Altius: "Positive Developments All Around"

shallow focus photograph of black and gray compass

Image Source: Unsplash

In the gold space everything is on sale and it’s a little like being a kid in a candy store. With everything down, we can afford to be highly selective. We see positive developments all around for Altius Resources (ATUSF); the company announced fourth-quarter revenues of almost $22 million, up 33% from the previous quarter.

Receipts were boosted by a doubling of thermal coal revenue due to the acquisition of an additional royalty in July; a large dividend from Labrador Iron Ore (LIFZF), which had withheld distributions for most of 2020; and stronger commodity prices overall.

Copper revenues account for about 35% of the total, followed by potash at 21%. Many of the assets are very long-term, over 1,000 years in the case of potash, with some of the iron ore and copper assets holding over 50 years mine life.

The most important recent development was the IPO of Altius Renewable Royalties. Altius initiated and developed the business and recently brought in Apollo Capital as a partner to co-invest in new assets. This unit was taken public far sooner than many thought it would, which I assert as evidence of its rapid growth.

Altius Resources currently owns about 60% of Altius Renewable Royalties — valued at approximately $60 million in the market — as well as royalties on different assets. By spinning it off, the renewable company can raise its own capital, and we expect strong growth in the period ahead.

There was more positive news recently with the completion of the acquisition of the Kami iron ore project by Champion Iron. This is a high-grade and high-quality project, stymied by the collapse in iron ore prices several years ago. They have since recovered. Altius — which was a shareholder, lender, and royalty holder of the previous owner (having initially spun out the project into a new company) — now has shares in Champion (the current value is over C$20 million) plus production-based payments.

The company also continues with its project generation business. Over $150 million was spent on these properties last year. In the last four years, Altius has successfully sold 61 properties for royalties and shares, and it continues to assemble new projects for which it is seeking partners. As of year end, it had cash and public equities valued at $136 million (just $30 million in cash), with debt standing at $141 million.

The company sees continued strong cash generation, but they "don’t see lots of places to spend it.” Altius, having spent the lean years assembling properties, is now in the harvesting phase. A higher dividend in the years ahead is a possibility. I see Atlius as a buy.

There is a difference between Adrian Day's money management services and his investment newsletter, and these should not be confused. A discussion of the legal and practical differences can be ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.