Altius Minerals (Toronto: ALS), one of our favorite resource companies, reported a strong end to the year, with royalty revenue for the quarter at C$17.5 million, and for the full year C$66.9 million, reports Adrian Day, commodity sector expert and editor of Global Analyst.

These are similar results as for the full calendar year 2017; Altius changed its financial year-end this year. In 2018, base metals contributed over C$29 million (with copper a majority of that), followed by potash and thermal coal, C$14 million and C$13.1 million respectively.

Overall, higher potash volumes and prices had a positive impact, while the decision of Labrador Iron Ore Royalty (Toronto: LIF) — of which Altius owns nearly 5% — to withhold a significant amount of its cash flow from its dividend, hurt results. Altius is forecasting similar total royalty revenue this year.

After the end of the quarter, Altius purchased a 2% royalty on the Curipamba copper-gold-zinc project in Ecuador. The purchase was from a third party; Altius already owns 21% of the equity of Adventus, the company which owns Curipamba.

More important than last year’s results, perhaps, is the tremendous progress made on farming out properties it acquired during the long down turn. Self-described as “a very productive year”, Altius sold or partnered a record 25 different properties, covering a range of minerals, and located throughout Canada, and in Australia.

On all transactions, Altius has created and retained a royalty as well as either payments or work commitments (or both). One transaction is of particular note, the creation of Adia Resources, currently private, created to advance Altius’ Lynx Diamond Project in Manitoba. Altius retains share ownership and royalty, bringing in De Beers Canada as a major shareholder.

One company which Altius sponsored — Alderon Iron Ore (Toronto: IRON), in which Altius owns 38% of the shares plus a royalty on its projects — is advancing its 75%-owned Kami proproperty, a premium iron ore project in Labrador, signing an agreement with Schneider Electric for the lease or purchase of equipment and help with financing.

At year end, Altius had $28 million in cash, $115 million in debt; and a portfolio of investments worth $139 million, most of which is in Labrador Iron Ore ($73 million) and a portfolio of junior equities ($54 million). After quarter end, Labrador Iron Ore share  price has jumped from just over C$24 a share to over $30, boosting significantly the value of Altius’ stake.

Trading at 7 x revenue and yielding 1.4%, Altius represents reasonable value. More importantly, the strong management, balance sheet and royalty pipeline offer the prospect of growing exposure to commodities in the years ahead. It is a core resource holding.

The stock price, having dropped precipitously from $13 to $10 at the end of December, has recovered about half of that. We would buy more on weakness, under C$11.

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