Altius Minerals Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 9, 2024

There are 5 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Altiris Minerals Corporation Q1 2024 Conference Call and Webcast. Session. 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.

Operator

Please go ahead.

Speaker 1

Thank you, and good morning, everybody. Welcome to our Q1 2024 conference call. Our press release and interim filings were released yet 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.

Speaker 1

The forward looking statement on Slide 2 applies to everything we say in our formal remarks and during our Q and A session. And with that, Ben will take you through the numbers.

Speaker 2

Thank you, Stephanie, and good morning, everyone. Royalty revenue for Q1 2024 was $17,400,000 compared to $21,400,000 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 75% in Q1 2024 compared to 86% in Q1 2023. The quarter's margin was also impacted by higher professional fees associated with the silicon arbitration.

Speaker 2

The Renewable Royalty segment had an EBITDA margin of 75% 36% for the current and prior year quarters respectively, reflecting the growth in the renewable royalty revenue. Q1 2024 adjusted operating cash flow of $5,500,000 compares to $4,500,000 in Q1 of last year. The increase is largely reflective of lower cash taxes. Q1 2023 included foreign taxes paid of $903,000 to a Chile tax authorities in relation to a distribution of funds received in 2022. Net earnings of $4,800,000 or $0.10 per share compares to net earnings of $5,500,000 or $0.11 per 2023.

Speaker 2

The Renewable Royalties segment included GBR's non cash equity related to early stage development investments, as well as $1,600,000 in interest expense related to GVR's new credit facility. Net earnings for the quarter were also affected by the higher cost of sales on our Chapada copper stream. Q1 twenty twenty four adjusted net earnings of $0.07 per share is consistent with the Q1 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, the expected near term commencement at the El Salz wind project and the recently acquired Angelo Solar project, which is expected to contribute revenue in Q4 of this year.

Speaker 2

Allocation and liquidity. During the quarter, we made our scheduled debt repayments of 2,000,000 dollars 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 or a total cost of $8,200,000 during the quarter. The Board of Directors also approved a $0.09 quarterly dividend, an increase of 12.5 percent from the previous quarterly dividend. This dividend will be paid to shareholders of record on May 31 with a payment date of June 14.

Speaker 2

Our current liquidity consists of $10,500,000 in cash at the end of Q1 2024. And we have $93,000,000 in unused revolver room on our credit facility. ARR held cash of $67,000,000 at the end of Q1. In addition, on May 2, Altice Minerals received $9,600,000 from Adventus Mining Corp and settlement of an outstanding loan receivable, all part of Adventus' plan of arrangement with the Silver Corp announced on April 25. We continue to hold a 2% net smelter return royalty on leaf through Pampa El Domo project, which with the acquisition by Silvercorp appears to be fully funded.

Speaker 2

And with that, I'll turn it over to Brian.

Speaker 3

Thank you, Ben, and thank you for joining us. Last quarter, we noted that the widely forecast looming supply demand deficit in copper is no longer looming. It has begun. It seems to be gaining broader market recognition now with a meaningful price response delays. A couple of years ago, we would have said utilization.

Speaker 3

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. Things are heading in the right direction. Lithium prices continue to show signs of stabilizing as higher cost production is forced in the market and broader price discovery for this 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 tie 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.

Speaker 3

We also note that Mosaic continues to drive up capacity at Esterhazy through incremental investments and that operation can now boast As an offset to the end of coal royalties within our portfolio, ARR had another strong quarter with continuing ramp 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 index now trading at 1 third of the levels that did at the time of the ARR IPO just over 3 years ago now. To put this in context, if ARR's performance has simply matched the relevant index since IPO, would now be trading less than $4 a share. So 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.

Speaker 3

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 that the Supreme Court of Canada provided last year. In essence, it said that it did not want to uphold law that would cause government to pay for private property expropriations when making regulatory decisions on environmental grounds. We never in this entire process ever object to the right of government to make regulatory decisions for whatever reasons it deems fits, including on environmental 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.

Speaker 3

A position that NGO Group fought strenuously against, including as intervenors in our case. We believe still that the SEC decision agreed with our 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 and property rights in Canada in our opinion and one that should give all land. We still find it ironic that in the year that we made our investments 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.

Speaker 3

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 and continues 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.

Speaker 3

We understand Champion to 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, which has published a more than 9,000,000 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 1 of, if not the largest gold mine by production rate in the world at its peak.

Speaker 3

Incredible. This is before even considering the adjacent 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 replies 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.

Speaker 3

The arbitration deals with the broader district scale land holdings that AGA is consolidators. With that, I can turn it over to questions.

Operator

Thank Your first question comes from Brian MacArthur with Raymond James. Please go ahead.

Speaker 4

Good morning and thank you for taking my questions. Just following up on the last comments 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, 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.

Speaker 3

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.

Speaker 3

I can't really speak to how long it will take them after receiving final submissions to make their decision, but they are it's a dedicated tribunal to this case. It will get their full attention.

Speaker 4

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?

Speaker 3

I think we're looking at it still pretty much the same. All options are definitely on the table where we'd be open to a sale, particularly if it's 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 some what it looks like now probably a very core part of our portfolio if we choose to maintain it.

Speaker 4

Thank you. And my last question just relates to the junior portfolio. Just a couple of questions. In that 45.4%, 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 $45,000,000 or was that sitting somewhere outside?

Speaker 4

And my third question related to that, Ben, is just where does that Adventist loan receivable sit on the balance sheet now?

Speaker 2

Yes, the Adventist loan receivable is not included in that. And your first question, I think you were asking about the other origin shares. So the origin shares are included in that. And yes, I can't recall exactly when we exercised the warrants on that. 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.

Speaker 4

Right. That's what I'm trying to figure out. So you would have you're going to get more cash in from the advantage that 9.6, the loan outstanding would have been 4. So 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? Yes.

Speaker 4

Okay, great. Thank you. I just want to clarify. I wasn't worried. So it's hard to tell exactly what's in that 45.4.

Speaker 4

Thank you for answering all my questions. Okay.

Operator

There seem to be no further questions at this time. I'll now pass it back to the speakers for any closing.

Speaker 1

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.

Speaker 3

Thanks everyone. Thank you.

Speaker 1

Thanks. Take care.

Operator

Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

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Altius Minerals Q1 2024
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