Altius Minerals Corporation (ALS) Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Altius Q3 2026 Financial Results Conference and Webcast Call. [Operator Instructions] This call is being recorded on Wednesday, November 11, 2026. I would now like to turn the conference over to Flora Wood. Please go ahead.

Thank you, Vincent. Good morning, everyone, and welcome to our Q3 2026 conference call. Our press release and interim filings came out yesterday after the close and are available on our website along with this conference call presentation. This event is being webcast live, and you'll be able to access a replay of the call along with the presentation slides. You would also have seen at 7:30 a.m., our definitive agreement to acquire TNR Gold, and we'll be -- we can answer questions on that as well. With me in the room, I have Ernie Ortiz, VP, Corp Dev. And online, I have Brian Dalton, CEO; and Stephanie Hussey, CFO. Brian and Stephanie will be our main speakers and Ernie is also here for questions in the Q&A. The forward-looking statement on Slide 2 of the deck applies to everything we say both in our formal remarks and during the Q&A. And with that, Stephanie is up first to take us through the numbers.

Thank you, Flora, and good morning, everybody. Yesterday, we reported Q3 net earnings of $10.1 million or $0.17 per share, reflecting higher revenues and higher expenses including cost of sales, share-based compensation and amortization when compared to last year. Earnings in the third quarter of 2025 reflected a gain on our partial sale of the Arthur royalty. Royalty revenue of $33.3 million, a record and adjusted EBITDA of $27.1 million for the third quarter reflects higher realized prices, timing of copper stream deliveries, the addition of 4 operating lithium royalties as well as higher electricity royalty revenue. Operating cash flow of $11.8 million reflect higher royalty receipts and interest income, offset by higher tax payments, interest paid and working capital changes. Adjusted net earnings of $0.18 per share for the quarter was higher than Q3 2025 with the main adjusting items being foreign exchange and revaluation of derivatives. During Q3, we announced a number of significant transactions, which we previously touched on in our Q2 call. On July the 21st, we closed a bought deal public offering of 3 million common shares at a price of $6.50 per share and received net proceeds of $174 million. On July 24, we completed an amendment to our credit facility to upsize the $350 million from $225 million replacing the previous term and revolving debt with a single revolver with no principal payments required going forward. The debt balance outstanding of $87 million was transferred to the amended credit facility at closing and maturity was extended from August 2028 to July 2030. The corporation completed a drawdown of $100 million on the revolver at the end of July. And on July 30, the corporation completed a share purchase agreement with Northampton and certain funds managed by affiliates of Apollo. The purchase consideration paid by Altius was USD 167 million, and it was funded through existing liquidity, consisting of cash on hand and debt. Altius increased its effective interest in Great Bay Renewables from 29% to 50% following the transaction. Current total liquidity available to the corporation is approximately $500 million and includes cash on hand $163 million available under the revolver as well as $150 million potentially available as an accordion feature subject to certain criteria under the terms of our expand credit facility. During the quarter, we paid total cash dividends of $6.1 million and issued approximately 6,000 shares under the dividend reinvestment plan. Yesterday, our Board of Directors approved a quarterly dividend of $0.11 per share to be paid to shareholders of record on November 30 with a payment date of December 15. In August, we also renewed our normal course issuer bid, which will end no later than August 21, 2027. And there were no shares repurchased under the NCIB in Q3. And with that, I'll turn it over to Brian.

Thank you, Stephanie. Good morning, everyone. Today, in addition to reviewing the quarterly results that we published last night, we also get to talk about our new acquisition. This morning, we announced that we've entered into an arrangement agreement to acquire TNR Gold. The key features of the transaction from our perspective are the addition of a royalty on the advanced stage Los Azules copper development project and the consolidation of the remainder of a royalty interest we already partly held relating to the operating stage Mariana Lithium Project. The Altius hallmark attribute that these assets have in common is a very large -- very large resource endowments and all of the life extension and production rate expansion optionality that comes from that. I won't take up too much time describing the transaction details, but do draw your attention to the release adjusted to wires. We're very happy to welcome TNR shareholders at Altius and to thank him for recognizing the enhanced strength and value that the combination offers both sides of the deal. Turning now to the quarterly results. During Q3, we continue to integrate around our Lithium Royalty acquisition and the increased interest we acquired in ARR while also closing on an equity raise and the restructuring and expansion of our credit facilities, as Steph has described. We also continued to be busy in expanding our PG equity portfolio and the longer-term royalty pipeline. Subsequent to the quarter end, we announced the transaction to acquire a royalty on a development-stage potash solution mine in Saskatchewan. Your team has been busy. Our operating royalties performed well again in Q3, with revenues continuing to ramp up in line with or slightly better than our strong 5-year growth outlook. We also continued to gain positive signals relating to a number of preproduction stage royalties that are keeping us optimistic that our revenue growth trajectory can extend well beyond our currently published outlook period. In lithium, there were some ups and downs, Sigma experienced a period of production shutdown due to permitting related challenges. These have since been resolved and the operation is back up and running and continuing to advance its Stage 2 expansion. Core continued its restart work at Finance and is expecting first production during the current quarter. Mariana, 3Q and Goulamina continued to ramp up production levels and advanced expansion planning and execution efforts. Lithium prices gave up a lot of their sharp earlier increases and are arguably now back below incentivization levels. While demand growth continues to occur at a remarkably high rate and inventories remain relatively seen. In base metals, we note that Chapada had another very strong production quarter while also breaking ground on construction of the infrastructure required for expanding operations and incorporating higher-grade ore from the new Saúva discovery. Silvercorp continued on track with construction at Curipamba while PFS work continued at Gunnison Copper. Vale indicated that it is now exploring expansion options in Voisey’s Bay following successful completion of the ramp-up of its 2 new underground mines. Base metal prices were generally stable during the quarter in spite of heightened global economic and geopolitical volatility and uncertainty. We saw a particularly strong quarter on the electricity front, with GBR and inter ARR making its largest portfolio contribution to Altius to date. This was partly due to our increased ownership but also reflected the continued commissioning of royalty projects that were developed both to our longer lead time developer investments as well as directly into late-stage operating stage projects. There continues to be a lot of growth activity occurring within the electricity generation portfolio with 15 royalty projects currently under construction and expected to commission over the next couple of years. Significant share of GBR's revenue this past quarter has come through the financing of fully refundable interconnection deposits. These deposit amounts are becoming increasingly burdensome for project proponents as grid authorities seek the [indiscernible] connection request congestion. For providing this capital on behalf of proponents, GBR allows them to instead focus their direct capital resources on project advancement. While GBR makes a spread over its own financing facilities costs when providing these deposits and maintains control over the refundability mechanics, its main objective with this business line is to drive royalty corporate development initiatives. The whole per is that as projects advance through interconnection fees and refundable deposits require replacement with nonrefundable deposits that we will be able to continue to support our partners with royalty-based capital into projects, which at that point would have been derisked from the key interconnection progress perspective. In potash, we heard continued favorable commentary from our operators. We're expecting record global demand this year and then again next as well as constrained production and shipping abilities for major global competitors. Prices continue to edge up in most regions. Each of Nutrien and Mosaic continued to describe the potential for low-cost production growth that could allow them to hold or grow market share as total demand steadily increases. This ability to grow capacity incrementally remains solid for the next few years before more meaningful brownfield-type expansions will be required if market share is to be maintained. Subsequent to the quarter, we acquired royalty interest in a new potash mine project being advanced by Buffalo potash. This project employs new patented solution mine technologies that are intended to improve efficiencies relative to conventional solution mining. Buffalo has since commenced the introduction of solution to the targeted potash horizon in what is referred to as its initial production modules. Benchmark quality iron ore prices were down during the quarter. However, this was offset by increases in premiums for higher purity concentrate and pellets. IOC production also improved quarter-over-quarter, but continued to be relatively low as a percentage of nameplate capacity. While significant investments in improving or accessibility and equipment and plant performance are made across the operations. These investments have continued to result in IOC not paying equity dividends to shareholders enhanced [indiscernible] shareholder dividend being derived entirely from royalty revenue lately. Kami partners Champion Nippon at Sojitz continue to advance feasibility work and discussions with stakeholders. We also heard good news concerning potential major hydroelectric agreements and development in the region that offer the potential to solve for that particular project designed bottleneck. Project generation, the team was busy identifying equity level deployment opportunities that mostly included royalty creation components as well. This work is serving to continue to grow our longer-term royalty pipeline and build upon strong progress last year that was highlighted by the rapid advancement of the Arthur Gold project and our underlying royalty interest there. At Arthur, AngloGold Ashanti continued to advance its feasibility study. They have stated that they are targeting decades of sustained production at approximately 500,000 ounces per year while also noting that current exploration targets have the potential to substantially expand the district's annual production capacity. For those interested, I would here highlight a property to our presentation that AGA has recently published to its website. The potential for additional growth and scale outlined within that presentation [indiscernible] streams. So with that, let me turn it over to questions. But first, let me once again thank my fellow team members for their incredible efforts. You're the smartest hardest working team in the business, and it's an absolute privilege to work with you. Thank you.

[Operator Instructions] First question comes from Orest Wowkodaw from Scotiabank.

Wonder if you could give us a bit more color on the acquisition from this morning. The press release mentioned, I guess, an NPI on the Josemaria project, which I assume is part of the Kona district with Lundin BHP. Can you give us some details on what the royalty is? And what, say, percentage of Josemaria Maria may cover? I'm just not sure it's just a sliver of it or if it covers the whole deposit.

Orest, yes, it covers 2 claim units, I guess, within the overall land package. It doesn't actually cover any of the known mineralization, but the southeast corner of the Josemaria deposit is basically touches right at that corner. So yes, I would look at it as sort of longer-term optionality within the district rather than it being something related to any of the known mineralization states. And yes, it's a net profits interest royalty. We definitely call it a lower priority than the other 2 assets we described in the presentation. So it's not good long-term optionality.

I see. Okay. So it's not part of the current reserves, resources or mine plan?

Maybe, but catches a corner of it.

Okay. Got it. And then just -- I like the fact that you're adding some more copper exposure here into the portfolio. I'm just wondering also if you're seeing more opportunities out there that could be similar to this that, I guess, could advance that copper exposure?

Some. I mean we've got our own list of the projects that we think have a shot at coming into this market and solving for that deficit that we all see, we all see looming. And some of those, particularly as they mount up for project finance the indications we're getting are that there will be some cracks at some things there. Now it's a question always as to whether or not those operators we'll try to stream buy products versus the copper that we'd be interested in. But yes, there is some stock brewing. Obviously, there's lots of people dusting off studies and trying to get to the point that they're targeting investment decision dates and that sort of thing. Obviously, the first time we've seen that in more than a decade.

Yes. Fair enough. And obviously, we've seen I mean, Altius has been very active on the transaction front in the last year or so. Should we anticipate that could continue through '27?

Maybe it's not really like something that -- other than when we closed the Arthur transaction, we did feel, I call it pressure, but an opportunity to redeploy that capital into even more assets and then things that are more probably along our more traditional commodity interest lines. But this one was more of an opportunistic thing rather than any kind of big concerted effort? Like I'd just like right now, the growth optionality that's already embedded in the portfolio across current operating assets or things that are under construction or that we think can get sanctioned. If something really attractive comes along, sure, we'll be there, but it's not an imperative by any means. So we're in really good shape for this market and what's coming.

Your next question comes from Craig Hutchison from TD Cowen.

A couple of questions just on the renewables royalty business. Just with the change in political fortunes in the U.S. here, do you guys see that as an opportunity for you guys? Obviously, Democrats were pretty pro renewables. That's the first question. And just you mentioned in your opening remarks around these interconnection deposits, obviously, very lumpy kind of quarter-to-quarter. But how should we think about it maybe going into Q4? And is there any kind of expectations around that into 2027?

It's a Good question. Is this the change in the Congress that's coming, if it's going to be a tailwind or a headwind. I mean some would argue that sort of the restraint that the data center industry is going to face might represent the longer-term decline in demand. I don't really buy that because quite frankly, there was never any way to ever provide enough electricity for what was being touted in any way. And I guess, more broadly, for sure, the Democrats are certainly lean more towards at least they're not -- it's not a full on assault on the industry like has been, right? So now again, despite that, despite a full on assault on the industry, in a really ironic way, this recent administration has probably done more for growth of the industry than any of the prior recent Democrat government. So who knows. I just know that the U.S. needs so much new electricity generation overall data centers or no data centers. And if you can get it on the grid, if you can connect to the grid there's going to be somebody that wants to buy that power and help to finance our projects. So this is a busy, busy pipeline there.

The interconnection deposits any kind of visibility into Q4 on that or thoughts in terms of what we should kind of factor in towards the next year.

Yes. Still lots of demand there. Again, I said it in the prepared remarks, there's the amount of those deposits has been ratcheting up pretty heavily is really what's going on, the Qs are just too congested. And so by forcing deposits on developers takes out some of the weaker more speculative players, but there's real projects are really feeling the strain, I think, of having to put up that much deposit alongside of trying to continue to advance the project. So, yes. Now the team has got a really good pipeline. I don't know how sustainable that business is in the long haul at this point. It's going to be a function of how this congestion -- interconnection congestion issue, how persistent that becomes and how much the system operators feel the need to continue to press back with these big deposits. I don't see any let up in it in line of sight. But again, it's sort of a new thing, and then we've got a really neat position there. And hopefully, it leads to a lot more longer-term recurring cash flows through royalty deployments, but I just can't promise it right now. But for now, we're seeing to claim.

Your next question comes from John Tumazos from John Tumazos Very Independent Research.

Could you review the timetable for the T&R assets or which year you think each one will begin to report revenue?