Brian, you founded Altius Minerals 25 years ago. Tell us a bit about how it has evolved into the royalty assets company it is today.
Back while still studying geology at University there was a major mineral discovery of nickel-copper-cobalt at a place called Voisey’s Bay in our home Province—today a major sought-after source for energy transition metals— we became the link for a lot of the junior companies rushing in to explore and from this experience gained the capital and confidence to start Altius. We started by selling mineral lands for cash and share positions as well as retained royalties. When the opportunity came to buy a portion of the royalties connected to the main Voisey’s Bay discovery, we took it, and before we knew it, we had accumulated profits of over $200 million.
The challenge though, being an exploration company, was how to deploy that much capital. We knew that we were not going to become a mining company so we decided to take a bigger role in the royalty space related to copper, nickel, potash and iron—whereas the more common space for mining royalties is gold and silver. We then waited for several years until mineral prices turned over. A lot of mining companies got in trouble with their balance sheets, while we were one of the few players that had contrarian conviction, as well as capital. That is when we bought royalties frenetically, relating to truly world-class, super long-life assets. And that is how we transitioned to making over $100 million in royalty revenue only last year.
Why has the stock for metal mining companies risen dramatically in recent years?
Mining is like no other sector because it goes from extreme undervaluation to extreme optimism in a short period of time. We executed the classic strategy: when there was a lot of fear, we bought high quality projects which we knew were going to keep operating. When everyone was predicting the end of the mining industry, we doubled down.
We invested early in industrial minerals—copper, uranium, lithium—and now we see a significant upsurge in their demand due to developments like decarbonization, which we felt was to become a mega trend.
We saw that the pessimism about mining in the last 15 years was causing underinvestment. So we remained focused on jurisdictions we felt comfortable in and, with time, reaped the benefits.
How important are royalty companies for junior mining companies struggling with exploration today?
Royalty companies in mining have become an important conduit for investment capital. Mining is complicated, it is risky—especially exploration—so investors are very cautious. You need technical expertise. We know how to vet a project and the people behind it. That is why investors feel comfortable letting royalty companies like ours evaluate what kind of portfolio makes sense for them.
The margins of mining companies have not done so well due to costs often rising faster than prices presently. Whereas a royalty company is immune to that cost-side of the equation, while we do collect the higher price based revenue. For most average investors without the technical expertise, it is a less risky way to play the space while still benefiting greatly.
Given your aforementioned ability to anticipate future trends, what is your wider strategy for the coming years?
I firmly believe that there is a new investment wave that is heading for the mining sector - it is a perfect storm: a relatively long period of low investment combined with major demand for a lot of metals, and a need for prices that incentivize new developments. Our assets have incredibly large resource lifespans (the main criteria we consider when investing) and the production rates can be expanded; this makes them far more attractive, as you can benefit from existing infrastructure and acceptance from the local communities for instance.
Production rates at our assets will increase when the next investment cycle kicks off. So, we will have none of the capital costs, but will be full beneficiaries of the higher production rates that come. We are not aggressive buyers of new assets today, we have to remain cognizant that many projects in our current portfolio will grow, or will become newly built, and just let that play out. That is the royalty side.
We are also busy on the exploration side - our focus being future-facing commodities. We have teams working in nickel and lithium, for example. When it becomes more attractive for investments in mines, there will also be a jump in demand for exploration projects. We think in very long timeframes, whereas most companies do not have that luxury. We have proved by now that we are not afraid to wait. Patience works.
Would you do it all over again? Was it a path worth taking?
It is the most interesting and challenging business in the world. You got the most colorful characters you will ever imagine. And if at the end of the day you can see the products of your work all around you—even if people do not recognize that it is present in the technology they use, the means of transportation they go on, and so on—it is something worth being proud of.
