Monday, March 21, 2016

Altius Minerals and optionality revisted


St. John’s ‐ Altius Minerals Corporation (“Altius” or the “Corporation”) reports attributable revenue (1) of $7,301,000 and adjusted EBITDA (2) of $6,273,000, or $0.16 per share, for the quarter ended January 31, 2016. This compares to attributable revenue of $7,583,000 and adjusted EBITDAof $5,200,000, or $0.16 per share, for the corresponding period last year.  

 A net loss of $16,794,000, or ($0.42) per share was recorded during the quarter resulting largely from non‐cash asset impairments of $17,773,000. This compares to a net loss of $5,701,000 and ($0.18) per share, in the prior year corresponding quarter.

 For the nine months ended January 31, 2016, the Corporation has attributable revenue of $25,620,000, adjusted EBITDA of $20,143,000, or $0.51 per share, and a net loss of $18,476,000, or ($0.46) per share. In the corresponding period in the prior year, the Corporation had attributable revenue of $21,827,000, adjusted EBITDA of $17,954,000, or $0.56 per share and a net loss of $39,150,000. 

The company recorded a loss due to having to recognize impairments in various holdings due to the bear market in commodities. These are non-cash events and I do not pay too much attention to them as I focus on the cashflow from the actual royalty portfolio. When commodity prices reverse the company will mark the assets back up. 

The company's portfolio of royalties continue to perform and I believe in the long term investment potential of this company. As the company pays down debt I expect increased dividends and stock buybacks as warranted. This management team has turned $16 million of investments into $220 million in realized gains between 1997 and 2011.

One of the main reasons I like this stock and its management team is the ability to grow the company through optionality. What I mean by that is when the company does a deal or buys a royalty they normally get rights to additional acreage in the vicinity of the current producing mine they have a royalty on.  

If the additional acreage has minerals on them that get developed then Altius will normally have negotiated itself a royalty on this land also. So optionality means we have a long term potential for further growth when and if additional commercialized mineralization takes place on land Altius has an interest in. 

This goes back to the saying that the founder of royalty company Franco-Nevada once said concerning optionality. "If you control the mineral rights on several million acres at some point don't you think you get lucky?" Meaning, the more land the more chances of finding a commercial deposit. 

Altius management has not been sitting around doing nothing during this bear market they have been out doing deals and getting work done on land they control by using other peoples money. Over the last two years they have increased their land holdings by a factor of 10. At some point two things will happen; the bear market in commodities will end and the second thing is at some point Altius and its partners will find something on all that land. 

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