ALS.TO - Altius Minerals

[linealdin]

On October 2nd Altius sold 600,000 shares of Bitterroot Resources for 23 cents a share. Altius originally bought the shares for 9.87 cents a share in September 2015. Proceeds of C$138,000. Some small change to fund Altius's exploration expenses.

 

Remaining equity position in Bitterroot of 3,451,514.

[linealdin]

 

I'm right here. My points still stand.

 

Please calculate the CAGR for the Champion debenture. Thanks in advance.

 

Oh great, the $525m company has made a good $10m investment, hurray, this changes everything!

 

Cynical. The small and medium size wins add up.

 

Market loves O'Keeffe and Champion. Debenture could be cashed out for upwards of C$30 million next June when Champion reports good results from its first quarter of production.

 

The 3.2 million LIF shares will be cashed out for $100 million plus when the market adjusts the LIF stock price to match the outsized dividends. LIF's going to end up paying C$176 million in 2017 dividends. Market cap of C$1.38 billion doesn't match the dividend payment. It will adjust.

 

Does $130 million tip the scale? (Dividends and interest not included.) We shall see.

 

 

 

 

 

[linealdin]

http://www.mining.com/web/canadian-diamond-discoveries-close-pending-supply-gap/

 

Not a bad time to have a diamond exploration project? A bunch of big diamond mines expected to run out of ore over the next 5 years. Canada's Dominion Diamond pledging to spend $50 million on greenfield exploration.

 

Canada has 14% of the world's diamond production. Marketed as ethical (no African blood).

 

Looks like Lynx should have its choice of partners.

[Gamecock-YT]

 

I'm right here. My points still stand.

 

Please calculate the CAGR for the Champion debenture. Thanks in advance.

 

Oh great, the $525m company has made a good $10m investment, hurray, this changes everything!

 

Seems to be materiality threshold in the CSU thread...what's their market cap, again?

[Liberty]

Seems to be materiality threshold in the CSU thread...what's their market cap, again?

 

Ha, nice try!

 

The point is not materiality, the point is cherry picking. If the rest of CSU's investments had gone the way ALS's investments have gone in the past 5-10 years, then a few good 10m investments wouldn't be changing much.

 

But look at CSU's FCF/share growth over the past 5-10 years and it's ROIC and I think you'll see that they've been doing quite well (when you look, don't forget the financials are in USD and the stock is priced in CAD). So once you know they have a good, repeatable process, you track how much capital they're deploying into it. Meanwhile, ALS's book value per share has been falling since 2011, large investments have been impaired, the stock has gone nowhere, and it's still just as dependent on the random fluctuations of commodity prices as ever. So while the recent upswing is producing all kinds of increases right now, a downturn in a couple years could undo it all, and you have to question their great early years as a company -- how much was skill and how much was riding the "commodity super-cycle". I've not been convinced that management has produced enough value in the past downturn to merit my capital, at least not at 1.65x book and the current multiple of free cash that they're selling at.

 

But that's just my own opinion.

[netnet]

"Now the reasoning of a sophisticated investor like Altius may be more logical. Maybe there's evidence that Tier 1 mines tend to expand, thus bringing distant future cash flows forward in time? Maybe they just think the discounting gets a little too hyperbolic, whatever that terms means. Maybe their perspective has changed because they collect actual cash value every month, not net present values? Better ask them."

 

I think that's a very valid point.

 

If you try to go back to the early 1980's when Mr. Lassonde and Mr. Schulich were developing the royalty model in precious metals, investing along them was, at least partly, an act of faith. Maybe there was a component of luck but I would venture to say that the very rewarding returns that occurred after were mainly due to an unusual degree of business acumen. And, over the first several years, the exceptional returns were delivered in a relative bear market for gold.

 

BTW, if anybody has annual reports from the early Franco-Nevada years, I would be interested as I am trying to dissect the potential ways (there are many, specific to the royalty model) that Altius have used and could use in the future.

 

I assume you know that Lassonde wrote a book on investing in gold; I haven't read it in years, so I don't remember exactly, but I assume he talks about Franco's early years.

[linealdin]

What Liberty is mad about is this: He was dumb enough to invest Altius when its market value was inflated by its holdings of Alderon. Altius in 2011 or 2012 had $3 million in annual royalties, a couple hundred million in cash, and a whole lot of Alderon shares trading for waaaaay too much.

 

Now Altius didn't actually lose money on its investment in Alderon. It cost Altius roughly $2 million to develop the project, then they flipped it to the market. Altius's royalty and 33 million shares of Alderon, even at these depressed levels, are still worth considerably more than their $2 million investment.

 

Altius didn't lose money on any of its bear market royalty purchases. All have returned significant cash flow and are expected to produce excellent revenue for very long periods.

 

Liberty basically bet money on Alderon working and he lost.

 

*

 

Alderon Derangement Syndrome. Now Altius is going to hit $72 million in annual royalty revenue, a record 22 project vend-outs in 2016, hundreds of thousands of meters drilled this year on Altius royalty land, multiple successful spinouts, Chapada expansion in the wings, LIF about to be cashed out for $100 million, the list of positive developments goes on and on and on.

 

It's a totally different, more diversified and better company than it was in 2011. Facts.

 

 

 

 

[Liberty]

What Liberty is mad about is this: He was dumb enough to invest Altius when its market value was inflated by its holdings of Alderon. Altius in 2011 or 2012 had $3 million in annual royalties, a couple hundred million in cash, and a whole lot of Alderon shares trading for waaaaay too much.

 

Now Altius didn't actually lose money on its investment in Alderon. It cost Altius roughly $2 million to develop the project, then they flipped it to the market. Altius's royalty and 33 million shares of Alderon, even at these depressed levels, are still worth considerably more than their $2 million investment.

 

Altius didn't lose money on any of its bear market royalty purchases. All have returned significant cash flow and are expected to produce excellent revenue for very long periods.

 

Liberty basically bet money on Alderon working and he lost.

 

*

 

Alderon Derangement Syndrome.

 

Very nice way to change the topic, you just called almost everybody who's been contributing to this thread for a long time and is a long-term investor in ALS dumb, because they were buying around that time...

 

Whatever fits your narrative, man. I'm not mad, just skeptical, something that had been missing in this thread.

 

As for your anchoring, the market doesn't care for your cost basis. Sins of omission are just as real as sins of commission. If you buy something for $1, it runs up to $1000, and then falls back to $1, you can say "oh well, nothing bad happened, I didn't lose anything", but it still won't change that fact that someone was ready to pay you $1000 for it and you didn't take it and it's a missed opportunity.

[linealdin]

Market timing matters. Can't get caught up in mania. I believe the Alderon run-up was a smaller version of the refinery mania that drove the stock price to $30. Both based on outsized expectations for single projects.

 

Of course cost basis matters. It is at the heart of the prospect generator model. Make small bets, spin them out to the market, and hope to cash out large gains. Altius did commit a sin of omission by booking only modest gains (currently 4X) on its $2 million investment in Alderon, not 50X or 60X gains.

 

They may have a chance to rectify that sin. We should see some movement for Alderon in the near future. The PEA should be of interest to the steel industry. Interesting that Altius has been buying Alderon shares in the last month.

 

*

 

I think the current attitude towards Altius is the opposite of mania. Investors are bored, disgruntled and disbelieving of the long list of positive developments. I really like the value here and will be voting with my Christmas bonus.

[Liberty]

Market timing matters. Can't get caught up in mania. I believe the Alderon run-up was a smaller version of the refinery mania that drove the stock price to $30. Both based on outsized expectations for single projects.

 

What mania are you talking about? The stock has been bouncing between $10 and 14 for all those years. I bought most of my shares between 10-12 and my last sales were at 13.47.

 

[linealdin]

The refinery project and Kami were both potential icebergs because they were each valued at $400 million or more based upon expensive pieces of paper: a feasibility study and a permit to operate. Neither had broken ground and started construction.

 

Any icebergs in Altius's current portfolio? Excelsior looks like a candidate. Market cap near $200 million based on expensive pieces of paper: an excellent feasibility study and nearly all permits obtained. No ground broken.

 

By next summer Excelsior could have a market cap of $20 million. Nobody is really certain this in-situ thing is going to work.

 

Same skepticism applies to Adventus. I have no doubt Kargl-Simard will make an acquisition in the next 12 months that will excite the market and send the stock price up. But you can't take that kind of mania seriously.

[linealdin]

Altius was overvalued in 2010, 2011 and 2012 because of optimism for Alderon. Too many eggs in one basket. Why in the world did Alderon have a $400 million market cap? A kind of market mania. Some Altius investors started making add-on bets by buying Alderon shares. Just crazy.

 

So much of Altius's value in 2011 was tied up in Alderon shares and the Voisey's Bay royalty. Both blew up! Lack of diversification. Altius should have been an $7 stock in 2011. The discounting/CAGR crew should have been discounting the hell out of Alderon.

 

I like Altius today 100X better than Altius in 2011. More baskets.

 

Now the discounting crew shows up and wants to tell me Altius's diversified, long life royalty streams aren't worth very much because they should be discounted at 15%. Bug off.

 

 

[Liberty]

Altius was overvalued in 2010, 2011 and 2012 because of optimism for Alderon. Too many eggs in one basket. Why in the world did Alderon have a $400 million market cap? A kind of market mania. Some Altius investors started making add-on bets by buying Alderon shares. Just crazy.

 

So much of Altius's value in 2011 was tied up in Alderon shares and the Voisey's Bay royalty. Both blew up! Lack of diversification. Altius should have been an $7 stock in 2011. The discounting/CAGR crew should have been discounting the hell out of Alderon.

 

I like Altius today 100X better than Altius in 2011. More baskets.

 

Now the discounting crew shows up and wants to tell me Altius's diversified, long life royalty streams aren't worth very much because they should be discounted at 15%. Bug off.

 

Hindsight is 20/20. If by random luck iron ore had just stayed flat from that level and the mines had been built, you wouldn't be saying it was overvalued at the time. This is part of the problem, it relies on luck and commodity prices (which during bad times tend to all move in lockstep, negating a lot of the diversification).

[linealdin]

Altius was overvalued in 2010, 2011 and 2012 because of optimism for Alderon. Too many eggs in one basket. Why in the world did Alderon have a $400 million market cap? A kind of market mania. Some Altius investors started making add-on bets by buying Alderon shares. Just crazy.

 

So much of Altius's value in 2011 was tied up in Alderon shares and the Voisey's Bay royalty. Both blew up! Lack of diversification. Altius should have been an $7 stock in 2011. The discounting/CAGR crew should have been discounting the hell out of Alderon.

 

I like Altius today 100X better than Altius in 2011. More baskets.

 

Now the discounting crew shows up and wants to tell me Altius's diversified, long life royalty streams aren't worth very much because they should be discounted at 15%. Bug off.

 

Hindsight is 20/20. If by random luck iron ore had just stayed flat from that level and the mines had been built, you wouldn't be saying it was overvalued at the time. This is part of the problem, it relies on luck and commodity prices (which during bad times tend to all move in lockstep, negating a lot of the diversification).

 

2011 really didn't feel like a market top to you? Iron ore rose to US$190! From US$30 a few years before. Well, it certainly wasn't a bottom, you have to admit that.

 

I don't think it takes particular genius to see the commodity price cycle. Let me look into my magic ball. Iron ore and potash are just climbing off their cyclical lows. Probably some good values still available in those commodities in terms of royalties/equities. Copper and zinc are in a roaring bull market. Proceed with caution. It is very simple.

 

Hypo: Altius's proposed copper spinoff, Copper Mania Resources, catches the market imagination. Copper price goes to $5 and Copper Mania all of a sudden has a $500 million market cap, and Altius holds 33% of the shares. Altius's market cap rises to price in that gain and to price in future gains in Copper Mania.

 

Am I going to give Altius full credit for that position? Am I going to buy add-on shares of Copper Mania? Hell no. Single project spinoffs are meant to take advantage of the gullibility of the market.

 

Altius management knows that Adventus isn't worth its market cap. I know that, too. If Adventus's market cap rises to $300 million I'm still going to treat it like what it is: an investment for gullible people.

[linealdin]

I just think Liberty has it all backwards.

 

He was bold when he should have been skeptical. Altius 5 years ago had very little diversification and its main project depended on a sketchy resource junior raising US$1 billion in capex.

 

And now he is endlessly skeptical (applying 15% discount rates to diversified royalties that have been producing for decades) when all signs point to a very prosperous bull run.

 

LIF closes at C$21.79, near its 52-week high. Altius position is worth C$70 million. A cash out at $100 million plus is not too far away. Onward!

[linealdin]

Liberty's accusation that Altius is just passively riding the commodity price cycle is remarkably stupid.

 

Altius gave a $10 million debenture to Champion on June 1st. If Altius were just riding a commodity wave it wouldn't matter which iron developer they gave money to. All deals in the sector would have prospered.

 

Does that conform to reality? Not even close. Iron ore is not in a roaring bull market. Almost no iron ore mines are being built today, with Bloom Lake being one of the few exceptions. Give that debenture to any other iron ore developer the money just disappears.

 

Same logic applies to all of Altius's recent deals. Expertise counts. Due diligence really matters.

[linealdin]

Spots: iron ore $65, copper $3.12, zinc $1.48. Stealth comeback for iron ore. I don't understand how iron ore isn't lower with China winter steel shutdowns.

[nostradamus]

That Willbob reference in their presentation is really strange. Surely if Altius had done a deal with them it would have been mentioned in the Oct 21 Midland press release or in the November Midland corporate presentation. Could Altius have taken an equity stake in Midland? (If they have it is underwater)

[nostradamus]

Project generation update:

 

http://altiusminerals.com/uploads/11-22-2017-Q2-Altius-Project-Generation-Update-Final.pdf

http://altiusminerals.com/uploads/Table-equity-portfolio-ALS-Oct-31-2017.pdf

 

(looks like they don't own midland from the latter - think the Willbob reference is probably just a mistake)

[Liberty]

I don't think it takes particular genius to see the commodity price cycle.

 

Famous last words.

[linealdin]

I don't think it takes particular genius to see the commodity price cycle.

 

Famous last words.

 

You're obviously the smartest guy in the room most of the time. I'm just very surprised you fell for the Alderon thing. Did you really think this sketchy Vancouver resource junior, named after a planet in Star Wars, was going to raise US$1 billion in capex? I suppose a lot of smart people fell for it. When Altius promotes these spinouts it's meant to excite and fool the market, not its own shareholders.

 

The same process will repeat with Adventus and Zeus Copper. Altius will try to sell some dross as gold. Buyer beware.

[linealdin]

Project generation update:

 

http://altiusminerals.com/uploads/11-22-2017-Q2-Altius-Project-Generation-Update-Final.pdf

http://altiusminerals.com/uploads/Table-equity-portfolio-ALS-Oct-31-2017.pdf

 

(looks like they don't own midland from the latter - think the Willbob reference is probably just a mistake)

 

Some notes on the Project Generation equity portfolio:

 

1) Century Iron. Altius received 5 million shares of Century in exchange for the Trough iron ore properties (all returned to Altius by now). Fairly valuable position at one point. Those 5 million shares are likely mostly sold; I'm surprised Altius retained any shares. Century is selling eggs now.

 

2) Champion Iron. This isn't the debenture, which hasn't been converted to shares yet. Altius received 3.2 million Champion shares when Mamba took over Champion. And they likely participated in Champion's last equity raise at 90 cents (my guess is 2 million shares). So the total position could be up to 15 million shares once the debenture is converted. Will amplify gains if the Bloom Lake restart is successful. I think Champion could hit C$3 per share once the mine restarts and O'Keeffe starts promoting.

 

Some of the royalty information on the sheet is incorrect. Altius doesn't own royalties with Century or Champion. The Trough properties and Snelgrove Lake have all been 100% returned to Altius. Altius does own a 1.5% royalty on Evrim's Lllano del Nogal property.

[Liberty]

I don't think it takes particular genius to see the commodity price cycle.

 

Famous last words.

 

You're obviously the smartest guy in the room most of the time. I'm just very surprised you fell for the Alderon thing. Did you really think this sketchy Vancouver resource junior, named after a planet in Star Wars, was going to raise US$1 billion in capex? I suppose a lot of smart people fell for it. When Altius promotes these spinouts it's meant to excite and fool the market, not its own shareholders.

 

The same process will repeat with Adventus and Zeus Copper. Altius will try to sell some dross as gold. Buyer beware.

 

Dude, you're creating a narrative in your head, which is largely built in hindsight bias and on stuff you're projecting onto me despite not knowing me at all. I didn't fall for Alderon anymore than Brian Dalton and Chad Wells and all the other posters in this thread fell for it, so if you want to insult all of these people and then claim that it's easy to predict commodity cycles (insulting all the posters in other threads who got surprised by the oil and metals cycles), go for it, but it doesn't make you look better.

[linealdin]

I don't think it takes particular genius to see the commodity price cycle.

 

Famous last words.

 

You're obviously the smartest guy in the room most of the time. I'm just very surprised you fell for the Alderon thing. Did you really think this sketchy Vancouver resource junior, named after a planet in Star Wars, was going to raise US$1 billion in capex? I suppose a lot of smart people fell for it. When Altius promotes these spinouts it's meant to excite and fool the market, not its own shareholders.

 

The same process will repeat with Adventus and Zeus Copper. Altius will try to sell some dross as gold. Buyer beware.

 

Dude, you're creating a narrative in your head, which is largely built in hindsight bias and on stuff you're projecting onto me despite not knowing me at all. I didn't fall for Alderon anymore than Brian Dalton and Chad Wells and all the other posters in this thread fell for it, so if you want to insult all of these people and then claim that it's easy to predict commodity cycles, go for it, but it doesn't make you look better.

 

Hindsight bias? I owned Altius before and during the Alderon-related run-up. I emailed and talked with Brian and Chad many times about cashing out, especially when Alderon's market cap was worth almost as much as Altius. It was crazytown.

 

Of course you fell in love with Alderaan:

 

"So if ADV had the same revenues of 2.5B, 3% GSR for altius would be about 75 million (I'm doing that right? GSR is calculated over revenue?). Very impressive. I guess it'll vary with the price of iron ore (f.ex. 2009 was 1.144B), but I was expecting something closer to 40-45m at recent prices. Since the 16m tons/year for Alderon won't happen for a while, the 8m tons/year should be about half that, or 37.5m."

 

Where was the discounting crew then?

 

[Cigarbutt]

Alternating between details and perspective, thought the article was interesting in terms of cycles and what it could mean:

https://seekingalpha.com/article/4103677-rising-price-industrial-metals-herald-beginning-next-commodity-super-cycle