We expect a pullback in gold over coming weeks; we do not expect it to be particularly long or deep, and it will present opportunities to buy, notes resources expert Adrian Day, editor of Global Analyst.
Altius Minerals (Toronto: ALS) — one of our favorite resource companies — has a deep pipeline of projects, some in development and others very early stage.
For the quarter, revenue was $16.3 million, down from $21.9 million. The company has withdrawn its full-year guidance, because of the shutdowns, with analysts looking for around $65 million revenue this year (down from $78 million for 2019).
Altius will experience sharply falling revenues from the 777 Mine in 2022 ahead of mine closure, previously one of its largest earners. It has four projects in the development phase which are scheduled to replace this revenue.
In addition, Altius has recently made large investments in renewable projects — wind and solar energy — totaling about C$100 million. The expectation is that Altius will be receiving full royalty revenue on these investments by the end of 2023.
Currently, Altius has $32 million in cash and net debt of C$122 million. It also owns a very liquid $50 million in Labrador Iron Ore shares, as well as a portfolio of junior resource companies.
This consists for the most part companies with which Altius has joint ventures or has royalties on a property owned by the companies. It has done a very good job of managing its junior equity portfolio, generating almost C$1 million from sales at the end of 2019, for example.
There are future sources of revenue outside of the royalties. Major holder and famed Canadian investor Prem Watsa is expected to exercise his warrants in the company by the end of 2022, helping to pay off its debt by mid-2023.
Altius remains a core holding: disciplined and innovative management, a good balance sheet, and diversified assets and deep pipeline.
Given our concern about a pullback in the resource sector, we would hold and wait for better prices to buy. If you do not own it already however, it is good value and can be bought as a long-term holding.
