corporate presentationaltiusminerals.com/storage/presentations/2020-03-12... · 2020-03-11 ·...
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TSX:ALS | OTCQX:ATUSFMarch 2020
Corporate Presentation
TSX:ALS | OTCQX:ATUSF
This document includes certain statements that constitute “forward‐looking statements” and “forward-looking information” within the meaning of
applicable securities laws (collectively, “forward‐looking statements”). Forward-looking statements include statements regarding Altius Minerals
Corporation’s (“Altius”) intent, or the beliefs or current expectations of Altius’ officers and directors. Such forward-looking statements are typically
identified by words such as “believe”, “anticipate”, “estimate”, “project”, “intend”, “expect”, “may”, “will”, “plan”, “should”, “would”, “contemplate”,
“possible”, “attempts”, “seeks” and similar expressions. Forward‐looking statements may relate to future outlook and anticipated events or results.
By their very nature, forward‐looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and
the risk that predictions and other forward‐looking statements will not prove to be accurate. Do not unduly rely on forward‐looking statements, as
a number of important factors, many of which are beyond Altius’ control, could cause actual results to differ materially from the estimates and
intentions expressed in such forward‐looking statements.
Forward‐looking statements speak only as of the date those statements are made. Except as required by applicable law, Altius does not assume
any obligation to update, or to publicly announce the results of any change to, any forward‐looking statement contained herein to reflect actual
results, future events or developments, changes in assumptions or changes in other factors affecting the forward‐looking statements.
Forward Looking Statements
TSX:ALS | OTCQX:ATUSF
Long-Term, Counter-Cyclical Discipline
ROYALTY REVENUE GROWING FAST ON VOLUME
GROWTH AND IMPROVED PRICES
COMMODITIES SUPERCYCLE COMMODITIES SUPERCYCLE
ENDS
$6M
$28M$33M
$47M
$67M
$78M
IPO & INITIAL YEARS
Royalty Acquisition
Altius Interpretation
of Mining Cycle
Position
Royalty Revenue
2002 – 20111997 – 2001 2012 – 2015 2016 – Present
Cash Build Acquisitions Organic Growth
• Less than $1MM market cap upon IPO in 1997
• Innovator of Project Generator Model for mineral exploration that trades projects for royalties and partner equity – protecting Altius capital structure
• Equity gains of more than $200MM and many early stage royalties created from PG business during super-cycle
• Decision to use profits to expand royalty portfolio with focus on non-precious metal commodities
• Developed a royalty wish list but forced to sit on cash for several years until commodity prices and sentiment declined
• Multiple royalty acquisitions made as balance sheet crisis hit the mining sector and motivated asset sales
• Royalty revenue from long life assets grown to $78M - with very high accompanying EBITDA and Cash Flow margins
• Embedded organic (free) growth coming from mine expansions and extensions while also innovating new renewable royalty business
• 42 million common shares outstanding - no roll backs
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TSX:ALS | OTCQX:ATUSF
$0.22$0.88 $0.83
$1.08
$1.56$1.86
$1.79-$1.91
FY 2014 FY 2015 FY 2016 FY 2017 2018 2019 2020Guidance
Growth Track Record
EBITDA Per Share
Royalty Revenue Per Share
$0.71 $0.64$0.80
$1.24$1.49
$1.43-$1.53
FY 2015 FY 2016 FY 2017 2018 2019 2020Guidance
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$6M$28M $33M
$47M
$67M$78M
$75M -
$80M
FY 2014 FY 2015 FY 2016 FY 2017 2018 2019 2020Guidance
Royalty Revenue
Per share growth focus
80% EBITDA Margin
56% OCF Margin
TSX:ALS | OTCQX:ATUSF
Royalty Growth Pipeline
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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
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 Studies168,000 metres of
drilling in 2020
60+ Exploration Stage Royalties
21 GW Development Portfolio
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TSX:ALS | OTCQX:ATUSF
Proven Equity/Royalty Investment Strategy Allows Creation of New Pipeline Royalties at Negative Cost and Provides Cash for 3rd Party Royalty Acquisitions
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
PG Net Monetizations
1stGunnison starting up to mark first
PG created royalty to reach production stage
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$22M$33M
$54M $54M$11M
-$3M -$6M
$17M
April 2016 April 2017 December2018
December2019
TSX:ALS | OTCQX:ATUSF
Levelized Cost of Energy Comparison
Renewables Transition Momentum Growth
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:
7Source: “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:
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TSX:ALS | OTCQX:ATUSF
Tri Global Energy Investment – First Year Progress
• 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
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TSX:ALS | OTCQX:ATUSF
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
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TSX:ALS | OTCQX:ATUSF
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
10Source Company Reports
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TSX:ALS | OTCQX:ATUSF
Diversified, High Quality Assets
15 Producing Royalties
Investment Grade Operators
Low Jurisdictional RiskCanada, USA and Brazil
Royalty vs. Stream Dominated
Copper 37%
Battery Metals (Ni-Li-Co) 2%Potash 19%
Electricity Generation (Coal) 14%
Premium Iron Ore 20%
Steel Making Coal 4%
Zinc 3%
2019CommodityRevenue
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TSX:ALS | OTCQX:ATUSF
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
Transportation Electrification
Potash
Macro-TrendAltius
Royalty Exposure
Subsidiary Altius Renewable Royalties Corp. (“ARR”) reinvesting royalty based capital to advance more than 23 GW of potential new renewable energy projects – as our 5 GW coal generation exposure phases out to zero
Altius’s potash fertilizer royalties relate to a portfolio of top-tier Canadian mines that are ramping up into pre-built capacity expansions as sustainable food production needs increase
Copper, which benefits more than any other metal from EV and renewable transitions, is Altius’s largest royalty exposure. Royalty exposure to battery metals - Nickel, Cobalt and Lithium is growing
Royalty from IOC relates to high iron / low impurity concentrates and pellets that require less metallurgical coal usage in steel plants
Aligned with Global Sustainability Macro Trend
Sector leading fundamental business growth from assets that enable the world to meet its sustainability objectives
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TSX:ALS | OTCQX:ATUSF
Longevity
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
TSX:ALS | OTCQX:ATUSF
Strength of Operator Margin
Notes
• All amounts USD. Spot as at March 9, 2020. Spot Potash is FOB Midwest.• 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 ofproduction (excluding brine) – 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.
Operator MineCommodity Benchmark
Spot Price Operating Margin
Lundin Chapada Copper $2.56 112%
Nutrien All Operations Potash $255 211%
Mosaic All Operations Potash $255 245%
Vale Voisey's Bay Nickel $5.96 106%
Rio Tinto IOC Fe Concentrate $91 102%
Rio Tinto IOC Fe Pellet $132 103%
Excelsior Gunnison Copper $2.56 194%
Hudbay Manitoba Operations Copper $2.56 701%
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TSX:ALS | OTCQX:ATUSF
Historic Royalty Acquisition Returns
AcquisitionAcquisition
DatePurchase
Price
Realized After-Tax Unlevered
Cashflow
Net Asset Value(5%)
Consensus
Realized Cashflow + NAV vs.
Purchase Price
Voisey's Bay 2003 $13.6 million $25.1 million $18.2 million 318%
Chapada Stream 2016 $76.8 million $40.2 million $124.0 million 214%
Potash Portfolio 2014 & 2018 $138.2 million $42.5 million $226.9 million 195%
IOC 2017 & 2019 $69.1 million $48.9 million $106.1 million 224%
Callinan Merger 2015 $70.9 million $23.0 million $71.7 million 133%
Coal Portfolio 2014 $191.7 million $67.9 million $67.1 million 70%
$560.3 million $247.5 million $614.0 million 154%
Note
1. Purchase price is based on cash purchase price in CAD. For the acquisition of Callinan Royalties in 2015, the purchase price excludes cash and consideration allocated to non-royalty related assets. (see Note 9, 2016 Annual Financial Statements), and also includes the cost to exercise the option increasing the Gunnison Gross Sales Royalty (exercisedin 2018).. The main producing royalty in Callinan is 777 with the Gunnison development stage royalty also part of that acquisition.
2. After tax unlevered cash flow is the cumulative (since acquisition) reported revenue up to December 31, 2019 after accounting for 27% corporate income tax. For LIORC, theeffective tax rate is adjusted to zero to reflect the actual tax rate on inter-corporate dividends. For the Chapada copper stream, reported revenue is net of a 30% deduction toreflect the cost of purchasing copper, as per the contract. The effective tax rate on Chapada is 0% until the initial deposit of US$60 million is fully recovered. Voisey’s Bayroyalty revenues are shown net of the 20% Newfoundland & Labrador royalty tax.
3. Consensus NAV by asset based on analysts reports from July - September 2019. The Callinan NAV consensus is based on NAV ascribed to 777 and to Gunnison.
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TSX:ALS | OTCQX:ATUSF
Dividends
$3M
Dividends
$5M
Dividends
$7MDividends
$7M
Dividends
$8M
Share buy back
$2M
Share buy back
$2M
Share buy
back…
Share buy back
$9M
2015 2016 2017 2018 2019
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TSX: ALS | OTCQX: ATUSF
Issued Common Shares 41.8 million
Fairfax Preferred Securities 10.0 million ($100 mm)
Basic Market Capitalization $353 million
Annual Dividend $0.20 per share
Outstanding Debt $109 million
Cash and Public Equity Holdings† $169 million
Available Under Credit Revolver† $85 million
4.9x
1.3x
x
1x
2x
3x
4x
5x
6x
2014 2015 2016 2017 2018 2019
Net Debt to EBITDA
4.9x
1.3x
x
1x
2x
3x
4x
5x
6x
2014 2015 2016 2017 2018 2019
Net Debt to EBITDA
Leverage Ratio 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 Mar 10, 2020. Cash and public equity holdings includes $22 million cash + $93 million LIORC equity value + $54.1 million project generation equity values
TSX:ALS | OTCQX:ATUSF17
0.69x 0.84x 1.12x
1.64x 1.76x 2.19x
ALS OR SSL WPM RGLD FNV
8.7x
14.9x 15.2x 17.0x 18.9x
25.4x
ALS SSL OR RGLD WPM FNV
9.2x 14.4x 15.8x
19.4x 19.4x
27.5x
ALS OR SSL WPM RGLD FNV
EV/EBITDA (2020E) P/CF (2020E)P/NAV
Source S&P Capital IQ, Company Reports. March 11, 2020
Potential Re-rate Catalysts
• Increased recognition of sector leading per share business growth metrics, longest duration assets, decreasing
leverage and increasing returns of capital
• New renewables royalty investment announcements
• Coal to renewables strategy execution eliminates current negative impact on investment suitability perception
• Broader portfolio sustainability attributes become recognized by ESG focused investors
• Announcements by mine operators of resource growth and mine expansion (e.g. Chapada)
Valuation
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TSX:ALS | OTCQX:ATUSF
Thank You
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PRODUCING
ROYALTIES
DEVELOPMENT
ROYALTIES
PROJECT GENERATION
PROJECT
RENEWABLE ENERGY
PORTFOLIO
CONTACT
INFORMATION
Flora Wood
Director, Investor Relations
Phone: (416)346-9020
Email: [email protected]