ALS.TO - Altius Minerals

[nostradamus]

I agree that it is highly likely that in the near term they will raise their dividend. Right now though, I wish they would do some share buybacks. One of their directors bought 4000 shares in the open market recently. I would too if ALS didn't already represent a recklessly large percentage of my portfolio...

 

N.

[linealdin]

I agree that it is highly likely that in the near term they will raise their dividend. Right now though, I wish they would do some share buybacks. One of their directors bought 4000 shares in the open market recently. I would too if ALS didn't already represent a recklessly large percentage of my portfolio...

 

N.

 

Their pattern last year was buybacks below the $10 level. I'm tapped out, too, ALS is 100% of my portfolio, though my wife owns plenty of mutual funds. If we get to crazy territory I will shift some of those funds towards ALS. All in.

[linealdin]

http://www.cbc.ca/news/canada/newfoundland-labrador/wabush-mines-new-owner-1.4148945

 

Looks like Alderon didn't win the auction for the Scully Mine? Tacora Resources is advertising for jobs at the mine.

 

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/562-tsx/cia/33067-champion-iron-limited-subsidiary-granted-c-5-2-million-in-financial-assistance-from-government-of-quebec-s-green-fund-for-bloom-lake-mine.html

 

Champion replaces most of its trucks with a 3.8 kilometer ore conveyor belt, and installs energy efficient boiler, at Quebec government's $5.2 million expense, paid from its Green Fund. Part of overall effort to reduce Bloom Lake's opex per tonne. O'Keeffe continues to impress.

[linealdin]

Anglo Pacific Group, the Altius competitor in the base/bulk space I had forgotten, has quite a different business model. They aim to pay the majority of their royalty related receipts as dividends (in 2016 they received $12.3 million pounds in revenue and paid out $11.8 million pounds in dividends). Around 6% dividend yield currently. Their cash position is fairly low.

 

The yield also bounces up and down with annual revenues (as is typical in the UK?) quite unlike the US/Canada model of slow, steady, sustainable growth in quarterly dividend payments (dividend aristocrats).

 

When Anglo needs to make an acquisition they issue shares and turn to the credit markets.

 

Obviously not a model we want Altius to pursue (constant dilution and debt isnt always available when you need it). I think Altius can grow slowly dividends while still accumulating a significant cash hoard during this bull cycle.

[Williams406]

I've wondered about Osisko GR's plans since it sold its LIORC stake. Now I know. Page 12 of the transaction presentation on Osisko's site shows PM royalty valuations. No news here, but looking at Franco's relative valuation, you can see why you should be nervous if you out-bid them.

 

O'Keeffe has been fun to watch at Champion and wish Altius had a larger stake in Champion right now. I'd like to see him work with Altius on some kind of consolidation of the Lab Trough post Bloom Lake re-start.

[linealdin]

I've wondered about Osisko GR's plans since it sold its LIORC stake. Now I know. Page 12 of the transaction presentation on Osisko's site shows PM royalty valuations. No news here, but looking at Franco's relative valuation, you can see why you should be nervous if you out-bid them.

 

O'Keeffe has been fun to watch at Champion and wish Altius had a larger stake in Champion right now. I'd like to see him work with Altius on some kind of consolidation of the Lab Trough post Bloom Lake re-start.

 

Does Altius own any shares of Champion? Has that been confirmed? When Mamba and Champion merged the deadline for New Champion to earn into Snelgrove Lake was extended to September 2017. Earn in is comprised of 1) $6.5 million in exploration spending: $6.1 million already spent; 2) $5.75 million option payment to Altius; 3) granting of 3% royalty to Altius.

 

Does Altius get that option payment in September? I assume no. Either way the drilling's been paid for and it is a hematite DSO project, worth stashing away because capex is on lower end.

 

As to consolidation O'Keeffe seems to believe it is an infrastructure issue. Once Bloom Lake is restarted attention will turn towards Champion's Fire Lake North assets. The building of a multiuser railway is the key to unlocking those assets and unlocking other Trough projects like Kami and Julienne Lake.

 

O'Keeffe has doubts about reliance on Rio Tinto's railway because rates could be raised arbitrarily putting the profitability of the mines in question. Best to own (partially at least) your own railway.

[linealdin]

On May 6th, 2016 Champion terminated the Snelgrove Lake option. Altius should update its fact sheet!

 

Altius did receive 3.2 million shares of Champion during the Mamba/Champion merger. They had 32 million performance shares which were consolidated 1 for 10. See link below.

 

http://cipartners.com.au/pdfs/MAB_181213.pdf

 

Altius also had 17 million options to purchase Champion shares at 25 cents which expired in August 2015. Too bad the options didnt survive the extended doldrums of iron ore market and Champion's very low stock price in that period. That could have been a huge equity position.

[linealdin]

It's smallball, but the Snelgrove Lake deal was positive:

 

Altius spent $640K developing the asset. That expense was more than covered by cash payments of $425K and $410K when CIP and Mamba earned into the project.

 

Mamba spends a total of $6.4 million drilling the project. One very good drill hole with DSO hematite.

 

The option is declined and Altius is returned 100% ownership of the project.

 

Altius also receives 3.2 million shares of Champion for its troubles. That shareholding begins a relationship with Champion that leads to the recent $10 million debenture that can be converted to 10 million, or more, additional shares (and hopefully to future royalty deals or iron ore project consolidations).

 

I like it.

[linealdin]

One tidbit from the Anglo Pacific Group reports: certain European banks refuse to do financings with Anglo because of its heavy dependence on the Kestrel coal royalties. New bank policies related to 2015 Paris Climate Agreements. Altius revolving debt lenders won't allow a coal royalty purchase. Coal is public enemy #1.

 

Altius is much more diversified away from coal than Anglo, and Altius has no particular need to raise money from European banks (plenty of financing available in Toronto should a special situation arise).

 

Safest path is to buy no more coal royalties, even coking coal, spend zero dollars developing the coal assets of CDP portfolio, and probably change the name of the Carbon Development Partnership. Just collect the cash and be quiet about it.

 

 

[linealdin]

If Altius, as Sandstorm and Osisko have done, starts investing in diamonds I would be concerned. Stick to the traditional commodities.

[Williams406]

Linealdin,

 

Champion's 2016 annual MD&A (I think) had some mention of dropping the Snelgrove option and Altius' 4Q 2016 MD&A dropped Snelgrove from the "Summary of Exploration and Pre-Development Stage Royalties" list whereas it was on the 3Q 2016. Was there only one, 1-10 split of those performance shares?

[linealdin]

Linealdin,

 

Champion's 2016 annual MD&A (I think) had some mention of dropping the Snelgrove option and Altius' 4Q 2016 MD&A dropped Snelgrove from the "Summary of Exploration and Pre-Development Stage Royalties" list whereas it was on the 3Q 2016. Was there only one, 1-10 split of those performance shares?

 

Yes only one split. 3.2 million shares of New Champion shares received at time of merger between Mamba and Old Champion.

 

Wonder if they kept the shares when Champion ran up to $1.45 early this year. Must have been tempting.

 

I checked NL map staking and all the Snelgrove Lake and Century Iron option properties (aside from Astray still with Northern Star) were transferred back to Altius in late 2016. $12 million or more of exploration work and drilling completed by Mamba and Century. Now the properties can be stashed away virtually cost free for many years. Iron ore will become interesting again eventually.

[linealdin]

http://www.weare121.com/121mininginvestment-new-york/3867-2/

 

Short Brian Dalton interview. Notes that Altius during last bull market, 2003 to 2011, made ~$250 million from a couple hundred thousand hectares of land in a single jurisdiction being sold to various parties. Now the scale is 2 million hectares of land in multiple global jurisdictions.

 

10X the amount of exploration land this market cycle, with more attractive diversification, the implication is Altius is aiming for a similar multiple of that $250 million in profit from their project generation business during this cycle.

 

8 deals done for 23 properties in FY 2017: the Moosehead gold property option deal must be completed, though not announced yet.

[netnet]

http://www.weare121.com/121mininginvestment-new-york/3867-2/

 

Short Brian Dalton interview.

That link didn't work.

[netnet]

If Altius, as Sandstorm and Osisko have done, starts investing in diamonds I would be concerned. Stick to the traditional commodities.

Linealdin, You really are anti carbon, you don't like coal or diamonds! ;)

[linealdin]

If Altius, as Sandstorm and Osisko have done, starts investing in diamonds I would be concerned. Stick to the traditional commodities.

Linealdin, You really are anti carbon, you don't like coal or diamonds! ;)

 

I love the money that coal brings to Altius (and to me, indirectly). I do understand that anti-coal mania is for real. I believe certain investment funds and banks are categorically refusing to invest in coal companies (like cigarettes) for virtue signalling purposes. Altius has to stay diversified enough it isn't labelled a coal-related company.

 

Diamonds seem like a niche mineral. What's next-- investing in opal? A streaming deal for Peridot?

[linealdin]

Some interesting thoughts from Chad Wells in old presentations/interviews (check Youtube).

 

1) Discounted cash flow models are used in the industry to price royalties. Those models are great at determining the present value of the first 10 to 15 years of future royalties. But if the royalty has a longer tail, as with the 100 year potash royalties, the models don't assign enough value to the tails (Altius's opinion).

 

A 50 year royalty may only cost 25% more to buy than a 25 year royalty.

 

Altius is intent on picking up those long tails for free or cheaply.

 

2) Mine lives are short in precious metals (10 year average?), no tails to pick up for cheap, while base metals and bulk minerals have longer lives and brownfield potential.

 

3) They targetted the Prairie royalties in 2009, mostly because of interest in the longlife potash. 5 years of waiting for the right opportunity to buy, at the right price.

[linealdin]

http://www.labradorironore.com/News-Releases/Press-Release-Details/2017/Labrador-Iron-Ore-Royalty-Corporation---Cash-Dividends-for-the-Second-Quarter-of-2017---060-Per-Common-Share-Comprised-of-a-Regular-Dividend-Of-025-and-a-Special-Dividend-of-035/default.aspx

 

Better second quarter dividend from LIF than I expected. 25 cents regular dividend and 35 cent special dividend. This means Altius receives almost 700K in revenue on July 25th, pumps up what looks like a strong Q1 for Altius.

 

IOC (and LIF) makes plenty of money at these iron ore prices.

[linealdin]

Alberta electricity demand has improved significantly, year over year. For example:

 

On June 2nd 2016 the average weekly demand was 7844 MW, with an average pool price of $14/MWh.

 

One June 2nd 2017 the average weekly demand was 8866 MW, with an average pool price of $21/MWh.

 

13% increase in demand and 50% increase in price. These types of year over year increases have been consistent in 2017.

 

Analysts expect Alberta electricity demand to continue to grow for the next ten years. Nothing has been built so far to take the place of the retiring coal baseline power supply.

 

Coal revenue going forward should be excellent at Genesee, Sheerness and Highvale.

 

 

 

 

[linealdin]

Why did Altius assemble 2 million plus hectares of exploration lands? Doesnt that seem like overkill?

 

Large land positions are what the market wants. Majors and juniors looking for earn-in or joint ventures want district-scale opportunities. If they are lucky enough to find a good deposit there are probably a couple more deposits close by. These things cluster. See 777 mine and Chapada.

 

The West Cork deal with First Quantum is for 110,000 hectares. Massive.

 

Wilding Lake and additional properties is over 50,000 hectares. Also district scale.

[brianr27]

The West Cork deal would be tough to push through...

 

"Today though, any attempt at large-scale extraction would be likely to provoke a backlash given the district's remoteness, scenic appeal and reliance on tourism."

 

http://www.independent.ie/business/irish/canadian-firm-goes-for-gold-with-copper-mine-stake-30494622.html

[linealdin]

http://adventuszinc.com/storage/news/pr1704-exploration---final-1497443287.pdf

 

Adventus Zinc update. Exploration at the Irish properties and Buchans. Confidentiality agreements signed to discuss several possible acquisitions. Two more veteran geologists signed up. One is a Peru specialist and the other, Valenta, is based in Australia. Valenta (as Proton Geoscience) sourced the Broken Hill zinc exploration project in Australia for Altius.

 

Quiet is broken for Adventus because CEO Christian Kargl-Simard has returned from his wedding and 3 week Italian honeymoon. (We are Facebook friends.)

 

Adventus will be fascinating to watch. The early shareholders are a "who's who" of the mining industry and signed up eagerly despite Adventus not owning a flagship property. They are making a bet on zinc and Kargl-Simard's dealmaking prowess.

 

 

[linealdin]

http://www.proactiveinvestors.com/companies/news/179255/excelsiors-gunnison-copper-project-takes-important-step-with-receipt-of-draft-operating-permit-179255.html

 

Excelsior receives its draft ADEQ permit. Now 30 days for public comment (the community supports this mine because the mine is in the middle of nowhere unlike the Florence mine) then the final permit will be issued. Federal EPA permit on schedule for Q3.

 

Really good news. Permitting is last hurdle because capex is incredibly low and will be raised without a problem.

 

This is going to be a mine. What will become important in late 2017 is making the 25 million pound plant, which I think of as a pilot project, successful and profitable, to attract funding for stages 2 and 3.

 

Once the mine is fully permitted a takeover, or joint venture, by an experienced operator could accelerate things. Funding for jumping straight to building a 125 million pound plant?

 

 

[linealdin]

I think my skepticism of Excelsior has something to do with those injection wells. Reminds me too much of geothermal power, and the failures in many of those investments.

 

Wells can be complicated, certainly more complicated than a simple open pit mine.

 

Anyway, I hope Excelsior proves all the skeptics wrong. Could be a nice long life royalty for Altius.

 

Score Excelsior as a win for Altius co-founder Roland Butler and his tenure at Callinan. (From photos on the Altius website Butler seems to be back in the field for Altius; see the project page for the recently staked Sail Pond.)

[linealdin]

If there is a proper bull market in commodities over the next 5 to 7 years (copper at $4, zinc reaching $2, iron ore at $120, coking coal at $250, gold reaching $1500) Altius should be positioned to make multiples of the $206 million they made from project generation in the last bull market.

 

Multiples as in $500 million to a billion dollars, just from project generation. Why not? Alderon, Excelsior, Adventus, Allegiance, Julienne Lake and the various gold projects are ready to run if market mania kicks in.