ALS.TO - Altius Minerals

[SharperDingaan]

Every stock can be valued using any of a number of different methodologies. Each method has its strengths & weaknesses, & most are applicable only at certain times.

 

Most methods assume the future will resemble the past in some fashion. If Coy X in the same industry trades at 10x EBITDA, Coy Y should do so as well (similar history).  If DCF or EV methodologies worked last year, they should do so again this year – because nothing has changed. The problem is, what if today is not the same as yesterday?

 

Cigar-but, net-net, liquidation, DCF, MOS all assume reasonably precise valuation of IV, purchase at a discount to IV, & that mean reversion will eventually drive the market price to IV . Conveniently - we  omit  that many of these choices will either BK & never reach IV,  could actually be fairly valued net of dilution, may take 20 years to regain IV, & may not be independent by the time mean reversion occurs.  We also don’t look back at how accurate our IV valuation actually is.

 

Nirvana is a healthy & growing business with a wide moat - bought cheap. Strong BS, growing EBITDA, dominant in 1 of the 3 Porter strategies (moat maintaining). The focus is on FORECAST, & how accurate those forecasts actually turn out to be; ie : the positive end of the value investment spectrum.

 

BAC at $5 cannot possibly go up. NBG, SAN etc, cannot possibly go up – because it is not convenient to believe so.

So … don’t buy them …. & remain poor forever; it is the process – not the destination.

 

2 months out this will all be moot – we’ll either have a nice dividend & share price, or a take-out; we’re agnostic as to choice.

But we will be rich – simply because we bought a ticket to the lottery.

 

We make our own choices.

 

SD

 

[alertmeipp]

oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D

 

 

[Liberty]

oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D

 

That's a scary thought.

[alertmeipp]

oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D

 

That's a scary thought.

 

Hey, FTP may still turn over well for us bagholders. :'(

[original mungerville]

Alderon getting some heavy names as board members...

 

Buried at the bottom of the same press release:

 

Alderon is also pleased to announce that it has received Toronto Stock Exchange ("TSX") approval to hold its annual general meeting ("AGM") on July 29, 2014, outside of the TSX requirement that a company hold an AGM within six months of its year end. Alderon is evaluating several transactions that may require shareholder approval and chose to delay the holding of its AGM rather than holding multiple shareholder meetings in short succession.

 

This is, well, a pretty damn important sentence isn't it? Good find - I totally missed this.

[wisdom]

Anyone take a look at the prariesky royalty ipo today. Looking at comparable.

 

They habe $195 mil FCF

 

http://www.680news.com/2014/05/29/encana-spinoff-prairiesky-royalty-ltd-surges-in-toronto-stock-exchange-debut/

 

[EliG]

Prairie Sky Royalty jumped 32% on the IPO day. Freehold Royalties up 4.5% on no news, just in sympathy with Prairie Sky.

 

Altius Minerals? Down 3% on some damn encouraging signals out of Alderon.

 

Don't you see what the problem is? It's the bloody company name!!

 

'minerals' scares the hell out of investors. Everyone thinks it's a stinky junior miner.

 

Just change the name already. Altius Royalties. Duh. So easy to unlock the value.

 

:P ::) ;D 8)

 

 

[cwericb]

    “ oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D”

  “ That's a scary thought.”

“Hey, FTP may still turn over well for us bagholders. :'( “

 

I finally got fed up with FTP a couple of weeks ago, dumped it (80% loss) and a couple of other long time losers and put the much depreciated funds into ALS. But it's kinda scarey to see you guys posting here. Then again there are quite a few of us SFK/FBK survivors here as well. Perhaps there’s something about pulp & paper...

[alertmeipp]

    “ oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D”

  “ That's a scary thought.”

“Hey, FTP may still turn over well for us bagholders. :'( “

 

I finally got fed up with FTP a couple of weeks ago, dumped it (80% loss) and a couple of other long time losers and put the much depreciated funds into ALS. But it's kinda scarey to see you guys posting here. Then again there are quite a few of us SFK/FBK survivors here as well. Perhaps there’s something about pulp & paper...

 

 

FBK was a sad story with pathetic ending. Should have bought CFX.TO instead.

[Blue Macaw]

    “ oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D”

  “ That's a scary thought.”

“Hey, FTP may still turn over well for us bagholders. :'( “

 

I finally got fed up with FTP a couple of weeks ago, dumped it (80% loss) and a couple of other long time losers and put the much depreciated funds into ALS. But it's kinda scarey to see you guys posting here. Then again there are quite a few of us SFK/FBK survivors here as well. Perhaps there’s something about pulp & paper...

 

 

 

FBK was a sad story with pathetic ending. Should have bought CFX.TO instead.

 

FTP.TO looked bad. How can you even compare that with Altius? Losing 20 M per quarter and having debt of 210 M is never a good thing. Altius will be different that is for sure

[giofranchi]

oh mine, Liberty and Lessthaniv...this feels like FTP.TO!?  ;D

 

That's a scary thought.

 

FTP has been brought up in this thread a lot of times… could someone please explain me what’s FTP business model, which kind of management is at the helm of FTP, and why the comparison to ALS should make sense? ???

 

Thank you!

 

Gio

 

[txitxo]

Every stock can be valued using any of a number of different methodologies. Each method has its strengths & weaknesses, & most are applicable only at certain times.

 

Most methods assume the future will resemble the past in some fashion. If Coy X in the same industry trades at 10x EBITDA, Coy Y should do so as well (similar history).  If DCF or EV methodologies worked last year, they should do so again this year – because nothing has changed. The problem is, what if today is not the same as yesterday?

 

Cigar-but, net-net, liquidation, DCF, MOS all assume reasonably precise valuation of IV, purchase at a discount to IV, & that mean reversion will eventually drive the market price to IV . Conveniently - we  omit  that many of these choices will either BK & never reach IV,  could actually be fairly valued net of dilution, may take 20 years to regain IV, & may not be independent by the time mean reversion occurs.  We also don’t look back at how accurate our IV valuation actually is.

 

SD

 

 

The true essence of value investing, in a few lines.

[giofranchi]

Every stock can be valued using any of a number of different methodologies. Each method has its strengths & weaknesses, & most are applicable only at certain times.

 

Most methods assume the future will resemble the past in some fashion. If Coy X in the same industry trades at 10x EBITDA, Coy Y should do so as well (similar history).  If DCF or EV methodologies worked last year, they should do so again this year – because nothing has changed. The problem is, what if today is not the same as yesterday?

 

Cigar-but, net-net, liquidation, DCF, MOS all assume reasonably precise valuation of IV, purchase at a discount to IV, & that mean reversion will eventually drive the market price to IV . Conveniently - we  omit  that many of these choices will either BK & never reach IV,  could actually be fairly valued net of dilution, may take 20 years to regain IV, & may not be independent by the time mean reversion occurs.  We also don’t look back at how accurate our IV valuation actually is.

 

SD

 

 

The true essence of value investing, in a few lines.

 

I am not sure I assume ALS future will resemble its past… Of course, I hope its PG part of the business will keep being as good and effective as it has been in the past… But my interest in ALS grew basically out of the change that occurred late last year, when they embarked on a journey to become a proven manager of royalties.

And, truth be told, this second part of their business is still the one I am more thrilled about… though the market still seems to ignore it and its potential for growth… we will see! ;)

 

Gio

 

[Blue Macaw]

So could Altius lose 80 % of its value like FTP?

 

I would say no and here is why.

 

Even if Kami is lost which includes the equity + royalty, Altius still have the possibility to pay the first part of the debt with the sale of Virginia Mines (30 M) and Cranberry (30 M) + money in the bank (12 M) + the 5,5 M that will come from Champion Iron and 5 M from Callinan. This equals roughly 80 M. With this they would have an additional 40 M of debt but now the payment would be 1/3 of 9 M or 3 M per year for interest rates. So with an income of 30-31 M ad costs of 5 (G/A+ exploration) + 3 M (finance) and 10 M amort + tax = a lot of plus. For Altius to fail we would have to see a lost Kami, and a complete destruction of Virginia M + Cranberry + Callinan +the producing royalties. The probability of this is very low which is why I am invested in Altius.

 

 

[txitxo]

Every stock can be valued using any of a number of different methodologies. Each method has its strengths & weaknesses, & most are applicable only at certain times.

 

Most methods assume the future will resemble the past in some fashion. If Coy X in the same industry trades at 10x EBITDA, Coy Y should do so as well (similar history).  If DCF or EV methodologies worked last year, they should do so again this year – because nothing has changed. The problem is, what if today is not the same as yesterday?

 

Cigar-but, net-net, liquidation, DCF, MOS all assume reasonably precise valuation of IV, purchase at a discount to IV, & that mean reversion will eventually drive the market price to IV . Conveniently - we  omit  that many of these choices will either BK & never reach IV,  could actually be fairly valued net of dilution, may take 20 years to regain IV, & may not be independent by the time mean reversion occurs.  We also don’t look back at how accurate our IV valuation actually is.

 

SD

 

 

The true essence of value investing, in a few lines.

 

I am not sure I assume ALS future will resemble its past… Of course, I hope its PG part of the business will keep being as good and effective as it has been in the past… But my interest in ALS grew basically out of the change that occurred late last year, when they embarked on a journey to become a proven manager of royalties.

And, truth be told, this second part of their business is still the one I am more thrilled about… though the market still seems to ignore it and its potential for growth… we will see! ;)

 

Gio

 

  SD reminds us that, no matter how well you calculate IV, there are many unforeseen factors which may stop the company from reaching that IV.  If you do your homework right, all you can say is that the odds of the stock going up are higher than the odds of the stock going down. It is not just a question of patience, waiting until the price converges to IV; often that will never happen, not necessarily because of a faulty analysis, but due to Murphy's law. The FTP thread illustrates that point very well.

 

  Altius looks cheap, based on the royalty valuations and the optionality. It has "quality" factors, like a solid track record and a star manager. The price action is not terrible so far (although that can always change). So I bought a full position. But nobody has any certainty about what will happen a year from now. We may be taken under at 9$, or we may have a great company with Dalton at the helm and twice the current stock price. Altius seems like a good investment to me just because I estimate the latter to be much more likely that the former.

 

 

[cwericb]

Just to clarify the comments on FTP etc....

 

In NO WAY was anyone comparing ALS to FTP.

 

The comments made by several of us were simply expressing surprise that quite a few of the posters on ALS had also been involved FTP. Also, several others had been involved in the SFK/FBK fiasco. A few of us were involved in both - I won't mention names to protect the guilty. :)

 

But no one was comparing ALS to those companies, in fact my comment was that I had dumped my FTP mistake and moved the remnants over to build on my ALS holdings.

[giofranchi]

Just to clarify the comments on FTP etc....

 

In NO WAY was anyone comparing ALS to FTP.

 

The comments made by several of us were simply expressing surprise that quite a few of the posters on ALS had also been involved FTP. Also, several others had been involved in the SFK/FBK fiasco. A few of us were involved in both - I won't mention names to protect the guilty. :)

 

But no one was comparing ALS to those companies, in fact my comment was that I had dumped my FTP mistake and moved the remnants over to build on my ALS holdings.

 

Ok! Appreciated!

I am not familiar with FTP (nor the SFK/FBK fiasco), and I was wondering why it was brought up so often in this thread…

Thank you for clarifying! :)

 

Gio

 

[ragu]

In effect, this was not a distressed sale. It was a competitive bid with other rational private market buyers of royalty assets. The idea that Altius paid 10x for something that is actually worth 20x suggests that other sophisticated and knowledgeable buyers dramatically undervalued the asset.

 

It does seem odd. But, ALS' management are pretty adamant that this was a steal(Pg. 5 of the latest presentation).

 

I completely agree with you with respect to "relative" valuation.                     

 

However, if this wasn't a bargain purchase, then a couple of possibilities emerge from that presentation:

 

a. Either management is being disingenuous.

b. Or there isn't as big of a price-value gap as management thinks there is.

 

While I find management a little too promotional for my taste, I find it hard to impart disingenuity to their motives. Which leaves us with the other alternative: there isn't as much value here as management thinks there is. Given their historical track record, that seems fairly low-probability.

 

The odds seemingly tilt towards a bargain purchase, IMO.

 

Best,

Ragu

 

Disclosure: No position. Yet. 

[alertmeipp]

Just to clarify the comments on FTP etc....

 

In NO WAY was anyone comparing ALS to FTP.

 

The comments made by several of us were simply expressing surprise that quite a few of the posters on ALS had also been involved FTP. Also, several others had been involved in the SFK/FBK fiasco. A few of us were involved in both - I won't mention names to protect the guilty. :)

 

But no one was comparing ALS to those companies, in fact my comment was that I had dumped my FTP mistake and moved the remnants over to build on my ALS holdings.

 

Ok! Appreciated!

I am not familiar with FTP (nor the SFK/FBK fiasco), and I was wondering why it was brought up so often in this thread…

Thank you for clarifying! :)

 

Gio

 

We just needed to whine somewhere. There are similarities between the two like both are jockey play and listed in Canada but thats pretty much it. And if you believe we can learn, having us around is a good sign. Haha

[ap1234]

Ragu, I have spoken to Altius management in the past. They have never said the Sherritt deal was a ‘steal.’ They have said that they followed the Sherritt assets for a long time, it fit their criterion for the qualities they wanted in a large royalty deal and the price they paid last December was less than the price they previously were asked to pay when they first started looking at the assets.

 

I don’t think you can read into that IR slide and interpret that Altius management thinks the asset purchase was a bargain. They think it was a good deal (otherwise they wouldn’t have done it) but not a steal. My impression of Altius management is that they are sharp guys. They clearly understand that every royalty has a different value (different reserve lives, optionality for mine expansion, etc.) and you can’t simply value a royalty by slapping on a relative EBITDA multiple. Altius (like Franco) would value each royalty’s cash flows on a bottom-up basis and try and figure out what the cash flows could be worth over the life of the asset.

 

Clearly, Sherritt management is never going to say to shareholders that they failed their fiduciary duty to by giving away the royalties at a bargain price. On the other hand, Sherritt hired bankers and managed to attract several knowledgeable investors (including Franco, P/E firms, pension funds, etc.) who all looked at the assets and didn’t offer more than 10x EBITDA. This does not sound like a distressed sale to me. Nor are we at such an extreme part of the cycle where royalties are being given away at firesale prices. If we were, I suspect you would see Franco being a lot more active doing deals given how much cash they have on their balance sheet. From what I can tell, there are too many people who are attracted to royalties in the current low rate environment to suggest that quality assets are being sold in distress. 

 

Dazel raises an excellent point. Sherritt wanted cash and not equity (to solve their own liquidity/debt issues). And the deal size was large (close to $500 million). I suspect there are not many buyers who would both be attracted to the asset (thermal coal) and have sufficient cash to close such a large deal. As such, it is quite possible that the deal was less competitive than other royalty deals. It is also possible that Franco put a low ball bid because they assumed few other players would be able to fork out the cash to close the deal and therefore Altius got a better price than they would otherwise have gotten. I have no idea if that is true or not.

 

Will the Sherritt assets prove to be worth more than 9-10x EBITDA? My best guess is that they will. I just struggle when I see other people on this thread slap on a 20x EBITDA and re-rate the stock as if they somehow bought a 50 cent dollar in a competitive, non-distressed sale. To be conservative, I assume that the deal was a ‘fair price’ when I value the business. I certainly hope that I am proven wrong and the assets turn out to be worth a lot more in the future. 

 

Again, whether Mr. Market decides to value the royalties at 20x EBITDA if Altius ever pays down their debt and becomes a high yielding stock is hard to predict. But my personal NAV will always reflect what I think a private market player would pay for the assets not what a yield hungry, retail investor might pay in the stock market for a fractional ownership of the asset.

 

[Blue Macaw]

Somebody wants out...It looks like we are heading towards 12,7 or lower. I entered too early.

[lessthaniv]

Just to clarify the comments on FTP etc....

 

In NO WAY was anyone comparing ALS to FTP.

 

The comments made by several of us were simply expressing surprise that quite a few of the posters on ALS had also been involved FTP. Also, several others had been involved in the SFK/FBK fiasco. A few of us were involved in both - I won't mention names to protect the guilty. :)

 

But no one was comparing ALS to those companies, in fact my comment was that I had dumped my FTP mistake and moved the remnants over to build on my ALS holdings.

 

Ok! Appreciated!

I am not familiar with FTP (nor the SFK/FBK fiasco), and I was wondering why it was brought up so often in this thread…

Thank you for clarifying! :)

 

Gio

 

Just to clarify;

 

  The SFK/FBK "fiasco", in the end wasn't really a "fiasco" to me. It was incredibly interesting to follow the legal battles but in the end ... it has made me money and I still own my all my original RFP stock plus additionally acquired shares.  As for the  FTP story, imo, it is also no where near complete. In fact it reminds me of the sentiment surrounding SFK/FBK at the time. (Page 8: Fairfax Letter to Shareholder: 2012 - on International Coal ... sometimes it takes years). With that comment, I'll leave the FTP talk to the FTP thread ...

[lessthaniv]

Somebody wants out...It looks like we are heading towards 12,7 or lower. I entered too early.

 

I warned you...  :)

[cwericb]

Wonder if we could go back to this portion of the recent Alderon press release...

 

“Alderon is also pleased to announce that it has received Toronto Stock Exchange ("TSX") approval to hold its annual general meeting ("AGM") on July 29, 2014, outside of the TSX requirement that a company hold an AGM within six months of its year end. Alderon is evaluating several transactions that may require shareholder approval and chose to delay the holding of its AGM rather than holding multiple shareholder meetings in short succession.”

 

First, the July 29 date seems to give us some insight into the timeline for some major announcements on Alderon/Kami. Obviously they expect some major changes and that those changes will be announced by July 29th.

 

Secondly, would anyone care to speculate as to what forthcoming transactions would cause “multiple shareholder meetings in short succession”? It would seem that there are only a limited number of transactions that would require shareholder meetings.

 

(Re SFK/FBK. Made a little money, but still feel we were robbed by FFH, but that's history and a learning experience.)

[SharperDingaan]

FTP/SFK etc.

 

SFK started life as a spin-off of one of RFPs most efficient P&P plants during the flow-through trust era. A subsequent change in the law, deep trough in the commodity cycle, & looming debt repayment schedule put them in the dumpster. They were seen as a one trick orphaned pony, dumping a plant for whatever they could get; but no industry players had the minimal cash required. You could buy whatever you wanted at 20c/share or less. We did, & it turned out Dazel was buying them as well.

 

During the ensuing drama we bought SFK distressed prefs cheap & sold them dear, for a double (plus interest) within 9 months. We were saved by FFH backstopping the negotiation. We have just done something similar with FTPs distressed prefs, & have every confidence that Francis will successfully negotiate the appropriate incentives.

 

SFK was eventually taken out via a take-under by FFH. It was with extreme distaste, & damaged FFHs image quite a bit. Dazel & us were among the very few who did very well on SFK, but we went on to scalp our stolen gain out of RFP - by trading the bad will & volatility that the take under created.

 

FFH/RFP were trying to consolidate the P&P industry, & benefit from the resultant rationalization & efficiencies; it is a mistake. We were just capitalizing on an opportunity where investor miss-perceptions were abundantly clear.

 

Relevance to ALS .....

 

Those new royalties are only because cash was forthcoming at the right time.

ALS investor miss-perceptions are again abundantly clear.

 

SD