ALS.TO - Altius Minerals

[bizaro86]

Well maybe you should go to Alderons website and read it. Kami has a positive BFS. Opex per tonne are a little over $40, but I don't believe that. It'll be higher but still profitable IMO. But always do your own DD.

 

Sorry, of course you're correct about the Kami feasibility study, I meant the one for Julienne Lake with the combination of ALS land and the new gov't land.

[SharperDingaan]

You were given the JL drill results in the most recent press release, & they were drilling on the crown land. They are now negotiating for the right to develop a mine on that crown deposit, & will include the kind of mine that will be acceptable.

 

SD

 

[matts]

Gio, I'm curious whether your bullishness on Altius has been affected by the recent events at Lancashire. Should we be discounting for key man risk here as well?

 

Thanks,

[Guest Dazel]

http://www.mining.com/one-more-reason-iron-ore-price-wont-stray-far-from-120-83308/

 

 

keep in mind that both Kami and JL have a 10% cost advantage because of the curency depreciation in the Candian dollar....this is not in the kami feasability study where the US-CDN currency conversion was 1-1. This combined with the possible purchase-amalgamation of the Wabush asset-infrastructure could make the build out much less than that contemplated in the numbers.

 

another option that SD has mentioned that has not got much attention is the possibility of a large scale consolidation of Kami and JL. This would allow for the chinese to secure 37 mta of annual supply..16mta(Kami) and @ 21mta (JL)....

By consolidating the two they would bring scale to the projects (lower long term prodution costs)...But the major and most important factor is there is not an opportunity globally to secure these type of resources with surrounding infrastructure already in place and billions of tons of resources (long life mines). This would make a lot of sense to chinese buyers.

 

if this were to happen we would see Altius stock price would more than double over night as Altius royalty income from these transactions would be above $120m per annum with iron ore at $110. The market is missing the huge win at JL. Altius deep relationships with Chinese steel makers has been cultivated by Brian Dalton who has been in China working tirelessly for a number of years...he simply is giving the steel producers what they want which is secured high quality iron ore supply for decades with minimal infrastructure cost build out. Kami and JL are a perfect fit for the Chinese government mandated plan for its steel industry and they have a $4 trillion dollar piggy bank to use in development of these assets.

 

Dazel.

[giofranchi]

Gio, I'm curious whether your bullishness on Altius has been affected by the recent events at Lancashire. Should we be discounting for key man risk here as well?

 

Thanks,

 

matts,

in earnest I had never witnessed what has happened at Lancashire before…

The people I like to partner with usually are true maniacs of what they do… Their flaws usually ensue from a lack of balance… They often run the risk of jeopardizing their personal lives, because of the love for what they do… This is what I usually worry about: they might lose clearness of vision, because too much involved, mentally and emotionally, in what they are doing…

Instead, the fact they might all of a sudden quit something they have devoted many years of their working lives to build… well, simply never heard of it before!

 

Until proven wrong again, I will treat what has happened at Lancashire as the exception to the rule.  ;)

 

Gio

 

[shalab]

Looks like more India production is going to come online soon.

 

http://www.bloomberg.com/news/2014-04-21/india-s-top-court-ends-mining-ban-in-goa-with-output-condition.html

 

[Williams406]

From the article: "Market watchers have been calling down the price of iron ore to single digits for a long time..." Oy vey--that would put a damper on things around here. My DCF models for JL and Kami "wobbled a bit" with a $9 iron ore price until I lowered my discount rate to accomodate. We're okay, but that was a close one.

 

As one with little mine development experience save the literal digging of lots of holes as a kid and figuratively digging many deep ones, generally with my wife, I would appreciate clarification regarding the super mine concept of JL, Kami, and Wabush. I think I understand the benefit to Kami of scooping up Wabush assets. I'd guess there is lots of mining and processing equipment with remaining useful life that can be had inexpensively. Is there more to this part of the idea?

 

Looking at a map, it appears JL is maybe 20-30 kilometers from Kami. Perhaps in the mining business that qualifies as being next door, but that strikes me as a long distance that would eliminate a lot of advantages to combining mining operations. I understand greater negotiating power with suppliers, but don't understand mining well enough to see how JL and Kami would fit together. Not disputing there is a case for combination, just saying I may lack the knowledge to see it. TIA for any insight.

 

 

 

 

 

[Guest Dazel]

 

Williams406,

 

First and foremost the financial backing of one powerful group of owners with deep pockets that need the product and are dedicated to maximizing production which will give Kami and JL scale. This would also help with the financial markets willingness to finance which would include Chinese banks. The Chinese governments willingness to finance because of the material amount of iron ore supply secured. It is part of the governments plan to be involved in these large scale supply transactions involving long life mines.

 

Other synergies

suppliers including a better rail and power deal because of volume, shipping costs,no sales force needed, one management team to deal with one big owner (group), one set of regulatory hearings for foreign ownership in both Canada and China. Government support for one large workforce and local government negotiation obviously this where Wabush closing might help with government

incentives. Kami and Jl would become the largest iron ore miner in Canada at full capacity.

[Crip1]

I sold one of my other holdings (LUK, for those interested) and plowed about half of the resultant funds into ALS. So, for those waiting for a better entry point, if the "Crip Rule" stays in tact, it should only take 3-5 days for a good solid 5-10% decline in price.

 

 

You're welcome.

 

 

-Crip

[rjstc]

Williams 406  -  I suspect you have more mining knowledge than most based on this statement you made.

 

"As one with little mine development experience save the literal digging of lots of holes as a kid and figuratively digging many deep ones, generally with my wife"

[investor-man]

Williams 406  -  I suspect you have more mining knowledge than most based on this statement you made.

 

"As one with little mine development experience save the literal digging of lots of holes as a kid and figuratively digging many deep ones, generally with my wife"

 

Speaking of which, there was a mining book suggested somewhere deep in this thread. Can I call upon the forces of "lazy-web" to ask what that book was and more suggestions to get a better feel for the mining industry?

 

Thanks

 

P.S. Thanks Crip!

[ItsAValueTrap]

As one with little mine development experience save the literal digging of lots of holes as a kid and figuratively digging many deep ones, generally with my wife, I would appreciate clarification regarding the super mine concept of JL, Kami, and Wabush. I think I understand the benefit to Kami of scooping up Wabush assets. I'd guess there is lots of mining and processing equipment with remaining useful life that can be had inexpensively. Is there more to this part of the idea?

 

This is my guess.  Because the mines are located close together, you can reduce the workforce slightly.  There are some people who sit around for much of the day and work furiously in short bursts.  So people like medics and IT people may fall into that category.  Because the mines may be a short drive from one mine to another mine, consolidating the operations could increase the efficiency of these people so that they spend less time sitting around.

 

I don't think that the cost savings are material.  Cliffs kind of has this going with Wabush and Bloom Lake I think.  (Wabush may be closing down or something.)

[SharperDingaan]

Cheaper port, railhead, & processing facilities. Everybody has to get their ore on a boat, & it may be useful to upgrade it by pre-processing. Significant scale (& marginal cost) advantages that you couldn't otherwise get unless you could split the cost 3 ways.

 

Longer mine life. Wabush was not cost effective because there wasn't any higher grade ore to mix with it, or cheap processing available to enrich it. Add a processor & higher grade ore for blending, & suddenly there is a lot of additional ore that can be added to, or withdrawn from production, very easily. To Chinese interests, a large quantity of swing production to mitigate price swings.

 

Assuming Chinese financing, these mines would be very much similar to the typical vendor financing attached to new build shipping. State sanctioned, very cheap, long term, & primarily with a view to securing distribution (goods out, oil/gas & minerals in). Very attractive, & the prospective newfie/mandarin culture mix should be interesting.

 

Significant bulk buying opportunities. Those huge mine trucks run around 1M/pop, + associated servicing (people/parts). Order 150 copies all in the same location; & extra trucks will be 1/3 to 1/2 off the list price (cost plus), & service time will be measured in hours - not days.

 

For practical purposes, consider each an independent & separate mine, but expect bulk buying & operating costs to err on the downside once the mines have been operating for 1-2 years. For those interested, look to the Hemlo gold fields ... & to a lessor extent - Fort McMurray & the Alberta Tar Sands.

 

SD

 

 

[yader]

Williams 406  -  I suspect you have more mining knowledge than most based on this statement you made.

 

"As one with little mine development experience save the literal digging of lots of holes as a kid and figuratively digging many deep ones, generally with my wife"

 

Speaking of which, there was a mining book suggested somewhere deep in this thread. Can I call upon the forces of "lazy-web" to ask what that book was and more suggestions to get a better feel for the mining industry?

 

Thanks

 

P.S. Thanks Crip!

 

investorman,

 

I think this might be what you're looking for.

 

http://glennchan.wordpress.com/2012/11/04/reading-round-up-books-on-mining/

[Liberty]

Cheaper port, railhead, & processing facilities. Everybody has to get their ore on a boat, & it may be useful to upgrade it by pre-processing. Significant scale (& marginal cost) advantages that you couldn't otherwise get unless you could split the cost 3 ways.

 

Longer mine life. Wabush was not cost effective because there wasn't any higher grade ore to mix with it, or cheap processing available to enrich it. Add a processor & higher grade ore for blending, & suddenly there is a lot of additional ore that can be added to, or withdrawn from production, very easily. To Chinese interests, a large quantity of swing production to mitigate price swings.

 

Assuming Chinese financing, these mines would be very much similar to the typical vendor financing attached to new build shipping. State sanctioned, very cheap, long term, & primarily with a view to securing distribution (goods out, oil/gas & minerals in). Very attractive, & the prospective newfie/mandarin culture mix should be interesting.

 

Significant bulk buying opportunities. Those huge mine trucks run around 1M/pop, + associated servicing (people/parts). Order 150 copies all in the same location; & extra trucks will be 1/3 to 1/2 off the list price (cost plus), & service time will be measured in hours - not days.

 

For practical purposes, consider each an independent & separate mine, but expect bulk buying & operating costs to err on the downside once the mines have been operating for 1-2 years. For those interested, look to the Hemlo gold fields ... & to a lessor extent - Fort McMurray & the Alberta Tar Sands.

 

SD

 

I hadn't thought of the extra flexibility provided by blending from the various mines, This makes a lot of sense, thanks SharperDingaan, your insights are appreciated.

[hohi]

Cheaper port, railhead, & processing facilities. Everybody has to get their ore on a boat, & it may be useful to upgrade it by pre-processing. Significant scale (& marginal cost) advantages that you couldn't otherwise get unless you could split the cost 3 ways.

 

Longer mine life. Wabush was not cost effective because there wasn't any higher grade ore to mix with it, or cheap processing available to enrich it. Add a processor & higher grade ore for blending, & suddenly there is a lot of additional ore that can be added to, or withdrawn from production, very easily. To Chinese interests, a large quantity of swing production to mitigate price swings.

 

Assuming Chinese financing, these mines would be very much similar to the typical vendor financing attached to new build shipping. State sanctioned, very cheap, long term, & primarily with a view to securing distribution (goods out, oil/gas & minerals in). Very attractive, & the prospective newfie/mandarin culture mix should be interesting.

 

Significant bulk buying opportunities. Those huge mine trucks run around 1M/pop, + associated servicing (people/parts). Order 150 copies all in the same location; & extra trucks will be 1/3 to 1/2 off the list price (cost plus), & service time will be measured in hours - not days.

 

For practical purposes, consider each an independent & separate mine, but expect bulk buying & operating costs to err on the downside once the mines have been operating for 1-2 years. For those interested, look to the Hemlo gold fields ... & to a lessor extent - Fort McMurray & the Alberta Tar Sands.

 

SD

 

Great stuff! Thanks a lot, SD! Keep it up ;)

 

I hope you all had some nice easter holidays. To a good week ahead...

[Williams406]

Dazel, Trap, and SD: Thank you for your insight--my debt to you keeps growing. Not in a legally-binding sense, of course...

 

I may ask Mr. Dalton to make that order 151 copies--I could use a new commuter vehicle. Won't my wife be surprised?

[Blue Macaw]

Only a week left until the news about the royalty deal....exciting times

[nostradamus]

Personally, I am starting to get confused by the market reaction to ALS news announcements.

 

When ALS announces that it is in exclusive talks for the JL project, significantly raising the probability of a massive future royalty stream, at practically zero cost to its shareholders, the stock price barely moves.

 

In contrast, when ALS announces that it is spending a huge amount of money (including raising a significant amount of debt) on the acquisition of a pool of royalties the stock price jumps.

 

Weird.

[Liberty]

Personally, I am starting to get confused by the market reaction to ALS news announcements.

 

When ALS announces that it is in exclusive talks for the JL project, significantly raising the probability of a massive future royalty stream, at practically zero cost to its shareholders, the stock price barely moves.

 

In contrast, when ALS announces that it is spending a huge amount of money (including raising a significant amount of debt) on the acquisition of a pool of royalties the stock price jumps.

 

Weird.

 

My guess is: The royalty deal only asked the market to look a little bit ahead to see dollar signs. JL might be a better opportunity all things considered, but it asks that you look even farther ahead, and Mr. Market doesn't see that far (especially for a stock that is still pretty under the radar).

 

Which is great because if the market was efficient, we'd all be in index funds.

[investor-man]

 

 

investorman,

 

I think this might be what you're looking for.

 

http://glennchan.wordpress.com/2012/11/04/reading-round-up-books-on-mining/

 

Thanks!

[Williams406]

Effective one on one defending in soccer calls for pressuring the ball carrier close enough that the attacker drops his eyes to the ball. This simplifies the defender's job because the attacker can no longer see good passing lanes and is only focused on the few square yards in his limited field of vision. Smart tactical insight is forgone because of the pressure-induced myopia. The great ones Baresi and Maldini both worked this principle to the benefit of AC Milan as Gio well knows since he's way too smart to be an Inter man. For my Canadian and Scandanavian friends, I suppose this is true in hockey as well. If you're from somewhere else, we'll stick with soccer, it's the safe bet.

 

Some prospective Altius investors will barely see Kami or JL in their narrow field of vision, limited by the pain of 2013 in the natural resource market. As Liberty suggested, the PMRL and CDP acquisitions are visible and come closer to 'bird in hand.' But, I think there are a lot of prospective future Altius shareholders who simply aren't even on the pitch yet. If you're a large institutional manager, you could look squarely at Altius, like what you see, but come away saying "Not enough trading volume yet." Others may be well informed but take a pass perceiving greater risk. I respect these folks, they may be right. But if not, they shouldn't be jealous when I roll by them in my gargantuan earth mover after delivery (I got the hybrid).

 

If it was the environment that existed a couple years ago, Mr. Market probably responds more enthusiastically to news of power lines, releases from environmental assessments, and JL news. But Alderon stock wouldn't be where it is or Altius at $15. Having added a lot of shares since December 24, I'm glad for what I think is Mr. Market's myopia. 

 

 

[cwericb]

Does anyone know if Fairfax or Chou has looked at Altius? Not that I would like to see Fairfax involved (many of us here have learned from past painful experience).  But does not Altius seem to be exactly the type of investment they both look for or am I missing something?

[Guest Dazel]

 

Williams406,

 

Thanks for the excellent post! I will match it with Mr. Buffett's famous quote that all North Americans will get.

"I invest like Wayne Gretzky plays hockey which is he does not go where the puck is he goes to  where it is going"

 

Altius is  unknown outside the smartest natural resource value investors...that will change as it is a rare gem...that will eventually be impossible to ignore.

 

 

[Guest Dazel]

 

Once the JL deal is negotiated and finalized with the government (gov will want it done quickly) we will get more appreciation...after the PMRL deal is done I will post on what a $70m per annum royalty for 30 years would cost in the marketplace if you were to buy it.