ALS.TO - Altius Minerals

[Sunrider]

Copper prices having a nice recovery this year. Makes the Chapada deal look like a reasonable win. At current spot prices, Altius will bring in ~$7.5M USD ($10M CAD) next year from the ~$65M purchase.

 

At current exchange rates and production, if copper returns to $3.50 (Altius' estimates of cost of production), Altius would bring in $10.5M per year. If we averaged that over the 17-year mine life, it would be a 6.1% compounded annual return (pre-tax). Not a home run, but a solid investment in this environment with the additional upside optionality if mine life extends OR production increases.

How is this a good investment when you need a commodity price a third higher just to get to  cover production costs and the cost leaders have cost of about 1 per pound?

[TwoCitiesCapital]

Copper prices having a nice recovery this year. Makes the Chapada deal look like a reasonable win. At current spot prices, Altius will bring in ~$7.5M USD ($10M CAD) next year from the ~$65M purchase.

 

At current exchange rates and production, if copper returns to $3.50 (Altius' estimates of cost of production), Altius would bring in $10.5M per year. If we averaged that over the 17-year mine life, it would be a 6.1% compounded annual return (pre-tax). Not a home run, but a solid investment in this environment with the additional upside optionality if mine life extends OR production increases.

How is this a good investment when you need a commodity price a third higher just to get to  cover production costs and the cost leaders have cost of about 1 per pound?

 

???

 

I don't think you're familiar with the details of their agreement. Chapada costs are expected to be $1.32 this year - bottom quartile figures. So they're already way profitable at current prices.

 

Further, Altius buys a % of production at 1/3 of spot - as long as copper prices stay above $1.32 to keep the mine in production, Altius will make money on that 70% spread. Altius doesn't need prices of copper to move at all - they're already making more than they thought when the deal was announced. If price rise to where they estimate the incentive price to be, they will make 50% more than they're currently making.

 

 

[Sunrider]

Indeed I don't but also don't understand the reference further up re 3 dollars being production costs (before we get to the Altima arrangements)?

Copper prices having a nice recovery this year. Makes the Chapada deal look like a reasonable win. At current spot prices, Altius will bring in ~$7.5M USD ($10M CAD) next year from the ~$65M purchase.

 

At current exchange rates and production, if copper returns to $3.50 (Altius' estimates of cost of production), Altius would bring in $10.5M per year. If we averaged that over the 17-year mine life, it would be a 6.1% compounded annual return (pre-tax). Not a home run, but a solid investment in this environment with the additional upside optionality if mine life extends OR production increases.

How is this a good investment when you need a commodity price a third higher just to get to  cover production costs and the cost leaders have cost of about 1 per pound?

 

???

 

I don't think you're familiar with the details of their agreement. Chapada costs are expected to be $1.32 this year - bottom quartile figures. So they're already way profitable at current prices.

 

Further, Altius buys a % of production at 1/3 of spot - as long as copper prices stay above $1.32 to keep the mine in production, Altius will make money on that 70% spread. Altius doesn't need prices of copper to move at all - they're already making more than they thought when the deal was announced. If price rise to where they estimate the incentive price to be, they will make 50% more than they're currently making.

[TwoCitiesCapital]

Indeed I don't but also don't understand the reference further up re 3 dollars being production costs (before we get to the Altima arrangements)?

Copper prices having a nice recovery this year. Makes the Chapada deal look like a reasonable win. At current spot prices, Altius will bring in ~$7.5M USD ($10M CAD) next year from the ~$65M purchase.

 

At current exchange rates and production, if copper returns to $3.50 (Altius' estimates of cost of production), Altius would bring in $10.5M per year. If we averaged that over the 17-year mine life, it would be a 6.1% compounded annual return (pre-tax). Not a home run, but a solid investment in this environment with the additional upside optionality if mine life extends OR production increases.

How is this a good investment when you need a commodity price a third higher just to get to  cover production costs and the cost leaders have cost of about 1 per pound?

 

???

 

I don't think you're familiar with the details of their agreement. Chapada costs are expected to be $1.32 this year - bottom quartile figures. So they're already way profitable at current prices.

 

Further, Altius buys a % of production at 1/3 of spot - as long as copper prices stay above $1.32 to keep the mine in production, Altius will make money on that 70% spread. Altius doesn't need prices of copper to move at all - they're already making more than they thought when the deal was announced. If price rise to where they estimate the incentive price to be, they will make 50% more than they're currently making.

 

Marginal production cost to meet the demand is how I understood it for their estimates. That's the cost of the marginal supply that will fulfill current levels of demand.

[SharperDingaan]

Any reason for Altius to be up 5% on triple normal daily volume?

 

 

-Crip

 

You may want to look at what is now being considered at ADV and the Kami project.

We used the last 2 years to quietly average down < $0.20, and now have a very healthy position.

 

SD

[TwoCitiesCapital]

Any reason for Altius to be up 5% on triple normal daily volume?

 

 

-Crip

 

You may want to look at what is now being considered at ADV and the Kami project.

We used the last 2 years to quietly average down < $0.20, and now have a very healthy position.

 

SD

 

Yea - No idea if it works, but Kami trying to get in on and benefit from the potential abandonment of the Wabush mines. Evidently has the potential to reduce start-up/operating costs where at least they're trying to sell it as being feasible in the current environment. Would mean Altius' stake in ADV isn't totally written off and they're royalties on Kami could come in sooner than expected.

[SharperDingaan]

Any reason for Altius to be up 5% on triple normal daily volume?

 

 

-Crip

 

You may want to look at what is now being considered at ADV and the Kami project.

We used the last 2 years to quietly average down < $0.20, and now have a very healthy position.

 

SD

 

Yea - No idea if it works, but Kami trying to get in on and benefit from the potential abandonment of the Wabush mines. Evidently has the potential to reduce start-up/operating costs where at least they're trying to sell it as being feasible in the current environment. Would mean Altius' stake in ADV isn't totally written off and they're royalties on Kami could come in sooner than expected.

 

Our basic premise is that KAMIs location and quality, really makes it a platform investment. If cost can be significantly lowered by incorporating abandoned facilities - sponsors really have little choice but to act on it. Hence todays activity.

 

However KAMI will not get built - so long as a buyer can get all they need from BHP mines. Hence timing really depends on how fast those mines deplete, and how fast their marginal costs increase. It's almost identical to buying an oil lease - you buy it to 'lock up' the deposit, and do the minimum work possible to retain the lease - for years. Same thing happens in real estate development.

 

Our expectation is that there will eventually be a mine, we think it's a great many years away yet, and there will be a least one share consolidation before its done. For us it will be almost entirely house money, so if it takes a decade - we don't much care. 

 

SD   

[Williams406]

Concurrently with Alderon's spike(s) of late, Champion has been going nuts. Note the Australian and Canadian shares when looking at volume. SD, is that you not so quietly having a go at Champion as well? Someone's got an interest in Labrador iron ore at the moment.

[SharperDingaan]

Concurrently with Alderon's spike(s) of late, Champion has been going nuts. Note the Australian and Canadian shares when looking at volume. SD, is that you not so quietly having a go at Champion as well? Someone's got an interest in Labrador iron ore at the moment.

 

No. We're purely passive on this one, and very long term.

Most of our position was bought in the $0.11-$0.20 range, in a long series of 10,000 share blocks - and over months. The expectation is that when the mine is built, nephews will be able to buy a house in London (UK); mortgage free.

 

We don't know what the interest is in Labrador iron ore at the moment - but it's highly likely they have a similar view to ours. In the current economic climate, and at current interest and labour rates; there is a lot to be said for building it early, and temporarily capitalizing losses until they get to break even. It's especially attractive if you can forward sell guaranteed production, to raise the cash to pay the interest.

 

Of course this is speculation;

but speculation backed with a real deposit & related facilities - is a whole lot different than betting on a moose pasture.

 

SD 

 

   

 

 

 

[Sunrider]

SD - perhaps a stupid question. What do you expect the cost of production of Kami to be per ton, compared to the ore from Oz/Pilbara (where apparently you can just drive a caterpillar across the landscape and scoop it up). Why buy and ship from Canada (presumably at higher costs before you even ship)?

 

Thanks.

 

 

Concurrently with Alderon's spike(s) of late, Champion has been going nuts. Note the Australian and Canadian shares when looking at volume. SD, is that you not so quietly having a go at Champion as well? Someone's got an interest in Labrador iron ore at the moment.

 

No. We're purely passive on this one, and very long term.

Most of our position was bought in the $0.11-$0.20 range, in a long series of 10,000 share blocks - and over months. The expectation is that when the mine is built, nephews will be able to buy a house in London (UK); mortgage free.

 

We don't know what the interest is in Labrador iron ore at the moment - but it's highly likely they have a similar view to ours. In the current economic climate, and at current interest and labour rates; there is a lot to be said for building it early, and temporarily capitalizing losses until they get to break even. It's especially attractive if you can forward sell guaranteed production, to raise the cash to pay the interest.

 

Of course this is speculation;

but speculation backed with a real deposit & related facilities - is a whole lot different than betting on a moose pasture.

 

SD 

 

 

[SharperDingaan]

We've no idea, but it must be in the ball park or there wouldn't be all this sudden interest.

 

We also suspect that the real reason for Kami is strategic. If Oz/Pilbara become the only game in town, they could easily cut back supply and drive the price up - iron ore's version of OPEC as it were. Create another big producer eager for volume, and you mitigate the possibilities. Of course there is an insurance cost to this, its very much a long term view, and its very Asian.

 

We pretty much expect that Kami is going to get merged, there will be a share consolidation, and the new partner will be carrying the Cashflow commitment for a while. Everybody avoids write-offs. Very elegant. 

 

SD     

 

 

SD - perhaps a stupid question. What do you expect the cost of production of Kami to be per ton, compared to the ore from Oz/Pilbara (where apparently you can just drive a caterpillar across the landscape and scoop it up). Why buy and ship from Canada (presumably at higher costs before you even ship)?

 

Thanks.

 

 

Concurrently with Alderon's spike(s) of late, Champion has been going nuts. Note the Australian and Canadian shares when looking at volume. SD, is that you not so quietly having a go at Champion as well? Someone's got an interest in Labrador iron ore at the moment.

 

No. We're purely passive on this one, and very long term.

Most of our position was bought in the $0.11-$0.20 range, in a long series of 10,000 share blocks - and over months. The expectation is that when the mine is built, nephews will be able to buy a house in London (UK); mortgage free.

 

We don't know what the interest is in Labrador iron ore at the moment - but it's highly likely they have a similar view to ours. In the current economic climate, and at current interest and labour rates; there is a lot to be said for building it early, and temporarily capitalizing losses until they get to break even. It's especially attractive if you can forward sell guaranteed production, to raise the cash to pay the interest.

 

Of course this is speculation;

but speculation backed with a real deposit & related facilities - is a whole lot different than betting on a moose pasture.

 

SD 

 

 

[Williams406]

Nice article profiling Dalton and Altius.

 

http://www.globalminingobserver.com/brian-dalton-altius-minerals-st-johns-newfoundland-172

[nostradamus]

ST. JOHN'S, NEWFOUNDLAND AND LABRADOR--(Marketwired - Dec. 13, 2016) - Altius Minerals Corporation (TSX:ALS) is pleased to report that together with select strategic investors it is participating in the co-founding of a new company, Adventus Zinc Corporation, that intends to become publicly traded and which will focus on the acquisition and advancement of zinc exploration and development projects.

 

Altius is contributing an extensive portfolio of zinc exploration projects in Ireland and Eastern Canada, which it has been opportunistically assembling over the past 4 years, and will be providing a portion of Adventus Zinc's pre-IPO seed capital funding.

 

In addition to advancing its exploration lands, Adventus Zinc intends to pursue the acquisition of advanced zinc projects that range from resource delineation through to feasibility stage. Altius and the co-founding strategic investors of Adventus Zinc will each contribute technical and financial strength to this effort.

 

Christian Kargl-Simard, P. Eng., has been appointed as the President and CEO of Adventus Zinc. Christian has had a 13-year mining-related career, including close to 10 years in mining investment banking at Raymond James Ltd. and Haywood Securities Inc., and brings a strong combination of technical and financial evaluation skills and corporate financing and M&A experience to Adventus.

 

Adventus Zinc intends to file a preliminary prospectus in connection with an IPO in the near future, at which time further details regarding the major strategic investors, board composition and projects will be provided.

[Gamecock-YT]

I guess this is similar to how Alderon was founded? Guess it's nice that it's a collection of sites instead on the egg in just one basket. Stock is also close to the stock offering price of awhile back too.

[wachtwoord]

Earnings are out, the call is today at 9.30 EST http://altiusminerals.com/uploads/PR1619-Q2.pdf

[TwoCitiesCapital]

Earnings are out, the call is today at 9.30 EST http://altiusminerals.com/uploads/PR1619-Q2.pdf

 

Was anything said on the call? Looks like someone wanted out real bad today...

[Williams406]

I didn't pick up on anything that profound on the call to drive the price down as much as it was mid-day. Prospectus for Adventus Zinc should be out before Christmas with expectation of going public early in the new year. Altius' cash contribution should be in the neighborhood of $1m-$2m. Question about Alberta coal settlement. Paraphrasing answer: "Altius applying for compensation under settlement as a clearly impacted party, but how the government decides to handle it is an open question since it's new territory." 14 minutes or so, two callers asked questions.

 

A quick read of the MD&A and Financials didn't raise any red or yellow flags that weren't already waving (for me, 777 closure in a few years, coal settlement, Voisey's Bay.)

[wachtwoord]

No news in the earnings call to me.

[netnet]

Any reason for Altius to be up 5% on triple normal daily volume?

 

 

-Crip

 

You may want to look at what is now being considered at ADV and the Kami project.

We used the last 2 years to quietly average down < $0.20, and now have a very healthy position.

 

SD

 

Yea - No idea if it works, but Kami trying to get in on and benefit from the potential abandonment of the Wabush mines. Evidently has the potential to reduce start-up/operating costs where at least they're trying to sell it as being feasible in the current environment. Would mean Altius' stake in ADV isn't totally written off and they're royalties on Kami could come in sooner than expected.

 

Our basic premise is that KAMIs location and quality, really makes it a platform investment. If cost can be significantly lowered by incorporating abandoned facilities - sponsors really have little choice but to act on it. Hence todays activity.

 

However KAMI will not get built - so long as a buyer can get all they need from BHP mines. Hence timing really depends on how fast those mines deplete, and how fast their marginal costs increase. It's almost identical to buying an oil lease - you buy it to 'lock up' the deposit, and do the minimum work possible to retain the lease - for years. Same thing happens in real estate development.

 

Our expectation is that there will eventually be a mine, we think it's a great many years away yet, and there will be a least one share consolidation before its done. For us it will be almost entirely house money, so if it takes a decade - we don't much care. 

 

SD 

 

You're in Alderon over Champion, interesting. I prefer Champion.

[Williams406]

Netnet,

 

Care to share your thinking on Champion?

[SharperDingaan]

We went to ADV primarily because it was dirt cheap; they own Kami, they have big backers, and ALS holds both 25% of ADV - as well as 100% of the proven nearby Julien Lake deposit. The expectation is that if/when a mine is ever developed; Kami, Wabush, and Julian Lake will end up consolidated into a single long life very low cost mine.

 

Today we own fewer shares, but its all house money, & we have an indefinite costless call option on activity in the Labrador Trench.

Champion might well turn out to be a catalyst - but as most everyone in the trough will need to use the ADV loading facility, ADV will be part of the discussion.

 

Our downside is really if/when anything ever happens, & we assume nothing will.

But if something does happen - it'll be as though we've hit oil at Hibernia 

 

SD

 

   

[bizaro86]

I'm reasonably plugged in to Alberta politics, but I think the idea that they would get government compensation is very, very unlikely. The big local power companies are huge employers and politically connected. Altus is neither. Also, they have stranded capex, which Altius as a landowner only does not. Westmoreland might get something for their stranded capital equipment, but I would put the likelihood of ALS getting more than 0 as 10% or less

[nostradamus]

Regarding the earnings call, Dalton mentioned that the basket of commodities to which they have exposure have risen by about 20 to 30%. He also said that there is a lag in the effect of commodities prices feeding through to the royalty stream, and that the royalty revenue this quarter has not reflected a whole lot of the increased prices. He said that we should start to see this in the coming quarters.

 

I also found their slide 7 of their presentation (http://altiusminerals.com/uploads/2016-dec15-Conf-call-PPT-FINAL.pdf) quite interesting, as it helps to predict the effect of commodity price moves Altius' revenues.

 

To me it looks like in less than a year from now they will have zero net debt and a lot of exploration projects being tested.

 

Exciting times.

 

N.

 

 

[Williams406]

Here is some analysis from Sandon Capital regarding Iluka's sweet royalty on BHP's Mining Area C in Australia. It's one of those royalties you'd love to see combined somehow with Altius' portfolio. 

 

http://www.sandoncapital.com.au/site/images/pdfs/Whitepaper_Iluka.pdf

[nostradamus]

http://altiusminerals.com/uploads/PR1601-ADZN-(final).pdf

 

The full prospectus for ADVENTUS ZINC is on SEDAR. Looks like Altius owns about 30% of the shares pre-IPO.