Renewables: Adapting Royalties

Today, we are breaking down Altius Minerals, a Canadian royalty company that stands apart from the precious metals and oil and gas names that usually define the category. 17 people in Newfoundland control royalties over Canadian potash mines that supply 90 percent of the potash used in the US, along with 2.9 gigawatts of operating renewable power.

I am joined by Luke Bridgeman, portfolio manager at Hosking Partners based in London. We start with Brian Dalton founding the business in a university dorm 29 years ago and how the company built its edge through a project generation model that turned $13 million of spend into $200 million of equity proceeds while keeping the royalties. We cover why Altius focuses on base metals rather than precious metals, how it extended the royalty structure into renewables where there is no land to claim, how countercyclical capital deployment has shaped nearly every important decision in the company's history, and what it means to run a $2 billion business with only 17 employees.

Please enjoy this breakdown of Altius Minerals.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page⁠⁠⁠⁠⁠⁠⁠ here.⁠⁠⁠⁠⁠⁠⁠

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Timestamps

(00:00:00) Welcome to Business Breakdowns

(00:04:20) What is Altius Minerals? 

(00:04:52) What Are Base Metals? 

(00:05:30) How Do Royalties Work? 

(00:09:57) When Are Royalties Sold? 

(00:11:04) Altius Origin Story 

(00:12:24) How Did Altius Differentiate? 

(00:13:35) Commodity Diversification 

(00:15:51) Geographic Diversification 

(00:17:37) Renewables Strategy 

(00:19:50) The Listed Renewables Vehicle 

(00:20:17) Renewables Financing Structure 

(00:21:08) Renewables vs. Legacy Minerals 

(00:22:04) Revenue Model: Volume x Price 

(00:22:43) Portfolio Revenue Breakdown 

(00:23:58) Do They Hedge Commodity Prices? 

(00:24:13) Cost Structure & Overhead 

(00:25:37) Capital Allocation Framework 

(00:27:14) Buyback Criteria 

(00:28:06) Use of Debt 

(00:28:42) Renewables' Balance Sheet Impact 

(00:30:42) Key Risks 

(00:31:59) Why Do Precious Metal Royalties Trade at a Premium? 

(00:32:47) Lessons from Altius