ALS.TO - Altius Minerals

[Liberty]

https://www.ft.com/content/488c5486-966f-11e9-9573-ee5cbb98ed36

 

Supply squeeze in iron ore catches miners on the hop

 

 

Dam disaster, bad weather and booming steel demand push prices to five-year high

 

 

 

“The market is telling us we need alternatives,” said Graeme Train, senior economist at Trafigura, one of the world’s biggest commodity traders. “What you are seeing in the price now is this risk premium for a commodity that has become regionally constrained. There is so much supply coming from two countries [Australia and Brazil] and very little from anywhere else.”

 

In commodity businesses, high prices lead to low prices as more supply is attracted...

[linealdin]

https://www.ft.com/content/488c5486-966f-11e9-9573-ee5cbb98ed36

 

Supply squeeze in iron ore catches miners on the hop

 

 

Dam disaster, bad weather and booming steel demand push prices to five-year high

 

 

 

“The market is telling us we need alternatives,” said Graeme Train, senior economist at Trafigura, one of the world’s biggest commodity traders. “What you are seeing in the price now is this risk premium for a commodity that has become regionally constrained. There is so much supply coming from two countries [Australia and Brazil] and very little from anywhere else.”

 

In commodity businesses, high prices lead to low prices as more supply is attracted...

 

“More supply is attracted” = a new mine at Kami and a major expansion at IOC? The latter (to 30 MTA) is coming once Rio Tinto’s ownership issues are sorted out. Incredible margins at IOC.

[Liberty]

https://www.ft.com/content/488c5486-966f-11e9-9573-ee5cbb98ed36

 

Supply squeeze in iron ore catches miners on the hop

 

 

Dam disaster, bad weather and booming steel demand push prices to five-year high

 

 

 

“The market is telling us we need alternatives,” said Graeme Train, senior economist at Trafigura, one of the world’s biggest commodity traders. “What you are seeing in the price now is this risk premium for a commodity that has become regionally constrained. There is so much supply coming from two countries [Australia and Brazil] and very little from anywhere else.”

 

In commodity businesses, high prices lead to low prices as more supply is attracted...

 

“More supply is attracted” = a new mine at Kami and a major expansion at IOC? The latter (to 30 MTA) is coming once Rio Tinto’s ownership issues are sorted out. Incredible margins at IOC.

 

Also, more supply internationally, faster expansion at existing mines, until commodity prices come down and margins come down. When you don't have a defensible advantage to protect your margins in a cyclical industry, they're going to come down. Over long period, inflation-adjusted prices of commodities have tended to come down as technology improves productivity.

[nostradamus]

Itochu Corporation of Japan (Itochu) has completed its review of the Tenas Metallurgical Coal Project Definitive Feasibility Study (Tenas DFS) and confirmed tranche 2 investment into Telkwa Coal Ltd (TCL).

 

Allegiance expects to complete the tranche 2 investment of C$1.5M from Itochu in early July 2019, which will take Itochu’s investment in TCL to C$3M in consideration for a 10.1 percent equity interest in TCL.

 

https://www.allegiancecoal.com.au/irm/PDF/1563_0/ItochuConfirmsTranche2InvestmentinTelkwa

 

Any ideas as to why Altius does not appear on this list of top 20 shareholders?

 

https://www.allegiancecoal.com.au/irm/PDF/1565_0/Top20securityholders

 

N.

[linealdin]

Itochu Corporation of Japan (Itochu) has completed its review of the Tenas Metallurgical Coal Project Definitive Feasibility Study (Tenas DFS) and confirmed tranche 2 investment into Telkwa Coal Ltd (TCL).

 

Allegiance expects to complete the tranche 2 investment of C$1.5M from Itochu in early July 2019, which will take Itochu’s investment in TCL to C$3M in consideration for a 10.1 percent equity interest in TCL.

 

https://www.allegiancecoal.com.au/irm/PDF/1563_0/ItochuConfirmsTranche2InvestmentinTelkwa

 

Any ideas as to why Altius does not appear on this list of top 20 shareholders?

 

https://www.allegiancecoal.com.au/irm/PDF/1565_0/Top20securityholders

 

N.

 

Altius is the #1 shareholder, listed as Citicorp Nominee. Australia allows or requires (I don’t know which) foreign shareholders to hold shares through a local subsidiary. Some queer provision of their securities law.

[nostradamus]

Thanks linealdin.

[linealdin]

https://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvTDYD4Au8yhCZof9oke92GA%3D%3D

 

Allegiance has received a Section 11 order for its environmental application. It’s a long process but Allegiance has been hard at work.

 

I really like how they are leaping the main hurdles to building a mine by obtaining financing from Itochu and a proactively entering the permitting regime. They did the community consultations and baseline monitoring over the last two years so permitting could go as fast as possible once it officially began.

[linealdin]

https://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvTDYD4Aq4zhmZpfpske92GA%3D%3D

 

EMU has paid Altius’s Chilean subsidiary US$100K for a 3 year extension to the option agreement. Another US$100K is likely to be paid this November. After that another US$2.7 million is required if EMU takes the full 3 years to pay for the property.

 

I believe the cash payments become project generation revenue on Altius’s financials.

[linealdin]

https://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvTDYD4Au%2BzhWZof9oke92GA%3D%3D

 

Allegiance Coal is revising its feasibility study to improve project economics. Its upside case is an average of A$186 million in average revenue over a 14.4 year mine life (with the potential to extend mine life another 22 years from additional deposits). The plan doubles the rate of production in years 7 to 15.

 

Altius will end up having a 4% royalty (at current coal prices and by picking up a low cost royalty option).

 

4% x A$186 million = A$7.44 million in annual royalty revenue for 15 to 37 years. The plan is to reach initial production by Q3 2021.

[mikek]

You sure they still have that 1.5 percent option? I haven't seen Altius mention it in quite a bit. All I see  them post is about the 1.5 to 3 percent sliding scale royalty depending on the price of the coal. Would be interested if anyone emails Altius about it and gets confirmation. If I had s cheap option for an additional 1.5 percent I think I would mention it. The original deal did sound like they had the option of having a 4.5 percent royalty but I haven't seen anything about that number for years.

[linealdin]

You sure they still have that 1.5 percent option? I haven't seen Altius mention it in quite a bit. All I see  them post is about the 1.5 to 3 percent sliding scale royalty depending on the price of the coal. Would be interested if anyone emails Altius about it and gets confirmation. If I had s cheap option for an additional 1.5 percent I think I would mention it. The original deal did sound like they had the option of having a 4.5 percent royalty but I haven't seen anything about that number for years.

 

This is a quote from an email from Altius management regarding Telkwa:

 

“the royalty is 1.5 - 3% as per the MD&A, but we also have a ROFO on a legacy owners' royalty, which gives us first rights to purchase another 3% royalty.”

 

So potentially a 6% royalty but Altius would have to pay up to acquire the additional 3% royalty. Not a low cost option as I assumed.

[cameronfen]

Do people view this as a compounder?  I mean I looked at their RoE at one point (maybe at the bottom of the cycle) and it was 15ish%.  Which makes sense as this is basically closed end fund investing in exotic assets.  Buy if the full cycle RoE is 15% why treat this like a great compounder?  There are companies with much higher RoI and RoE that are also growing intrinsic value by deploying capital (like FB for one although its not deploying much more capital because roi is basically infinite).  Just trying to really understand the thesis. 

[SharperDingaan]

Do people view this as a compounder?  I mean I looked at their RoE at one point (maybe at the bottom of the cycle) and it was 15ish%.  Which makes sense as this is basically closed end fund investing in exotic assets.  Buy if the full cycle RoE is 15% why treat this like a great compounder?  There are companies with much higher RoI and RoE that are also growing intrinsic value by deploying capital (like FB for one although its not deploying much more capital because roi is basically infinite).  Just trying to really understand the thesis.

 

We view ALS as a compounder ... with twists

 

Set the compound period (10yrs). Forward compound RoE/historic compound ROE > 1.

All else equal, ALS participation in future commodity booms has to be more profitable, and for longer periods. Via better quality assets generating higher margin, diversification over multiple commodities to raise participation, long-life mines, and more boom years in the forward 10 years than there were in the trailing 10 years. Obviously, double faster (1/ROE), and you will be worth more 10 years out; but here, you will have to make a macro call on both the economic cycle, AND the operator.

 

As pointed out; you could just buy a Sched-A bank, or a FB, with more quntifiable risks. ALS is just a dividend paying diversifier.

You could also just buy a Rio Tinto, Barrick, Anglo, etc at the bottom of a commodity trough; and arguably shorten compound period.

Higher risks, rewarded by higher returns.

 

SD

 

 

 

 

.

[Liberty]

Do people view this as a compounder?  I mean I looked at their RoE at one point (maybe at the bottom of the cycle) and it was 15ish%.  Which makes sense as this is basically closed end fund investing in exotic assets.  Buy if the full cycle RoE is 15% why treat this like a great compounder?  There are companies with much higher RoI and RoE that are also growing intrinsic value by deploying capital (like FB for one although its not deploying much more capital because roi is basically infinite).  Just trying to really understand the thesis.

 

Where are you getting 15% ROE from? Book value/share has barely moved in a decade, from what I see at a glance.

 

It hasn't been a compounder, against the hopes of many (including me at one point). Maybe someday it will be, who knows.

 

The market is inefficient, but not *that* inefficient. When a stock price isn't moving in a decade where the market is going up double-digits/year, the underlying business probably isn't compounding value at 15% (or higher)... It might have trouble earning its cost of capital. A decade at 15% is a four-bagger.

[cameronfen]

Do people view this as a compounder?  I mean I looked at their RoE at one point (maybe at the bottom of the cycle) and it was 15ish%.  Which makes sense as this is basically closed end fund investing in exotic assets.  Buy if the full cycle RoE is 15% why treat this like a great compounder?  There are companies with much higher RoI and RoE that are also growing intrinsic value by deploying capital (like FB for one although its not deploying much more capital because roi is basically infinite).  Just trying to really understand the thesis.

 

Where are you getting 15% ROE from? Book value/share has barely moved in a decade, from what I see at a glance.

 

It hasn't been a compounder, against the hopes of many (including me at one point). Maybe someday it will be, who knows.

 

The market is inefficient, but not *that* inefficient. When a stock price isn't moving in a decade where the market is going up double-digits/year, the underlying business probably isn't compounding value at 15% (or higher)... It might have trouble earning its cost of capital. A decade at 15% is a four-bagger.

 

I'm being generous with the 15%.  It could've been 10%.  I don't remember the number but I remember once I saw the number I decided to look at something else although I remember seeing the number was not terrible but not great.  I obviously don't think its much of a compounder but didn't want to stir anything. 

 

I looked at this a while back so my memory is foggy, but basically what I did was take some deals and calculate the return on the deals, adjust for cash and leverage.  Keep in mind there is a dividend and the argument is the market will turn up while ALS is investing, so intrinsic value is higher than what the market is giving it credit for.  I think that's the crux of the thesis but I'm not buying it.  I'm curious if some of the bulls have better arguments. 

[Liberty]

Do people view this as a compounder?  I mean I looked at their RoE at one point (maybe at the bottom of the cycle) and it was 15ish%.  Which makes sense as this is basically closed end fund investing in exotic assets.  Buy if the full cycle RoE is 15% why treat this like a great compounder?  There are companies with much higher RoI and RoE that are also growing intrinsic value by deploying capital (like FB for one although its not deploying much more capital because roi is basically infinite).  Just trying to really understand the thesis.

 

Where are you getting 15% ROE from? Book value/share has barely moved in a decade, from what I see at a glance.

 

It hasn't been a compounder, against the hopes of many (including me at one point). Maybe someday it will be, who knows.

 

The market is inefficient, but not *that* inefficient. When a stock price isn't moving in a decade where the market is going up double-digits/year, the underlying business probably isn't compounding value at 15% (or higher)... It might have trouble earning its cost of capital. A decade at 15% is a four-bagger.

 

I'm being generous with the 15%.  It could've been 10%.  I don't remember the number but I remember once I saw the number I decided to look at something else although I remember seeing the number was not terrible but not great.  I obviously don't think its much of a compounder but didn't want to stir anything. 

 

I looked at this a while back so my memory is foggy, but basically what I did was take some deals and calculate the return on the deals, adjust for cash and leverage.  Keep in mind there is a dividend and the argument is the market will turn up while ALS is investing, so intrinsic value is higher than what the market is giving it credit for.  I think that's the crux of the thesis but I'm not buying it.  I'm curious if some of the bulls have better arguments.

 

Book value/share went up rapidly in their early years when they grew up from a tiny nothingcap into a microcap while riding the China-led commodity super-bubble, but after about 2008, book value/share stabilized and has been hovering around the same range (6.5-9.5). The dividend only showed up in 2011, and it's too small to make much of a difference in this case.

 

It's also worth nothing that they spent a fair bit of money buying back shares and they haven't yet really gotten any return on that money. This was during a time when many said there was blood in the streets in their area, and yet they apparently couldn't find elsewhere to deploy that capital at better returns.

[linealdin]

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/551-tsx-venture/wlf/64063-wolfden-extends-high-grade-fwz-discovery-with-a-second-drill-hole.html

 

Wolfden extends the footwall zone with a second drill hole hit.

 

https://www.wolfdenresources.com/wp-content/uploads/2019/06/WolfdenPickettMtJun272019.pdf

 

Wolfden’s current presentation shows the importance of the footwall zone to expanding the 4 million tonne resource at Mt. Pickett. It is potentially a long and rich lens.

 

[linealdin]

Altius reports spending C$803,088 to buy back 66,000 shares. Purchases in the second half of June.

 

Yamana reports Chapada produced 31.23 million pounds of copper in Q2. Strong.

[linealdin]

https://www.google.com/amp/s/www.proactiveinvestors.com.au/companies/amp/news/223655

 

Lithium Royalty Corp spends A$8.125 million on a 2.5% royalty on the Finniss lithium project in Australia. Altius has a large equity position in LRC and has a 10% direct participation right in LRC’s royalty deals. This is LRC’s 4th royalty deal. Gaining weight for an eventual public listing.

 

https://1hwvv3e8td62pxnul3irjfz1-wpengine.netdna-ssl.com/wp-content/uploads/2019/05/1.-Q1-2019-Lithium-Royalty-Corp-Letter-to-Investors.pdf

 

This is LRC’s Q1 2019 investor newsletter with corporate development highlights and an overview of the lithium market.

[linealdin]

https://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvTDYD4Ai7wBaZof9oke92GA%3D%3D

 

Allegiance buys New Elk hard coking coal mine in Colorado for $1 and an agreement to pay US$11 million in debt settlement and reclamation bond. Mine is fully permitted and built. Looks like a turnkey operation.

 

Altius is Allegiance’s largest shareholder and should benefit if Allegiance returns this mine to profitable operation.

 

 

[bizaro86]

As someone who has an interest in the sale of that mine, I'm pleased it sold and fine with the price, although I think the fact that they get a year to pay even the initial consideration is a long time to wait for my money.

[linealdin]

http://altiusminerals.com/uploads/2019-07-17--Altius-Q2-2019-royalty-revenue-FINAL.pdf

 

Looks like Altius sold some LIF shares in Q2. C$3.494 million in LIF dividends / 90 cent per share Q2 dividend = 3.882 million shares of LIF.

 

Last quarter Altius owned 6.3% or approximately 4.032 million shares of LIF.

 

So Altius cashed out 150,000 shares when LIF spiked to C$34 to C$35. A quick C$5 million to help with the debt reduction campaign?

 

Dalton in the last conference call did mention potentially establishing a small trading position within LIF holding.

 

 

[linealdin]

Allegiance Coal currently trading at 15 cents. Market seems to like their move to purchase the New Elk mine. Altius is Allegiance’s biggest shareholder at 57.4 million shares, currently worth A$8.61 million.

 

Altius owns so many damn shares of AHQ that it’s going to reap a big score if Allegiance executes its plans to become a met coal producer.

[linealdin]

Kargl-Simard going wild raising cash for Adventus. C$14.3 million bought deal financing, at C$1 per share, follows the C$12.1 million financing, at 86.7 cents a share, by Nobis Group.

 

Kargl-Simard’s best attribute is that he is connected with the money people. Very few resource juniors are able to conjure cash for their projects the way Adventus does.

 

Adventus spiked to C$1.16 after the financings. Altius’s position worth C$18.1 million at that level, a little less at the current share price of C$1.08.

 

(Kargl-Simard also sold 900,000 shares at C$1.02 recently. Taking care of his bottom line.)

[linealdin]

https://www.google.com/amp/s/www.cbc.ca/amp/1.5237586

 

Mosaic idles high cost potash production at Colonsay (mine with no Altius royalty) in favor of ramp up at Esterhazy K3 (on which Altius has a big royalty). Very similar to how Nutrien idled high cost production in New Brunswick (no Altius royalties) in favor of ramping up Rocanville (important Altius royalty).

 

I want to see Altius’s potash royalties bring in around C$22 million total in 2019.