ALS.TO - Altius Minerals

[Williams406]

Sunrider,

 

I can sympathize with your Altius return experience thus far. I'm not sure when in 2013 you purchased shares, but the company was sitting on a sizable cash hoard from earlier "value realization." Altius did repurchase some shares with cash (don't recall quantity but my rough recollection is that it was close to the amount issued in the PMRL/CDP deal and at much lower prices than the PMRL stock issuance price). Thinking about the two sizable deals they've done since December 2013 (Callinan also), would you have done things differently? Reasonable minds can certainly differ on this. But given the scale of those deals, any spare cash was going to be used to get those deals done. That historical share repurchase--though it was before you became a shareholder--represents some return to shareholders. The dividend in place today represents a small return to shareholders.

 

Unlike early 2014 when I anticipated some chance at a favorable outcome with respect to Alderon financing and news on Julienne Lake, I don't see clear catalysts for stock price. Deals like the Bitterroot transaction are likely to be deals for the next 5-10 years. The land bank has grown a lot in the past couple years and those assets are like seeds. Most won't germinate but if one or two do, they could be material. But who knows when? Optionality, mineral rights, and acreage are big things.

 

More interesting to me right now are the two unspecified investments in publicly-traded royalty companies that have historically paid sizable dividends. To your point, Altius spent a lot of cash on that aggregate investment. I'm confident Altius would love to be debt free. I think the company would love to pay a higher dividend. I suspect Altius would love to be buying back shares, but I don't think they are (could be wrong on this). The question is why?

 

I'm also very curious to see if miner carnage translates to any large syndicated royalty deals involving Altius. I have concerns about syndication and the influx of capital from sources not traditionally in the royalty/streaming space, but think it makes better sense than the big dogs killing each other over the low-return deals they have been doing.

 

Champion now has Bloom Lake with rail assets. Does this benefit Altius' Lab trough iron ore assets?

 

As an outside passive minority investor, I have to speculate and guess a lot. Just as my investing activity sky-rocketed in fall of 2008, I suspect Altius is busy right now. When I see them not using cash for purposes I believe they'd like to use it for, I have to believe they are trying to line up some things. Will they succeed? No idea. But I'm betting they will, but not with any thought of capital appreciation within the next couple of years. Short of some miner paying them a lot of money for some asset or Altius getting a buyout offer, I don't know what would drive the stock right now.

 

Coal exposure, serious Voisey's Bay issues, and general commodity exposure have hit Altius stock hard. And frankly, a low stock price is a further negative when you're considering deals that might outstrip your available cash. Like Sunrider, I'd love to hear others' thoughts and insights. If you're CEO, what do you do right now given your balance sheet, cash flow, and industry environment?

 

[TwoCitiesCapital]

Hmmm so I've been in this since late 2013 and am down a fair bit. The story from their IR presentation sounds good but this value realisation they speak about did not flow to shareholders, it went to management comp and is tied up in the investments they subsequently made.

 

I suppose you have to believe that they will eliminate the debt quickly $1 in royalties per share vs $1 in debt as per the presentation and ramp up the dividend or make smart investments and the cycle turning again soon so that they can then realise. Not sure about timing on either.

 

Thoughts?

Thanks - C.

 

Revenue per share has grown 5x since 2013 while total debt per share has fallen 50%. They've made strategic investments in land and publicly traded mineral royalties that will seed future revenue and project growth. They have stable cash flows to continue to cover debt service, dividend obligations, and future investment allowing them to re-invest 5-10% of the company's market cap at favorable prices every year without having to accept any further debt and they still have the option of re-levering for other large acquisitions.

 

TBH, I'm seriously surprised that a non-distressed company with massive appreciation in per share revenue/FCF, a massive reduction in per share debt, massive (and stable) free cash flows that can be reinvested at very favorable rates of return, would trade at such a discount. As a value investor, could you really ask for a better pitch?

 

Who cares what the share price has done since 2013 - look at the underlying company and tell me that they're not significantly more valuable and in better shape than at the end of 2013 and then ask yourself why you're hesitating to buy more if you were happy buying in 2013.

[wachtwoord]

Altius is almost 30% of my portfolio (my average purchase price is still >20% higher than today's price though). I'm very happy holding this long term (of course I'll sell if the price ever gets really expensive).

[goldfinger]

http://finance.yahoo.com/news/champion-announces-definitive-agreement-acquire-175625717.html

 

Champion buys Bloom Lake.

 

$10 million in cash. Cliffs paid $4.9 billion in 2011.

 

That's quite the negative CAGR...

 

Indeed - but it bodes very positively for the types of deals that Altius has available to it in this environment. Very exciting to see what the next 5 years will hold.

 

Maybe, if commodities don't stay depressed for a decade as they sometimes do (not saying they will--have no idea). ALS stock has been mostly flat for almost a decade, would be a shame if it was for another one... They may not be exposed to capex directly, but their partners are, and they are exposed to commodity prices....

 

Diamonds were worth nothing during the Great Depression - probably a good time to buy them then (with more than a decade horizon). Dalton is a very disciplined investor with a 40m+/year cash machine for which he has to pay nothing almost. He can chose to buy other cash flow streams or deposits. His last 3 investments were pretty lucrative while the bear market was raging hard. He buys deposits when they are priced at next to nothing (1m for the Michigan lands) and seems pretty conservative when buying equity and/or cash flows. As for the stock price, we went through a super cycle recently- is that representative of the value created underneath at Altius? No. This is for very patient people...

[goldfinger]

http://finance.yahoo.com/news/champion-announces-definitive-agreement-acquire-175625717.html

 

Champion buys Bloom Lake.

 

$10 million in cash. Cliffs paid $4.9 billion in 2011.

 

That's quite the negative CAGR...

 

Indeed - but it bodes very positively for the types of deals that Altius has available to it in this environment. Very exciting to see what the next 5 years will hold.

 

Maybe, if commodities don't stay depressed for a decade as they sometimes do (not saying they will--have no idea). ALS stock has been mostly flat for almost a decade, would be a shame if it was for another one... They may not be exposed to capex directly, but their partners are, and they are exposed to commodity prices....

 

Diamonds were worth nothing during the Great Depression - probably a good time to buy them then (with more than a decade horizon). Dalton is a very disciplined investor with a 40m+/year cash machine for which he has to pay nothing almost. He can chose to buy other cash flow streams or deposits. His last 3 investments were pretty lucrative while the bear market was raging hard. He buys deposits when they are priced at next to nothing (1m for the Michigan lands) and seems pretty conservative when buying equity and/or cash flows. As for the stock price, we went through a super cycle recently- is that representative of the value created underneath at Altius? No. This is for very patient people...

 

I was re-reading an old (2014) research article on Altius tonight and here is the excerpt on the Voisey's Bay royalty:

 

"Prior to a key transaction that we discuss below, Altius‟ flagship royalty was a 0.3% NSR royalty on Vale S.A.‟s

(previously Inco‟s) Voisey‟s Bay nickel-copper-cobalt mine in Labrador with an estimated remaining mine life of 20

years. Altius acquired the royalty for about $13 million in 2003 from the company whose principals had discovered

Voisey‟s Bay. In the last twelve months, the royalty produced revenue for Altius of approximately $2.5 million, which

Altius expects to continue in the future, based on typical production volumes and current base metal prices.

Recently, Vale reached an agreement with the Government of Newfoundland and Labrador to develop the

underground deposits at Voisey‟s Bay. We assume that Vale goes ahead. This would extend Voisey‟s Bay mine life to

over 40 years."

 

It the first six months of 2015 - this royalty brought an income of 1.049M CAD in a depressed environment.

I mean this is incredible returns right there... a 50+ year bond with increasing coupon at almost 20% yield after 10 years... Of course there are hick ups along the way but still... especially if you can reinvest the coupons at similar return profiles... which seems easier with a slightly bigger size when it comes to that field.

Altius makes its money when it buys at low prices - I hope the current environment lasts for a long time... the amount of deals has accelerated exponentially in the last 2 years.

 

[goldfinger]

http://www.commodity-tv.net/c/mid,34988,Mines_und_Money_London_2015/?v=295236

 

[Libs]

Doubled my position at $6.07 / share today (ATUSF).

 

BV = $6.31

 

What a bloodbath. Down 10%.

[TwoCitiesCapital]

Doubled my position at $6.07 / share today (ATUSF).

 

BV = $6.31

 

What a bloodbath. Down 10%.

 

NICE!

 

It's already my largest position by cost-basis but I increased 15% (shares wise) at $6.00. I'm hesitant to buy heavily in-front of what appears to be irrational selling, but will buy another 10-15% or so if if we see it trade closer to $5.

 

[nostradamus]

Also just acquired some more ALS shares. I never expected to have the opportunity to get more at less than 9 CAD.

 

I really have far too much invested in ALS. I think I need to spend some time looking at new pretty pictures that they have on their website to take my mind of my overly concentrated exposure. (They have added some new project pages to their website)

 

N.

[TwoCitiesCapital]

Also just acquired some more ALS shares. I never expected to have the opportunity to get more at less than 9 CAD.

 

I really have far too much invested in ALS. I think I need to spend some time looking at new pretty pictures that they have on their website to take my mind of my overly concentrated exposure. (They have added some new project pages to their website)

 

N.

 

Yea. I'm getting hesitant to add too just because I've been burned in the past by holding steadfast in the face of what appeared to be irrational selling at the time - as it turns out, on both cases, the market was right and I was wrong. But Altius is a much simpler case/company than those other two and so I have been taking nibbles at lower and lower prices increasing it above my self-imposed position limits by 1-2%.

 

While I'm beginning to ignore those position limits now, it has certainly been to my benefit to have had them - otherwise I might have had my fill when it was at $9 and wouldn't be in a position to buy more at $6.

 

It'd be nice to see some conviction on the company's part and begin repurchasing some of those 12M shares they issued over the past 2 years now. Surely we have to be getting to a price where repurchasing Altius shares compares in risk-adjusted attractiveness to some of the yields they're seeing in the market.

[Williams406]

I miss the good 'ol days of a couple weeks ago when I could blame year-end tax management for price declines. Above-average volume yesterday and today. Not much going on with other royalty/streaming company stocks.

 

My orders are in, haven't filled...but I'm confident it's only a matter of time.

 

 

 

 

 

 

[intothebreach]

Mine have just been filled at 8.75 CAD in ALS.TO

[SnarkyPuppy]

How much has Dalton bought on the open market since he sold 7% of his stake?  I'm having trouble finding his insider purchases

[kab60]

I've been following the discussion here on and off, but I'm still now sure how to value this. Last presentation says aprox. 40m revenue, but how much of that is distributeable? Or said another say, how do you guys (roughly) value the company, and what do you peg the owner earnings at?

[doc75]

How much has Dalton bought on the open market since he sold 7% of his stake?  I'm having trouble finding his insider purchases

 

You view all insider purchases on sedi.ca.

 

There were 16000 shares flagged as "insider trades" yesterday, and another 14500 again today, at $8.43 and $8.25 avg, respectively. (As per TMX.)  I'm guessing this is a buyback under the existing NCIB, given that the max allowed daily volume is 16088.  But of course it could be Dalton/Wells/etc. back at the table.

 

 

 

 

[goldfinger]

I've been following the discussion here on and off, but I'm still now sure how to value this. Last presentation says aprox. 40m revenue, but how much of that is distributeable? Or said another say, how do you guys (roughly) value the company, and what do you peg the owner earnings at?

 

To quickly respond here: 5M/year of op expenses to maintain the business + interest on their debt (64M or so - they can chose to bring it more aggressively to 0 with cash/investments/income). Chad explains it well below:

http://www.commodity-tv.net/c/mid,34988,Mines_und_Money_London_2015/?v=295236

On the other end, the life of their royalty may greatly exceed the official expected life used for calculating NAV/buying price. On this I would trust Dalton's judgement...

[SnarkyPuppy]

I've been following the discussion here on and off, but I'm still now sure how to value this. Last presentation says aprox. 40m revenue, but how much of that is distributeable? Or said another say, how do you guys (roughly) value the company, and what do you peg the owner earnings at?

 

To quickly respond here: 5M/year of op expenses to maintain the business + interest on their debt (64M or so - they can chose to bring it more aggressively to 0 with cash/investments/income). Chad explains it well below:

http://www.commodity-tv.net/c/mid,34988,Mines_und_Money_London_2015/?v=295236

On the other end, the life of their royalty may greatly exceed the official expected life used for calculating NAV/buying price. On this I would trust Dalton's judgement...

 

Is there a good summarized presentation floating around that details out the various revenue streams?

 

Very simplistically, looking at their Q2 Filing (December 2015), I arrive at revenue $6.4mm + earnings from JVs $6.9mm = $13.3mm for 2 quarters of the year.  Extrapolated to a full year, this is $26.6mm revenue.  What is driving the remainder of the quoted $13mm? 

 

I understand that one of the most attractive aspects of these royalties is free optionality going forward, but I'd like to place a value on their current earnings ex the free options. 

 

Apologies if I'm driving the quality of discussion down with such a fundamental post on a 400page thread, but there is a lot of moving parts with this company that I'm attempting to wrap my head around.   

 

I've gone through their history of acquisitions and capital allocation over the last 10 or so years and am inclined to look further after thinking qualitatively about management. 

 

Obviously Dalton selling earlier this year is a massive red flag.

[wachtwoord]

How much has Dalton bought on the open market since he sold 7% of his stake?  I'm having trouble finding his insider purchases

 

Obviously Dalton selling earlier this year is a massive red flag.

 

It's never good news but a massive red flag? He likely just wants to diversify, his wealth must be extremely concentrated (I remember Dazel making some comments at the time). He also probably knew that there was a chance of more pain coming when he sold at C$14.51. I really doubt you'll see him selling at these prices.

 

BTW: according to sedi he sold 9.9% of his stake. He sold 100k shares and has 912442 shares left.

[SnarkyPuppy]

How much has Dalton bought on the open market since he sold 7% of his stake?  I'm having trouble finding his insider purchases

 

Obviously Dalton selling earlier this year is a massive red flag.

 

It's never good news but a massive red flag? He likely just wants to diversify, his wealth must be extremely concentrated (I remember Dazel making some comments at the time). He also probably knew that there was a chance of more pain coming when he sold at C$14.51. I really doubt you'll see him selling at these prices.

 

BTW: according to sedi he sold 9.9% of his stake. He sold 100k shares and has 912442 shares left.

 

Good reminder for me to not be lazy and do the research myself.  For some reason I thought I read he sold 70% of his shares. 

[Williams406]

dc42, I'd suggest reading through the latest MD&A as it presents on page three a summary of royalty revenue by project. Keep in mind that the earnings from JV is not a gross revenue figure from JV royalty properties, if that's what you're after. Amortization of royalty interests, G&A, and mining tax are deducted from JV royalty revenue. The revenue projections used in many presentations that are higher than your figure are gross revenue projections. Your method is incorporating some expenses.

[naboo]

now it's time to re-evaluate ALS,  form 2015Q2 report,  the royalty income didn't down much, and this year, after ALS pays back more debt and interest expense should go down significantly, then earning will become positive. at current ($6) price, I don't see huge downside risk, but I think we won't see huge jump in short period of time either. 

[bergman104]

Hey everyone,

 

I've been following this forum for a while now too. I am curious if any of their royalty properties would be in danger of shutting down at these commodity price levels or if the prices were to take another dive down. Is there anything in the structure of their contracts that would allow them to still maintain any of their revenue? It is tough to find any public information though. I'm just trying to factor in the risks to their current revenue streams.

[beerbaron]

Well they are kinda protected against production being cut off. Potash is holding well and the coal is linked to power plants.

 

BeerBaron

[SnarkyPuppy]

How much has Dalton bought on the open market since he sold 7% of his stake?  I'm having trouble finding his insider purchases

 

You view all insider purchases on sedi.ca.

 

There were 16000 shares flagged as "insider trades" yesterday, and another 14500 again today, at $8.43 and $8.25 avg, respectively. (As per TMX.)  I'm guessing this is a buyback under the existing NCIB, given that the max allowed daily volume is 16088.  But of course it could be Dalton/Wells/etc. back at the table.

 

That's quite honestly the most confusing site I've ever been on - how do I view what you're viewing?

[hohi]

Started buying in today. Sold all my holdings a few month ago and was thinking until a few days ago it was a big mistake. I got lucky and now I love it ;). Who would have know...

These are the times ALS' business model can build a strong foundation for the next growth phase. I have no doubt management is evaluating tons of prospective mineral lands right now.

 

Be right and sit tight my friends.