Good morning, and welcome to the Altius Second Quarter twenty eighteen Financial Results Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note that this event is being recorded. I would now like to to turn the conference over to Flora Wood, Director, Investor Relations.
Please go ahead, Ms. Wood.
Thank you, Brian. Good morning, everyone, and welcome to our Q2 conference call. Our press release and filings were done yesterday after the close and are on our website and on SEDAR. This event is being webcast live, and you'll be able to access a replay along with the presentation slides on the webcast and added to our website. Brian Dalton, CEO and Ben Lewis, CFO, will both be speakers.
And for the Q and A, we have with us Chad Wells, VP, Business Development and Stephanie Hussey, Director of Finance. We've switched up the order today. Ben is going to be speaking first on the financials, and he'll then turn over to Brian for his overview and a look ahead. And after Brian, we'll go to the Q and A. So getting started on Slide two, we have the forward looking statements.
This applies to everything today, both in our formal remarks and during the Q and A. And with that, I will hand over to Ben.
Thank you, Flora, and good morning, everyone. We had a good quarter with $16,500,000 in royalty revenue, dollars 13,000,000 in EBITDA and earnings per share of $0.12 per share. Our earnings included a couple of noncash items that I should point out, including a gain of $1,900,000 on the fair value adjustment of derivatives and offsetting this, an $800,000 onetime charge to extinguish our old debt facility. This morning, I'll mainly focus on a few changes arising from recent business activities, our debt refinancing and the resulting liquidity improvement. Starting with the income statement, you'll notice that we began consolidating Potash Royalty revenue after we acquired an additional stake in the Potash Royalty Limited Partnership at the March.
We now show that potash royalty on the face of our income statement and also report a noncontrolling interest in the statement of earnings, representing the earnings of the other 9% minority holder of that potash partnership. This accounting change was effective for the full quarter and makes our actual revenue, earnings and cash flow just a little more transparent to the financial statement used. Not always the result we get in our world of infinite accounting rules, but a refreshing change. Note that we still report our thermal and met coal revenue in earnings from joint ventures since these royalties are held in partnerships that we jointly control. So you'll still have to dig a little deeper to get our true royalty revenue figure.
I'll refer you to the MD and A and the segmented information, Note 16, in the financial statements for the full picture on royalty revenue. Reflecting on potash again for a moment, ignoring the effect of the acquisition I just mentioned, second quarter potash revenues are still up 24% from the comparable period in 2017 with volumes up 15%, very nice. Thermal coal revenue of $3,300,000 this quarter is down around $800,000 from last quarter, with most of that change coming from sheerness mine sequencing changes as we move on and off higher royalty rate lands. On a six month basis, you'll see coal royalty tons down 24.5% over the period we're comparing last year. But revenues are actually up year over year as we've been on higher royalty rate loans.
Looking at costs, we have higher depreciation and amortization in the second quarter compared to the first quarter with higher sales but lower on a year over year basis. The difference is due to lower production units from the seven seventy seven minutee, offset by a higher contribution from potash, where depreciation on the potash assets is spread over a much longer reserve life. First half G and A costs were higher than normal with some onetime costs relating to the Potash acquisition. We had professional fees of roughly $1,000,000 in the first half relating to due diligence, the Potash acquisition and other legal fees. G and A in the second half of the year should be lower and allow us to end the year closer to the $6,000,000 annual level.
And finally, on the income statement. Income taxes were lower than in the first quarter, averaging out something closer to our statutory rate in the first six months. On the balance sheet, you'll notice that the potash consolidation moved a couple of things around when you compare to our December balance sheet. Our royalty and streaming interest assets increased by about $123,000,000 related to the potash royalty assets. And the joint venture asset line decreased by the cost of our original investment, all as a result of the switch to consolidation accounting.
On the liquidity side, we ended the quarter with $52,200,000 in cash after our term debt repayment under the old facility. Going forward, our new term debt facility will require principal repayments of $5,000,000 each quarter, which is a comfortable repayment level given our diversified royalty portfolio and also given our project generation model, which sees very little in expenditures on any one project. We have a slide in our presentation addressing the change from the former credit facility to the current, and I'll summarize for you. Basically, we upsized by $100,000,000 extended the term by five years until June 2023 and obtain more flexibility to go after development stage assets, which enable us which will enable us to grow our business. The better credit terms are the result of improved revenues as continue to grow the company, our proven repayment history and our continuing strong relationship with our lenders.
For those of you modeling our expected interest expense, we improved the premium paid over BAs on the floating portion. More importantly, we chose to lock in interest rates for 80% of the term debt at an interest rate of approximately 5.4%. Considering the expected rate of return on the potash assets that we acquired with the credit, we're very comfortable locking in at this stage. Our available liquidity at quarter end is $152,000,000 counting cash and undrawn revolver and does not take into account any of the value of our equity investments, which all combined could add another $137,000,000 to our potential liquidity. We declared a $04 dividend to be paid in September and still have our normal course issuer bid in place to buy back shares at prices below our threshold, which we revisit quarterly.
So to sum up, we had a good quarter for cash flows and earnings. We have a strong balance sheet and liquidity that gives us flexibility to pursue both cash flowing and development stage opportunities as they become available, and we'll continue to put emphasis on paying down ing. Now I'll turn it over to Ron.
Thank you, Ben, and good morning, everyone. Thank you for joining us. Our second quarter saw improved royalty revenue relative to the first quarter and to the prior year comparable quarter. The improvement year over year was mainly attributable to higher volumes, especially in potash, but also Chapada copper. Our royalty revenues have been on a strong and steady uptrend since the industrial commodities market turned around in early twenty sixteen.
But this is the first quarter since then that saw more of the benefits come from organic volume growth than price improvements. I believe this is a strong testament to the quality of the work during our market buying spree in selectively identifying projects underlying extension and expansion based option value potential. As you will hear in the following updates, we received a lot of good news of this type second quarter. Chapada copper volumes during the first half of the year are running well ahead of last year, and Yamana has stated that they expect to exceed guidance of 120,000,000 investments continue to deliver improved metal recovery. In addition, it has initiated studies to consider potentially significant capital investments in new plant and mine capacity additions.
Yamana is also having great exploration success, identifying higher grade deposit expansions and in defining new potential deposits within what we believe is now emerging as a district rather than just deposit per se. Our stream exposure at Chapada encompasses the entirety of the district scale and package held by Yamana and has no ultimate cap. Our other current base metal revenue comes from $7.77, Hudbay's mine in Manitoba, where we saw modest declines in both copper and zinc production as the workings extended deeper and into more challenging mining areas. On the positive side, however, Hudbay indicated that it is now expecting an extra year or so of production, extending the mine life to late twenty twenty one based upon its most up to date mine plan, while also stating that it continues to examine options for further incremental mine life extension. Vale announced a cobalt stream financing to provide capital towards the new development of underground deposits at Voisey's Bay that will replace the Ovoyd open pit deposit over the next few years and that will add approximately fifteen years to the project mine life.
This royalty has not been paying over the past couple of years as a result of Vale's assertions around the deductibility of processing plant related capital costs and so may have been forgotten by many of you. We disagree strongly with the Vale position and a trial to make determination issue amongst other historical underpayment restrictions is scheduled to be heard in Newfoundland and Labrador Supreme Court next month. This was our first full quarter of incorporating the recently increased potash royalties ownership levels. Our belief in a long term increasing global requirement for potash fertilizer and prices currently sitting at below full term incentive price requirements was encouraged by recent announcements from counterparties, Nutrien and Mosaic. They both spoke to the very strong and broad based global demand.
And in the case of Nutrien, this was accompanied by increased corporate level potash sales guidance, presumably facilitated by further ramp up at Roseville. Boat also spoke of improving prices with data from Mosaic indicating various regional gains in the range of 15% to 25% relative to year ago levels. These developments, together with the increased ownership levels, allowed potash revenue to overtake thermal coal as our second largest commodity exposure and to now represent 23% of our diversity mix. Thermal coal revenue was lower in the second quarter relative to both the first quarter and the prior year comparable quarter, but was well within the broader range we have been experiencing after sales timing variability and mining progression across land with varying royalty levels are considered. The lower revenue this quarter was largely attributed to mine sequencing at Tirnitz.
Met coal revenue from Cheviot, part of Teck's Cardinal River complex, was relatively flat quarter as better prices offset lower production volumes. We did, however, welcome an announcement from Teck this quarter that they've begun studying the development of another resource area that could extend the mine life by up to nine years, taking it out to 2029. The potential new mining area under study is on our royalty land. Our indirect royalty exposure to IOC held through our shareholding in Labrador Iron Ore Royalty Corporation turned in a very disappointing quarter relative to quarter one and a comparable quarter last year. This was as a result of a nine week, but since resolved, labor disruption at the mine.
This was particularly unfortunate given the further widening of quality premiums that has been seen in the market. A particular interest in this regard is the increasing relevance of low alumina content determining premium iron ore pricing. IOC products are the very best in the world by this measure in addition to their high relative iron content. It is also worth noting that IOC expects to begin mining from the new Wab 3 pit later this year as part of its continuing ramp up of recently completed expansions. Keeping with iron ore, in July, Champion announced their first quarter results since restarting Bloom Lake and shipping first concentrate April 1.
In the quarter ended June 30, while still ramping up full capacity, they had sales of CAD120 million, operating cash flow of CAD38.6 million. They also disclosed that their sales of 1,800,000 metric tonnes of high grade 66% iron concentrate were priced at a premium of 35% benchmark 62% index. They also announced the beginning of studies to explore further capacity expansion. This is an excellent result in our estimation, which not only bodes well for debenture interest, but also for increasing confidence in the merits of other potential Labrador iron ore trough development opportunities, allowing me the opportunity here to highlight Alder Iron Ore and its CAMI project, which is located next to Bloom Lake and IOC and in which we have a large equity holding and an underlying project royalty interest. If it sounded like I just said the words expansion, extension, new development, ramp up a lot in that overview, it's because I did.
Each of these words means billions upon billions of capital expenditures, either made already or to be made, which we have no share of the cost but a full share of the benefits. This is the power of the lopsided option value equation associated with our diversified mining royalty model. We've been saying for some time that with the improved broader cyclical sentiment from when we made most of our major royalty acquisitions, value in stage royalties is becoming harder to find. With that said, the more recent junior mining equity pullback has led to improved deal flow in preproduction stage opportunities. It is quite remarkable in some situations that we were nonexistent the broader market is as an investment competitor, in fact.
We have, therefore, been quite active during the quarter in negotiating for royalty and equity interests in promising projects and expect to be able to close on some of these smaller deals in the second half of the year. Along this vein, during the first half of the year, we invested a total of $7,000,000 both directly into and alongside Lithium Royalty Corporation. LRC is a private company in which Altius is a roughly 12% shareholder and holds one Board seat. Thus far with LRC, we have signed a purchase and sale agreement on one royalty with another in advanced discussions. The LRC team is comprised of several experts within the still very much emerging lithium mining sector, and this modest investment allows Altius to benefit from their knowledge and to position and learn for the as we expect rapid evolution of transportation electrification trends.
We also continue to progress our effort to identify opportunities to develop a portfolio of renewable energy based royalties under a platform being referred to as Blue Sky Renewable Energy Royalties that we have co founded with a U. S.-based team of renewable energy investment and development specialists. Several discussions are currently underway with potential counterparties that are either developing new projects or operating existing projects. Altius also continues to consider utilizing the residual phase out years of its coal electrical generation royalties as a funding source to create the long term renewable energy portfolio. My last comments before we open it up to questions are on our project generation business.
Over the past two years, we have vended out 41 projects and have other transactions pending. Contrary to what you might guess looking at the TSX Venture Exchange, demand for exploration projects is the strongest we've seen in our history as both juniors and majors recognize a looming crisis in the industry due to the acute lack of exploration investment in the sector from 2012 onwards. We now have 27 positions in our junior equity portfolio, many of which have active drill programs underway this year. Some of this drilling has been turning up exciting results that you may want to keep track of, given the potential for low cost value creation for Alphea shareholders. Our portfolio information is available through the website for those that wish to dig deeper.
We talked about Everest high grade gold and trenches in Mexico last quarter as a highlight. This time, the highlight is perhaps a toss-up between the infill drilling results at Adventist's El Domo deposit that has identified a thick and extremely copper rich core zone and results from Sockem and Iron, who announced drill results in three holes on the Moosehead gold project in Newfoundland that included a reported intercept of 11.9 meters of 44.96 grams per tonne gold, and this was followed by a strategic equity financing. Altius is a large shareholder of both companies and also holds a royalty related to the Moosehead project. Finally, we continue to make progress with respect to creating strategic partnerships and the IPO of our Lynx diamond discovery in Manitoba. We should have lots of news to report on this in the coming weeks in advance of beginning first drilling programs this coming winter.
That wraps up our formal remarks, and we'll turn back to the operator for Q and A. Thank you.
Thank you, sir. And our first question will come from the line of Jackass Wortman with Eight Capital. Your line is now open.
Hi, good morning. A very compelling overview, Brian. Thanks very much for that. One quick question for me. Can you speak to how you see Blue Sky kind of unfolding here in terms of opportunities you might see or maybe in terms of an initial rough timeline?
Thanks.
It's hard to put a timeline on things. It's we're introducing a new basically a new type of capital source into the overall capital stack for that sector. So a lot of the work that's been happening has been educating the operators and developers about how royalty financing might work. And I have to say that over the past few months, we've had quite a lot of success in introducing that. There are definitely some dynamics that play within that space right now that make we believe make that kind of financing something that is going to play an increasing role.
Lots of term sheets out there getting beaten around. Again, can't put a time frame on it, but again, quite optimistic that there will be deal flow here that will make this ultimately become a real business for us.
And I think when you first announced it, you had said that there was one project that was going to be vended in from your partner right from the get go. Maybe you can't speak to that just yet because I don't know if it's actually closed the whole JV structure. But anything you can say about that? And is it a paying opportunity?
Yes. The guys that we're working with as partners and really the experts that are going to be charged with a lot of on the ground deal hunting have a couple of quite small royalties in their portfolio right now. One is a hydro royalty with solar component to it. These aren't going to be big deals that move the needle dramatically. They're assets within their business that are coming in as part of their joining of the whole.
And they're starting royalties, but they're obviously going to be they're much smaller than what we'd anticipate being the target size going forward, on the order of hundreds of thousands a year, not millions.
Okay. Thanks very much, Brian, for that. And thanks, Ben, for the overview on the financials. Great quarter.
Thank you. Thank
you.
And our next question will come from the line of Mark Glasser with Intra American Trading. Your line is now open.
Good morning, gentlemen, and my acknowledgment of the wonderful work you're doing. To get on some of the old things, I'm sure that you're watching the RMR situation in Labrador very closely. And I guess what happens focuses now on Champion. If you can give a little insight as to what you're seeing? And also the status of the Rio Tinto project, I think it's Geothite Bay that's north of Carole Lake.
And also the prospects for Bitterroot now. And I believe that Ulthius retained one of the properties in Ireland and the other ones are in Venice. If you could say anything about Ireland, that would be good. And again, thank you for the good work.
Thank you very much. I'll try to address all those parts. So first, on iron ore, yes, of course, it's something we watch very closely and in fact, have been doing so for best part of twenty years. What's happening with Champion and the whole Bloom Lake restart is extremely important. Obviously, the Bloom Lake project practically brought Cliffs down a few years ago.
So it's got a certainly a mixed taste in the markets mind. And I guess a lot of money was sent to a lot of capital was sent to money heaven on that project. So it's really gratifying now to see, first off, what's evolved in the marketplace and how the market is really just developed directly seeking more and more of exactly the type of product that comes out of Labrador and to watch the Bloom Lake project scale back, done a little bit less maybe a little less frantically iteration and just being carefully brought forward. It's really fun to watch it play out right now. And again, the implications for Alderon as we watch that project evolve into a successful mining story again, I think are pretty profound.
IOC, similarly, market is exactly seeking what it produces. When you consider the new premiums that are being applied for low alumina content in addition to the higher iron ore content, and this is some of it, not the very best material available in the marketplace right now. Gotite Bay is for those who don't know, is a project that we optioned to Rio Tinto during the last cycle, and that resulted in a pretty significant discovery just to the north of the IOC operations. We haven't seen much in the way of activity there in the last little while. I mean, the deposit has been broadly defined, but it's not immediately in the crosshairs for development that we can see.
Right now, IOC is developing its Wab 3 pits to help feed its ramp up. But again, in the very long term here, we anticipate that Gotek Bay could very much form part of the mining plan at IOC. But whether that's years or decades away, I can't really speculate. What was the next part of the question? Bitterroot.
Bitterroot, I don't have a whole lot to say. We have a pretty small interest there. Most of you would know that we took a controlling position in their nickel project in Michigan, which basically covered a lot of the potential extensions of the geology related to the Eagle deposit, which is being mined by Lundin right now. So we continue to work our way on that project, geophysical surveys and just developing targets. And it's part of a broader initiative that we have underway putting together projects, high potential nickel sulfide projects in several jurisdictions.
So we're quietly beavering away on that. We're pretty confident that at some point, the nickel market will come our way, and we'll be able to show just how much we've done to get ready for that. Don't underestimate our patience in these regards. And finally, the last question was, did we hold back a project from Adventist in Ireland? I wouldn't exactly phrase it that way, but we had a second initiative on exploring for zinc in the sedimentary basins in Ireland.
We also had an effort underway to look for a pretty unique idea really for Ireland that was the dots of red bed copper in the very extreme southern part of the country. And that's a relatively early stage project that is now being funded and advanced by First Quantum. And again, it's not part that's wholly owned by Altius, the joint venture to First Quantum. Adventus, that spin out was all related to zinc assets in Ireland. So Mark, I hope I covered all of the questions there.
Thank you. Thank
you. And I'm showing no further questions in the queue at this time. So now it's my pleasure to hand the conference back over to Ms. Florwood, Director of Investor Relations for closing comments and remarks.
Thank you, Brian, and I'd like to thank everybody for dialing in. If you have any other questions, happy to talk to you after the call, and we'll talk again in the quarter.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program and we may all disconnect. Everybody have a wonderful day.