Diversified Green Royalty Company Positioned for Long-Term Growth

• Altius is a diversified royalty company with long-term royalty assets focused on various commodities. The main pillars of their portfolio include potash, battery metals, and renewable energy, with a strong focus on growth and a long-life portfolio.
• Altius reported revenue of $103.5 million for 2022, with expectations for further growth. The company emphasizes the importance of potash, seeing a global demand that will grow to 90 million tons over the next decade, and stresses the Canadian-based supply growth as a key player.
• The discussion emphasizes potash's critical role in replenishing soil nutrients and its demand in global food production.
• Altius is transitioning away from coal and their royalty interests are being replaced by renewable energy, reflecting a broader shift in their investment focus.

Overview of Altius Minerals' Four Pillars

Altius Minerals Corporation (TSX: ALS) is a diversified natural resource royalty company with a portfolio of long-life assets poised for steady growth.

Altius Minerals has arranged its royalty portfolio around four key commodities it believes have strong long-term growth fundamentals: potash, copper, battery metals, and renewable energy. As Dalton explains, "We selected them because they actually are going to be drivers of increasing demand for the particular commodities that we're associated with."

Potash

The potash assets, concentrated in Saskatchewan, Canada, are extraordinarily long-life with reserves that could sustain thousands of years of production. Yet the market narrative around potash demand has been excessively short-term, focused on current oversupply and pricing weakness.

In reality, potash demand is inextricably tied to global population growth and agricultural yields. While near-term pricing suffers periodic cyclical weakness, the market will likely grow from ~70 million tonnes today to 90 million tonnes over the next decade. Altius Minerals' royalties, representing close to 25% of global potash production, are well positioned to ride this demand growth.

Copper

Altius Minerals holds a copper stream on the Chapada mine in Brazil operated by Lundin Mining. Acquired in 2016 near the bottom of the commodity cycle, this asset has already generated more revenue for Altius than the original purchase price. Resource life has grown from 40 to 60 years over the first 7 years of Altius' ownership, and Lundin now plans to expand production. This highlights the long-term growth potential.

Battery Metals

Altius has royalties on several lithium projects, held indirectly through its majority stake in Lithium Royalty Corporation. While lithium markets are currently oversupplied, the specific projects Altius has exposure to are on the lower end of the cost curve with resource expansion potential. Battery metals remain a key long-term demand growth driver.

Renewable Energy

Altius owns royalties on wind and solar energy projects. Unlike mines which deplete finite resources, renewable projects have perpetual productive potential as long as the wind and sun resource persists. As existing projects are repowered with new technology every 20-25 years, they can expand electricity production without expanding their physical footprint. This allows for perpetual life asset renewal and growth.

Long Duration Assets Create a Unique Value Proposition

A key point Dalton emphasizes is how traditional discounted cash flow techniques tend to undervalue multi-generational assets like Altius' royalties. Modeling production and pricing as constant into perpetuity fails to account for the likely production growth over time.

For example, simply assuming Altius' potash royalties maintain existing market share against a backdrop of rising global potash demand growth increases their valuation from $350 million to over $800 million. The renewable energy assets have even longer perpetual productive potential not captured in standard modeling.

As Dalton explains, "These are long-term investing at its best...that ability to invest for the long term in this business that we're in particularly at the royalty level, it means that you make very thoughtful bets on assets that are a long duration." The inflation protection inherent in royalty structures further enhances their appeal as long-duration assets.

Disciplined Approach to Long-Term Growth

With its assets poised to grow in value alongside increasing production volumes over time, Altius' focus is on maintaining a disciplined approach to capital allocation and avoiding dilution of its royalty interests. As Dalton explains:

"Our job is mostly to be very careful about diluting current shareholders' interests into things that we already own that will naturally deliver all this growth that we've talked about...whether the markets recognize that today or tomorrow is another matter."

Altius believes buybacks of its own shares represent the best use of capital today to increase shareholder exposure to its undervalued royalties. The company can also opportunistically trade royalties in minerals outside its core areas (e.g. precious metals) for additional royalties in potash, copper, battery metals, and renewable energy. But Altius is not actively seeking to sell its core royalty interests.

Track Record of 20% Annual Returns Over 25 Years

Since its founding in 1997, Altius has compounded its share price and dividends at an impressive 20% annual rate over 25 years. While past performance is never a guarantee of future results, Dalton feels Altius' portfolio has strong embedded growth still to be realized.

The Investment Thesis for Altius Royalties

For investors with a long-term mindset, Altius Minerals offers diversified exposure to commodities with compelling demand growth trajectories. The duration and perpetual renewal potential of Altius' royalties may be underappreciated by conventional valuation techniques. Altius' disciplined approach to allocating capital focused on minimizing equity dilution could help drive attractive long-term investment returns. The company's 25-year track record offers evidence of management's alignment with long-term shareholders.

• Diversified exposure to commodities with strong fundamentals - Altius' portfolio provides exposure to potash, copper, battery metals, and renewable energy - sectors with clear long-term demand growth drivers. This diversification helps mitigate risk.
• Inflation protection - Royalty structures allow Altius' revenue to grow with inflation as higher costs at the mining operator level translate to higher royalty payments. This makes royalties attractive assets in inflationary environments.
• Long asset duration - Many of Altius' royalties are on multi-generational assets with extremely long productive lives measured in decades or centuries. This long duration is undervalued by standard valuation techniques.
• Growth potential - Altius' royalties have significant growth potential through production expansions, resource extensions, and perpetual renewable energy asset renewal. This growth is likely to exceed modeling assumptions.
• Strong track record - Altius' 20% annual total return over 25 years provides evidence the company can generate attractive long-term returns. The current portfolio has similar characteristics.
• Disciplined capital allocation - Management focuses on maximizing per share value and minimizing equity dilution, suggesting an alignment with long-term oriented shareholders.

For investors with longer time horizons and belief in the long-term commodity demand trajectories, Altius Minerals offers a differentiated royalty-based investment exposed to some of the most compelling natural resource end markets. The long duration of its assets, potential for meaningful growth, and shareholder-aligned management make it worthy of consideration.