Good day, and thank you for standing by. Welcome to the Altius Minerals Corporation Q1 twenty twenty one Financial Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Laura Wood.
Please go ahead.
Thank you, Adrienne. Good morning, everyone, and welcome to our Q1 call. Our press release and quarterly filings were released yesterday after the close and are posted to our website. This event is being webcast live and you'll be able to access a replay of the call along with the presentation slides that have been added to the website at www.altiasminerals.com. I'll also point out after the call, we'll be holding our annual general meeting again by conference call webcast and the coordinates for that event are on our website and in the management information circular.
Start time for that is 11:30 Eastern. One more event announcement, tomorrow from nine to eleven a. M. Eastern, we're holding a virtual Investor Day call and webcast where we're doing a deeper dive into the fundamentals of our producing royalties and also covering development stage royalties. The details for that are on our website.
The conference call has a live Q and A session, and the webcast is a recording of the session. So no live Q and A interface, but we'd love to get questions in advance, and we'll read them out and answer them on that call. With the Investor Day going on tomorrow, our Q1 call today will be a bit shorter than usual. Brian Dalton, CEO and Ben Lewis, CFO, are both speakers today, and then we'll open it up for questions. The forward looking statement you've seen on Slide two applies to everything we say, both in the formal remarks and during Q and A.
And with that, I'll turn over to Ben to take us through the numbers.
Thank you, Flora, and good morning, everyone. Q1 royalty revenue of $17,800,000 or $0.43 per share was down 19% from Q4 twenty twenty when we had the large end of year catch up dividend from Labrador Iron Ore Royalty Corporation and on some price and timing of sales recognition lags this Q1 that we expect to start to catch up during Q2. On a year over year comparison basis, Q1 revenue was up 9% from last year. Q1 EBITDA was $14,600,000 or $0.35 per share compared to $17,600,000 last quarter, consistent with the change in revenue. The EBITDA margin was 82% this quarter compared to 80% last quarter.
Both Q4 and Q1 EBITDA margins are at the upper end of our traditional range. Relative to revenue growth, fixed costs remained stable, and so we were constructive to margins. G and A expenditures of $1,900,000 in Q1 are down 27% from Q4. This is explained mostly by higher legal and other professional fees in the prior period. The Great Bay Renewables subsidiary G and A is no longer included in our consolidated numbers after the formation of the joint venture between ARR and Apollo Funds in October, with revenue and expenses now presented in earnings or loss from joint ventures.
Adjusted operating cash flow was $8,800,000 this quarter, down 35% from Q4 adjusted operating cash flow of $13,500,000 and was largely caused by the timing of corporate tax installments. The quarterly net earnings of $11,800,000 or $0.28 per share include $0.14 in non cash adjustment items that are identified in the waterfall table and slide that you can find on our website, leading to adjusted net earnings of $0.14 per share. The main adjustment item is a $09 per share gain on fair value of derivatives, which reflects the increase in market value of warrants held within the PG equity portfolio. In addition, there are smaller foreign exchange gains, dilution gains and a reversal of the impairment recorded on the secured loan to Alderaan. We fully recovered the loan amount shortly after the quarter when we received an additional 600,000 Champion shares as part of that receiver chip based asset sales settlement process.
I'll also remind you that we hold a 3% gross sales royalty on the Canny iron ore project, which Champion is currently evaluating. The Board of Directors declared a $05 per share dividend to be paid to shareholders of record on May 31. Payment date will be 06/15/2021. Now I'll turn to the balance sheet and capital allocation. The cash position increased to approximately $112,000,000 at the end of the quarter, mainly because of the net proceeds received from the IPO of Altius Renewable Royalties.
We report ARR in our consolidated financial statements because we currently own 59% of that company. The cash position, excluding the ARR IPO proceeds, is $19,000,000 which has been around our comfort level for the last few quarters. We received $5,600,000 from the exercise of 400,000 warrants that were held by Humana as part of the 2016 Chapada stream purchase and immediately used these proceeds as well as some additional cash to buy back 473,000 shares during the quarter or 1.1% of our shares outstanding for a total cost of $7,400,000 In addition, our regular interest payments or in addition to our regular interest payments, dividend payment, preferred distributions, and debt reduction payments, we also invested 4,000,000 in investments in our PG equity portfolio. This was offset by $7,000,000 in sales. In addition, we invested $2,200,000 in Lithium Royalty Corporation, which was part of a previously disclosed investment commitment.
That's my main remarks for today, and I'll turn it over to Brian.
Thank you, Ben. Thank you, Flora. As Flora said, we have our Investor Day tomorrow, so I'll keep these remarks brief. I don't want to run the risk of having nothing fresh or fun to talk about tomorrow. By way of a teaser for Investor Day, I want you to consider the following excerpts from our 2019 letter to shareholders, which can be found in its entirety in the Investors section of our website.
At the conclusion of that letter, we said, the business is strong and filled with embedded royalty volume growth that is already happening in a meaningful and measurable fashion. This is occurring across a diverse portfolio of long life, high margin mining assets, mines that produce those commodities that are best aligned with long term global structural trend shifts. The Alpeus Renewable Royalty platform is developing more quickly than they could have hoped. The timing of the perfect storm for metal prices is hard to call precisely, but its forces are deeply structural and intensifying. Its demand drivers have already begun to emerge, while the incentivization conditions needed to bring on required levels of new supply for replacements and growth are still absent.
The longer that this combination persists, the stronger the storm is likely to be when it comes, and our royalties will directly and immediately benefit. Our PG business should flourish, and even more production growth will materialize from within our current pipeline. So an incredible number of things have gone on in the world to try to offset that thesis since then. In 2019, there was a Trump trade war with China, emboldened the bear and slowed the approach of the storm. And then, of course, the whole world shut down for the best part of 2020.
To keep the meteorological analogy going, we can probably call COVID the mother of all blocking system. The front edge of the storm has made its inevitable landfall now, however, and it is feeling like a duty. Previous super cycle, we measured from bottom to bottom, ran from about 2001 to 02/2016. Incentive price and sentiment conditions were crossed into around 02/2005, 2006 and persisted until, say, 02/2011 to 2012. If we ignore the little global financial crisis episode in the middle, when resulting supply impacts began to push the market to below incentivization levels for the next nine years or so until today.
The boom sets up the bus and vice versa. Our focus during Investor Day will therefore be to highlight how Altius has positioned itself to benefit from this latest cyclical shift. You will hear the words organic growth and optionality quite a bit. Don't gloss over the forward looking statement warning. We've had a lot of fun putting it together, so I hope our shareholders and investors will find it an interesting session.
We also have a special treat of being joined by champion, David Caterford, who will tackle the topics of iron ore quality and cleaner steelmaking for us and explain why the Labrador trough is about to become so much more globally relevant and necessary. Anyway, hope that's enough of the teaser. Any questions on the quarter?
Adrian, you want to open up the Q and A?
The next question comes from the line of Craig Hutchison with TD Securities.
Hi, guys. Thanks for taking the question. I'm sure you're going address this tomorrow, but just and I don't want to steal your thunder, but just in terms of a question of capital allocation, obviously, given the extraordinary strength we're seeing here in the underlying commodities and in your royalty portfolios, any insight you can provide into thinking what you guys might do with some of that excess cash flow, both in terms of capital allocation and maybe further capital returns to shareholders?
Well, first off, Craig, I can't even tell you how happy I am to get a question like that. We actually had a board meeting yesterday. It look. It's been a really busy, busy, busy quarter between the ARR spinout and everything else. But as we go into the rest of the year and even this quarter, there's a lot of work, that we're planning to do on updating our capital allocation strategy.
We feel like this is a bit of an inflection point now cyclically. Conditions are not great for, for, you know, m and a type activity and buying assets. It's just not the right part of the cycle. That was the last part when we were very busy. We've obviously got, some debt still on our books from all those acquisitions, so that'll be part of the prioritization, but, you know, returns of capital are definitely gonna be a huge part of that discussion.
But give us a give us a quarter or so to do the work and think things through, you know, with a longer term perspective so we can give our shareholders some some better guidance. So work in progress.
Maybe just one other question for me. In terms of your project generation portfolio, we are seeing a lot of renewed exploration spending and budgets here. Is there anything in one or two assets in your portfolio that you just wanna highlight maybe just in terms of what you see the the best kind of growth potential and and maybe the possibility eventually, you know, paying royalty in your portfolio?
It's definitely getting into thunder for stealing thunder from tomorrow, but I'll I'll give it a stab. I mean, the things we're looking at with high anticipation, are probably foremost would be hopes that Champion goes ahead and builds the county project that would be incredibly material event in our future if that were to come to be. Broadly speaking, within the PG portfolio, Ventus, we've got a feasibility study coming this year. Half a dozen or so have resource estimates and PEA type studies coming. I don't think all of those are, you know, really are it's possible for some some of those could get through this cycle.
Others, I think, are probably longer term. That's the best, but they're all, you know, lots of things going in the right direction. Far more speculative speculatively, we won a royalty on a project that AngloGold Ashanti in Nevada has been very busy on called Silicon, and there's quite a bit of buzz around that. Don't know. They've been very tight lipped about results today.
I think there's some strategic reasons for that. But Sure. You know, it's just a little something that we're watching kind of kind of item. You know, there's there's quite a bit. Like, we we we really did a lot of work between, say, 2013, 1617, loading up on land, converted those equity positions.
The junior that ended up with those projects are doing really well. They've been, I think, raising an outsized share of capital. They've been attracting really strong new investors to come in alongside of us. So couldn't be happier with how the PG business is unfolding now that now that speculative capital has returned to the sector. Seems like it's finally left weed and everything else, and it's come back to its natural home.
So not too soon. I agree. Okay. Sounds great. Look forward to
speaking with you tomorrow, and thanks for taking my questions. Cheers.
The next question comes from the line of Carey MacRury with Canaccord Genuity.
Just one question for me on
the quarter. Just in terms of the coal business, you had a big Q4 and then it came down pretty sharply in Q1. Just wondering, is there any guidance you can give us
for coal for 2021?
Is it going be more similar to Q1? And I noticed you mentioned sort of share in us reaching end of life wealth generation. So just any color on the coal business would be great.
Yeah. We don't see much hope for surprises from Sharon. Think that is, of course, a lot of what happened in q four. It's a bit of a surge. I don't know if it was getting rid of what inventories were around or whatever, but we don't see much there.
For Genesee, it looks, you know, like business as usual for a bit of time yet as they get going on their on their gas conversion. So, I mean, I think if I were looking at us and how I see it, mean, looking at Genesee doing okay and and keeping on going for a bit here, but we we all know the writing is on the wall and that Capital Power is trying to get go off of its of its record as well as quickly as possible. So it's a couple more years here.
Okay. Great. That's it for me. I'll I'll save the rest for tomorrow. Thanks.
The next question comes from the line of Brian MacArthur with Raymond James.
Hi, good morning. Again, just quickly vis a vis your capital cycle comments, do you have much more to monetize in the private or junior equity portfolio? Or are we pretty well done? Are you expecting a lot more to come out of that as far as monetization? So we did
the PG portfolio? Yes, please. Wow. You know, we have I think at the end of the March, we reported somewhere in the mid fifties of equity values held. And we've been monetizing, you know, lots over the last few years, but we've also been continuously adding positions because we've, you know, we've still been the team has been doing really well with selling on new projects for new equities with a bit of a natural replenishment that happens there.
So it would have been mid fifties, and and you know what the market has gone since the March. It's more than that now. But, yeah, it's it's there's been good appreciation, and I think there's still quite a bit on some of the names to come. And we'll keep adding new equity positions as additional projects are appended for shares and and royalties. Pretty early days for what's gonna come from that portfolio for this cycle for a long term.
Right. That's sorry. Just my my just to be clear, there there's more private stuff that you can vend out. I mean, last cycle, you had a whole inventory.
I was curious where
we are in that part of the phase of vending the land back out to to juniors, whether we're 80% done or 60% done.
Yeah. Sorry. I I misinterpreted the question. So even if I remember back to 2016, we would have talked about, you know, when it was somewhere around 1,700,000 hectares of land and then an awful pile of sales over the next few years. And the inventory has been running on a sort of just in time basis ever since.
So the team is active in building up positions. There's there's a handful of projects within the portfolio that are, you know, at at different stages, and there's new ones being added. So there's no there hasn't been a, like, a a big inventory there for a couple of years. It's been a you know, but, you know, we we continue to work at reclinations all all every day. The big backlog or the big bolt up, as we call it, through the down cycle, when things were really opportune, has been has been cleared, and now it's just new ideas and and continuous additions.
Thank you very much. I'll keep the rest of my questions till tomorrow. Great.
The next question comes from the line of John Tumazos with John Tumazos Beret Pendant Research.
We realize that the history of all this is very patient, project generating, exploration, getting in sort of on the ground floor and helping to grow a project. And some of the other companies write big checks. In the March, Franco Nevada invested about $600,000,000 in iron ore. They bought a $538,000,000 debenture in Vale as a participating debenture, plus some Labrador iron units. Could you give us a sense of the speed of the redeployment away from coal and potash into base metals and renewables and the trade off between patients or Franco writing a big check and getting immediate exposure?
You know, yeah, I think that's a great question, John. First one, just to clarify, yes, there's no doubt that Franco recently bought the Vale debentures, but I note that they were actually basically disclosing much earlier purchases of Labrador. In fact, based on their average prices, it sounds like we we're running a pretty parallel track in terms of when we started probably in around 2016. There's no other way you can get to that average price other than other than there. We were 2016 and right up into 2018 soon after the we used a bunch of the Fairfax proceeds actually where where we got a lot of our opposition.
As far as the longer term approach, yeah, we're more, I guess, we'll be we're countercyclical, obviously, and we'll build things up a bit slower and let the option value play out. It's kinda where you're going, I think, is, you know, do we buy all through the cycle? And, generally speaking, no. That's not how we do it. We feel really good about the bets we had in some of the earlier stage that we made over the last number of years making it, you know, growing our portfolio, whether it's expansions at existing mines or or new developments like Canning or those sorts of things.
Yeah. I think it's not a I wouldn't look for it. I mean, I would just wouldn't look for it from us. We never say never because special situations arise, but it's not our intent to buy all through the cycle. We buy when conditions are are really opportune, and we let organic growth take over when prices and incentivization conditions kick in.
So that's why we were picking for royalties, whether they were existing operations or development assets that we felt were most likely to be invested in when, when the time came. So big resource lives, great margin positions, pretty straightforward predictors really of future investment. And so that's what we see in our immediate future. The last comment I'll make there is Franco has a different situation than we do in that they have a different equity cost of capital profile, and that gives them, I think, more flexibility, you know, to to work throughout the cycle. I mean, maybe we get there someday, but, that's not what we're to now.
And, you know, the other thing the other way that reflects is that a lot of our acquisitions through the down cycle may use of leverage. You know, Franco, though, we typically do that because their equity capital has got cost of capital if they don't have to. So I don't know if I'm answering any part of your question here. That's we feel really good about where we're positioned for this part of the cycle. And whenever this one end, hopefully, ten or fifteen years from now, we'll be ready to go again on the more on the M and A side, but it's not the key focus right now.
Thank you. That's a very good explanation. If I could ask another question once again on iron ore. Champion lists eight projects on their website. Clearly, a couple of them are much bigger and advanced producing or potentially producing.
Are you open to investing in such early stage iron ore exploration in the Labrador Trough to add to your iron ore exposure? Or is owning 600,000 shares of Champion a good enough way to participate in the quick package of the different growth properties?
We've got a little more than that because we still We we invest invested in Champion back whenever they soon after they bought Bloom Lake. And we have we have somewhere just over a million shares, I think, at Champion, but still, to your question, you know, a lot of our exposure here going forward to what Champion does, at least we hope, is through our royalty in in. We we really hope that rises to the forefront as far as their next phase of expansion and growth develops there. But we also do have other pretty significant iron ore interests in the Labrador Trough.
We've been active there for, I don't know, how long now, fifteen years probably. So we all know about Camby and our royalty there, but there are other projects that actually, one of which we probably have a first resource estimate published on later this year. It's within a company called the Avidian Gold or spin out of theirs or a division of theirs called High Tide. So we're we're definitely you know, we've got more layers of exposure to the Labrador Troughs, and I I do think the Labrador Troughs it's probably been running now for whatever it is, fifty or sixty or seventy years. I think it's really just coming into its heyday.
So from a long term perspective, we're very deeply positioned there. Would we get involved with other projects? Probably. You know, we have a great relationship with Champion that goes way back. And,
you
know, if there's something else that they were advancing and they wanted to work with us, you know, David Michael would only have to pick up the phone. It's been very open here for sure. So it does great.
I'll now turn it back over to John for closing remarks.
Well, thanks, everybody. Yeah. Thanks, everybody, for dialing in, and really appreciate the questions. And we'll look forward to talking to you tomorrow.
Thanks, everybody.
Thank you.
This concludes today's call. You may now disconnect.