Altius Minerals takes advantage of market weakness

April 21, 2016 11:51 AM

Altius Minerals Corp. has continued to make progress through the bear market in resources. Most recently, it has entered into a metal purchase agreement with Yamana Gold to purchase some of the future copper production from its Chapada mine.

Altius Minerals will pay US$60 million plus 30% of the spot copper price upon delivery. It will also give Yamana 400,000 warrants exercisable at CA$14 per share. It will receive just under 4% of the copper production from Chapada (with some reductions after 75 million pounds has been delivered and if the mine expands production).

The deal is expected to increase Altius' earnings by around CA$8 million per year at the current price, significantly adding to total revenue (which for the past 12 months was a little over $30 million). It diversifies the resource base, reducing reliance on coal royalties, and adding an interest in another long-life, low-cost mine. To finance the deal, Altius is entering into short-term debt facilities, which will also replace its current term loan at a lower interest rate.

Altius Three-Month Chart

Building a mineral bank

Altius has also been very active, though quietly so, on increasing exposure to exploration projects worldwide, emphasizing zinc, copper, gold, nickel and PGMs, in Newfoundland, Ireland and Chile, as well as Michigan. This is largely low-cost prospect-generation, during what it says was the "best opportunity in more than 15 years" to acquire minerals rights that will be highly sought after as exploration money flows back to the sector, allowing it to retain royalty and minority interests.

Altius is one of our top core holdings. The stock tends to be quite volatile, so we would look for pullbacks to add to positions. Though it is good value at this price, patient investors will likely see better opportunities ahead.

About the Author

Adrian Day is president of Adrian Day Asset Management, a boutique money management firm which handles accounts in both global and gold equities for individuals. Contact him at or