Athabasca Minerals Inc

XTSX:AMI

Earnings Call Transcript 2020-Q4

[Tanya Finney, Director of Investor & Stakeholder Relations]

Hello. My name is Tanya Finney, and I'm the Director of Investor and Stakeholder Relations. Thank you for joining us for our 2020 year-end and investor update webcast. We hope you are staying safe and healthy. We thank you for your patience as we change speakers, allowing time for masking and distancing factors.Today, I'm joined online by Robert Beekhuizen, our Chief Executive Officer; Mark Smith, our Chief Financial Officer; and Dana Archibald, our Chief Operating Officer. We have posted a slide presentation on our website, which we will reference during this webcast. For this webcast, you are welcome to submit your questions through the Q&A feature.Before we start, I'd like to draw your attention that this presentation contains forward-looking information regarding our business. Any statements we provide in this presentation are subject to risks and uncertainties that could cause actual results to differ materially, and we ask that you review these statements.And now Robert Beekhuizen, our CEO, will go through our agenda and an executive summary.

[Robert J. Beekhuizen, CEO & Director]

Good morning. Thank you, Tanya, and good afternoon, depending on where you are on the continent as well. I hope you're healthy and safe. As Tanya mentioned, I'm joined today by Mark Smith, our CFO, here in Calgary; and also by Dana Archibald, our COO, who is online in Edmonton, and who will provide context on AMI's divisional performance and operational highlights along with myself.I'm starting on Page 4 of the presentation, which provides an agenda of what we'll be discussing today in our quarterly investor call. The agenda includes a recap of 2020 corporate financials. Our operational highlights for each of the 4 divisions, our 2021 goals to build value and some time for Q&A to respond to investor questions with answers.I'm starting now on Slide 6, and here's a brief overview of AMI's 2020 financials. The results were press released and posted last week on SEDAR. Obviously, 2020 was a challenging year with the impact of COVID-19 and the persistent downturn in the economy. However, we are glad to have weathered the storm and got through it.At the end of 2020, we had $2 million of cash, unrestricted cash in our bank account and our book value was $0.22. In spite of revenues being down in 2020, we are already turning upward in 2021, which our recent press release support. And this momentum is expected to continue.Turning to Slide 7. In spite of COVID and the economy that I mentioned, we're pushing through. We are still able to achieve some noteworthy milestones over the past year and into Q1 2021. To recap, we strengthened AMI Silica by arranging an offtake agreement with Shell Canada. We increased our AMI's ownership to 100% in our premium domestic sand deposits, and we also secured $1 million financing in October of 2020.We were flanked by getting Coffey Lake opened and into production and by AMI RockChain picking up significant orders, including most recently, the regional municipalities of Alberta. These milestones have positioned AMI well for a more robust forecast in the upcoming year.On Slide 8, we show a summary of our historical share price over the past 15 months. With COVID-19 and the persistent economic downturn, our share price in 2020 hovered around $0.15 for most of the year. In Q1 2021, however, the business outlook has improved and so are the fundamentals with Coffey Lake Public Pit recommencing production and our increased ownership in our sand deposits and with RockChain as well as TerraShift securing new purchase orders, our stock has rallied upward in the order of 40% or more in recent months.Now let's look at our most recent announcement on Slide 9. Turning to Slide 9. We want to recap on AMI's corporate portfolio as we get into our divisional highlights. Athabasca Minerals is comprised of AMI Aggregates, AMI Silica, AMI RockChain and TerraShift Engineering, the latter which we acquired in June of 2020. Each of our companies are engaged with resources and projects.AMI Aggregates, our base division is underpinned by 9 corporate pits, our government contract to manage Coffey Lake Public Pit for the Province of Alberta and our planned Richardson Quarry project. AMI Silica, our sand division holds permits and mineral licenses for 3 premium sand deposits strategically positioned to serve the energy sector in Alberta and British Columbia. Our Duvernay Sand Project is in the final stages of front-end engineering development together with an international partner. AMI RockChain, our supply and logistics division, driven by our RockChain data and technology platform has surpassed over $400 million of bids in just over 18 months with over 100 repeat customers across Western Canada and Ontario and continues to grow. TerraShift Engineering is active with numerous external clients, providing resource, environmental and regulatory engineering. Their technical skills and proprietary technology, including TerraMaps are being applied and integrated into each of AMI subsidiaries on a daily basis.Our corporate mantra is to develop, deliver and sustain that is to develop and deliver on solutions and to sustain our future business-wise and with care for the environment.I will now turn it over to Dana Archibald, our COO, who will address AMI Aggregates and AMI Silica.

[Dana Archibald, Chief Operating Officer]

Thanks, Rob, and thanks, everyone, for joining us today. Moving on to the update for AMI Aggregates. We'll turn to Slide 11.In Q1 2021, our base division resumed production from our Coffey Lake Public Pit with more than 130,000 tonnes delivered in February and March. We have positioned several of our corporate pits for production in 2021 through project bidding as well as leveraging regional strategic partnerships through royalty agreements. The Province of Alberta has granted AMI final approval for the Hargwen aggregate pit located in Western Alberta between Edmonton and Jasper. Hargwen was previously held under exploration license and is now held by AMI as a lease to develop and operate as of March 2021.We have seen a measured increase in bidding activity across our assets in the Wood Buffalo region in Q1 and the beginning of Q2 2021, indicating a positive market improvement over 2020.Over the next 12 months, we are working on a number of initiatives for AMI Aggregates. We stay continually engaged with our industry partners surrounding both Coffey Lake and our corporate pits with regards to upcoming projects and aggregate requirements. As identified in the previous slide, we are seeing a recovery in bidding activity and demand in the Wood Buffalo region, which should reflect in additional orders from Coffey Lake as well as reactivating throughput from both our Kearl and Conklin Hub, which includes both Logan and the 248 pit.With the positive indicators from the market, we are also working with potential strategic partners to operationalize the True North Hub located 7 kilometers from the Coffey Lake Public Pit. We continue to have discussions with potential partners for select corporate pits, including the Richardson Quarry project, north of Fort McMurray.Outside of the Wood Buffalo region, AMI expects to see production in 2021 from the Pelican Pit through its royalty agreement with a local contractor. We continue to bid on projects out of the Emerson Pit with the goal to reactivate the asset. We also continue to monitor regional market demand that would support the opening of both Hargwen as well as East Pine in Northeast B.C.We are looking to stimulate new growth and regional expansion through acquiring additional aggregate resources in strategic locations with a support from TerraShift and our First Nation relationships.Now moving to AMI Silica on Slide 14. We continue to advance the opportunity to displace the reliance on imported American sand with our premium domestic sand projects. Our focus in 2020 and continuing in 2021 is on the commercialization of our Duvernay Sand project. With access to both highway and rail, this project will provide premium domestic sand to serve operators in the Duvernay, Montney and Deep Basin regions.In 2020, AMI maintained its mineral exploration rates on over 150,000 hectares of land in Northwest Alberta and Northeast B.C. In 2021, AMI is undertaking a program to further delineate our Montney holdings.Our Firebag deposit remains strategic to our sand strategy. And with the future development of our Duvernay asset, Firebag has now become within trucking distance to that operation.Moving to Slide 15. In Canada, we are seeing an uptick in commodity prices and capital expenditure forecast increases for 2021 and 2022. We believe the fundamentals for sand in Canada will improve based on market fundamentals getting better. And the average tonnage of sand used per well also increasing.From related market research, a recovery in sand demand to pre-COVID levels, in the order of 5 million tonnes per year is expected -- is the expected trend in the next 12 to 24 months. This coincides well with our AMI Silica Duvernay project coming on stream.Moving to 16. As Rob mentioned, in October we announced the $1.48 million nonbrokered private placement with proceeds to advance the Front-End Engineering & Development, or FEED, for the Duvernay Sand project. Our team, along with the design build contractor, TPS, have made some great progress on the FEED, and we have a strong technical team working through the regulatory process over the next couple of months.In September, we announced our joint venture with an international industry partner to co-design and build one of the greenest sand facilities in the market. The synergies with this industrial partner include industrial land and utilities for the facility with close proximity to additional sand resources secured by AMI in 2020.If you go to Slide 17, we'll discuss the development and growth in the next 12 months. So as we take a glance at the next 12 months, on our Duvernay project. Following the regulatory applications for the mine and plant site will be our highest priority in the coming months, including our community and stakeholder outreach engagement. We are currently completing the work to confirm our resources on the -- on our additional lands secured in 2020. We will also be confirming the major bid items and long lead items as it relates to the project procurement and construction, and we are also taking preparatory steps towards arranging financing, in support of our final investment decision also referred to as FID.With regards to our Montney project, we are looking at refining our exploration program to identify the future development zones. As a result, we will be looking at completing further field drilling and resource delineation, which would support both securing mineral licenses and the development of an NI 43-101 resource estimate.I'll now turn it back to our CEO, Robert Beekhuizen to address AMI RockChain, TerraShift and our goal is to build value in 2021. Thank you.

[Robert J. Beekhuizen, CEO & Director]

Thank you, Dana. On Slide 19, you will see a snapshot of AMI's upgraded website. We have undertaken recent improvements to enhance the speed, accuracy and econometrics as well as user interface of our proprietary digital platform and technology. The website is mobile-friendly, so people in the field can work from their smartphones or tablets as well.We can also see how the metrics on the platform continue to increase since our initial launch a year ago. We have now surpassed over 32 million tonnes of Aggregates being requested for bid with a bid value exceeding over $400 million and climbing.Moving to Slide 20. Our geography has increased across the nation. We have over 100 repeat users now and growing. Our recent contract with the regional municipalities of Alberta has resulted in further rollout underway to serve the 69 Rural Municipalities in Alberta. We're also introducing the RockChain platform to interprovincial affiliates in Ontario, Saskatchewan and Manitoba.Moving to Slide 21. For the next 12 months, we have an ambitious plan to continue to expand the user base across Canada and thereby increase the number of orders for Aggregates accordingly. We have a game plan to increase the functionality of the RockChain platform that includes expanding our databases, the AMS and the TIM systems, as we call it. We also aim to strengthen the econometrics and supply chain processes, so Aggregates can be readily made as a commodity account with greater transparency for customers and with greater purchasing power. Now possible with the benefits of the technology that we're offering.We also are making inroads with strategic relationships in the United States and are excited about the potential of a market entry so to the border in the coming year.Now we come to TerraShift Engineering. On Slide 23, we see an example of TerraShift's proprietary TerraMaps. This is a powerful technology, which also feeds and support AMI RockChain. The TerraMaps platform is a fantastic repository of intelligence on resources, phases of regulatory applications and approvals and with access to layers of regional infrastructure, which can be turned on and off when examining development prospects and opportunities.On Slide 24, we recap that TerraShift has regular clientele and recurring revenues, which continue to expand and grow. TerraShift has also developed expertise in niche markets, including aggregates, silica sand, pit resources and other industrial minerals as well as rares. This division has made strategic inroads with First Nation relationships as well. Their abilities to deliver on environmental management and remediation programs with reliable, cost-effective solutions is coming to fruition, including recently the waste management program for the Ministikwan Lake Cree Nation.Turning to Slide 25. Over the next 12 months, TerraShift will continue to expand its markets in terms of services and regional geography across Canada. There will be a continued focus on the use and role of technology, expanded data that serves a multitude of provinces and integrating this with RockChain. There's also a strategic interest in TerraShift for U.S. market entry that is being explored with a potential U.S. partner.Now moving on to AMI's goals to build value in 2021. Referring to Slide 27, our goals in 2021 can be summarized as follows: increase our revenues from AMI's cash flowing divisions, that is AMI Aggregates, AMI RockChain and TerraShift Engineering; advance the AMI Silica business through its projects, the location and supply of premium sand resources and through key relationships, which will help monetize the future; pursuing potential M&A and/or strategic joint venture opportunities; market and geographic expansion; maintaining financial discipline and making responsible decisions with a watchful eye on our cash position; keeping focus on expanding the role of AMI's proprietary technologies and strengthening our relationships with investors and stakeholders. This is what we are aiming to accomplish in 2021 -- sorry, in 2021, and we look forward to bringing material news to our shareholders and the investment community accordingly.We will now address some questions we have received.

[Robert J. Beekhuizen, CEO & Director]

Question number one, we have a question about the Shell offtake agreement.I want to reinforce and give assurance that this offtake agreement with Shell Canada remains in effect. And our ability with our Duvernay project allows us to move sand not only to the Duvernay, but to the Montney as well where Shell has her assets. In addition, we're also looking at the disposition of Shell's assets and following that to address customers in the area that will be acquiring these assets and for us to be able to offer them an excellent offtake agreement as well.We have another question saying, will the sand project get going this year?We are well underway with our regulatory applications, and we hope to be filing imminently. We are excited about Q2 and what that brings in terms of advancing the project. And hopefully, you're going to see that soon in upcoming news releases.We have a question about revenue generation and how that's coming.Obviously, we had challenges last year with COVID-19. We've surpassed that. We had a good start in 2021 with the press releases that we had both on TerraShift and RockChain. And as I mentioned during the course of this presentation and with the RMA contract, we feel that there's a robust quarter ahead. And again, we look forward to some upcoming news as that is realized.I have another question about, tell me more about RockChain? And what's coming, the upgrades to the RMA new business?We did have an upgrade on our website. Folks may have noticed that if you go to www.amirockchain.com. As I mentioned in this presentation here today, the speed and efficiency and functionality of the RockChain platform has improved. And this is allowing us to keep up with the bid volume, which has increased significantly. We are doing many bids a day, and the use of our technology is allowing us to keep up with the demand in the client area.I have another question, is TerraShift going to grow?We are very excited about TerraShift and its capabilities, and that's been echoed in recent relationships and discussions that we are informative stages of -- with potential partners in the United States who see the value as well. And we look forward to bringing coming news on TerraShift as and when that happens. We had a good start this year with the pit resource contract, and there's some steady activity going on with existing clientele. So more to come on that, too.Thank you very much. I don't have any more questions. So I think that concludes our investor call today.The last slide, you have contact information for our Director of Investor and Stakeholder Relations, Tanya Finney. So if you have any lingering questions, please reach out to Tanya, and we'll be happy to address those questions.So thank you again for your attention, and we look forward to a good 2021 ahead.