Exploring Atlas Salt as a Defensive Stock Opportunity

By Patrick Davis

Nov 04, 2024

Salt is a non-cyclical and truly defensive investment, and an efficient salt mine drives incredible long-term free cash flow. That's why Atlas Salt stands out.

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Newfoundland-based Atlas Salt Inc. (TSX.V: SALT) (OTCQB: REMRF) is on a path to sustainable revenue through a strategic offtake agreement with Scotwood Industries. The agreement allocates approximately 50% of Atlas Salt’s production to the Canadian retail market1. This news is great for Atlas as it aims to capitalize on its prime location and drive long-term revenue growth.

With salt's non-cyclical nature and strong demand stability, Atlas Salt’s efficient production model positions it as a defensive investment, offering the potential for reliable long-term cash flow even during times of economic uncertainty.

Atlas Salt CEO, Rick LaBelle, commented:

Since I joined the Company, I’ve been focused on opportunities in the retail market, where supply is more predictable, and margins are generally higher. Atlas is excited to work with Scotwood Industries, the largest packaged retail de-icing business in the United States, on a mutually beneficial strategic offtake and joint venture to provide tailored packaged salt solutions for the Canadian marketplace, by leveraging Atlas Salt’s high-quality, made-in-Canada salt and Scotwood’s brand strategy, industry expertise and reputation for superior customer service.

Introducing The Great Atlantic Salt Project

Atlas Salt’s flagship asset is its Great Atlantic Salt Project, which contains an estimated 860 million tonnes of high-purity Rock Salt2 and stands out for multiple reasons.

  • A product with stable prices and increasing market demand.

  • The first new underground salt mine in North America in over 20 years. 

  • A world-class resource set in a strategic location close to key markets. 

  • An innovative design that will use the latest, state-of-the-art mining technology. 

  • A focus on sustainability, with extremely low greenhouse gas emissions.

  • 50% of its production is already allocated to a strategic offtake agreement.

  • The potential to provide a $4.8 billion boost to regional GDP.

Notably, Great Atlantic is well positioned to become the new “Gold Standard” of salt mines in North America due to its shallowness, homogeneous nature and accessibility through inclined ramps vs. vertical shafts.

As the first new salt mine in eastern North America in more than 20 years, the Great Atlantic should benefit immensely from new technology and its close proximity to a deep-water port and high-voltage hydroelectric power. Situated in a mining-friendly jurisdiction, it is also close to the Trans Canada Highway, with existing roads connecting to the project, further facilitating convenient access.

Is Atlas Salt the Answer to Reducing Dependence on Imported Salt?

Eastern North America imports around 18 million tonnes of road salt annually3. With growing concerns over supply chain disruptions, fluctuating transportation costs, and geopolitical risks, Atlas Salt offers a cost-effective domestic alternative. Its Great Atlantic Project aims to reduce import dependence, ensure safer roads and support winter economic activity.

Envisioning the success of The Great Atlantic Salt Project is easy when considering its incredible combination of innovative mine design and compelling project economics. It’s also backed by a leadership team with proven success, presenting a very strong investment proposition.

Discover all you need to know about Atlas Salt's plans to secure North America’s domestic road salt supplies with our in-depth ONLINE REPORT.

How is Atlas Salt Paving the Way for a Greener Future in Mining?

Another reason Atlas Salt stands out is its determination to be transparent and green from the project’s outset to delivering salt around 20304. According to a feasibility study, The Great Atlantic Salt Project is projected to be one of the world’s lowest greenhouse gas (GHG) emission mining projects. Indeed, the operational GHG emissions of 79 tonnes annually is comparable to the emissions of the annual carbon footprint expected from just four Newfoundland families of four5.

Investors, stakeholders, and the public increasingly demand transparency in understanding the GHG emissions associated with products from their point of origin. This detailed tracing allows them to assess the environmental impact of their investments or purchases. 

Atlas has already selected Sandvik Mining and Rock Solutions as its preferred equipment supplier and integrated project delivery partner6. Their battery-electric fleet plans include continuous miners, haul trucks, scooptrams, and an AutoMine® system with tele-remote and autonomous operation6.

Sandvik will also provide battery management to minimize downtime, aligning with Atlas Salt's goal to reduce its environmental footprint. Furthermore, Sandvik has offered a non-binding $73 million financing arrangement for the equipment and services, pending final purchase documents and due diligence6.

Additionally, the mine’s adaptive infrastructure and modular expansion capability underscore its ability to grow, with minimal re-work required to achieve expansionary goals to 4.0 million metric tons per annum (Mtpa) of production2.

Can a Modern Approach Give This Mine an Edge Over Competitors?

Atlas’s planned use of ramps is not only a time and money saver but offers much greater flexibility in operation. Ramps are simple to construct and maintain, adaptable to varying geological conditions, safer, and ultimately scalable. Indeed, the use of inclined ramps, along with continuous miners and battery-electric truck haulage, provides Atlas Salt with a significant advantage over aging competitor mines.

Atlas Salt aims for long-term success in the mining sector. The project’s extensive inferred resources total 868 Mt2, and the leadership team realistically expects to extend the mine's life beyond 34 years2.

What Economic Impact Will This Salt Project Have?

Jupia Consultants Inc. recently conducted an economic impact assessment on behalf of Atlas Salt7. Their findings show that the Great Atlantic Salt Project will provide substantial economic advantages to Newfoundland and Labrador with a $4.8 billion boost to regional GDP and long-term job creation contributing $2.5 billion in employment income to the province. This project establishes Atlas Salt as a major private-sector investment in southwestern Newfoundland.

David Campbell, President, Jupia Consultants Inc., remarked:

The Great Atlantic Salt Project, represents a generational investment in southwestern Newfoundland, bringing substantial economic benefits and sustaining hundreds of high-paying jobs and associated economic benefits in the province on an annual basis over at least a three-decade period. The $4.8 billion boost to provincial GDP over the 34-year Project life will be felt by everyone in Newfoundland and Labrador.

Is a $1.1B Valuation Within Reach as the Project Progresses?

A Feasibility Study, carried out by SLR Consulting (Canada) Ltd8 valued the project at over $550 million (after-tax NPV at 8%) with an 18.5% after-tax Internal Rate of Return (IRR) over a 34-year mine life. Indeed, as the project progresses and is further derisked, using a 5% discount rate, the valuation jumps to $1.1 billion. 

Atlas Salt's prospects are strengthened by historical mining industry M&A activity and consolidation in the salt sector. De-risking strategies support an expansion case, offering the potential for increased production, project life and enhanced financial returns.

The feasibility study and a greenhouse gas (GHG) emissions survey confirm the Great Atlantic Salt Project's viability, and once operating, robust economics, strong free cash flow conversion and infrastructure support potential expansions. This Tier 1 asset focuses on sustainability with low GHG impact. It has passed its environmental assessment with conditions, lined up equipment financing, and started pre-construction.

Given salt's essential role and consistent demand, Atlas Salt’s domestic supply advantage and ability to displace foreign imports reinforce its potential as a defensive investment, offering stability alongside promising growth prospects.

DISCOVER MORE ABOUT ATLAS SALT

Sources:

  1. Atlas Salt. Atlas Salt and Scotwood Industries Sign MOU for Strategic Salt Production Offtake & Canadian Joint Venture for Packaged Salt and Related Products. August 20, 2024. https://atlassalt.com/atlas-salt-and-scotwood-industries-sign-mou-for-strategic-salt-production-offtake-canadian-joint-venture-for-packaged-salt-and-related-products/

  2. Atlas Salt. Corporate Presentation: A unique & differentiated story. September 2024. Retrieved from https://atlassalt.com/

  3. Atlas Salt. Market Opportunity. https://atlassalt.com/market/

  4. Atlas Salt. Atlas Salt Announces De-risked Development Schedule for the Great Atlantic Salt Project. August 12, 2024. https://atlassalt.com/atlas-salt-announces-de-risked-development-schedule-for-great-atlantic-salt-project/

  5. Statistics Canada. Map 1 Household greenhouse gas emissions per capita, by province and territory, 2021. December 20, 2023. https://www150.statcan.gc.ca/n1/daily-quotidien/231220/mc-c001-eng.htm

  6. Atlas Salt. Atlas Salt Enters Strategic MOU with Sandvik Mining and Rock Solutions for Underground Mobile Equipment Supply, Including $73 Million Financing. September 9, 2024. https://atlassalt.com/atlas-salt-enters-strategic-mou-with-sandvik-mining-and-rock-solutions-for-underground-mobile-equipment-supply-including-73-million-financing/

  7. Atlas Salt. Great Atlantic Salt Project to Provide Significant Economic Boost to Newfoundland and Labrador and Canada. July 23, 2024. https://atlassalt.com/great-atlantic-salt-project-to-provide-significant-economic-boost-to-newfoundland-labrador-and-canada/ 

  8. Atlas Salt. SLR Amended NI 43-101 Feasibility Study for the Great Atlantic Salt Project. May 1, 2024. https://atlassalt.com/wp-content/uploads/2024/05/SLR-20240501-Atlas-Salt-Great-Atlantic-NI-43-101-FS-AMENDED.pdf

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