ALS.TO - Altius Minerals

[finetrader]

No logic other than I think that Altius is fully valued at 14$ with no Kami or Julienne project in sight.

I've been too greedy when stock price was 10$ and preferred to wait for a lower price that never materialized.

 

I sold because I felt I had no business holding a 2.5% fully valued portfolio position. I'm sure I will be able to find a better opportunity in oil stocks pretty soon.

[SharperDingaan]

We cannot know the future, but we can say with reasonable certainty that XYZ will either be higher, lower, or at about the same price; 1-2 quarters from now.  If we routinely apply the approach to XYZ, over time each possibility will have a 1/3 probability of occurrence; if we do it infrequently, the probabilities will be different. Statistics 101.

 

We will either be right (sold high & bought lower) or wrong (sold low & bought higher), but if we have been in XYZ for any significant length of time, & understand its actual business, we are probably going to be right more often than we are wrong. In effect, we have detected that the fatness of the left and right normal curve probability tails are not the same. If we are just 10% better, & right 55% of the time, we have a systemic way of capturing 10% (55% right – 45% wrong) of the share price volatility over our hedging period.

 

How much we capture depends on the volatility, & the degree of confidence. If we want 99% confidence the tails are very thin; at 90% they are fatter, the difference between them easier to detect, but there is more chance we could be wrong. Applied Statistics 101.

 

We don’t apply this outside of the actual underlying. Were we institutional we would be using options to minimize our outlay, credit instruments to alter the payoff probabilities, & access to a large block of treasuries under repo & reverse repo agreements. 

 

Obviously very powerful, & lots of potential use; but you have to work out the specific applications for yourself. Value proposition stuff.

 

SD

 

[Williams406]

Not a new topic to this board, but an article discussing the possibility of a "consolidated umbrella" of iron ore assets in the Labrador Trough.

 

http://www.globalminingobserver.com/okeeffe-buying-opportunity-labrador-trough-108-1

 

Getting something done seems like a really difficult, complex path, but motivated parties are working on it at least. I appreciated finding out a bit more about O'Keeffe and Champion.

 

As I look at the new Osisko, I'd guess Altius sells their shares when the deal closes. That's based on a rich Osisko valuation (very rough guess on my part) and balance sheet benefit to Altius of the cash proceeds. Anyone have a divergent view?

[netnet]

Not a new topic to this board, but an article discussing the possibility of a "consolidated umbrella" of iron ore assets in the Labrador Trough.

 

http://www.globalminingobserver.com/okeeffe-buying-opportunity-labrador-trough-108-1

 

Getting something done seems like a really difficult, complex path, but motivated parties are working on it at least. I appreciated finding out a bit more about O'Keeffe and Champion.

 

As I look at the new Osisko, I'd guess Altius sells their shares when the deal closes. That's based on a rich Osisko valuation (very rough guess on my part) and balance sheet benefit to Altius of the cash proceeds. Anyone have a divergent view?

 

Interesting article.  Champion and O'Keeffe seem worthy of investigating given O'Keeffe's record. 

Despite the nay sayers, I still like Altius a lot.  It's currently at a fair value, but fair is sometimes the cheapest you get for a great company, eventhough it was cheaper a few months ago. Timing these things is beyond me.

 

My only "problem" is that Altius has no dry powder in the current environment;  they historically make a lot of money in down markets like this.  On this cycle, they will have to make do with what they currently have under control.

 

 

EDIT I stand corrected, see the Feb 3 presentation on Altius's site.  They are actively looking for land and acquisitions, go Dalton go.

[Guest Dazel]

Happy New Year all! I thought I would check in briefly.

 

The Brian Dalton's and the O'Keefe's of the world...are successful because they are always looking forward and they know what the value of assets are worth (they will sell when appropriate). As with the O'Keefe and Dalton article referenced in the last few posts...the sector environment is now in full consolidation mode.

After meeting with Brian Dalton it is evident that he is going to win and this is an environment Altius will do well in...and while we do not agree on everything our core belief is the same... creating future value. There is more than one way to get to financial heaven...for those that have difficulty with the rocky road of the last year you have been given an education in the volatility of the market... With Altius latest win VGQ-OR in a absolutely brutal investing climate...they are well positioned for the future.

 

The royalty sector will continue its consolidation here with deals being rumoured with all players. The VGQ-OR merger success and the share appreciation of most of the royalty players has made consolidation option number one for all. It has been rumoured that OR is an immediate buy out target with the closing of the deal.

 

We see some tremendous synergies in some Altius combinations less in others...they are in the crosshairs of industry consolidation. The VGQ-OR monetization or strategic positioning...Altius-Mason Hill will be one of OR's largest shareholders...timing is excellent. As shareholders we could not be in better hands than Dalton and his team....it should be an interesting couple of months with another major deal announced today.

 

http://ca.reuters.com/article/businessNews/idCAKBN0KS15E20150119

 

will check in in a couple of months...

Best of Luck to All!

 

Dazel

 

 

[netnet]

Happy New Year all! I thought I would check in briefly.

 

The Brian Dalton's and the O'Keefe's of the world...are successful because they are always looking forward and they know what the value of assets are worth (they will sell when appropriate). As with the O'Keefe and Dalton article referenced in the last few posts...the sector environment is now in full consolidation mode.

After meeting with Brian Dalton it is evident that he is going to win and this is an environment Altius will do well in...and while we do not agree on everything our core belief is the same... creating future value. There is more than one way to get to financial heaven...for those that have difficulty with the rocky road of the last year you have been given an education in the volatility of the market... With Altius latest win VGQ-OR in a absolutely brutal investing climate...they are well positioned for the future.

 

The royalty sector will continue its consolidation here with deals being rumoured with all players. The VGQ-OR merger success and the share appreciation of most of the royalty players has made consolidation option number one for all. It has been rumoured that OR is an immediate buy out target with the closing of the deal.

 

We see some tremendous synergies in some Altius combinations less in others...they are in the crosshairs of industry consolidation. The VGQ-OR monetization or strategic positioning...Altius-Mason Hill will be one of OR's largest shareholders...timing is excellent. As shareholders we could not be in better hands than Dalton and his team....it should be an interesting couple of months with another major deal announced today.

 

http://ca.reuters.com/article/businessNews/idCAKBN0KS15E20150119

 

will check in in a couple of months...

Best of Luck to All!

 

Dazel

 

Dazel,

 

Happy New Year to you too.  I just wanted to thank you for your ideas on this board over the years, particularly Altius.  I had been looking through Royalty sector looking for smart, hardworking and honest owner operator type, and there was Dalton, top notch.

 

If you ever find yourself in the SF Bay area, dinner is on me.

 

Best,

 

Nick (netnet)

[naboo]

It's been quiet month for ALS, both share price and here.Was there really nothing for ALS? Maybe not

 

1.  Canadian dollar lost a lot of value during this month. Back to last April, when ALS did the secondary offering, CAD/USD was around 1.1/1, now it is 1.25/1.  so exchange rate is playing a big role in ALS debt, cost, and of course revenue.

 

2.  Canpotex signed potash deal with China.  That was around USD $305/ton, renewable every 6 months till end of 2017.

    http://globalnews.ca/news/1771141/canpotex-signs-deal-to-sell-potash-to-china/

[Williams406]

Quiet is a good word to describe the ALS board. Things I've been pondering during the silence:

a) As Dazel noted, the major royalty players RGLD and FNV trade north of 20x royalty revenue right now

 

b) Osisko's Roosen strikes me as a man on the move. The recent $200m bought deal, plus a lot of liquidity already, a rich stock price, and the backing of Quebec pensions. He could swing very big. I'm trying to figure out what his next moves are if Osisko stays independent. A different model than Altius in that mine-building may be in the firm's circle of competence, but two cornerstone gold royalties providing cash flow.

 

c) What will Altius do with it's Osisko shares in a few weeks?

 

d) Will Altius be able to get a Julienne Lake agreement in the near future? Or does JL belong in the Kami dead-for-now category (that I'm putting Kami in)? I realize such an agreement would likely not mean much financially for several years, but getting the process rolling in this environment would be impressive. Is Altius being pressured to reduce their equity stake or royalty? When Champion's O'Keeffe said in December that the Chinese are "on the sidelines" with respect to Labrador does that mean JL's shot for now?

 

e) What assets could be consolidatedunder O'Keeffe's "Consolidated umbrella"? Bloom Lake just sought creditor protection, just as they threatened. Can the interested parties pull something together and what does it look like? Altius, Champion, Arcelor, Rio, Nucor, Japanese Steelmakers, Chinese Steelmakers, Cliffs, Alderon, governments of Quebec and N&L are all in the mix. How hard can it be? Lock 'em in a room and tell them they aren't getting out until there's a deal.

 

f) It's killing me to see Altius in this environment without access to cheap capital. I've got to believe the deal flow for non PM royalties looks pretty good.

 

That said, I'm ready for some noise.

[nostradamus]

Altius posted a new presentation on their website today:

 

http://altiusminerals.com/presentations

 

Nothing particularly new. However, I thought it was interesting that they chose to say on page 11: "Current market conditions favourable for further accretive acquisitions."

 

I had been assuming that Altius would now concentrate on paying down debt through investment sales and other internally generated cashflow, but maybe not...

 

N.

[netnet]

Not only did they say:  "Current market conditions favourable for further accretive acquisitions."

They also said "We are busily assembling land positions in both Canada and Chile". emphasis added.

 

I looked through the October financials and I don't see anything to account for this activity, but there can be lags and mining accounting is not my strong suit.  I'm glad (in fact overjoyed) that they are doing this; I had assumed that they were too debt constrained to do anything in this market cycle.  Well this just proves that they are smarter than I am!

 

I should add that they made half of their market cap on 16 million to start with, so they may not need too much dry powder to hit the long ball...

[TwoCitiesCapital]

Altius posted a new presentation on their website today:

 

http://altiusminerals.com/presentations

 

Nothing particularly new. However, I thought it was interesting that they chose to say on page 11: "Current market conditions favourable for further accretive acquisitions."

 

I had been assuming that Altius would now concentrate on paying down debt through investment sales and other internally generated cashflow, but maybe not...

 

N.

 

They've mentioned previously that current market conditions were similar to the ones that they started in that resulted in many of the royalties/projects/JVs that we see today. I wouldn't read too much into this.

 

Not only did they say:  "Current market conditions favourable for further accretive acquisitions."

They also said "We are busily assembling land positions in both Canada and Chile". emphasis added.

 

I looked through the October financials and I don't see anything to account for this activity, but there can be lags and mining accounting is not my strong suit.  I'm glad (in fact overjoyed) that they are doing this; I had assumed that they were too debt constrained to do anything in this market cycle.  Well this just proves that they are smarter than I am!

 

I should add that they made half of their market cap on 16 million to start with, so they may not need too much dry powder to hit the long ball...

 

This is way more important. Land can be had for cheap and it means that Altius can still prioritize debt repayment while slowly accumulating more land tracks to partner with. I'm still excited about the future of this company despite the collapse in iron.

[nostradamus]

I know that they have previously said that current market conditions are similar to the ones that resulted in the royalties/project/JVs that we see today. This explains the assembly of their land positions, which I also think has been clear from their MD&A for a long time.

 

However, this is all very different to indicating that they might do additional acquisitions. What slide 11 effectively says is :

 

1. We have just done a massive a acquisition.

2. Current market conditions are favourable for futher acqusitions

 

Why would you make point 2 if you were not actively considering further acquisitions?

 

N.

[naboo]

I know that they have previously said that current market conditions are similar to the ones that resulted in the royalties/project/JVs that we see today. This explains the assembly of their land positions, which I also think has been clear from their MD&A for a long time.

 

However, this is all very different to indicating that they might do additional acquisitions. What slide 11 effectively says is :

 

1. We have just done a massive a acquisition.

2. Current market conditions are favourable for futher acqusitions

 

Why would you make point 2 if you were not actively considering further acquisitions?

 

N.

 

 

If you measure ALS' debt by using US Dollar, it has been down 20%, and also all the cost.  ALS highest priority should still be to pay off the debt, not make more acquisitions.  how much cash does ALS hold now?

 

 

[Williams406]

I agree with debt repayment up to the point that Altius' debt agreement incentivizes getting to $80 million for the lower interest rate. It seems like there are other important factors, though:

a) what does Altius' access to capital look like--I don't think they have a lot of cash on hand,

b) what opportunity set are they looking at in this environment.

 

As a thought experiment, what would you do as Altius CEO if you had a quality, long-life non-PM royalty or royalty portfolio in Canada of $10-$20 million LTM revenue come across your desk available at 6-8x LTM Rev? Do you reject the deal to pay down existing debt? Finance with debt, equity, a combo, maybe a partner? Clearly, the details matter. How stable are the revenues? What are debt terms? At what price is equity raised?

 

The first few slides of the presentation aren't ones I've seen before, but I don't think they represent a change of vision for Altius. Altius wants to be the non-PM royalty consolidator. Let FNV, RGLD, Osisko and SLV slug it out over the few PM royalties and streaming deals out there. Try to forge a mining royalty enterprise of scale with institutional respect where you aren't paying the competitive premiums the above have to. It snowballs if you can lower your cost of capital. To get there from here, you've got to deal during the trough parts of the cycle.

 

 

 

[hohi]

I would love to see them take over Anglo Pacific Group at these levels. Their Kestrel royalty is one of the, if not the best royalties on coking coal and that single one is worth more than APF's whole market cap at the moment.

If they could get the debt and do a little financing I definitely would love some great acquisition of a stable, long-life and cash flowing package of royalties (like the Prairie ones).

[nostradamus]

I think their debt, and their clear intentions to pay it down asap, make the hurdle for acquisitions very high. But the slides seem to suggest that it may not be insurmountable.

 

Also, as I think I mentioned before, there is the possibility to acquire with stock rather than cash. Potentially they could make an acquisition that is both good value for ALS shareholders and helps them pay down their debt. Callinan is a potential example. I don't really know anything much about Callinan, except that ALS management clearly think that it is undervalued given their ownership stake, plus it has both cash on the balance sheet and royalty cash flow.

 

[hohi]

I think their debt, and their clear intentions to pay it down asap, make the hurdle for acquisitions very high. But the slides seem to suggest that it may not be insurmountable.

 

Also, as I think I mentioned before, there is the possibility to acquire with stock rather than cash. Potentially they could make an acquisition that is both good value for ALS shareholders and helps them pay down their debt. Callinan is a potential example. I don't really know anything much about Callinan, except that ALS management clearly think that it is undervalued given their ownership stake, plus it has both cash on the balance sheet and royalty cash flow.

 

Whatever they might or might not do - I am confident that management will make consistently good decisions in the future. They'll maybe miss one or two good opportunities, but they will never endanger the business. That's why I own Altius and not Anglo Pacific Group - though I am very tempted to buy some at these levels ;).

 

Be right and sit tight my friends

[ItsAValueTrap]

there is the possibility to acquire with stock rather than cash.

 

That is probably what they mean by "accretive acquisitions".  Use (overvalued) stock as acquisition currency.

[wachtwoord]

Stock doesn't need to be overvalued in absolute terms, just relatively to the aquisition target.

[hohi]

Wow - I am so glad I did not buy into Anglo Pacific yet. They just announced a deal to buy a thermal coal royalty by issuing new equity. That is exactly why I love Altius so much - they are obsessed with share structure. Never issue shares when you are undervalued and issue them when you are overvalued. Anglo's new management seems way to aggressive, I'll stick with Dalton and his team.

[Sunrider]

I wouldn't call the raise last year as happening at a particularly overvalued point! (In fact, I think they got a poor deal and I have no idea what they paid those bloody investment bankers for.)

 

 

Wow - I am so glad I did not buy into Anglo Pacific yet. They just announced a deal to buy a thermal coal royalty by issuing new equity. That is exactly why I love Altius so much - they are obsessed with share structure. Never issue shares when you are undervalued and issue them when you are overvalued. Anglo's new management seems way to aggressive, I'll stick with Dalton and his team.

[hohi]

I wouldn't call the raise last year as happening at a particularly overvalued point! (In fact, I think they got a poor deal and I have no idea what they paid those bloody investment bankers for.)

 

In retrospect I would say that the placement was a good thing. The Prairie royalties are superb quality and will pay us generations to come. I am sure management did it with a bleeding heart but they knew this would bring us to the next level. Five years out we'll all be happy campers imho.

 

Be right and sit tight.

[Sunrider]

I'm sitting tight ... now I just hope I'm right.

 

Anyway, none of the elaborate theories that went around the board at the time turned out to be true ... that doesn't mean it was a bad deal. Only time will tell.

 

I wouldn't call the raise last year as happening at a particularly overvalued point! (In fact, I think they got a poor deal and I have no idea what they paid those bloody investment bankers for.)

 

In retrospect I would say that the placement was a good thing. The Prairie royalties are superb quality and will pay us generations to come. I am sure management did it with a bleeding heart but they knew this would bring us to the next level. Five years out we'll all be happy campers imho.

 

Be right and sit tight.

[Williams406]

The Osisko-Virginia deal has closed as of today. I believe Altius is now free to sell its Osisko shares if it chooses. 

 

Just above that in my newsfeed is a disclosure by Anglo Pacific regarding Major Interest in Shares. I opened that expecting to see Hohi had acquired control of the company (Liontrust Investment Partners bought 15%).

[Guest Dazel]

 

Altius has been restricted in discussions, negotiations or solicitation with regards to their lockup agreement with Osisko gold royalty. With the closing of the deal it now opens up many possibilities that were not legal to discuss for the last number of months. There has been speculation in the market place that Royal Gold would take a run at taking over OR when the deal was complete. The rumour of FNV kicking the tires at Altius has been around as well....While rumours are just that.....Altius' hands have been tied from the lock up agreements until today.

Brian Dalton will be busy this week...that is for sure.

 

Dazel