ALS.TO - Altius Minerals

[linealdin]

http://www.yamana.com/English/investors/news/news-details/2017/Yamana-Gold-Provides-an-Update-on-Exploration-Metal-Price-Protection-Efforts-and-Consolidation-of-Senior-Management-Into-Toronto-Office/default.aspx

 

Chapada exploration update. Baru/Sucupira defining a copper/gold resource with similar grades to Chapada. Studies will lead to a PEA to study a large open pit operation. Also hits at Suruca Southwest and Buriti, two more near mine deposits.

 

I really want expansion at Chapada. 200 million pounds per annum? Why not, the resources seem to be there.

 

 

 

 

 

 

[linealdin]

This is kind of interesting...

 

On Sept 21 Roger Lace, President, Hamblin Watsa Investment Counsel Ltd. (Fairfax) purchased 10,000 shares of Altius at $11.58.

 

The stock is stupidly cheap, given recent developments. The professionals see the value.

[linealdin]

http://www.alderonironore.com/index.php/news/2017/416-

 

Alderon recovers C$11.5 million from C$21 million it gave to Newfoundland Hydro to build a power line. A little breathing room financially? Announces rescoping of PEA to not include the dumb Scully tailings pit idea.

 

How about going small to start? Staged production, low capex. What's wrong with a 1.5 million tonnes per annum operation?

 

 

[cwericb]

This is kind of interesting...

 

On Sept 21 Roger Lace, President, Hamblin Watsa Investment Counsel Ltd. (Fairfax) purchased 10,000 shares of Altius at $11.58.

 

The stock is stupidly cheap, given recent developments. The professionals see the value.

 

Not just any professional. As most know, Hamblin Watsa is the investment arm of Fairfax. So when the president of Hamblin Watsa invests his own personal money in Altius, it would seem to indicate that he thinks the company is undervalued and recognizes that Altuis has a bright future.

 

Altius can likely depend on more support from Fairfax in the future. I have always thought that Altius would make an excellent partner for Fairfax. So one might think that Fairfax’s present investment with Altius is only the first step. It will be most interesting.

 

My only concern is that Fairfax’s goals may not always be in line with those of Altius shareholders.

[linealdin]

http://www.allegiancecoal.com.au/irm/PDF/1256_0/IndependentInvestmentResearchSeptember2017

 

Research report on Allegiance Coal. Bank sees base case valuation of 37 cents per share with upside to 82 cents a share. Stock trades at 4 cents!

 

 

 

 

[linealdin]

http://www.alderonironore.com/index.php/news/2017/416-

 

Alderon recovers C$11.5 million from C$21 million it gave to Newfoundland Hydro to build a power line. A little breathing room financially? Announces rescoping of PEA to not include the dumb Scully tailings pit idea.

 

How about going small to start? Staged production, low capex. What's wrong with a 1.5 million tonnes per annum operation?

 

Alderon gets a $750K discount if construction resumes on power line within 5 years. So that seems to be the timeframe the company is looking at. Save money, hunker down, and hope the iron ore market really comes to life sometime in the next 5 years.

 

With the big $11.5 million check deposited in the bank there is plenty of cash to keep the lights on and the $400K executive salaries paid for a few years. I guess that's a plan.

[FFHWatcher]

http://www.alderonironore.com/index.php/news/2017/416-

 

Alderon recovers C$11.5 million from C$21 million it gave to Newfoundland Hydro to build a power line. A little breathing room financially? Announces rescoping of PEA to not include the dumb Scully tailings pit idea.

 

How about going small to start? Staged production, low capex. What's wrong with a 1.5 million tonnes per annum operation?

 

Alderon gets a $750K discount if construction resumes on power line within 5 years. So that seems to be the timeframe the company is looking at. Save money, hunker down, and hope the iron ore market really comes to life sometime in the next 5 years.

 

With the big $11.5 million check deposited in the bank there is plenty of cash to keep the lights on and the $400K executive salaries paid for a few years. I guess that's a plan.

 

Not sure Liberty Metals and Mining (LMM) will see it the same way

[linealdin]

The size/frequency distribution of microdiamonds seems to be predictive of how many larger carat diamonds will be found in the deposit. Hence the meticulous charting of diamonds by sieve size in the press release.

 

1mm diamonds are used for diamond pave, and are the lowest commercially feasible size. The microdiamonds aren't commercial but they are abundant. Macrodiamonds are very low abundance. Even in an economic deposit a tonne of the deposit may only yield 1 to 3 carats of commercial macrodiamonds.

 

From a comparison with early stage findings at other diamond mines I believe the Altius microdiamond size/frequency results are a world class discovery.

 

The final proof of a diamond deposit, bulk sampling of 100 tonnes and up, is very, very expensive. A partner will be necessary.

 

[A more typical, non-world class, discovery result would be a 195 kg mini-bulk sample yielding a grand total of 13 microdiamonds. See recent press release from TSX listed 5 Star Diamonds.]

[racemize]

I'm trying to figure out if this is a PFIC as a preliminary matter.  The website says they aren't for 2015, but then has PFIC statements for every year.  I realize this is a complicated tax matter, but does anyone have any thoughts/guidance?

[linealdin]

I'm trying to figure out if this is a PFIC as a preliminary matter.  The website says they aren't for 2015, but then has PFIC statements for every year.  I realize this is a complicated tax matter, but does anyone have any thoughts/guidance?

 

It's complex law but basically it's not a PFIC. The big one to watch is how Franco Nevada is treated (not taxed as PFIC). Lots and lots of US shareholders own Franco Nevada.

 

PFIC laws were passed to protect the US mutual fund business. So don't buy foreign mutual funds if you don't want to get entangled with PFIC issues.

 

Nobody in the IRS cares about active businesses like Altius or Franco Nevada collecting royalties. Please don't read the law too literally!

 

 

[linealdin]

Renard is now a diamond mine that Stornaway runs. Osisko earns a big royalty from Renard. Compare some early exploration results from 2002 with Altius's recent results at Lynx:

 

http://www.ecoweek.ca/issues/ISarticle.asp?aid=1000113466

 

A 206 kg sample from the Renard 1 ore body yielded 54 microdiamonds and 5 macrodiamonds.

 

A 163 kg sample from the Renard 2 ore body yielded 116 microdiamonds and 29 macrodiamonds.

 

(Renard definition of macrodiamond is at least 0.5 mm in one dimension, not particularly large.)

 

At Lynx Altius is testing 16 kg samples and getting results of 100 to 300 total diamonds from some of the samples. The Lynx test samples are less than 1/10 the weight of the samples at Renard, but can yield as many or more diamonds.

 

The early results are world class.

 

Oxford House, Manitoba is pretty far north so the exploration season will last another month or two at most. Get cracking on those stones. I want a farm out deal this winter once the results of more sampling are in.

 

[netnet]

http://www.allegiancecoal.com.au/irm/PDF/1256_0/IndependentInvestmentResearchSeptember2017

 

Research report on Allegiance Coal. Bank sees base case valuation of 37 cents per share with upside to 82 cents a share. Stock trades at 4 cents!

 

FWIW, this research was paid for by the company.

[linealdin]

The other long term trend in China is the drawdown of its domestic iron ore production. News today that China will cancel 1/3 of its iron ore mining licenses. These are mostly small producers who mine low quality, high impurity ore and pollute the environment.

 

What will replace this production? High quality, low impurity imported ore. Trough ore, for example.

[linealdin]

777 royalty had quite a quarter: $3.341 million in revenue.

 

Updated Callinan payback calculation:

 

$18.825 million in revenue / $60.43 million purchase price = 31.2% payback in 2 years.

 

Updated Callinan payback calculation after Q1 2018:

 

$22.329 million in revenue / $60.43 million purchase price = 36.9% payback in 2.25 years.

 

Roughly 13 more quarters of revenue left from the 777 mine.

 

[linealdin]

Updated Prairie Royalties payback calculation:

 

$64.652 million in revenue / $240.9 million purchase price = 26.8% payback in 3 years.

 

Updated CDP royalties payback calculation:

 

$5.652 million in revenue / $42 million purchase price = 13.5% payback in 3 years.

 

Updated Prairie Royalties payback calculation:

 

$70.428 million in revenue / $240.9 million purchase price = 29.2% payback in 3.25 years.

 

Updated CDP royalties payback calculation:

 

$6.291 million in revenue / $42 million purchase price = 15% payback in 3.25 years.

 

 

 

 

[linealdin]

Updated Chapada payback calculation:

 

Chapada purchase price was US$60 million, or C$76.8 million on the day the deal closed (1.28 exchange rate).

 

Chapada topline revenue of C$14.069 minus stream cost of sales of C$4.157 = C$9.912 actual cash flow

 

C$9.912 million / C$76.8 million = 12.9% payback in 1.25 years.

[linealdin]

Alderon stock hammered down to 24 cents. Market does not believe. Wabush tailings fiasco wasted a year. Headed down to 10 cents unless Morabito pulls a rabbit out.

[linealdin]

Altius spent a decent amount of money on the diamond project in Q1 ($153K) but spent an enormous amount on the Finland gold project ($387K). That is a lot for exploration that doesn’t include drilling. What’s the hurry? Aurion, the neighboring gold property, is on a ridiculous bull run, up to $3.49 in recent days. This is all based on some excellent rock samples but no drill results yet. More than a hundred bagger since 2015.

 

There must be plenty of juniors chomping at the bit hoping to capitalize on this excitement.

 

If Altius has also found excellent rock samples (and the pace of exploration spending indicates they have) the property will be very attractive to the juniors.

[linealdin]

The saving grace for Kami is the location. All the mines and infrastructure in the Lab City/Fermont area are actually piled on top of each other. O’Keeffe of Champion talks about realizing this when touring the area by helicopter.

 

Kami is actually a few kilometers closer to IOC’s processing facilities than the Geothite Bay deposit, for example (Altius exploration JV with IOC). The Geothite Bay deposit has had good drill results and is a peripheral deposit that could eventually feed into IOC’s existing plant.

 

Kami is also in turn a few kilometers closer to Bloom Lake (and Mont Wright) than it is to IOC.

 

The easiest way to reduce the $1 billion in capex to mine Kami? Don’t build a processing facility. That saves most of the billion. Let IOC or Champion or Arcelormittal build a crusher and a conveyor belt and feed the ore into their plants. The 3% royalty pays no matter who mines Kami.

 

Perfect location surrounded by what should be 3 or 4 operating iron ore mines next year. Something has to give.

 

(Similar logic applies to Julienne Lake, though it is too far from Bloom Lake to become its satellite deposit. Julienne Lake is closer to IOC than Goethite Lake).

 

 

[linealdin]

Fascinating how badly the Alderon crew bungled the PR for the Wabush mine purchase.

 

What they told the everyone: We are going to pay nothing, zero, zilch for Wabush which we are going to use as a tailings pit. Which sounds like using it as a garbage dump. This makes none of the stakeholders happy.

 

What they should have said (99% the truth): We plan to pay market price during the auction process for this beautiful Wabush facility where we will build our concentrator, ore stockpile and loading facility. We plan to load ore on to the existing Wabush rail loop. While we will investigate the possibility of blending Kami and Wabush ore at the new concentrator it is possible part of the Wabush pit will be used to store tailings once the ore body is depleted.

 

We plan to hire as many highly skilled Wabush Mine workers as are willing join us once the new facilities are built.

 

Now doesn’t that sound a hell of a lot better? These aggressive idiots. The group that won the auction made deals with the workers and nice sounding promises to the government. Once you actually own the asset then you do whatever you want.

 

Morabito is not a mine builder. This process is way, way, way out of his league. Wave the white flag and sell the fully permitted project to someone who can build it.

[linealdin]

http://www.rengold.com/i/pdf/2017-09-14-presentation.pdf

 

Latest Renaissance Gold presentation with updates on drilling schedules. Ramelius Resources set to drill Jupiter in October/November (Altius 1.5% royalty) and Anglogold plans to drill Silicon in January/February (Altius 1% royalty).

 

Ramelius has a A$200 million market cap while Anglogold has a US$3.5 billion market cap. These are gold producers, not the usual junior market nobodies. It means something that they are committing cash to drill these properties. Roland Butler at Callinan was right to make the initial generative deals with Renaissance and Kinetic.

 

Altius owns ~683,000 shares of Renaissance. The stock has made a nice advance to 40 cents.

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/01901631.pdf

 

PolarX, formerly Coventry Resources, currently has two drill rigs working at the Zackly historic deposit and potential extensions. See annual report recently released above. The Zackly deposit is high grade but small: 1.54 million tonnes at 2.9% copper and 4.51 g/t gold. Quadruple that historic resource and they probably have a mine.

 

Altius holds a 2% royalty, last vestige of the Millrock deal.

[linealdin]

If Champion does develop more greenfield iron ore projects after Bloom Lake restarts, compare Kami to Fire Lake North:

 

Kami, fully permitted and 15 km from Bloom Lake Railway.

 

Fire Lake North is not permitted and is at least 43 km from the same railway.

 

No contest. What would Kami cost to acquire? Maybe $50 million in Champion shares? A little all share transaction/merger? Will be cheaper to issue the shares once Champion is rerated as a significant iron ore producer.

 

 

[linealdin]

http://www.marketwired.com/press-release/champion-announces-final-closing-of-prospectus-offering-asx-cia-2235553.htm

 

Champion closes last tranche of equity offering. Now fully funded for construction. The debt lenders just have to sign the money over they previously committed. This is very good for the Labrador Trough. A successful restart will attract more investment into the Trough from strategic players. And Champion as a producer could become a vehicle for additional consolidation.

 

My belief is that Altius likely participated in this equity offering, picking up 2 to 4 million shares at 90 cents per share. With Champion having such difficulty closing the offering all favors/relationships were called in. Dalton is close to O’Keeffe. Altius is flush with cash, and has already done their due diligence on the Bloom Lake restart.

 

As for the convertible debenture Altius will see how the stock market reacts in the next couple of weeks to this news and the coming stream of construction developments. The spirals for the concentrator, a long lead time item, have arrived for example. Obviously they will only convert their debenture into Champion stock if the stock price makes a significant move up. I’d be happy converting at $1 per share if the stock price is $1.15 or above.

 

Michael O’Keeffe is going to make an absolute killing if Champion is rerated as a producer. He owns something like 35 million shares and another 15 million or so options (all deep in the money). More options being issued every quarter. He is going to restart the mine then try to cash out $150 million for himself by selling Champion to a major. Could be the biggest score of his career by far.

[SharperDingaan]

Always keep in mind that when you're talking about Kami - we're really talking about Kami+Julienne Lake(JL)+Altius. Then add to it that the size of Kami+JL together pretty much swamp out everyone else, all the trough mines are starting from scratch, iron ore is very much a commodity product, and the miners best defense will be a collaborative development.

 

It makes most sense to build the infrastructure big (concentrators, rail, port, power, tailings, infrastructure, etc.), share use across ALL the mines in the trough, & to use something like Fort McMurray as the development template. Were it anywhere else but Newfoundland & Labrador the cooperation, vision and goodwill wouldn't be feasible. 

 

Our own thoughts are that Altius will hold back Kami+JL on this cycle, and let Champion & others do the running. It will generate royalties, de-risk their trough investment overall (Champion+Kami+JL), prove the concept, and avoid undue competition. When Kami & JL eventually do come in, it would seem highly likely that they end up scaling overall trough production to something very similar to the RTZ facilities. All good, all very competitive, but its the long game.

 

Alderon is a long time option on iron ore, with no expiry. All they need do is charge a modest rent to use their loading pier, use the money to keep the firm quietly ticking over, and keep their ore in the ground. Maybe 2-3 people, & a couple of contractors, for 5-10 years.

 

All good.

 

SD