Athabasca Minerals Inc

XTSX:AMI

Earnings Call Transcript 2021-Q2

[Cheryl Grue]

Good morning, and welcome to the Athabasca Minerals Q2 2021 corporate update. We will be beginning shortly. Robert Beekhuizen will be presenting to our investors today. We also have online Mark Smith, our Chief Financial Officer; and Dana Archibald, our Chief Operating Officer.[Operator Instructions] Thank you for joining us today. And without further ado, Mr. Beekhuizen will present.

[Robert J. Beekhuizen, CEO & Director]

Thank you, Cheryl, and welcome shareholders and guests. Today's call is an update on our Q2 results, and I'll just be clicking through a slide deck that's online. And just scrolling down here. I'm obliged to disclose first and foremost that there are forward-looking statements here in this presentation. So the results that we're talking about today are of actual results, but as you get to the back of the slide deck, we'll be talking about our future plans, and those forward statements have not yet been materialized yet.Next slide, please. We came on Slide 4 and today's presentation will cover AMI's divisions at work, the Q2 highlights, 2021 strategy and goals as a recap, our path forward for 2021 and then a Q&A.Next slide. Just as a recap of our corporation. We have the 4 divisions. I've gone over this before in the past, but we have AMI Aggregates, our base division, that's where Coffey Lake is held and -- our 10 corporate pits. We have AMI Silica, our sand division, which holds our Firebag asset, our Montney asset and our Prosvita Project, our Duvernay -- formerly our Duvernay Project, as well as we have an operations agreement now in place for AMI Silica. We have TerraShift Engineering, that's our resource and regulatory engineering. And we have AMI RockChain, which is our technology-enabled midstream company, moving aggregates to customers across the nation.As noted here on the slide, all of these divisions are cash flowing and are synergistic. Over the past 4 years, this has been a market improvement to AMI's corporate structure. When I started the company, we simply had corporate pits, and we had the Susan Lake contract at the time and the Firebag asset. Now we have divisional structures, cash flowing divisions and a portfolio with a good future ahead.Next slide. I'm on Slide 7 now. So just as a year-to-date recap, we started the year at just under $0.15, and yesterday, we closed at $0.205 for our share price, which is up 46% year-to-date. We have just over 68 million shares outstanding. Our book value per share is around $0.21 with 18% insider ownership by me and my Board and management with over 1,000 shares. We will move to the next slide now, please. In terms of our financial results that were posted on -- in Q2 and the recent press release, our revenues midyear are $3.2 million with a gross profit of almost $0.5 million. I won't go through each of these points here, but we do have cash on hand. We have a good balance sheet. And as mentioned previously, our book value per share was around $0.21. I did state in the prior press release or this recent press release that our midyear results show a marked improvement year-over-year compared to previous years and since I joined the company 4 years ago.Next slide, please. I'm now on Slide 10. Just as a recap here for our goals and strategies in 2021, and I did address this at the AGM, but we are on a mission to increase and generate a step change in our revenues across our portfolio that I described previously, also to exponentially grow RockChain. With RockChain, for example, we are now over 1,000 bids since inception and over $0.5 million worth of bid value, and we see continued growth in RockChain and excited about the future there. So that's a focus. Obviously, with RockChain, we're focused on technology and throughout our portfolio, that is a focus, whether it's in TerraShift or RockChain, or what we want to do with, for example, AMI Silica and how we use technology to build a state-of-the-art plant for the Prosvita Project.And our strategic partnering is important to us across our portfolio, be that with our indigenous stakeholders who are strategically located in places where AMI is operating or with business partners that see an opportunity to team with AMI for us to generate business opportunities together, that are mutually beneficial. We have a goal to become the leading sand supplier from a premium domestic sand standpoint with AMI Silica and with our in-basin sand opportunities. And as I mentioned here, we continue to focus on our ESG and stakeholder relationships as part of our core values. Next slide, please. Just in terms of our accomplishments -- I'm on Slide 11, year-to-date, at the start of the year, we acquired 100% ownership in Privco1 and Privco2. Those were the companies that were co-owned previously and held the Montney and Duvernay sand deposits, so they are now 100% AMI. You'll see also in Q1 that we had established the 3-year RMA contract, which is now also referred to as Canoe Procurement, and TerraShift had picked up contracts early in the year and are busy executing.In the second quarter, RockChain 2.0 was launched, and we had also a $4 million transportation contract for RockChain in which we have successfully executed and completed at the end of July. And AMI also has another aggregates pit that has been approved from a regulatory standpoint and is ready for operations. In June, we filed our application -- our regulatory application under AMI Silica for the Prosvita Sand Project, again, formerly known as the Duvernay Project. And also in June, we picked up a short-term agreement for pit management in the sand sector with a confidential client, and we have that now cash flowing in 2021. In July, we appointed Paul Leveille as our CTO for RockChain. And Paul is busy working on the next generation of RockChain modules, which we're excited about, including RockChain 3.0. I'll touch on that.And just in terms of metrics, we're hitting -- we continue to hit milestones. As I mentioned a moment ago, we're over 1,000 bids for well over 140 customers. Those bids are worth, in their entirety, and I'm talking about since inception, $500 million worth. We are selectively transacting as these contracts are awarded. The bids that we submit or submitted to oftentimes, construction companies, large general contractors who themselves are outbidding to win the work with RockChain to supply the aggregate. So our probability on the transaction side is tied to the general contractors and the major constructions that we're supporting as they try to win the work themselves.Notably, we have now increased our coverage literally coast-to-coast with pits in the system, which is over 8,000, and we have over 2,000 trucking companies. And I'll touch on this in a subsequent slide, but we have new revenue generation streams that are unfolding. This is not unusual when you have a technology-based company. We entered this world -- or this arena to basically be able to provide aggregates and deliver them, but there are new opportunities over and above that, that we are now keen on monetizing in addition to the transactions. And as I mentioned here, we are cash flowing now across all our divisions, including AMI Silica.Next slide, please. Our path forward for the next 4 months, first of all, until the balance of the year and into 2022, is founded, we think, on some positive market factors. So we're seeing some recovery in the market as a result of COVID-19 and the rebound associated with that. Government has continued to focus on investment in infrastructure, and this is well positioned for our base division, AMI Aggregates as well as RockChain. Commodities are on the increase, including right across the board. So we think that with respect to commodity prices, that's going to support TerraShift and the work that they do as a resource and regulatory engineering company as well as support us through RockChain and our base division as well as our sand division.We are seeing an uptick in the sand market. We are right now supporting a client in moving sand and running a mine for them, and we're seeing an improvement from their side on the deliveries. And likewise, we know after -- I think we all know this coming through last year. And the emergence of -- and the importance of technology through the whole COVID-19 pandemic, we feel that we were ahead of the curve on that with RockChain. And this is still a progressive way of doing business, and we want to continue to be on the forefront of that and leaders in the industry. As I mentioned, our book value is around $0.21, and our trading value is right close to that. When you consider our portfolio, there's a lot of upside potential with the future opportunities in mind.Next slide, please. I'm on Slide 14. So I'll just finish off here with a recap for each of the divisions on what's ahead. So I mentioned about the positive market factors. So we're seeing some increased demand for aggregates regionally with respect to the location of our corporate pits. In particular, we see continued growth year-over-year from Coffey Lake, Kearl, Pelican and Emerson pits. And also, we've made it a focus, as I said earlier, with respect to ESG and stakeholders. Our relationships and our focus on indigenous stakeholders and doing progressive business with them that helps the community and the local economy there, has been a focus for us. And we see opportunities with our base division and actually across our portfolio. I'll touch on this again with TerraShift too.For RockChain, I mentioned that we continue to see increasing usage and customer demand for the tools and the software. And with that, we are working on the next generation of RockChain, RockChain 3.0. This is where we're going to -- with the 8,000 pits that we have in the system, we're having customers now that want us to post pits for sale and for us to be able to facilitate that with the -- not only with the website, but with the ability for us to do resource assessment using TerraShift Engineering built into the equation.We are going to monetize RockChain across multiple divisions. So not only the aggregate deliveries where we started, but transportation solutions, which I mentioned are already underway with a sizable contract that we acquired in Q2. Pit sales, which I've talked about here, we think we have a great repository with RockChain. The owners of the pits can also be the future buyers of somebody else's pits. And software-as-a-solution based on the demand that we are having for our software, we are now implementing programs for members that want to subscribe. We have rock rewards associated with that and for repeat users, and this is underway within RockChain.Also, we have an eye on financial services' aspect to the business. The aggregates market is very fragmented across the country, and we see a role for RockChain to support that as a community of aggregate pit operators and to introduce future services that will benefit the operators that are in RockChain with discounted insurance, for example, bonding capabilities and so forth. So more to come on that, but that's something that we're working on. We want to continue to lever our strategic municipal relationships. So I mentioned the RMA, which is now -- our relationship is involved to Canoe Procurement literally across the country. And we've been engaged in demos for municipalities across Canada who are regularly requiring aggregates for their municipal programs, and we're excited about the potential of that and the power of our econometrics that is within RockChain. And as I've said before in previous presentations, we continue to focus on geographic growth and market penetration. Next slide. In terms of Silica, AMI Silica, we've mentioned that we have filed our regulatory application in June for approval on the Prosvita Project and so we are now engaged in -- with stakeholder relations and community forums and also just the normal process of responding to government stakeholder questions that are associated with the application so that we can keep the project on target for approval to proceed to construct.We have our Montney resource and have mentioned in the past, we've had -- we do hold a mineral license for over 150,000 hectares, it's quite sizable. And we are refining that now for resource location within that geographic spread for an ideal spot to develop. We have a geophysicist on staff now as well. It's also part of the TerraShift team. And so with TerraShift's resource engineering and their geology and geophysics capabilities, we are now zooming in within that mineral license for the ideal spot for development, and we'll be looking forward to the back end of this year to reserving that area for development as well as the field development program that would be associated with that.I mentioned on the sand side that we -- in Q2, we also had a -- we're fortunate to establish an operations agreement for sand management with a confidential client. And we have a long-term view to that, but it is a short-term contract right now in 2021. But we have a view to expanding that if possible and more to come in the future as that relationship unfolds.TerraShift Engineering. Our targets on TerraShift during the -- from the start of the year has gone up significantly in terms of their revenue generation opportunities. So there's a lot of bidding going on. And in some cases, recently some sizable contracts that hopefully we'll see materialize. We continue to do the resource engineering, but also we are working with strategic partners in the First Nation and indigenous stakeholders. And this includes, as I mentioned before, the Ministikwan First Nation, where we're right now doing waste management, but we also see other related opportunities that segue into municipal engineering. We're fortunate to have repeat clients. We've developed an expertise in the peat sector, for example, and we're excited about -- as peat -- as the resource evolves to support agriculture, TerraShift is in a good spot, with their expertise to cater to those clients, and we are doing that right now.And finally, just in terms of -- well, a couple of other points, sorry, before finally, target acquisition opportunities. We do have an engineering company, and we are poised to look at other affiliated companies in the country that we would like to form not only relationships with, but selectively acquire. And so we are right now starting a process to investigate and identify companies and have -- sort of talking to companies about the potential of joining and combining with TerraShift. So again, this is a forward-looking statement, but it is something that we're working on strategically.And then from a portfolio standpoint, it's been a tremendous benefit to the AMI group of companies to have TerraShift supporting us across the board. So they are active in terms of the requirements for AMI Aggregates, AMI RockChain, in terms of the technology, for example, in AMI Silica. So TerraShift Engineering does have proprietary technology in TerraMaps.And TerraMaps basically, just to kind of give you a snapshot on how that works, any regulatory application or operating resource in the aggregate sector that is filed with any provincial government is actually picked up as a data point by TerraMaps every week. And so with that intelligence, we know what's going on in the marketplace and where applications are at, which pits are operating, which new pits have come online. That information gets filtered and technologically in the background between TerraMaps and RockChain. And this allows us to really expand the performance of RockChain across the country because of the synergies with TerraShift and TerraMaps. And we have an eye of doing that in the United States as well. And this is proving out in Canada. I've mentioned before that it is our intent to cross over selectively, and we're looking at states to do that and partnerships also in that respect.Next slide. That kind of brings us to the end of the Q2 update. So we will go live with questions and answers now with Zoom. If -- and between myself, Dana Archibald, our Chief Operating Officer, who's online in Edmonton; and Mark Smith here in Calgary, as our CFO, we'll be happy to answer any questions as they may come through any one of us, as I just mentioned, and appropriately respond to questions accordingly. I'll just pause.Okay. Well, I'm just saying if there -- are there any written questions that have come in? No. All right, then folks, that will conclude our presentation today. So we look forward to keeping you are apprised and abreast of our developments going forward. We're excited about the future and what we're trying to accomplish here as we grow Athabasca Minerals and the AMI group of companies.Thank you very much for your time today, and we'll be connecting again soon. Bye-bye.