Contrarian Royalty Company Positioned For The Next Bull Market

Altius Minerals Corp. (ATUSF) is a core holding in the resource space, a company that generates and acquires royalties, run by one of the shrewdest people in the business. It has long taken a contrarian stance, acquiring land during bear markets and harvesting in strong ones. Over the last few years, the company has purchased several royalties on various commodities, resulting in a fairly diversified package of royalties with exposure to many commodities. It has also been busy acquiring large land packages around the world, particularly in Chile, Finland and Ireland, as well as in Michigan and across Canada, which it hopes to turn into joint ventures with exploration companies and eventually additional royalties (as it has done so successfully in the past).

One last new royalty 
CEO Brian Dalton thinks the market has turned, reducing opportunities to acquire cash-flowing royalties. (The copper royalty on Chapada—see below—"came just under wire," he says.) Now the company is looking at realizing value from the exploration package accumulated during the bear market. And Altius is in a great position to harvest gains and future revenue from this land in the stronger market ahead.

Indeed, we have two examples of the strategy at work in just the last couple of weeks. First, a private-company optionee on a B.C. coal mine is to be acquired by an Australian public company; Altius retains its shareholding as well as a royalty. Then, just in the past week, Altius reported new gold discoveries on a property in Newfoundland (Wilding Lake), and an agreement to option the project to a new public company in return for shares and a royalty.

Revenue up again, despite difficulty at one royalty 
In the last year, Altius received revenue of $33 million (or 83 cents per share), from the royalties it acquired on coal and potash (from Sherritt) and the Triple Seven base metals mine (through the acquisition of Callinan). The base metals royalties—despite low prices for many metals—now represent almost two-thirds of the big coal revenue, and Altius aims to further add to base metals royalties to further diversify its royalty base. In May, it purchased a copper royalty on Yamana's Chapada gold-copper mine, which will increase base metals revenues for the year ahead. Chapada is the third major cash-flowing royalty acquired in the past three years. It is a long-life, low-cost mine, while Altius believes there is a lot of upside in the mine, beyond the reasonably modest pro-forma returns and commodity price upside.

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