altius - copperaltiusminerals.com/storage/presentations/altius... · 2020-04-16 · • ioc margin...

TSX:ALS | OTCQX:ATUSF

Cle

an S

teel

Copper

Potash

Renewable Power

CopperLithium Nickel Cobalt

April 2020

Corporate Presentation


Copper 37%

Battery Metals (Ni-Li-Co) 2%

Potash 19%

Electricity Generation

14%

Clean Iron Ore 20%

Steel Making Coal 4%

Zinc 3%

Diversified Assets and Operators

15 Producing RoyaltiesInvestment Grade Operators

2019RoyaltyRevenue

2


$6M$28M $33M

$46M

$67M$78M

FY 2014 FY 2015 FY 2016 FY 2017 2018 2019

Growth

Royalty Revenues

$3M $1M$15M

$26M

$35M

$44M

FY 2014 FY 2015 FY 2016 FY 2017 2018 2019

Adjusted Operating Cash Flow

3

$16.3M

Revenues(Q1-2020)

Quarterly Performance

Base Metals 40%

Potash27%

Electricity Generation

15%

Clean Iron Ore 6%

Steel Making Coal 4%

Other7%

Q1-2020RoyaltyRevenue


4.9x

1.4x

x

1x

2x

3x

4x

5x

6x

2014 2015 2016 2017 2018 2019

TSX: ALS | OTCQX: ATUSF

Issued Common Shares 41.8 million

Fairfax Preferred Securities 10.0 million ($100 mm)

Basic Market Capitalization $300 million

Annual Dividend $0.20 per share

Outstanding Debt $155 million

Cash and Public Equity Holdings† $116 million

Available Under Credit Revolver† $35 million

Leverage Ratio (Net Debt:EBITDA)

Dividends

$3M

Dividends

$5M

Dividends

$7MDividends

$7M

Dividends

$8M

Share buy back

$2M

Share buy back

$2M

Share buy back

$5M

Share buy back

$9M

2015 2016 2017 2018 2019

Returns of Capital

Research Coverage

Richard Gray

Craig Hutchison

Brian MacArthur

Carey MacRury

Jacques Wortman

Orest Wowkodaw

Capital Structure

†Capital table values, return of capital and net debt to EBITDA numbers as of Dec 31 2019 except for market cap as of Apr 3,2020. Cash and public equity holdings as at Mar 31, 2020 includes $32 million cash + $49 million LIORC equity value + $34 million project generation equity values

COVID19’s Impact on Assets


Copper

Zinc

Lead

Nickel

Iron 65% Pellets

Iron 65% Fines

-30%

-20%

-10%

0%

10%

20%

30%

15-Jan-20 28-Jan-20 10-Feb-20 23-Feb-20 7-Mar-20 20-Mar-20 2-Apr-20

Commodity Prices Since COVID19 Outbreak Began

First Confirmed COVID19 Death (China)

6

Price component of Altius’s top line (i.e. non-marginal) royalties have declined by 2019 revenue weighted average of 11%


Production Level Changes Since COVID19 Outbreak Began

7

• On March 17, 2020 Vale ramped down its Voisey's Bay mining operation and placed it on care and maintenance for a period of four weeks, as a direct result of the COVID-19 pandemic.

• The mine accounted for less than 2% of Altius overall 2019 revenue.

• Iron Ore Company of Canada temporarily halted two iron pelletization lines (of six) due to weak demand in Europe and North America.

• As a result, IOC plans to shift more of its output to high grade iron concentrate, which continues to see strong demand.

• In Q1-2020. Altius sold a portion of the LIORC common shareholding and continues to hold approximately 2.9 million shares of LIORC.

• On March 26, 2020 Excelsior announced that the retrofit and wellfield upgrades have been successfully completed.

• However, in response to the unfolding global COVID-19 pandemic, the Board of Directors has placed the Gunnison Copper Project on temporary suspension.

• Nutrien announced that it continues to expect solid demand for crop inputs for the coming spring season and that its facilities continue to operate given its business is deemed an essential service by governments.

• The U.S. farmer is generally in good shape, with debt to assets less than 13%, equity at an all-time high, and stable cash receipts expected again this year.

• Global grain consumption should exceed production for the first time since 2011-2012, according to the USDA.

Gunnison

IOC / LIF Shareholding Potash Demand

Voisey’s Bay

All other operations appear to be running at or near capacity


Strong Underlying Operating Margins

Operator MineCommodity

Benchmark

Guidance Post Covid-19 Outbreak Altius Price

Based

Royalty

Δ

Operator

Margin

ΔCommodity

Price

Operating

Margin

Commodity

Price

Operating

Margin

Lundin Chapada Copper $2.74 126% $2.19 81% -20% -45%

Nutrien All Operations Potash $255 211% $240 193% -6% -18%

Mosaic All Operations Potash $255 245% $240 224% -6% -20%

Vale Voisey's Bay Nickel $5.88 103% $5.04 74% -14% -29%

Rio Tinto IOC Fe Concentrate $110 144% $98 117% -11% -27%

Rio Tinto IOC Fe Pellet $141 117% $128 96% -9% -20%

Excelsior Gunnison Copper $2.74 215% $2.19 152% -20% -63%

Hudbay Manitoba Ops Copper $2.74 800% $2.19 639% -20% -161%

Notes

• All amounts USD. Gudance commodity price as at January 22, 2020 and post covid-19 price as at April 4, 2020.• Chapada margin calculated using Lundin’s guidance of 2020 C1 cash costs of copper per pound (NI43-101 report October 10, 2019) after precious metal by-product credits. Chapada cash

costs do not include the effects of copper stream agreements which will be a component of the copper revenue and will impact realized revenue per pound.• Nutrien and Mosaic per tonne margins calculated by taking FOB Midwest Spot over Cost of Product Manufactured. COPM = Potash COGS for the 2019 excluding depreciation and amortization

expense and inventory and other adjustments divided by the production tonnes for the period. For Mosaic, we used the 2019 four quarter average actuals cash costs of production (excludingbrine) – MOP ($/tonne)

• Voisey’s Bay margin calculation using SNL Modeled Cost Curve for Total Cash Cost per pound of nickel net of by-product credits.• IOC margin based on Altius modeled $45/t cash costs for concentrate and $65/t cash costs for pellet.• Gunnison is expected to be in commercial production in 2020. Total cash cost pe pound of copper is derived from the Base Case of the Feasibility Study dated January 16, 2017• Manitoba Operations margin calculated using Hudbay’s annual actuals year ended December 31, 2019. Cash cost per pound of copper produced, net of by-product credits.

8

Operations have margin protection against economically driven closures - Underlying operator margins remain strong at an average of 197% despite Covid-19 based price compression

Long Term Growth Profile


Coal to RenewablesFossil Fuel to Clean Energy

Conversion

Cu, Co, Ni, Li

Clean Iron Ore Products

Lower Emission Steel Making

Soil Quality/Agricultural Yield Improvements

Electrification and Storage

Natural PotashFertilizer

Macro-TrendAltius

Royalty Exposure

Subsidiary Altius Renewable Royalties Corp. (“ARR”) reinvesting declining coal royalty proceeds to fund the advancement of a portfolio of more than 23 GW of potential new renewable energy projects

Altius’s potash fertilizer royalties relate to a portfolio of top-tier Canadian mines that are ramping up into pre-built capacity expansions as the need for sustainable food production, without additional deforestation, increases

Copper, which benefits more than any other metal from EV and renewable energy transitions, represents a large portfolio component. Royalty exposure to battery metals - Nickel, Cobalt and Lithium - set to increase in importance

Royalty from IOC relates to high iron / low impurity concentrates and pellets that require less metallurgical coal usage in steel making – minimizing pollution and carbon impacts

Royalties on a Sustainable Natural Resource Future

10

Industry leading fundamental business growth from assets that enable the world to meet its sustainability objectives


Royalty Lives - Unrivalled Sustainability & Expandability

Mine lives calculated based on current mineral inventory and 2018 throughput. Coal asset lives denote the expected plant closure and not based on

reserves. The 2018 revenue weighted average mine life is based on remaining reserves inclusive of MI resources and throughput capacity.

85+ Year Revenue Weighted Life

11


Short to Medium Term Royalty Growth Profile

Strong operating margins and long resource lives (85 years revenue weighted average) motivating multiple new build and expansion investments by operators = free royalty growth

Organic (Free) Mine Royalty Growth

New renewable energy royalty business growing fast as electricity generation transition accelerates and sector begins to recognize benefits of royalty finance offering

Renewable Royalty Business Gaining

Momentum

12

Discovery

Renewable Development Portfolio

2.5 GW Portfolio

Rocanville

Cory

Allan

Vanscoy

Esterhazy

Completed Potash Expansions

New Mines in Construction

Voisey’s Underground

(Ni-Co-Cu)

Gunnison (Copper)

BuildingRamping UpFinancing

and Development

ChapadaExpansion (Cu)

Resource Stage Expansion Study

Expansion of Existing Assets

New Build Studies 168,000 metres of drilling in 2020

60+ Exploration Stage Royalties


“Built” Growth

13

Completed Potash Expansions

• In the past decade, The Mosaic Corporation along with the predecessor companies of Nutrien, Potash Corp and Agrium, embarked on and completed $9 billion of capital expansions.

• These expansions more than doubled the total nameplate capacity of mines with royalties articulable to Altius at no cost to Altius.

• Incremental increases in capacity utilization are magnified by our disproportional ownership of the two flagship assets, Nutrien’s Rocanville and Mosaic’s Esterhazy, which are both ultra low-cost mega-operations.

Mine Operator

Expansion Name Plate Capacity (Mtpa)Production

(Mtpa) 2019

Capacity

UtilizationAnnouncemnt Date Completion Date Pre-Expansion Post-Expansion 2019

Esterhazy Mosaic May 2009 December 2017 3.9 6.2 3.9 63%

Rocanville Nutrien February 2010 October 2017 3.0 6.5 5.14 79%

Allan Nutrien June 2008 December 2012 1.9 4.0 2.18 55%

Vanscoy Nutrien February 2010 December 2015 1.5 3.0 1.42 47%

Cory Nutrien September 2010 April 2012 1.4 3.0 0.97 32%

Patience Lake Nutrien - - 1.0 0.3 0.24 80%

Total 12.7 23.0 13.9 60%

Source: S&P Global, Company Reports

Note: (1) Weighted Average Capacity Utilization

1


Near Term Production Growth Investments

14

Chapada Upside and Optimization

• The Chapada Cu-Au mine located in Goais, Brazil was sold by Yamana to Lundin Mining in early H2 2019. Lundin Mining has taken a fundamentally different approach to the Chapada operation and is planning to replicate the success it had at the Candelaria copper mine in Chile where it first increased reserves by more than 100% in the first few years and based on this substantially improved the production profile.

• Lundin’s approach to increasing value of the asset is based on this systematic approach of first understanding the full potential of the mineral resources, achieved by implementing a well funded exploration program led by qualified personnel. The exploration budget for 2020 is at least US$10M, which translates into 50,000 m of drilling. By comparison, in 2017 plus the first 6 months of 2018, Yamana drilled about 28,000 m around Chapada (a ~3X increase).

• Lundin’s approach to the operation will also focus more on maximizing the NPV of the operation, which is unlike Yamana’s mandate which was to maximize gold production from what is primarily a copper deposit.

• Prior to the sale to Lundin, Yamana was studying an expansion from 24Mtpa to 32Mtpa. Lundin has guided to the market they it is their intention to revisit studying an expansion which may be of greater throughput than Yamana’s plan and that understanding the near mine exploration upside was the key to determining the size of any potential expansion.

Gunnison ISL Copper Mine and Expansion Potential

Voisey’s Bay Expansion

• In 2018, Vale announced that it would recommence the $1.7billion underground expansion of the Voisey’s Bay mine. Two new ramps at its Reid Brook and Eastern Deeps deposits, will ultimately replace the open-pit mine now used. This project extends the Voisey's Bay mine life to 2034 or longer.

• Operations at Voisey’s Bay have been temporarily put on Care and Maintenance as the fly-in fly-out operation seeks to protect its norther communities from COVID-19.

• Upon reaching commercial production Excelsior Mining’s Gunnison In-situ Leach operation would be the 16th producing royalty in Altius production portfolio. The project was in the late stages of commissioning when in March 2019, the project was put on care andmaintenance due to the Covid-19 pandemic.

• The Project’s feasibility study envisions a three phased approach to production with the first phase producing 25 million pounds of copper per year and expanding to 125 million pounds over the projects 24 year life.


Renewables Transition Momentum Growth

Levelized Cost of Energy Comparison

EV Battery $ Cost / kWh

$ Cost Parity with Internal Combustion Engine

Electrification trends (e.g. transportation about to shift to EV) will

cause demand for electricity to grow and gain market share

relative to other sources of consumer energy such as fossil fuels

Lower costs, higher efficiencies and underlying demand growth

coupled with a surge in ESG investment mandates creating a

massive tailwind for renewable energy investments

Megatrends driving increased electricity demand:

ESG Going Mainstream:

Source: “Electrifying Insights: How Automakers can Drive Electrified Vehicle Sales and Profitability,” McKinsey – January 2017 ,

Lazard’s Levelized Cost of Energy Analysis – Version 13.0 (November 2019), US SIF Foundation

Within the electricity sector, renewable energy has become

the cheapest form of new generation

Past the tipping point:


ARR Development Progress Accelerating

GBR formed and

begins working on

business concept

with Altius

Developed and refined

renewable royalty structure and

offering (legal, tax, etc.)

First renewable

royalty on small

hydro/solar

project in VT

GBR acquired by Altius

(through Altius Renewable

Royalties)

$30MM royalty investment in

Tri Global Energy

Silverpeak acquired Canyon Wind

(TX) from TGE with 1st embedded

royalty on a TGE project

CIP acquired Woodford Wind

(IL) from TriGlobal Energy

with 2nd embedded royalty

attributable to Altius

$35MM+ royalty investment

in Apex Clean Energy

2017 2018 20202019

Silverpeak acquired Flatland

Solar (TX) from TGE with 3rd

embedded royalty on a TGE

project

16


ARR’s Royalty Finance Model Attracts Second Major DeveloperUS$35MM+ Investment in Apex Clean Energy

Apex is one of the largest renewable energy developers in the U.S. and has commercialized over 5 gigawatt (GW) of clean

energy projects since inception in 2009. Its current portfolio includes approximately 21 GW (12.5 GW wind, 8.5 GW solar) of

development projects. Apex typically vends these projects to utilities, infrastructure funds and other institutional investors

prior to construction.

Overview

• On March 10, 2020, Altius announced that ARR has closed a US$35+ million royalty investment transaction with Apex Clean

Energy (“Apex”)

• ARR’s investment is funding Apex’s development efforts for its current portfolio of projects and also facilitating its expansion -

allowing Apex to ultimately bring more projects to market

• As Apex sells its development projects to final project sponsors ARR receives new royalties until a minimum royalty vesting

threshold is met.

• Once vested by ARR, royalties are “perpetual” and uncapped

Royalty Contract Details

• Option mechanism allows for future US$10 million tranches based upon achieved milestones

• Royalty payment is pre-set as a percentage of gross revenues

• Using current assumptions portfolio is estimated to generate US$3-4 million in new annual royalty revenues

17


21 GWDevelopment Portfolio

1.6 GW Projects Transacted

in 2019

+2.0 GW Under Construction

Apex Is One of the Largest Renewable Energy Developers in US

18


Tri Global Energy Investment – Proof of Concept

• Renewable energy royalties are being generated ahead of schedule – project sales in first year represent more than half that

required for full royalty vesting threshold - with remainder expected throughout 2020

• First royalty project, Canyon Wind (360 MW – TX), sold in October 2019 to Silverpeak Strategic Partners with operations

expected to begin in Q2 2021

• Woodford Wind (400 MW – IL) sold to Copenhagen Infrastructure Partners in December 2019 with operations expected to

begin in Q4 2021

• Flatland Solar (180 MW – TX) sold to Silverpeak Strategic Partners in March 2020 with operations expected to begin in Q4

2021

• TGE development pipeline has increased to over 2,300 MW (even after accounting for the 940+ MW in project sales)

Source Company Reports

19


Altius generates mineral exploration projects for sale in exchange for royalties and equity positions. This is a proven Equity/Royalty Investment Strategy that allows creation of new pipeline royalties at negative cost and provides cash for 3rd

party royalty acquisitions

20

PG Business Growth - Royalty Creation At Negative Cost

57 Projects

$17M

Converted to new royalties and junior equities since 2016 market bottom

Positive cash generation in 2019

Junior Equity Portfolio Growth

$22M$33M

$54M $54M

$34M

$11M

-$3M -$6M

$17M

$1M

April 2016 April 2017 December 2018 December 2019 March 2020


21

PRODUCING

ROYALTIES

DEVELOPMENT

ROYALTIES

PROJECT GENERATION

PROJECT

RENEWABLE ENERGY

PORTFOLIO

CONTACT

INFORMATION

Flora Wood

Director, Investor Relations

Phone: (416)346-9020

Email: [email protected]

Thank You

altius - copperaltiusminerals.com/storage/presentations/altius... · 2020-04-16 · • ioc margin...

Documents