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Guest Dazel

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http://www.theaureport.com/pub/na/12525

 

TGR: What are some Chinese investment themes that perhaps investors can piggyback on?

 

PG: China has a tremendous need for resources. That appetite is not going to disappear anytime soon. It's underpinning the commodities bull market, in particular steel and iron ore.

 

TGR: I read a report recently that said China was seeking alternative sources of iron ore for its smelters as part of an effort to limit its reliance on iron ore from Australia and Brazil. China's looking to northeastern Canada in the Labrador Trough. Do you know anything about that?

 

PG: A couple of my clients are there and some of my largest personal holdings are there. The Labrador Trough is probably the most interesting play in the world right now. A Chinese company recently did a big deal with Adriana Resources Inc. (ADI:TSX.V; ANARF:OTCBB; A7R:FSE) up there.

 

I'm very bullish on Alderon Iron Ore Corp. (ADV:TSX; ALDFF:OTCQX). I call it the son of Consolidated Thompson because it has many of the people who were successful at Consolidated Thompson and is following Consolidated's path, but in a more expedited way. I believe it's going to go the same way and be taken over within 12 months.

 

TGR: Alderon has the Kami iron ore project near to Consolidated Thompson's Bloom Lake deposit in the Labrador Trough. A recent preliminary economic assessment (PEA) on the project reported a pre-tax net present value (NPV) of just above $3 billion (B). How does the Kami deposit compare with its peers?

 

PG: Alderon should be able to develop Kami at a lower cost, which is key in that area. There's no question that there's a lot of iron ore up there, but success is a question of cost, efficiency and effectiveness. The expectation is that it will get port access in a relatively short period. The last missing ingredient will be an offtake agreement with a Chinese company, and the company seems to be suggesting that it's in advanced talks. All in all, the next big deal in that area appears to be Alderon.

 

A year from now, Alderon could be worth $10–12/share based on what Consolidated Thompson was worth. It's a legitimate target to have in the back of our minds.

 

Though the conflict of interest should be noted: http://www.grandich.com/comp/

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Liberty,

 

 

I think we will start calling Alderon

 

"TC2" Thompson Consolidated 2...

 

 

Not to be mistaken with T2 which grossed only $500m. TC2 will make a lot more!

 

Dazel

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http://www.newswire.ca/en/story/920521/harper-government-announces-job-creating-investments-in-the-port-of-sept-iles#.TzlmZ3JIJKU.email

 

Sept-Iles is the port that Alderon will have to use.

 

 

The ministers announced today that the Government of Canada will invest up to $55 million and will contribute to the construction of a new multi-user deep water dock at the Port of Sept-Îles equipped with two ship loaders, as well as two conveyor lines. This investment will help the port meet global shipping standards for the iron ore industry, which is the largest commodity shipped through the port to overseas markets. It will also boost the effectiveness and capacity of port operations. The Port of Sept-Îles is an important part of Canada's Continental Gateway system.

 

For those who can read French (or use google translate):

 

http://www.radio-canada.ca/regions/est-quebec/2012/02/13/003-investissement-port-sept-iles-quai-eau-profonde.shtml

 

It says the expansion should be done for March 31, 2014. In time for Kami to use.

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Remember that Altius could own a real nice chunk of century iron ore!

 

http://altiusminerals.com/labrador_trough_iron_ore.php

 

Disclosure: we own Altius minerals and Alderon shares....we do not own Centruy iron ore

 

Dazel

 

I can't quite remember where I saw that, but the "bonus shares" that they mention altius getting if certain targets are met or exceeded, if I remember correctly thats quite a lot of shares (if anyone remember where that info was published, I'd appreciate the pointer). This could be a nice double whammy if Century hits jackpot, because Altius has a sliding royalty of 1-4%, and on top of that they could be getting more than the base 5 million shares of Century.

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I can't quite remember where I saw that, but the "bonus shares" that they mention altius getting if certain targets are met or exceeded, if I remember correctly thats quite a lot of shares (if anyone remember where that info was published, I'd appreciate the pointer). This could be a nice double whammy if Century hits jackpot, because Altius has a sliding royalty of 1-4%, and on top of that they could be getting more than the base 5 million shares of Century.

 

http://www.benzinga.com/pressreleases/11/11/m2118105/century-iron-mines-announces-update-on-its-acquisition-from-altius-mine

 

Based on the foregoing, pursuant to the terms of the Principal Agreement and assuming the achievement of the NI 43-101 Milestones, Altius could own up to an aggregate of 40,000,000 common shares of the Company representing approximately 43.08% of the currently issued and outstanding common shares of the Company or 30.11% of the issued and outstanding common shares of the Company on a post transaction basis assuming no other shares of the Company are issued.

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http://www.marketwire.com/press-release/century-iron-mines-altius-minerals-announce-completion-acquisition-century-altius-labrador-tsx-fer-1589894.htm

 

 

More commentary from the old release....for those that have not been watching this board...Wisco is the majority owner of Century iron ore... Wisco financed TC1...and made a fortune...They have to be looking at TC2...they are already partners with Altius at Century. For a quiet year it seems the Altius team has been literally moving mountains.

TC1-Thompson consolidated iron

TC2-Alderon Iron mines

 

Dazel

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We will post what our updated value of Altius is soon..when I get back from Aruba...but it sure is not in the teens....they have created a lot of value in the last couple of years. Remember these properties were staked in 2003. Not unlike what happened at Fortescue. We see Altius as the Leucadia of that deal. No risk of loss of capital. Whoever can make these properties producers will become the home run hitter aka Andrew Forrest and Wisco... we will get Leucadia type returns.

 

But the difference is Leucadia put up $400 million...Dalton and his team have used their brain, hard work and very little capital...so their return in our opinion is a grand slam! Our kind of people.

 

Dazel.

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We will post what our updated value of Altius is soon..when I get back from Aruba...but it sure is not in the teens....they have created a lot of value in the last couple of years.

 

Thanks, I'm definitely curious to see what kind of IV range you are seeing.

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The sun must have fried my brain...we will not be posting our evaluation...if you read through these threads and you have a grade 2 math education you can figure it out...we have build a position over 3 years and it would be ridiculous of us to create more competition for us to continue buying shares as we have...the stock is too illiquid and we have seen our hard work as well as all of yours all over the internet. Our position has become too large to express opinions..so our posts from now on will be facts.

Happy buying and good luck to all.

 

 

Dazel

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It's entirely up to you. Personally, I think I prefered the sun-fried Dazel, though  ;)

 

My estimate of Altius's IV is fuzzy on the upside, but the downside is very clear -- extremely well protected, which makes me comfortable. If something really bad happens to Alderon and Paladin's CMB, it probably means the industry as a whole is depressed enough for Altius to deploy capital in very attractive opportunities (both in royalties and equities, and maybe repurchases), and if Alderon and Paladin go forward as planned, it should be a big homerun. In the meantime, Voisey's Bay is more than enough to fund operations/exploration...

 

I can't quantify the upside precisely, but the range is extremely attractive and I'm confident in management's ability to do what is best for the shareholder.

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http://www.labradorironore.com/Corporate-Information/default.aspx

 

 

You can plug numbers in using Labrador iron ore royalty to get an idea of what Altius' royalty at Alderon could look like. As large as The iron ore company of Canada is they are producing 15m tonnes of ore right now (they are raising production) less than the 16m that Alderon is planning...we are using these numbers for comparability. Labador iron ore royalty has a 7% payout compared to Altius' 3% and they own 15% equity in the Iron ore company of Canada....their market cap is $2.3b and they do not have any other assets. Keep in mind that they have paid out $100's of millions of dollars in dividends already...$134m last year!

 

I hated to leave you hanging Liberty.

 

Dazel.

 

 

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