Altius Minerals Corporation

Good morning, ladies and gentlemen, and welcome to the Altius Minerals Q3 2024 conference call and webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during the call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, November 8th, 2024. I would now like to turn the conference over to Flora Wood. Please go ahead.

Thank you, Mike. Good morning, everyone, and welcome to our Q3 conference call. Our press release and interim filings came out yesterday after the close and are available on our website and on social media. This event is being webcast live, and you'll be able to access a replay of the webcast along with the presentation slides that are on our homepage and on the investor page. Brian Dalton, CEO, and Ben Lewis, CFO, are our main speakers on the call, and will be available in the Q&A. The forward-looking statement on slide two applies to everything we say, both in our formal remarks and during the Q&A. And with that, I'll turn over to Ben to take us through the numbers.

Thank you, Flora. Good morning, everyone. Revenue for Q3 2024 was $16.6 million. compared to $17.8 million in Q3 2023. Revenue and adjusted EBITDA for the quarter reflects higher base metal prices, higher dividends from R&R, and growth of the renewable royalty portfolio, partially offset by lower potash prices and lower coal revenue due to the closure of the Genesee mine. The mineral royalties segment had an EBITDA margin of 69% in Q3 2023. compared to 76% last year and was impacted by higher professional fees associated with the SIL account arbitration. Q3 2024 adjusted operating cash flow of $10.9 million compares to $11.0 million in Q3 last year. The timing of interest, corporate tax payments, and refunds positively impacted adjusted operating cash flow during the current quarter. Net earnings of $3.2 million or $0.06 per share compares to net earnings of $3.5 million in Q3 2023. The decrease in net earnings reflects lower revenues, lower amortization, which was partially offset by marginally higher costs. Q3 2024 adjusted net earnings of $0.05 per share is consistent with the third quarter of 2023. and includes minor adjustments for derivatives and foreign exchange. ARR reported its Q3 2024 results on November 5th, and details can be found on ARR's website, arr.energy. ARR is also approaching the special meeting date of November 19th for its take private transaction, which is expected to close in late November. An affiliate of Northampton Capital Partners LLC is expected to purchase all outstanding common shares of ARR for $12 per share, not owned by Altheus Minerals. After the close, Altheus Minerals will own approximately 57% of ARR. I'll now turn to capital allocation and liquidity. During the quarter, the corporation amended its credit facility to extend the term to August 2025, or sorry, from August 2025 to August 2028, and replaced the combination of its previously outstanding term and revolver debt. The total available credit of $225 million and its principal repayments are consistent with its previous facility, and we did not draw any additional amends at this time. The amended credit facility consists of 50 million Canadian term credit facility, 36 million U.S. term credit facility, and a $125 million revolving credit facility. During the quarter, we made our regularly scheduled debt repayments of 2.0 million, paid total cash dividends of 3.9 million, and issued 12,389 common shares under the corporation's dividend reinvestment plan. The corporation also renewed its normal course issuer bid, which commenced August 22nd, 2024, and will end no later than August 21st, 2025. We did not purchase it and cancel any shares in the third quarter. However, we have expended 10.7 million on a year-to-date basis on the buyback. The Board of Directors also approved a $0.09 quarterly dividend that will be paid to shareholders of record on November 29th with a payment date of December 16th, 2024. Our liquidity consists of $25.6 million in cash at the end of Q3, and we have $116 million in unused revolver room on our amended credit facility. ARR held cash of US $62.1 million, plus has additional capacity under GBR's debt facilities, with sufficient room to fund its commitments and to continue to pursue new investment opportunities. And with that, I'll turn it over to Brian.

Thank you, Ben, and thank you, everyone, for joining us again. Start today with base and battery metals. We currently have three royalty projects nearing construction completion and or an early ramp up. These are the Eastern Deep single copper cobalt mine and the Tre Cabradas and Marianas lithium mines. Also during the quarter, early construction works began at the El Domo copper gold mine. Looking a little further out, we heard from Lundee that they continue to be excited about the delineation work ongoing at the new Saúba discovery. within their Chapada district scale lands and are now completing a scoping study. Resource growth overall at Chapada has continued steadily since our acquisition in 2016, and this has led Lundin to study to evaluate its overall expansion possibilities. It is also worth noting that Lundin has had positive results in optimizing the existing Chapada mine plant and reducing operating costs, while also guiding towards a strong four-quarter production level expectation. Turning now to Potash, where global demand has returned to levels predicted by long-term compounding demand growth trends, and will set a new record this year and likely another next. Nutrien also noted relatively more limited near-term competitive supply growth globally, while commenting on their own ability to continue to feed into incremental demand growth on a highly competitive basis. Similarly, Mosaic has recently increased nameplate capacity levels at the Eskerhazy mine, through ongoing incremental investments and initiatives. This supports our own long-term view that production rates across our portfolio continue to steadily compound in accordance with global demand growth of the foreseeable future. As these have done over the past 10 years since we acquired these very special royalties. Altius Renewable Royalties continues to ramp up its revenue profile as new acquisitions start to contribute and as existing development stage projects continue to advance in commissions. It also continues to be encouraged by upward revisions to power demand forecasts across many of its key investing regions. And as Ben noted, during the quarter, ARR announced a co-private transaction that is expected to see Northampton Capital acquire all of its shares other than those held by Altius Minerals at a price of $12 per share. This represents a significant premium to its trading range over the past considerable while, and the transaction proposal has been endorsed by the majority of its public shareholders. for positive voting support agreements. The transaction is expected to close later this month. In recommending the transaction, ARR noted that its cost of and access to public equity capital was not supportive of its potential growth opportunities. Through Northampton and its investors, the business expects to gain access to deeper, longer-term focus and more attractive repriced pools of capital. IOC continued to progress its efforts to achieve improved operational stability while continuing to invest meaningfully in growth initiatives that are focused particularly on serving the expanding market for high-purity iron ore products. Forest fires in the area hampered production during the past quarter but did not cause any significant damage to facilities or infrastructure, and normal operations have since resumed. Champion continued to advance permitting activities for the CAMI project while also commenting on ongoing negotiations with potential strategic industry partners for the project. It also reiterated its view, a certain view that we agree with, that the market is poised to require meaningful new supplies of the ultra-high-purity products and plants produced in the project, and a large number of new electric arc furnace-based steel plants continue to be constructed throughout the world. at the expense of traditional blast furnace fleet that has typically been more reliant on lower-quality iron ore products. At Silicon, we noted the reporting of further strong drilling results from the high-grade core of the Merlin deposit as Anglo-Gold Ashanti continues with its large-scale delineation drilling program there. It also stated its expectation to release a pre-feasibility study for the project by mid to late next year. Meanwhile, we continue to await the results of arbitration proceedings that took place earlier this year to determine the full extent of our royalty rights relative to the district scale land position that Anglo Gold has consolidated in the region. It is worth noting that the areas hosting the Silicon and most of the Merlin deposits are not under dispute between the parties. Following receipt of the arbitration result, we will continue to evaluate our strategic alternatives for this increasingly important That concludes my remarks. I'll turn it now over to any questions. Thank you.

Thank you. If you do wish to ask an audio question, please press star 1 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star 2 again to cancel. Once again, please press star 1 to register for a question. There will be a brief pause whilst questions are being registered. Our first question comes from the line of arrest, Waukadao. Your line is now open.

Hi, good morning. Brian, I was wondering if you can give us more details on the current process around the Silicon, your plans there, and the arbitration. I'm just curious what sort of options are you currently entertaining on this obviously very highly valued royalty. I'm wondering if you can just run through the alternatives and if you're leaning a certain direction at this point in terms of either a sale or asset swap or what direction you're going.

Maybe I'll start with the end a little bit. I think the direction we'll go will kind of be guided more or less by the process, but, you know, the range of options is pretty wide for us right now. Could include, you know, at one extreme, a pull from sale of the asset. There's certainly quite a bit of interest, I think, amongst the precious metal royalty companies. in a royalty on an asset of this type. So we'll certainly hear that out. We've been, I guess, fairly clear that one opportunity that we would certainly look towards if we were going to go to the sale room would be to potentially take back non-precious royalties for our portfolio, either as full or partial consideration. That would have some And the other alternative, quite frankly, is to simply add silicon as a long-term component of our own portfolio. I mean, I know we're not focused on precious metals and haven't been, but that largely relates to not being that interested in precious metal royalties from an M&A perspective. And that's just a function of what we perceive our relative costs of capital to be compared to those we will be competing with in those situations. But this isn't like that. This is the royalty that's come up through our PG system. And maybe while some of the precious metal groups are cautious around having too much non-precious metal exposure in their portfolios, the inverse isn't true. So it really just comes down to a question about where the highest and best use for this royalty sits. Like where's the best value for our shareholders going to be realized? Is it within Altius? Is it external? And we'll be kind of guided by what interest is out there as we run a bit of a process once we get through the arbitration.

Sorry, Brian, just on that point, so is the process basically in a holding pattern until you have a decision on the arbitration? Is that the way this is going to play out?

Yes, we have had, I guess, indicative interest expressed to us and, you know, from that we kind of know who's most interested. But really, until the arbitration is sorted, it's pretty hard for anyone to come to something more definitive. So that really is the precursor step that we need before we go any further.

Okay. And obviously, the arbitration's been going on quite some time now. Any visibility at all on when we could expect a decision?

Unfortunately, no. It's not in our hands. I mean, the hearing was heard April, I believe, early to mid-April in that period, and that was preceded by lots of submissions by both parties, but it's in the hands of the arbitrators now, and we patiently wait for the result.

Could that drag into next year, or should we be anticipating something by the end of the year?

I really don't have any any insight or guidance to that. It's in their hand. They'll make their decision when they make their decision. But, yeah, I just don't know. Okay. Thank you. It could be tomorrow. Let's hope so. Thank you. Cheers.

Thank you. Your next question comes to the line of Craig Hutchinson at TD Callen. Your line is now open.

Good morning, guys. Thanks for taking my question. My question is just on the Northampton acquisition of a take-private transaction for the public float. I understand, obviously, your comments in terms of access to deeper, more attractive pools of capital from the perspective of Altius Renewables. But are there certain benefits that you guys see it from beyond that, from the Altius Minerals perspective? I guess what I'm getting at, you know, is there a potential once the deal closes that you guys could maybe reduce your position within – Altius Renewables to maybe use those proceeds to buy other royalties. Thanks.

I think from a minerals perspective going forward, not much really changes. When ARR was public and proposing investments and looking to raise capital, minerals would have evaluated those opportunities and in the case where it did raise equity, minerals did take up its pro rata rights. But yeah, I mean, really, there's no requirement for minerals to do that then and there wouldn't be going forward. So it's really going to be pretty situational, I think. It'll be your function of its own liquidity, its own efforts around, you know, balancing its portfolio and those kinds of things. So it's pretty hard to predict that way, to be honest with you, Craig. It'll be situational.

Okay. And then can you just speak to the more broader market here for M&A in terms of your guys' position to acquire new royalties? Is it really tough right now just given where metal prices are? Are you seeing opportunities? If you are, kind of maybe what commodities are you guys kind of looking at or what stage of development are you guys looking at?

I wouldn't call it particularly active out there, but there are a few opportunities that we've got going through the system right now. And it will be, you know, within our more traditional commodity areas. So, you know, across, you know, the existing kinds of commodities that we're exposed to today. There's a few opportunities out there, but it's not overly active. I guess the theme of the day is M&A amongst the operators and some of the later stage developers that can shake some assets out or bring people to the market looking for capital to support that kind of work. But at least in the things we've been looking for, not a lot yet, not as much as you'd even expect, to be honest with you.

Right. Okay.

I appreciate that, guys. Thanks for taking my questions. I will add here, again, it's not the driving focus of our business right now. I went through in the prepared remarks here just the sheer number of projects within our existing portfolio that are being developed and or being made subject to studies around expansion. This is that part of the market where things are getting a little more constructive, where For us, the key elements of growth we'd expect are going to be more organic from existing assets within the portfolio. That doesn't mean our minds are closed to potential opportunities and the silicon process we just talked about might have some implications in that regard. But I guess my main point is that we feel really comfortable with how this business will evolve and grow organically going forward irrespective of what the M&A market looks like. Great. I appreciate the additional color.

Thank you. As a reminder, if you wish to ask a question, please press star 1 on your telephone keypad. And at this time, we have no further questions. I'll turn it back over to the presenters.

Thank you, Mike. Thank you, Craig and Norris, for your questions. Good to see you. And thank you to everybody who joined us on the Q3 call. We'll look forward to speaking to you in the new year.

Thank you. This does conclude today's conference call. You may now disconnect.