Thank you for standing by, and welcome to the Althea Minerals Q4 and Year End twenty twenty Financial Results 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. Please be advised that today's conference is being recorded. Thank you.
It is now my pleasure to hand the conference over to Flora Wood, Director of Investor Relations. Ms. Wood, please go ahead.
Thank you, Jack. Good morning, everyone, and welcome to our q four and year end conference call. Our press release and annual filings were released yesterday after the close and are available on our website along with the presentation. This event is being webcast live, and you'll be able to access a replay of the call along with the presentationslides.com. Brian Dalton, CEO and Ben Lewis, CFO, are both speakers on the call, and Ben will open it up for questions.
The forward looking statement on Slide two applies to everything we say both in our formal remarks and during the Q and A session. And with that, I will turn over to Ben to take us through the numbers.
Thank you, Flora, and good morning, everyone. Thank you for joining us. Annual royalty revenue was $67,500,000 or $1.62 per share as compared to $1.83 per share in 2019. This reflects lower prices for much of the year as well as certain volume curtailments related to COVID nineteen precautionary measures as well as maintenance and equipment related interruptions in the latter part of the year. Prices began a strong rebound towards the end of the year with several approaching multiyear highs.
ILC paid a pent up dividend amount, and we benefited from a full quarter of higher coal royalty ownership, which in combination resulted in a new quarterly revenue record record of $21,900,000 or $0.53 per share in Q4. EBITDA margins of 78% for the year were lower than the 80% recorded in 2019, in line with the lower annual revenue. Adjusted operating cash flow was $47,500,000 or $1.14 per share for the year compared to 44,000,000 or a dollar 3 per share in 2019. The annual cash flows the annual cash flow was higher despite the lower revenue on lower Chapada stream costs, lower G and A expenditures and the timing of tax installment payments in 2020. The adjusted operating cash flow amount does not include net investment proceeds of 6,700,000.0 or $0.16 per share stemming from our PG business.
Although the PG business positively contributes to cash flow, the gains on these investments are recognized under other comprehensive income in our financial statements. The main adjusting items in 2020 are the 1.11 per share impairments recorded earlier in the year, primarily on shorter expected thermal coal lives as conversions to gas based generation continue to accelerate in Alberta. In addition, we recognized a small impairment as a result of the receivership by investee company Alderman Iron Ore. Partially offsetting the impairments were foreign exchange gains and gains on fair market value of a derivative and adjustments relating to equity investments and joint ventures, including the impacts of no longer accounting for Great Bay Renewables or GBR as an underlying subsidiary following a r Altius Renewable Royalties or ARR's joint venture transaction with Apollo that was announced in October. Capital allocation in 2020 focused heavily on the building of Altius Renewable Royalties or ARR as we invested 67,600,000.0 in further royalty based funding to Apex and TGE.
Subsequent to year end, ARR completed a $100,000,000 TSX IPO that is expected to result in less direct capital allocation emphasis at the Alpeus Minerals level going forward. This recently closed IPO, along with the Apollo partnership announced in mid October, sets our ARR up to participate in the tremendous growth in the renewable energy royalty sector that is underway globally. Brian will have more to say on this later. We also extended 9,000,000 on a net basis to increase our ownership of existing thermal coal royalties to 97.3%. We paid 8,300,000.0 in common share dividends in 2020 and repurchased 644,000 shares at a cost of $6,100,000.
Subsequent to year end, we repurchased another 400,000 shares under the normal course issuer bid. These shares resulted from the exercise of warrants issued as part of our Chapada Stream acquisition in 2016. Repayments on our term debt totaled $20,000,000 and we have $41,000,000 available liquidity on our revolver. We ended the year with $21,800,000 in cash and cash equivalents, unchanged from last year, and a $146,000,000 in the market value of mining and other investments comprised
of
the remaining junior equity portfolio holdings and Labrador R and R Royalty Corporation shares. Our net debt at year end stood at a 112,000,000 on a cash basis and a negative 34,000,000 on a cash and market investments basis. That leaves a lot of material for Brian to cover on the outlook and macro environment. And now I'll turn it over to Brian.
Thank you, Ben, and thank you all for joining us this morning. As usual, I'm gonna stay in the big picture today as there's lots of detail available in the formal disclosure materials that we published. Let me begin with some personal remarks today. I must commend Ben and his team for a top notch year of financial management achievement in the face of great and unexpected uncertainty, also a tremendous business development support workload. Altius demonstrated solid financial resiliency through through even the scariest parts of 2020 and then went on to finish the year in stronger shape than ever.
Thank you. I also wanna recognize John, Flor, and Mark who worked like dogs this year in keeping all of our many initiatives moving smoothly forward. They often never knew from hour to hour in which direction they would get pulled next, but they were always exactly where it needed to be, getting it done with smiles on their faces. Chad and Larr and the whole PG team adapted remarkably quickly when COVID derailed many of their global plans and pivoted our focus towards more home turf opportunities with tremendous resulting success. Last but not least, to every other Alpeus employee, my sincere thanks for all the hard work and smart thinking, keeping each other safe, and for being a pleasure to be on the team with during this past remarkable year within this company that we carve out every stone up together.
Thank you, everyone. So 2020 is not a year that any of us will likely forget anytime soon. Stresses and impacts of a deadly pandemic that we have all faced will firmly etch the year in human societal history. It will likely also come to be known as a truly transformative year from a global industrial history perspective. The early lockdown gave many people an unexpected glimpse of cleaner skies and waterways than they've ever seen and paved the way for governments to dedicate massive amounts of economic recovery stimulus spending towards a cleaner rebuild of our futures.
More market facing capital sources also came fully onboard to cement this path forward. As a result, the sustainability based macro trends we have been speaking about and aligning our business with for the past several years all across critical tipping points in 2020. Altius now finds itself well positioned on all fronts through its creation of a renewable energy royalty business from the embers of coal fired power generation, through its focused exposure to the base and battery metals that are critical to the renewable energy and transportation electrification transitions, through iron ores that minimize pollution from steelmaking, and through its royalties on natural products fertilizers that allow the feeding of our growing population while minimizing additional agricultural based deforestation. A great place to learn more about all of the ways that Altius is aligning its shareholders with these objectives is through our recently published inaugural sustainability report. Please seek it out on our website and reach out to floor with any helpful feedback or ideas you might have and how we can keep doing better.
Before jumping in to discuss various developments from each of these areas, I'll say a few words on our new approach to guidance. We will no longer be providing revenue based guidance. Generally speaking, our revenue is a simple function of production volumes multiplied by prices. There are no shortage of ways for investors to find prices and price expectations on an ongoing basis to inform their own views on revenue over whatever time frames happen to matter to them. Going forward, we will continue to provide summaries of our outlook for production levels across our assets, but we've come to the conclusion that guessing at volatile short term realized prices versus holding to our broader cyclical views is quite a waste of the time shareholders pay us for.
Moving on now to our business exposures. Starting with our own made at Altius version of the colder renewables transition, 2020 was a monumental year. Frank Gettin and his Great Bay Renewables team in New Hampshire worked both cleverly and tirelessly in innovating and executing on the business model and have very much to be proud of. Upon the investment in APEC Clean Energy early in the year, we began to sense that adoption of the royalty model in the renewable sector was taking hold With this realization, we set out to to attract a strategic part a partner, a task not made easier during a pandemic, I can assure you, but that ultimately resulted in a joint venture with the infrastructure group at major private equity firm Apollo in q three.
This was immediately followed by an additional investment in TriGlobal Energy and a further enhanced sense of sense of growing sector adoption and ultimately the decision to take Altius Renewable Royalty Corp public. This was completed just a couple of weeks ago. And so today, ARR is well armed with its Apollo joint venture and the proceeds of successful $100,000,000 IPO to further GBR's efforts to deliver on its innovative strategy. Royalties on four U A US based renewable energy projects, now totaling more than 1,100 megawatts, have been created from investments to date, and several more are in progress. Meanwhile, the coal royalties that we used to fund the building of ARR continue to fade out while still contributing.
A few years ago, we decided to not divest our coal royalties and essentially pass the buck on the exposure while also crystallizing losses. We instead decided to use the remaining revenue to try to find a way to fight back the losses and to create something enduring as a replacement. The value of our interest in ARR based upon the recent IPO valuation now exceeds the write down amounts we took when the accelerated regulatory phase out of coal was announced. So this, we owe great thanks to our shareholders for their trust and to our board for their courage. Turning to base and battery metals.
The perfect storm we have been talking about for a while seems to have made landfall. It has now been more than a decade since any meaningful industry capital investment in mine supply replacement or growth has occurred, while existing mines have continued to to deplete or move into more challenging parts of ore body. On the demand side, most of the world has become acutely focused on directing large amounts of investment towards infrastructure that supports a more sustainable future. The build out of renewable energy, including related grid and storage requirements, and EVs and their supporting infrastructure needs, each fully depend on access to greater amounts of the metals we provide royalty exposure to. These include copper, iron ore, nickel, zinc, lithium, and cobalt through our various operating and development stage assets.
During 2020, our existing base metal mines all performed well in spite of the challenges of COVID. Other portfolio development highlights included the continued strong progress of Lithium Royalty Corporation, which we are a cofounding private shareholder, in acquiring new assets and in attracting major private equity firm Riverstone Holdings as a large new investor. Sigma Lithium, over whose key project LRC holds a royalty, attracted significant project financing during the year, and it seems well on its way to achieving producer status. Excelsior Mining, the Gunnison project in which Altius holds a royalty, achieved first copper production late in the year. Adventist continued to advance its feasibility study for the high grade polymetallic Aldomo deposit, which is also sub subject to an Alpheus royalty and continue to attract significant strategic strategic and institutional capital.
Vale continued to advance the construction of its new underground nickel copper cobalt mining operations at Voisey's Bay, and we look forward to hearing from Lundin regarding ongoing exploration results and expansion plans at the Chapada copper gold mine. It was somewhat of a mixed year for our Saskatchewan potash royalty exposures. Prices spent the first half of the year near multiyear lows as previous excess inventories weighed heavily in several key markets, and demand during the early months of COVID looked quite uncertain. By late summer, however, crop prices began to really turn upwards, and potash demand and prices quickly followed suit. Turns out that we kept eating and growing global population throughout the pandemic.
It ended up being a record year of global demand for potash with another record widely expected this year and prices now approaching multiyear highs. The mines we hold royalties on are really well positioned to benefit in this environment as they collectively host the bulk of the world's current spare production capacity. I continue to hold that this is the most globally essential mining district in the world. To put this optionality into a royalty holder's perspective, production levels at these mines can continue to grow into increasing demand by more than 50% before existing current nameplate capacities are reached. And longer term expansion possibilities beyond that are vast and arguably the most competitive available in the world.
Our iron ore exposures relate to the Labrador Trough Mining District, which produces some of the highest grade and purity ore in the world. These forms of iron ore are becoming increasingly important as the next major front of attack on pollution and climate change begins to gain momentum. High priority forms of iron ore result in considerably less carbon based and other forms of pollution during steelmaking compared to lower quality ores that are more typical. Prices for Labrador trough iron ore products have now reached all time highs accordingly. Our interest in the district include indirect royalty exposure to Rio Tinto's IOC mine through our shareholding in LIORC and our direct royalty interest in the advanced stage CAMI project, which Champion Iron Ore announced the acquisition of during the year.
IOC has announced increased growth based capital spending for 2021, and Champion has begun rescoping the CAMI project as part of its own ambitious growth targets. PG had a great year both technically and in terms of commercialization and demonstrated once again why I think it represents one of the world's leading exploration origination teams. Of particular note were several quality projects that I was able to assemble within the emerging Central Newfoundland gold camp, where in fact many of the early roots of Altius were set. And in turn, Vendi's on several new strong partners. Excuse me.
In total, the PG team has now successfully bended more than 60 projects over the past five years, which is likely unrivaled within its project generation peer group. The return of capital availability to the junior sector more broadly was also very positive for many of the junior companies we hold large stakes in. These collectively raised more than a 150,000,000 in financing during the year and have plans for around a 178,000 meters of exploration and resource definition drilling in 2021. To put that in context, all of that core were laid out in a line. One would have to complete the equivalent of more than four marathons just to view it all.
This provides loads of essentially free option value bets to all of your shareholders. Happy now to take any questions that you might have. Thank you.
Your first question comes from the line of Carey McMurray with Canaccord. Your line is open.
Hi. Good morning, Brian and everyone. Just given, obviously, a big change in the commodity price environment, where do you see the biggest upside to Altius in your portfolio over the next couple of years assuming that metal prices stay at pretty good levels here?
Upside from these prices, I mean, really, who knows what the
price are. Necessarily mean
from prices, but, like, in terms
of the underlying assets in terms of
Yeah.
Oh, you
know, expanding or expanding.
Yep. Go ahead.
Yeah. What I got excited about with these prices is that many of them have now reached what I'd call incentivization levels. So you're getting to that point now where, you know, free cash flows from existing operations and just more market type sources of capital are all available. So this is the environment where you'd expect to get the announcements from operators about capital investments and expansions. So, obviously, you know, Chapada and whatever Lundin side do their conditions really couldn't be better.
I don't know if they could have timed that acquisition and the work they've done to to think about expanding any better. You can't ignore potash this. I mean, it's already built. There's 50% growth from here, and you've got huge demand surge underway right now. So, again, the price part is hard to call, Gary.
I don't know where we're to right now. We're definitely in an upswing, whether it's got lots of legs left to it yet because the truth of it is what's amazing is that it still hasn't resulted in anybody breaking from the whole, you know, super disciplined. We're gonna return capital to shareholders to starting to make any kind of capital investment announcements, and it it really can't end until that happens. That has to happen. They have to decide to spend the capital.
They have to put the capital to work, and then you have to start to have line of sight on the production growth. We haven't even kicked off with production announcements. So I'm pretty bullish on prices, but mainly, I would say, you know, that's one lever that's natural and embedded. But the real exciting part longer term for us is that how many of our assets, either that are already built, will get expanded or how many of the development stage projects will get funded and built this cycle. That that's the exciting part for us.
And then maybe one other one. I know I know you guys like to invest countercyclically and, again, you know, given the commodity price environment. Does that mean we're unlikely gonna see new investments over the next couple of years and it's more, you know, moving the existing investments along? Or do are are you seeing any opportunities for for new investments?
Pretty limited. I see opportunities to invest in, you know, more earlier stage situations where we have particular views on further resource growths, maybe some last money in on project finance type situations. But, you know, to be honest with you, there's probably not going to be a lot of large scale operators seeking royalty financing in this environment. You know, they've got other forms of capital. So, yeah, we're I've said it many times.
We're not dollar cost averages. We made in we laid in so many bets through the down cycle that, you know, we feel like we're moving to that point where the growth comes from the existing assets for a while right now. I mean, we'll stay poised. There's always special situations and market anomalies and those sorts of things, but this isn't 2016. And you're kidding yourself if you think it is.
And unless you're a dollar cost average, or that basically means it's the cycle is telling you that this is not the time. This is the time to grow from what you did in the downtimes. Great. Great. Thanks, Brian.
Thank you.
Craig Hutchison with TD Bank. Your line is open.
Hi. Good morning, guys. Congratulations on the IPO of the renewables business. Thank you. You guys you guys announced last week, I guess, your first deal with Apex on the Jay Jayhawk Wind project in Kansas.
Do you guys expect similar deals this year, and how quickly kind of do you expect some announcements on that front?
Yeah. With respect to Apex in particular, I know people were wondering why when we announced the deal last, whenever it was, March, why no no world stemmed from that investment. And the reason for that is when we made the investment in Apex, they had several projects within their pipeline that we called excluded projects together. And these were essentially just projects that they had, you know, subject to prior sale, if you will. They had current negotiations underway, and it wouldn't have been fair or practical to try to have royalties inserted in in on them at that point.
So what's key now is that that backlog is clear. They had a really strong year. They sold a load load of projects last year. It's just that that was part of that backlog, which is now cleared. So Jayhawk was the first one to come from the Apex investment.
That was about 200 megawatt. Apex is targeting probably close to you know, by some historical numbers, they'll probably do close to 2,000 megawatts this year. And most of those projects, if not all of them, are nonexcluded. In other words, they will be subject to royalty. So we do expect quite a busy year in terms of projects being made subject to royalty from existing investments as well, of course, as opportunities for more deployment and to attach ourselves to more portfolios and even to more advanced stage projects.
Okay. Great.
And and just I
know you guys aren't providing specific guidance now, but just in terms of the coal business, you still have a pretty good valuation here for Genesee. Are you expecting similar kind of volumes and prices for 2021 as we saw sort of in Q4 twenty twenty for Genesee?
We're projecting, I believe, a bit of a lower volume coming out of Genesee. Some of it has to do with, you know, just work that's underway as part of the gas conversion, which we expect is going to, you know, impede production, traditional production to some degree, and and also just, you know, where the mining occurs relative to our royalty land. You know? That said, you know, I watch take a quick look every morning at at what the what the generation looks like in Alberta. There's a public site that shows it, and, you know, it's obviously been a cold couple of months.
So Genesee has been pretty flat out for the couple of months here. So, you know, there there's a lot of variables, but generally speaking, Craig, I think the way to look at good coal is, you know, pretty much everything but Genesee is done now, and Genesee is winding down. It's happening earlier than Capital Power probably even imagine twelve months ago. I guess it's a function of you know, I think they're feeling their own pressures from an ESG perspective. So whereas they might have been thinking about running out the coal for longer as long as regulations allowed, you know, other pressures are building.
They're they're in more of a hurry. So a good reference point is the investor day materials that they provided. Think 2023, 2024 is when they're targeting being being fully gassed. So the end is nigh, but that's fine. We got our work done.
We got we got our work done, thankfully. I thought we had so much more time on that investment, you know, taking the coal royalties and building out the renewables business that it could have been a quite a gradual thing. And in the end, we actually ran the renewables build up harder probably than we would have imagined. And, boy, are we that we did. Everything everything happens faster these days than you imagined.
So I thought we had loads of time, and I think in the end, we were just in time.
Alright. Thanks, guys. Thanks for taking my question,
and congrats on a great year. Thank you.
Brian MacArthur with Raymond James. Your line is open.
Good morning. I just wanted to follow-up on the countercyclical investing and Carrie's question. But on the PG side of the business, which, again, as you said, maybe doesn't get as lot of focus, How far are you through the vending process this cycle versus last cycle? Have we all that land you got when things were out of favor, is most of it into vehicles now, or is there more to do on PG vending business as we go forward?
Like, in terms of the big bill, what I'll call the big inventory buildup, say, in '20 you know, really when the when the cycle turns out in 2013 or so, 12/13, where the juniors ran out of money. Like, we really loaded up on projects, and I won't say we were indiscriminate, but we were if there's a key belt with land coming open in it, that just just take your brain out and grab it. That sort of big inventory buildup has definitely cleared. There's been 60 projects, I believe, from that that have been vended out. That doesn't mean we don't continue generating projects in the PG business.
Really, what it means at this part of the cycle when, you know, access to land just isn't the same. A lot of juniors and majors are funded, and the the amount of prospective mineral terrain that's available to acquire is is dramatically reduced over a lot of what have been in that period. But there's always room for you know, more innovative new ideas. So branching out into new trains, new ideas, just more more of a deeper technical focus, and things that come from that are always attractive. So that's I I still see more projects getting generated and created, and I do see more project sales.
But the big wave we were very purposeful at the beginning, you know, around 2016, 2018 when the first signs of capital started to show up for the better of the juniors and even, you know, the majors started to get their exploration budgets back. We're very purposeful about getting that those projects out into the hands of the the the groups that would ultimately explore them as early in the cycle as possible. Know, exploration takes time, and that was a bit of a strategic change over how we would have ran the business model in the previous cycle. So I guess long answer to your question, but, yeah, the the backlog of the big inventory amounts are already are are already placed, and the bets are in, if you will. But, you know, the team is is busy generating projects.
And, actually, quite a good just year this year in adding new projects as well as pending on projects that didn't exist at the beginning of last year.
So just if I can ask a little bit more, when you say innovative, are are you talking new commodities? I don't know. Maybe manganese, which is in the whole EV chain, or are you talking innovative financing in the sense that you wouldn't just be doing royalties, you'd be doing other things as well, and and the royalty model would change.
It might be just new takes on existing belts or even trying to open up new belts. So more true generative work versus, say, 2015, you could walk into Chile and, you know, here's the two biggest copper mines in the world and look. There's a big chunk of ground open up. Well, just grab that. So that was that was there.
You couldn't do that today, obviously. But thinking, you know, much more technically, much deeper deeper levels of sort of more of a scientific approach to generating new concepts and new belts, That's more where I'm I'm talking about. More hardcore science at this point. Less realistic work.
Great. Thank you very much. That that's very helpful. Thank you.
James Willen with Aldebaran Asset Management. Your line is open.
Thank you very much for taking my question. Altius has acquired lots of shares in Origin royalties over the last month. What in particular makes the purchase of Origin royalties shares extremely attractive at the present time?
Oh, we have been invested in the predecessor companies to merger of Everem and Renaissance, both quite quite strong project generation teams in their own right. It has the royalty on the Hermetano project, which is moving along nicely, and it also has a royalty on a, I guess, a rumored discovery in Nevada that that if it's if the discovery is anything close to the rumors is is pretty pretty exciting. But our view there is is a bit longer term. We we just like the business and how it's being run. We like it as a project generator.
We like Patty and the team, and we felt that the share price was, you know, was attractive and decided to add to our position. We we've been making a lot of cash in the PG business over the past several months, so just selectively redeploying here and there.
Thank you very much.
Thank you.
Adrian Day with Adrian Day Asset Management. Your line is open.
Yeah. Thank you. Hi hi, Brian. When I was at one of your meetings, I don't know if it was ten years, fifteen years, or what it was, time flies. But you mentioned that you're sort of I'll call it a broad goal or broad aim was to be exposed to commodities more or less in proportion to their market size.
And I'm wondering if there are based on that, if there are any particular areas that you feel, you know, you're missing or you're significantly underweight that you'd like to you'd like to boost?
One that's always stood out for us, but there aren't many ways in, is aluminum or alumina. You know, we've thought about it, but it's it's more of a industrial, less of a sort of a mining geology driven type business. That's one that if something strange could be worked on, we'd certainly take a quick hard look at it. And to be honest with you, you're exactly right. I mean, we tried to stay away from relatively smallish market type commodities and and that volatility in favor of more bread and butter and sizing our our portfolio around general size of the traded markets.
So on that basis, why are we investing in lithium today? And we are. We have got a big focus there or have been for the last several years because it you know, on total traded volume, it wouldn't seem to fit the bill. But there, it's just a case of, you know, we expect it to, and we're we're getting out ahead ahead of it. But broadly speaking, you know, I I do feel like the portfolio is is pretty balanced.
Like, you know, another way to describe what what you're describing, what I would have said probably at the same time is that the objective here might be to try to create a an alternative to investing at the operator level into diversified mining. So, ultimately, to, you know, to represent the alternative that Franco does to Barrick or Newmont. Well, how do we do that relative to a Rio or a BHP? And, you know, I think we're pretty we're in pretty good shape in that regard now. Zinc is one that's probably kinda come off with seven seven seven in a couple years, but then you've got Curry Palma coming on behind that with loads of zinc in it.
So no big pressure. Again, it's long answer, but no. I don't feel any big pressure anywhere within the portfolio right now that something is really way overweight or way underweight, against the exposures we wanna have.
Okay. Super. Second quick question. Any updates on the lawsuit in Alberta?
Yes. There was a I think we announced on this, but there was a call it a hearing. It's not before a judge. It's more a sort of a mediator I could call a master.
It's sort of a sublayer to the courts that heard things out in late fall, and that didn't go our way. But it it really has no teeth, and it's not binding. So, basically, the real first. Day in court in any way.
Okay. Super. Thank you.
There are no further questions at this time. It's now my pleasure to turn the call back over to Flora Wood for concluding remarks.
Thank you, Jack, and thank you everybody for tuning in. Those were great questions, and we'll look forward to speaking to you all after the q one results. Bye bye.
Concludes
concludes the Alpheus Minerals q four and year end twenty twenty financial results conference call. We thank you for your participation. You may now disconnect.