Altius: Royalties &Resources

10/17/2016 7:00 am EST


Adrian Day

Chairman and CEO, Adrian Day Asset Management

This recommended stock 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, explains Adrian Day, editor of Global Analyst.

Altius Minerals (ALS) 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.

Now the company is looking at realizing value from the exploration package accumulated during bear market. And Altius is in a great position to harvest gains and future revenue from this land, in the stronger market ahead.

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 addition to 14 producing royalties, Altius now has 31 non-producing royalties, mostly in iron ore, nickel, copper, zinc and gold. The major generative program over the last couple of years will add royalties for years to come.

There is concern about the exposure to coal; it should be noted however that Altius’ coal royalties are based on volume not price and that there are long-term contracts with local power generators.

This poor sentiment towards coal has hurt Altius’s stock, down from over $15 a share last year. Following the sharp drop in the stock, Altius reinstituted a buyback program, with authorization to buy up to 5% of its shares over the next year.

Altius is a core holding for us; if you do not yet own these shares, you should use the current weakness to buy.

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By Adrian Day, Editor of Global Analyst

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