ALS.TO - Altius Minerals

[SharperDingaan]

The nice thing with both of these is that it is all upside optionality. We don't have to know what is going on, and we only need to be right once; anything more is gravy.

 

Any Glencore equity investment in Kami, needed to keep the offtake alive, now becomes an easily supportable dowry. And Rio is a well positioned potential 2nd partner over which to spread the financial risk of start-up.

 

Any FNV/Lundin interest in expanding Candelaria, pretty much means an earned interest on the Altius land, a drilling program, and potentially a future buyout if the deposit is found to extend onto Altius land.

 

SD

[Gamecock-YT]

Wabush Mines sale talks off between Cliffs, MFC Industrial

 

http://www.cbc.ca/news/canada/newfoundland-labrador/wabush-mines-sale-talks-off-between-cliffs-mfc-industrial-1.2792559

 

The local president of the union representing steel workers in Wabush says talks between MFC Industrial and Cliffs Natural Resources for the purchase of Wabush Mines have broken off.

 

Jason Penney, with the United Steelworkers Union, told CBC News the potential sale of the idled iron ore operation won't be going ahead.

 

A spokesperson with MFC Industrial confirmed Wednesday afternoon that "discussions have been terminated" between the two companies.

 

In July, workers with USW Local 6285 agreed to a five-year contract to work for MFC Industrial if the sale went ahead.

 

Penney said the union received word Thursday morning that MFC and Cliffs were "unable to reach an agreement" on the sale of the mine.

[SharperDingaan]

The take away is that regional governmental intervention is becoming increasingly necessary.

 

Kami mine development - stopped

Further power line development - stopped

Potential Wabush mine sale & restart - stopped

Other regional economic activity - largely stopped

JL development - probably deferred, potentially stopped

 

The best mega-project for the region is very likely Kami, & the region very much needs the stimulation.

How long can it really be before the decision is made.

 

SD

 

 

 

[wisdom]

http://www.stockhouse.com/news/newswire/2014/10/10/canadian-iron-ore-ceo-accuses-rio-tinto-rio-predatory-tactics

 

[SharperDingaan]

Nice to see, but a rough hockey game is not the place to be polite ....

 

We are pretty sure that the CEO of RIO will not appreciate his public comments being viralized, just ahead of noises into a WTO  potential investigation into global predatory pricing in the iron ore market. It is also highly likely that Rio would prefer not to be widely used as the well publicized short leg, in iron ore long-short combinations. Real bummer if the primary buyer is also on the other side of many of those trades, & they suddenly start rejecting &/or delaying deliveries from RIO. There is nothing to prevent profiting from sudden difficulties that RIO might encounter  ;)

 

On the other hand, RIO could see the light & be intelligent. The negotiation would go better though if a state intervention made the mine development an inevitable outcome, & private partners were arm wrestled the old fashioned way. The stubborn usually have to experience some pain first.

 

SD

[Guest Dazel]

http://www.smh.com.au/business/markets/iron-ore-surges-as-china-slowdown-fears-ease-20141014-115mln.html

 

 

 

[SharperDingaan]

WA premier lashes BHP, Rio over iron ore

http://www.ntnews.com.au/news/national/wa-premier-lashes-bhp-rio-over-iron-ore/story-fnjbnvyj-1227090453161.

... skippy having a tough day

 

 

Nerves of steel necessary for a foray into metal

http://www.heraldsun.com.au/business/in-the-black/nerves-of-steel-necessary-for-a-foray-into-metal/story-fni0d787-1227090618447?nk=9d2050ecab6fc661fd641468565b70f9

 

That is undoubtedly a significant negative for a new shareholder but this share overhang is counteracted by a really low price, which fell from above $1 a share as recently as May to a low of just 32.5c. Add to that the fact that the $754 million is now safely in the bank and will be used to pay down debt and the Arrium balance sheet is ironically in better shape than it was when the share price was much higher.

 

... what happens when you see irrational behaviour.

 

SD

 

[SharperDingaan]

Just to add to the misery  ;)

http://www.forbes.com/sites/timtreadgold/2014/10/14/bhp-billiton-and-rio-tinto-risking-a-monopoly-investigation/

 

“If I was sitting around a board table in one of those big companies I’d be pretty nervous about what the WTO and European regulators would think about this,” he said.

 

SD

[topofeaturellc]

Who is being damaged here? Not the consumer . RIO and BHP are driving prices lower. They aren't damaging competitors by pricing below their marginal cost in an effort to dump product. They still make money at prices in the 30 or 40s. You'd even argue that the recent capacity expansions are NPV positive for them at any price greater than the mid 60s . there is just no evidence of anti-competitive behavior.

 

I mean it sucks to be above fmg on the cost curve but that's not RIOs faul .

[Gamecock-YT]

Who is being damaged here? Not the consumer . RIO and BHP are driving prices lower. They aren't damaging competitors by pricing below their marginal cost in an effort to dump product. They still make money at prices in the 30 or 40s. You'd even argue that the recent capacity expansions are NPV positive for them at any price greater than the mid 60s . there is just no evidence of anti-competitive behavior.

 

I mean it sucks to be above fmg on the cost curve but that's not RIOs faul .

 

"He said he was buying in to the situation to protect his State’s interests.

 

“The iron ore belongs to the people of Western Australia. It doesn’t belong to the companies until they load it on a ship,” he said.

 

“We’ve got a direct commercial interest. If they push out so much iron ore that the price drops by more than it should normally, then that costs the Western Australian taxpayer severely.”"

[SharperDingaan]

WTO challenges don't have to be won; they just have to stop the predatory pricing, & make the old school solutions obsolete. There was a time when a RIO might have seen its ship loading facilities suddenly fall into the ocean - with a little help. Take away the ability to load ships, and they would be decapitated for quite some time.

 

Predatory pricing hurts everyone. In the short-term the state gets less from the ore, and in the long-term it suffers retaliation in other exports/imports - to offset the bargaining power abuse that predatory pricing is intended to facilitate. Retaliation could be in the form of additional duties, or state intervention; it impedes free trade, and we all suffer - solely because of the one or two bullies in the sandbox, controlling a single product. States import/export a bunch of products.

 

C-Suites are readily replaceable. States make the law of the land, and they can change it - at anytime.

Change attitude or suffer the threat of new impositions; who do you think is likely to win.

 

 

SD

 

[TwoCitiesCapital]

Who is being damaged here? Not the consumer . RIO and BHP are driving prices lower. They aren't damaging competitors by pricing below their marginal cost in an effort to dump product. They still make money at prices in the 30 or 40s. You'd even argue that the recent capacity expansions are NPV positive for them at any price greater than the mid 60s . there is just no evidence of anti-competitive behavior.

 

I mean it sucks to be above fmg on the cost curve but that's not RIOs faul .

 

These things aren't determined by actual consumer damage. They're judged by the potential for consumer damage based on limited competition. Standard Oil used the same practice and was still broken up.

 

That being said, I don't have a great idea of what's going on here and don't exactly know how valid the argument against the large players is. I'm more concerned about the coming slowdown in Europe and Asia than I am flooding the iron ore market.

[topofeaturellc]

Nah what standard oil did was completely different. It had an actually monopoly on refining capacity and used that power to drive people out of business by selling to retail at less than their cost of production and only selling to downstream competitors at inflated prices. Not to mention the upstream stuff they did.

 

Rio and BHP are pure price takers. And make very good returns at prices significantly below current spot. You can argue their expansion strategy isn't rational (it actually might be given how low the capital spend per ton) but it's not predatory if they don't set the price and they make money at the prices they choose to produce at. 

 

This guy can jump and yell all he wants but it really isn't going to keep true price of iron ore high enough to make Alderons economics attractive outside of a reacceleration in chinese growth. Rio's own Canadian assets need help to survive at today's price .

 

 

[topofeaturellc]

My mind is boggled that Rio is committing predatory pricing.

[SharperDingaan]

RIO does not have to sell at below marginal cost to be predatory.

 

RIO is not a price taker, it is a price setter, and it is setting price by artificially increasing production to capture market share. They are on record stating their intent is to keep out competitors, and were rapped for abusive oligarch behaviour less than 8 years ago.

 

Abuse your market position and you get made to regurgitate - and then some. All Western Australia need do, is impose a temporary tax on RIO; large enough to more than remove their cost advantage at maximum production, & recover the royalty they are being ripped off. The abuse would stop instantly.

 

The government of Western Australia makes the law, & RIO can either pay gracefully - or give up their leases. The politician leading the charge claims credit for averting a WTO challenge, shows his ability to stand up for all Australians, and gets to prove the Australian commitment to global free trade. Just the goods to get somebody re-elected, and there is no time limit on how long temporary is.

 

Alternatively, were RIO simply to give up the practice, the politician would not have the ammunition to impose the tax; and business would return to normal. The C-Suite also gets to stay in place.

 

SD

 

[nostradamus]

When I started reading this part of the thread, I initially agreed with the view that what Rio is doing is not predatory pricing. But then I looked up the definition on Wikipedia:

 

Predatory pricing (also undercutting) is a pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly.

 

In many countries predatory pricing is considered anti-competitive and is illegal under competition laws. It is usually difficult to prove that prices dropped because of deliberate predatory pricing rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.

 

Under this definition, what Rio are doing probably is predatory pricing. But to me there is nothing wrong with it. There is a world of difference between (a) pricing below the cost of production to drive out competition; and (b) accepting lower (but still postive) profits to increase market share. The latter, even if it is called "predatory pricing" seems to be completely legitamate.

 

Is anyone really saying that businesses should not be allowed to undercut their rivals as a way of winning market share?

 

N.

 

 

 

[EliG]

BNP is doing the exact same thing as RIO. One can argue that RIO/BNP colluded to flood the market and turn it into an oligopoly. The counterpoint would be that RIO/BNP are simply competing with each other for market share.

 

I don't have a big problem with what they are doing (even though they are killing my ALS shares).

[Blue Macaw]

Kami might get built in some years, who knows. The problem now is that Vale, Rio and BHP are flooding the market with iron ore, which they can produce quite cheaply or at least cheaper than other players. Vale has some 20 dollars more in cost than Rio and BHP due to transport from Brasil to China but will cut that now with the new agreement on their Vale max ships by some 7 dollars. However Vale has some cash cost of 25 instead of Kami´s 42 which will have them make money anyway with these prices.

 

Vale´s total cost is in the range of 60-67 dollars per ton. Kami´s would be 42+20 (transport)+general admin(3 dollars)+finance cost (6-7 dollars)+ exploration (1 dollar) = $ 73 per ton. The margin of safety is gone with these prices so I doubt that anyone is willing to invest 1 billion $ now.

 

I don´t see a problem of what they are doing. They are increasing prodcution which will lower the price and their margins (some since they increase market share). This should benefit all the people in the world (except for those that own shares in high cost mines) with lower prices on steel which then leaves them with more money over for other things.

[ItsAValueTrap]

Kami might get built in some years, who knows. The problem now is that Vale, Rio and BHP are flooding the market with iron ore, which they can produce quite cheaply or at least cheaper than other players. Vale has some 20 dollars more in cost than Rio and BHP due to transport from Brasil to China but will cut that now with the new agreement on their Vale max ships by some 7 dollars. However Vale has some cash cost of 25 instead of Kami´s 42 which will have them make money anyway with these prices.

 

Vale´s total cost is in the range of 60-67 dollars per ton. Kami´s would be 42+20 (transport)+general admin(3 dollars)+finance cost (6-7 dollars)+ exploration (1 dollar) = $ 73 per ton. The margin of safety is gone with these prices so I doubt that anyone is willing to invest 1 billion $ now.

 

I don´t see a problem of what they are doing. They are increasing prodcution which will lower the price and their margins (some since they increase market share). This should benefit all the people in the world (except for those that own shares in high cost mines) with lower prices on steel which then leaves them with more money over for other things.

The Valemax ships aren't allowed in China because China wants to subsidize its shipbuilding industry.  It's pretty ridiculous.

 

As far as believing in Kami's cash costs... I hope you for your sake that you invest as little money as possible in junior miners.

[Blue Macaw]

Kami might get built in some years, who knows. The problem now is that Vale, Rio and BHP are flooding the market with iron ore, which they can produce quite cheaply or at least cheaper than other players. Vale has some 20 dollars more in cost than Rio and BHP due to transport from Brasil to China but will cut that now with the new agreement on their Vale max ships by some 7 dollars. However Vale has some cash cost of 25 instead of Kami´s 42 which will have them make money anyway with these prices.

 

Vale´s total cost is in the range of 60-67 dollars per ton. Kami´s would be 42+20 (transport)+general admin(3 dollars)+finance cost (6-7 dollars)+ exploration (1 dollar) = $ 73 per ton. The margin of safety is gone with these prices so I doubt that anyone is willing to invest 1 billion $ now.

 

I don´t see a problem of what they are doing. They are increasing prodcution which will lower the price and their margins (some since they increase market share). This should benefit all the people in the world (except for those that own shares in high cost mines) with lower prices on steel which then leaves them with more money over for other things.

The Valemax ships aren't allowed in China because China wants to subsidize its shipbuilding industry.  It's pretty ridiculous.

 

As far as believing in Kami's cash costs... I hope you for your sake that you invest as little money as possible in junior miners.

 

Don't worry. I got out a while back, between 14 and 15. When Kami did not deliver I actually thought Altius was a bit expensive according to Graham valuations.

 

Unfortunately I have lost some money on the recent downturn in oil price. I did not see it coming. But as it is now lots of them are quite cheap. just don't have the money which sucks

[SharperDingaan]

Undercutting rivals as a way of winning market share......

 

Agreed there is nothing wrong in this, so long as it is in moderation. It becomes a problem when capital intensive industries with low variable costs (airlines, mining) are unable, or unwilling, to self-discipline. Shareholders own the businesses, not managers; and the objective is profit maximization over the long term - not market share over the short term.

 

Airlines are notorious long term capital destroyers because they are marketing driven, and rank success by market share - not profitability. Management as agent, dominant over shareholders as principal.

 

Miners don't get the option. They don't own the depleting resource, & they have to work with their state landlord to achieve the highest long-term value for the resource. That means continually selling at the highest price possible, and letting the buyer set the price - not the selling miner. Predatory pricing is to temporarily sell at the lowest price possible.

 

Minerals are strategic assets, airline seats are not. There is less tolerance for school yard bullying, and states reply with broad trade restraints that hurt everyone - not price cuts. The expectation is that each state brings its local bullies to heel; and if they lack the power - there is a collective disciplinary response. Were this oil, & not iron ore, there would be little hesitation in applying discipline.

 

Obviously some industries are better at applying discipline that others, but they all apply it. Concrete overshoes are crude, but simple, and everyone immediately understands the message. State intervention is just more sophisticated.

 

SD

 

[SharperDingaan]

"The Valemax ships aren't allowed in China because China wants to subsidize its shipbuilding industry.  It's pretty ridiculous.

As far as believing in Kami's cash costs... I hope you for your sake that you invest as little money as possible in junior miners."

 

Don't assume that China is not being entirely rational. The party does not make stupid decisions - & it is why they are still there.

Don't assume buy and hold did not include hedging. Folks who sold some at higher prices, have realized losses and unrealized short gains - getting bigger every day. Realized loss + unrealized short gain could quite easily be positive.

 

SD

 

[Guest Dazel]

http://www.chinadaily.com.cn/business/2014-10/22/content_18781015.htm

This is the plan....

[sculpin]

 

Any thoughts on Callinan? CEO terminated. Lots of cash - been living off the one large royalty while entering into various lower quality royalty deals.

 

CAA Close 2014-10-21 C$ 1.72

 

Mr. Brian Irwin reports

 

CALLINAN ANNOUNCES NEW INTERIM PRESIDENT AND CEO AND RESIGNATION OF DIRECTOR

 

Callinan Royalties Corp. has appointed Glenn R. Brown, PhD, currently a director of Callinan, to the role of interim president and chief executive officer, effective immediately. Roland Butler, formerly president and CEO of Callinan, has been terminated without cause and has resigned from the board of directors as part of a transition process.

 

Mr. Butler stated, "I am thankful for the opportunity to serve Callinan for the past four years and wish the company and its shareholders well in the future."

 

Brian Irwin, chairman of Callinan, stated: "Mr. Butler has shepherded Callinan during its transition phase to a successful royalty company, and the time, investment and effort he has contributed is very much appreciated. We wish him well in his future endeavours."

 

CALLINAN ROYALTIES RELEASES Q4 AND YEAR-END FINANCIAL STATEMENTS

 

Callinan Royalties Corp. has released its financial results for the fourth fiscal quarter and for the fiscal year ended June 30, 2014. The audited financial statements and management's discussion and analysis are available on Callinan's website and on SEDAR. The company's net income for the year ended June 30, 2014, is $6,091,942 compared with $8,851,153 for fiscal 2013. Income per share for basic and fully diluted is 12 cents compared with 18 cents for basic and fully diluted in fiscal 2013. All amounts are in Canadian dollars. A summary of the financial information is included in the attached table.

 

                                              FINANCIAL HIGHLIGHTS

 

                                  Three months ended  Three months ended  Twelve months ended  Twelve months ended

                                      June 30, 2014      June 30, 2013        June 30, 2014        June 30, 2013

 

Income                                $3.34-million      $3.51-million        $11.93-million        $16.80-million

Net income                            $1.90-million      $1.62-million        $6.09-million        $8.85-million

Net income/fully diluted share                $0.04              $0.03                $0.12                $0.18

Cash flow from operation              $0.97-million      $0.96-million        $10.34-million        $9.19-million

The following are key highlights for the fiscal year:

 

The annual royalty income for the year ended June 30, 2014, was $10.7-million compared with $15.7-million last year.

A total of $3.98-million was paid out in dividends to shareholders.

 

Cash on hand at June 30, 2014, was $24,057,672 (compared with $24,883,295 at June 30, 2013).

 

Callinan completed a staged royalty investment with Excelsior Mining and exercised the first royalty option. In total, Callinan has acquired a 1-per-cent gross revenue royalty on the Gunnison copper project in Arizona and holds options for the right to increase its royalty to a 3-per-cent GRR in return for additional payments following completion of additional key project milestones.

 

Callinan announced the creation of two separate exploration alliances. As part of these alliances, Callinan has agreed to finance exploration programs totalling $150,000 on the Alvito project in Portugal with Avrupa Minerals and the same amount on the Golden Shears project in Nevada with Renaissance Gold in exchange for a 1.5-per-cent net smelter returns royalty on each project.

[vinod1]

The one statistic that keeps me from investing in Altius even at the current price is that China with 12% of global GDP is consuming 60% of the world's iron ore. So my question is this, if you believe as I do that iron ore prices are going to average $50 to $60 for the next decade or so, would you still invest in Altius?

 

Dazel - Thanks for sharing this truly unique one of a kind idea with this board.

 

Vinod