Good morning. My name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Altius Q1 twenty nineteen Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. Flora Wood, Director of Investor Relations, you may begin your conference.
Thank you, Heidi. Good morning, everyone, and welcome to our Q1 conference call. Our press release and quarterly filings were done yesterday after the close and are available on our website. This event is being webcast live, and you'll be able to access a replay of the call along with our presentation slides on the webcast and on our website. In the room this morning, we've got Brian Dalton, CEO and Ben Lewis, CFO, both of whom are speakers on the call.
We also have Frank Getman with us, CEO of Altius Renewables, here for the Q and A session. We've done some marketing recently in Toronto and Montreal with the Renewables team and had lots of interest in our first wind energy transaction and the general transition underway from coal to renewables. Stephanie Hussey, Director of Finance, is also with us. Getting started, you'll see the forward looking statements, Slide two. It applies to everything we say, both in the formal remarks and during the 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. We had an excellent quarter. Altius generated $21,800,000 or $0.50 per share in royalty revenue during the quarter, up 24% from $17,600,000 or $0.41 per share in Q4 last year. Adjusted EBITDA of $17,400,000 or $0.41 per share is also a record compared to $12,700,000 in Q1 last year and $13,400,000 in Q4. Net earnings of $6,300,000 or $0.15 per common share include a foreign exchange loss and a loss on derivative financial instruments.
Together, these two items are roughly $974,000 or $02 per share, which gives us normalized earnings of $0.17 per share compared to normalized EPS of $09 in Q4. Revenue guidance for the year has recently been increased to 77,000,000 to $81,000,000 from earlier guidance that we provided of $67,000,000 to $72,000,000 This is reflective of the strong first quarter performance and other positive developments within our portfolio. We ended the quarter with $21,300,000 in cash and cash equivalents and $180,000,000 in the value of public equities comprised of the junior equity portfolio and Labrador iron ore royalty shares. The junior equity portfolio finished the quarter at $61,000,000 on a mark to market basis, which does not include net investment proceeds of $7,500,000 during the quarter. We had an active quarter for both the purchase of new royalties and new investments.
Royalty investments increased by GBP 13,500,000.0 with the purchase of the Kuripamba 2% net smelter return royalty from RCF. We also used the combined total of $23,700,000 in cash to add to our Labrador Iron Ore Royalty Corporation position and to acquire the TGE renewable royalty portfolio. We also added approximately $1,000,000 to our investments with Lithium Royalty Corporation to acquire an additional participating interest in a development stage lithium royalty from Sigma Lithium. The other uses of cash in the quarter were the scheduled 5,000,000 repayment on our term debt, a $1,300,000 preferred share distribution and a quarterly cash dividend of $0.04 per share. Total debt at quarter end was $135,000,000 but this has since been reduced to $109,000,000 with another scheduled $5,000,000 repayment of term debt at the April and an $11,000,000 discretionary repayment on the revolver.
Steady royalty revenue growth is allowing us to accelerate the repayment of the borrowing that was utilized to fund several important acquisitions during the last few years. As we begin to look forward to more noncapital requiring organic revenue growth, we will be in a stronger position to repay previous acquisition related debt. That said, we still retain the credit based liquidity and flexibility to execute on special situation acquisition opportunities should they emerge. Last but not least, the Board approved an increase to our regular quarterly dividend to $05 per share that recognizes the growth that our diversified portfolio of long life royalties has been experiencing. And with that, I'll turn it over to Brian.
Thank you, Ben. Good morning all and thank you all for joining. On our last conference call, I described structural shifts underway globally related to pollution reduction and decarbonization initiatives in transportation, power generation and steel making. I also highlighted the strategic long term acquisitions we've made over the past several years to address these macro trends. As Ben has just outlined, these investments are working well and have resulted in a record quarter and solid justification for a revenue guidance increase, accelerated debt reduction and a dividend increase.
Today, I'll speak to a few quarterly highlights in both the royalty and project generation business and then I'll finish by touching on our assessment of where we are in the cycle and the resulting adjustment of prioritization within our capital allocation strategy. Our copper stream from the Chapada mine benefited from particularly strong fourth quarter twenty eighteen production that partly flowed through to us during the first quarter. The big news from Chapada, however, was the announcement that operator, Yamana Gold, has agreed to sell the operation to base metals focused Lundin Mining Corp. While Yamana has been a great and effective counterparty, we do welcome this change since we have long held that Chapada is a copper district with gold credits and not vice versa. We also believe that there remains exceptional copper exploration upside throughout the large property package that Lundin is well suited and capitalized to maximize on this type of opportunity.
$7.77 revenues were weaker this quarter as the mine plan encountered lower zinc grades. Hudbay Minerals did report however an increase in ore mined due to improved equipment availability and a focus on improving several key performance indicators. It also announced a planned extension of the mine life into 2022 based on its most recent estimate of mineral reserves. Vale continued to progress the $1,700,000,000 development of an underground mine, which is intended to extend the Voisey's Bay life to at least 02/1934. Vale expects the underground mine to begin production in 2021 and to ramp up over four years, while the current open pit mining of the Obwai deposit is expected to progressively decommission through 2022.
During this transition period, we expect royalty amounts to remain around currently subdued levels and to improve thereafter. Revenue from our potash mine royalties in Saskatchewan continued a trend of steady orderly growth as a result of improving potash prices and a continuing ramp up of production levels into strong global demand growth. Note that at current rates, these mines can collectively further increase production by almost 50% before nameplate capacities are reached. We increased our holding of Labrador Iron Ore Royalty Corporation from 5.46% to approximately 6.3% during the 2019. Lyric has recently confirmed that it operates as a passive flow through vehicle for proceeds from a 7% gross overriding royalty and a 15.1% equity position in the Iron Ore Company of Canada operations in Labrador.
Dividends received were up strongly as a larger than normal cash build up during late twenty eighteen was distributed to shareholders this quarter. Iron ore prices have moved up substantially during the quarter on the combined basis of considerable supply disruptions and continuing global steel demand growth. A noteworthy tidbit here is that much of the supply that has disappeared contained low impurity levels and was critically important for blending with pollution and cost intensive high impurity ores. IOC produces a rare ultra low impurity ore. Our royalty on Teck Resources, Cheviot metallurgical coal mine benefited from significant volume improvements during the first quarter compared to recent periods.
Teck is currently undertaking a detailed design study to evaluate the Mackenzie Red Cap project, which has the potential to extend production at Chevy at Cardinal River to approximately 2027. The development decision regarding the project is expected later this quarter. Production volumes related to our tonnage based electrical coal royalties in Alberta were stable during the quarter and continued to provide consistent revenue. We continue to progress litigation against the Alberta and Canadian governments related to policy and regulatory changes that will effectively expropriate our royalty entitlements at the Genesee mine after 02/1930. We also announced our first renewable energy royalty investments during the first quarter.
And you will recall that these are intended to replace electrical coal within our commodity mix as it is phased out over the coming decade. This first investment is related to a portfolio of U. S.-based development stage wind energy projects being advanced by Texas based TGE, which has an excellent track record of generating projects that successfully reach commercial operational status. As Flora mentioned, several members of the ARR team, including CEO, Frank Gettman, are here with us at St. John's this week.
And Frank is here today and available for any questions at the end of the call. The Corporation's junior equity portfolio continued to edge up and seeming defiant to the apathy being displayed in the capital markets for the sector. The portfolio had a market value of $60,700,000 at March 31. This does not include proceeds from sales and investments during the quarter that was a net amount of $7,500,000 This amount also excludes the market value of Labrador, BIORC and the book value of privately held Lithium Royalty Corporation, which stood at $118,400,000 and $9,400,000 at the end of the quarter respectively. Within the Project Generation business, we are shifting our primary emphasis away from the conversion of our portfolio of mineral projects into royalties and junior equities, primarily because this objective has largely been completed with 57 projects dealt since the market bottom in 2016.
We will now work closely with the management teams of the various junior equity portfolio investment companies to find ways to add value through the provision of technical and various other supports were deemed helpful. In terms of a highlight development within our PG business, note that Altius owns 15,500,000.0 shares or approximately 22% of Adventist as well as a 2% royalty on its Curipampa project located in Ecuador. Subsequent to quarter end, Adventist released an overview of a preliminary economic assessment for the El Domo deposit, which is part of the Curipampa project. This described robust project economics while outlining next project steps, the planned testing of additional nearby exploration targets. Also subsequent to quarter end, Adventist announced an equity financing, which is being led by NOBUS Group, an influential Ecuador based conglomerate, who will be very helpful in Adventist navigates its all important social licensing programs in that country.
We have sold a portion of our holding in Champion Iron Ore. This was done irrespective of our generally positive views on the value and potential of Champion and is instead reflective of the fact that our interest was converted entirely to a non cash flowing equity interest at the 2018. We generally feel that pure equity holdings without a strategic royalty or other direct revenue generating component are not appropriate as long term holdings within Altius. Also subsequent to quarter end, we announced an investment to increase our ownership of Renaissance Gold. Renaissance holds a royalty interest in the Silicon project as well as several project joint ventures that are anchored in royalty interest.
Altius is also a direct royalty holder in the Silicon project which is being advanced by AngloGold Ashanti and for which the AngloGold CEO recently indicated that a new discovery has been made. Another positive PG portfolio development is the continued entry of strategic investors into several of our portfolio companies. This stands in contrast again to the still near complete absence of capital market participants in the junior sector. Within our portfolio examples include Newmont buying into Everem, Kinross into Walton, BHP in the Midland, De Beers in India, AngloGold in Renaissance Eirik Spradt investing in Sockerman Atochu in Allegiance and Wheaton, Precious, Greenstone and now Nobis investing in Adventus. Finally and as touched upon by Ben, given the recovery of commodity markets since 2016 to levels that are beginning to translate into stronger operator margins and cash flows, Altius foresees decreasing opportunity for M and A based royalty activity in the near term after five years of intense activity.
This is now being more than replaced, however, by the improved confidence of operators to sanction asset level investments to build, extend or expand operations at several of our royalty projects. As conditions begin to favor this type of non capital requiring organic royalty growth versus providing deep value M and A type opportunities, we expect to transition our capital allocation prioritization towards the repayment of borrowings that we utilized for our many strategic acquisitions during the cyclical trough period. If this cyclical transition persists, we look forward to being able to continue to increase our dividend in accordance with our growth and reduce debt service and repayment costs. And that concludes my remarks on the call and we're happy to take your questions. Operator, could you open up the Q and A please?
Certainly. And it appears there are no questions in the queue.
Okay, well, that's an unusual circumstance for us. We definitely didn't prepare any script for that.
We were very clear.
Yeah, they're all hypnotized. I guess if there's no questions for
My apologies, we just had a couple queue up.
Excellent. And your first question is from
the line Orest Wowkodaw with Scotiabank. Please go ahead.
System issue because we couldn't star one up until about five seconds ago, just so you guys know. But my question was on Chapada and with Lundin's announced acquisition of Chapada, I'm just wondering if you see upside to the value of your royalty there, maybe through higher production levels or more focused mine plan on copper and what kind of upside we might see there?
Yes. Thanks, Orest. I recall being on the due diligence visits when we were considering that purchase and what struck us more than anything else was that, first and foremost, this is not a gold district, it's a copper district. And we were pretty taken aback by just how much exploration potential we saw throughout the property to the point that we even tried to convince Humana to sell us the peripheral exploration lands at the time. They obviously didn't go for that.
So yes, I think that Lundin is really well suited to advance those opportunities. I think there's potential for several other deposits on that project beyond what Yamana has already begun to talk about in terms of more immediate production expansion levels. I should note however though that there is a small reduction in our stream amount that accompanies an initial expansion. It wouldn't I forget what the actual numbers are, but it's certainly in our materials. But it wouldn't impact on a larger expansion.
And the other thing that I think is very important to point out here is that our stream amount is not capped. We were very focused on making sure that we maintained full exposure to the asset and all that might happen to it in the fullness of time. So it's a really positive development. It's a copper asset being run by a copper miner and we do believe that there's a lot of option value there in the form of exploration, discovery and expansion production rates for sure. Really good news.
Awesome. Thank you very much. Thanks, George.
And your next question comes from the line of Craig Hutchinson with TD Securities. Please go ahead.
Good morning, guys. Just
a question on
your iron ore business. So you guys have added to your LIARC position a couple of times now. Obviously, since you guys put out your asset segregation analysis, the share price has actually weakened despite actually stronger iron ore fundamentals. Do you guys have a sort of set limit internally in terms of how much of a position you're willing to add here? Are you sort of comfortable with the existing position?
Or if you see a pullback, would you add more?
Generally, I'd say that we're comfortable around where we're to right now. If you look at the presentation, you look at the percentage of revenue that we have coming in from iron ore, it's starting to match up relatively well with the amount that iron ore represents to the global mining industry. So I think it's a nice it's around a nice level within our portfolio. More recent acquisition during this past quarter timed with a really sharp and unusual pullback in the share price. And yes, so I mean if it looks really dumb, we're going to buy more for sure.
But
there's
a we see our position right now as a core position, whether we'd also do trade around a little bit around with a bit of a trading position there. I mean we know the asset really well, so we're certainly in a good position to do so. But we wouldn't rule that out. But generally speaking, we're happy roughly where we're to.
Any potential updates on Alderon and how that project moves forward?
There are things happening there, but I'm not really in a position to talk too much about it. It's obviously there's an effort underway by Alderon right now to look to strategic partners and other opportunities to advance project. I mean realistically, if ever there was a time for new high grade,
low
impurity, magnetite rich pellet feed type iron ore sitting on infrastructure now would seem to be it. So there is a big push underway and we're trying to be as helpful as we can, but I can't really speak any more to it than that.
Understood. And maybe in terms of your renewable energy business, I know you guys have some stage milestones and payments to make. Can you just maybe talk about how that's going and when you guys sort of expect to make your next sort of payment going forward?
I'm going to hand that one over to Frank.
Sure. It's going well. Things are on track with TGE and their development schedule. I would expect later this year, there would be they would achieve milestones. So there would be another tranche released in the schedule.
Things are on track. We're still looking at late twenty twenty to have the first cash flow from this and then going forward from there building the position over time.
Okay. And
maybe one last question for me. I know, Brian, you mentioned that just given where we are the cycle, maybe there's less opportunities to do royalties with some the producing companies given that most companies are in a cash flow in position. Are there other opportunities to buy royalties from other players in the industry? I know you guys were able to purchase the Caripamba one this past quarter. Are you seeing opportunities there in terms of people selling down some of the royalties that maybe are non core?
It's a funny time right We're definitely not seeing much opportunity coming out of producers and those that have cash flow. It's just not desperate times for them. They can be a bit more selective. And generally speaking, when we like to buy when people have to sell, not when they want to sell. So that's the first thing.
And then when it comes to development stage opportunities, we need more things working at the same time. You're not going to do a project complete project finance generally around royalties and streams. So you need equities and debt markets to be open as well. So we're not at that point. I think there would be appetite amongst royalty players, including ourselves, particularly where there was a really strong technical view.
But the rest of the market just isn't there yet. And until that happens, I expect that to be subdued as well. But we'll stay ready.
Okay. All right. Thanks, guys.
And your next question comes from the line of Carey MacRury with Canaccord Genuity. Please go ahead.
Hi, good morning. Just had a question on the Alberta litigation. Just wondering if you could provide a little more color on where that stands? And is there any sort of milestones or timeline that you're thinking there?
It's not a fast process, that's for sure. We haven't maybe Flora, you Flora has been keeping on top of it pretty close, so you might be able to speak to anything more specific. But generally, we're just trading a bunch of paper back and forth and getting ready for discovery, that sort of thing.
Think
so. It'll take a while.
The last items we have, Kerry, are posted on the website under COOL 02/1930. But like you said, Brian, I think there's a long time lapse before the and it's the other side, I think, who has to do something next.
One thing I will point out is that the newly elected Premier, one of the planks of his platform was to ensure that where policy resulted in events tantamount to expropriation, the government would treat those types of events as expropriations and provide compensation. Kind of goes pretty much straight down the alley of what we're talking about and claiming. So we'll see how true they are to their word now that they're in power versus what they promised reelection. So something something to look to. But, yeah, the whole concept of of takings as being essentially expropriations was was was quite clearly articulated in the campaign.
So see if mister Kenny is the promise keeper.
So maybe on that point, with the new Premier, I think they're pushing back more on the carbon tax. Do you think there's an opportunity for some of this coal to gas gasification that's happening to slow down and could end up having more life out of the coal assets?
Possibly. I mean the other thing that's been fun to watch there is when all the compensation was handed out to encourage shifts from coal to gas, There were announcements made, but they were pretty loose and it seemed to deal more with building in the flexibility to switch between fuels as, you know, economics dictated rather than full blown philosophical conversion. So that was interesting to watch. They were quite happy to take all the compensation, but we're not seeing the big actions that would drive the changes that were meant to motivate. Obviously, a lower carbon tax would change the skew the economic argument for coal for longer if that's the main factor.
But yes, interesting times in Alberta as always.
Maybe one last one on the Gunnison project is under construction. I'm just wondering what's your view on how that's progressing and when you expect to receive royalty revenue from that one?
From what we understand from Excelsior, things are moving along quite well. We don't we haven't been down ourselves in a while, but we're going to go down pretty soon. So maybe by the next call, we'll be able to give you a little bit of a better update. But all reports are that things are quite on track.
Okay, great. That's it for me. Thanks.
Thanks, Carey.
And your next question comes from the line of Jacques Wortman with Laurentian Bank. Please go ahead.
Hey, good morning, guys. Three quick housekeeping things for me, if you could. First of all, I just want to confirm that you said that you sold all of your Champion stock and if you could just let me know when about that was?
We haven't sold all of the Champion position. Sold some during the first quarter share price would have been in the $30.1.4 dollars range, I guess.
No, no, 2%, wasn't it?
That was during the quarter and then subsequent to the quarter we sold another little bit and that would have been in current range, so somewhere north of $2 We currently hold 2,500,000.0 shares.
That's exactly what I was looking for. Okay, thanks a lot, Brian. Second thing was, could you just give me a sense I know that seven seventy seven is winding down by sort of Q2 twenty twenty two, but what's the relative timing of your receipt of your royalty revenue? Is it essentially a one quarter delay?
This is Ben. So the zinc will get paid pretty well immediately. That's based on production. But the copper, there is the typical delay because they have to sell it to a third party.
Okay. And the last thing, if you could just provide any kind of an update on what's happening with Adia. I know it's private, but any kind of update would be appreciated there.
Yes. So they've completed a winter drilling program. It unfortunately got shortened because of just weather conditions and drilling conditions. But was successful in the sense that it collected a lot of the ultramafic rock material of the type that we saw at surface and that all the micro diamonds were in. So we definitely we did manage to or ADEA did manage to collect lots of material sufficient to do the next level of sampling and to put much better constraints on the general geology.
I won't preempt more detail than that, but basically mission accomplished for the winter drilling program and we look forward to those results later this year.
Okay. Thanks very much guys. Great quarter.
Thank you. And
there are no further questions in the queue.
Thanks everyone.
Thanks everyone. We'll talk to you after Q2.
And this concludes today's conference call. You may now disconnect.