Earnings call transcript: Altus Strategies explores geothermal in Q3 2023

Altius Minerals (TICKER: ALS), a $53.4 billion market cap company, held its Q3 2023 earnings call, focusing on strategic initiatives rather than specific financial results. The company, which maintains a "GREAT" financial health score according to InvestingPro, is exploring potential expansions into geothermal energy and silicon-related opportunities. The stock price remained stable at 46, reflecting no immediate market reaction.

Key Takeaways

• Altus Strategies is considering geothermal energy as a new venture.
• The company is in arbitration with AngloGold, affecting strategic decisions.
• Silicon opportunities are being evaluated for future growth.

Company Performance

Altus Strategies has shifted its focus to strategic expansions and arbitration processes, while maintaining strong financial performance with revenues of $64.1 billion and impressive 12.28% growth. The company is actively exploring new energy sectors, notably geothermal, which is seen as a complementary addition to its current portfolio. This strategic pivot aligns with broader market trends towards renewable energy investments.

Financial Highlights

• No specific financial metrics were discussed during the call.
• The focus was on strategic and operational updates rather than financial performance.

Outlook & Guidance

Altus Strategies is planning to discuss a longer-term strategic outlook in an upcoming quarterly meeting. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model, suggesting potential upside from current levels. The company is exploring geothermal and silicon opportunities, which could shape its future business model. Forward guidance includes potential expansions into these sectors, reflecting a strategic shift towards renewable energy. For detailed valuation metrics and additional insights, check out the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

• "We definitely consider geothermal to fall within the broader mandate of the business," said Brian, a company executive, highlighting the company’s interest in geothermal energy.
• "We’ve been taking in proposals fairly recently here that kind of cover the gamut," Brian noted, indicating active exploration of silicon strategic options.
• "Attractive opportunities in geothermal show up. It’s absolutely on the permissive list," Brian added, underscoring the potential for geothermal investments.

Risks and Challenges

• The ongoing arbitration process with AngloGold poses a strategic challenge.
• Entering new markets like geothermal and silicon involves inherent risks and uncertainties.
• The company’s ability to successfully integrate new energy sources into its portfolio remains uncertain.

Altus Strategies’ focus on strategic expansion into geothermal and silicon represents a significant shift in its business approach. Trading at a P/E ratio of 11.72 and maintaining a strong dividend growth rate of 13.53%, the company’s ability to navigate these new ventures will be crucial for its future growth and market position.

Full transcript - Altus Strategies PLC (ALS) Q4 2024:

Analyst: good morning, Brian. Just wondering if you could give us some more color on how you’re thinking about silicon. I know you’re still looking at potential alternatives there, but sort of where do you think you are in that process?

Brian, Company Executive, Altius Minerals: We’ve been taking in, I mean, we’ve obviously been flagging that we’re going to look at this thing strategically and consider all of our options, but we have been taking in proposals fairly recently here that kind of cover the gamut that I talked about in the prepared remarks. So, yes, we do have some proposals in front of us now that we’re basically in the early stages of evaluating and that kind of follows a lot of work that we’ve done in the first part of this year in terms of getting our own heads around what the ultimate potential at silicon might look like and to try to get our own sense of the third step before we consider any kind of transactions, particularly if it involves any type of disposition. So it’s quite active as we speak. We are looking at that proposals that have come in. And I won’t be adding any more color than that.

Analyst: Fair enough. But would any transaction be contingent on finalizing the final arbitration award or now that you’ve got the partial award that’s kind of good enough potentially?

Brian, Company Executive, Altius Minerals: Yes. So I guess where things are to with the arbitration, I mean that is to some degree will be up to there’s enough information right now I believe for at least initial proposals to come in and to be based upon a pretty decent handle on what the ultimate royalty area will be. And to be honest, the areas that I think still need to be resolved would be less material in terms of current valuation just because they would lie much further outwards from the current areas of activity. So I won’t say that from a legal perspective, if we’re pursuing a transaction that we’re there yet and that a deal could close until the final award is submitted. That’s probably the case.

But in terms of people putting to paper what they think the royalties were and certainly for us internally in putting a valuation, internal valuation on not only the published resources, but what we believe is still to come, we’re definitely in a position where we can do that now.

Analyst: Okay. And then maybe just one last one. I mean ARR obviously is in full growth mode. Is there a sense down the road of when ARR will start to contribute cash back to Malthus Minerals or is it too soon to go there?

Brian, Company Executive, Altius Minerals: Probably a little soon to go there. We’re I’m actually going to leave this call and we’re going to a quarterly meeting for GVR, the underlying holding. And so there’s a bit of a longer term strategic outlook that’s going to be discussed at that meeting. So maybe I’ll have more color for you on that next quarter. All right, great.

That’s it for me. Thanks, Brian. Thank

Ludi, Conference Moderator: you. And your next question comes from the line of Brian MacArthur with Raymond James. Please go ahead.

Brian MacArthur, Analyst, Raymond James: Good morning and thank you for taking my questions. I’ve almost been asked. But can I just go back to silicon on the partial award? Has anything changed? I thought it was a sixty day discussion period, which I would I thought it was March 10, but I don’t know how they count the sixty days versus the announcement before.

Has anything changed there? I get it, you don’t sound too concerned one way or the other in the valuation. But I’m just curious, has it been delayed or is there anything different going on right now?

Brian, Company Executive, Altius Minerals: No. In fact, yesterday, we each of ourselves in AngloGold made our submissions that were requested in the partial award, which is to say to identify and we work with AngloGold and there’s considerable agreement about what is included and what is not included. But there’s also areas of disagreement and again, I point out those would be more peripheral land. So each of us have made our respective submissions as well as our responses to each other’s submissions. And at least to the best of my knowledge, that is the end of our role in the process.

So everything has now been handed over to the arbitrators to make final determinations, particularly with respect to those areas that Anglo and Altius currently don’t agree constitute either included or excluded land. So it’s moving along. It’s on track.

Brian MacArthur, Analyst, Raymond James: Great. Thanks very much. I appreciate it.

Brian, Company Executive, Altius Minerals: Thank you.

Ludi, Conference Moderator: And I’m showing no further questions over the phone lines. I will turn it back to Flora Ward for further questions.

Flora Ward, Company Representative, Altius Minerals: Thank you, Ludi. We do actually have a question from an investor online. And Brian, you talked about The U. S. Sentiment toward renewables, the questions around geothermal and whether ARR would consider geothermal as an alternative to wind and solar?

Brian, Company Executive, Altius Minerals: As an alternative, no. As an addition, certainly, I mean, we’d look at we definitely consider geothermal to fall within the broader mandate of the business. And in fact, one of the early assets of GBR at the time that we got involved was a small scale geothermal asset. So I’m not trying to foreshadow that we’re about to jump whole hog into the geothermal game, but attractive opportunities in geothermal show up. It’s absolutely on the permissive list, if you will.

Flora Ward, Company Representative, Altius Minerals: Thanks, Brian, for answering that. And any investors who want to submit questions in advance, we absolutely welcome that. Rudy, do you have any other questions?

Ludi, Conference Moderator: We currently have no questions at this time. Flora, you may continue.

Flora Ward, Company Representative, Altius Minerals: Okay. Thanks again to everyone for joining us. I know it’s March break this week and we’ll look forward to speaking to you for Q1.

Brian, Company Executive, Altius Minerals: Thank you everyone.

Ludi, Conference Moderator: Ladies and gentlemen, this concludes today’s presentation. Thank you all for attending. You may now disconnect.

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