ALS.TO - Altius Minerals

[bizaro86]

 

 

If you are assuming it was going to be a straight debt deal then you should be disappointed...we do not and that's why we like Endeavor in there.  Miners need to get creative in this environment and producers and their bankers need to be involved. For example We would like to see Endeavour leverage Glencore to put the consortium together.

That would not happen with BNP trying to be the lead.

 

From an ALS perspective I don't care how they get it done, as long as they get it done. However, if BNP is no good then Alderon never should have hired them in the first place. This definitely isn't positive news, as you mentioned, anything other than them getting the $ is a negative development.

[SharperDingaan]

BNP may have been a good choice a year ago, before its issues became public - but times have moved on. Endeavor is entirely off-shore; they will be accessing euro-$ deposits, minimizing tax, & working the relationships better than BNP could.

 

Most would expect a successful ALS negotiation for JL, & inclusion of permission to deal it off to an actual mine developer - in return for a royalty. The logical choice is a sale to ADV, a deal done before the ADV equity chunk is raised, & a sale of the ALS shares in ADV -  alongside the equity raise. Given that 30-40%, of a 46 mta low cost deposit, in a friendly location; is a rare opportunity - ADV shares are unlikely to go at todays prices.

 

BNP could not put forward a viable, public solution, as they did not invent it. To do so would be to admit that they brought little/nothing to the table. With BNP gone, the dynamics now change as well.

 

This is the time for clear heads, & the folks involved are more than capable.

Let them get on with it.

 

SD

[BRK7]

http://www.miningweekly.com/article/alderon-stock-trends-lower-after-changing-financing-strategy-2014-08-21

 

[Guest Dazel]

 

 

Gio,

 

 

We were getting off topic on the BAC thread....I had something to add that is a disadvantage to owning BAC compared with Altius (royalty company) and BH holdings a food franchise company that has nothing to do with models.

While I like fee income at BAC which is comparable to royalty or franchise income-royalties. BAC will benefit from increased m&a through higher investment banking fees....however,

 

Altius or BH could be taken over any day....the return could come in an instant on a take ober bid where as BAC will not ever be taken over. Altius and BH have peers who's business plan is to take over other companies in their royalty and franchise income stream. BAC is the top of the food chain.

 

If you want evidence ask Tim Horton's shareholders!

 

Dazel

[giofranchi]

Thank you, Dazel!

 

Be sure that I understand your thesis about BAC very well and I think it will be a wonderful investment.

 

It is just that I am more comfortable sticking to what I think I know...

 

Especially now that the Shiller P/E of the S&P500 is nearing 27...

 

Cheers,

 

Gio

[Guest Dazel]

 

Yes Gio that was my point..unlike the bull market that is going on..

 

 

 

Altius industry is in a massive bear market...and there will be huge consolidation going forward...there is no take out premium in Altius share price. BAC will "never" have a take out premium even in a huge bull market because of it's size and importance to the united states. This certainly plays into your philosophy with Altius and BH holdings....great entrepreneurs will get noticed and those that realize this will buy them and look to profit off what they have created.

 

 

[SharperDingaan]

Gio, look at Talebs Antifragile

 

P175 - section on Options & Asymmetry.

.... more upside than downside equals asymmetry equals likes volatility. If you make more when you are right than you are hurt when you are wrong, then you will benefit in the long run, from volatility (& the reverse). You are only harmed if you repeatedly paid too much for the option.

 

ALS includes the possibility of a JL win, a JL flip for a BV gain & a royalty, a successful Kami financing, a successful sale of its ADV stake for big $, & the rising possibility of a take over. Assume a floor price of $14, & for $.50/share you have an open-ended call option on any of 5 different & high probability events. Clearly more upside than downside, & volatility has reduced the cost of the option to virtually nothing. Antifragile.

 

BAC has much more limited upside, it will very likely take longer to manifest, & with the lawsuits settled - volatility is now working against you. Very good odds of repeatedly overpaying for the option, to earn materially less. A fragile investment - not necessarily a bad one.

 

We alluded to SAN; not much different to BAC ... except for the volatility from BRIC exposure, which often clips 10% off the price depending on the news theme at the time. Buy when the world hates BRIC, & you will repeatedly underpay for the option. Broadly similar exposure, but now Antifragile. A little hedging, & roundtrip trading; & those open ended options are also deep in the money  ;)

 

SD

 

 

[giofranchi]

ALS includes the possibility of a JL win, a JL flip for a BV gain & a royalty, a successful Kami financing, a successful sale of its ADV stake for big $, & the rising possibility of a take over. Assume a floor price of $14, & for $.50/share you have an open-ended call option on any of 5 different & high probability events. Clearly more upside than downside, & volatility has reduced the cost of the option to virtually nothing. Antifragile.

 

BAC has much more limited upside, it will very likely take longer to manifest, & with the lawsuits settled - volatility is now working against you. Very good odds of repeatedly overpaying for the option, to earn materially less. A fragile investment - not necessarily a bad one.

 

Thank you SD! I understand.

But, though I can easily say I agree with you on ALS, I tend to withhold any judgment about an investment in BAC. Of course I understand Dazel’s thesis on BAC, and I might also think it sounds very convincing. But, just like I have said in my previous post, I stick to “what I think I know”. And almost by definition I cannot say if “what I think I don’t know” is fragile or otherwise. Nor I need to! All I need to do is to fight the urge to dabble with “what I think I don’t know”. ;)

 

Gio

 

[SharperDingaan]

Little further on the same page ...

Centrally, we just don't need to know what is going on when we buy cheaply when we have the asymmetry working for us. But this property goes beyond buying cheaply: we do not need to understand things when we have some edge. The edge from optionality is in the larger payoff when you are right, which makes it unnecessary to be right too often.

 

To most businessmen this is really obvious, & pretty much what is done every day. Furthermore, if your business has been successful for any length of time, you are also very good at this; if you were not you would have long since gone bankrupt. But apply that process in a different setting -  & you get very different results.

 

SD

[giofranchi]

Little further on the same page ...

Centrally, we just don't need to know what is going on when we buy cheaply when we have the asymmetry working for us. But this property goes beyond buying cheaply: we do not need to understand things when we have some edge. The edge from optionality is in the larger payoff when you are right, which makes it unnecessary to be right too often.

 

Though I certainly agree, I rarely reason about business that way.

I do only things that I think I understand, and of course that I like. Both in business and in investments. I am very well aware of the fact that “to think to understand” is not the same thing as “to actually understand”. But I don’t need to be right all the times.

Listen: I know what I like and look for in a business. If I don’t see what I like, price matters little to me. If I see what I like, I wait for a good price. If I see what I like and I get a good price, I purchase a lot. How much is “a lot”? Between 5 and 10 companies (or more) at any time. Because I know I will make mistakes. This is all I do.

 

Gio

 

[nostradamus]

http://www.mining.com/largest-iron-ore-miners-smashing-chinese-competitors-64366/

 

The article that implies that the big three iron ore miners are willing to keep production high and iron ore price low for a while as a way of forcing Chinese iron ore producers out of business. I guess if this really is what is happening then it is in the interests of China's iron ore users to make sure that there is are alternative sources of ore coming into production to counterbalance the increasing market dominance of the big three.

 

 

[SharperDingaan]

We are on the same page.

 

The edge stuff is no different to everyday bidding on various new jobs to fill your pipeline. You have the clients specs, but it is the experience on similar jobs &/or locations that gives you an immediate sense as to whether the job is worth doing or not - surprizes, difficulty, client priorities, etc. If it looks good, & the price seems OK, you throw a bid in.

 

We get closer to Taleb when its a new client, or the job entails some things we don't currently have experience with. We use our everyday experience with similar situations (optional asymmetry), to assess the unkown, & if we win more times than we lose - throw in our bid.

 

SD 

[Liberty]

Alderon hitting new 52-week lows.

 

This thread's been very quiet again... Hopefully a contrary indicator.

[SharperDingaan]

The nice thing about asymmetry is that you don't need to know what is going on.

The lower ALS goes the greater the odds on a take-out, the longer the quiet goes the greater the odds of a JL announcement & related horse trading. What's not to love?

 

SD

[giofranchi]

The nice thing about asymmetry is that you don't need to know what is going on.

The lower ALS goes the greater the odds on a take-out, the longer the quiet goes the greater the odds of a JL announcement & related horse trading. What's not to love?

 

SD

 

Surely the asymmetry you have been pointing at is good to have. But I own ALS because I like the business:

 

A diversified royalty business in some basic necessities of life, with embedded future royalty growth potential with almost no development costs, led by a still very young entrepreneur who has demonstrated to know how to create much value for his shareholders during more than 15 years now.

 

What’s not to love? ;)

 

Until the future of Alderon is uncertain, and until the price of iron-ore remains under pressure, I guess we will witness a lot of volatility… And if ALS’s stock price keeps trending down, I will buy more.

 

Gio

 

[finetrader]

Don't wanna be a downer but this article is not very positive on iron ore:

 

http://www.bloomberg.com/news/2014-09-10/goldman-calls-end-to-iron-age-after-dramatic-drop-in-ore-price.html

 

I have seen what an oversupplied market can do to a commodity price with dissolved pulp and it is not pretty

 

 

[wisdom]

ALS should still do well if they get the financing in place for Alderon in the near future. They can sell their equity, pay down debt and the only exposure would be through royalties.

[TwoCitiesCapital]

Don't wanna be a downer but this article is not very positive on iron ore:

 

http://www.bloomberg.com/news/2014-09-10/goldman-calls-end-to-iron-age-after-dramatic-drop-in-ore-price.html

 

I have seen what an oversupplied market can do to a commodity price with dissolved pulp and it is not pretty

 

 

Iron ore matters very little at this price. I know very little about mining but a reaonsable individual could argue that the current coal/potash/nickel royalties are fairly valued at the current market cap and all future developments, price deposits, and equity investments are free.

 

I basically see near 0% downside as is and 100-200% upside based on how Kami and JL shake out. I used conservative pricing ($80-$100 for iron ore) and 10% discount rates with a 40% tax rates after year 5 for Kami/JL estimates.

 

I just dont know how the market is missing this. The math is simple and estimates conservative. Just makes no sense. I would love to see this go back down to $10 - it's my largest position and I could justify more at that price.

[SharperDingaan]

The lower ALS goes, the more attractive a take-out it becomes. And it is very attractive, as the buyer would essentially get the iron for free - & also be able to partially pay in stock because of current conditions. If they could persuade the province, & the fed, that it is better than what they could do.

 

The combined Kami, Wabush & JL deposits would have a life exceeding 80yrs, & will take 2 yrs to bring Kami into production. A crappy market while the mine is being brought on stream - is actually desirable; re lower labour, materials, financing & opportunity costs. With such a long life, there will also be many cycles over which to make up any temporary interim losses.

 

1.3B with a 4-5 yr payback is not especially large, & well within federal & provincial infrastructure development mandates.

Loan guarantees, &/or interim short-term financing in return for jobs - is not out the question.

 

Let them get on with it.

 

SD

 

 

 

[TwoCitiesCapital]

The lower ALS goes, the more attractive a take-out it becomes. And it is very attractive, as the buyer would essentially get the iron for free - & also be able to partially pay in stock because of current conditions. If they could persuade the province, & the fed, that it is better than what they could do.

 

The combined Kami, Wabush & JL deposits would have a life exceeding 80yrs, & will take 2 yrs to bring Kami into production. A crappy market while the mine is being brought on stream - is actually desirable; re lower labour, materials, financing & opportunity costs. With such a long life, there will also be many cycles over which to make up any temporary interim losses.

 

1.3B with a 4-5 yr payback is not especially large, & well within federal & provincial infrastructure development mandates.

Loan guarantees, &/or interim short-term financing in return for jobs - is not out the question.

 

Let them get on with it.

 

SD

 

Problem is, I don't want a take out except at a massive premium to current prices which I dont think we'll get. I want to hold onto this for years and let the compounding and cash flow work in my favor.

[SharperDingaan]

The lower ALS goes, the more attractive a take-out it becomes. And it is very attractive, as the buyer would essentially get the iron for free - & also be able to partially pay in stock because of current conditions. If they could persuade the province, & the fed, that it is better than what they could do.

 

The combined Kami, Wabush & JL deposits would have a life exceeding 80yrs, & will take 2 yrs to bring Kami into production. A crappy market while the mine is being brought on stream - is actually desirable; re lower labour, materials, financing & opportunity costs. With such a long life, there will also be many cycles over which to make up any temporary interim losses.

 

1.3B with a 4-5 yr payback is not especially large, & well within federal & provincial infrastructure development mandates.

Loan guarantees, &/or interim short-term financing in return for jobs - is not out the question.

 

Let them get on with it.

 

SD

 

Problem is, I don't want a take out except at a massive premium to current prices which I dont think we'll get. I want to hold onto this for years and let the compounding and cash flow work in my favor.

 

Agreed.

 

SD

[original mungerville]

Don't wanna be a downer but this article is not very positive on iron ore:

 

http://www.bloomberg.com/news/2014-09-10/goldman-calls-end-to-iron-age-after-dramatic-drop-in-ore-price.html

 

I have seen what an oversupplied market can do to a commodity price with dissolved pulp and it is not pretty

 

 

Iron ore matters very little at this price. I know very little about mining but a reaonsable individual could argue that the current coal/potash/nickel royalties are fairly valued at the current market cap and all future developments, price deposits, and equity investments are free.

 

I basically see near 0% downside as is and 100-200% upside based on how Kami and JL shake out. I used conservative pricing ($80-$100 for iron ore) and 10% discount rates with a 40% tax rates after year 5 for Kami/JL estimates.

 

I just dont know how the market is missing this. The math is simple and estimates conservative. Just makes no sense. I would love to see this go back down to $10 - it's my largest position and I could justify more at that price.

 

Given today's market cap, what after-tax earnings yield are you getting from the current royalties (excluding Iron Ore), and therefore what P/E do you have as a fair value.

[giofranchi]

I have changed my mind… Not about the quality of ALS, of course… but about how I want to play the situation…

 

Before the end of the year Liberty Media is going to spin-off Liberty Broadband, rights will be offered to purchase more shares of Liberty Broadband at a discount, probably with the right to oversubscribe.

Just as I have participated to the fullest extent possible in the BH rights offering, the same I want to do with Liberty Media.

Therefore, I have sold some ALS and bought more Liberty Media.

 

My hope, of course, is Alderon doesn’t get financed before the end of the year, the price of iron-ore remains under pressure, and therefore the market volatility in ALS stock continues.

 

Then, after the Liberty Broadband spin-off is over, and I have exercised all rights of mine plus oversubscription, hoping the market receives the spin-off well and reevaluates Liberty Broadband accordingly, I will start purchasing ALS again. Luckily at a bargain price still.

 

Risks of this strategy:

1) Alderon gets financed in the next 3 months

2) ALS gets acquired,

3) No oversubscription right will be accorded to Liberty Broadband shareholders

4) Liberty Broadband won’t be reevaluated by the market

 

I see the Liberty Broadband spin-off as an event driven investment, while I look at ALS as a business I want to hold for the very long term: I am putting aside for a short period of time a very long term investment for an event driven one.

 

How does it sound? Very foolish? ???

 

Gio

 

[wachtwoord]

I have changed my mind… Not about the quality of ALS, of course… but about how I want to play the situation…

 

Before the end of the year Liberty Media is going to spin-off Liberty Broadband, rights will be offered to purchase more shares of Liberty Broadband at a discount, probably with the right to oversubscribe.

Just as I have participated to the fullest extent possible in the BH rights offering, the same I want to do with Liberty Media.

Therefore, I have sold some ALS and bought more Liberty Media.

 

My hope, of course, is Alderon doesn’t get financed before the end of the year, the price of iron-ore remains under pressure, and therefore the market volatility in ALS stock continues.

 

Then, after the Liberty Broadband spin-off is over, and I have exercised all rights of mine plus oversubscription, hoping the market receives the spin-off well and reevaluates Liberty Broadband accordingly, I will start purchasing ALS again. Luckily at a bargain price still.

 

Risks of this strategy:

1) Alderon gets financed in the next 3 months

2) ALS gets acquired,

3) No oversubscription right will be accorded to Liberty Broadband shareholders

4) Liberty Broadband won’t be reevaluated by the market

 

I see the Liberty Broadband spin-off as an event driven investment, while I look at ALS as a business I want to hold for the very long term: I am putting aside for a short period of time a very long term investment for an event driven one.

 

How does it sound? Very foolish? ???

 

Gio

 

Why don't you try to buy the spin-off on the open market immediately post spinoff? Spin-offs often drop immediately after being issued.

[nostradamus]

http://web.tmxmoney.com/article.php?newsid=70239878&qm_symbol=ALS

 

Net loss attributable to common shareholders of $8,102,000 in Q1. If the market just looks at the headline figures we could see some swings.

 

N.