I'm trying to figure out. So you would have -- you're going to get more cash in from the vent that 9.6, the loan outstanding would have been forced, you're going to have a extra cash and a profit over and above that 45.4, right, for cash in resulting in this going forward.
Ben Lewis: Yes.
Brian MacArthur: Okay. Great. I just wanted to clarify, I wasn't -- it's always hard to tell exactly what the net 45.4. Thank you for answering my questions.
Ben Lewis: Okay.
Operator: [Operator Instructions] There seems to be no further questions at this time. I'll now pass it back to the speakers for any closing.
Stephanie Hussey: Thank you. I don't have anything else, but thank you very much for joining our call today, and we look forward to speaking to you guys again at Q2.
Ben Lewis: Thanks, everyone.
Brian Dalton: Thank you.
Stephanie Hussey: Thanks, Taher.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.
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