Q3 2024 Elemental Altus Royalties Corp Earnings Call
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Speaker Change: You have joined the meeting as an attendee and will be muted throughout the meeting. 121 to 125,000 tonnes of copper, a bit lower than when they upgraded in Q2. They've been affected by the labour dispute since resolved, but it's really in line with that original 2024 guidance of 120,000 to 130,000 tonnes, aiming for $6 million of revenue plus from CAFSA owners. They're doing really well there under Lundin ownership.
Speaker Change: Steve is going to be the real contributor as Frank says, we don't want to just waiting and guidance for off from Allied for the production in Q4. So we are we have taken that out of our our guidance for fiscal 2020 for any royalty revenue that we get will be incremental and all upside to us sorry, yeah, redo yacht really encouraged to see what what the production.
Speaker Change: I'm going to get out of Crawley said, new named edema.
Speaker Change: And allied are being quite clear on how significant that mine and that deposit is going abate as they look to us to fund the capex the sulfide death second in Saudi our complex.
Speaker Change: As you say their production.
Speaker Change: Initial production has been better grade better recovery onto very encouraging I think this will turn into our one of our largest royalties, particularly quickly.
Speaker Change: Great quarter upon a crime when adding yet now more than 98% of the ounces coming from from areas linked to our royalty. So that's very exciting allied have also been clear that are exciting high grade materials in 2025, and 2026, I'm sorry, with that combined with effectively doubling that revenue from from Q4.
Means that wear out yet it will this will become on a rolling basis, our largest royalty and a portfolio with that fully a high exposure to gold prices one Jan had a bit of a change of ownership from from endeavor to Williams now operated by the state of Makena.
Speaker Change: Production, a little bit lower in Q3.
Speaker Change: They are out they are continuing to.
Speaker Change: They are continuing to explore continuing to aim for that 120 140000 ounces of gold a year are we still take talk to the same people inside and still still get paid by the same group side.
Speaker Change: I am very encouraging to see the outcome of what happens to our tier one you're on.
Speaker Change: In terms of where we're going so as Fred said just start to me to be extremely conservative how we have taken we have taken Carly sur de Boer out of the guidance and say that that the results.
Speaker Change: Results in adjusted guidance of 9000 to 9500 ounces that will result in record two.
Speaker Change: 2020 for revenue and there's significant organic growth in the portfolio in 2025, and 2026 are the real near term tow will be born a crowd.
Which is obviously performing extremely well and now we've got a full 4.5% royalty.
Speaker Change: Their first production and first royalty revenue.
Gabe: Gabe I expecting a full contribution for the year contribution in 2000 and twenty-five quickly becoming one of our largest royalties likewise at Ballarat now, they're well settled under new ideas.
Gabe: And with doubling up of that royalties through the alpha stream.
Gabe: Transaction, we're looking forward to seeing what they can do to increase production and implement mine upgrades to get costs lower increase production slightly longer time lag into 2026, I've got incredibly exciting our expansion plans at it Carlo NSF, 50% throughput, reducing re handling of lower grade material.
Gabe: The server should result in a 30 site expansion up to that 150000 ounces a year still maintaining that 10 year lives and the operated therapy not exceptional Ed at reserve replacement, even in the short time that that mine has been operating.
Gabe: In terms of the financials I think it really does show a couple of things that's number one.
Suppose you to go price sorry, while we have gold equivalent ounces are up 3%. This time last year, we've got adjusted revenue, that's including cats arenas.
Gabe: <unk> up 32% to $4 8 million I think we're really proud of that EBITDA is a record for the company adjusted EBITA, there of $3 $7 million and it's a quarterly record up 72% from this time last year, and that's really reflecting the lower cost base of the company and the lower costs were accruing.
Gabe: You know, which will translate into more cash flow likewise operating cash flow after working capital adjustments there of $2.8 million, that's up 44% from this time last year. So it's a real strength of the model, where we're getting costs lower and then we've got that full exposure to gold price, which should deliver extraordinary growth and in margin.
Speaker Change: Yeah. So in terms of that bridge cervical obviously revenue plus cats around a dividend off the tax G&A is considerably lower year on year. Following the monetization of the royalty generation business in that into some of the core assets for the company most of the tax repay is at Catarina.
Speaker Change: Which is you know obviously included in that post tax that dividend number and yeah. It's a bit lower this quarter, just because of timing I had a couple of one off working capital outflows in the quarter they'll be nonrecurring and I think importantly, the rapid deleveraging of the company is showing that net interest number come in considerably down would've thought we aren't given we're in it.
Speaker Change: Our cash position as of today, we expect that interest paid to be negligible going forward subject to obviously transactions that we do.
Speaker Change: And so how does that work for cash evolution for the for the group for the for the quarter. So generated five turnout million dollars of free cash flow in the bank.
Speaker Change: We completed a royalty acquisition in the quarter that was the acquisition of the tungsten and Dixie tungsten royalties operated by Fireweed.
Speaker Change: And I tongue operated by violate.
And so that's a $3 million initially upfront and then you had some small small proceeds from disposal representing the final a monetization of the royalty generation business that leaves us with $6 million as of various at September but as of today, that's 2000 $21 million in the bank following the launch a private placement.
Speaker Change: This type of things is how we think about the P&L I'm just for accounting reasons with catheter Inez. We don't report that as revenue I have got a new equity account that so you'll see that a 0.1 of the share of profit from associates. So we represent the profit. So that's after tax and depletion as a separate line. We've got a couple of gains on disposals. These alarm wind overtime starkly.
Speaker Change: If he losses as well that point to there again. These are nonrecurring and then you see how we back out that our adjusted EBITDA number so we have out.
Speaker Change: Unadjusted EBITDA there at the bottom and then back out the depletion and tax so we haven't at Katz arenas to get that $3 7 million, which again I would say is a record for the company for a quarter.
Speaker Change: I guess not included in some of our forecast of the milestone payments and in buybacks that we're expecting I think the key ones. They are going to be a $1 million. After 90 days 90 days after commercial production at Charlie said.
Speaker Change: We're also expecting nearly $10 million in April next year as part of a settlement I mean and then in.
Speaker Change: Towards the end of H. One next year are the rights for Arizona and oriented buyback that 0.14% of the cactus royalty that right expires, we fully expect that to happen as well. So we are looking for considerable payments nearly $12 million of one off payments next.
Speaker Change: Next year, so that should be quite quite material for us.
Speaker Change: Okay.
Speaker Change: Yeah. So in terms of performance as a society assets the.
Speaker Change: The assets have done okay, obviously benefiting from a higher gold price Lady that $4.8 million of adjusted revenue and.
Speaker Change: G is I'd say, just slightly up quarter on quarter.
But I guess this is the benefit of being being fully exposed to gold prices. We expect this to improve not just through the app for stream acquisition, but obviously maiden maiden production currently sad so that D var from and some in Q4, but the real real fully contributor in 2025.
Speaker Change: The benefit of the real cost reduction and focus on growth in the business has been a growth in margins.
Speaker Change: Sorry, you can say that even even with a slightly lower revenue for the quarter, but record EBITDA and record EBITDA margin. This is even pre merchandize, so up towards 77% and we expect this trend to continue as revenue grows and we maintain or shrink the cost base of the business.
Speaker Change: In terms of the capital structure post post Alpha stream deal. So this is as of as of today.
Speaker Change: Capitalization of that 200 million in U S dollars were about $20 million in the bank into an EV of yet just on just on $200 million Oliver onto with exercising their anti dilution rights come in it remain at 32% shareholding without constraint joining the register at 14%.
Speaker Change: As we said before we can credibly well supported from a strong institutional shareholder some of which have been with us since our private days I think encouraging in the quarter as well we've added another analyst.
Speaker Change: Our covering analysts with National Bank, so great to have full bank covering the stock and as Fred said, we've now got a three bank syndicate with a $50 million facility. So with a nationally by national in theory T and obviously it means that we've got.
Speaker Change: And $50 million of.
Speaker Change: Available liquidity for royalty acquisitions without having to dilute our shareholders event and that will increase every quarter three free cash flow from the company.
Speaker Change: We're incredibly attractively valued obviously you have a revenue focus we look we look very strong and our market cap to revenue basis, achieving broker consensus and on a price to NAV given the given the focus and the strong progress on producing royalties.
Speaker Change: We remain very attractively valued on an NAV basis as well.
Fred I might pass it back to you to summarize just before we before we pass over to any any Q&A.
Fred: Thank you, Dave and thank you everyone for joining so look in conclusion.
Fred: Three I think.
Fred: We started to show some of that benefits them.
Fred: Free cash flow margin coming through the business and with the addition of the Alpha stream.
Fred: The portfolio from the first of October and with alloys announcements.
Speaker Change: For all these Oh my God.
Data is now in production.
<unk> combines rare they will drive our revenue growth and then our margins going into Q4 and Q1 next year.
Speaker Change: And I think.
Being in a in a net cash position.
It puts us in a in a in the strongest position with peanuts as Dave alluded to to to really deploy capital into new acquisitions and to do it in a way that.
Speaker Change: We don't have to be publishing our shareholders to do it.
Speaker Change: A really strong position for the company.
Speaker Change: If you look at the metrics on a per share basis.
When when elemental analysis, most in 2022 I think we have.
Speaker Change: We're close to a similar number on a revenue share I'm not sure.
Speaker Change: The Big change since then has been.
Speaker Change: Turning up about 70 royalties.
Speaker Change: And the development of advanced exploration.
Speaker Change: So we've been able to maintain the revenue pressure numbers, but at the same time building out the development pipeline in the portfolio.
Speaker Change: Continuing to add to it and has as we've said we've made one acquisition in the last quarter.
Speaker Change: Building out our diet.
Speaker Change: Last year as well and we'll continue to look out producing and also development advanced exploration assets, that's going forwards.
Speaker Change: From where we sit today.
Speaker Change: A very compelling case, we have a very very strong revenue profile.
Speaker Change: Really good organic growth in the portfolio going into 2025 outspend through 26, we have two really cornerstone assets and collagen during counselor Rnas that will underpin further in our opinion.
Speaker Change: The decades to come we have organic growth coming in from Q4 onwards, we continue to make acquisitions, where we see really good opportunities.
Speaker Change: The addition of Alpha stream to the retro style.
Speaker Change: Abstracts deciding that the average utilization rate is strengthen our shareholder register.
Speaker Change: Exemplify the support that we have so where we sit today and particularly looking at current commodity prices gold and copper principally relevant for us.
Speaker Change: We're not we're in a very strong position to continue to grow out that.
Speaker Change: I haven't really add value to shareholders through making your acquisition.
Speaker Change: I know a lot of shareholders who are on it.
Speaker Change: Coal has been a bit squaring off site. So thank you for your support and for anyone.
Speaker Change: He is listening and I'm looking at the company, we're always make ourselves available to talk if you have any questions. Please feel free to reach out.
Speaker Change: And with Akamai on Brexit day.
Speaker Change: If there's any any questions in the Q&A.
Speaker Change: Yeah.
Speaker Change: Yeah. So I think I think there is a Q&A button at the bottom of your screen a few.
Speaker Change: If you'd like to ask questions.
Speaker Change: There are a few people raising their hands, yeah, and then maybe thanks Barak could you could you want and need to Simon Walton from mechanical.
Speaker Change: Hey, guys hear me.
Speaker Change: Yeah, loud and clear I had thought of and how are you.
Speaker Change: Can you hear me.
Speaker Change: Yes, absolutely.
Speaker Change: Sorry, I'm, having trouble hearing you guys now.
Bob: Hi, Bob and we can hit your okay, maybe ill or I can't hear you guys, but maybe I'll ask my question and Oh for yourself with them.
Bob: I want to say congrats on the quarter or a couple of questions but.
Bob: You guys noted earlier this year, you were expecting about $20 million of payments from our portfolio over 'twenty 'twenty four and 'twenty five I Wonder if you could just remind us sort of what's sort of what that consists of them whats come in so far and what you're sort of still expecting.
Speaker Change: Yeah, Let me, let me just jump back to that slide so great questions I'm sorry.
Speaker Change: Sorry, if you if you see the slide we have here. So we have already received we've already received just over $300.
Speaker Change: From the sale of the initial part of the mainstream settlement. So that's giving a total of just over 13 million U S dollars.
Speaker Change: Vessels, we paid just over 11 I've.
Speaker Change: We've also sold some noncore investments that that came from the office manager on the Canyon resources shares.
Speaker Change: Where else will come so we've received a 400000 U S dollars and that came from the consideration of the deferred consideration on the sale of the Egyptian licenses here. We're the third largest landholder in Egypt, we sold that to a company called into metals, a private company and Theyre carrying us we have free carried 20% of that.
Company for $10 million of exploration plus a royalty on all of that ground.
Speaker Change: Also received your discovery bonus of first half a million dollars.
Speaker Change: At S care.
Speaker Change: I would note as well that we've doubled up on that with the Alpha stream acquisition. So any further discovery bonuses would be that full $1 million Australia.
Speaker Change: And then the other the real large ones are expected to come really expect it to come next year sorry.
Speaker Change: That first million dollars on debit commercial production. There's also another $2 million on D. Var are producing 100000 ounces a golf now will that happen will that happen next year I think that's probably TBC. So we've been a bit conservative and maybe push that into 2026.
Speaker Change: But yeah, that's a million dollars on commercial production at Labor and then obviously as well discuss the $10 million there Hopkins equity and Firefly metals, The Australia listed company and that was part of the acquisition on the disposal of the of the mainstream and.
The other key one there is a the two.
Speaker Change: $2 million, one point I'm in adults that we'll expect to get from Arizona sooner.
Out of there by the end of the royalty.
Speaker Change: Okay. Okay. That's great. Thanks for that I Wonder if I could ask one more question.
Speaker Change: You guys have done a great job paying down debt this year.
Speaker Change: I Wonder if you can let us know that's sort of.
Speaker Change: You guys I mean, do you have a 20 billion whilst combo I've ever vulgar I Wonder are you guys still focused on paying that down or is that still a priority or are you sort of pivoting now and also sort of wondering sort of house transaction opportunity out there either weapons traffic or.
Speaker Change: Yeah, I guess, just what's the capital allocation.
Speaker Change: Towards the end of the year and into next year, absolutely maybe it may I'll do them one at a time. So yeah definitely came to de lever and also came to use that revolver like a like a revolving credit facility. So we are able to come in and out of it.
Speaker Change: And so yeah, we where else we have been aggressively paying it down we will continue to do that.
Speaker Change: Obviously, if we do need it for transactions, we can access that cash incredibly quickly.
Few a few limitations on what we can use that for as well. So yeah. The idea is to get that free as quickly as quickly as possible and then and then yes I have that available liquidity with the banks to use a golf building a cash pile and then also having the facility for transactions I'm sure. The banks will be supportive of increasing that as well for the right number.
Speaker Change: Hey, cash flowing acquisition.
Speaker Change: And obviously the cash on hand, wherever we can keep keeping a high interest savings accounts as well, so we get pretty reasonable interest on that as well so its not definitely not being wasted.
Speaker Change: Terms of the pipeline I think you had said, it's without exaggeration as strong as we've ever seen and.
Speaker Change: We've definitely been focusing on third party acquisitions are identifying those ourselves through through the database through the contacts we have.
Speaker Change: And really looking to stay away from sort of auctions and competitive processes and really going back to I think what we're good at which is acquiring third party royalties that we've identified over the years.
Okay. That's great and then we're happy to see you guys computer do you ever.
Speaker Change: But before I have Ah congrats on the quarter.
Sean: Thanks, Sean.
Sean: I think we've got another another question there from from Remy Mcewen.
Speaker Change: Is that right and there was a case where its really.
Speaker Change: Sure.
Speaker Change: You hear me I can loud and clear Okay. You've told me he was very good.
Keith Moore: Keith Moore.
Keith Moore: Hi.
Keith Moore: Yeah I'm fine thank you.
Keith Moore: I've been a shareholder I think now two and a half years coming in around the $1 50, I think from memory.
Speaker Change: Two years ago, when you had the placing it.
New new right. It's it was I think down around the 125.
Speaker Change: And what.
Speaker Change: What other understand we'll see you just quoted.
Speaker Change: Compelling valuation Liberals, except he returned value to shareholders.
Speaker Change: Well discounting the price I paid over two years with no value to shareholders whatsoever.
Speaker Change: You focus on EBITDA.
Speaker Change: I stand corrected.
<unk> change quite rapidly, but in the nine months you had a revenue of $14 7 million revenue.
Speaker Change: But I believe nine months, you still have no profit for us.
Speaker Change: Uh huh.
Speaker Change: No no.
Speaker Change: Perfect.
Speaker Change: Even if you were thinking of doing that so when you say compelling valuation.
Speaker Change: Despite the gold price going up 30% in this period and the progress you seem to be making money, but nothing is flowing through to show.
Speaker Change: And just one of them.
Speaker Change: The valuation of the share price has moved them, whether or not it's cheap or more expensive than the peer group.
Speaker Change: Whereas the value for shareholders. What are you really waiting for is still due to it seems that it's a bit like a treadmill.
Speaker Change: So.
Speaker Change: What do you see that's going to bring about a re rating of the shares and win.
Speaker Change: Hi, Keith Yeah, Great question, maybe I'll just jump in on the on the financials and then I'll, let Fred talk to a bit more of the.
Speaker Change: The strategy. So I think I think in terms of the near term catalysts, where really we are at a pivotal point from the company. So I say post post merger there wasn't an active decision by the board to to monetize and create value for them from a generation business.
Speaker Change: And sorry, if this has been this has been quite an active process for us. It's a running processes on these different active exploration businesses, which has resulted in a bit of staff turnover and also quite a few sort of one off costs now we've come out of that incredibly strongly.
Speaker Change: With one of our largest growth royalties, which is correctly. So data as a direct result of that and then some of our highest conviction exploration upside, but it's still early stage and in Egypt.
With me and one 5% royalties on all of that ground.
Speaker Change: But the question is as you know what changes and I think what what what gets people to pay attention I think it really is going to be going forward that growth in cash flow.
Speaker Change: So we are going to have looking forward considerably lower G&A year on year, we're going to have considerably higher.
Speaker Change: Revenue.
Speaker Change: Year on year.
Speaker Change: And that really will result in growth of cash flow margins considerably higher than all our peers and more comparable to and closer to the sort of mid tier mid tier royalty companies, which one I think we demonstrated in our financials and we did have a profit this quarter.
Speaker Change: Versus you know at this time last year cause you know lots of over $2 million, whilst we were starting to unwind some of that business.
Speaker Change:
Speaker Change: I think youll see that and then what we will also be able to do.
Speaker Change: Is contemplate returns to shareholders, but then also best how to use that cash for non dilutive acquisitions accretive acquisitions to shareholders Fred.
Speaker Change: Fred did you have anything else.
Fred: Yeah and Keith.
Fred: Maybe in terms of.
Fred: Since the since the merger.
Fred: With.
Fred: With the generation side of the portfolio on the royalty side combined I think we are seeing some some of the assets you have in the development stage Bona karri I think we're expecting to come in earlier than it did since Q2 of last year, it's been in full ramp up right and then with data correctly.
Fred: Again, we expect the dots around June this year and again, it's being it's being delayed a bit.
Fred: Say that now we are producing.
Producing from it so from let's go through a full production from.
Fred: From that.
Really when Dave talks to the margin numbers.
Fred: When we did the budget analysis.
Speaker Change: One people.
Speaker Change: Combined almost sort of team and family and then we have about 70 people through the subsidiaries on a lot of those exploration Jbs Hum.
Speaker Change: And if you look at US today, we have a head count of about 12 people in total I'm sorry.
Speaker Change: 95% of that is that those people with those assets and working on these projects. They went with apartments being built in but that wasn't how I'd go Molly yeah. It was criteria in Morocco.
Speaker Change: Oh into metals in Egypt.
Speaker Change: A lot of that team and a lot of those people went with those groups.
Speaker Change: Our actual ability to continue to progress the project.
Speaker Change: So what we've seen is Molly allies have spent a significant amount of money.
The Bill passed since we didn't do a lot of folks talk come to whole road. They increase the resource curse. The result is a karate said they declared a maiden reserve.
Speaker Change: Being actively drilling more of that.
Speaker Change: This year than I think has happened in many years in the case of Egypt.
Speaker Change: Depleted that voucher program last year are currently undertaking a second drill program.
Speaker Change: They haven't announced the results of that yet.
They're a private company, but anticipate that well so I think a lot of those assets.
Speaker Change: Well earlier in the development pipeline and stage.
Speaker Change: That you would've been familiar with and M D.
Speaker Change: The exploration portfolio like a lot.
Speaker Change: Those are actually being progressed much faster than we would have been able to progress them ourselves and now without the direct cost that we have to do also so yeah.
Speaker Change: Those asset values in the business and in the portfolio today I don't think they do I mean, when we look through the assets and we.
Speaker Change: And we talk to the relative valuation.
Speaker Change: That is I suppose hit by the producing assets I think a lot of the additional 70 assets portfolio ranging from.
Speaker Change: Development pre feasibility stage copper assets in Arizona, all the way through too.
Speaker Change: A large exploration high risk in Egypt, all of that is Oh.
Speaker Change: Quickly doesn't get a lot of value in our portfolio today, and that's partly a reflection of the market and and where it's actually I think a lot of exploration et cetera.
Speaker Change: Age projects.
Speaker Change: The valuations for those have come off significantly in the last 18 months, our mining is a cyclical business we know that.
Speaker Change: The reason we focus so much from the beginning of the company on building a portfolio that had revenue diversified revenue and that could really generate free cash flow was to make also put ourselves a be resilient in downturns, but b when when they're all those put us in a position where we can actually inverse.
Speaker Change: Council cyclically through the cycle.
Looking at off today.
Speaker Change: We're able to do that to continue to invest in it.
Assets in some of those assets the captives royalty that we bought last year in Arizona.
Speaker Change: Mack Tung royalty that we bought in in Canada.
Speaker Change: Some of.
Speaker Change: Those are assets.
Speaker Change: I think we're very confident we'll turn into actual mines have long mine lives ahead of them and those royalties will be multiples of what we have to cough and Paul.
Speaker Change: Bob.
Speaker Change: Sometimes happen with specific catalysts and updates from the operators on the timing so look I appreciate it.
Speaker Change: Yeah.
Speaker Change: The frustration on the share price.
Speaker Change: And I know we feel ourselves.
Speaker Change: We have had periods I think.
Speaker Change: Alright chosen toward Florida management, rather than.
Speaker Change: Any one of us have sold the shack.
Speaker Change: It's only seen by from insiders in the periods, we're able to because I think we continue to see compelling value at the sharp price for Iraq.
Speaker Change: Going into next year.
Speaker Change: Yeah, I think the consensus revenue for us as well.
Speaker Change: It'll be a it will be adjusted as we come in right at consensus revenue is about 37 million U S.
Speaker Change: For next year are we going to see some one off payments around got coming in as well. So we should we should be sitting next year in a position where we are on.
Speaker Change: Increasing increasingly large amount of cash and that gives us options in terms of what we do with it.
Speaker Change: And how we deploy that happen and that that will be between gross options acquisitions.
Speaker Change: And also other options to consider.
Speaker Change: Yeah.
Speaker Change: In terms of things like dividends.
Speaker Change: Go ahead Bob.
Speaker Change: On your question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Right right.
Speaker Change: Thanks Kate.
Speaker Change: I think right I think that's a that's it in terms of question, so I'm only theater to sum up.
Speaker Change: Look thank you everyone for attending who I think this is a we did one in Q2, we did one in Q3 and part of this is an exercise in translating the accounts and making them simpler trying to find where coffee royalties are fall into different categories, such as cancer in Asia, but.
Speaker Change: But also part of it is trying to enable us to tell the story and communicated by that in terms of where the business is going well.
Speaker Change: The outlook is.
Speaker Change: And what we are what we're trying to achieve.
Speaker Change: It also enables shareholders to ask us.
Speaker Change: People in Q1 25, you said you were going to do X on the previous quarterly call where are you in terms about how youre executing on it where have you seen success well have you have a hot issue so the.
Speaker Change: The format of this call Oh I think it is.
Speaker Change: It's helpful for us as a management team, but hopefully even more safer for you as shareholders.
Speaker Change: Following the company and as always please feel free to reach out to US directly after school. If you have any follow up questions or would like some more detail on aspect and we'll always make ourselves available.
Speaker Change: Thank you.
Speaker Change: Goodbye.