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ALS.TO - Altius Minerals


Guest Dazel

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Royal Gold hit another 52 week high today....$72...making Altius' stake in the company now worth $38.1 million...the $38 million is all  profit from the IRC deal.

 

hopefully the management is doing what they do best in this latest downturn...

 

they are trading for less than cash. crazy times.

 

Dazel.

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Crazy times indeed:

 

Altius Market cap: $300m

 

Cash: $190m

Alderon shares : $100m

Royal Gold shares: $38m

 

Total: $328m

 

Everything else: $-28m

 

It seems like the market is pricing Altius as if its stake in Alderon was going to zero.  Meanwhile it prices Alderon as if development will continue.  Something has to give...

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Can you confirm whether my numbers are correct and if the Altius share count is fully diluted? Does the $190m in cash include the Cranberry Capital joint investment? Thanks!

 

Altius shares outstanding: 28,815,895.

 

In addition to cash Altius owns:

 

32,285,006 Alderon shares.

 

529,297 Royal Gold shares.

 

 

 

 

 

 

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Crazy times indeed:

 

Altius Market cap: $300m

 

Cash: $190m

Alderon shares : $100m

Royal Gold shares: $38m

 

Total: $328m

 

Everything else: $-28m

 

It seems like the market is pricing Altius as if its stake in Alderon was going to zero.  Meanwhile it prices Alderon as if development will continue.  Something has to give...

 

What I like is we get Voisey Bay royalty for free. This somewhere between 75-100M worth.

 

I'm curoius to see what they can recuperate from the refinery project... 5-10M?

 

 

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Well, that was dumb. I didn't think to check Alderon. Up a lot on 4x volume, so some of that probably spilled over to altius, though I'm still not sure if there's a specific reason for the jump.

 

This piece has a lot of nice things to say about Alderon, though nothing really new:

 

http://www.businessinsider.com/rodney-cooper-bullish-on-iron-ore-and-copper-2011-8

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"Over 100k shares traded today. Wonder if there was a news item that hasn't hit the wires I monitor yet.. Anyone has seen anything? Could be just a random fluctuation in the spatio-temporal-continuum, though  ;)"

 

we were part of the buying......there was a large seller in Altius over the last 2 weeks....yesterday they were dumping at $10.30....odd for us to have liquidity in buying so we assumed it was forced or tax loss selling. This was before the pop in Alderon.

 

this seller or sellers along with the fact Altius is in a "quiet period" before earnings and therefore cannot buy shares have driven the shares to stupid levels.

 

 

 

Dazel.

 

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http://www.mbironoreindex.com/

 

iron ore is now at a 3 month  high! just in time for the Alderon scoping study that is out this month. We expect the numbers to look very good for production at Alderon at which time the world will take notice of the value of Alderon's potential.

 

The really wonderful part for both Alderon and Altius is that the potential suitors are awash in cash and have the ability to take on massive amounts of leverage for capital build outs at record low interest rates. Things could get very interesting.

 

Dazel.

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this seller or sellers along with the fact Altius is in a "quiet period" before earnings and therefore cannot buy shares have driven the shares to stupid levels.

 

 

That's a good point. What's the rule on the quiet period & buybacks? How long? Is it the same in the US as in Canada?

 

As for the prices being stupid, indeed. I bought some at 10.15 on Monday :)

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I am pretty sure they are different for each company....not positive though.

 

Altius usually releases results around September 10th ...so I am assuming they are in a black out period.

 

 

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Crazy times indeed:

 

Altius Market cap: $300m

 

Cash: $190m

Alderon shares : $100m

Royal Gold shares: $38m

 

Total: $328m

 

Everything else: $-28m

 

It seems like the market is pricing Altius as if its stake in Alderon was going to zero.  Meanwhile it prices Alderon as if development will continue.  Something has to give...

 

What I like is we get Voisey Bay royalty for free. This somewhere between 75-100M worth.

 

I'm curoius to see what they can recuperate from the refinery project... 5-10M?

 

 

I have not seen anybody discounting the ~5M$/year expense in General and administrative.

Would it not more or less cancelled the Voisey Bay royalty ?

 

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I have not seen anybody discounting the ~5M$/year expense in General and administrative.

Would it not more or less cancelled the Voisey Bay royalty ?

 

Don't forget about interest on cash.  I think that currently pays for about half the General and administrative.  Conceptually, to be conservative, I think about the company as essentially being funded by the royalty and the interest on cash.  Even if you cancel the voisey bay royalty out with the G&A it is still cheap.  In my own spreadsheet I also haircut cash and subtract all the liabilities.  But, that is just to look at the numbers in an extra conservative way.  In reality, if you are investing in the company for the long run, you are implicitly assuming that management will be bringing significantly more than $5 million in added value per year...

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Voisey Bay... is Royal gold's largest royalty and is trading there at aPE of above 60 right now...$37 million for less than 6 months will make it the largest contributor to Royal Gold's portfolio in this calender year...

Now if you assumed Royal Gold wanted the rest of it from Altius, how much would they pay for it? If I were getting a multiple like like that I would think about paying a good amount of money to get it...half of their multiple is 30 times...which makes it worth well over $100 million....and immediately at a value in range $ 300 million to Royal Gold. Actually things get better for the value....As Vale is spending about $2.6 billion in capital at Voisey Bay....

 

http://www.vbnc.com/NickelProcessingPlantCareerInfo.asp

 

As for admin expenses they were $2.5m, $4.8m in the previuos years...obviously in good years there are bonuses paid.

Income 2 years ago was $4.5 m and this year the Royal Gold share appreciation will add $20m plus. We are not worried about the admin costs as you can see there is a ton of value in this company if you have a look. We think it is ridiculous what you could get for this company in an auction of their assets....

Royal Gold could buy the whole company for less than cash and get the entire purchase price out of their new multiple on Voisey Bay alone!

 

Dazel

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“We are very excited to see such a high NPV, especially since this PEA is only based on the Rose

Central zone  of the Kami Property.  There is  significant upside once we include North Rose and

Mills Lake,” says Tayfun Eldem, President and CEO of Alderon.  “These positive results allow us to

move directly to the Feasibility Study phase and we expect that report by the third quarter of 2012.”

 

The PEA demonstrates very attractive project economics.  Based on a production rate of 8 million

tonnes per year of iron ore concentrate at a grade of 65.5% iron and an iron recovery of 82.8%, the

PEA shows a Net Present Value (“NPV”) of US$3.07 billion at a cash flow discount rate of 8%.  The

internal rate of return (“IRR”) for the project is 40.2%.

 

Wonder what kind of NPV North Rose and Mills Lake have. Anywhere close to Rose Central, or just a small faction? I don't remember seeing anything preliminary on those, but maybe I missed it.

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“We are very excited to see such a high NPV, especially since this PEA is only based on the Rose

Central zone  of the Kami Property.  There is  significant upside once we include North Rose and

Mills Lake,” says Tayfun Eldem, President and CEO of Alderon.  “These positive results allow us to

move directly to the Feasibility Study phase and we expect that report by the third quarter of 2012.”

 

The PEA demonstrates very attractive project economics.  Based on a production rate of 8 million

tonnes per year of iron ore concentrate at a grade of 65.5% iron and an iron recovery of 82.8%, the

PEA shows a Net Present Value (“NPV”) of US$3.07 billion at a cash flow discount rate of 8%.  The

internal rate of return (“IRR”) for the project is 40.2%.

 

Wonder what kind of NPV North Rose and Mills Lake have. Anywhere close to Rose Central, or just a small faction? I don't remember seeing anything preliminary on those, but maybe I missed it.

 

 

"Alderon is presently exploring the Rose North deposit which is not developed sufficiently to be included in the PEA. As the Mills Lake deposit is anticipated to account for a much smaller portion of the overall resource, it has not been included in the PEA."

 

 

As mentioned in the release,  Mills Lake is ignored, but I want to know how small that is? (1M, 10M or 100M, or even 1B to be ignored).  I am waiting for the number from North Rose too. Hope it could surprise us.

 

Market has no reaction to this release.

 

 

 

 

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"Alderon is presently exploring the Rose North deposit which is not developed sufficiently to be included in the PEA. As the Mills Lake deposit is anticipated to account for a much smaller portion of the overall resource, it has not been included in the PEA."

 

 

As mentioned in the release,  Mills Lake is ignored, but I want to know how small that is? (1M, 10M or 100M, or even 1B to be ignored).  I am waiting for the number from North Rose too. Hope it could surprise us.

 

Market has no reaction to this release.

 

It seems like Mills Lake is not that small

 

From their NI 43-101:

 

Categorized Mineral Resource Estimate for Kami Iron Ore Project

(Cutoff of 20% Tfe)

 

Category        Zone                  Tonnes (Million)          TFe%  magFe%  hmFe%  Mn%  SiO2%

 

Indicated        Rose Central      376.1                          29.8  18.6          8.3          1.56    44.9

                        Mills Lake            114.1                          30.5    22.1        5.7          1.02    45.6

 

Inferred          Rose Central      46.0                            29.8    19.2        8.0          1.61    44.9

                        Mills Lake            71.9                            30.7    22.2        6.0          1.05    4

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