ALS.TO - Altius Minerals

[giofranchi]

I agree that once ALS has a stable royalty dividend it will trade on yield, and probably around a 2-2.5% yield.

 

It'll be interesting to me to see how much of the newly acquired cash flow they're willing to dividend out. If they go with a high payout ratio the stock may pop right away, but that hurts their flexibility to spend money on project generation going forward. If they keep more of the cash internally, there is less immediate upside, but their record is good so I'm comfortable with that as well.

 

bizaro,

as I have always said, with ALS you might get the best of both worlds: because their PG side of the business, where growth lies, needs very small capital! Therefore, from their portfolio of royalties side of the business, where stable and safe free cash flow lies, they can decide to initiate a dividend, without compromising future growth!

 

I am not saying they should do it, or that I expect a dividend in the near term. In fact, if they could use the free cash flow from their portfolio of royalties to buy more royalties at advantageous prices, I would be very glad to go on without a dividend!

 

Instead, what I am saying is this: ALS imo is very unique… at least, I have still to find a business structured the way ALS is: a machine that generates stable and safe free cash flow, which can be entirely paid out to shareholders, leaving growth prospects utterly intact, almost perfectly undamaged… It is a very rare animal, don’t you agree?!

 

Well, surely Mr. Market doesn’t agree right now… We will see! ;)

 

Cheers,

 

Gio

 

[giofranchi]

 

Bizzaro,

 

They do not spend much money at all on project generation...it would not figure into the new cashflow because it has always been more than covered off by the Voisey Bay royalty.

At $20 share price a 2% yield is .40 or about $12.5 million. When Kami  comes on stream the dividend will increase and the share price with it.

 

Dazel

 

Ah! Ok! I hadn’t read Dazel’s last post yet… He is always one step (two or three steps would be closer to the truth! ;)) ahead of me!!

 

Gio

 

[EliG]

Instead, what I am saying is this: ALS imo is very unique… at least, I have still to find a business structured the way ALS is: a machine that generates stable and safe free cash flow, which can be entirely paid out to shareholders, leaving growth prospects utterly intact, almost perfectly undamaged… It is a very rare animal, don’t you agree?!

 

Is it really that unique?

 

Take a look at Anglo Pacific.

 

The strategy of the Group is to expand its mineral royalty interests in long-life mining assets. The Group achieves this through both direct acquisition and investment in projects at the development and production stage. It is a continuing policy of the Group to pay a substantial proportion of these royalties to shareholders as dividends.

 

Asset Portfolio

http://www.anglopacificgroup.com/asset-portfolio.html

 

5 producing royalties - £15M royalty revenue in 2013

10 development royalties

6 pre-development royalties

 

I haven't done a deep dive on how Anglo Pacific compares to ALS. Superficially, they look quite similar.

 

[gary17]

Angelo looks quite attractive, probably more than altius

- same multiple to revenue

- no debt

- trading at book

- appears to be more diversified

- pays 5% dividend!

 

[SharperDingaan]

"hmm...you think the stock will jump if they just give out 1-2% dividend (similar level to FNV)? 

and Isn't the fact that they will do a dividend already well-telegraphed?"

 

Cant trade on a dividend yield basis - until there actually is a dividend.

Cant justify 2% when competitor (FNV & most others) yields are lower, & there is a guaranteed material increase in FCF 2 yrs out (Kami go ahead).

Cant justify a yield much higher than FNV - as the FNV would simply temporarily use their UW proceeds to arbitrage the delta (ie: buy ALS, capture the yield spread).

 

So ....  an FNV UW to break the ground, & take yields lower;

followed by an ALS dividend declaration soon after the Kami announcements in 2-4 weeks;

or a take-out if there is any kind of significant delay in declaring an appropriate dividend.

 

...... basically the job that Larry, Curly, & Moe failed to do.

 

SD

 

 

 

 

[Blue Macaw]

Angelo looks quite attractive, probably more than altius

- same multiple to revenue

- no debt

- trading at book

- appears to be more diversified

- pays 5% dividend!

 

I wouldn´t say that. The royalty comes generally from 1 source which is the Kestrel mine (coking coal). I think it is in the range of 70 % of total revenue. The second biggest comes from gold royalty (20 %) and the rest is from iron ore. Royalty has steadily gone down from Kestrel as (from what I have understood) Rio Tinto have moved away from royalty land + additional shut downs. The southern part of Kestrel has started but full benefit will be reach in 2016 the earliest. Rio T will however invest 2 Billion in Kestrel so I think it could be worth a shot to get into AngloPacic for 2016. Dividend is ok.

 

Growth wise I think Altius has far better chances with both Kami and Julienne lake together with CDP. The potash expansion will be in the range of 30-50 % increase on 5,5 million (current royalty income) which will mean between 1,5-3 million more in royalty income. CDP also has some royalty that has yet to be included in the revenue column. (i don´t know why to be honest. On web page the state as much as 3 M can come from CDP). The we have the 777 mine which will generate 0,2 M and Elenore mine which will start produce this fall. Another 0,2 is expected from dividend there.

 

So looking at near term possibilities I think Altius outlasts all other competion by far. Anglo P is not a bad company and might well be interesting after Altius has reached its potential and it is time to move on. Who knows?

[giofranchi]

I haven't done a deep dive on how Anglo Pacific compares to ALS. Superficially, they look quite similar.

 

EliG,

Obviously, I was talking about ALS’s business model… Anglo Pacific might certainly be another good example of such a “unique” business model!

My meaning is that it is extremely difficult to find another business model that can afford to paying out almost all the free cash it generates, and still being able to grow… If you know another such business model, please let me know! ;)

 

Gio

 

[giofranchi]

Anglo P is not a bad company and might well be interesting after Altius has reached its potential and it is time to move on. Who knows?

 

What do you exactly mean by “after Altius has reached its potential”?! ???

Mr. Dalton is very young and my hope is he will never sell nor leave the company, instead that he will go on piling new projects over old ones and new royalties over old ones for many many years into the future…

So, how many decades and $billions away is ALS’s full potential? ;D ;D

 

Gio

 

[Blue Macaw]

Anglo P is not a bad company and might well be interesting after Altius has reached its potential and it is time to move on. Who knows?

 

What do you exactly mean by “after Altius has reached its potential”?! ???

Mr. Dalton is very young and my hope is he will never sell nor leave the company, instead that he will go on piling new projects over old ones and new royalties over old ones for many many years into the future…

So, how many decades and $billions away is ALS’s full potential? ;D ;D

 

Gio

 

Hopefully there are more smart people on the team than just Dalton. What if he dies in a car crash tomorrow? Will the company survive or perish? I know it is all about the people on the team. It is just that. The company can create a culture that is beneficial and risk averse and that kind of put the stupid people in line. But for a company to do great you need a very good team. That is why Alderon should be ok.

 

The potential might never be reached. But you could reach a point where you can get better return on other things and then it might be time to move on. That is life. I believe that point is not now for sure. Things are actually looking just fine and we will very likely see 20 CAd by the end of the year. Will I sell then? Don´t know. I evaluate things on a 6 months basis. If things have advanced and share price is low then great. I'll buy more. If the opposite maybe I sell. It will be very interesting to see the numbers when they come out in the next report.

[giofranchi]

Hopefully there are more smart people on the team than just Dalton. What if he dies in a car crash tomorrow? Will the company survive or perish? I know it is all about the people on the team. It is just that. The company can create a culture that is beneficial and risk averse and that kind of put the stupid people in line. But for a company to do great you need a very good team. That is why Alderon should be ok.

 

The potential might never be reached. But you could reach a point where you can get better return on other things and then it might be time to move on. That is life. I believe that point is not now for sure. Things are actually looking just fine and we will very likely see 20 CAd by the end of the year. Will I sell then? Don´t know. I evaluate things on a 6 months basis. If things have advanced and share price is low then great. I'll buy more. If the opposite maybe I sell. It will be very interesting to see the numbers when they come out in the next report.

 

Well, just two observations:

 

1) I never think in terms of “months” while investing: I like years… but I much prefer decades! ;D When I find myself in a “licking boat”, I feel the urge to change business… but I experience the exact opposite feeling, when I own instead a wonderful company!

 

2) While a good team is a desirable thing to have, I need to see what I call an “entrepreneurial force”, just one man or one woman that I admire a lot… usually a great team develops around such an outstanding entrepreneur. ;)

 

Gio

 

[EliG]

Kami Announcement Coming Tomorrow

http://www.vocm.com/newsarticle.asp?mn=2&ID=46457

[alertmeipp]

If we get any good news tomorrow, this got to be one of the better shake the tree before good news example.

[investor-man]

Looks like good news to me -- bad news would probably have been a press release over this past Memorial Day weekend not the Tuesday after. But what do i know

[Liberty]

If we get any good news tomorrow, this got to be one of the better shake the tree before good news example.

 

"Premier Tom Marshall Natural Resources Minister Derrick Dally, area MHA Nick McGrath and Alderon President Tayfun Eldem have called a news conference for tomorrow morning at 11 at Confederation Building. VOCM News will be there to bring you the news first."

 

Do you bring all that brass in front of cameras to say that it's not going to happen, "sorry guys"?

 

I think it'll be positive. Wonder why they don't do it before market opens or after rather than at 11 am. I think some people will read into the pre-announcement the same thing I do and it'll run up tomorrow morning. This was my short-term prediction of the year. Let's see how it turns out..

[Blue Macaw]

This was a tough one to call...good or bad news.

 

From a federal point of news it would be a good one since they have approved everything now after the environmental announcement the other week. Why would they stop the project?

 

So that leaves us to Alderon who by now must have the second off take agreement ready or not. The approval the other week must have been the last thing they waited for which then seems likely that this would be some good news. Everything ready- deal is on kind of thing.

 

Iron ore price is around 98 so we are lower than the 107 stated in the Feasibility study. If they are long term (like the chinese are) this should not affect the project. I would say the opposite, because now they know that new iron ore mines are coming on stream and most are non chinese mines leaving them with less control over the ore since they will need to shut down chinese mines because of cash costs.

 

Look for WISCO to step in...

[alertmeipp]

This may turn out to be a non-significant event.... expect more media coverage if so.

[Blue Macaw]

This may turn out to be a non-significant event.... expect more media coverage if so.

 

So you mean it will just be a kind of news conference where they state that it is all on going still? I agree it is a bit weird the whole thing. They should have posted on their web page if it was something significant I assume

[tengen]

This may turn out to be a non-significant event.... expect more media coverage if so.

 

If the premier is attending, I'm sure it's a politically significant event. We'll see if it's significant for the market.

[Blue Macaw]

So next report revenue and cost should look something like this (without Amortization and tax)

 

1 may - end of june = 2months of revenue from royalties

 

Coal 3,3 M

Potash 0,9 M

Voisey bay 0,75 M

777 mine 0,05

 

Total 5 M

 

Cost finance 1,72 M

Cost G and A + exploration (full quarter) 1,25

 

Total cost approx. 3M

[Guest Dazel]

11 am in Newfoudland is 930 a.m in New York.

 

If it is significant you will see a trading halt to both Alderon and Altius....It is possible that this has been in the market for sometime and was likely expected to be done in connection with Altius equity offering. There was a rumour that an off-take agreement was done around the time of the Altius offering. The quietness and lack of support for Altius from the investment banks after the offering may have coincided with insider information....meaning they knew it was coming.

 

The iron ore price today is almost dead on with the feasibility study even though the media has told us iron ore is worth nothing! $98.80 62FE is around $107 for the 65FE Kami will produce.

 

conference is likely:

 

1.construction update on the power line which is probable and will be used for political uses to justify the expenditure.

 

2.an off take agreement

 

3. first tranche of debt financing

 

If I were in Vegas I would take number 2.

 

Dazel

[SharperDingaan]

4. provincial involvement, possibly as a co-partner.

 

Bodes very well for us, but lets let them speak & hear what they have to say.

 

SD

[alertmeipp]

You would expect the company to issue a PR for the conference call if it's significant?! Now, our only source is a local newspaper.

[gary17]

It is interesting alderon did not post

but the news is also found from the governments twitter

 

[alertmeipp]

We will know soon enough. Hope for good news!

[Guest ajc]

It is interesting alderon did not post

but the news is also found from the governments twitter

 

 

 

A cynic might say that's because the government is doing Alderon a favor and so they've demanded to own the story in exchange. So, what asset does the government have to sign off on as things stand?

 

I mean, it's just speculation but if Alderon are quiet and the government are talking then it's possible that the local politicians have opted for the publicity while Alderon get to have whatever the government is prepared to deal them.

That way, both parties end up happy and with something.

 

Alternatively, there's nothing to it at all and it's just an oversight. Clearly, you'd also hope it's nothing worse.