ALS.TO - Altius Minerals

[peter1234]

Maybe b/c iron ore is at 5 yr lows?

:o

[Ghost]

The market found out Gio was selling??  :-X

[SharperDingaan]

Just a quick thanks to Mr Market  :)

 

... you may also want to keep in mind that both ALS & ADV are presenting at a Newfoundland conference today.

 

SD

[wachtwoord]

Well I just increased my position with 65%.

[Crip1]

The market found out Gio was buying??  :P

[giofranchi]

The market found out Gio was buying??  :P

 

No, I am not buying yet. Though ALS is dirt cheap imo! It is just that I keep buying Liberty Media. All new funds go into that idea.

 

Gio

 

[crackspread]

Fun times in the market. Alderon continues to get killed. Altius is getting killed.

 

Dazel, can you elaborate on your reasoning into why you would like an Altius sale?

[hohi]

Thank you god. Sometimes prayers do get heard it seems ;). Most of the sector is down though. Anglo Pacific Group is getting interesting at these prices also. Coal isn't loved these times so I see a lot of potential.

[SharperDingaan]

Interesting that there were no other announcements today .... but can't really blame them, given todays market action.

 

The JL update is expected by end of summer (Sep-30 to most people), we know there is now shareholder activism regarding potential asset sales/combinations, and that FNV is also more than sniffing around ALS. Todays property agreement may well also turn up a gas deposit under the coal, once the seismic is over.

 

13% is enough to force friendly change, but it could also go up very quickly if you add those who bought into the UW from hell, & everyone else who has been opportunistic over the last few weeks. Granted that ALS may not necessarily like the options, but its pretty clear that we are now done with the waiting.

 

Obviously, lots of possible scenarios, but one has to think the vast bulk of them are positive.

May we all do well.

 

SD

 

 

 

[beerbaron]

Just a quick thanks to Mr Market  :)

 

... you may also want to keep in mind that both ALS & ADV are presenting at a Newfoundland conference today.

 

SD

 

Can you elaborate on the information provided in the conference?

 

Thanks

BeerBaron

[EliG]

Dazel, I have a dumb question:

 

Why would you push to sell the company in the present circumstances.

 

$11.60 + 20% premium = $13.92

$11.60 + 30% premium = $15.08

 

Nothing to get excited about. Do you think they can get a higher premium? That doesn't seem likely given the doom and gloom about iron, coal and China.

 

What am I missing?

[investor-man]

Dazel, I have a dumb question:

 

Why would you push to sell the company in the present circumstances.

 

$11.60 + 20% premium = $13.92

$11.60 + 30% premium = $15.08

 

Nothing to get excited about. Do you think they can get a higher premium? That doesn't seem likely given the doom and gloom about iron, coal and China.

 

What am I missing?

 

Doubt Dazel will respond... my guess is he'd say the appropriate comps for Altius are royalty companies, and they have much higher multiples than the ones that would fetch the prices you're quoting. Today Altius announced another royalty deal. With every announcement like this, they look more and more like a royalty company. None of us really want Altius to sell out. My hope would be kicking up some press will rerate Altius from "junior miner" to "royalty company".

[SharperDingaan]

Don't assume that ALS itself should be sold

 

It would make a hell of a lot of sense to sell just the ADV stake, and the Kami royalty, together as a package to a syndicate. The syndicate could then use its control to rescind the royalty, & meet the offtake agreements out of surplus capacity on existing mines. If ALS then wins JL they can still deal it off for another royalty.

 

SD

[nostradamus]

Personally I would vote aganist any sale of ALS that was priced below $25 per share. I would also disagree with the sale of kami at this point, unless the sale  meaningfully increased the likelihood of the mine being built. As for the sale of the royalty, I would much prefer it if they held on and waited until conditions allow the mine to be built than sell out at the bottom (hopefully) of the market.

 

Regarding shareholder activism, I am massively surprised to see shareholders who have raved about the quality of ALS management for many years, now suggesting that they doubt that management are on the right course. Why try for short term gains when there is much greater long term value that will be realised if we just let management get on with it.

 

N.

[SharperDingaan]

We're on the same page as Dazel with this, & probably many others as well.

 

It does not mean no confidence in the team, they are exceptionally good; it simply means there is no longer any appetite to tolerate further extended delay regarding Kami. It has been 9 months now, & most would argue that the real problem is that ADV is too weak a credit to support the financing - even with the production pre-sold. Its time to change the plan.

 

In the IFRS world, all ALS assets & liabilities in a business combination would be valued at FMV; royalty CF discounted at todays very low rates, securities at FMV, projects at negotiated value, etc. News of ALS in discussion with a major would also drive up the value of ALS, & its securities - simply because there is more chance of positive movement.

 

If ALS shareholders take stock (our preference) vs cash; we care only about the negotiated ALS/major exchange rate, how much of a lift the buyer is likely to get from developing the ALS assets once we own their shares, & how long we intend to hold the shares. Given that ALS is not dealing from weakness, & that Kami/JL are big enough to significantly move the dial of the combined entity (if they develop it); a sale of ALS itself, really also has to be on the table.

 

This is just being realistic, & recognizing that the approach has to change.

Nothing to do with confidence in the management.

 

SD

 

 

 

 

 

[naboo]

We're on the same page as Dazel with this, & probably many others as well.

 

It does not mean no confidence in the team, they are exceptionally good; it simply means there is no longer any appetite to tolerate further extended delay regarding Kami. It has been 9 months now, & most would argue that the real problem is that ADV is too weak a credit to support the financing - even with the production pre-sold. Its time to change the plan.

 

In the IFRS world, all ALS assets & liabilities in a business combination would be valued at FMV; royalty CF discounted at todays very low rates, securities at FMV, projects at negotiated value, etc. News of ALS in discussion with a major would also drive up the value of ALS, & its securities - simply because there is more chance of positive movement.

 

If ALS shareholders take stock (our preference) vs cash; we care only about the negotiated ALS/major exchange rate, how much of a lift the buyer is likely to get from developing the ALS assets once we own their shares, & how long we intend to hold the shares. Given that ALS is not dealing from weakness, & that Kami/JL are big enough to significantly move the dial of the combined entity (if they develop it); a sale of ALS itself, really also has to be on the table.

 

This is just being realistic, & recognizing that the approach has to change.

Nothing to do with confidence in the management.

 

SD

 

 

If ALS is on table for sale, what kind of price we can accept???

 

I think ALS should seriously review their projects and get rid of some of them when they still can.  For now, number one thing bothers me is their DEBT.  Forget about the future growth,  I like to see ALS DEBT FREE first. 

 

 

[craigatk]

ALS is on the table for sale every single day. Some of us buy and some of us sell. I would read more about: http://minesvirginia.com/en/index.php/props/eleonore/ if you want to understand what Dazel is hinting at. I'm surprised he's commenting at all  :)

[nostradamus]

OK, I think I am being a bit slow here, I need someone to spell it out.

 

So Altius is being lobbied to support a takeover of Virginia Mines so they can sell their stake at a big profit and pay down their debt, is that it? If so, I am not sure management need to be lobbied on this issue, the Virginia stake was always available for sale at the right price. I think I must be missing something.

 

N.

[BRK7]

I can understand FNV’s  interest in the Eleonore asset specifically.  However, I don’t see why FNV would be interested in anything else owned by Altius, considering that Altius’ other gold-related assets are pre-development and presumably highly speculative for that reason.

 

FNV is a pure-play gold company.  I was told that FNV was a bidder when Altius bought the coal and potash royalties late last year.  If FNV had really wanted the coal/potash royalties, FNV easily could have outbid Altius.  My understanding is that FNV was only interested if they could “steal” the coal/potash royalties.  Paying a “non-steal” price for the coal/potash royalties doesn’t make sense of FNV, because FNV believes (or so I was told) that its high market multiple is a consequence of the purity of its portfolio (almost exclusively gold). 

 

Also, to Nostradamus’ point, I believe the Virginia stake has always been available for sale, subject to the right price.  Maybe I am missing something as well.

 

[Guest Dazel]

I have removed our last two posts...this is more appropriate

We will be looking to aid Altius unlock value in  in every way possible which includes asset sales and or the sale of the company.

 

Dazel

[TwoCitiesCapital]

Just a quick question I've been pondering: why is ALS reporting a loss in investments in associates (MTM adjustment for Alderon stock) and their share off losses at the associate? It seems this is double counting of sorts - if ADV is losing money, Altius writes down 25% of that loss as well as the loss in stock market value of their 25% holdings. Just seems like it's over kill.

[lessthaniv]

Just a quick question I've been pondering: why is ALS reporting a loss in investments in associates (MTM adjustment for Alderon stock) and their share off losses at the associate? It seems this is double counting of sorts - if ADV is losing money, Altius writes down 25% of that loss as well as the loss in stock market value of their 25% holdings. Just seems like it's over kill.

 

Asset Classification Accounting Rules for marking to market the stock.

Equity Method Accounting Rules for sharing losses.

 

[BRK7]

Annual Meeting began today at 11am Newfoundland time (about 3 hours ago). 

 

Anyone attend the meeting?  Anything interesting or unexpected discussed?

[TwoCitiesCapital]

Just a quick question I've been pondering: why is ALS reporting a loss in investments in associates (MTM adjustment for Alderon stock) and their share off losses at the associate? It seems this is double counting of sorts - if ADV is losing money, Altius writes down 25% of that loss as well as the loss in stock market value of their 25% holdings. Just seems like it's over kill.

 

Asset Classification Accounting Rules for marking to market the stock.

Equity Method Accounting Rules for sharing losses.

 

I'm not terribly familiar with IFRS, but in GAAP if you choose equity method of accounting for a a fractionally owned company or subsidiary, and consolidate the results, there is no MTM entry - only adjustments for dividends paid back to the parent.

 

I Fairfax doesnt mark to market it's significant investments  accounted for using the equity method. Why would Altius?

[SharperDingaan]

If ALS is on the table for sale, what kind of price we can accept???

As there are so many possible, & very different, scenarios; we cannot really determine this until we know the actual terms.

 

Example:

Imagine that a syndicate of senior iron ore producers bought the ADV shares from ALS, and the Kami royalty - as a package. Then imagine that with these new syndicate owners, and the existing Kami offtakes, the price of ADV rises high enough for the convertible to convert. The syndicate owners then buy out that owners holdings, & use their majority (assume) control to rescind the royalty, and mothball the entire Kami project until better times. They also agree to meet the Kami 8m tpa offtake requirement, starting immediately, from their existing mines - until such time as Kami is actually built. That additional tonnage passing through the existing mines, more than lowers the cost of production below the interest cost on the debt used to buy the ADV shares & the Kami royalty - & everybody wins. Everyone wins even more if ALS opts to take shares of the producers instead of cash (essentially swaps ADV shares for XYZ shares), & then sells some of them to repay debt.

 

This is very feasible, & a routine practice used to control company making deposits (De Beers, Anglo, etc.) - but not what just about everyone might have expected. How do you value this, if you are not at the table? Everything is on the table today - & one has to expect that some of the ALS options might well resemble this.

 

SD