From Coal To Renewables: Altius Minerals

Altius Minerals Corporation ATUSF ALS, a Canadian diversified royalty company, is positioning itself strategically in the energy sector by transitioning from thermal coal to renewable energy royalties. This shift not only aligns with the global push towards decarbonization but also reflects the economic advantages of renewable energy on the grid. 

Altius Minerals acquired its first portfolio of royalties (after buying a single royalty in 2003) in late 2013. The portfolio included royalties on Canada’s world-leading potash mines in Saskatchewan, but the seller of the portfolio bundled the potash royalties with coal royalties on Alberta thermal coal mines. 

In 2015, both the Alberta and Canadian federal governments made announcements to significantly accelerate the phase-out of coal-fired electricity. This meant that mines (and Altius’s associated royalty) that were originally expected to run until 2055 received a government mandate to end by 2030. This represented a significant loss of potential royalty revenue to Altius – but also caused management to evaluate how best to evolve as a company. 

Altius recognized the need to divest from thermal coal and seize the opportunities presented by the growing renewable energy industry, and the company has taken an active stance in an industry that is often criticized for its contribution to climate change.

The company’s move towards renewable energy was accelerated in 2019 when Altius acquired Great Bay Renewables, a private U.S. renewable energy company, to form a renewable energy royalty company. In 2020, Altius attracted prominent private equity player Apollo as a joint venture partner in its renewable energy business. This partnership signaled the growing interest and confidence in the renewable energy sector. Subsequently, in 2021, Altius successfully completed an initial public offering (IPO) for its renewable energy royalty vehicle, now known as Altius Renewable Royalties ATRWF ARR.

Altius is a royalty company that, unlike most of its competitors, has very little gold royalty exposure. Although gold has properties that make it uniquely adaptable for uses including medical and technology applications, its main demand source is jewelry and coins. Contrast that with copper, which, along with potash, makes up Altius’s main exposures. 

Altius has always pursued large, global end-use markets that address global sustainability problems. Most of the royalty revenue comes from potash, electrification battery metals and iron ore for green steel, along with their core holding in subsidiary ARR. These markets align with multiple UN sustainable development goals, such as eradicating poverty, ensuring renewable energy, responsible procurement and more. This strategic focus aligns with the values of stakeholders who believe in these goals.

As a publicly listed company, ARR currently holds 33 royalties on wind, solar and soon-to-be battery storage projects in the United States. This extensive portfolio potentially positions ARR as a key player in the renewable energy royalties industry. Additionally, ARR has a robust 15 GW pipeline, showcasing its potential for future growth and expansion.

The market for renewable energy royalties could be massive. With the increasing global focus on transitioning from fossil fuels to clean energy sources, investments in wind, solar and other renewable energy projects are expected to soar. According to Allied Market Research, the global renewable energy market was valued at $881.7 billion in 2020 and is projected to reach $1.9 trillion by 2030. Renewable energy royalties, in particular, have recently emerged as a growing segment of the renewable energy industry. As countries and corporations prioritize renewable energy to combat climate change and achieve sustainability goals, the demand for investments in this sector will likely continue to grow.

Altius Minerals, with its focus on diversified minerals royalties, recognized this emerging market trend and strategically made its foray into the renewable energy sector. The potential size of the renewable energy royalties industry is expected to be larger than the scope of Altius Minerals itself. The massive investments in clean energy projects worldwide, coupled with the growing number of companies and investors involved in renewable energy royalties, indicate that the market has significant potential for expansion.

Altius Minerals' strategic shift from coal royalties to renewable energy royalties through the formation of ARR demonstrates the company's adaptability and foresight in capitalizing on the potentially shifting landscape of the energy sector. With its IPO and an extensive portfolio of wind, solar and soon battery storage royalties, ARR seems well-positioned to benefit from the growing demand for renewable energy as the global transition to clean energy continues to gain momentum.

Featured photo by Matthew de Livera on Unsplash.

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