Altius Minerals Corp. (ALS:TSX.V) held an “investor day” last week.
Although it was mostly a review of their business and approach, there was one significant new item, while the presentations emphasized two things: first, Altius acts countercyclically; and second, there are multiple valuation-creation opportunities within the Altius portfolio.
Altius and its founder Brian Dalton have always seen the need to act countercyclically in an inherently cyclical industry.
This is a time for harvesting, while new opportunities will come from within its portfolio rather than from large-scale acquisitions.
Much Value Within Altius’ Portfolio
We have discussed the company’s valuation-creation opportunities before. Among these are:
- a possible go-public event for Lithium Royalty Corp (LTUM:OTCQB)., in which Altius is a 12.6% founding shareholder, which from LRC comments seems much closer than before
- a new discovery at the Chapada mine (now Altius’ largest asset)
- exciting drilling results from Voisey’s Bay, extending Altius’ royalty
- the Kami iron ore deposit, which Altius discovered and over which it holds a royalty, under active consideration by owner Champion to move to a production decision
- Both Nutrient and Mosaic signaling increased potash production, with Altius owning royalties over several of their top mines and likely candidates for expansion
Altius still see opportunities to add to its investment in Altius Renewal Royalties, coinvesting with Apollo Management.
A Gold Portfolio Offers Value Enhancement
Dalton discussed the current thinking of Altius’ precious metals royalties.
The successful prospect generation business is now over one-third precious metals, while Altius also holds some royalties separately, many from the Callaghan acquisition in early 2015.
Dalton described this as an emerging gold and precious metals royalty business.
He said the board had recently conducted a corporate strategy session and decided that a precious metals business does not fit in the Altius business, and various alternatives were possible to release the full value, including selling it or swapping it for royalties that would be a better fit.
Altius might look to leverage its existing gold royalties by building the company before selling it.
Altius Shares Compete With Other Opportunities
The company also discussed its buyback program.
It views buying back its own shares differently from most companies, not primarily as a way of returning capital to shareholders, but as an investment that competes with all other potential growth opportunities.
If buying its own stock has a higher projected return than another opportunity, then it will buy its stock.
Altius noted that three of its eight units had already fully paid back all costs while continuing to generate revenue (Voisey’s Bay, Labrador Iron, and the Callaghan acquisition), with a couple closer to doing so.
Altius remains a core holding for exposure to the broad commodities sector, and a solid buy here for those who are underweighting the stock.
Orogen Continues With its Farm-Out Program
Orogen Royalties Inc. (OGN:TSX.V) announced it had optioned another of its properties, this being a copper-gold porphyry project in Sonora, Mexico to Riverside, where it will fall under that company’s alliance with BHP.
Riverside can earn 100% interest in the Llano de Nogal project by making payments of $2.5 million and exploration expenditures of $5 million over a six-year period.
Orogen will retain a 1% royalty (which can be bought down to 0.5%).
This deal fits within Orogen’s new royalty acquisition parameters, whereby it is prepared to divest 100% of a project in return for strong spending commitments.
In its first-quarter results, which included the first full quarter of revenue from Ermitaño, CEO Paddy Nicol noted that the company have generated a profit for the quarter.
The Ermitaño royalty generated $738,842 while prospect generation activities produced another $182,459.
The company has $7.3 million in cash and short-term investments, with no debt.
It also holds shares in other companies valued at approximately $3.5 million.
Orogen remains one of our favorite juniors and is a strong buy at this price.
Agnico Increases Investment in Cartier
Cartier Resources Inc. (ECR:TSX.V) said Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) was undertaking a placement in the company consisting of 14 million units at $0.13 per unit, consisting of a share and a warrant to buy additional shares at $0.16.
Agnico owns almost 18% of the shares in Cartier, but if the warrants were exercised, it would rise to 19.7%.
It is clearly positive to see Agnico want to exercise its rights to acquire additional shares.
However, Cartier has undertaken pretty much one placement each year since 2013; since then its shares outstanding have nearly quadrupled.
We are holding Cartier.
TOP BUYS this week include, in addition to the above, Osisko Gold (OR.NY, 11.64); Vista Gold (VGZ.NY, 0.825); Wheaton Precious Metals (WPM.NY, 42.44); Hutchison Port (HPHT, Singapore, US$0.23); Royal Gold (RGLD, Nasdaq, 115.33); Ares Capital (ARCC, Nasdaq, 19.87); Barrick Gold (GOLD.NY, 20.60); and Pan American (PAAS, Nasdaq, 22.75).
Originally published on Mar. 28, 2022.
Adrian Day, London-born and a graduate of the London School of Economics, is the editor of Adrian Day’s Global Analyst. His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."
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