ALS.TO - Altius Minerals

[Liberty]

So, linealdin, are you buying more here?

 

Yes, aggressively buying. Turning a US$300K plus retirement account into ATUSF shares. My broker likes the fees.

 

That one company is still 100% of your portfolio?

[linealdin]

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSL8N1YQ65Y

 

Rio Tinto doing a dual listing for its 58.7% stake in IOC. New York and Toronto in the first half of 2019.

 

Targeting a US$4 billion valuation for the IPO. At that valuation LIF’s 15.1% equity stake is worth US$1.03 billion, or C$1.4 billion at current exchange rates. A little less than LIF’s current market cap of C$1.57 bilion.

 

 

[linealdin]

So, linealdin, are you buying more here?

 

Yes, aggressively buying. Turning a US$300K plus retirement account into ATUSF shares. My broker likes the fees.

 

That one company is still 100% of your portfolio?

 

100% of equity risk portfolio. Not including our home, rental property, gold coins, wife’s low risk mutual funds etc.

[SharperDingaan]

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSL8N1YQ65Y

 

Rio Tinto doing a dual listing for its 58.7% stake in IOC. New York and Toronto in the first half of 2019.

 

Targeting a US$4 billion valuation for the IPO. At that valuation LIF’s 15.1% equity stake is worth US$1.03 billion, or C$1.4 billion at current exchange rates. A little less than LIF’s current market cap of C$1.57 bilion.

 

Aug-2018 the IOC thought it could get USD 6 billion, 4 months later its USD 4 billion?

http://www.mining.com/rio-tinto-closer-selling-6bn-stake-iron-ore-canada/

 

IOC will need to sell at least 25% (USD 1 billion) to meet float and new investor requirements, and all existing partners will have the opportunity to sell proportionately. At 25% Mitsubushi's stake would decline to 19%+, essentially setting the limit on what the new buyer could purchase. Mitsubushi would also receive USD 262 million of the sale proceeds.

 

Then imagine what might occurr if Mitsubushi and Glencore (Kami) exchanged places.

Merry Christmas.

 

SD

 

[linealdin]

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSL8N1YQ65Y

 

Rio Tinto doing a dual listing for its 58.7% stake in IOC. New York and Toronto in the first half of 2019.

 

Targeting a US$4 billion valuation for the IPO. At that valuation LIF’s 15.1% equity stake is worth US$1.03 billion, or C$1.4 billion at current exchange rates. A little less than LIF’s current market cap of C$1.57 bilion.

 

Aug-2018 the IOC thought it could get USD 6 billion, 4 months later its USD 4 billion?

http://www.mining.com/rio-tinto-closer-selling-6bn-stake-iron-ore-canada/

 

IOC will need to sell at least 25% (USD 1 billion) to meet float and new investor requirements, and all existing partners will have the opportunity to sell proportionately. At 25% Mitsubushi's stake would decline to 19%+, essentially setting the limit on what the new buyer could purchase. Mitsubushi would also receive USD 262 million of the sale proceeds.

 

Then imagine what might occurr if Mitsubushi and Glencore (Kami) exchanged places.

Merry Christmas.

 

SD

 

I’m not sure Mitsubishi or LIF have any involvement in the IPO. Rio Tinto is injecting its whole stake in IOC (58.7%) into a public listing. The public vehicle would presumably pay dividends to its investors from its share of IOC profits (considerable the last couple of years).

 

LIF theoretically could inject its 15.1% IOC equity stake into the vehicle as well but that’s a matter of negotiation. If LIF even wants a part of this public vehicle.

[SharperDingaan]

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSL8N1YQ65Y

 

Rio Tinto doing a dual listing for its 58.7% stake in IOC. New York and Toronto in the first half of 2019.

 

Targeting a US$4 billion valuation for the IPO. At that valuation LIF’s 15.1% equity stake is worth US$1.03 billion, or C$1.4 billion at current exchange rates. A little less than LIF’s current market cap of C$1.57 bilion.

 

Aug-2018 the IOC thought it could get USD 6 billion, 4 months later its USD 4 billion?

http://www.mining.com/rio-tinto-closer-selling-6bn-stake-iron-ore-canada/

 

IOC will need to sell at least 25% (USD 1 billion) to meet float and new investor requirements, and all existing partners will have the opportunity to sell proportionately. At 25% Mitsubushi's stake would decline to 19%+, essentially setting the limit on what the new buyer could purchase. Mitsubushi would also receive USD 262 million of the sale proceeds.

 

Then imagine what might occurr if Mitsubushi and Glencore (Kami) exchanged places.

Merry Christmas.

 

SD

 

I’m not sure Mitsubishi or LIF have any involvement in the IPO. Rio Tinto is injecting its whole stake in IOC (58.7%) into a public listing. The public vehicle would presumably pay dividends to its investors from its share of IOC profits (considerable the last couple of years).

 

LIF theoretically could inject its 15.1% IOC equity stake into the vehicle as well but that’s a matter of negotiation. If LIF even wants a part of this public vehicle.

 

IOC is a partnership trying for a liquidity 'event'; all partners will have the right to participate in the 'event' proportionately.

Mitsubishi and LIF could choose not to participate in the IPO (allowing RTZ to sell more of its stake for cash); or choose to participate via a non-cash 'equity swap' with a 3rd party at the prevailing market price.

 

SD

 

 

 

[linealdin]

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSL8N1YQ65Y

 

Rio Tinto doing a dual listing for its 58.7% stake in IOC. New York and Toronto in the first half of 2019.

 

Targeting a US$4 billion valuation for the IPO. At that valuation LIF’s 15.1% equity stake is worth US$1.03 billion, or C$1.4 billion at current exchange rates. A little less than LIF’s current market cap of C$1.57 bilion.

 

Aug-2018 the IOC thought it could get USD 6 billion, 4 months later its USD 4 billion?

http://www.mining.com/rio-tinto-closer-selling-6bn-stake-iron-ore-canada/

 

IOC will need to sell at least 25% (USD 1 billion) to meet float and new investor requirements, and all existing partners will have the opportunity to sell proportionately. At 25% Mitsubushi's stake would decline to 19%+, essentially setting the limit on what the new buyer could purchase. Mitsubushi would also receive USD 262 million of the sale proceeds.

 

Then imagine what might occurr if Mitsubushi and Glencore (Kami) exchanged places.

Merry Christmas.

 

SD

 

I’m not sure Mitsubishi or LIF have any involvement in the IPO. Rio Tinto is injecting its whole stake in IOC (58.7%) into a public listing. The public vehicle would presumably pay dividends to its investors from its share of IOC profits (considerable the last couple of years).

 

LIF theoretically could inject its 15.1% IOC equity stake into the vehicle as well but that’s a matter of negotiation. If LIF even wants a part of this public vehicle.

 

IOC is a partnership trying for a liquidity 'event'; all partners will have the right to participate in the 'event' proportionately.

Mitsubishi and LIF could choose not to participate in the IPO (allowing RTZ to sell more of its stake for cash); or choose to participate via a non-cash 'equity swap' with a 3rd party at the prevailing market price.

 

SD

 

All that would be true if IOC were going public. I don’t think that’s what is happening. LIF’s 15.1% equity stake is already trading in a public vehicle (LIF on the TSX). Now Rio Tinto is attempting to replicate what LIF has done. But they will get a higher valuation because they own the majority control stake.

 

IOC stays private.

[John Hjorth]

Merry Christmas, linealdin!

[linealdin]

Merry Christmas, linealdin!

 

Cheers to you!

[linealdin]

Rio Tinto received US$249 million in dividends in Q3 and Q4 from its 58.7% IOC equity position. So US$400 million in dividends is certainly possible over a year.

 

Does a US$400 million annual dividend justify a US$4 billion market cap for a publicly listed vehicle? Maybe so.

[linealdin]

http://statements.qld.gov.au/Statement/2018/12/5/exploration-grants-say-head-north

 

Altius wins an A$300K grant to cover 75% of its exploration costs at two of its Mount Isa silver/zinc/lead exploration projects. The grant will pay for geophysics at Min Min and drilling at Brumby. Work must be completed by August 2019 to receive the full A$300K.

 

Great exploration jurisdiction. Government pays for most of the cost of early stage exploration.

[no_free_lunch]

2018 royalty revenue should come in around C$68 million, in the upper range of guidance of C$64 million to C$69 million. LIF strike and cash hoarding cost Altius C$3 million or so.

 

2019 should see growth to C$80.2 million in royalty revenue. My estimates:

 

Chapada: C$18.5 million (new recovery circuit improvement kicking in H2 2019).

777 mine: C$10 million.

LIF: C$12.25 million (3.5 million shares x C$3.50 in annual dividends; the C$85 million LIF cash hoard is reduced to normal historical levels in 2019).

Potash: C$20 million

Electrical coal: C$13 million

Cheviot: C$3.5 million

Voisey’s Bay: C$1.5 million

Coal bed methane: C$600K

Interest and investment: C$500K

Excelsior: C$365K (1 quarter of revenue).

 

 

Thanks for putting this out there.  My question is, doesn't $450 market cap seem a lot for $80m in royalties?  What net profit margin do you see?

[linealdin]

2018 royalty revenue should come in around C$68 million, in the upper range of guidance of C$64 million to C$69 million. LIF strike and cash hoarding cost Altius C$3 million or so.

 

2019 should see growth to C$80.2 million in royalty revenue. My estimates:

 

Chapada: C$18.5 million (new recovery circuit improvement kicking in H2 2019).

777 mine: C$10 million.

LIF: C$12.25 million (3.5 million shares x C$3.50 in annual dividends; the C$85 million LIF cash hoard is reduced to normal historical levels in 2019).

Potash: C$20 million

Electrical coal: C$13 million

Cheviot: C$3.5 million

Voisey’s Bay: C$1.5 million

Coal bed methane: C$600K

Interest and investment: C$500K

Excelsior: C$365K (1 quarter of revenue).

 

 

Thanks for putting this out there.  My question is, doesn't $450 market cap seem a lot for $80m in royalties?  What net profit margin do you see?

 

I benchmark against all the royalty/stream companies. Altius’s market cap divided by projected annual royalty is an extraordinarily low multiple against those peers. If you think Altius is expensive then Franco Nevada’s multiple will make your head explode.

 

Altius EBITDA margin was 81% last quarter. That should improve as more low cost royalties (Excelsior for example) are added.

[linealdin]

The great benefit of Rio Tinto dual listing its IOC stake: likely production expansion.

 

Investors in the public vehicle are going to demand an aggressive growth story at IOC. As owners of the control majority stake they can push for an expansion from 23 MTA to 30 MTA and beyond.

 

LIF would benefit from that expansion (higher royalties) while taking little of the capital risk.

[linealdin]

Champion C$10 million convertible debenture matures on December 31st but is now out of the money for Altius (Altius can convert at $1 per share but Champion is trading at 92 cents). Options:

 

1) Altius takes the C$10 million principal back in cash on the 31st. Currently a target rich environment for investment in new royalties.

 

2) Altius allows the debenture, paying 8% interest, to be extended for another 6 months.

 

*

 

Despite the stock price dropping Champion is fundamentally a successful company. They are hitting their production targets and making a lot of cash (iron ore premiums are intact). There’s no problem

paying Altius the C$10 million back.

[linealdin]

Andre Gaumond, Altius director, bought around 25K shares on Christmas Eve. Smart man.

 

I can guarantee Altius has also been buying back close to its maximum daily allowance (10,558 shares) under the NCIB in the last few weeks. The mandatory filing showing the buybacks will be early in the new year.

 

Altius had C$33.784 million in cash at the end of September. I want to see another C$10 million deployed to buy LIF shares and C$5 million to buybacks. Now’s the time to be aggressive.

[linealdin]

http://explorationmidland.com/en/MediaHandler.ashx?MediaId=432e14db-5136-40a0-b878-a2df501c94e1

 

Midland has done a couple of private placements recently: flow through shares for C$4.1 million and regular shares for C$200K.

 

In this press release they announce they are using the placement fund a drill program at Mythril in 2019.

 

Gino Roger, CEO of Midland, has confirmed to me that Mythril is a designated Altius JV project (Altius 1% royalty), though that fact isn’t noted yet on either company’s website or filings.

[linealdin]

I estimate C$80.2 million in 2019 royalty revenue. Total revenue for Altius, including project generation revenue, will be around C$82 million for 2019. Altius will earn fees for managing exploration programs for Adia, New Found Gold, Canstar etc.

[linealdin]

https://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvSDYL4gy6yxf1v%2FRw%2FrFiGug%3D

 

Altius converted the C$10 million Champion Iron debenture to Champion shares at $1 per share on December 31st. Champion closed at C$1.07 on the 31st. Not much of a discount.

 

Altius received C$1.2 million in interest from the debenture. The interest was always paid in advance (interest for the first 6 months was paid to Altius on the day the debenture closed) which increased the effective interest rate. Champion also paid Altius’s expenses in relation to the execution of the debenture.

 

I estimate Altius now holds about 15 million Champion shares. They participated in Champion’s pre-construction equity raise at 90 cents per share.

[linealdin]

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/551-tsx-venture/wlf/56615-wolfden-announces-mineral-resource-estimate-for-pickett-mtn-project.html

 

Wolfden establishes 4.08 million tonnes of resources at around 20% zinc equivalent. Ultra-rich. Altius owns a 1.35% royalty on that 4.08 million tonnes.

 

My belief is that if this deposit reaches 5 million tonnes at 20% zinc equivalent it will eventually become a mine. Wolfden has to find a couple more VMS lenses.

 

The rule of thumb is a deposit of 10 million tonnes at 10% zinc equivalent is likely economic.

[linealdin]

Altius bought back 104,000 shares in December. Share count down to 42.85 million.

 

The current NCIB only allows them to repurchase 814,972 shares. They’ve used about half of that allocation. Once they hit the max they can institute a new NCIB. Buybacks continue in January.

[linealdin]

https://www.alderonironore.com/news/2019/515-alderon-enters-strategic-partnership-with-schneider-electric-to-develop-its-premium-quality-kami-iron-ore-project

 

Alderon signs partnership with equipment supplier. Equipment financing loans will certainly be part of any construction financing package (see equipment financing deals by Champion and Tacora).

 

Alderon also claims this partnership will help secure Export Credit Agency financing. Schneider manufactures equipment in Asia, therefore Asian credit agencies will help finance Kami as a big customer for Schneider equipment?

[Liberty]

Altius bought back 104,000 shares in December. Share count down to 42.85 million.

 

The current NCIB only allows them to repurchase 814,972 shares. They’ve used about half of that allocation. Once they hit the max they can institute a new NCIB. Buybacks continue in January.

 

So they bought back 0.2% of shares... Let's have a look at share count over time:

 

[linealdin]

http://altiusminerals.com/uploads/2018-01-10-Project-Generation-update-Q4-and-Year-End-2018-FINAL-.pdf

 

“During the quarter, Altius completed transactions covering its entire Australian minerals land holdings which included the vending of 7 properties to a private Australian company which intends to seek a public listing in 2019, in exchange for 3.5 million shares and a 1% gross revenue royalty interest. Three other properties (Dajarra) were dealt to a leading diversified mining company active in the Mt. Isa district under an option to earn a 75% interest in the projects by expending $2.5 million AUD over the next 4 years, with Altius retaining a 1% gross revenue royalty.”

 

*

 

The “leading diversified mining company” is likely Teck. Besides the exploration spending requirement there will likely be significant direct cash payments to Altius in order for the diversified mining company to earn 100% interest in the properties. Altius has mostly stayed away from these types of deal with majors (West Cork sold to First Quantum is the other one), instead focusing on receiving large equity positions in juniors and spinouts.

 

The deal with the private Australian company seeking an IPO is similar to the Aethon Minerals deal. Sweeping up early stage properties from 1 country into a public vehicle. Altius should exit the IPO with around 35% of the equity. The Australian equity markets are still able to raise money (investors being rich from the iron ore boom).

 

 

[linealdin]

The Australian private company rolling up Altius’s Aussie properties is BMEx Ltd. headed by Andy Browne. This is the company description from Linkedin:

 

“Exploration for zinc-cobalt-lead-silver-copper in Australia (Amadeus Basin and McArthur Basin) and Ireland (Irish Zinc Basin). Unlisted public company; intend to IPO Q1 2019. Criteria: stable jurisdictions; rapid access; clear and significant upside potential; rapid cost-effective testing with clear decision paths.”

 

I believe BMEx has also made a deal for Adventus Zinc’s Irish properties. Altius and Adventus will exit the Q1 IPO as large shareholders (similar to their cooperation in the Canstar consolidation deal).