Altius: Royalties and Resources

06/25/2018 5:00 am EST

Focus: COMMODITIES

Adrian Day

Chairman and CEO, Adrian Day Asset Management

Altius Minerals (Toronto: ALS) is one of our favorite junior resource companies; the miner is pursuing exploration and building royalties, and is a good buy at current levels, explains Adrian Day, resources expert and editor of The Global Analyst.

Altius Minerals reported modest increases in revenue, reflecting “slow and steady cyclical price rebounds as well as incremental volume increases”, according to CEO Brian Dalton.

Copper currently has the highest allocation of revenue, at 36%, with strong results from Yama’s Chapada Mine where a new expansion has just been announced, foretelling a strong outlook.

Thermal coal had a strong quarter, but the overall allocation to that commodity continues to decline, since Altius’ royalty is based on volume, while other royalties are based on price, and commodity prices generally improving, while potash—another big segment for Altius—has hit cyclical lows (according to Mr. Dalton).

Dalton commented that the mix of commodities “is not bad” relative to the size of the commodity markets overall, with a few major commodities, such as aluminum, difficult to purchase royalties on.

But he emphasized that the company was more focused now on good quality assets than on tweaking the mix to ensure it precisely matches global markets.

Altius has also just launched a renewable energy business in joint venture with Great Bay Renewables, which lends the technical expertise in that sector.

The junior mining firm has $57 million in cash, with almost the same amount drawn on term debt and another $75 million drawn on the revolver (for a total of $128 million debt).

It recently drew on its revolver for its recent potash acquisition, so total debt is higher than normal. Indeed, the company is in the process of re-negotiating its debt. In addition, the company holds a portfolio of equities in mostly junior companies.

Down from $14.50 in April, with strong cash flows and a broad land portfolio, some joint ventured and more available for joint venture, Altius is a good buy here.

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