ALS.TO - Altius Minerals

[Williams406]

I'd rather "be right and time stock entry and exit like Hohi." Out of curiosity, what prompted you to sell your holdings a few months ago?

 

The price decline does raise the question of  buying back stock vs. buying producing royalties. The terms on a new royalty have to be pretty good, along with good financing options to trump buybacks at these levels. I realize it is not an either/or proposition and they could be buying back stock now. If they do any acquisitions here, I hope the asset provides immediate (and substantial) cash flow rather than prospective mineral lands.

[goldfinger]

I'd rather "be right and time stock entry and exit like Hohi." Out of curiosity, what prompted you to sell your holdings a few months ago?

 

The price decline does raise the question of  buying back stock vs. buying producing royalties. The terms on a new royalty have to be pretty good, along with good financing options to trump buybacks at these levels. I realize it is not an either/or proposition and they could be buying back stock now. If they do any acquisitions here, I hope the asset provides immediate (and substantial) cash flow rather than prospective mineral lands.

 

Agreed for cash flow accretive acquisitions but remember, the Michigan prospective land acquisition cost "only" 1M.

[hohi]

I'd rather "be right and time stock entry and exit like Hohi." Out of curiosity, what prompted you to sell your holdings a few months ago?

 

Once I realized that the IronOre projects won't be coming on until maybe 5-10 years into the future I just thought there was a lot less upside that I previously modelled. Plus there are many great resource companies out there that were crushed (trading under cash like IVN for example). And on a  macro perspective I think we are in for a lot of trouble in the years to come. So I went all cash a few month ago and started investing heavily into crushed resource companies a few weeks ago. Wouldn't have thought ALS would be one of them though.

 

But I admit I only got lucky with the timing.

 

And don't get me wrong - I think ALS is a fantastic company. I would have had no problems holding on to my ALS shares for 10+ years as I think the CF is solid and long term management will def. create huge value in these market conditions.

 

There is probably still downside and if my macro views come true it could be a lot of downside. But ALS will weather every storm and it will absolutely be one of the huge winners coming out of this commodity bear market. Superior business model, superior management, superior assets.

[nostradamus]

Nice to see that ALS has started buying back it stock again. 53,700 bought back yesterday. Small amounts, but should support the share price a bit.

 

N.

[TwoCitiesCapital]

Nice to see that ALS has started buying back it stock again. 53,700 bought back yesterday. Small amounts, but should support the share price a bit.

 

N.

 

That's not a bad pace. It would only take 7 business days for them to repurchase 1% of their nearly 40,000,000 shares outstanding with this rate of repurchasing and would cost them about $2M USD at current prices. They probably won't continue at that rate just given the cash flows, their determination to pay down debt, and the desire to make further investments, but we could easily see a few percentage points of share reduction at these prices.

 

 

[SnarkyPuppy]

Seriously - is there any reliable way of seeing Dalton's history buying/selling the stock?  I've spent a significant amount of time trying to figure out the info presented on sedi.ca and cannot find additions/subtractions of open market trades

[nostradamus]

Anyone want to speculate on the next deal for Altius?

 

My guess is that they take out Revelo. Altius wants to create royalties in Chile. They did some deal last year with Revelo in exchange for shares, so they already have a foothold and Revelo are running out of cash. Their website says that their cash is sufficient to see them though to mid 2016, so they must be starting to consider all options to avoid the company going under. Although Revelo, like altius, is a prospect generator, there is a fundamental difference: they don't have the royalty cash flow to fund their generation of projects. The current resource bear market is showing the huge problem with this: just at the point in time where land becomes cheap (the bear market), the financing for generating new projects and maintaining existing projects dries up. Their prospects would therefore fit much better within altius, which does need outside financing in the bear market to keep them maintained until the next bull market.

 

From a Revelo shareholder perspective, I think the choices are: (i) high dilution from some kind of private placement to get enough cash for another year; (ii) start selling of individual properties; (iii) get taken out. The first option may not even be possible, but even if it is, it would likely result in significant dilution (and probably a share price decline in the short run). The second option would involve selling properties at the worst point in the cycle and could simply amount to a slow death of the company as the property sales are used to fund corporate expenditure until the money runs out again. The third option would be hard to swallow (giving away all that upside....) but it would give some immediate upside.

 

Anglo Pacific I guess is another possible acquisition, but I think this is too big without Altius having to issue shares.

 

Any views?

 

N.

[Liberty]

ALS first hit this price in the summer of 2006, so it's been basically flat for almost 10 years.

 

I understand that the stock price isn't the IV, but still, I think it should give owners of the stock some pause, especially if they don't see a positive catalyst on the horizon (and remember, Alderon was supposed to be a catalyst, and now the market cap basically fits into a thimble), and there's potentially a secular negative if it turns out that the past 15 years have been a commodity anomaly caused by China's double-digit growth...

 

Is this a case of a brilliant management being in a business with a reputation for bad economics..? Royalties are very clever, but the price of the commodities still matter, and someone still has to do the capex...

[wachtwoord]

I believe this is simply an amazing buying opportunity. Of course there's a fine line between brilliance and insanity ;)

[goldfinger]

ALS first hit this price in the summer of 2006, so it's been basically flat for almost 10 years.

 

I understand that the stock price isn't the IV, but still, I think it should give owners of the stock some pause, especially if they don't see a positive catalyst on the horizon (and remember, Alderon was supposed to be a catalyst, and now the market cap basically fits into a thimble), and there's potentially a secular negative if it turns out that the past 15 years have been a commodity anomaly caused by China's double-digit growth...

 

Is this a case of a brilliant management being in a business with a reputation for bad economics..? Royalties are very clever, but the price of the commodities still matter, and someone still has to do the capex...

 

1. We seem to be close to a bottom of a generational bear market in commodities (Goldman Sachs recent call)

2. The acquisition of a stream of income of 40m/year was a game changer: Altius can go after sizable opportunities...

3. Altius always used conservative commodity prices in its assumptions. Capex is done when existing production is depleted enough...

 

[Liberty]

1. We seem to be close to a bottom of a generational bear market in commodities (Goldman Sachs recent call)

 

I don't know. The various long-term inflation-adjsuted charts of various commodities that I've seen lately make me think that there's a good chance that we're headed toward more normal prices, rather than being in a depression.

 

But it's commodities, so who really knows, right? No real way to be sure...

 

2. The acquisition of a stream of income of 40m/year was a game changer: Altius can go after sizable opportunities...

 

Lots of things were said to be game changers in the past 4-5 years that I've been following the stock. We'll see.

 

3. Altius always used conservative commodity prices in its assumptions. Capex is done when existing production is depleted enough...

 

By that I meant that for Alderon or Julienne Lake to be worth something, someone has to build and operate the mines. Same for the other partners and promising land stakes. 

 

Not saying there won't be another upswing in commodity prices and some stuff won't be built, but at some point you have to look at what CAGR you are actually getting if you have to wait another 5 years for that...

[goldfinger]

1. We seem to be close to a bottom of a generational bear market in commodities (Goldman Sachs recent call)

 

I don't know. The various long-term inflation-adjsuted charts of various commodities that I've seen lately make me think that there's a good chance that we're headed toward more normal prices, rather than being in a depression.

 

But it's commodities, so who really knows, right? No real way to be sure...

 

2. The acquisition of a stream of income of 40m/year was a game changer: Altius can go after sizable opportunities...

 

Lots of things were said to be game changers in the past 4-5 years that I've been following the stock. We'll see.

 

3. Altius always used conservative commodity prices in its assumptions. Capex is done when existing production is depleted enough...

 

By that I meant that for Alderon or Julienne Lake to be worth something, someone has to build and operate the mines. Same for the other partners and promising land stakes. 

 

Not saying there won't be another upswing in commodity prices and some stuff won't be built, but at some point you have to look at what CAGR you are actually getting if you have to wait another 5 years for that...

I wonder what would happen to the share price if he was buying back with 20m every year?

[Liberty]

I wonder what would happen to the share price if he was buying back with 20m every year?

 

At current price that's about 6% of the market cap.

 

If you really believe that this is a temporary bear market in commodities and you think Dalton & co are great capital allocators, you'd probably want them to redeploy that capital rather than return it to shareholders, though.

 

But the thing with royalties, even long-lived ones, is that they are wasting assets. They have a finite life, so you can't just put a multiple on them, and as commodity prices go down, what becomes economic for the mine operators goes down (they go for high-grade, leaving less of it for later).

 

There's also some political risk for the coal assets. The existing plant might keep going for a while (can never be 100% sure, depends on politics to some extent), but the undeveloped coal assets might never leave the ground under some scenarios.

 

As I said, I don't know. Things could rebound tomorrow.

[goldfinger]

I wonder what would happen to the share price if he was buying back with 20m every year?

 

At current price that's about 6% of the market cap.

 

If you really believe that this is a temporary bear market in commodities and you think Dalton & co are great capital allocators, you'd probably want them to redeploy that capital rather than return it to shareholders, though.

 

But the thing with royalties, even long-lived ones, is that they are wasting assets. They have a finite life, so you can't just put a multiple on them, and as commodity prices go down, what becomes economic for the mine operators goes down (they go for high-grade, leaving less of it for later).

 

There's also some political risk for the coal assets. The existing plant might keep going for a while (can never be 100% sure, depends on politics to some extent), but the undeveloped coal assets might never leave the ground under some scenarios.

 

As I said, I don't know. Things could rebound tomorrow.

I understand your points and there are definitely risks... It all depends on how conservative dalton's assumptions are. But every time I dig I find out that he has done his homeworks multiple times over.

Voisey bay is an example. For thermal coal, it seems Canada is ahead of current politics and that there is a cost advantage to just upgrade plants to available env efficient tech. For potash reserve life is quite long etc...

[Gamecock-YT]

My guess is they increase their stakes in the unnamed dividend paying stocks they own.

[goldfinger]

I wonder what would happen to the share price if he was buying back with 20m every year?

 

At current price that's about 6% of the market cap.

 

If you really believe that this is a temporary bear market in commodities and you think Dalton & co are great capital allocators, you'd probably want them to redeploy that capital rather than return it to shareholders, though.

 

But the thing with royalties, even long-lived ones, is that they are wasting assets. They have a finite life, so you can't just put a multiple on them, and as commodity prices go down, what becomes economic for the mine operators goes down (they go for high-grade, leaving less of it for later).

 

There's also some political risk for the coal assets. The existing plant might keep going for a while (can never be 100% sure, depends on politics to some extent), but the undeveloped coal assets might never leave the ground under some scenarios.

 

As I said, I don't know. Things could rebound tomorrow.

I understand your points and there are definitely risks... It all depends on how conservative dalton's assumptions are. But every time I dig I find out that he has done his homeworks multiple times over.

Voisey bay is an example. For thermal coal, it seems Canada is ahead of current politics and that there is a cost advantage to just upgrade plants to available env efficient tech. For potash reserve life is quite long etc...

Also alder on and other projects are long term options. I would not be in it without the large stream of free cash flow...

[goldfinger]

I wonder what would happen to the share price if he was buying back with 20m every year?

 

At current price that's about 6% of the market cap.

 

If you really believe that this is a temporary bear market in commodities and you think Dalton & co are great capital allocators, you'd probably want them to redeploy that capital rather than return it to shareholders, though.

 

But the thing with royalties, even long-lived ones, is that they are wasting assets. They have a finite life, so you can't just put a multiple on them, and as commodity prices go down, what becomes economic for the mine operators goes down (they go for high-grade, leaving less of it for later).

 

There's also some political risk for the coal assets. The existing plant might keep going for a while (can never be 100% sure, depends on politics to some extent), but the undeveloped coal assets might never leave the ground under some scenarios.

 

As I said, I don't know. Things could rebound tomorrow.

I am not advocating he buys back. Just trying to show the optionalities available to that business. 6% ever year would quite prop up the share price... Won't happen!

There is no such thing as permanent bull or bear markets... I do not think things will go back to where they were before. Dalton bought the last royalty streams when the underlying commodities were already out of favor and depressed. He actually started his business in an unfavorable price environment... The bear is an advantage to him actually. Patience

 

[Liberty]

I am not advocating he buys back. Just trying to show the optionalities available to that business. 6% ever year would quite prop up the share price... Won't happen!

There is no such thing as permanent bull or bear markets... I do not think things will go back to where they were before. Dalton bought the last royalty streams when the underlying commodities were already out of favor and depressed. He actually started his business in an unfavorable price environment... The bear is an advantage to him actually. Patience

 

http://www.stewardwealth.com.au/wp-content/uploads/2015/05/Real-iron-ore.png

 

 

If you look at long-term inflation-adjusted charts, I think it's similar with lots of other commodities. In real terms, prices tend to stay fairly constant or even fall over time, with a bunch of volatility.

 

What if the current prices are the new normal (or rather, back to the old normal)? Sure things will keep going up and down, but what if we were at an abnormally elevated plateau for a while - long enough for our puny human brains to get used to it and think that's how things were - but going forward we just won't get back anywhere near there for a long while?

 

Altius' cashflows are nice, but with every passing year, the bathtub is draining a little bit, and prices could stay low compared to the levels at which they made their investments (over the past 10 years) for a decade or more. Not saying that's what will happen, but it seems a risk that has been underestimated by many bulls (including me in the past). Just wanted to point it out.

 

 

[goldfinger]

I am not advocating he buys back. Just trying to show the optionalities available to that business. 6% ever year would quite prop up the share price... Won't happen!

There is no such thing as permanent bull or bear markets... I do not think things will go back to where they were before. Dalton bought the last royalty streams when the underlying commodities were already out of favor and depressed. He actually started his business in an unfavorable price environment... The bear is an advantage to him actually. Patience

 

http://www.stewardwealth.com.au/wp-content/uploads/2015/05/Real-iron-ore.png

 

 

If you look at long-term inflation-adjusted charts, I think it's similar with lots of other commodities. In real terms, prices tend to stay fairly constant or even fall over time, with a bunch of volatility.

 

What if the current prices are the new normal (or rather, back to the old normal)? Sure things will keep going up and down, but what if we were at an abnormally elevated plateau for a while - long enough for our puny human brains to get used to it and think that's how things were - but going forward we just won't get back anywhere near there for a long while?

 

Altius' cashflows are nice, but with every passing year, the bathtub is draining a little bit, and prices could stay low compared to the levels at which they made their investments (over the past 10 years) for a decade or more. Not saying that's what will happen, but it seems a risk that has been underestimated by many bulls (including me in the past). Just wanted to point it out.

 

Understood and your points are valid. Thanks for bringing them up!

All I am saying is that the thesis doesn't rely on commodity prices rising to elevated levels back again... it is about a frugal company with little expenditures that has the knowledge, the contacts and now the cash flows to deploy money selectively and opportunistically to acquire stream of cash flow that extend beyond a purchasing price based on conservative estimates of length of life, price levels and producer resilience. As far as I know his methods are to research areas super deep (time and time again),  take a conservative view of the commodity price and see if at that level it meets the criteria. Mines deplete and producers have to expand if it makes economic sense. The other JVs are basically lottery tickets with odds in the 1000s instead of Ms...

Without the cash flow Altius would definitely be a startup at best at this moment...

[netnet]

Liberty, Goldfinger, et.al.  you guys raise and discuss important points. 

 

My concerns are balanced against the obvious example of a really smart guy, Dalton, going into a boom of a lifetime (just as there was another one in the inflation wracked days of the 70's a generation ago!)

• That was one hell of a boom, the bust may be as big
  
• In the worst cases, a bear market can last 15 to 25 years!
  
• If the bust is as big, Dalton will probably build and the company should do fine, but if we are waiting 10 years what kind of CAGR will we get?
  

 

Even given these issues, having a 'tax', i.e. a royalty to a business is one of the absolutely best things to have. Liberty, my friend, in no way shape or form is it a bad business, but to Liberty's point, you have to 'tax' a business that is alive. And the royalties are on one of the worst businesses around, mining, aka a hole in the ground with a liar on top.

[Williams406]

Gamecock-YT: Why do you guess the dividend-paying stake(s) are getting more Altius capital now? Could well be, just curious about your rationale.

 

"Lower for longer", political, legal/contract (Voisey's Bay, pre-revised 777 royalty) are all risks that are out there with royalties, to name a few. $70 million or so is due over the next four years and the payments represent a use of cash that takes away from what is available for land assembly, producing royalty acquisition, buybacks, etc.

 

I think Altius has the means, smarts, and discipline to plant seeds in this environment that will be very valuable "down the road." But as Liberty points out, how far down the road value realization is can make a big difference. Some of Altius' sources of royalty cash flow goes away in the not-to-distant future. Then again, depleting ore bodies affects Altius' operating partners and would-be prospect/project buyers. I'll be concerned if the mining business is still bad or worse in two years and all we've seen from Altius is land assembly that could be 5-10 years out for the 1-2 projects that might pay off. Don't get me wrong, I like seeing them increase their acreage and realize it has been very lucrative for the company. I want them to keep doing it. But I want to see after-tax, per share royalty cash flow build over time.

 

Another thought that might fit in here somewhere is that commodities aren't some monolithic asset class. Each has its own supply/demand characteristics. Iron ore might be stuck for a while but perhaps zinc or nickel performs differently. 

 

I'll sign out for now, but I'm glad to see the discussion.

 

[Gamecock-YT]

Gamecock-YT: Why do you guess the dividend-paying stake(s) are getting more Altius capital now? Could well be, just curious about your rationale.

 

 

Nothing more than just spitballing. That's been their only 'big' move since the Callinan transaction, and if it's LIORC/Anglo Pacific like has been speculated, the yield has only gone up since their first buys around September.

[goldfinger]

Gamecock-YT: Why do you guess the dividend-paying stake(s) are getting more Altius capital now? Could well be, just curious about your rationale.

 

"Lower for longer", political, legal/contract (Voisey's Bay, pre-revised 777 royalty) are all risks that are out there with royalties, to name a few. $70 million or so is due over the next four years and the payments represent a use of cash that takes away from what is available for land assembly, producing royalty acquisition, buybacks, etc.

 

I think Altius has the means, smarts, and discipline to plant seeds in this environment that will be very valuable "down the road." But as Liberty points out, how far down the road value realization is can make a big difference. Some of Altius' sources of royalty cash flow goes away in the not-to-distant future. Then again, depleting ore bodies affects Altius' operating partners and would-be prospect/project buyers. I'll be concerned if the mining business is still bad or worse in two years and all we've seen from Altius is land assembly that could be 5-10 years out for the 1-2 projects that might pay off. Don't get me wrong, I like seeing them increase their acreage and realize it has been very lucrative for the company. I want them to keep doing it. But I want to see after-tax, per share royalty cash flow build over time.

 

Another thought that might fit in here somewhere is that commodities aren't some monolithic asset class. Each has its own supply/demand characteristics. Iron ore might be stuck for a while but perhaps zinc or nickel performs differently. 

 

I'll sign out for now, but I'm glad to see the discussion.

 

To confirm Liberty's concerns about the length of the bear in commodities, Currie, even if kind of announcing the birth of a new bull market in commodities over the course of 2016, underlined in an interview today the fact that for base metals it will take a while to get rid of the overcapacity issue as China spent its infrastructure Capex already and it is just less expensive to let overproduction just die off over time than shut in quickly in base metal mining. Jim Rogers echoed the same message a month ago - oil being the first to recover and base metals being in the crapper for a while. The next few years will tell us if Altius can leverage optionalities like commodity selection for project generation (different supply fundamentals among these commodities as Williams406 hinted at), advantageous existing royalty stream acquisitions from distressed mining companies and equity investments among others... In the end it all relies on Dalton and his team being capable of choosing investing opportunities among all these effectively over time. A few qualities they have going for them: knowledge of the sector, contacts, patience, discipline, recurring cash flows, options.

[nodnub]

Seriously - is there any reliable way of seeing Dalton's history buying/selling the stock?  I've spent a significant amount of time trying to figure out the info presented on sedi.ca and cannot find additions/subtractions of open market trades

 

 

Go to sedi.ca

click on english

click on Access Public Filings (top Right corner)

click on "View Summary Reports"  (Side menu on Left)

select Insider Transaction Detail

In first drop down menu, select "Insider Family Name" Then type Dalton in the box.

Leave everything else blank. 

Hit Search button at bottom of page. Select Brian Dalton from the search results. Click on View. Big table will load. 

Scroll down to relevant section for Issuer: Altius Minerals

Note the subsections for Common Shares, Options, Warrants, RSUs etc:  Scroll Down to see transactions in 2015 on Common Shares.  Note last transaction, disposition of common shares 100,000.  Remaining balance 912,442.

 

Poke around that table and if you can't figure out the accounting for shares, warrants, options try asking a specific question about it here.

 

Now you can play around with the site and get more targeted reports and use custom date ranges. Yes, the site design is brutal.  But it is fairly logical if you move slowly and read the directions contained on the first page after you click Access Public Filings. Good luck

 

---

*alternatively choose "View Summary Reports" and then "Insider transaction detail" and then select "Issuer Name" from first drop down and enter Altius and a date range to get a single list of all possible insider transactions for the company.

[SnarkyPuppy]

Seriously - is there any reliable way of seeing Dalton's history buying/selling the stock?  I've spent a significant amount of time trying to figure out the info presented on sedi.ca and cannot find additions/subtractions of open market trades

 

 

Go to sedi.ca

click on english

click on Access Public Filings (top Right corner)

click on "View Summary Reports"  (Side menu on Left)

select Insider Transaction Detail

In first drop down menu, select "Insider Family Name" Then type Dalton in the box.

Leave everything else blank. 

Hit Search button at bottom of page. Select Brian Dalton from the search results. Click on View. Big table will load. 

Scroll down to relevant section for Issuer: Altius Minerals

Note the subsections for Common Shares, Options, Warrants, RSUs etc:  Scroll Down to see transactions in 2015 on Common Shares.  Note last transaction, disposition of common shares 100,000.  Remaining balance 912,442.

 

Poke around that table and if you can't figure out the accounting for shares, warrants, options try asking a specific question about it here.

 

Now you can play around with the site and get more targeted reports and use custom date ranges. Yes, the site design is brutal.  But it is fairly logical if you move slowly and read the directions contained on the first page after you click Access Public Filings. Good luck

 

---

*alternatively choose "View Summary Reports" and then "Insider transaction detail" and then select "Issuer Name" from first drop down and enter Altius and a date range to get a single list of all possible insider transactions for the company.

 

Thank you very much for posting this - problem was I was searching by company for Altius which didn't show me a chronological view of additions/disposals/net balance like this family view does.

 

Thanks.