Altius Minerals Corporation (OTCPK:ATUSF) Q3 2020 Earnings Conference Call November 12, 2020 9:00 AM ET
Flora Wood – Director, Investor Relations
Brian Dalton – Chief Executive Officer
Ben Lewis – Chief Financial Officer
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Conference Call Participants
Orest Wowkodaw – Scotiabank
John Tumazos – Very Independent Research
Brian MacArthur – Raymond James
Craig Hutchison – TD Bank
Jacques Wortman – Laurentian Bank
Ladies and gentlemen, thank you for standing by and welcome to the Altius Minerals Corporation Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Flora Wood, Director of Investor Relations. Please go ahead.
Thank you, Denise. Good morning, everybody and welcome to our Q3 call. Our press release and quarterly filings were released yesterday after the market closed and are available on the website. This event is being webcast live, and you’ll be able to access a replay of the call along with the presentation slides that have been added to the website at www.altiusminerals.com. Brian Dalton, CEO; and Ben Lewis, CFO, are the speakers for the call, and then we’ll open it up for an open Q&A session. The forward-looking statement on Slide 2 applies to everything we say both in the formal remarks and during the Q&A.
And with that, I will turn it over to Ben to take us through the numbers.
Thank you, Flora and good morning everyone. Q3 royalty revenue of $16.2 million was up 25% from last quarter’s royalty revenue of $13 million, largely due to copper prices rebounding from a low of $2.30 per pound realized last quarter to approximately $2.95 realized this quarter. We also recognized higher zinc volumes at 777 and higher copper volumes from Chapada when compared to last quarter. Base metal revenue accounted for 53% of total royalty revenue in the quarter, demonstrating our leverage to copper.
Offsetting the base metals contribution in Q3 was a 16% lower realized potash price as compared to Q2. We also experienced continued low thermal coal revenue due to the ongoing COVID-related impacts of reduced Alberta economic activity and related power consumption but that was offset by 2 months of increased royalty level ownership. Pass-through iron ore revenue from Labrador Iron Ore Royalty Corporation, LIORC, continue to track lower as ILC again elected not to pay an equity dividend in spite of continued strong iron ore performance and cash flow generation. Brian will have more to say on these topics and our outlook for relevant commodity exposures.
Q3 EBITDA of $12.4 million was also up 24% from Q2, with the increase following the revenue growth. G&A costs of $2.4 million are up from the $1.9 million reported last quarter, with most of the growth coming from higher corporate development expenditures in the third quarter related to the Liberty acquisition and the Renewable Royalties business joint venture transaction with Apollo. Nevertheless, our EBITDA margins came in at a healthy 77% and consistent with last quarter’s EBITDA margins.
Adjusted operating cash flow of $7.3 million this quarter reverses the trend in Q1 and Q2 of adjusted cash flow exceeding EBITDA due to the timing of income tax payment due dates that were pushed out by authorities this year due to COVID-related economic support measures. On a year-to-date basis, adjusted operating cash flow of $33.9 million is just under last year’s comparable period, despite the lower revenue this year. This reflects lower cost of sales on Chapada’s stream revenue, lower G&A and slightly higher interest charges. The quarterly net loss of $39.8 million or $0.96 per share includes a non-cash impairment charge of $45.6 million or $1.10 per share.
Adjusted net earnings were $3.6 million or $0.09 per share. The main factor contributing to the impairment charge related to our acquisition of an additional 45% interest in the coal royalties LPs to take our interest to 97% or a net cost after adjustments of approximately $9 million. Prior to the purchase, we had collectively carried our share to coal LPs at a value of $73 million and the incremental acquisition costs, therefore, resulted in a significantly lower weighted average carrying value, which prompted an impairment evaluation. Other considerations made were more conservative views regarding future Alberta power demand and the pace of potential power plant retirements and/or natural gas refueling capabilities.
Other non-cash adjustments this quarter relate to the dilution gain that resulted from Adventus Mining successful completion of a $38 million financing. During Q4, we will continue to evaluate the impact of the Apollo Renewables’ transaction on our financial reporting. We also expect the Alderon receivership process to unfold in Q4. I’ll remind you that the loan to Alderon, our 37% share ownership position in Alderon and our 3% gross sales royalty on the Kami Iron Ore project, all had a combined carrying value on our books of $1 million. The current receivership-based sales process for the former assets of Alderon, including the Kami project, is ongoing. We had previously booked impairments to the value of these holdings upon initiation of the receivership process, but that may require upward adjustments based on the final results of the asset sales process, which, as Brian will further describe, we understand to have attracted strong interest. The Board of Directors declared a $0.05 per share quarterly dividend, and again, this dividend is eligible for our dividend reinvestment plan, which we announced last quarter for shareholders who are interested in receiving common stock instead of cash. Please visit our website or contact Flora for more information on how to enroll in this program.
Finally, looking at the balance sheet and capital allocation, we ended Q3 with $45.5 million in the value of the project equity portfolio and $73.8 million in LIORC shares. After payment of approximately $9 million for the Liberty acquisition, our preferred security distributions, and common share dividends and the funding of an additional $3 million to TGE on a milestone-based payment, we ended the quarter with $16 million in cash and cash equivalents. We also have modest activity on our normal course issuer bid in Q3, and on a year-to-date basis, we have repurchased and canceled 644,000 shares at an average price of $9.45 per share. We have paid $15 million year-to-date on our term debt and have approximately $39 million in undrawn availability on our revolver.
As Brian will discuss in greater detail, Apollo is expected to fund the next $80 million in renewable energy royalty transactions, which will reduce our near-term expected level of capital allocation towards this initiative. Subsequent to quarter end, we funded $7 million to TGE, of which $5 million was funded directly by Apollo. Brian has more to say on macro conditions and the recent acquisition, and now I will turn it over to him.
Thank you, Ben and Flora and thank you everyone for joining. We are certainly happy to note the improvement in revenue levels over recent quarters. While this has been accompanied by some headwinds, on balance, we believe that forward signals give reason for optimism that the worst of 2020 is now behind us, and that a resumption of our longer-term positive growth trajectory is underway.
I will start today by summarizing some of the highlights and challenges that occurred through the quarter and subsequent period. We saw strong price rebounds begin to take shape across the base metals complex, but also technical issues at Chapada and 777 that have resulted in temporary production level decline. Our ash prices averaged prices averaged lower than in the prior quarter, while the outlook for global demand and production volumes from our operators became firmer. The operator of the IOC mine again elected to not distribute dividends to shareholders. However, premium quality iron ore prices remain robust and resulted in strong royalties, while the potential of our interest linked to the Kami project were also bright.
Turning to the electricity component of our royalties, we elected to take a non-cash write-down with respect to our electric and coal assets. While on the other hand, our most significant development during the quarter saw Altius Renewable Royalties received an accretive investment and strong endorsements from major private equity player, Apollo. A mixed bag of updates there for sure, but this yet again underscores the benefits of holding a well-diversified portfolio.
Overall, the positives outweighed the negative. And we remain confident in our positioning and overall time frame. Allow me to break all of this down further and provide additional context to our outlook. The technical challenges experienced at Chapada and 777 were isolated and solutions to return to full production levels in relatively short order are being implemented by both mine owners, and we continue to view as top-tier operators. Lundin, in particular, appears to be making the most of the situation by advancing stripping and ore stockpiling, while also stepping up activities related to their expansion plan studies for Chapada.
At Voisey’s Bay, nickel copper and cobalt production has ramped back up from COVID-related curtailments, and the new underground mine development work continues to progress well. Earlier this week, we were pleased to learn that Excelsior Mining has begun initial copper recovery processes at the Gunnison project in Arizona, in which Altius hold the royalty interest. Adventus Mining also closed a major institutional equity financing round during the quarter that paved the way for it to complete feasibility study work at its high-grade Curipamba polymetallic project in Ecuador as well as to advance other regional copper porphyry exploration target. We hold a royalty related to Curipamba and are significant Adventus shareholders.
Base metal price strengthening continues as the challenges of a protracted period of low investment and new and replacement capacity is being met concurrently by expectations of higher global demand, an increased electrification infrastructure and renewable energy investments. This is to come from both the public sector as stimulus is set to be disproportionately allocated to these objectives and the private sector that is increasingly seeing outsized long-term growth emanating from these particular sustainability transition-based macro trends. The perfect storm for copper and other metals, such as nickel and lithium that we have talked about in past updates, is indeed taking form in building and intensity. Both of our major potash mining counterparties, have noted a resumption of demand growth and a better industry supply-demand balance as we get set to close out 2020. Global agricultural conditions are markedly better than at this time last year when a series of weather-driven events caused a sudden decline in fertilizer demand that led to price deterioration. Crop prices are strong and farmers around the world are now busy working to catch up on replenishing the nutrient content of their soils.
Potash inventory levels have normalized as a result and prices have begun to trend back up. Iron ore prices have continued to hold up well, in spite of better supply conditions as the year progressed. This is due to strong steel demand growth, particularly in China, as post-COVID infrastructure stimulus measures there were very quickly implemented. While it is hard to assess for how long this increased level of demand will continue in China or to determine when other markets begin to ramp up steel demand to meet their own infrastructure investment plans, we continue in any event to be long-term bullish under disproportionate need for ultra-high quality iron ore type that we have been purposely aligning our shareholders with.
We are noting a steady build of policy direction in capital allocation towards the goal of reducing the emissions impact of steelmaking and expect this thematic to only further accelerate. Ultrahigh-purity iron ore products of the type, arguably best exemplified by Canada’s Labrador Trough mining district result in natural reaction efficiencies and significantly reduced emissions in use during steelmaking. As such, they are in increasing demand as direct inputs, and its blend stock for ore from other regions, and in particular, Australia, Pilbara that are, in many cases, experiencing a progressive deterioration of average low quality.
Specific to the IOC mine from which all of our current iron ore based revenue M&A, this trend is being reflected in strong quality-based premiums that are not only linked to high iron content, but increasingly, to low content of impurities, such as silica, alumina and phosphorus. IOC’s role within operator Rio Tinto’s overall portfolio also seems to be gaining insignificant, with the late September announcement by the major of the securing of facilities in North China that are being used to upgrade ore from the Pilbara operations with IOC drive material. It is worth reminding here that a core part of our long-term attraction to IOC relates to its expenses and arguably underdeveloped mineral endowment, and it’s certainly underutilized transportation infrastructure. We have recently learned that a receivership process that seeks to sell the former assets of Alderon Iron Ore, being mainly the feasibility stage Kami Iron Ore project, which is located immediately south of the IOC mine, has attracted significant industry interest.
We also understand that a proposal from an established mine operator is being recommended by the receiver for approval by the Supreme Court of Newfoundland and Labrador in a hearing that is expected to occur in the coming days. Further details of the proposal remain sealed at this time pending court approval. Altius originated the Kami project and retained 3% gross sales royalty related to any future potential production. Our efforts to convert the residual revenue from our phased out stage of Alberta thermal coal royalties into a long-term stream of renewal of energy-based royalties, achieved a significant milestone during the quarter. Apollo funds can now earn a 50% interest in the business in exchange for sole funding the next $80 million in approved investment. We held a specific investor call on this deal when it was announced, but I won’t rehash the details today.
The main subsequent update to note, however, is that the joint venture has announced its first investment in the form of $25 million expansion of an existing agreement with Tri-Global Energy. This was motivated from our side by a recognition that TGE is now either sold or has visibility on sales of efficient projects to meet our estimate of the number of creative royalties required to meet thresholds under our original investment amount, while at the same time, having increased its total project pipeline to levels beyond that at the time of the initiality agreement. As such, we were delighted to reach terms with them to essentially keep the process rolling, and we would hope to do the same again at successive points in the future as their business continues to grow and prosper.
The Apollo announcement has also had a positive impact in terms of our deal flow origination work as potential counterparties continue to gain awareness of the royalty model generally and developed increased confidence in our particular capabilities to provide innovative partner-like solutions for their businesses. We’ve also continued to evaluate the optimal methods and structures that ARR can utilize to fund its share of investments that are identified following completion of the earnings stage of our agreement with Apollo. We have completed an initial assessment of options, and these are currently being more fully developed as part of an ongoing board-level decision-making process. As has been discussed with you at several points over the past year, this list of options continues to include the potential for taking ARR public as a pure-play renewable royalty spinout company. Broader market conditions have remained favorable for this possibility. That said, there are many factors that go into such a decision, and we continue to explore and evaluate how best to proceed to ensure that we maximize the exciting long-term opportunity that we believe ARR represents for shareholders.
Lastly but never least, we continue to see positive developments throughout our project generation business. Our portfolio holdings continue to attract strong interest from investors and gain access to broader pools of capital through which we will advance to various projects. This will translate into a tremendous amount of exploration and development activities and news flow throughout the remainder of the year and into 2021. This will hopefully result in continued portfolio value growth and underlying royalty project advancement. We also remain active in our own internal exploration efforts and are continuing to find strong demand for the projects that are being generated, with several new project deals completed during the quarter that add new equity positions and early-stage royalties to our portfolio.
Thank you. And with that, we will open the call for your questions.
[Operator Instructions] Your first question comes from Orest Wowkodaw with Scotiabank. Your line is open.
Hi, good morning. I wanted to get a little bit of better understanding on how the mechanics work on renewables deal with Apollo? And specifically, I’m just wondering, with the $25 million new transaction that was announced that will be funded by Apollo, does that effectively mean that they – upon closing of that transaction that they would effectively gain or earn in, I think, a 15.5% ownership of the renewables? Is it just dollar-for-dollar percentage of that $80 million effectively from an earning perspective?
Yes, that’s correct. And so the ultimate target here is $80 million of sold funding from Apollo to reach the full 50% level.
Okay. So there is no specific milestones, it’s just percentage of dollars spent effectively?
Orest, to be honest, I want to go through the details of the agreement to be absolutely certain on that, but generally speaking, that’s correct.
Okay. Thank you very much.
If there is any significance, I’ll update.
[Operator Instructions] Your next question comes from John Tumazos with Very Independent Research. Your line is open.
Thank you for taking my question. In comparing the quarter’s revenue to a year ago, how much is the impact of the various prices – you noted Potash was a big decrement. How much was the impact adverse to volume from the virus? And how much was the impact of volume from either growth or depletion?
Single biggest factor is none of those. In fact, it actually is the decision of IOC to withhold – or withhold is probably not the right word, but to not declare dividends throughout the year. So there is 2 forms of income that flow into Labrador Iron Ore Royalty Corporation, which we’re a holder of, and that ultimately get passed through, there is the royalty amount, which, obviously, the operator has no discretion on, it’s simply a function of production and prices. But then there is the equity level interest that lie or hold and typically, there is a pretty fullsome payout ratio that results to shareholders from that. But so far, in 2020, that would be the single biggest difference quarterly and year-to-date in our revenue. No doubt, Potash prices have had a significant impact, they’re down considerably year-over-year spot volumes are slightly up. And I would consider the other more COVID volume-driven impact to really have been relatively minor. The major one would be at Voisey’s Bay, but that’s still a relatively small royalty within our structure. If I were to pinpoint, in order, I’d say, the dividend situation at IOC, which we obviously hope gets reversed in Q4, but obviously don’t get to make that call. Potash pricing, and then beyond that, particularly in the middle part of the year, base metal prices, mainly copper.
Brian, can I ask another? Looking at the cash flow statement, the acquisition of investments is $68 million, how much of that is renewable? And what were the larger investments this year with traditional mining and geology nature?
The biggest investment there would have been a $35 million investment in Apex Clean Energy in, I guess, it would have been late Q1, early Q2 or convert that to Canadian, and you’ll find a lot of the number. There were ongoing milestone payments made to Tri-Global Energy as well, those related to the original investments. But the way they were structured, that money were actually released and deployed upon them achieving actual sales and portfolio growth milestone. The only mining-related investments of note would be the additional interest that was acquired in the coal limited partnerships and then some more modest incremental purchases of Potash Royalty interest in Saskatchewan, basically just some cleanup of some small third-party holders, which – sort of a regular program that we are running.
If I can ask one last one, broad question is, how do you select the jurisdictions for renewable energy investment? Yesterday, Fortis Steel Metals, which is predicting they’re going to have a future energy or renewable energy company bigger than ex-Chevron or Total, said that their Chairman and Deputy CEO are going to 47 countries, evaluating opportunities. I guess the sunlight is stronger in some deserts than others. Here in – or in my township, there are corn fields converted to solar because the state subsidies are so big, even though New Jersey is not as good as Arizona for sunlight. I didn’t put solar on my house because I didn’t want to bank on the subsidies. I think New Jersey is more bankrupt than Puerto Rico. But how do you evaluate the different jurisdictions and the best way to invest for renewable?
Well, right now, all of our investment focus is in North America. And to be honest, that’s as much as anything a function of the knowledge base that our management team has – the network of connections that they have. And sort of a strategic objective that we’ve had to try to perfect the royalty financing model for renewables within what we feel is the most sophisticated capital market that exists in the space right now. But there is still a longer-term strategy or plan to take the model further afield as the business grows in the long term. If you want to get more granular as we are in North America, we’re invested. We certainly do a pretty rigorous evaluation of the overall portfolios of the developers that we’re investing in. So there is some element of choosing, I suppose, and that we’re conscious of where their efforts and projects are concentrated. But for the most part, it’s pretty diversified across the different grid networks in the U.S. Even in New Jersey, right now, with the cost of solar panels and the efficiencies having improved so much, there is an unsubsidized economic case for these projects. But again, it’s not – the way it works with us is that we’ll receive royalties, somewhat in significantly diversified portfolios and we’ll receive them into order that they’re sold. So it’s more of a market-driven set of forces that will determine how our ultimate geographic diversity is going to shape up at least within North America. And it has more to do with than just resource, it also has to do with factors such as interconnection availability, grid bottlenecks, there is a whole host of factors there, that go into that. But what I can say is that the sales of these projects is – and the appetite for buying these projects from final sponsors or by final funds or from the developers that we’re backing is very much economically motivated beyond historical subsidies, which, quite frankly, are already set to roll off pretty soon. I take a lot of comfort in the fact that there is an economic and a rational economic underpinning to the order in which these projects are being sold and royalties are being created right now.
And your next question comes from Brian MacArthur with Raymond James. Your line is open.
Good morning. I am just – a little bit back to Orest’s question. The $7 million you just put into TGE, Apollo did $5 million and you did $2 million. So a couple of questions. I guess, I just want to confirm, that brings your investment so far to TGE up to $24 million, I guess. So you have $6 million of your share to go. And secondly, is that the way we should think about it going forward? I mean, I thought originally, you would put it in the first $30 million, and then they would put in the next $80 million, but you kind of split it $5 million and $2 million. Just – is that how it works going forward? Or what was the rationale for getting it that way?
Brian, the $2 million was actually a milestone payment that was made for solely on our account prior to the signing of the Apollo deal. The next milestone tranche was triggered after the Apollo deal. So I guess, the other way of answering is that at whatever point we were when Apollo entered sort of stopped our funding requirement for remaining milestone tranches under the original investment and put that over to Apollo’s ledger. I don’t know the exact number, but I believe it was $8 million or so remaining at the time of the Apollo entry. So the funding of those $8 million would obviously contribute towards their $80 million earnings and/or maybe not roughly $8 million.
And does the next $25 million that goes in that you have announced post that deal then – I mean, the original TGE royalties were going to be 3%. Are the new $25 million kind of the same sort of thing, 3% royalties? Is that sort of structure? So in fact, the $25 million is a real true continuation, like the full $55 million works the same way?
Yes. It’s just an expansion of the whole program. And so we just – there was very little modification, minor tweaks here and there to the actual investment agreement. But as I tried to explain in the remarks, what was happening is that we were getting visibility on enough sales and royalties being created that we were going to soon cap out on receiving new royalties just because of the success that they have had. And we obviously didn’t want that to happen. We think that they have met our expectations, gone well beyond our expectations in terms of the pace that they been able to bring projects to sale and royalty creation. We have noted that particularly because they were able to access our capital, their portfolio has grown to beyond what it was when we originally invested. So they were very happy to keep using our capital to events and grow their portfolio forward. They are obviously very happy with the relationship, and similarly, so were we. I mean, bigger picture here, what I would love to see happen is that in the case of that TGE agreement, the Apex agreement and even others that we might complete from here is that they are not one-off that they’re continuing, that we can continue to keep funding their growth and development with a partner like capital, and they can continue to keep creating royalties on our behalf. That would be extremely efficient for us from a business development path going forward. If we cannot only rely on new transactions with new players, but we can just continue to reload on investments with those groups that are meeting expectations and succeeding so well in their own businesses.
Great thank you very much. Very helpful. Thanks a lot
Your next question comes from Craig Hutchison with TD Bank. Your line is open.
Good morning I just wanted to ask about the outlook for the funding you put to Apex. You have got three deals, or I guess three royalties already created with the funds. You went to TGE. Can you provide any outlook in terms of when you think you might be able to sort of actually secure royalty on the funding provided to Apex?
Yes. Apex is actually having a banner year. I think they are on target for more project sales than at any other point, which in some ways, we are pretty remarkable when you consider the kind of a year we have had. But what’s important to point out here is that when we entered that agreement with Apex and also with TGE for that matter, we look through their portfolios, and they identified projects within that were already fairly advanced in terms of discussions with potential buyers. So it was not – it wasn’t going to work for us to try to interject royalty structures into ongoing sales processes. That would have obviously not been well received by the people that they are already dealing with. So there was a carve out of projects of what we call excluded projects that were more or less subject to prior sale already. And what that does is it generated a backlog of sales that they had to get through before next sales subject to royalty would be completed. Well, they are actually very close to reaching that point now, and we are optimistic that before year-end, the flow will start to develop a sales with royalties attached. And from there forward, we will be essentially all [indiscernible] with royalties attached that would come out of their portfolio. But their sales have been remarkable. They have been knocking it out the park all year, and in fact, they worked through that backlog with excluded projects, quite a bit ahead of schedule, more or less. They’re not quite there yet, but very close to reaching that point.
I appreciate the additional color.
No problem. Thanks.
There are no further questions at this time. I will hand the call back over to Flora Wood.
Thank you, Denise. I do have one question that’s coming from an investor who’s on the webcast. And Ben or Brian, he wants you to speak to your estimate of the impact on the 777 and Chapada shutdown. So which quarter and anything you can estimate on quantity.
Ben, you can speak to the timing elements of that. I guess – or at least correct me if I get this wrong, but with Chapada, there is a lag impact. So we kind of – when you see Q4 revenue, it really comes from Q3, and that’s before there was the technical issues. So in other words, we’d expect to see much of the impact from the curtailment of the reduced production, in fact, in that case in Q1, that seems less of an issue at 777. So there are current challenges we would expect to book in or not in Q4. Before I go further with that, Ben, is that accurate?
Yes, that’s accurate. So yes, the only difference with 777 is that the zinc we get paid for as it’s produced because there is a refinery there. So it’s only – the copper would have a similar lag at 777 as well.
Got you. And then as far as the overall impact, what we have heard from the operators is that in both cases, they are still running, but at reduced levels. But Chapada has managed to replace some of the down equipment, but there is only one mill running. And if I am not mistaken, they are estimating that they are currently running at around 30%, and that by sometime in December, that should be back up to full capacity. So I don’t know if you can make your own estimates as to what that relates to, but probably 50% of production, depending on how the ramp-up goes. And with regard to 777, time line is a little less clear, but they are similarly guiding to be back to full capacity by year-end. So right now, there is some production, but what’s happening is that it’s coming throughout through the ramp, so there – a constraint there. So obviously, the pulling the ore from the – through the shaft is not happening at the moment, but there is still some production coming from the ramp. The other thing I will point out, I should say that Chapada is that Q1 is typically a pretty weak production quarter at Chapada because of – it’s the rainy season in Brazil. And a lot of the bottlenecks and curtailments happened at the mine itself. And one thing that Lundin seems to be doing is advancing a lot of pre-stripping and continued mining levels so that they can work from stockpiles once they get up and running. And I am assuming anyway that, that is – that should have a positive impact on negating some of those mine level impacts that quarter one typically has. So I think the again, they are making a bolster the situation in trying to fight things back the best that they can. They’re clever people. So I’m not – I’m optimistic that they will really minimize impacts here.
And we do have a question on the phone. Your next question comes from Jacques Wortman with Laurentian Bank. Your line is open.
Sorry, Brian. There was some pushback when Altius increased its interest in thermal coal. Some felt that it conflicted with the renewable energy royalty push, and now you have written down the carrying value. Can you just revisit the thesis or the rationale on the transaction from July and where that kind of sits now?
Sure. Funny enough, it actually was a bit of a driver for the write-down because the cost per percentage of ownership implied by that transaction and then buying out Liberty’s remaining interest is considerably lower than the original purchase price on the core interest. So when you weight average the cost across old purchases, you get a significantly lower number. And that’s what, in many ways, triggered impairment factors there. As far as the motivation for that transaction back in July and the rationalization for – the factors that we are seeing and that have gone into our consideration of the write-down were known to us at that time and factored in. So we continue to believe that the rationale at the time was strong and that our expectation for a fairly rapid payback still hold. We obviously have better visibility on the near term than long term and in rationalizing that investment, we certainly put almost all of our weight on the very near term. Beyond that in terms of how it could be perceived to be in conflict with our broader goal of phasing our own interest from coal and into renewables, yes, I can see the point, but the arguments other – again start that by picking up that additional interest, really nothing is going to change. The mines are going to still run and operate at exactly the same pace irrespective of who the ultimate owner of that additional royalty interest was. So it’s not like there was any way, shape or form that this is an investment that somehow could encourage or would enable the longer life of the assets. Beyond that, I guess, the arguments we made is that at that point in time, we had already reached the point that we had invested all of what we expected on remaining coal revenues into growth of the renewables business as per sort of an early promise when we started the whole renewables initiative. And we are still seeing lots of opportunity and here was an accretive opportunity to acquire more of those cash flows to final waning gas in stages in the coal business and to reinvest. So more simply put, we didn’t really see it as a doubling down on coal as much as we did see it as doubling down on our renewable investment focus, just a way to leverage the dollar because nobody wants to pay anything for coal and to take that dollar and to further accelerate the renewables’ investment plan.
Okay, thanks. And I guess just in terms of the really rough math here, if you are still carrying the thermal coal portfolio at, call it, $37 million combined, a 44.9% interest that you bought in July for $9 million is still worth roughly $16 million, $17 million? In other words, it still looks like it was accretive even with the right dynamic taken.
Yes. I mean, again, the other thing about the – it’s more than just the weighted average, right? So if we also got really conservative to the factors ranging from watch your prognosis for energy consumption in Alberta, what the future gas price is going to be. Again, we took, we believe, a very conservative view across that. There is so many subjective variables that going to how things will play out, with coal and Alberta going forward, that – again, it’s a gas at best. I think the approach we have taken is appropriate and definitely conservative.
Okay thanks Brian I appreciate that.
There are no further questions queued up at this time. I will turn the call back over to Flora Wood for closing remarks.
Okay. Thanks, Denise, and I want to thank everybody for dialing in and for the questions and we will look forward to talking to you for year end.
Thank you, everyone.
This concludes today’s conference call. You may now disconnect.