ALS.TO - Altius Minerals

[SharperDingaan]

Purely speculation, but assume ...

 

A MFC purchase at market rate less the PV of the Cliff royalty payment, plus cheap labour for an extended period. Little cash

Wabush contributed to ADV for ADV equity. No cash

Off-take agreement. Cash for mine restart

 

SD

[Gamecock-YT]

Not sure if it was a fat finger/bad data or what, but someone bought almost 9x the avg daily volume at the open for Alderon.

[Crip1]

Not sure if it was a fat finger/bad data or what, but someone bought almost 9x the avg daily volume at the open for Alderon.

 

 

I blame Dazel...

 

 

-Crip

[SharperDingaan]

Not new ... but look at the LMM loan conversion being voted on tomorrow at the ADV AGM.

 

One might want to ask oneself why a company chooses to convert 22M of 8% loan into equity at $2.376/share when the current market price is $1.29 - & the resultant dilution would otherwise lower it to around $1.18.

 

May we all do well  :)

 

SD

 

 

 

 

[Blue Macaw]

Yes may we all do well. Tomorrow will be a big day that is for sure. Some questions will be answered. If the day turns out to be good maybe we will see share price around 16,5?

[Liberty]

Alderon Iron Ore Corp.  is pleased to announce that The Kami Mine Limited Partnership, an affiliate of Alderon, has entered into an off-take agreement with a subsidiary of Glencore plc , with respect to an off-take transaction pursuant to which Glencore will acquire all of actual annual production from the Kami Project that has not been allocated to Hebei Iron & Steel Group Co., Ltd.

 

Under the terms of the Off-Take Agreement, Glencore will be obligated to purchase, upon the commencement of commercial production, 40% of the actual annual production from the Kami Project up to a maximum of 3.2 million tonnes of the first 8.0 million tonnes of iron ore concentrate produced annually at the Kami Project. The term of the Off-Take Agreement will continue until Kami LP has delivered 48.0 million tonnes of iron ore concentrate to Glencore, which is expected to be 15 years after the commencement of commercial production.

 

“We are extremely pleased to have entered into the Off-Take Agreement with Glencore,” says Mark J. Morabito, Alderon’s Executive Chairman. “Glencore is one of the world’s largest natural resource trading companies and in Alderon’s view, this commitment demonstrates the quality of the Kami Project and its management team.”

 

“With 100% of the initial production from the Kami Project now committed, we believe this enhances Alderon’s ability to obtain the requisite financing required to commence construction of the Kami Project,” says Tayfun Eldem, Alderon’s President & CEO. “The offtake arrangement with Glencore gives Kami concentrates global exposure and the multi-year agreement serves as another significant de-risking milestone for the Kami Project.”

 

The market price paid by Glencore will be based on the monthly average price for iron ore sinter feed fines quoted by Platts Iron Ore Index for 62% iron content (plus additional quoted premium for iron content greater than 62%), less a discount equal to 2% of such quoted price.

 

http://www.marketwired.com/press-release/alderon-announces-off-take-transaction-with-glencore-tsx-adv-1933512.htm

[Phaceliacapital]

Thanks, great news!

[Liberty]

I know Mr. Market will always do whatever he wants to do, but I always find it amusing to see how Alderon and Altius stocks are so disconnected.

 

Alderon was up almost 10% last I checked, and Altius was down a little. Yet anything that improves the chances of the Alderon mine being built is significant for Altius' future value (both because they own a huge block of stock and because of the royalty).

 

Not that I mind... Maybe someday they'll announce full Kami financing and ALS will barely move and I'll be able to pick up a few more shares...

[TwoCitiesCapital]

I know Mr. Market will always do whatever he wants to do, but I always find it amusing to see how Alderon and Altius stocks are so disconnected.

 

Alderon was up almost 10% last I checked, and Altius was down a little. Yet anything that improves the chances of the Alderon mine being built is significant for Altius' future value (both because they own a huge block of stock and because of the royalty).

 

Not that I mind... Maybe someday they'll announce full Kami financing and ALS will barely move and I'll be able to pick up a few more shares...

 

 

 

Let us not forget that good news for Kami also increases the likelihood of JL given their proximity, no? JL is the monster that will drive future returns. It's nearly 3x as big as Kami is expected to be.

[bizaro86]

I know Mr. Market will always do whatever he wants to do, but I always find it amusing to see how Alderon and Altius stocks are so disconnected.

 

Alderon was up almost 10% last I checked, and Altius was down a little. Yet anything that improves the chances of the Alderon mine being built is significant for Altius' future value (both because they own a huge block of stock and because of the royalty).

 

Not that I mind... Maybe someday they'll announce full Kami financing and ALS will barely move and I'll be able to pick up a few more shares...

 

If that happens I'd be shocked, happy, and be buying hand over fist to pick up the free money. Financing of Kami adds a few dollars a share to ALS value, imo.

[SharperDingaan]

All of Kami phase I production has now been sold on a take-or-pay basis. With a 4 year payback, & all of sold production pledged, financing should now be fairly straight forward. ALS will not benefit until ADV Kami financing is announced.

 

ADV didn't just announce a 2nd off-take today. There was also a significant debt-equity conversion, & approval of a series of conditional transaction driven bonuses. Management is well incentivised, & ADV appears to be transforming itself into a miner (Kami ownership interest). Possibly Wabush as well (speculation).

 

It is highly likely that JL is near to conclusion, & mirroring much of the Kami labour & environmental agreements with the province. As ALS (and the province) will not benefit from JL until there is a producing mine, most would expect JL ore to be processed by Kami I & II once that infrastructure has paid itself back. Kami III as it were.

 

Per the trench, it looks like 1 very big producing mine (owned by ADV) and 1 very big royalty house (ALS). ADV debt holders, & potential partners, would seem to agree.

 

Punch cards, but there is a need to manage expectations.

 

 

SD 

 

 

 

 

[tengen]

I was curious about Glencore so I checked their entry on Wikipedia. Here's a line from the company history section:

 

The company was founded as Marc Rich & Co. AG in 1974 by billionaire commodity trader Marc Rich, who was charged with tax evasion and illegal business dealings with Iran in the US, but pardoned by President Bill Clinton in 2001.[12] He was never brought before US courts before his pardoning, therefore there was never a verdict on these charges.

 

And then there is the "Controversies" section, which leads off with "Financial and accounting manipulations" and "Dealings with rogue states".

 

http://en.wikipedia.org/wiki/Glencore

[Guest Dazel]

http://www.bloomberg.com/news/2014-04-30/munk-exits-lauding-glencore-over-bhp-as-best-mining-model.html

 

 

[BRK7]

 

ADV didn't just announce a 2nd off-take today. There was also a significant debt-equity conversion

 

 

SD,

 

Are you referring to the $22 million Liberty loan?  That loan has a conversion price of $2.376 per common Alderon share is not convertible until February 2015. 

 

Quoting from Alderson press release dated July 30. 2014:

 

"Shareholders at the Annual and Special Meeting also approved the appointment of Alderon’s auditors,

the re-approval of Alderon’s stock option plan, the Company’s Advance Notice Policy and the conversion

option of the $22.0 million loan from Liberty Metals & Mining Holdings, LLC, a subsidiary of Liberty

Mutual Insurance."

 

My read is that shareholders approved the conversion feature of the debt.  I don't believe there was any actual debt-equity conversion. 

 

Am I missing something here?  thanks.

[Liberty]

http://www.bloomberg.com/news/2014-04-30/munk-exits-lauding-glencore-over-bhp-as-best-mining-model.html

 

Welcome back, Dazel. I knew you couldn't stay away! Hope you had a good forum vacation :)

[SharperDingaan]

Are you referring to the $22 million Liberty loan?  That loan has a conversion price of $2.376 per common Alderon share is not convertible until February 2015. 

 

Yes. AGM Information Circular, LMM Loan Conversion, p 47-48

The conversion price was always $2.376, but the number of shares (inclusive of accrued interest) has now been formally set, & LMM's resultant 22% interest officially disclosed. Not the kind of thing one does unless there is intent to convert in the near future.

 

Per their recent PP deck, the ADV Kami financing has a 50M equity requirement.

Purely speculation - but we put it to you that the intent may well be to meet it through debt to equity conversion, and an all equity asset purchase. No cash involved. Very elegant, if it occurs.

 

SD

 

 

 

 

[BRK7]

Yes. AGM Information Circular, LMM Loan Conversion, p 47-48

The conversion price was always $2.376, but the number of shares (inclusive of accrued interest) has now been formally set, & LMM's resultant 22% interest officially disclosed. Not the kind of thing one does unless there is intent to convert in the near future.

 

Per their recent PP deck, the ADV Kami financing has a 50M equity requirement.

Purely speculation - but we put it to you that the intent may well be to meet it through debt to equity conversion, and an all equity asset purchase. No cash involved. Very elegant, if it occurs.

 

SD

 

SD,

 

To be clear, there was no actual debt-equity conversion at Liberty, just the shareholder approval of the pre-existing conversion terms.  Also, the number of shares to hypothetically be issued is not new information. The shares to be issued (whether for principal or interest) have always been based on the conversion price of $2.376, which was announced back in February 2014.

 

For example, take the $22 million loan, divide it $2.376 and you get the 9,259, 259 common shares that appear on page 48 of the Circular.  The fact that Liberty could theoretically end up with a 22% ownership interest likewise follows mathematically from the conversion price of $2.376.  I guess these conversion terms are now “formally set” as you say, but was there any doubt that the terms would be approved by ADV shareholders?  I mean, realistically, were ADV shareholders going to back out on a previously-agreed-upon financing package with an important provider of capital to the company?

 

I cannot possibly speak to Liberty’s conversion intentions, but I do note that at the current $1.49ADV price, the shares of ADV would have to rise approximately 59% for the conversion option to be available to Liberty.  While I certainly *hope* that ADV soon exceeds $2.376 in value, I don’t see anything about this conversion-approval disclosure that changes the probability it happening.

 

More generally, Alderon’s disclosure of the approval of the conversion features would appear to be based upon TSX requirement (see top of page 48 in the Circular), not Liberty’s intentions or expectations with respect to conversion in the future.

 

Having said all of this, I appreciate your input and contributions, I just don’t happen to agree with you on this point.

 

 

 

[tengen]

http://www.bloomberg.com/news/2014-04-30/munk-exits-lauding-glencore-over-bhp-as-best-mining-model.html

 

Good to know Dazel is still keeping an eye on this discussion.

 

Concerning Glencore, I guess I was a bit surprised to see the "controversies" in which it is involved. On the other hand, I agree with Munk that "risk-taking is essential to expand and survive in mining", requiring an "aggressive, buccaneering spirit".  I wonder what valuetrap would make of all this? ;-)

[bizaro86]

Interesting. Glencore's reputation doesn't concern me that much, the Marc Rich days were a long time ago, and commodities trading is a dirty business in dirty places.

 

What does concern me is that Glencore is only signed up to buy the production at a small discount to market prices, which they will sell on to steelmakers, as opposed to making an investment. Essentially, Glencore will act as the marketing and transportation department for Alderon. That's all well and good, but selling commodities at the market price isn't the hard part of this project, getting the upfront capital is.

 

Glencore regularly makes equity investments in juniors/projects in exchange for the right to market the product, so I wonder why they wouldn't have taken equity from Glencore to help move the financing along.

 

A couple of examples:

oil production in chad: http://www.ft.com/intl/cms/s/0/051708f8-0270-11e2-8cf8-00144feabdc0.html#axzz38zgcXGXk

iron ore in Spain: http://ironinvestingnews.com/7279-iberian-minerals-glencore-joint-venture.html

iron ore in Africa: http://www.mining-journal.com/finance/glencore-invests-in-african-iron-company

 

I'm long ALS and still hopeful ADV will get their financing, but this doesn't seem like an especially significant piece of news to me.

 

[ItsAValueTrap]

Interesting. Glencore's reputation doesn't concern me that much, the Marc Rich days were a long time ago, and commodities trading is a dirty business in dirty places.

From what little I understand, Marc Rich made money by circumventing the embargoes on certain countries.  (Embargoes create highly profitable arbitrage opportunities.  The unintended consequences of the embargoes get perverse as sketchy people make a killing.)  Not relevant to Alderon.

 

I don't think that Glencore's reputation is particularly important.  All of the counterparties will have protection against each other in almost all cases.  There are things like letters of credit.

 

What does concern me is that Glencore is only signed up to buy the production at a small discount to market prices, which they will sell on to steelmakers, as opposed to making an investment. Essentially, Glencore will act as the marketing and transportation department for Alderon. That's all well and good, but selling commodities at the market price isn't the hard part of this project, getting the upfront capital is.

Right on.

[SharperDingaan]

Our bad - we did not realize that the 8.5M of interest was for the entire period of the loan, & not just for the time already elapsed.

Agreed, as at right now, nothing would suggest conversion.

 

But … assume FD at around 160M shares all in (conversion, share options, etc) & the ADV market price was $2.40 versus $1.49. The ADV ownership of the Kami Project, post financing announcement, would have to rise by just 146M (160x(2.40-1.49)) to tip the decision to conversion. One has to think that with all of Kami I production now pre-sold … this is not much of a stretch.

 

Of course if the belief is that Kami will not get financing, its a moot point.

 

SD

 

[Guest Dazel]

 

http://business.financialpost.com/2012/03/20/glencore-to-buy-viterra-for-6-billion/

 

Glencore's money is good! We know them well as they paid us a lot of cash in the past! There were many doubters on the Viterra thread as well! We like the negativity as it is always where we have made our biggest returns. Anyone that can pay cash for our poor old grain handling assets at Viterra for $6 billion could certainly have A deal done for both Kami and JL in a day or two. I am not saying that will happen but it would be an easy deal for Glencore to pull off.

 

I see Sanjeev showed up on a couple of threads..thought I would check in...and let you know about the last time we teamed up with Glencore....makes me smile.

 

Good luck all!

 

Dazel

 

 

 

 

 

 

 

[SharperDingaan]

Now what are the odds that Wabush, & its infrastructure, are about to find a new owner in the very near future ....

 

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/cliffs-natural-appoints-new-chairman-ceo-after-proxy-battle/article19949347/

 

 

SD

 

[bizaro86]

 

http://business.financialpost.com/2012/03/20/glencore-to-buy-viterra-for-6-billion/

 

Glencore's money is good! We know them well as they paid us a lot of cash in the past! There were many doubters on the Viterra thread as well! We like the negativity as it is always where we have made our biggest returns. Anyone that can pay cash for our poor old grain handling assets at Viterra for $6 billion could certainly have A deal done for both Kami and JL in a day or two. I am not saying that will happen but it would be an easy deal for Glencore to pull off.

 

I see Sanjeev showed up on a couple of threads..thought I would check in...and let you know about the last time we teamed up with Glencore....makes me smile.

 

Good luck all!

 

Dazel

 

Glencore's money spends just as well as everyone elses. However, the difference is they put up equity for Viterra and not any equity here, just an offtake. It would be an easy deal for Glencore, which is why I'm disappointed they didn't do it.

[SharperDingaan]

Glencore's money spends just as well as everyone elses. However, the difference is they put up equity for Viterra and not any equity here, just an offtake. It would be an easy deal for Glencore, which is why I'm disappointed they didn't do it.

 

... Just keep in mind that Glencore will ultimately be selling this ore to Chinese steel makers, & will probably receive favourable future access to those steel makers in return for having stepped up. No different to most deals in the oil patch.

 

SD