doc75 Posted June 30, 2014 Share Posted June 30, 2014 The Company continues to advance all of the elements of its financing plan, including debt, equity and additional off-take arrangements .... Omitting what is not convenient ? Most folks would surmise that Kami LP has been green lighted, & that financing announcements are now near at hand. SD I don't think most folks would come to this conclusion. Sure doesn't look that way from the price of the shares, anyway. The phrase "...continuing to advance..." is completely meaningless. I think Itsavaluetrap has good cause to ignore such PR boilerplate. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted June 30, 2014 Share Posted June 30, 2014 Aren't they sandwiching bad news between two slices of fluff and spin? If you have to report bad news, what you do is you put the bad news in the middle of the press release. The title of the press release should be uneventful and boring, as opposed to "Alderon suspends work on its mine because there are doubts as to whether it will EVER get financing". It seems to me that the company is trying to disseminate bad news but in a promotional manner. ... WPCS has done what they were hired to do. I thought they were hired to do the whole thing. Perhaps I am mistaken. However, the press release does quote the CEO: "but expect WorleyParsons (WPCS) to resume its role as the EPCM contractor for the Kami Project once a decision to commence construction is reached" Link to comment Share on other sites More sharing options...
nostradamus Posted June 30, 2014 Share Posted June 30, 2014 I would also agree that this is bad news. Why would Alderon need to announce the suspension of WPCS if they had just completed what they were contracted to do? If someone can confirm that there are no penalty payments due that would be nice. If there are penalty payments due and they chose not to mention it in the press release it would say a lot about the trustworthiness of the management. I still think the financing will get done eventually, but now I think the odds are in favour of delay to Kami. One of the flip sides to all this is that it should put ALS and partners in a good negotiating position for the JL project... N. Link to comment Share on other sites More sharing options...
jose Posted June 30, 2014 Share Posted June 30, 2014 Dumb question - assuming this is the ol' sh*t-sandwich move, why would they be compelled to release this particular bit of "bad" news. Just wondering if law requires Alderon to release news that they put a contractor on pause. If indeed Kami financing has been indefinitely postponed, wouldn't they be compelled to release that project postponement information directly instead of the somewhat peripheral info that a contractor has been suspended? If they aren't required by law to release this contractor pause info, then this just seems like a milestone news release. Like I said, I'm probably just being thick. Aren't they sandwiching bad news between two slices of fluff and spin? If you have to report bad news, what you do is you put the bad news in the middle of the press release. The title of the press release should be uneventful and boring, as opposed to "Alderon suspends work on its mine because there are doubts as to whether it will EVER get financing". It seems to me that the company is trying to disseminate bad news but in a promotional manner. ... WPCS has done what they were hired to do. I thought they were hired to do the whole thing. Perhaps I am mistaken. However, the press release does quote the CEO: "but expect WorleyParsons (WPCS) to resume its role as the EPCM contractor for the Kami Project once a decision to commence construction is reached" Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted June 30, 2014 Share Posted June 30, 2014 1- I'm not sure if companies need to break out the cost of everything. The reporting burden would be a little onerous if they did. I'm not sure if they need to say how much money it costs for Alderon to suspend work?? 2- If indeed Kami financing has been indefinitely postponed I didn't say that. I think Alderon will still try to get the project fully financed. So if they are still trying, there is a chance that they will succeed. They did not put the project on hold "indefinitely" like what Cliffs did to the Bloom Lake expansion and chromite mine (Cliffs' press release uses the word indefinitely). 3- They should announce the news because it's material. If they're suspending the engineering on the Kami project so that they won't throw good money after bad... that's material. Without the engineering work completed, they can't built a mine. If the mine isn't built, there will be no cash flow and Alderon's flagship asset will be "worthless". (The property will have some residual value because it may become economic if iron ore prices were to skyrocket.) Link to comment Share on other sites More sharing options...
alertmeipp Posted July 1, 2014 Share Posted July 1, 2014 I don't disagree this is bad news, but 1. This is kind of expected. 2. This share price is like fifty percent off while the mine has derisked substantially. The mine will likely get further delayed but i think the option value still remain. Link to comment Share on other sites More sharing options...
giofranchi Posted July 1, 2014 Share Posted July 1, 2014 Without the engineering work completed, they can't built a mine. If the mine isn't built, there will be no cash flow and Alderon's flagship asset will be "worthless". I think ALS is cheap right now even if Kami were truly worthless! Therefore, I don’t pay much attention to ADV. Anyway, I still think you are confusing bad news with its direct consequences… The only bad news for Kami was the recent drop in iron-ore prices. Period. Could it be foreseen? Maybe… But who cares?! ADV’s management didn’t see it coming and that’s history! Kami will probably be delayed for many more months… That’s not to say it won’t be built, eventually! Now what? Cut costs, starting from consultants, as much as possible, and try all you can to secure some sort of financing! Then… hire back your consultants, if you still need them!! That’s just a consequence… and imo the right one! Would you do something different instead?! Gio Link to comment Share on other sites More sharing options...
SharperDingaan Posted July 2, 2014 Share Posted July 2, 2014 http://www.alderonironore.com/_resources/presentations/presentation_tn.jpg p1. Updated. Additional partner p24. Financing. Implementation commenced p25. Cap-ex financing p25.2 Hebei responsible for up to 25% (220M) of the 880M not covered by project financing p25.3 Offtake partner for up to all the remaining 40% of production AND an equity investment http://www.bloomberg.com/news/2014-06-19/alderon-may-miss-financing-deadline-as-iron-price-slumps.html “That’s possible, though it won’t be much longer before we have it,” Morabito said by telephone from Beijing. “The project itself is shovel ready -- we are fully permitted. All we have to do is bring in the money.” Quite a bit different from the wash-out that Kami apparently is. SD Link to comment Share on other sites More sharing options...
nostradamus Posted July 2, 2014 Share Posted July 2, 2014 "All we have to do is bring in the money" - Ha! Is that all? No problem then. As the bloomberg article correctly points out: "Last August, he said Alderon was within weeks of signing on a new Asian partner for Kami and that a financing package would be completed near the end of 2013." I think we need to ignore any forward looking statements from Morabito... N. Link to comment Share on other sites More sharing options...
Blue Macaw Posted July 2, 2014 Share Posted July 2, 2014 Kami will never be completely worthless. A lot of money has been put into this project and it has passed ALL the milestones for it to become a project. Lets say the current circumstances makes it a no go but I would say it is still number 1 in line in Canada. The Chinese are long term in their thinking, a lot more than the western economies. It would not surprise me if the Chinese get it for a lot lower than what Alderon wants. But for Altius it will be beneficial. Link to comment Share on other sites More sharing options...
nostradamus Posted July 2, 2014 Share Posted July 2, 2014 I also think it is highly likely that it gets built eventually. The basic problem for Alderon shareholders, as I see it, is that Hebei is being relied on to provide the financing via the Chinese banks. And although good financing terms will benefit Hebei's investment in Alderon, they will also benefit all of the other Alderon shareholders. Hebei, I assume, is taking the view that if they provide the financing, they should get a much bigger share of the benefits. Just as Hebei renegotiated their original investment in Alderon after it was first announced, I am sure they are attempting to grab as much benefit for themselves out of the financing. The only way for Alderon to counteract this is to find an alternative/competing form of financing. Not an easy task in the current environment. N. Link to comment Share on other sites More sharing options...
doc75 Posted July 2, 2014 Share Posted July 2, 2014 http://www.alderonironore.com/_resources/presentations/presentation_tn.jpg p1. Updated. Additional partner p24. Financing. Implementation commenced p25. Cap-ex financing p25.2 Hebei responsible for up to 25% (220M) of the 880M not covered by project financing p25.3 Offtake partner for up to all the remaining 40% of production AND an equity investment http://www.bloomberg.com/news/2014-06-19/alderon-may-miss-financing-deadline-as-iron-price-slumps.html “That’s possible, though it won’t be much longer before we have it,” Morabito said by telephone from Beijing. “The project itself is shovel ready -- we are fully permitted. All we have to do is bring in the money.” Quite a bit different from the wash-out that Kami apparently is. SD You are choosing the most optimistic interpretation of entirely vague statements. How can you take the fact that they claim the additional offtake and financing is "commenced" to be a positive sign? I'm sure it's true... but it's vacuous! I think nostradamus makes a good point. With iron prices where they are, ADV is not in a strong negotiating position. Link to comment Share on other sites More sharing options...
investor-man Posted July 2, 2014 Share Posted July 2, 2014 http://altiusminerals.com/uploads/PR1409-Q4-V2-June-27-2014-cw-jb.pdf and same stuff here: http://online.wsj.com/article/PR-CO-20140702-905401.html Nothing new, but nice to see Altius news on WSJ Link to comment Share on other sites More sharing options...
Blue Macaw Posted July 2, 2014 Share Posted July 2, 2014 Impairment of Alderon of 13 Million to valuation of market value. They don´t see it paying more then. Sad but true Link to comment Share on other sites More sharing options...
craigatk Posted July 2, 2014 Share Posted July 2, 2014 Impairment of Alderon of 13 Million to valuation of market value. They don´t see it paying more then. Sad but true It's just mark to market, nothing implied from mgmt about the potential... Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted July 2, 2014 Share Posted July 2, 2014 Impairment of Alderon of 13 Million to valuation of market value. They don´t see it paying more then. Sad but true It's just mark to market, nothing implied from mgmt about the potential... It's been on the books above market price for the last two years. The fact they're marking it down to current market price suggests they can no longer reasonably defend having it booked at that price. It doesnt guarantee anything but it does speak volumes of Altius' current assessment of the value of the stake. Link to comment Share on other sites More sharing options...
SharperDingaan Posted July 2, 2014 Share Posted July 2, 2014 Impairment of Alderon of 13 Million to valuation of market value. They don´t see it paying more then. Sad but true It's just mark to market, nothing implied from mgmt about the potential... http://en.wikipedia.org/wiki/Mark-to-market_accounting FAS 157 defines "fair value" as: "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date". All trading assets are recorded at fair value, if they are available for sale or held for sale, they are required to be recorded at fair value or the lower of cost or fair value, respectively. (FAS 115 covers the accounting for securities.) FAS 115 … Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as "trading" securities and reported at fair value, with unrealized gains and losses included in earnings. The AR named investments were written down to current values to reflect re-designation as "trading" securities for purposes of selling in the near term. It does not reflect any permanent impairment, & will result in realized gains if the securities sell for more than they are currently valued at. SD Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted July 2, 2014 Share Posted July 2, 2014 I think you guys are reading too much into the accounting?? Here's what the latest financial statements say: The most significant accounting estimate of the Corporation during the current fiscal period was the assessment of the Corporation’s investment in Alderon. Prior to management’s analysis at the reporting date, the market value of the Alderon shares held by the Corporation was $52,590,000 versus the carrying value of $66,525,000 (Note 10). Management reviewed the investment in Alderon for impairment indicators, using the same criteria as applied to available-for-sale investments. The evaluation of whether there were impairment indicators present included consideration of a number of factors including an evaluation of the market, economic and legal environment in which Alderon operates; consideration of whether Alderon was in significant financial difficulty, and considerations relating to the existence of any contractual breaches of Alderon. Management also considered facts specific to Alderon in determining whether or not an impairment adjustment was warranted. Factors considered included the duration and amount of the decline in the share price of Alderon relative to the carrying value; the implied valuation of the investment based on recent financings. The Corporation also assessed the current financial position, expected financing requirements to commence mine development, and evaluated the expected long-term cash flows of Alderon based on the January 2013 Feasibility Study on the Kami project after consideration of consensus iron ore prices. Based on the evaluation of the above-noted factors, and in particular the duration and amount of the decline in the share price of Alderon relative to the carrying value and combined with reduced iron ore prices, management has concluded that a reduction in the carrying value of Alderon to market value is appropriate at this time. This resulted in an impairment adjustment of $13,935,000 before taxes. Here are snippets from the MD&A: Alderon continued to meet significant development milestones during the year, and is in the process of evaluating financing alternatives for the Kami project. Pending finalization of financing, Alderon expects to commence mine construction in late 2014, with a goal of initial commercial production at 8 million tonnes of iron ore concentrate per annum in late 2015. As noted above, the Corporation holds a 3% GSR on the Kami project, which at the proposed 8 million tonne per annum production level could provide the Corporation with additional gross royalty revenue of approximately $25,000,000 per annum as per BBA’s 2013 Feasibility Study assumptions for the Kami Iron Ore project. Feasibility Study released January 2013 - $3.2B net present value and 29.3% IRR discounted at 8%. Hebei has completed its initial strategic investment in the Kami iron ore project for an aggregate amount of C$182.2 million. Financing plan, detailed engineering, procurement of long-lead items and infrastructure agreements for rail and power are underway. Release from provincial EA granted on January 10, 2014 and a positive decision regarding federal EA was granted on February 18, 2014. A third transmission line was also recently announced by the Province which ensures power supply and on February 25, 2014, a Power Purchase Agreement was concluded with Nalcor. On March 27, Alderon signed an agreement with the Town of Wabush and received permission for mineral extraction. On April 2, 2014 Alderon commenced work at its proposed Terminal Site near the Port of Sept-Iles. The MD&A strikes me as rather optimistic and upbeat. It does not contain the word "WorleyParsons" at all. (*The MD&A may have been written before the recent news about WorleyParsons.) Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted July 2, 2014 Share Posted July 2, 2014 WorleyParsons is publicly traded on the ASX under the symbol WOR. Here is their press release: http://www.asx.com.au/asxpdf/20140701/pdf/42qk6145h1nywj.pdf "EPCM Contract for Kami Iron Ore Project temporarily suspended" "The EPCM contract [...] has been temporarily suspended pending completion of the financing plan for the project." Link to comment Share on other sites More sharing options...
SharperDingaan Posted July 2, 2014 Share Posted July 2, 2014 The ADV stake was revalued at $1.599; closing market price of ADV on Apr-30, the date of the financial statements. D&T signed off June-25. External Audit is required to confirm the factual accuracy of MD&A disclosure before sign-off, & that would include the outlook section, forecast 2.5M FCF for VB, forecast 30M FCF for PRL, Kami LP mine construction in late 2014, forecast 25M FCF for Kami LP @ 8MT, and Worley Parsons. D&T had to confirm that a prudent person would find the forecasts reasonable, & that their basis tied to market fact. The Alderon, Virginia, & Callinan stakes have been marked at 91M. The AR implies that proceeds will be used to retire the 119M long term debt. The omission of a dividend initiation, implies there are more announcements to come; in-line with the Morabito statement from Bejing. SD Link to comment Share on other sites More sharing options...
Blue Macaw Posted July 3, 2014 Share Posted July 3, 2014 From what I can see long term debt is 109 which means they are only paying 7,35 % instead of 8,85 % on loans. That would make it 8 M instead of 12,4 M a year. I see them stacking up extra cash instead of paying dividend the first two years. They need to pay back the 27 and 49 M 2015 and 2016. If Alderon turns out to give something then maybe you could justify a dividend. Link to comment Share on other sites More sharing options...
wachtwoord Posted July 3, 2014 Share Posted July 3, 2014 From what I can see long term debt is 109 which means they are only paying 7,35 % instead of 8,85 % on loans. That would make it 8 M instead of 12,4 M a year. I see them stacking up extra cash instead of paying dividend the first two years. They need to pay back the 27 and 49 M 2015 and 2016. If Alderon turns out to give something then maybe you could justify a dividend. Yeah, dividend in the short term only seems to make sense if Kami delivers. Link to comment Share on other sites More sharing options...
wachtwoord Posted July 3, 2014 Share Posted July 3, 2014 BTW: Quick question I am holding ATUSF (OTC) instead of ALS.TO avoid currency exchange fees when buying the stock (and frankly, I believe having a USD and EUR balance in my portfolio is sufficient). couldn't find any problems with doing this because the shares are equally valuable (they represent the same equity) and the OTC volume on average is 1/3rd of the Toronto one. Lately I've been seeing quite a spread develop between the two, usually int he advantage of Toronto (yes I account for the USD:CAD exchange rate): 1) Am I missing anything (especially when it comes to risks) 2) The Altius website is a bit limited when it comes to investor relations and the OTC shares aren't even mentioned. Am I right the rights they represent are equal to the Toronto ones? Is there a method of converting the 2 stock types to each other like there is for my China Mobile ADRs? (not that I want to because of the fees, but if there is a method this should force the two to trade on par more due to the arbitrage opportunities). Thanks! Link to comment Share on other sites More sharing options...
Blue Macaw Posted July 3, 2014 Share Posted July 3, 2014 So I see Altius paying off debt year 1 and 2 from profit. Should have amort. of 15 M a year. Revenue 32 Cost -5 Finance -8 Amort -15 Profit 4 Tax 1 Net profit 3 per share 0,1 Link to comment Share on other sites More sharing options...
nostradamus Posted July 3, 2014 Share Posted July 3, 2014 I think they will pay off debt from cash flow, which should significantly exceed profit. Link to comment Share on other sites More sharing options...
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