ALS.TO - Altius Minerals

[linealdin]

... $1 growing at 20% a year is what ungodly number in 100 years?

 

$82,817,975.

 

[i'm so bored waiting for BRK 2018Q3!]

 

While we're doing the math:

 

"From the C$240.9 million + C$65 million combined purchase I expect Altius to receive about C$2.5 billion in this century. And more in the next."

 

$2.5bn from $305.9m over 82 years ("this century") is 2.6%/year CAGR.

 

Also the coal/potash royalties as they are received are continuously reinvested in additional accretive royalty deals. That reinvestment has to be considered if you’re calculating the CAGR of a pot of money. Back to the drawing board.

[Liberty]

Also the coal/potash royalties as they are received are continuously reinvested in additional accretive royalty deals. That reinvestment has to be considered if you’re calculating the CAGR of a pot of money. Back to the drawing board.

 

Sure. Also give me your numbers of those. I was just doing the math on the numbers you gave, I never said it was more than that.

 

That 2.6% is actually a CAGR number, btw, so it assumes reinvestment. The simple interest number is conveniently 10%, showing that you just plugged 305m into a simple interest calculator set to 10% and 82 years to get that 2.5bn number. Complex analysis there.

[linealdin]

Also the coal/potash royalties as they are received are continuously reinvested in additional accretive royalty deals. That reinvestment has to be considered if you’re calculating the CAGR of a pot of money. Back to the drawing board.

 

Sure. Also give me your numbers of those. I was just doing the math on the numbers you gave, I never said it was more than that.

 

That 2.6% is actually a CAGR number, btw, so it assumes reinvestment. The simple interest number is conveniently 10%, showing that you just plugged 305m into a simple interest calculator set to 10% and 82 years to get that 2.5bn number. Complex analysis there.

 

I have no idea what you’re talking about. Back to the drawing board.

[Liberty]

I have no idea what you’re talking about.

 

Clearly.

[linealdin]

I have no idea what you’re talking about.

 

Clearly.

 

Enough. Time to get back to your studies of World War 1 potash.

[linealdin]

 

Brent Cook presentation at the Gold and Silver summit:

 

1) Very down on Sokoman Iron's Moosehead project (Altius 2% royalty). Not enough continuity of mineralization, too many drill holes already, don't get fooled by the "discovery" hole.

 

2) Very bullish on Evrim's Cuale (Altius 1.5% royalty). Deposit becomes interesting if they can establish 1 million gold ounces at 1 g/t gold. Very interesting if 2 million ounces can be established. Could be a low capex, profitable deposit because of easy access, low strip ratio, open pit, and favorable metallurgy and recoveries. Low cost heap leach.

 

Cook said at the conference that Evrim is now his largest personal stock position.

[linealdin]

http://adventuszinc.com/storage/presentations/adzn---corporate-presentation---nov-2018-1541445991.pdf

 

Adventus November presentation outlining aggressive drill plans in 2019:

 

1) Completing 18,000 meters of drilling at Curipamba in 2018 (including 15,000 meters of infill drilling of the El Domo open pit resource).

 

2) 2019 will shift to exploration of the larger land package with the goal of discovering new VMS and gold/silver systems. Airborne geophysics and 18,000 meters of regional exploration drilling planned for 2019 at Curipamba.

 

3) Airborne geophysical surveys for Pijili and Santiago in Q4 2018. 10,000 meter drill program planned for Pijili, which starts in Q4 2018.

 

4) Aggressive programs burn a lot of cash. Adventus, with the recent Wheaton PM private placement, is funded through mid-2019. 

[bizaro86]

 

Brent Cook presentation at the Gold and Silver summit:

 

1) Very down on Sokoman Iron's Moosehead project (Altius 2% royalty). Not enough continuity of mineralization, too many drill holes already, don't get fooled by the "discovery" hole.

 

2) Very bullish on Evrim's Cuale (Altius 1.5% royalty). Deposit becomes interesting if they can establish 1 million gold ounces at 1 g/t gold. Very interesting if 2 million ounces can be established. Could be a low capex, profitable deposit because of easy access, low strip ratio, open pit, and favorable metallurgy and recoveries. Low cost heap leach.

 

Cook said at the conference that Evrim is now his largest personal stock position.

 

I went and looked up the 2000 annual report (oldest on Sedar) as I was going to weigh in on your discussion with Liberty about how their returns have been full-cycle. Incidentally, the CAGR of their book value (same metric WEB used to use) has been very good over the life of the company. Largely from prospect generation gains though, not big gains on purchased royalties...

 

Anyway, it struck me that Moosehead was their biggest (by spend) prospect even then. They had just got it back from someone, and had had it for awhile already. If 20+ years isn't enough to find a mine somewhere, I think it's worth considering the possibility that there isn't a mine there to be found. I hope they're selling some Sokoman, but based on past experience (Alderon no share sale durin huge run up debacle) I doubt it. In my opinion this is management's biggest weakness, not taking some money off the table when things are looking up.

 

Paladin is their biggest win, and that wasn't their choice to sell it was a takeout. If they sold down some of these equity positions on rumours and drill results they would be better off, imo. There is still the chance for a big win from the retained royalty, and you get a slug of high-profit cash now to reinvest. Maybe sell in tranches if the fear of missing the big strike is too much...

[Cigarbutt]

^When you look at the pre-royalty era, from 1997 to 2014, book value per share increased primarily because, on a net basis, value was realized from their various involvements in different mining projects, at different stages of financing and development. They also opportunistically issued 1,9 million shares at 28$ a share for net proceeds of $51,2 million in 2007. From 2000 to 2014, SE went from $0,9 million to $242,0 million and share count went from 15,4 million shares (diluted) to 27,7 million shares.

 

So they started with a low base and have included a royalty model since 2014. The returns to be obtained (less risk but less variable) boil down quite closely to the upcoming commodity cycles, up and down. Discounting is important but is a secondary factor.

[linealdin]

 

Brent Cook presentation at the Gold and Silver summit:

 

1) Very down on Sokoman Iron's Moosehead project (Altius 2% royalty). Not enough continuity of mineralization, too many drill holes already, don't get fooled by the "discovery" hole.

 

2) Very bullish on Evrim's Cuale (Altius 1.5% royalty). Deposit becomes interesting if they can establish 1 million gold ounces at 1 g/t gold. Very interesting if 2 million ounces can be established. Could be a low capex, profitable deposit because of easy access, low strip ratio, open pit, and favorable metallurgy and recoveries. Low cost heap leach.

 

Cook said at the conference that Evrim is now his largest personal stock position.

 

I went and looked up the 2000 annual report (oldest on Sedar) as I was going to weigh in on your discussion with Liberty about how their returns have been full-cycle. Incidentally, the CAGR of their book value (same metric WEB used to use) has been very good over the life of the company. Largely from prospect generation gains though, not big gains on purchased royalties...

 

Anyway, it struck me that Moosehead was their biggest (by spend) prospect even then. They had just got it back from someone, and had had it for awhile already. If 20+ years isn't enough to find a mine somewhere, I think it's worth considering the possibility that there isn't a mine there to be found. I hope they're selling some Sokoman, but based on past experience (Alderon no share sale durin huge run up debacle) I doubt it. In my opinion this is management's biggest weakness, not taking some money off the table when things are looking up.

 

Paladin is their biggest win, and that wasn't their choice to sell it was a takeout. If they sold down some of these equity positions on rumours and drill results they would be better off, imo. There is still the chance for a big win from the retained royalty, and you get a slug of high-profit cash now to reinvest. Maybe sell in tranches if the fear of missing the big strike is too much...

 

Regarding Aurora uranium it was definitely Altius's choice to sell. Go back to the news from 2006.

 

Right after the Aurora IPO in March 2006 Altius did a secondary offering of some of its shares getting them C$38.5 million. Then it September Altius announced sales of Aurora shares yielding them C$31 million. November they announced another C$33.3 million in sales.

 

They sold Aurora relentlessly into a truly crazy bull market for uranium. That's how they got most of the C$200 million plus. The takeout of Aurora happened later.

 

Altius has taken plenty of money off the table when their investments have run up. I can give many examples. Alderon was the exception to the rule, and ended up being a C$100 million mistake.

 

And the reasoning for the Alderon non-sale was credible. Altius decided not to sell any shares because Alderon was going around to banks trying to raise C$1.2 billion in capex. It would have sabotaged the financing process.

 

 

[linealdin]

You'll see in the financial statements released tonight: Altius is continually selling shares.

 

C$2.387 million in equity sales in the six months ended June, 2018.

C$7.723 million in equity sales in the 8 months ended December, 2017.

C$12.726 million in equity sales in the year ended April, 2017.

C$7.972 million in equity sales in the year ended April, 2016.

C$43.852 million in equity sales in the year ended April, 2015.

 

They are patient with their project generation portfolio but all of it will eventually be monetized for hard cash.

 

 

[linealdin]

The project generation portfolio has more potential for sudden, spectacular gains than the royalty portfolio, of course.

 

If Cuale and Curipamba are what I think they are Altius is going to be collecting big chunks of cash in takeouts by majors. C$50 million to C$100 million for each deal. Adia Resources also has great potential to be taken over by a diamond major.

[linealdin]

Nutrien's sales volumes were way up in Q3. 3.858 million tonnes in Q3 versus 3.179 million tonnes in Q2 2018. Realized sale price per tonne was only 5.5% higher than Q2.

 

I think basically Nutrien is still working through sales contracts it signed last year when potash spot prices were much lower. Once those are finished at the end of this year then 2019 should see realized prices that are 25% higher.

 

That's the price bump which will take Altius from C$16 million+ in annual potash revenue to C$20 million+ in potash revenue in 2019.

 

Nutrien permanently decommissioned its New Brunswick potash facilities (where Altius had no royalty land). Future production increases will all be in Saskatchewan on Altius royalty land, heavily focused on production increases at Rocanville, the lowest cost producer on the planet.

[linealdin]

Tidbits from the Kami feasibility study filed on SEDAR:

 

"The NL EA Release is valid only by annual extension until January 2020. By this date, the Kami LP must start construction or risk the requirement for a new assessment. There is no legislated deadline for the start of construction with respect to the Federal EA Release."

 

*

 

"Under the terms of the Glencore off-take agreement, Glencore will be obligated to purchase, upon the commencement of commercial production, 40% of the actual annual production from the Kami Project up to a maximum of 3.2 million tonnes of the first 8.0 million tonnes of iron ore concentrate produced annually at the Kami Project. The term of the agreement will continue until the Kami LP has delivered 48.0 million tonnes of iron ore concentrate to Glencore, which is expected to be 15 years after the commencement of commercial production."

[linealdin]

Current Alderon management will get one more shot to raise construction financing over the next 14 months. If they fail there will be consequences. Sprott and Altius can call in their US$14 million loan due on December 31st, 2019, force a management change, then broker some kind of sale of the Kami deposit to HBIS or any of the iron ore producers in the region.

 

Kami can't stay on the shelf for another cycle because its provincial environmental permits will expire. The province may grant extensions but they are not indefinite extensions.

[linealdin]

http://altiusminerals.com/uploads/2018-11-07-Altius-Reports-Q3-2018-Royalty-Revenue-of-17-1M-and-Adjusted-EBITDA-OF-13_-9M-FINAL_.pdf

 

Altius reports total Q3 revenue of C$17.634 million. Final numbers better than preliminary estimates, as usual.

[Liberty]

Altius Minerals Corporation (“Altius” or the “Corporation”) reports attributable royalty revenue(Note 1) of $17.1 million ($0.40 per share) for the quarter ended September 30, 2018 compared to $16.5 million ($0.38 per share) in the previous quarter and $17.9 million ($0.42 per share) in the comparable prior year quarter ended October 31, 2017. Total Q3 2018 revenue of $17.6 million includes project generation based revenue of approximately $0.5 million.

 

Adjusted EBITDA(Note 1) of $13.9 million ($0.32 per share) for the three months compares to $13.0 million ($0.30 per share) in Q2 2018 and $14.6 million ($0.34 per share) for the three months ended October 31, 2017. Q3 2018 net earnings per share were $0.14 compared to $0.12 in Q2 2018 and $0.16 in the comparable quarter last year. Q3 2018 earnings include a non-cash $2.0 million dilution gain (approximately 4.7 cents per share) related to the Adventus Zinc Corporation private placement financing and another issuance of shares for an exploration alliance.

 

Revenues and EBITDA basically flat year-on-year (down a little actually).

[mikek]

Some thoughts on that quarter...

 

Maybe Altius only has 1.5 to 3% royalty on Allegiance now.  I thought they had the option to increase it 1.5% more but I'm not so sure anymore.  It seems they would mention it if they did.  The first document regarding that deal was this document.  It leads me to believe that they only have 1.5 to 3% sliding scale if they aren't mentioning it.  If anyone gets any clarification on that question I would like to know.

 

https://www.asx.com.au/asxpdf/20160916/pdf/43b7b388g7fwzr.pdf

 

"Altius is a substantial Excelsior shareholder"

 

Looks like Altius owns shares of Excelsior, I thought they might have sold them by now but it looks like they still have them.

 

"During the quarter ended September 30, 2018 the Corporation invested an additional $2 million into Lithium Royalty Corporation (“LRC”) for a total investment to date of $8.4 million. As a founding investor and as consideration for providing ongoing technical support, the Corporation received the right to participate directly in LRC royalty acquisitions on a 10% basis. One such co-investment has been made thus far, the details of which will be disclosed once disclosed by LRC."

 

I wonder if that 2 million was part of the co-investment or if the co-investment was separate.  Cash has declined quite a bit from last quarter.  8.7 million to LIF royalty, 2.6 million to Alderon for the loan and 2 million on LRC.  Seems like they might have done some other things since cash went from 52 million last quarter to 33 million now.

 

"Adia is planning an initial drilling campaign during Q1 2019."

 

"On October 9, 2018 Westmoreland Coal Company (“Westmoreland”) announced it has entered into a restructuring support agreement with members of an ad hoc group of lenders and filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the US Bankruptcy Court. Westmoreland’s Canadian entities (Westmoreland Canada) are excluded from these voluntary petitions, and their operations are currently unaffected by the U.S. actions.

 

Prairie Royalties Limited Partnerships (“Prairie Royalties LP”) holds certain royalties in which Westmoreland Canada is the operator, some of which are paid through Westmoreland Canada rather than being paid directly through the utility. While the Corporation has not experienced any collection issues with Westmoreland Canada to date and there are no past due payments, the Corporation is taking steps to further protect its interests and will continue to monitor the situation."

 

That could possibly be concerning, not an issue right now but you never know.

[linealdin]

http://www.labradorironore.com/News-Releases/Press-Release-Details/2018/Labrador-Iron-Ore-Royalty-Corporation-Announces-Results-for-the-Third-Quarter-Ended-September-30-2018/default.aspx

 

LIF Q3 results. The special meeting to vote on permission to buy royalties has been cancelled for now. I doubt major shareholders like Altius and Anglo Pacific want to create a new competitor for royalties.

 

Building a huge cash position. Should be C$62 million cash position after Q3 dividends are paid. Normalizing to a C$40 million cash position leaves an extra C$22 million to pay out as dividends.

 

I expect at least a $1 dividend in Q4, worth C$3.5 million to Altius. Could be higher.

[linealdin]

IOC is enjoying above forecast third party haulage (Champion Iron rail fees). And IOC is trying to improve recoveries with a spiral improvement project and a reflux classifier project. I like incremental improvements. Q4 should be strong.

[linealdin]

Champion Iron files quarterlies in Canada. The operation looks robust in this price environment:

 

Net realized price per tonne of C$90.4 (after shipping costs).

 

Cash costs of C$45.2 per tonne. The net sales price is double the cost.

 

Phase 2 expansion to 15 MTA could begin construction in late 2019. I’m sure O’Keeffe has strategic investors lined up around the block to finance the modest initial capex (Phase 2 plant mostly constructed by Cliffs already).

 

Altius debenture matures at the end of December. Conversion likely.

 

 

[linealdin]

Some thoughts on that quarter...

 

Maybe Altius only has 1.5 to 3% royalty on Allegiance now.  I thought they had the option to increase it 1.5% more but I'm not so sure anymore.  It seems they would mention it if they did.  The first document regarding that deal was this document.  It leads me to believe that they only have 1.5 to 3% sliding scale if they aren't mentioning it.  If anyone gets any clarification on that question I would like to know.

 

https://www.asx.com.au/asxpdf/20160916/pdf/43b7b388g7fwzr.pdf

 

"Altius is a substantial Excelsior shareholder"

 

Looks like Altius owns shares of Excelsior, I thought they might have sold them by now but it looks like they still have them.

 

"During the quarter ended September 30, 2018 the Corporation invested an additional $2 million into Lithium Royalty Corporation (“LRC”) for a total investment to date of $8.4 million. As a founding investor and as consideration for providing ongoing technical support, the Corporation received the right to participate directly in LRC royalty acquisitions on a 10% basis. One such co-investment has been made thus far, the details of which will be disclosed once disclosed by LRC."

 

I wonder if that 2 million was part of the co-investment or if the co-investment was separate.  Cash has declined quite a bit from last quarter.  8.7 million to LIF royalty, 2.6 million to Alderon for the loan and 2 million on LRC.  Seems like they might have done some other things since cash went from 52 million last quarter to 33 million now.

 

"Adia is planning an initial drilling campaign during Q1 2019."

 

"On October 9, 2018 Westmoreland Coal Company (“Westmoreland”) announced it has entered into a restructuring support agreement with members of an ad hoc group of lenders and filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the US Bankruptcy Court. Westmoreland’s Canadian entities (Westmoreland Canada) are excluded from these voluntary petitions, and their operations are currently unaffected by the U.S. actions.

 

Prairie Royalties Limited Partnerships (“Prairie Royalties LP”) holds certain royalties in which Westmoreland Canada is the operator, some of which are paid through Westmoreland Canada rather than being paid directly through the utility. While the Corporation has not experienced any collection issues with Westmoreland Canada to date and there are no past due payments, the Corporation is taking steps to further protect its interests and will continue to monitor the situation."

 

That could possibly be concerning, not an issue right now but you never know.

 

1) Every Allegiance document, including the most recent filings, note that Altius has a 3% to 4.5% sliding scale royalty. This is a discrepency best explained by the existence of some kind of low cost option to purchase an additional 1.5% royalty?

 

2) Altius has sold some but not all of its original 5.8 million share Excelsior position. There’s lots of indirect evidence of that. Excelsior used to be one of the top 3 largest position in Altius’s PG portfolio, then suddenly it wasn’t. Excelsior has also removed Altius as a strategic shareholder from its presentations. I think Altius sold more than half the position when Excelsior ran into the $1.40’s. The remaining position could still be fairly classified as “substantial.”

 

3) C$8.4 million market value is for investments into “Lithium Royalty Corp or associated royalties.” The language is clear.

 

4) Westmoreland has agreed to a restructuring deal with its lenders which will move quickly through the Chapter 11 process. The cash flow positive Canadian assets are not part of the bankruptcy filings or debt restructuring agreement. No issues for Altius.

[linealdin]

Major cash outlays in Q3

 

C$8.7 million LIF purchase

C$2 million LRC associated royalty purchase

C$2.625 million Alderon debenture loan

C$2.65 million in buybacks

C$5 million debt principal payback

C$2.058 interest payment on longterm debt

C$1.26 million preferred share distribution

C$1.64 million in Altius dividends

 

Total of C$25.9 million. An expensive quarter. Altius will look to monetize some investments next quarter.

 

[linealdin]

Decent shot of C$20 million+ revenue in Q4 for Altius. Swing factors:

 

1) Does LIF hoard cash (hoping to convince shareholders to let it buy a copper royalty) or does it pay out the C$1 to C$1.15 per share in dividends it can pay based on the sky high pellet premiums? C$3.5 million to C$4 million at stake for Altius.

 

2) Yamana is guiding a huge production quarter for Chapada.

 

3) Potash in a rising price environment. Nutrien raising production at Rocanville.

 

4) Sheerness returning to higher rate royalty land.

 

5) General seasonality for the Altius portfolio. December quarter revenue is usually strong.

[linealdin]

http://altiusminerals.com/uploads/2018-11-07-Q3-Conf-call-presentation-FINAL.pdf

 

From the Q3 results presentation:

 

“Excelsior US$75 million project finance package recently announced, with a construction timeline and first copper production now in sight for our next producing copper royalty; Altius also has an option to purchase additional royalty exposure on this project, which it expects to exercise.”