ALS.TO - Altius Minerals

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/01912044.pdf

 

PolarX with some good-looking IP survey and soil/rock chip sampling results over the Mars prospect. They are hoping this is evidence of a large buried porphyry copper-gold deposit. Altius holds a royalty on the Mars and Zackly prospects, and most of the geological trend in between.

[linealdin]

http://www.excelsiormining.com/index.php/news/news-2017/529-excelsior-mining-s-gunnison-copper-project-receives-draft-federal-epa-permit

 

Excelsior receives its draft EPA permit, now open to public comment for 30 days. Last permitting milestone.

[nostradamus]

It's interesting that Millrock's share price has not reacted to any of this recent news from PolarX, given that they hold a royalty as well over Stellar. PolarX's share price is 8 times higher.

[linealdin]

It's interesting that Millrock's share price has not reacted to any of this recent news from PolarX, given that they hold a royalty as well over Stellar. PolarX's share price is 8 times higher.

 

Yes, curious indeed. Millrock's shareholders are a little beaten down, and investors are bored of prospect generators? PolarX is a one property pony, and investors like to focus on single properties that will make them rich? Aussie resource investors are less beaten down, and therefore more optimistic, than Canadian resource investors?

[netnet]

LIF's 15.1% equity ownership position in IOC is probably undervalued. Rio Tinto only owns 58.7% of IOC equity but during its recent sales process for that stake (which attracted bidders like Wuhan, Minmetals, Teck and Glencore) was demanding US$3.5 billion to US$4 billion. I understand a deal was never finalized but it gives a ballpark valuation of what LIF's equity stake might be worth in a bull market: around C$1.2 billion.

 

What is LIF's current market cap? C$1.33 billion.

 

I now understand why Altius was aggressively building a position when LIF was trading at C$13. LIF was trading below the value of its 7% royalty AND it was also probably trading below the value of its IOC equity position. When you consider the value of both combined? A screaming value play.

 

LIF still cheap at C$21.

 

LIF was THE play, (in retrospect).

[linealdin]

Listened to Capital Power's Q3 report. Despite low natural gas prices no change of plans as to timing of natural gas conversions of Genesee 1 and 2. Conversions still set for 2031.

[linealdin]

https://docs.wixstatic.com/ugd/8d6671_770851db0e19480f99f29281bbca026e.pdf

 

Some more color on EMU's upcoming 36 hole drill campaign. Specialist air core drilling contractor retained to deal with the difficult drilling conditions. After air core, possible follow-up with diamond drilling if results warrant. Tenements staked by Altius's Chilean subsidiary and EMU to cover more of the ground between the Vidalita and Jotahues prospects.

 

Soil sampling in November, and drilling probably begins in December. 12 man camp.

 

A$2.3 million in cash at the end of September. I'm sure they'd like to raise more money before the end of the year.

[linealdin]

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/878-tsx-venture/nai/37604-canex-metals-reports-trenching-results-from-gibson-project.html

 

More Gibson trench results from Canex Metals. Results look good.

 

Mentions of a possible Phase 1 drill program. I see only C$636K in the coffers at the end of June. I'm sure half of that is gone with the trenching program in Q3. Let's see if Canex can raise another million or so.

[linealdin]

http://www.potashcorp.com/news/webcast/2316/

 

Strong Q3 results from Potash Corp:

 

1) Record quarterly potash sales volume of 2.9 million tonnes. (Compare with Q2 sales volume of 2.4 million tonnes.)

 

2) Average realized price of $179 per tonne. (Compare with Q2 average realized price of $174 per tonne.)

 

Sales volume up 21%, sales price up 2.8%, quarter over quarter.

 

Latin America the biggest potash customer in the quarter, not China. That's surprising.

 

This will show up in Altius's potash royalty revenue. It's going to be a big quarter for Altius.

[linealdin]

I like the potash demand picture Potash Corp is conveying for 2017 and 2018.

 

1) Canpotex, the Canadian sales consortium, is full committed for 2017.

 

2) Predicted global shipment range of 62 to 65 million tonnes of potash, potentially setting a new all time high. (60 million tonnes were shipped globally in 2016.)

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/01912727.pdf

 

New PolarX Limited presentation for their Australia roadshow. These guys sound pumped up. Maybe that's why their stock price has moved but Millrock's hasn't.

[linealdin]

Not a peep from Wolfden Resources. Maybe the Maine mountain purchase has run into trouble in the due diligence phase? Target date for financing was Oct. 4th. They need to communicate better with their shareholders.

[linealdin]

Altius's total potash revenue (including CDP potash) was C$1.758 million in the last reported quarter.

 

Next quarter total Altius potash revenue will be in the C$2.2 million range, if results from Agrium and Mosaic mirror Potash Corp's Q3 results.

 

(Potash prices still very low compared to the levels of the last bull market. At those exalted supercycle levels Altius would be receiving C$15 million to C$25 million annually in potash revenues. We can dream.)

[linealdin]

Asset quality shows in a bear market.

 

Back in 2014 when Altius bought the potash royalty package, Potash Corp's Rocanville and New Brunswick mines were both in operation, each at 2.0 million tonnes annual nameplate capacity.

 

Three years later, in a brutal bear market, New Brunswick has been shut down while Rocanville has been expanded to 6.5 million tonnes nameplate capacity. Rocanville is now officially the largest capacity potash mine in the world, and among the lowest cost per tonne producers.

 

Imagine owning a royalty on New Brunswick instead of Rocanville? What a nightmare that would be.

 

Even if the potash price is flat for the next 10 years expect continued production growth from Altius royalty mines. The worldwide potash demand is still growing at a steady 3% every year. Canpotex is certainly going to get its allocation of that incremental demand growth.

 

At the current rate of demand growth (which is not solely dependent on China anymore, there is demand pressure in all regions) the total worldwide demand could be 86 million tonnes by 2027.

[linealdin]

http://www.teck.com/media/Q3-17-News-Release.pdf

 

Teck Q3 results:

 

7.54 million tonnes of coal sold. (Q2 6.9 million tonnes sold.)

 

Realized price of US$159 per tonne. (Q2 realized price of US$169 per tonne.)

 

Sales volume up 9.3%, sales price down 5.9%.

 

No breakdown for Cardinal River. Steelmaking coal business unit is still the major profit center for Teck, over the copper and zinc units.

[linealdin]

http://www.yamana.com/English/investors/news/news-details/2017/Yamana-Gold-Announces-Third-Quarter-2017-Results-and-Increases-Production-Guidance-for-All-Metals/default.aspx

 

Yamana Q3 results (detailed). Production guidance for copper in 2017 raised to 125 million pounds. (I expect 130 million pounds.) Initial results from the new cleaner circuit at Chapada are higher recovery rates for copper and gold.

 

Mention of a "broader Suruca complex" that will be studied in 2018. Basically the Suruca oxide (gold only) deposit is set to come into production in 2019 but the copper-gold deposit at Suruca Southwest looks like it may be brought into production simultaneously.

 

The original plans for mining the copper/gold sulphide deposit beneath the Suruca oxide involved building an overland conveyor and feeding the ore into the Chapada processing facility.

 

If they do a "broader Suruca complex" it would almost certainly mean increasing the annual production capacity of the Chapada complex. I like 2019 as a target date for expansion. This could all happen in the near term, right into the midst a roaring copper bull market.

[linealdin]

http://www.mining.com/vale-stockpiling-iron-ore-make-higher-prices/

 

Vale expects the benchmark iron ore price to be above US$65 in 2018, higher than the current price of US$60. It seems to be stockpiling some ore to sell into a higher price environment.

 

Averaging US$65 in 2018 would be excellent for LIF and Champion because both companies would be receiving 25% or more premiums to that benchmark because of their high quality concentrate and/or pellets.

 

In the case of Champion at US$65 benchmark they would get:

 

Cash costs of US$43 per tonne

Sales of US$81.25 per tonne

 

That margin is fine, especially given the tiny amount of debt they've taken on to restart the mine.

 

 

[linealdin]

http://s2.q4cdn.com/271094385/files/doc_presentations/2017/Q3-2017-Conference-Call-FINAL-Webcast2.pdf

 

http://www.gowebcasting.com/events/yamana-gold-inc/2017/10/27/third-quarter-financial-results/play

 

The Yamana Q3 results conference call is highly recommended.

 

1) Chapada expansion discussed in detail. Chapada originally built at 19 MTA, then expanded, will process 23 MTA in 2017 and 2018. But management sees stockpiles building up because the plant can't process them fast enough, even with the recent optimization efforts. Therefore the Chapada plant needs to expand. They are studying alternatives and will likely reveal their decision once they announce next year's guidance in February 2018.

 

2) The decision to expand is based independently on the existing 20 year Chapada reserves. The recent exploration discoveries should increase both Chapada district reserves and resources when announced early next year, but the expansion plans don't depend on them. Yamana wants to bring gold and copper production forward to take advantage of the commodity price environment. The exploration discoveries should extend mine life and will be a bonus.

 

3) One option being considered is adding a CIL or CIP gold leaching plant to the Chapada facilities. I believe this will allow the Suruca gold-only oxide, the Suruca SW copper-gold sulphides, the Suruca underground copper-gold sulphide, and the Suruca NW deposit to all be processed at Chapada. This option would nix the independent heap leach operation for Suruca gold oxides set to start in 2019. This "broader Suruca complex" would begin production in 2020.

 

4) It sounds like the expansion decision has been made. Now it is a question of the details. What is the optimal expanded throughput? What is the optimal capex versus IRR tradeoff? What will the construction timeline be?

[linealdin]

"At such time (the “Project Expansion Date”) as the existing treatment plant at the

Chapada Mine has: (i) been upgraded and/or expanded; (ii) achieved a throughput rate of

at least 26,000,000 metric tonnes of copper-bearing sulphide ore, on an annualized basis

for a period of one hundred and fifty (150) consecutive days; and (iii) achieved a 33%

increase in Reference Copper after deducting or factoring in the payable rate of copper

contained in the applicable Offtake Agreement, as compared to the projected Reference

Copper after deducting or factoring in the payable rate of copper, as provided by the

Seller to the Purchaser in the model entitled “ChapadaS1_vNov2” in the data room and

summarized in Schedule H (collectively, the “Project Expansion”). The Seller shall

deliver to the Purchaser a certificate signed by a director or senior officer of the Seller

certifying that the Project Expansion has occurred."

 

*

 

That is relevant language from the Chapada copper purchase agreement. Some takeaways:

 

1) Some strict language for the expansion. 26 MTA throughput has to be achieved for 150 consecutive days. Not an easy task if the nameplate capacity of the expansion is only 26 MTA (hard to run at max capacity every single day with no hiccups). Makes more sense to build a 28 MTA or 30 MTA plant and fulfill the 150 day throughput test by running at 95% or 90% of capacity. I think 28 MTA would be the absolute minimum nameplate expansion at Chapada if Yamana expects to the clear the hurdle for a royalty rate reduction to 2.65%.

 

2) The rate isn't reduced until the 150 day test is finished and other requirements are completed. Sometimes ramping up to a certain capacity can take YEARS. Stockpiles have to be built up; bottlenecks have to be cleared; workers have to be threatened. Increasing production is always easier on paper as a feasibility study than in real life. Altius will enjoy the higher production of the ramp-up and 150 day test periods at its original 3.7% royalty stream.

 

With the right copper price and the right USD/CAD exchange rate Altius could reap C$30 million in Chapada revenue in a year of a ramp-up and throughput testing.

 

3) A successful expansion could lead to further expansions/optimizations. Yamana, like everyone else, knows this is a bull market and is hungry to reap the benefits. The resource base is growing and can support much higher production. 250 million pounds of copper per year? Why not?

 

 

[linealdin]

Very amusing that Sandstorm Gold has a copper stream on Chapada but will get zero immediate benefit from expansion. They are capped at receiving 975,000 pounds per quarter, or a maximum of 3.9 million pounds per year, until they reach a cumulative 39 million pounds.

 

If Yamana gets ambitious and expands to 250 million pounds per annum production Altius would be entitled to 6.625 million pounds (250 million x 2.65% expansion rate stream).

 

Sandstorm would still be stuck at 3.9 million pounds.

 

What's the point of negotiating a nice sounding 4.2% stream if that stream is capped at 3.9 million pounds per year? If Chapada produces anything above 93 million pounds per year Sandstorm doesn't see additional benefit (93 million pounds x 4.2% stream = 3.9 million pounds).

 

 

[linealdin]

Producers vs royalty holders, part 100

 

I literally wouldn't pay $1 to own all of Westmoreland's Canadian coal operations. I'd worry about the operations never making a real profit (despite hundreds of millions in revenue) and about the possibility of being saddled with expensive environmental fines and reclamation fees once the mines close (Sherritt just got hit with a $1 million fine for a mine they sold years ago).

 

I would however liquidate everything my family owns (homes included) to purchase Altius's Prairie royalty package.  We'd make our investment back in a year.

 

Altius is tarred with the same brush as coal producers like Westmoreland. It's ridiculous, the business models are so starkly different. All Altius does in relation to coal is collect checks.

[Liberty]

I would however liquidate everything my family owns (homes included) to purchase Altius's Prairie royalty package.  We'd make our investment back in a year.

 

You forgot to mention what price you'd be willing to pay for it.

 

Or did you mean you'd buy it at 1x FCF? I'd do that too.

[linealdin]

I would definitely pay everything we own, wedding rings and homes included. It is not much, in the scheme of things. Beyond that? I would let the seller ask for his price first. I am not making my best offer yet.

[linealdin]

Chapada processed a record 5.915 million tonnes of ore in Q3. Over a year that is 23.66 million tonnes. Nameplate capacity is 23 million tonnes.

 

Yamana is "overclocking" the processor at Chapada to take advantage of the bull market. Some of the recent optimizations (advanced control system) are paying off.

 

I'm interested to see if the expanded cleaning circuit, just commissioned last week, improves recoveries enough in Q4 to make a noticeable difference.

 

I predict Chapada beats guidance and comes in at 130 million plus pounds for 2017. I believe the full effect of the optimizations will be felt in 2018 with 140 million pounds of copper production.

 

Yamana guidance is always very conservative, they like leaping over a low bar.

 

140 million pounds of production at the current copper price = roughly C$20 million in Chapada royalty revenue. Shocking but true.

[linealdin]

http://adventuszinc.com/storage/news/pr1708-update-1509368624.pdf

 

Adventus exploration update:

 

1) Curipamba, Ecuador: Helicopter electromagnetic survey to be completed in November. Drilling in early 2018 to infill and extend the El Domo deposit. They need to hit on some new VMS targets in order to grow the El Domo resource. A little bigger and it becomes world class.

 

2) Working on "several" additional zinc-related transactions on corporate and project basis.

 

My reading of corporate transaction: a deal with a major that would require Adventus to issue a large amount of equity as compensation.

 

Project basis: Adventus earning into a property by paying exploration expenses (like the Curipamba deal) or farming-out an existing property to a junior (a possibility with the Buchans and Irish properties).