naboo Posted May 8, 2014 Share Posted May 8, 2014 Hohi, Thanks for the great work! You are also correctly assuming that Altius large future DCF will be effected by an all in 35% tax rate....that is quite a chunk of change... Keep in mind that Leucadia paid very little tax in their existence because they deployed an incredibly successful tax strategy....Altius certainly easily could deploy this strategy with the amount tax losses in the mining industry finite...not unlike the telecom industry when Leucadia bought WilTel... Altius' team will likely follow this strategy and pick up gems in the rough along the way...as Leucadia did...if CDP was a corporation not a partnership they would have picked up $50m in operating losses. In an industry where 90% plus of the companies lose money those that make it (Royalty Companies) can pick through the ruble for tax loss carry forwards in companies that may provide some value. Another reason why management matters. Dazel, if I remember correctly, two taxes will be included, royalty tax and other tax(federal, provincial, local etc.). the difference is royalty tax is based on revenue, the other tax is on profit. So I really don't know how Alitus can work on the royalty tax (20%) ??? Link to comment Share on other sites More sharing options...
bizaro86 Posted May 8, 2014 Share Posted May 8, 2014 I'm pretty sure the royalty tax is levied by Newfoundland, the province where Voisey's bay is located. While that makes it material for the iron projects, it doesn't apply for the AB/SK assets, which will be the bulk of the revenue for at least awhile. I know Alberta has freehold mineral tax (at least for oil and gas, but probably for coal too). But it's immaterial. Link to comment Share on other sites More sharing options...
Liberty Posted May 8, 2014 Share Posted May 8, 2014 Hohi, Thanks for the great work! You are also correctly assuming that Altius large future DCF will be effected by an all in 35% tax rate....that is quite a chunk of change... Keep in mind that Leucadia paid very little tax in their existence because they deployed an incredibly successful tax strategy....Altius certainly easily could deploy this strategy with the amount tax losses in the mining industry finite...not unlike the telecom industry when Leucadia bought WilTel... Altius' team will likely follow this strategy and pick up gems in the rough along the way...as Leucadia did...if CDP was a corporation not a partnership they would have picked up $50m in operating losses. In an industry where 90% plus of the companies lose money those that make it (Royalty Companies) can pick through the ruble for tax loss carry forwards in companies that may provide some value. Another reason why management matters. Does anyone who has been in contact with management know if they are thinking like this and have that kind of tax expertise? It certainly would be nice if they went all Leucadia/Malone and picked up a bunch of NOLs. Maybe someone could suggest it to them -- nobody's an expert in everything and maybe they haven't looked too much yet at that angle to optimize CFs... Link to comment Share on other sites More sharing options...
BRK7 Posted May 8, 2014 Share Posted May 8, 2014 From Alderon’s March 31, 2014 MD&A, filed today: While the Company has sufficient funds to cover its estimated working capital requirements, as discussed in the “Outlook for 2014” section below, the Company intends to commence construction of the Kami Project early in the third quarter of 2014 which is later than previously expected. This change is primarily due to longer than expected time spent on permitting and completing the Senior Debt Facility. The Company does not currently have sufficient resources to fund the construction of the Kami Project. In order to obtain the necessary funds the Company plans to conclude the Senior Debt Facility and issue equity instruments as discussed further in the section below. The Company will not be able to commence the construction of the Kami Project until the funds are obtained. Outlook for 2014 During the second quarter of 2014, the Company will focus on completing the financing for the construction of the Kami Project, including concluding the Senior Debt Facility and issuing equity instruments. As discussed above, the overall project financing strategy likely will take the form of a combination of debt and equity instruments (including additional proceeds following the finalization of additional off-take arrangements, regarding which discussions are ongoing). Once financing is in place, Alderon intends to commence construction of the Kami Project. Construction is expected to commence in the third quarter of 2014, contingent on the successful completion of the Company’s financing plan, including the closing of the Senior Debt Facility. Following commencement of full-scale construction, it is currently estimated to take 26 months for completion, including pre-operational verifications, hot commissioning and handover to mine operations team. Link to comment Share on other sites More sharing options...
naboo Posted May 8, 2014 Share Posted May 8, 2014 From Alderon’s March 31, 2014 MD&A, filed today: While the Company has sufficient funds to cover its estimated working capital requirements, as discussed in the “Outlook for 2014” section below, the Company intends to commence construction of the Kami Project early in the third quarter of 2014 which is later than previously expected. This change is primarily due to longer than expected time spent on permitting and completing the Senior Debt Facility. The Company does not currently have sufficient resources to fund the construction of the Kami Project. In order to obtain the necessary funds the Company plans to conclude the Senior Debt Facility and issue equity instruments as discussed further in the section below. The Company will not be able to commence the construction of the Kami Project until the funds are obtained. Outlook for 2014 During the second quarter of 2014, the Company will focus on completing the financing for the construction of the Kami Project, including concluding the Senior Debt Facility and issuing equity instruments. As discussed above, the overall project financing strategy likely will take the form of a combination of debt and equity instruments (including additional proceeds following the finalization of additional off-take arrangements, regarding which discussions are ongoing). Once financing is in place, Alderon intends to commence construction of the Kami Project. Construction is expected to commence in the third quarter of 2014, contingent on the successful completion of the Company’s financing plan, including the closing of the Senior Debt Facility. Following commencement of full-scale construction, it is currently estimated to take 26 months for completion, including pre-operational verifications, hot commissioning and handover to mine operations team. 53 days left in 2014 Q2, hope Kami won't be another NLRC ??? Link to comment Share on other sites More sharing options...
wisdom Posted May 8, 2014 Share Posted May 8, 2014 http://www.bloomberg.com/news/2014-05-07/world-ore-glut-outweighs-slowest-china-growth-since-90.html iron ore glut in the world as new production is coming on line with China slowing. Prices expected to fall until 2017. Link to comment Share on other sites More sharing options...
SharperDingaan Posted May 8, 2014 Share Posted May 8, 2014 Couple of tid-bits from the ADV sedar filings ..... Notice the conversion price, re the convertible. Hebei is financing Kami, not ADV. We know who the partner is, & it looks like they have both signed on to off-take agreements equal to their total purchases. Hebei has also committed up to another 100M. Notice the ore will be now be concentrated, $42/t cost, & the payback is less than 4 yrs. Very big CF Interesting day SD 10 Convertible debt Commencing 12 months after the issuance of the Note, the principal amount of the Note and any accrued but unpaid interest, become convertible at Liberty’s option into the Company’s common shares at a conversion price equal to $2.376 per common share. The Company has the option to prepay the entire balance of the Note, at a premium of a 20% internal rate of return to Liberty. 12 Transaction with Hebei Hebei and Alderon also entered into an arrangement pursuant to which Hebei would invest an additional $119,926,293 (the “Initial Investment”) in exchange for a 25% interest in the Kami Project. Per the definitive agreements entered into between the Company and Hebei, the latter’s 25% interest would be made into The Kami LP. Hebei’s further contributions to The Kami LP will depend upon the amount of aggregate proceeds received as project debt financing and will not exceed $220,000,000. 17 Capital disclosures (continued) $65,985,610 million of cash is held by The Kami LP which is the remaining amount of the Initial Investment. Under the terms of the agreements with Hebei, Alderon has agreed that the proceeds from the Initial Investment would be used solely for Kami Project related expenditures. The Kami Project The Company’s goal is to become a producer of low-cost iron concentrate by taking advantage of the Kami Property’s strategic location and of the readily available regional infrastructure. Average estimated operating costs (loaded in ship Port of Sept-Îles) per tonne $42.17 Projected years to payback, at 8% discount rate 3.8 Alderon currently relies on one significant customer that represents 60% of the Alderon expected output of 8 Mt of iron ore concentrate annually once the commencement of commercial production occurs. Alderon has entered into the Off-Take Agreement with Hebei to purchase 60% of the actual annual production from the Kami Property, up to a maximum of 4.8 Mt of the first 8.0 Mt of iron ore concentrate produced annually at the Kami Property. Link to comment Share on other sites More sharing options...
Guest Dazel Posted May 9, 2014 Share Posted May 9, 2014 http://www.fool.com/investing/general/2014/03/31/china-has-an-iron-ore-problem-it-cant-solve-alone.aspx The key is not the supply of ore it's the quality.....All of China ore production will have stop if prices fall..... Link to comment Share on other sites More sharing options...
Blue Macaw Posted May 9, 2014 Share Posted May 9, 2014 Very interesting comaprison between Kami and Bloom lake. Taken from latest Alderon presentation http://www.alderonironore.com/_resources/presentations/ADV_PPT.pdf Could not say how accurate it is. Link to comment Share on other sites More sharing options...
Blue Macaw Posted May 9, 2014 Share Posted May 9, 2014 If they believe they can really achieve 43 in cash cost then there will be a project that is for sure. Carol lake which is very profitable has cash cost around 60 last time I checked. If it could be like Carol lake I would be happy, very happy. But I think it looks promising....and the key is infrastructure. Kami has better probability than other projects in the region. If iron ore prices go down then we see no projects what so ever. But if they stay high then Kami is number one. I might risk some and buy Alderon shares at these prices. Link to comment Share on other sites More sharing options...
Blue Macaw Posted May 9, 2014 Share Posted May 9, 2014 Freight cost about 10 % higher than C3 (Brazil-China) which currently means 22 dollars/ton. Link to comment Share on other sites More sharing options...
giofranchi Posted May 9, 2014 Share Posted May 9, 2014 As Gio says - it is just a great business with a long and prosperous future ahead of it if you can stay put for the long run. Yes! It seems too easy… except, of course, it is not! ;) And I would add this: if you keep some cash, volatility is your friend! Because it will enable you to take advantage of market’s short term view, while you instead stay put for the long run. Gio PS hohi, many thanks for the great work, as usual! :) Link to comment Share on other sites More sharing options...
giofranchi Posted May 9, 2014 Share Posted May 9, 2014 http://glennchan.wordpress.com/2014/05/08/altius-minerals-post-mortem-part-2/ Glenn, you know the importance I attach to ownership/management (rightly or otherwise…). Therefore, I would really like to understand your skepticism about ALS’s management right now. And my question is this one: By “for stock promotion purposes” do you mean ALS’s management has deceived investors? In other words, has management lied about the true state of ALS’s business situation today? Or by “for stock promotion purposes” you simply mean that management is putting too much attention on good developments in ALS’s business situation, overlooking existing risks and uncertainties? Thank you very much for your time! :) Gio Link to comment Share on other sites More sharing options...
SharperDingaan Posted May 9, 2014 Share Posted May 9, 2014 Interesting last page re the Kami-Bloom lake comparison. Looks like the ADV convertible is going to be converted, & the ALS stake will go to the new partner for cash (32.5M shares x 2.376 = 77M = what ALS agreed to pay down on its debt within the next 12 months). ALS will also book a similar sized gain on sale - along with the debt repayment. Nobody believes the $42/t cost - simply because it is so low; even if the initial cost comes in 15% higher it is still low ($49/t). Keep in mind that they are concentrating the ore & will double production over time, increasing throughput & lowering the FC/t by around 50%. $42/t is probably a very good long-term number. Nobody believes the financing - simply because it is Chinese, & the 1.3B/4yr payback means FCF of around 325M/yr; which will actually be a lot higher if the capital leases have lives longer than 4 yrs. Cdn/US banks would have been offered the opportunity & rejected it, so much of it is essentially just sour grapes. Interesting times ... SD Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted May 9, 2014 Share Posted May 9, 2014 By “for stock promotion purposes” do you mean ALS’s management has deceived investors? There are different kinds of stock promotion. Some types of stock promotion are slimy. Whether or not Altius' promotion is slimy or not is for you to decide. How does GMR make its money? HINT: Most newspapers make money from paid subscriptions or advertising. Because they want to attract advertisers, there will be contact information on the website for people who are interested in advertising. The journalists names will appear in the articles. The address listed on the website will point to the company's actual offices, not some law firm which handles their business registration. (EDIT: Ignore that last sentence. The website clearly states "registered in England".) Link to comment Share on other sites More sharing options...
giofranchi Posted May 9, 2014 Share Posted May 9, 2014 Whether or not Altius' promotion is slimy or not is for you to decide. Well, actually I was interested in knowing your opinion on this matter… I mean: have you ever find false or at least misleading information about ALS’s business situation… anywhere? Whether in presentations, or in newspaper articles, or in any other form of advertising? In other words, you simply don’t like promotional behavior, or have you caught ALS’s management, in an effort to promote the quality of their business, delivering false information? Hope my question is clear enough. :) Thank you, Gio Link to comment Share on other sites More sharing options...
gary17 Posted May 9, 2014 Share Posted May 9, 2014 Gio - there is one Article here http://altiusminerals.com/uploads/2013-Issue-44-Global-Mining-Observer.pdf a few more http://altiusminerals.com/uploads/Global-Mining-Observer-Issue-82(may14).pdf http://www.naturalresourcesmagazine.net/wp-content/uploads/2013/12/v15n3_briandalton.pdf Link to comment Share on other sites More sharing options...
giofranchi Posted May 9, 2014 Share Posted May 9, 2014 Gio - there is one Article here http://altiusminerals.com/uploads/2013-Issue-44-Global-Mining-Observer.pdf a few more http://altiusminerals.com/uploads/Global-Mining-Observer-Issue-82(may14).pdf http://www.naturalresourcesmagazine.net/wp-content/uploads/2013/12/v15n3_briandalton.pdf Thank you, Gary! I have read those articles… And didn’t find anything I would label as “false” or “misleading”… But, who knows? I might be missing something here: that’s why I asked Glenn, who seems to have sold his ALS shares because very concerned about the integrity of management. Gio Link to comment Share on other sites More sharing options...
Liberty Posted May 9, 2014 Share Posted May 9, 2014 Gio - there is one Article here http://altiusminerals.com/uploads/2013-Issue-44-Global-Mining-Observer.pdf a few more http://altiusminerals.com/uploads/Global-Mining-Observer-Issue-82(may14).pdf http://www.naturalresourcesmagazine.net/wp-content/uploads/2013/12/v15n3_briandalton.pdf One more: http://www.globalminingobserver.com/altius-flies-higher Link to comment Share on other sites More sharing options...
naboo Posted May 9, 2014 Share Posted May 9, 2014 Nickel price has gone up 40+% since Jan 2014, now it's $9/lb. If the price stays, it will add $1M+ royalty revenue. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted May 9, 2014 Share Posted May 9, 2014 who seems to have sold his ALS shares because very concerned about the integrity of management. I sold my shares because I didn't think that the Kami/Alderon assets were worth much. I estimated Kami's all-in costs at $120/t. (I have a feeling that my estimate may be low.) At current iron ore spot prices... this mine should not be built. In the past, a lot of uneconomic mines did get built because people are crazy. The crazy factor increases the value of Altius' Kami/Alderon assets. But it doesn't look like the crazy factor will kick in, or otherwise Alderon would've been financed by now. It's only now that I have concerns about management. I didn't understand the lengths that management was willing to go to in efforts to promote the stock. I always thought that their presentations were promotional and maybe that should have been a warning sign. (*EDIT: There are differences between cash costs, operating costs, and all-in costs. My $120/t guestimate includes D&A.) Link to comment Share on other sites More sharing options...
giofranchi Posted May 9, 2014 Share Posted May 9, 2014 I always thought that their presentations were promotional and maybe that should have been a warning sign. Well, imo what’s promotional and what’s not, in a presentation about a business that’s radically transforming itself, is… at least very subjective. False information, on the other hand, is not subjective at all. Therefore, I want to know: are we talking about something subjective, or about something that can be objectively proven false? Gio Link to comment Share on other sites More sharing options...
Guest Dazel Posted May 9, 2014 Share Posted May 9, 2014 Trap, You make 40% on the back of a hard working bunch working 80 hour weeks and traveling the globe for you the shareholder. While struggling to finance a transformational acquisition through the worst bear market any have seen in commodities so that you could get the return you did.... and then you come back and shit on them because of 7 year old article on their website! Shame on you...really shame in you as human....very sad. Show some respect. Dazel Link to comment Share on other sites More sharing options...
Ross812 Posted May 9, 2014 Share Posted May 9, 2014 I estimated Kami's all-in costs at $120/t. (I have a feeling that my estimate may be low.) How did you come up with your estimate? I agree that the current estimate is low, but I don't see it being off by a factor of 2-3x. Have you looked into other investments Hebei has made? Hebei is the largest state owned steel producer in China and has purchased iron assets all over the globe. I doubt their engineers would make an error of that magnitude when performing their due diligence. I would have to take a look at the feasibility study, but I believe LT ore prices were assumed in the $90s so it is doubtful their engineers projected LT ore prices grossly above that mark as well. Link to comment Share on other sites More sharing options...
doc75 Posted May 9, 2014 Share Posted May 9, 2014 Trap, You make 40% on the back of a hard working bunch working 80 hour weeks and traveling the globe for you the shareholder. While struggling to finance a transformational acquisition through the worst bear market any have seen in commodities so that you could get the return you did.... and then you come back and shit on them because of 7 year old article on their website! Shame on you...really shame in you as human....very sad. Show some respect. Dazel Dazel, I'm curious about your claim that this is the worst bear market in commodities that anybody has ever seen. I know nothing about this, so please be patient with me. What makes it the worst bear market? What are the metrics? With the very little I know, I have viewed the declines over the past few years mostly to be a result of bubble-ish prices before the big bust. Commodity pricing still seems quite robust, just less crazy than before. So when you talk about the "worst bear market", do you mean purely in terms of price declines of the commodities themselves? Or in terms of price declines in the common stock of commodities producers? Or something more fundamental? Thanks Link to comment Share on other sites More sharing options...
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