Mr. Brian Dalton reports
ALTIUS REPORTS 2022 ATTRIBUTABLE ROYALTY REVENUE OF $103.5M AND ADJUSTED EARNINGS (1,2) OF $33.9M
Altius Minerals Corp. had full-year 2022 revenue of $102.0-million, compared with $81.7-million for 2021, and $21.7-million for the 2022 fourth quarter, compared with $22.6-million for the same period in 2021.
Full-year 2022 attributable royalty revenue, adjusted for joint venture revenue, of $103.5-million ($2.27 per share) was 23 per cent higher than the $83.9-million ($2.03 per share) reported for 2021. Fourth quarter 2022 attributable royalty revenue of $23.1-million (49 cents per share) compares with $23.5-million (57 cents per share) during Q4 2021. Attributable royalty revenue for 2022 represents an annual record for the corporation, mainly based upon higher realized commodity prices and the continuing ramp-up of renewable royalty-based revenue.
Commenting on the record year and outlook, Brian Dalton, chief executive officer, said:
"Two thousand twenty-two was the 25th anniversary year for Altius as a public company and the first year that royalty revenues reached the $100-million milestone. Of far more importance, however, practically all of our long-term exposures are gaining growth signals in the form of one or more of new build intentions, production rate expansions or resource increase-based life extensions. These developments underpin our confidence that the value of our portfolio will continue along its trajectory of long-term organic growth realization -- growth that largely does not require us to make any further investment. We are also particularly gratified to note the continuing acceleration of portfolio growth and long-term revenue buildup that is occurring within Altius Renewable Royalties, which is coinciding closely with the elimination of coal from our business."
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $89.7-million or $1.97 per share during 2022 increased by 34 per cent as compared with $67.0-million or $1.62 per share during the prior year. Adjusted EBITDA for the fourth quarter was $18.0-million or 38 cents per share, which compares with adjusted EBITDA of $17.7-million or 43 cents per share in Q4 2021. The adjusted EBITDA margin in 2022 was 82 per cent versus 80 per cent last year. The increase in adjusted EBITDA for the year ended Dec. 31, 2022, is consistent with the increase in attributable revenue but was partially offset by an increase in consolidated expenses within the renewable royalties segment primarily due to public company related costs and team expansion. The mineral royalties segment had an EBITDA margin of 87 per cent for both the current year and the prior year.
On a full-year basis, adjusted operating cash flow of $75.9-million or $1.65 per share compares with $49.4-million or $1.19 per share last year. Adjusted operating cash flow for the quarter was $19.2-million or 40 cents per share, which compares with adjusted operating cash flow of $15.9-million or 38 cents per share in Q4 2021. Adjusted operating cash flow for the quarter and year ended Dec. 31, 2022, is consistent with the increase in royalty revenues.
Net earnings for the quarter and year ended Dec. 31, 2022, were positively impacted by strong royalty revenue and were partially offset by negative non-cash based fair value adjustments on derivatives and foreign exchange. Net earnings of $39.5-million or 82 cents per share for 2022 compare with net earnings of $38.3-million or 97 cents per share in 2021. Adjusted net earnings per share of 74 cents in 2022 compare with adjusted net earnings per share of 77 cents per share in 2021. Net earnings during the fourth quarter were $6.8-million or 14 cents per share and 10 cents per share
on an adjusted basis. This compares with net earnings of $2.1-million or seven cents per share and, on an adjusted basis, 19 cents per share in Q4 2021. Adjusting items for the current quarter include unrealized gains on derivatives related to the revaluation of share purchase warrants on junior mining equities compared with unrealized losses last year, as well as higher gains related to the receipt of common shares in exchange for the transfer of several mineral properties year over year.
The attached table summarizes the financial results and attributable revenue for the four quarters of 2022 along with the years ended Dec. 31, 2022, and Dec. 31, 2021.
Base and battery metals (primarily copper) revenue of $4.7-million and $28.5-million for the quarter and year decreased compared with the prior-year amounts primarily due to the scheduled closure of Hudbay Minerals Inc.'s 777 mine with royalties from other operations performing largely in line. Average realized copper prices during both years were very similar.
Copper delivered under the Chapada stream agreement was consistent year over year. Operator guidance for 2023 is targeting copper production of 43,000 to 48,000 tonnes, which compares with 46,000 tonnes produced in 2022.
Early in 2022, Lundin Mining announced the discovery of the Sauva deposit at Chapada and in February, 2023, it announced a maiden mineral resource estimate that has indicated grades that are significantly higher than those being currently mined. An aggressive expansion-and-delineation-focused drilling program continues. Lundin has also indicated that Sauva is now being considered as part of its continuing production expansion studies at Chapada.
Lithium Royalty Corp. (LRC), of which Altius is a co-founding 11.4-per-cent shareholder, continued to build out its portfolio during 2022 with the total number of project royalties acquired since inception in 2018 amounting to 29 royalties on 27 properties -- with two currently producing and four under construction. LRC filed a preliminary base PREP prospectus on Feb. 21, 2023, describing a proposed initial public offering of common shares as it continues to advance several new royalty investment opportunities. Altius also holds co-participation-based, limited partnership minority interests in each of LRC's Tres Quebradas, Grota do Cirilo and Mariana royalties. These are expected to add first-ever royalty revenues from lithium production to the base and battery metal component of Altius's broader royalty portfolio during the current year.
At Voisey's Bay, underground mining has begun with initial production achieved from the Reid Brook mine, while development of the Eastern Deeps mine continues. Exploration efforts also continued to indicate the potential for mine life extensions, particularly beneath the currently defined resource areas at Reid Brook, where long core length and high-grade nickel and copper drilling intercepts are being encountered that highlight the potential for future resource and mine life growth.
Adventus Mining Corp. continues to progress the Curipamba-El Domo copper-gold project in Ecuador with its recent announcement of an investment protection agreement with the government of Ecuador. This follows its entering into a comprehensive project finance package for the project earlier in 2022. It is currently completing a social consultation process with regional stakeholders and completing other studies in expectation of making a construction decision in the second half of the year.
Potash royalty revenue of $9.8-million in Q4 2022 and $41.4-million for the year is up 42 per cent and 115 per cent from the comparable periods last year. Potash prices increased significantly during the first half of the year as the market reacted to supply concerns relating to the Russia-Ukrainian war but have since retreated to below prewar levels -- despite the market currently being undersupplied relative to unconstrained soil replenishment requirements. Tonnes of potash production attributable to royalties were similar to prior-year levels.
The K3 production unit at Mosaic's Esterhazy mine was fully commissioned during the year with production from this unit now replacing production from the K1 and K2 production units. Both Mosaic and Nutrien announced the start of capital investment programs during the year that are designed to complete the ramp-up of low-cost production capacity at most of the company's royalty mines over the next one to four years. These investments have been initiated in response to both current global supply constraints and medium-to-long-term-trend-line-based demand growth expectations.
Iron ore royalty revenue of $2.6-million was recognized in Q4 2022 ($3.3-million Q4 2021), while full-year revenue was $10.7-million ($17.2-million in 2021). The decrease was primarily the result of lower realized product prices and lower equity dividends from IOC -- as a greater percentage of IOC's free cash flow was directed toward strategic growth and sustaining capital investments. Prices have since rebounded strongly on expectations of demand recovery related to the easing of COVID-19 restrictions in China and broader global infrastructure building and refurbishment initiatives. The corporation's current iron ore revenue stems from the pass-through of royalties and equity dividends paid by the Rio Tinto-controlled IOC to Labrador Iron Ore Royalty Corp. (LIORC), of which the corporation is a significant shareholder.
Champion Iron Ore is expected to announce the results of an updated feasibility study for the Kami project later in 2023. The study is targeting production of high-purity, DR quality feed that can serve the rapidly expanding transition to electric arc furnace-based steel making. Electric arc furnaces require no coal inputs and also cannot utilize the vast majority of the world's current iron ore type production base. Altius holds a 3-per-cent gross sales royalty related to the Kami project.
Thermal coal royalty revenue was $3.8-million in Q4 2022 ($1.4-million Q4 2021), while full-year revenue of $15.2-million was higher than the 2021 revenue of $9.1-million. The increase reflected higher inflation indexed royalty rates and higher plant utilization at the Genesee power plant, which was negatively impacted by unplanned maintenance shutdowns in the prior year. The operator of the Genesee power plant continues with natural-gas-based conversion investments that are expected to commission over the next year and bring an end to coal usage and the associated royalty payments by the end of 2023.
Altius Renewable Royalties (ARR) released its Q4 2022 and year-end results on March 1, 2023. The corporation holds 58 per cent of the common shares of ARR and participated in its late-year common share equity raise.
ARR reported 2022 proportionate royalty revenue of $4.4-million (U.S.), as compared with $400,000 (U.S.) in the prior year, relating to its 50-per-cent joint venture interest in Great Bay Renewables (GBR). ARR also announced that GBR's 2023 revenue is expected to continue to ramp up strongly based upon recently issued guidance of $11.5-million (U.S.) to $13.5-million (U.S.) despite lower, currently projected power price assumptions.
ARR's annual results and business development activities can be reviewed in greater detail in its published MD&A (management's discussion and analysis) and financial statements.
Silicon project gold royalty
AngloGold Ashanti Ltd. continues to advance significant new gold discoveries at the Silicon project, located near Beatty in Nevada. It
an increased and higher-confidence mineral resource estimate for the Silicon deposit of 4.22 million ounces of gold (3.4 million ounces as indicated and 800,000 ounces as inferred) and further cumulative mineral resource estimates totalling 4.18 million ounces from three additional deposits within the district (North Bullfrog, 1.19 million ounces measured and indicated, and 360,000 ounces inferred; Motherlode, 1.55 million ounces indicated and 170,000 ounces inferred; and Sterling, 910,000 ounces inferred). It also reported that it will now evaluate the Merlin deposit discovery on an integrated basis with the adjacent Silicon deposit, as part of a combined prefeasibility study, with further updates expected in 2023. This reporting will potentially include a maiden resource estimate for Merlin, which was recently described by AngloGold Ashanti's chief executive officer during the Q4 2022 financial results conference call as the real gem in the district.
Further information concerning the results and progress of the various components of the corporation's royalty and exploration portfolios can be found in its MD&A and financial statements.
Capital allocation summary
The corporation's capital allocation priorities are intrinsically linked to its strategy of creating per-share value through a portfolio of originated and acquired assets that relate to long-life expandable operations that will naturally grow in value on a per-share basis and provide it with the opportunity to regularly increase shareholder capital returns.
New investments completed during the year totalled $69-million and were directed to initiatives including the purchase of additional shares of LIORC and ARR, a convertible debenture investment into Invert, a carbon-credit-focused development-stage company, as well as several junior-mining-company-based royalty and equity investments.
The corporation expended $4.8-million in the repurchase and cancellation of 268,000 shares under its normal course issuer bid during the year and paid dividends of $13.9-million (following a 14-per-cent increase in its regular quarterly dividend that was announced midyear).
During the year, the corporation made scheduled debt repayments of $8-million, debt interest payments of $6.6-million and preferred security distributions of $3.3-million. The corporation also drew down $10-million on its revolving credit facility for the acquisition of investments.
On April 14, 2022, the corporation announced that Fairfax Financial Holdings Ltd., through certain of its affiliates, exercised 6.67 million common share purchase warrants for gross proceeds of $100-million. These proceeds were then in turn used to redeem $100-million of preferred securities that were held by Fairfax. Altius now has no outstanding common share purchase warrant or preferred securities distribution obligations, and Fairfax has become the holder of approximately 13.9 per cent of Altius issued and outstanding common shares.
Cash and cash equivalents at Dec. 31, 2022, were $82.4-million, compared with $100.0-million at the end of 2021. Cash, excluding $67.9-million held by ARR, was $14.5-million. The value of publicly traded project generation business equity holdings was $50.3-million at Dec. 31, 2022. The market value of LIORC shares was $125.6-million and the market value of ARR shares, including the in-the-money indicated value of share purchase warrants, was $169.8-million.
The corporation's board of directors has declared a quarterly dividend of eight cents per share. The current quarterly dividend is payable to all shareholders of record at the close of business on March 17, 2023. The dividend is expected to be paid on or about March 31, 2023.
This dividend is eligible for payment in common shares under the dividend reinvestment plan (DRIP) announced by news release on May 20, 2020, and available to shareholders who are Canadian residents or residents of countries outside the United States.
In order to be eligible to participate in respect of the March 31, 2023, dividend, non-registered shareholders must provide instruction to their brokerage and registered shareholders must provide completed enrollment forms to the transfer agent by March 10, 2023, five business days prior to record date. Stock market purchases made under the DRIP for the March 31, 2023, payment will be satisfied by issuance from treasury at the five-day volume weighted average price ending at the close of trading the day before payment date. Shareholders who have already provided instruction to be enrolled earlier this year will continue to be enrolled unless they direct otherwise. For more information, please see
the company's website. Participation in the DRIP is optional and will not impact any cash dividends payable to shareholders who do not elect to participate in the DRIP. The declaration, timing and payment of future dividends will largely depend on the corporation's financial results as well as other factors. Dividends paid by Altius on its common shares are eligible dividends for Canadian income tax purposes unless otherwise stated.
Non-GAAP (generally accepted accounting principles) financial measures
Management uses the following non-GAAP financial measures: attributable revenue, attributable royalty revenue, adjusted EBITDA, adjusted operating cash flow and adjusted net earnings (loss).
Management uses these measures to monitor the financial performance of the corporation and its operating segments, and believes these measures enable investors and analysts to compare the corporation's financial performance with its competitors and/or evaluate the results of its underlying business. These measures are intended to provide additional information, not to replace international financial reporting standards (IFRS) measures, do not have a standard definition under IFRS, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. As these measures do not have a standardized meaning, they may not be comparable with similar measures provided by other companies. Further information on the composition and usefulness of each non-GAAP financial measure, including reconciliation to their most directly comparable IFRS measures, is included in the non-GAAP financial measures section of the company's MD&A.
Fourth quarter and year-end 2022 financial results conference call and webcast details
Date: March 8, 2023
Time: 9 a.m. ET
Toll-free dial-in number: 1-888-396-8049
International dial-in number: 1-416-764-8646
Conference call title and identification No.: Altius Q4 and year-end 2022 results, ID No. 08977051
Webcast: A webcast will be available.
Altius's strategy is to create per-share growth through a diversified portfolio of royalty assets that relate to long-life, high-margin operations. This strategy further provides shareholders with exposures that are well aligned with sustainability-related global growth trends, including the electricity generation transition from fossil fuel to renewables, transportation electrification, reduced emissions from steelmaking and increasing agricultural yield requirements. These macrotrends hold the potential to cause increased demand for many of Altius's commodity exposures, including copper, renewable-based electricity, several key battery metals (lithium, nickel and cobalt), clean iron ore and potash. In addition, Altius runs a successful project generation business that originates mineral projects for sale to developers in exchange for equity positions and royalties. Altius has 47,624,958 common shares issued and outstanding that are listed on Canada's Toronto Stock Exchange. It is included in each of the S&P/TSX Small Cap, the S&P/TSX Global Mining and the S&P/TSX Canadian Dividend Aristocrats indices.
We seek Safe Harbor.
© 2023 Canjex Publishing Ltd. All rights reserved.