Altius Minerals Corporation - A Unique Royalty Company Positioned for Growth

• Altius Minerals Corporation (ALS) is a royalty company focused on base metals, bulk commodities, and renewable energy sources.
• Altius holds royalties in copper, iron ore, potash, and renewable energy projects, with a sustainability theme.
• Inflation is impacting commodities, but Altius believes it benefits from commodity exposure and tailwinds.
• Precious metal royalty companies have faced challenges due to oversaturation in the market.
• Altius sees potential for consolidation among smaller royalty players and emphasizes long-term strategy and patience for success.

About Altius Minerals Corporation

Altius Minerals Corporation (TSX:ALS) is a royalty company focused on base metals, bulk commodities, and renewable energy projects. With over 20 years of experience, Altius holds royalties on a diverse portfolio of assets that are well-positioned to benefit from strong tailwinds related to sustainability and decarbonization trends. The company generates royalty revenue from copper, iron ore, potash, and renewable energy projects.

Interview with CEO Brian Dalton

Current Market Conditions Favor Altius’ Commodity Exposure

With high inflation persisting, Dalton believes the types of commodities Altius is exposed to through its royalties will be real beneficiaries. While some commodity prices were volatile throughout 2022, potash prices have continued to surge. Altius has seen its royalty revenue continue to build as operators holding its royalties plan expansions and new projects.

As Dalton explains, “the thing about our story is that it's not meant to change a lot this is a long-term plan and it's playing out.” The company aims for a steady approach even during periods of commodity price volatility. With its focus on base metals and bulk commodities linked to decarbonization trends, Altius expects tailwinds for its commodity exposures in the coming years.

M&A Outlook for the Royalty Sector

With many new entrants competing in the precious metals royalty space, Dalton sees consolidation ahead. He notes, “I think everyone would agree that they're certainly on the precious metal side that there's too many players. They're competing for too few assets.” With strong market conditions, base metal producers generating substantial cash flow have less need to monetize future production through precious metal streams.

Dalton expects significantly fewer precious metal royalty companies in the next few years as consolidation accelerates. With its focus on base metals and bulk commodities, Altius is positioned in a less competitive segment of the royalty market.

Delivering Organic Growth

While M&A activity has been limited, Altius continues to deliver organic growth. Its renewable energy royalty subsidiary, Altius Renewable Royalties, has deployed over $100 million to acquire five cash-flowing royalties in just the past year. Its portfolio has tripled from 1,000 to over 3,000 megawatts since May 2022.

In the mining royalty business, operators of Altius’ royalty assets are investing in expansions and new projects that will grow the company’s net asset value and cash flow. Significant recent discoveries were made at the Silicon gold project, on which Altius holds a royalty. Major miner AngloGold Ashanti has been consolidating land around Silicon and sees potential for a sizable new gold district.

Rising inflationary pressures have led builders and operators to want less hedging and more exposure to market prices. This shift has opened opportunities for Altius to provide capital and earn attractive returns from funding earlier stage renewable energy projects. Renewables are also benefiting from a desire for energy security through domestic supply.

ESG Tailwinds and Commodity Demand Growth

Dalton sees robust demand growth for the commodities underpinning the global energy transition. However, he notes that ESG investors may be underestimating the inflationary pressures impacting the supply side. From rising wages to land use pressures, he sees real potential for cost increases to outpace technological gains in renewable energy equipment.

To meet surging copper demand from electrification, the mining industry faces those same inflationary pressures. Despite booming demand growth, equity investors have been fickle on mining stocks due to recession fears. But the widening gap between supply and demand makes a powerful case for exposures like Altius provides to key metals enabling the energy transition.

Conclusion

With its focus on base metals, bulk commodities, and renewable energy royalties, Altius Minerals Corporation offers a differentiated way to invest in decarbonization and energy transition themes. The company is poised to benefit from robust demand growth in commodities like copper, potash, and renewable energy.

Trading at just over 11x estimated 2023 cash flow, Altius offers significant upside potential if commodity prices remain at elevated levels. The company’s royalty model provides leverage to theresource sector without exposure to rising costs. For investors seeking inflation protection and exposure to sustainability mega-trends, Altius deserves a close look.