ALS.TO - Altius Minerals

[phil_Buffett]

Altius has not traded in the market since it closed the PMRL deal....It was halted from the share issue announcement.

$65m is not a large share issue. If Dalton thought his stock was overvalued he would have raised a lot more money thorough equity not debt....

 

I guess we can tell from the tone of some posts who was selling Altius and who was buying.

 

Dazel.

 

i bought the last weeks as much as i can. in 4 Portfolios  ;D ;D ;D. now i have no more Money left.  ;D  ;D so i hope it goes up

[alertmeipp]

I thought the chance of this deal not closing was low, no?

[investor-man]

Altius has not traded in the market since it closed the PMRL deal....It was halted from the share issue announcement.

$65m is not a large share issue. If Dalton thought his stock was overvalued he would have raised a lot more money through equity not debt....

 

I guess we can tell from the tone of some posts who was selling Altius and who was buying.

 

Dazel.

 

Heh, context is definitely lost in text. My tone should be perceived as pure stupidity, not one of skepticism :)

 

So if I break it down like I'm five:

 

- deal costs $269.1 million

- they have $125.74 million in cash/securities

- they are using that and $140 million line of credit and a $7.2 million loan to pay for the whole thing

- which gives them something like $272 million

- having no cash might freak them/financiers out, so they're selling some shares to put $65 - $75 million back on their balance sheet.

 

I feel more comfortable with this after working through the numbers. Anything that should be added?

[SharperDingaan]

Can I ask is this based in your past experience of similar companies or a former company Mr. Dalton ran? Thanks!

 

No experience with Dalton companies, but we have been in the market for a very long time; & we know supply/demand.

 

These are not deep value investors; they are institutions, they are buying a long lived world class royalty stream, & 20x earnings is cheap for what they are getting. This is simply the start of investor turnover; at the margin - deep value investors giving way to growth/momentum investors, with a different POV.

 

The fact is - the ALS float is too small for institutional purposes, especially if ALS becomes part of the index. They could have issued the additional shares via convertibles, or gone with an auction. They would not have gone the auction route, if they did not think they would maximize price.

 

We had suggested 20x eps (20 x $1.59 = $31.80) once the deal was done - & dividends were declared. Approx 2.45M shares for 75M of capital raise. For this many shares; there is only 1 place you can get them - & you have to anticipate/outbid your likely competitors. There will be gaming, & some will overbid - to receive extra shares to sell on to rivals at inflated prices.

 

We want at least 4x our cost, & even then we will only give up 50% of our holding. Should not really be a problem once JL is spun off, & the value in the rest of the ALS pipeline starts being recognized.

 

Greed is great!

 

SD

 

 

 

[JAllen]

 

 

Looks like Brian Dalton figured out that Alderon is a bust?

 

Dalton is not stupid.  He would not do a secondary offering unless Altius shares were overpriced.

 

I agree Dalton is not stupid. Perhaps, though, he might do a secondary offering with shares below intrinsic value if he had confidence he was acquiring more than he was giving up.

 

 

The royalties are awesome, but just doing some cursory math on CDP tells you why he's fine with selling shares here.  He's right to do this and maintain an ultra-conservative capital structure.

 

Hi JAllen,

 

Can you explain this like I'm five? The way I see it, if there was confidence that the JL deal were to succeed, they'd wait to issues share until after because the share price would surely jump. To my mind, issuing shares here, mixed with good news, means they think the price will likely drop. Maybe there's some other reason, like they desperately need money to buy some land, but the simple answer to "why are you selling shares you just bought?" is the same as any of us would answer: "because they've reached fair value."

 

 

It's impossible to win a race if you don't finish it. Over the last four months Altius has gone from an interesting company with a couple of interesting projects and excellent management to one with the most promising future of any public company we're aware of (go back and read some of my older posts expressing my extreme skepticism about Kami, China etc. when Altius' value was very reliant on almost Kami alone and this one to understand how our opinion of Altius has changed). 

 

 

With massive progress on Kami, JL, now there's a steady flow of royalties that will be coming in from contractual, non-discretionary commodities, and CDP!  Like I said, if you do even the most cursory of math on CDP (you can even exclude ALL of the potential coal royalties therefrom) you will see that if you place a low probability on each of Altius' projects and CDP, that a couple projects currently in the hopper WILL happen (say 2/~10 to be conservative).  Pretty much any of these are transformative projects for Altius' in the context of its current market cap.  This excludes any future projects that we don't know about. Remember that current purchasers are only paying a couple hundred million for this upside; a majority of Altius' value is solidly represented by the royalty streams that will mostly be dividended out as of today.

 

 

So in my not so humble opinion, the future of Altius has become so bright over the last few months that this share sale frankly doesn't matter and will be quickly forgotten over the coming five years.  It is designed to ensure that Altius reaches the finish line safely and injury free so it can attain the immense prosperity that appears to be coming its way. 

 

 

If you look at CDP: take just the Potash (which is an absolutely crucial commodity that will be consumed until there doesn't exist a pound regardless of any environmental concerns because of its role in agriculture), you can do crazy things like use 15% discount rates, assume no Potash price inflation over time, assume half of the Potash is never produced, and you get annual royalties of almost the current market cap of Altius, from this one of many future projects.  This excludes ALL other projects and existing royalties, including the 7+ billion tons of coal from CDP and 11,000 hectares of additional land with no resources attributed to.  The potash that comes with CDP is not just royalty interests, it's 100% interests, enabling Altius to spin off more projects but retain royalties.  The existing potash royalties carry higher royalty rates - 4.5% - while potash carries a much higher price than iron ore ~$350.  Keep in mind that the potash I'm referring to is NOT the producing-royalty potash - it's potash sitting in the ground. 

 

 

Some interesting math is this: potential CDP potash billion tons: 2 -  current price of potash ~$350/ton.  2B * $350 is......

 

 

It's hard to see wealth while it's still lying underground - it's actually impossible to see and understand, but investors need to look at the big picture and wonder what Altius will look like in five and ten years. A little bit of math and conservatism goes a long way.

 

 

Keep in mind that we really hope to hold Altius 10+ years, so our perspective is quite a bit longer than most folks.  Also, none of our estimates are precise; we merely look at what could happen, assume only a fraction will and hope for the best.

[TwoCitiesCapital]

 

 

Looks like Brian Dalton figured out that Alderon is a bust?

 

Dalton is not stupid.  He would not do a secondary offering unless Altius shares were overpriced.

 

I agree Dalton is not stupid. Perhaps, though, he might do a secondary offering with shares below intrinsic value if he had confidence he was acquiring more than he was giving up.

 

 

The royalties are awesome, but just doing some cursory math on CDP tells you why he's fine with selling shares here.  He's right to do this and maintain an ultra-conservative capital structure.

 

Well it was obvious to everyone that ALS didn't have all the money to buy the royalties, especially after the announced they would buy 100% of CDP. I don't like a PP and I don't like debt. But I like the royalties and CDP properties and am confident that our management thought it through.

 

I don't believe ALS thinks Alderon is a bust. They just needed the money now, or they would have lost the deal. I am wondering which equities they will sell / already sold. Would be hard to sell all of the Virginia Mines equity so fast. Or maybe it is all done already...

 

This. There are two reasons Brian Dalton would sell shares and everybody is only focused on one of them. Shares could be perceived as expensive OR management needs the cash to close the deal in May. Seeing as we haven't heard any news of Kami being sold, and Altius is unlikely to exit it's other investments, it decided that issuing shares to lower it's debt burden and replentish cash was a good idea. I hardly fault them.

 

Secondly, I don't know how likely SDs scenario of issuing shares at a premium is, but the first example I could find doing a Google search was a company that placed it's shares to two institutional shareholders at an 85% premium to the then current market price because they were too illiquid for the investors to obtain a sizable position any other way. I'm not suggesting the same will happen here, but if Altius believes it can place shares at $20 a share to institutional investors would anybody on this forum fault them for doing so? $20 a share is only "undervalued" at this point if both Kami and JL go through and there is still risk involved with those developments. All large companies had follow on offerings that are dilutive...that didn't stop investors in Coke, Berkshire Hathaway, etc. from growing enormously wealthy because the proceeds were invested and compounded on.

 

It's impossible to win a race if you don't finish it. Over the last four months Altius has gone from an interesting company with a couple of interesting projects and excellent management to one with the most promising future of any public company we're aware of (go back and read some of my older posts expressing my extreme skepticism about Kami, China etc. when Altius' value was very reliant on almost Kami alone and this one to understand how our opinion of Altius has changed). 

 

 

With massive progress on Kami, JL, now there's a steady flow of royalties that will be coming in from contractual, non-discretionary commodities, and CDP!  Like I said, if you do even the most cursory of math on CDP (you can even exclude ALL of the potential coal royalties therefrom) you will see that if you place a low probability on each of Altius' projects and CDP, that a couple projects currently in the hopper WILL happen (say 2/~10 to be conservative).  Pretty much any of these are transformative projects for Altius' in the context of its current market cap.  This excludes any future projects that we don't know about. Remember that current purchasers are only paying a couple hundred million for this upside; a majority of Altius' value is solidly represented by the royalty streams that will mostly be dividended out as of today.

 

 

So in my not so humble opinion, the future of Altius has become so bright over the last few months that this share sale frankly doesn't matter and will be quickly forgotten over the coming five years.  It is designed to ensure that Altius reaches the finish line safely and injury free so it can attain the immense prosperity that appears to be coming its way. 

 

 

If you look at CDP: take just the Potash (which is an absolutely crucial commodity that will be consumed until there doesn't exist a pound regardless of any environmental concerns because of its role in agriculture), you can do crazy things like use 15% discount rates, assume no Potash price inflation over time, assume half of the Potash is never produced, and you get annual royalties of almost the current market cap of Altius, from this one of many future projects.  This excludes ALL other projects and existing royalties, including the 7+ billion tons of coal from CDP and 11,000 hectares of additional land with no resources attributed to.  The potash that comes with CDP is not just royalty interests, it's 100% interests, enabling Altius to spin off more projects but retain royalties.  The existing potash royalties carry higher royalty rates - 4.5% - while potash carries a much higher price than iron ore ~$350.  Keep in mind that the potash I'm referring to is NOT the producing-royalty potash - it's potash sitting in the ground. 

 

 

Some interesting math is this: potential CDP potash billion tons: 2 -  current price of potash ~$350/ton.  2B * $350 is......

 

 

It's hard to see wealth while it's still lying underground - it's actually impossible to see and understand, but investors need to look at the big picture and wonder what Altius will look like in five and ten years. A little bit of math and conservatism goes a long way.

 

 

Keep in mind that we really hope to hold Altius 10+ years, so our perspective is quite a bit longer than most folks.  Also, none of our estimates are precise; we merely look at what could happen, assume only a fraction will and hope for the best.

+1

 

 

 

 

 

 

[TwoCitiesCapital]

http://www.stockhouse.com/companies/bullboard/t.als/altius-minerals-corporation?postid=22497320

 

Thoughts on the AngloAmerican development discussed in the link?

 

Also, I wanted to bump this back up to the front since it was immediately lost in the flurry of announcements that followed this afternoon.

[Liberty]

Latest presentation updated today: http://altiusminerals.com/uploads/Investor-Presentation-(April-28,-2014).pdf

[investor-man]

@JAllen thanks for the post!

[SharperDingaan]

We are now officially a royalty company .....  http://altiusminerals.com/press-releases/view/286

 

Very elegant gentlemen.

 

SD

[JAllen]

I may be wrong about the CDP interests being 100%, according to today's presentation, but nevertheless, the royalty rates are higher for potash and the price is 3X iron ore. 

[gary17]

I'm wondering for those who has looked at alderon / kami closely - was there ever a discussion or disclosure by management about change in the concentration of iron ore? Thanks

[Myth465]

New presentation.

 

http://altiusminerals.com/uploads/Investor-Presentation-(April-28,-2014).pdf

 

I held for 2.5 years, and sold 2 months before the magic happened. Sold at $10....

Will watch for now.

[giofranchi]

Too much speculation in the ALS thread for my tastes…

 

ItsAValueTrap,

I usually like your posts very much, really!

But I don’t understand your rationale with ALS… Sorry!

 

If future growth is half what past growth has been, ALS even without Kami is clearly undervalued. No doubt about it. It’s simply math. If Kami will not be built, don’t you think they will find other opportunities for growth? On the other hand, if Kami ends up being built, future growth might be on par with past growth: in this case, obviously, ALS is even more undervalued today!

 

You say: I don’t know mining well enough to make a reasonable projection about future growth…

But do you really think you understand LMCA’s industry much better?! Personally, I know I don’t.

 

That’s why we try to partner with the best in the world: because they are the ones truly knowledgeable about their own businesses.

Tell me: what’s the point of partnering with them, and then questioning every choice of theirs?!

Sincerely, I don’t understand.

 

Issuing of shares: I cannot really know the true reasons why Mr. Dalton has decided to issue shares. You suggest because ALS shares are overpriced… others suggest because they already have debt and they want to keep a liquid balance sheet… Who is right? I cannot know for sure.

But what I know, instead, is Mr. Dalton has the best interest of ALS, and therefore ALS’s shareholders, always in mind, and will do what’s best to maximize value over the long term.

 

Gio

 

[kirkomi]

I usually like your posts very much, really!

But I don’t understand your rationale with ALS… Sorry!

 

Tell me: what’s the point of partnering with them, and then questioning every choice of theirs?!

Sincerely, I don’t understand.

 

+1.

 

I have pretty much read all the annual reports (since 2000) and a lot of articles written on Mr. Dalton. It is evident that he is an upstanding operator and quite good at it. There is no point questioning every move he makes. As long as he is not actively trying to screw the shareholders, why should we keep such close tabs at what he is doing ? I mean, this is like me trying to run his business. I am sure that I will never measure up to what he knows unless I start my own mining company. There is a limit to what you can learn without actually trying it yourself.

 

I would rather trust him, watch from the sidelines and keep myself abreast with the developments. Choosing to not do anything unless he does something which is clearly stupid. Or, if there is a risk of permanent damage to the business he is operating. One should protect oneself from these biases because sometimes the management thinks that they know better and they pigeonhole themselves into a particular way of thinking; driving themselves and the business towards oblivion.

 

Until then, give him slack.

[giofranchi]

One should protect oneself from these biases because sometimes the management thinks that they know better and they pigeonhole themselves into a particular way of thinking; driving themselves and the business towards oblivion.

 

That’s my definition of mediocre management… certainly not “the best in the world”! ;)

Anyway, I do agree, and I am clearly not advocating to avoid thinking about a business… It is “overthinking” that I often see, and I am wary about.

 

Gio

 

[Guest Dazel]

+1

 

I would suggest you all read Brian Dalton's letter to shareholders....no further comment needed from me on an otherwise longwinded thread he says "exactly" what I am thinking. I have full confidence in him and the Altius team. I have been a shareholder for a long time and will continue to be....my optimism has never been questioned here I have made a "special effort" to bring you all along. Congrats to those that followed and hats off to those that tried....we think that the risk to Altius has been drastically cut and the upside is unmatched in the market in our view. We expect to next collect dividends for decades...SD and others can carry the torch here...

I may start a royalty thread with Altiius as a focus....too tired to hear another iron content question. Believe or don't whatever each of you believe is what matters.

 

Disclosure:we have been buying shares for four years some very low $5.70 and some very high $15's last week...we have been approached to buy into this equity deal we may or may not take part. I have been humble here because that is my character....however, my investing record over the last  decade is in the range of 30% per annum...I will not answer questions anymore. Thank you all.

 

"Every significant price move of any individual common stock in relation to stocks as whole occurs because of a changed appraisal of that stock by the financial community"

 

Phillip Fisher 1958

 

Dazel.

 

 

 

[giofranchi]

I have been humble here because that is my character....however, my investing record over the last  decade is in the range of 30% per annum.

 

I obviously didn’t know that, but I pride myself on recognizing “the best in the world” when I meet them.

 

Thank you very much for everything! :)

 

Gio

 

[Blue Macaw]

Interesting day today.....(or is trading stopped today as well??)

 

Will we see a drop in the share price due to dilution or...

 

I really hope you are right Dazel and SD. If we see 25 CAD per share in a few weeks I would be surprised to say the least. But happy of course.

[DynamicPerception]

No matter what happens, Thank you Dazel and SD.

I expect only good things long term.

 

p.s. Talking of trading, what normally happens in this situation?

      Does trading resume after the $65M offering is complete?

[EliG]

Folks who complain about dilution seem to have forgotten:

 

The terms of the deal announced in December included convertible loan. We would be carrying high interest debt for a few years... and then get diluted anyway.

 

I like the new terms much better.

[cwericb]

There seems to be a lot of pessimism here over the last day or so about Kami and Alderon. Contrarily there have been some recent rumors about a second off take at Kami (which I know nothing about) but the present stock price has moved up over the past few days.

 

But I don’t understand the recent pessimism. Sure it might have been nice for Altius to wait for more good news from Kami, but they couldn’t postpone their financing forever. I don’t see why this suggests a negative view on Kami. At some point they had to pull the trigger and if we are correct in our assessment of Altius’s potential, things will only get better and the share price will continue to rise. Taking a negative view on Kami because of the share issue is like saying other future Altius developments are also in danger since they didn’t wait longer.

 

And as for criticism about the company not buying back shares recently, this should lay those questions to rest. They bought back shares when they were cheap and now that the price has risen by 50% they are using those cheap shares to help finance this deal.

 

As for dilution, you can't have it both ways. When you buy something that increases the value of the company, you still have to pay for it and whether its through shares or debt there is not a big difference. In fact in this case, issuing shares to those involved creates a vested interest by some pretty important people. These Altius dudes are smart!

 

 

[investor-man]

There seems to be a lot of pessimism here over the last day or so about Kami and Alderon. Contrarily there have been some recent rumors about a second off take at Kami (which I know nothing about) but the present stock price has moved up over the past few days.

 

But I don’t understand the recent pessimism. Sure it might have been nice for Altius to wait for more good news from Kami, but they couldn’t postpone their financing forever. I don’t see why this suggests a negative view on Kami. At some point they had to pull the trigger and if we are correct in our assessment of Altius’s potential, things will only get better and the share price will continue to rise. Taking a negative view on Kami because of the share issue is like saying other future Altius developments are also in danger since they didn’t wait longer.

 

And as for criticism about the company not buying back shares recently, this should lay those questions to rest. They bought back shares when they were cheap and now that the price has risen by 50% they are using those cheap shares to help finance this deal.

 

As for dilution, you can't have it both ways. When you buy something that increases the value of the company, you still have to pay for it and whether its through shares or debt there is not a big difference. In fact in this case, issuing shares to those involved creates a vested interest by some pretty important people. These Altius dudes are smart!

 

I'm somewhat responsible for adding to that "pessimism". I'm new to ALS and I was trying to wrap my head around this latest deal. I think it's good to take a step back when shares are issued and ask if that's a good thing -- in fact each and everyone of you should have done this. In reflecting on it on my own and reading the posts here, it's clear to me that it was the right decision and I'm quite optimistic about ALS, and I plan to add to my position as soon as I can!

[original mungerville]

This is now a royalty company, with growing royalties far into the future requiring no additional capital investment for that growth

 

This is due to growth of current royalties over time, and Altius' brain power- / royalty rights- driven growth of royalties - ie. exploration, JV/new royalty, then equity sale to purchase new royalties.

 

The $70 million capital raise will strengthen the balance sheet to a) permit this growing stream of royalties to be dividended out sooner rather than later, b) raise awareness of Altius in the investment community as it is being done through major lead brokers, and c) permit some minor flexibility on Altius's balance sheet / enough to cover management expenses (on the assumption the full royalties are dividended out.

 

Some here have speculated that given the low float of shares, the stock should move quickly now. I don't think that is totally crazy speculation. We have a growing royalty stream now that goes far into the future with most/all of that being dividended out (as no extra capital is required for that growth).

 

What Dazel has been saying is that the change in perception from an exploration/mining holding company yesterday to a royalty company today will make a big difference in the multiple. So get ready for a high multiple on the dividend which is about to get paid.

 

 

[Williams406]

+1

 

I would suggest you all read Brian Dalton's letter to shareholders....no further comment needed from me on an otherwise longwinded thread he says "exactly" what I am thinking. I have full confidence in him and the Altius team. I have been a shareholder for a long time and will continue to be....my optimism has never been questioned here I have made a "special effort" to bring you all along. Congrats to those that followed and hats off to those that tried....we think that the risk to Altius has been drastically cut and the upside is unmatched in the market in our view. We expect to next collect dividends for decades...SD and others can carry the torch here...

I may start a royalty thread with Altiius as a focus....too tired to hear another iron content question. Believe or don't whatever each of you believe is what matters.

 

Disclosure:we have been buying shares for four years some very low $5.70 and some very high $15's last week...we have been approached to buy into this equity deal we may or may not take part. I have been humble here because that is my character....however, my investing record over the last  decade is in the range of 30% per annum...I will not answer questions anymore. Thank you all.

 

"Every significant price move of any individual common stock in relation to stocks as whole occurs because of a changed appraisal of that stock by the financial community"

 

Phillip Fisher 1958

 

Dazel.

 

 

 

I second Dazel's suggestion of reading Dalton's letter to shareholders--I've read it a number of times in the past few months. One highlight:

 

"The royalty revenue that Altius receives will be received

for a very long time; several generations in fact. We are

deeply attracted to long‐term sustainable revenue that

does not require sustaining investment."

 

The older I get the more I come to appreciate things of enduring value. I'm not the guy to ask about how Altius' stock opens today or where it ends up in a week. What I am confident about is that a) the PMRL and CDP acquisitions will serve Altius shareholders very well for a long time to come in ways that may be tough to imagine today and b) probable outcomes for Altius' assets cluster positively, per SD's framework.  The PMRL royalties for me are the foundation for Altius. I've imagined what the structure may be and could be in the future. I'm okay watching the construction patiently now with a solid foundation in place.

 

Having quoted Dalton above, I'll close by quoting Monty Python:

 

"When I first came here, this was all swamp. Everyone said I was daft to build a castle on a swamp, but I built it all the same, just to show them. It sank into the swamp. So I built a second one. That sank into the swamp. So I built a third. That burned down, fell over, then sank into the swamp. But the fourth one stayed up. And that's what you're going to get, Lad, the strongest castle in all of England."