Good morning. My name is James, and I will be your conference operator today. At this time, I would like to welcome everyone to the Altius Q4 year-end 2018 financial results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to the Director of IR, Flora Wood. Please go ahead.
Thank you, James. Good morning, everyone, and welcome to our Q4 conference call. Our press release and annual filings were done yesterday after the close and are available on our website. This event is being webcast live, and you will be able to access a replay of the call, along with the presentation slides on the webcast, which is on our website at www.altiusminerals.com. Brian Dalton, CEO, and Ben Lewis, CFO, will both be speaking on the call and will then open it up for questions. We also have Lawrence Winter, VP Exploration here for any questions you got on PG. Getting started, the forward-looking statement is on slide two and applies to everything we say, both in our formal remarks and during the Q&A. With that, I would like to turn over to Ben to take us through the numbers.
Thank you, Flora, and good morning, everyone. Altius generated CAD 17.6 million in royalty revenue during the quarter, compared to CAD 17.1 million in Q3. Q4 was our strongest quarter this year for revenue and came close to the record quarter ended October 31, 2017, when royalty revenue was CAD 17.9 million on higher Labrador Iron Ore Royalty Corp dividends, or LIORC, and higher Chapada revenue. EBITDA for the quarter came in at CAD 13.4 million, compared to Q3 at CAD 13.9 million. The loss per share of CAD 0.29 for the quarter and earnings per share of CAD 0.03 for the full year include non-cash impairment charges of CAD 14.3 million relating to the write-down of a non-producing royalty and goodwill. This amount also includes our share of a write-down of CAD 3.5 million relating to the Genesee Royalty Limited Partnership's amended royalty calculation.
The fourth quarter earnings also included a CAD 4.1 million unrealized loss on the fair value adjustment of derivatives. We have a slide in our presentation showing the waterfall for the full year reported earnings and the after-tax impact for non-cash items on a per-share basis. If we normalize for these items, our EPS for the year would have been CAD 0.39 per share compared to CAD 0.42 last year. Normalized EPS for the fourth quarter would have been CAD 0.09. We ended the quarter with CAD 28.4 million in cash and cash equivalents after spending CAD 5 million to exercise the option to increase our Gunnison gross revenue royalty to 1.625%. Excelsior has commenced construction at the in-situ copper leaching operation and expects production later in 2019. We also invested another CAD 1.8 million in share repurchases in Q4 under our normal course issuer bid.
Other uses of cash during the quarter included a scheduled CAD 5 million payment on our term debt, a CAD 1.3 million preferred share distribution, as well as our regular quarterly cash dividend of CAD 0.04 per share. Total cash and market investments at the end of Q4 were approximately CAD 153 million, with undrawn revolver capacity of CAD 100 million. That's the quarter. I'll step back and talk about a few accomplishments during the year which will deliver long-term benefits. Earlier in the year, we increased our potash royalty exposure with the addition of additional partnership units from Liberty, which proved to be very well-timed. We also refinanced our debt at the end of the second quarter, which resulted in lower interest costs, better covenants, and a new term out to June 2023.
We entered into a swap to lock in the interest rate on CAD 100 million of that debt of what was originally CAD 125 million facility. The fixed interest rate is now approximately 5.45%, and the interest rate on the balance is floating. Our position in LIORC grew from under 5% of their shares issued and outstanding at the beginning of 2018 to approximately 6.3% today. For all of 2018, distributions to us, which we treat as indirect iron ore royalty revenue, amounted to CAD 5.9 million. The first quarter dividend, which the LIORC board declared March 7th of CAD 1.5 per share, will give us approximately CAD 4.2 million, or close to 70% of last year's full year iron ore revenue. We increased our debt position by a net amount of CAD 20 million since the year-end.
As noted previously, we continued to increase our LIORC position to 6.3%, or a little over four million shares as of today. After year-end, we also acquired a 2% GSR on the Curipamba high-grade copper zinc deposit in Ecuador for $10 million U.S. We closed our first renewable energy royalty transaction and launched a renewable royalty business, which we are very excited about. All of these transactions are described in recent news releases. Brian will speak more to them later. Our debt balance as of today stands at CAD 135 million, with cash on hand of CAD 22 million. Investment value is approximately CAD 159 million. The board also declared the quarterly dividend of CAD 0.04 per share payable at the end of March. We expect a strong year for royalty revenue with guidance of CAD 67 million-CAD 72 million.
We're very comfortable with that based on commodity price movements since the beginning of the year, especially in potash and copper. With that, I'll turn it over to Brian.
Thank you, Ben. Good morning, all. Thanks for joining. To begin today, I want to provide a somewhat bigger picture overview regarding the current nature of our royalty portfolio as it relates to important trends, and to explain how this past year was a pivotal one for us in terms of our long-term portfolio management focus. Our portfolio has been designed to line up with major global shifts that are underway that we believe are long-term and entirely structural in nature. These include electrification trends, particularly with respect to renewable generation and transportation, are a huge potential demand-side catalyst for the next global commodities bull cycle and beyond. Conversion of fossil fuel-based energy sources to clean energy sources on emission reduction imperatives is underway. Lower pollution intensity from steelmaking, requiring higher quality, lower impurity iron ore inputs is spreading to Asia.
Continued focus on improving agricultural yields for a growing population and shrinking arable land base, with each piece of available farmland now expected to yield 40% more food than during the 1960s. We provide copper, nickel, cobalt, and lithium exposure to address electrification. Our thermal coal royalties are being transitioned into renewable energy royalties. Labrador-based iron ore products are amongst the cleanest available anywhere, and Saskatchewan potash mines might be the most important mining assets in the world when one thinks of the impact they have on global food needs. These trends are all linked, obviously, with Altius' particular resource royalty portfolio emerging as a hub for the converging spokes.
The other core long-term focus that Altius has brought to its royalty portfolio creation and management is to select underlying assets that have large existing resource bases and/or outsized exploration potential that at minimum imply long operating lives at existing production rates. Big resources are also the best harbingers of future mine expansions. As royalty holders with no cost share but full benefits, there's not much better that can happen in terms of bolstering long-term returns than having an operator announce an expansion. It is worth noting as well that announcements of this type happen mainly during periods of cyclical resource company margin expansion, such as the one we are now seeing unfold.
This also explains why whenever we stood back and really looked critically at our otherwise very long life portfolio, that the approaching ore exhaustion at Triple Seven and the wind down of Alberta Electrical Coal over the next decade struck us as our key challenges to overcome. We therefore made 2018 the year to do just that. In the case of Triple Seven and the potential problem of base metal revenue declines over the next few years, we now believe that the solutions are fully in place. We recently increased our royalty interest in the construction phase, Gunnison Copper Mine. This will ramp up as Triple Seven declines. We also purchased a royalty on Adventus and Salazar's exciting high-grade Curipamba polymetallic project. We resolved our issues with the operator of Oasis Bay relating to royalty payment calculations.
While a major capital investment was announced to build a new underground mine there. Expansion studies for Chapada on the strength of excellent exploration-based resource growth are due later in the year. Problem solved, in fact, perhaps even oversolved. The Alberta Electrical Coal wind down presented a trickier problem for us. Simply finding other thermal coal exposures on long life assets in other jurisdictions was a possibility, of course, but not very attractive, given that it would only likely attract more of the types of issues we experienced in Alberta. We therefore decided to replace our electrical coal royalties with the very thing that is surely but steadily replacing coal-fired electricity globally, namely the remarkably rapid emergence of renewable sources as lower cost generation alternatives.
Our first investment in this area is with an expert Texas-based wind developer, Tri Global Energy, that should see us generate CAD 4 million to CAD 5 million per year in revenues as the projects build out over the next few years. This is a solid start to replacing the CAD 12 million to CAD 14 million we currently receive from Alberta Electrical Coal. The potential opportunity set we are finding in this newly created resource royalty area is quite strong. With these developments, we can now classify all of our portfolio components as either long term or ultra long term. This is an incredible luxury for Altius shareholders that not only indicates an increase in our expansion potential-driven option value, also means that any organic or acquisition growth that occurs becomes purely accretive rather than replacement type in nature.
To further confirm these points, I draw your attention to some of the other highlights from the year beyond those described above. Potash markets continue to surprise skeptics by displaying continued strong global demand growth and subdued mine supply. This resulted in higher prices and strong growth in production from our potash mine royalty portfolio, which has significant remaining capacity available for further production growth as recent expansions continue to ramp up, particularly now with regards to Esterhazy K3. IOC's new Moss Pit is in commissioning and is expected to improve production rates. Teck has signaled likely expansions at Cardinal River, with further details and announcement expected this year. Alderon and Allegiance provided positive economic study results for Kami and Telkwa. Adventus and Salazar are preparing an updated PEA for Curipamba that will incorporate high-grade exploration drilling results received during 2018.
Neo Lithium's 3Q project and Sigma Lithium's Grota do Cirilo also achieved important project milestones during the year. Within our earlier stage PG royalty pipeline business, we estimate that a remarkable 140,000 meters of exploration drilling will occur on the projects we hold royalties over in 2019. Collectively, at all of the above noted projects, we can count many billions of Canadian dollars of recent, current, and planned capital investments, for which we will fully benefit while never receiving a cash call. In terms of 2018 specific performance, our royalty revenue growth trend continued. We achieved a midpoint of guidance as lower base metal prices, a strike at IOC, and withheld LIORC dividends were offset by potash and met coal price and volume growth and higher iron ore quality differentials. Our 2019 guidance shows a further growth expectation.
Since we issued this guidance, LIORC has announced a large special dividend to distribute last year's withheld cash amounts. The guidance estimate was also created in January using then spot prices, which so far this year have generally moved higher, but it is still too early to consider any adjustments given the great many short-term volatility factors currently at play. Please note that we also recently responded to an invitation to submit a presentation to the LIORC board outlining our thoughts on the potential benefits of segregating its royalty and equity related interests. We will post the presentation to our website for information purposes in the coming days. Finally, we remind you that we commenced a CAD 190 million litigation against the government of Alberta and Canada during the year for actions that we feel were tantamount to expropriation of our Genesee Alberta Electrical Coal royalty entitlements past 2030.
Full details of all public filings related to this action are being made available on our website under Investor Info. That concludes my remarks for today, and I'm happy to open up the lines for questions. Thank you.
At this time, I'd like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster. Again, if you'd like to ask a question, please press star, then one on your telephone keypad. Your first question comes from the line of Brian MacArthur from Raymond James. Go ahead, please. Your line is open. Brian, if you're on mute, please unmute your line. Your line is open.
Good morning. Just a couple of questions. Just following up on the Genesee royalty that was restructured, you make a comment about you changed it, but it's going to be more reliable going forward. Is there any way we can get any more details exactly what's been done there?
Yeah. Hi, Brian, this is Ben. Just in summary, there was a portion of the Genesee royalty that was based on a mine profits calculation. It was based on an old Alberta mining tax calculation, extremely complicated, uncertain, and it varied very much from year to year. We negotiated with Capital Power, basically it's similar to the rest of the royalty now. It's an inflation indexed per ton royalty amount.
Right.
What it triggered was that because we did this renegotiation, we had to deal with net present value and discount rates and work out the value of that. It was a slight adjustment in the value of the royalty once we updated it for all the new assumptions. It was a very small adjustment, as you know. Hopefully that gives you a little more color, but it'll give us more certainty going forward. We'll know exactly how much per ton we're going to receive after we adjust for inflation.
It's over the whole property?
Yes, that's correct. Yeah.
Okay. That's very helpful. Just second thing on coal, there was a statement, the government's asked on the lawsuit for an extension to March 1st to file documents or something. Is there any update? I know you said you're going to put it over as things come out. Is there any update you can give us since March 1st has passed right now, where that stands?
There have been a few new filings. This is Brian here, sorry. We were asked to provide additional particulars related to our claim, which we have. That's up and available on the website. Statements of defense have been filed now by both Canada and Alberta. I'm really going to do my best to avoid interpreting much of that. I'm not a lawyer, so this is more or less why we're choosing to provide pretty much everything that gets filed directly to shareholders. If I were to take a chance at a very rough summary, I would say that it wasn't a very surprising defense. Basically, there was general denial of any requirement to provide compensation, which was not unexpected. If I take a positive away from it, we can see absolutely no argument with any of the facts that we've provided going forward.
Again, I'm in no position to really speculate on outcomes or progress. Everything that happens that's public will be available to any shareholder to review of their own accord.
There's no real timeline update or anything?
No, not particularly. It's a process we expected to be long, and we're prepared for that.
Fair enough, sir. Thanks. Just another question, just quickly. I'm just curious, I think you remain pretty positive as you've talked about for the iron ore setup in Quebec. Obviously increased in LIF. I also saw you sold down some of Champion. Is there any rationale for that, or is that just plain portfolio management?
We invested originally in Champion in a convertible instrument that had two conversion features. One was to royalty. There was a feature of that conversion option that disappeared in the event that project financing happened in short order, which it did. The conversion feature provided income as well.
Right.
That expired at the end of December. We converted to pure equity. The rationale in terms of Altius as ultimately an asset level royalty buyer diminished. We're not trying to be equity portfolio managers. We obviously invest in equities where there's a strategic path to royalty. It was partly that. It was also timed with the sale there, was partly timed with the acquisition of the additional Labrador interest. We basically took some profits on what had become a pure equity hold and increased royalty level holdings.
Great. Thank you very much. That's very helpful.
Thanks, Brian.
Again, as a reminder, if you'd like to ask a question, please press star then one on your telephone keypad. Your next question comes from the line of Craig Hutchison from TD Securities. Go ahead, please. Your line is open.
Good morning, guys.
Good day.
The question of Lithium Royalty Corp. Can you give probably some context in terms of the original investment? I think it was CAD 6.5 million. How much of that amount has been actually deployed into royalties? Then in terms of, I think you purchased a royalty in February being developed by Sigma Lithium Resources. Can you provide some context of when you expect to start getting paid royalties from the lithium portfolio?
I'm probably going to have to get back to you on some of that, we have just over CAD 9 million total invested in Lithium Royalty Corp., which includes in the equity in the business, but also co-participation on some of the royalties that they've acquired. I don't have an exact up-to-date amount in terms of how much of the total capital that LRC has raised has been deployed.
A substantial amount of the initial raise certainly has been put to work already. More broadly speaking there, lithium prices and lithium company valuations certainly took a hard turn downwards last year, which was exactly what the doctor ordered in terms of our plans there.
Right.
I wouldn't look to put too much in the near term into the model. This is a bit of a more of a long-term listening post type investment for us as we expect in the fullness of time that lithium becomes a much bigger sector globally, and we want to be prepared for that. This is very much an early stage, development stage type listening post investment, as I said. I can later, I can follow up with any additional details that I can get from the company directly.
Okay. Are there any restrictions in terms of moving past the lithium space, maybe to other battery metals, whether it be cobalt or nickel?
No, certainly not. We're obviously going to be showing more impact from nickel and cobalt as Voisey's Bay ramps up. We think we have royalty exposure to both of those commodities, probably from one of, if not the best assets out there. That's going to happen naturally without us having to do much more. We probably wouldn't be looking to specifically increase cobalt other than as part of nickel and cobalt type investments overall. Right now I think we're fine, and natural growth that'll come from the ramp up in the underground development of Voisey's Bay, combined with the fact that we got the royalty agreement sorted out with the operator this year, puts us in fine shape in those commodities.
All right. Thanks, guys.
Thank you.
Your next question comes from the line of Carey MacRury from Canaccord Genuity. Go ahead, please. Your line is open.
Hi, good morning. Just had a question on the 2019 guidance for coal and potash. I'm just wondering in terms of the change from 2018, in terms of volume versus price. Like for the potash, are you assuming sort of similar levels or spot price at the end of the year for your 2019 guidance? Similarly for coal, or should we expect volumes to be higher or lower, kind of year-over-year?
Our assumption in terms when we made the guidance was for flat pricing over last year's levels. One thing you do want to be careful of, though, is that there is a lag effect from the operations and sales to when our royalties were received. We didn't get the full impact last year of the big price increases. Some of that will start to flow into this year. Our guidance also assumed the best knowledge we had at the time from the operators, which was At that point, they weren't prepared to talk about plans for 2019, so we assumed flat volumes year-over-year.
Reading between the lines at some of the guidance we've since seen from the operators suggests that there's room for continued volume ramp-ups there as other producers globally seem to be running into more and more troubles getting their volumes brought down, and demand growth continues. We're optimistic there, but our guidance, to answer your question, was based on flat numbers.
On the coal side?
Thermal coal?
Yeah.
Well, again, there's obviously no price exposure.
Slightly lower.
Yeah, no.
Not significantly lower.
Right. Our guidance from producers, and a lot of this just has to do with the way the mine plan runs in and out of higher royalty lands. Overall, we're anticipating that the utilities will run at similar levels and that our relative royalty component to that will mean slightly lower volumes and of course, no price component.
Great. Thank you.
Thank you.
There are no further questions at this time. I turn the call back over to our presenters.
Okay. If there's no further calls, I'd like to thank everybody and Q1 is coming up soon, so we'll be talking to you again in just about six weeks, I guess.
Thanks, everyone.
Thank you.
This concludes today's conference call. You may now disconnect.