Altius Minerals' (OTCQX: ATUSF) Development Stage Royalty Could Become Its Largest As Global Steel Industry Transitions Away From Coal

Steelmaking is one of the oldest industries in the world. Currently, steelmaking is divided into two different processes: the use of electric arc furnaces and the use of blast oxygen furnaces. Blast oxygen furnaces melt iron ore with coal whereas electric arc furnaces use electricity and scrap steel to melt iron ore. As the world works on decreasing carbon emissions, blast oxygen furnaces are coming under scrutiny due to their high production of CO2. Electric arc furnaces are more environmentally friendly because of the decreased reliance on coal.  

Today, 70% of steel made in the U.S. comes from electric arc furnaces, and as other economies follow suit, it will be important that industries have the infrastructure in place to convert to a more environmentally friendly process. One of the big questions surrounding this issue is whether there is enough scrap metal available for the process to be sustainable. Luckily, DR-grade (direct reduced) iron is a suitable substitute for scrap metal and in some cases could even be 100% of the input when using electric arc furnaces. 

Altius Minerals ATUSF ALS holds a strategic royalty on the Kami Project. Altius Minerals is a 27-year-old mining royalty company that has a royalty portfolio in copper, other battery metals, potash, renewable energy and high-grade/low-impurity iron ore. Exposure to potash and renewable energy has already positively situated Altius Minerals in some of the key markets in the 21st century, but its iron ore royalty may also be advantageous to the greening of the steel industry.

In 2021, Champion Iron CIAFF acquired the Kami Project in Newfoundland and Labrador, near the Quebec eastern border. Altius reports that the Kami Project stands out as a promising DR-grade iron ore project situated in a strategic location in the Labrador Trough geological belt. Positioned just a short distance from the company’s operating Bloom Lake mine, the project benefits from existing infrastructure and a high-purity iron resource that has been significantly de-risked by its previous owners. 

Altius Minerals shares that the company has a 3% gross sales revenue royalty in the Kami Project, or a 2.6% gross sales revenue royalty after deducting the amount that goes to the province. By the company's estimates, the gross sales revenue might look something like this: if the price was $154/tonne (base price in the Project Study) and volumes sold were consistent with the Project Study, royalty revenue to Altius would be roughly $30 – $35 million Canadian per year. Altius Minerals is confident that if projects come to fruition, investment in the Kami Project will become Altius's largest royalty. 

The global iron and steel market size is astronomical; in 2022 it was valued at $1.676 trillion, and it is expected to grow at a CAGR of 3.8% from 2023 to 2030. As more and more industry leaders transition to greener steel manufacturing and use electric arc furnaces, companies like Altius Minerals could be well-positioned to profit. 

Featured photo by James Baltz on Unsplash.

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