ALS.TO - Altius Minerals

[nostradamus]

Anyone who bought Alderon in the last 3 years would be happy with a big takeover premium. Good point about Hebei, they could make a deal quite awkward.

[linealdin]

Anyone who bought Alderon in the last 3 years would be happy with a big takeover premium. Good point about Hebei, they could make a deal quite awkward.

 

Definitely. I'm not sure the majority of all shareholders would be happy with a 42 cent all cash takeover offer (50% premium to current price).

 

Altius would accept it if the buyer is someone who can actually build the mine. The royalty is much more important to them.

 

Takeover a hard sell for Liberty. They need to get back at least 50 cents on the dollar?

[nostradamus]

http://www.theaustralian.com.au/business/mining-energy/rio-tinto-to-focus-on-highgrade-iron-ore/news-story/36a279af0c1c56d8a5a908866b4fc701

 

Rio Tinto is emphasizing higher quality iron ore because of market changes. Low phosphorous iron ore mentioned in the article.

 

Applies to the Trough: Ore from IOC, Bloom Lake, Kami, and Julienne Lake is favored now.

 

Interesting. Do you know whether Rio has done any work recently on the Labrador Iron Ore Project properties (Bruce Lake, Goethite Bay, Carol Lake, Campground, Huguette Lake and Green Water Lake)? The information on the Altius website seems quite old and I wonder whether that is because Rio are now just sitting on the properties.

 

[linealdin]

http://www.theaustralian.com.au/business/mining-energy/rio-tinto-to-focus-on-highgrade-iron-ore/news-story/36a279af0c1c56d8a5a908866b4fc701

 

Rio Tinto is emphasizing higher quality iron ore because of market changes. Low phosphorous iron ore mentioned in the article.

 

Applies to the Trough: Ore from IOC, Bloom Lake, Kami, and Julienne Lake is favored now.

 

Interesting. Do you know whether Rio has done any work recently on the Labrador Iron Ore Project properties (Bruce Lake, Goethite Bay, Carol Lake, Campground, Huguette Lake and Green Water Lake)? The information on the Altius website seems quite old and I wonder whether that is because Rio are now just sitting on the properties.

 

No work reports filed recently for those properties. 10 year deadline for royalty reduction option coming up: IOC has option to pay Altius $10 million to reduce royalty from 3% to 2% on those properties.

[nostradamus]

Thanks linealdin. Looking back over past press releases, it seems that the deadline for the $10m for 1% is December 2018.

[linealdin]

Couple of more themes in the Labrador Trough:

 

1) China vs Japan.

 

Chinese steelmakers like Hebei and Wuhan have tied up billions of tonnes of ore in the ground, but it looks like Japanese firms like Mitsubishi (part owner of IOC) and Sojitz (offtake customer at Bloom Lake) will be enjoying the actual production.

 

Smart money vs dumb money?

 

2) Long steel vs flat steel

 

Long steel products used for structural building products like girders and beams. Lower quality iron ore is okay for that. China has been focused on long steel to build out its ghost cities.

 

Flat steel is needed in more advanced economies for building products like cars and tractors. Flat steel requires iron ore with lower impurities. See Japan and Mitsubishi.

 

The longterm trend in China has to be towards higher end products and more need for flat steel and higher quality iron ore. China over the next 50 years becomes more and more similar economically to South Korea and Japan.

 

*

 

Dalton has talked about being very optimistic about Trough iron ore ore but pessimistic about iron ore generally. I think these are some of the reasons why.

[linealdin]

http://www.theaustralian.com.au/business/mining-energy/rio-tinto-to-focus-on-highgrade-iron-ore/news-story/36a279af0c1c56d8a5a908866b4fc701

 

Rio Tinto is emphasizing higher quality iron ore because of market changes. Low phosphorous iron ore mentioned in the article.

 

Applies to the Trough: Ore from IOC, Bloom Lake, Kami, and Julienne Lake is favored now.

 

Interesting. Do you know whether Rio has done any work recently on the Labrador Iron Ore Project properties (Bruce Lake, Goethite Bay, Carol Lake, Campground, Huguette Lake and Green Water Lake)? The information on the Altius website seems quite old and I wonder whether that is because Rio are now just sitting on the properties.

 

Rio Tinto was considering either idling or selling IOC during the bear market. Now because of the structural changes in the market favoring the premium ore the question for Rio Tinto becomes how quickly to expand production at IOC. First step is their goal of ramping up to 22 million tonnes this year, then adding in production from the Wabush 3 pit in 2018.

 

Still blue sky beyond that. There was once talk of 50 million tonnes per annum.

 

 

[linealdin]

Adventus up to 80 cents per share. Altius's equity position now worth C$9.7 million.

 

A lot of market good will flowing towards zinc stocks. Now the banker CEO needs to do what he does best: Make a transaction. The stock will spike if the deal sounds good.

[linealdin]

https://www.bloomberg.com/news/articles/2017-08-30/how-iron-ore-s-most-valuable-lessons-all-come-from-grade-school

 

The spread between the price of 65% iron ore and 58% iron ore is now a stunning US$50. At the beginning of 2016 the spread was only US$10.

 

If this change is structural and permanent then many more Trough iron projects become viable. Also explains why LIF is paying big dividends when the benchmark 62% ore price is mediocre. Big premiums for its high quality pellets and ore, sweetened by credits for low phosphorous and alumina.

[linealdin]

Looks like Excelsior about to announce receipt of Arizona Department of Environmental Quality (ADEQ) permit. Trading halt this morning.

 

EPA permit should follow shortly. They let the state regulators do the heavy lifting.

[linealdin]

Altius reported 1.7076 million shares of LIF at the end of April. I believe they continued to buy shares during the dips in July.

 

I hope they've accumulated at least 2 million shares by now.

 

2 million shares X $2.10 in annual dividends (Credit Suisse prediction) = C$4.2 million in annual revenue.

 

The LIF position then becomes Altius's 5th largest royalty stream (after 777, Chapada, Genesee and Sheerness).

 

Volume expansion hopefully becomes a bigger factor at LIF rather than iron ore price. IOC only hit 19.6 million tonnes of production in 2016. This year their target is 22 million tonnes, a 12% annual increase.

 

The Wabush 3 pit, once put into production next year, increases annual capacity to 23 million tonnes.

 

And IOC's Concentrate Expansion Program part 3 (CEP3), which was shelved during the downturn, was planned to increase production capacity by another 4 to 6 million tonnes.

 

With Rio Tinto's stated focus on servicing the market's need for higher quality ore I expect CEP3 to be relaunched very soon.

[Williams406]

Indeed, Excelsior has state permit:

 

https://ceo.ca/@marketwired/excelsior-mining-granted-state-operating-permit-for

[linealdin]

Indeed, Excelsior has state permit:

 

https://ceo.ca/@marketwired/excelsior-mining-granted-state-operating-permit-for

 

Positive market reaction. Briefly hit a new 52 week high of C$1.48.

 

(Altius equity position worth C$8.58 million at that high).

[linealdin]

The iron ore investment in the Trough I forgot about: POSCO (South Korea) and China Steel (Taiwan) bought 15% of Arcelor's Mont Wright in 2013. Again, it is steelmakers from the more mature economies who value the higher quality Trough ore.

[linealdin]

https://mobile.twitter.com/QuakeWrap/status/900514121107390464

 

Engineers from Excelsior investigating innovative pipeline solution: FRP Infinitpipe.

 

Manufactured on site by a small unit in a truck. Truck dispatched days after order is placed. Very light, very strong, any length, no joints to leak from. Can construct 2 miles of pipe per week.

 

[linealdin]

http://www.teck.com/news/news-releases/2017/teck-updates-steelmaking-coal-guidance-

 

Teck updates steelmaking coal guidance for Q3:

 

Volume between 7.2 million and 7.5 million tonnes because of strong demand.

 

Realized price between $158 and $163 per tonne.

 

Compare with Q2:

 

Volume: 6.8 million tonnes

 

Realized price: $169 per tonne

 

Volumes roughly 8% up, price roughly 5% down.

[linealdin]

Had thoughts about Teck's Cardinal River:

 

Cardinal River ships coal through the struggling Ridley Terminals, not through Westshore Terminals like the rest of its steelmaking coal mines. There is probably some strategic incentive for Teck to keep the Ridley Terminals in business so Westshore doesn't gain monopoly power to overcharge Teck. Best way to do that is to extend the life of Cardinal River and keep shipping ore through Ridley until 2027.

 

Quintette coal mine, which Teck put on care and maintenance, will also ship through Ridley whenever it is put back into operation. Ridley being in existence gives Teck some optionality.

 

*

 

Teck's Coal Mountain closes very soon: sometime in Q4 2017. That leaves only 5 steelmaking coal mines for Teck. If Cardinal River ends in 2019 or 2020 there would only be 4 coal mines left.

 

Can Teck afford so much attrition in the steelmaking coal unit? It is the major profit center of the company: 73.6% of Teck's gross profit in the most recent quarter.

[linealdin]

http://www.labradorironore.com/News-Releases/Press-Release-Details/2017/Iron-Ore-Company-of-Canada-Dividend-962017/default.aspx

 

IOC pays LIF (15% shareholder) a monstrous C$33 million dividend. IOC is very profitable in this market with its focus on premium ore and pellets.

 

The last two IOC dividends to LIF were C$15.3 million and C$9.9 million.

 

The last two quarterly LIF shareholder dividends were 60 cents and 50 cents.

 

My prediction for the next LIF dividend payable in late October is 80 cents per share (C$1.366 million to Altius). It is going to be a really good Q2 for Altius.

 

 

[linealdin]

Alllegiance Coal again tries to be dramatic. In a trading halt for release of its Stage 1 PFS which should lower initial capex to US$36 million without resorting to leased equipment or contract mining.

[linealdin]

https://www.theaureport.com/pub/na/excelsior-mining-impresses-markets-by-receiving-app-permit-for-gunnison

 

Some color on permitting and financing developments at Excelsior. Management expects no appeals of its state permits and expects delivery of final EPA permit by November.

 

Possibility of starting with larger capacity plant to take advantage of higher copper prices is discussed.

 

I still think it makes most sense to prove up project at 25 million pound pilot plant then jump straight to full capacity at 125 million pounds. The 75 million pound interim plant makes little sense to me.

[linealdin]

Assuming Altius hasn't increased its LIF equity position it has reaped roughly C$3.89 million in LIF dividends (last payout on July 25th). Position held since around April/May/June 2015.

 

It is an easy way to pump up quarterly revenue. LIF with a series of increasing special dividends this year.

 

Positive market reaction to the announcement of the IOC dividend, LIF up 3.25% to $20.31. Altius equity position is worth C$34.68 million.

 

LIF is probably going to pay out at least $2.50 in dividends per share in 2017. A 12% annual yield. Stock price has to go up.

 

If LIF goes to $30 this year Altius could cash out C$51 million and use it to wipe out most of the remaining debt.

[linealdin]

http://www.marketwired.com/press-release/champion-announces-terms-of-previously-announced-offering-of-subscription-receipts-asx-cia-2233001.htm

 

Terms of Champion's equity financing announced: 90 cents per share, significantly below the current market price.

 

They are certainly having a hell of a time closing this financing.

 

If these investors are getting cheap shares then why not Altius? I think they should consider not converting the debenture into $1 shares and just get their C$10 million repaid.

 

 

[Williams406]

Altius doing due diligence on Wolfden Resources deal in Maine. Equity plus royalty. Cash consideration for initial 1.35% royalty is C$6 million with option to increase after production. Looks like new legislation has opened up the state for mining.

 

http://www.wolfdenresources.com/files/News-Sep7-2017.pdf

[linealdin]

Altius doing due diligence on Wolfden Resources deal in Maine. Equity plus royalty. Cash consideration for initial 1.35% royalty is C$6 million with option to increase after production. Looks like new legislation has opened up the state for mining.

 

http://www.wolfdenresources.com/files/News-Sep7-2017.pdf

 

So this is the first of the small ball development royalties we've been promised.

 

1) Altius pays US$6 million, or C$7.28 million for the 1.35% royalty. Along with the C$3,550,000 private placement Altius's total investment is C$10.83 million at today's exchange rates.

 

2) Altius becomes a 14.3% equity stakeholder in Wolfden Resources, pending additional participants in the private placement. The private placement does come with 7.1 million warrants to purchase shares at 35 cents for a generous period of 5 years. (Current stock price is 18 cents.)

 

3) Wolfden had about a million in cash at the end of June, with additional cash coming in from deal with Galway Metals. If the additional private placement is filled then Wolfden gets around C$1.75 million in funding after paying for the property. Just enough for a drill campaign.

 

4) I just go back from a vacation in Maine (like half of America). Fancy lobsterland tourist territory quite different politically from Northern Maine which is Trump country. Maine governor is a conservative madman. Thought the mining bill wasn't favorable enough to mining companies.

 

5) The bill basically bans large open pit mines in Maine and sets strict water monitoring rules. An underground mine of a small, valuable deposit should work under the new laws. This VMS deposit seems to fit.

 

6) I love the high grades of the historic drilling. Makes up for the permitting risk?

[linealdin]

http://www.gsmmaine.org/wp-content/uploads/2010/02/A-History-of-non-ferrous-metal-mining-and-exploration-6.pdf

 

The Maine deposit Altius just bought a royalty on used to be called the Mount Chase deposit. Conservation Forestry LLC is the property owner selling to Wolfden. Fred Beck, author of the presentation linked above, ran the exploration program at Mt. Chase for Getty Mines. So he should know things!

 

Historic estimates: 3.2 million tonnes at 11.25% zinc, 4.83% lead, 1.45% copper.

 

Let's assume 88% recovery for zinc, 78% for lead, and 80% for copper (metallurgical tests cited in press release). That means 698 million pounds of zinc, 266 million pounds of lead, and 82 million pounds of copper recoverable from the deposit.

 

Altius's full royalty of 1.85% entitles it to:

 

1) 12.9 million pounds of zinc, current market value US$17.8 million

 

2) 4.9 million pounds of lead, current market value US$4.99 million

 

3) 1.5 million pounds of copper, current market value of US$4.5 million

 

Total value of US$27.335 million, or C$33 million.

 

(With the 1.35% royalty the take is US$19.94 million, or C$24.13 million.)

 

Not a very economic royalty purchase unless the deposit grows from its historic estimates.

 

Just for comparison: 777 is also a VMS deposit. When it entered production it was 14.53 million tonnes at 2.53% copper and 4.68% zinc. The Pickett Mountain deposit needs to be drilled deeper and it needs to grow. Discovery of satellite deposits would also help the economics.

 

I do like the management at Wolfden. They are minefinders. Ewan Downie, Chairman of the Board,

is CEO of Premier Gold, and Donald Hoy, CEO, was in charge of exploration for Cliffs Natural Resources. Both recognized for major deposit discoveries.