ALS.TO - Altius Minerals

[linealdin]

After the recent runup Altius is trading at at a C$574 million market cap, or roughly 9.4X the LTM (last 12 months) revenue of C$61 million.

 

Still drastically undervalued by that "market cap to LTM" measure compared to all other leading royalty companies. Why?

 

1) Investors at night dream about gold, not potash and zinc.

 

2) Investors are bored with prospect generators.

 

3) Strong anti-iron ore and coal sentiment.

 

*

 

How to overcome these factors?

 

#1 above is probably a structural part of the market. Gold is shinier than potash. We dream about shiny things. It is what it is.

 

#2 will be overcome by big discoveries.

 

#3 will require the bulk commodity prices to move. BHP speculates there could be strong upward price movements in iron ore and met coal by February.

 

[linealdin]

Rick Rule has a lovely formulation for prospect generators:

 

1) Total of all joint venture partner exploration spending = synthetic revenue

 

2) Subtract from that synthetic revenue the prospect generator's exploration and administrative costs leaving: synthetic profit.

 

Keeps the focus on the process (getting Other People to spend their Millions drilling your properties) rather than on the short term results.

[linealdin]

Altius, if it spun out its prospect generator business, might trade at a higher multiple. Investors are probably afraid the royalty revenue will be plunged into fruitless exploration expenses.

 

To combat this fear Altius has committed to finance their annual exploration expenses (which are fairly modest) only with profits from the project generation business. Makes sense.

[nostradamus]

Altius, if it spun out its prospect generator business, might trade at a higher multiple. Investors are probably afraid the royalty revenue will be plunged into fruitless exploration expenses.

 

To combat this fear Altius has committed to finance their annual exploration expenses (which are fairly modest) only with profits from the project generation business. Makes sense.

 

Agreed that it is good discipline. However, didn't the prospect generator side of the business make so much money with Aurora that their exploration expenses are already covered for decades? (ie it is not really much of a constraint)

[linealdin]

Altius, if it spun out its prospect generator business, might trade at a higher multiple. Investors are probably afraid the royalty revenue will be plunged into fruitless exploration expenses.

 

To combat this fear Altius has committed to finance their annual exploration expenses (which are fairly modest) only with profits from the project generation business. Makes sense.

 

Agreed that it is good discipline. However, didn't the prospect generator side of the business make so much money with Aurora that their exploration expenses are already covered for decades? (ie it is not really much of a constraint)

 

Aurora money already spent buying royalties. The constraint is that Altius exploration expenses will be funded from the current C$36 million PG equity portfolio being periodically monetized.

 

A poster here once expressed skepticism that Altius’s portfolio of junior equities could be monetized. Too illiquid, too damaging to the juniors.  Absolutely wrong. The junior equities can and MUST be sold in order for exploration to be funded.

 

Altius, in selling these junior equities, has advantages over average retail investor. Private sales, institutional brokerage services etc. Difficult job but they get it done.

[nostradamus]

The constraint is that Altius exploration expenses will be funded from the current C$36 million PG equity portfolio being periodically monetized.

Thanks for the correction. That really is good discipline.

[linealdin]

Antler Gold completed 2,599 meters of drilling across 30 holes on November 13th. Assays pending.

[linealdin]

Yamana issues US$300 million in senior notes due in 2027. The cash will be used to repay the large amounts of debt due in 2018 and 2019. This basically puts Yamana out of danger of default in the near term. Without the new senior notes Yamana would have depended on the new cash flow from Cerro Morro to pay off the debt. But new mines often have hiccups in the beginning.

 

This is an example of counter party strength. A bigger company can manage huge debt positions with agility.

 

Path is now clear for a Chapada expansion.

[linealdin]

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/650-tsx-venture/md/38977-midland-exploration-and-altius-minerals-sample-up-to-5-46-zinc-at-shire-project-in-james-bay-region.html

 

Midland and Altius report channel sampling results at Shire Zinc and Moria Nickel projects.

 

Shire: 5% zinc over a meter. Interpreted as edge of VMS ore body.

 

Moria: Up to 14% nickel over short lengths.

 

The team plans mechanical trenching on both prospects once the spring exploration season begins.

[linealdin]

The 62% iron ore benchmark price chart is a beautiful looking upward trend over the last 2 years. From US$31 in January 2016 to US$68 today. That is a 120% gain.

 

The investment banks, mostly iron ore bears, have been wrong. At one point Goldman Sachs predicted US$35 iron ore for 2017. Dead wrong. Anyone who shorted iron ore based on Goldman's advice is hurting. Goldman's new prediction is US$50 iron ore by the end of 2018.

 

To make real money you have to be both contrarian and right. Altius made contrarian bets with LIF and Champion (along with existing bets on ADV and Julienne Lake). If the uptrend continues they are going to make a fortune on those bets.

[linealdin]

Potash Corp presented at the CITI Basic Materials conference.

 

Rocanville now accounts for ~50% of Potash Corp's potash production. 2017 potash sales guidance is 9.1 to 9.3 million tonnes. So Rocanville is operating at roughly 4.6 MTA out of a nameplate capacity of 6.5 MTA. (Up from 2.0 MTA when Altius bought the royalty in 2014.)

 

I expect Rocanville production to keep ramping up as market conditions allow. Rocanville can increase production by another 41% without additional capex investment.

 

There's strong incentive to increase Rocanville's share of production because its costs per tonne should be the lowest in the industry. (Idling New Brunswick potash and ramping up Rocanville has already lowered the potash unit's costs per tonne by about US$10 per tonne.)

 

*

 

Further refutation of the wrong-headed idea that Altius is just passively riding the performance of the producer. The quality of the particular royalty asset is far more important than the general performance of the producer or the general state of the market. Today if you owned a royalty on Potash Corp's New Brunswick mine you are receiving zero in revenue. If you own the Rocanville royalty your royalty revenue is increasing (doubling, tripling) even in a flat potash market.

[linealdin]

https://investingnews.com/daily/resource-investing/precious-metals-investing/gold-investing/newfoundland-labrador-site-visit-antler-gold/

 

An investor makes a site visit to Antler Gold during their recent 2599 meter drill campaign. A lot of interesting local color. Visible gold in the rocks and a strong emphasis on systematic exploration.

 

I like the existing logging roads (helicopters are expensive) and the hotels and rental cabins (no need to set up an exploration camp). As the area is a traditional logging area, now down on its luck, I think a mine could be welcome for its economic benefits.   

[linealdin]

LIF cracking a new 52 week high at C$23.01. Altius position is worth C$73.63 million at that level.

 

Anticipation of IOC dividend to LIF that will be announced next week. If it is in the C$30 million range the LIF Q4 dividend will be 75 cents or more.

 

LIF is now Altius’s 3rd biggest royalty after Chapada and 777. Aside from the Potash royalties LIF has the longest mine life remaining in the royalty portfolio, at 70 years.

 

They’ve finally got the big iron ore royalty they’ve wanted for a decade.

 

Does it end at owning 5% of LIF? My guess is that they are still buying shares. The pellet premiums are getting stronger and production volume is growing. LIF’s market cap still undervalued by C$1 billion or so.

[linealdin]

LIF hits another 52 week high at C$23.54. Altius position worth C$75.33 million at that level, 13% of Altius's market cap.

 

LIF should hit $30 sometime in H1 2018. Excellent momentum.

[Cardboard]

I was wondering when the Altius post would finally come out today?

 

Cardboard

[linealdin]

Point taken. LIF is very boring. It just goes straight up.

 

Some real news. The McChip Q3 royalty revenue came in very, very low. What the hell did Altius pay C$8 million for?

[linealdin]

Sokoman Iron raises $604K out of proposed $800K in flow through units. Satisfies Altius requirement they raise at least $500K to acquire Moosehead Gold option. Should see drilling in 2018.

[linealdin]

Altius took the last C$50 million from Fairfax on November 10th. But no new royalty deals have been announced. Has the cash been sitting still? I doubt it.

 

In LIF I see two unusual, high volume trades a couple days after November 10th. 200K plus shares traded in each transaction. Altius picking up another 500K shares of LIF for C$10 million plus?

 

Investment thesis remains the same. Much cheaper buying equity of the royalty pass through vehicle than buying an equivalent producing royalty directly.

 

In 2018 I expect Altius to receive C$9 million in revenue from its current 3.2 million share LIF equity position. Buying an equivalent royalty would cost C$90 million or more in this market.

 

Most important question for LIF investors: Is the pellet premium structural and long lasting? Pellet premium has risen from US$5 or US$10 per tonne to US$58 per tonne in a very short period of time. Altius has made its call.

 

If premium is structural even Goldman Sachs’s gloomy scenario of US$50 benchmark iron ore by the end of 2018 makes little difference to IOC’s bottom line.

[linealdin]

LIF concentrate production on an uptrend. 18.7 million tonnes in 2015, 19.2 million tonnes in 2016. 15.4 million tonnes so far in first 3 quarters of 2017. For the year they should hit 21 million tonnes with a solid Q4. This will actually be underperformance of IOC’s guidance of 22 million tonnes for 2017.

 

Guidance for 2018 will be at least 22 million tonnes. And 23.3 million tonnes, full nameplate capacity, will be the next benchmark.

 

Over the next few years, if there’s any strength in the iron ore market, IOC will restart the CEP3 expansion project to get the nameplate capacity to 30 million tonnes. They’ve already done the feasibility studies. Plenty of rail & port capacity. And the market is short of the high quality pellets and ore IOC produces.

 

Expansion is how the LIF stock price gets to $50 or $60, even in a flat iron ore market. That is the case for a long term hold. Enjoy the regular dividends and see how much IOC is producing in 5 years. Could be a substantial change.

 

 

[linealdin]

Rio Tinto tried to take over LIF in 2001 before the supercycle really got going. But they lowballed the bid, LIF was trading at $11.50 and Rio first offered $13.50, then $14.50. Soundly rejected.

 

Should have offered $20 to $23. Still would have saved them a fortune in royalty and dividend payouts once the iron ore price took off.

 

So the companies have been dancing around each other for a long time. An expansion to 50 MTA, which has been discussed, would certainly require a takeout of the LIF royalty and equity position.

[linealdin]

Iron ore benchmark on Friday hit US$70. Sneaky strong. Shrugging off Goldman Sachs predictions.

 

 

[linealdin]

https://www.bloomberg.com/news/articles/2017-12-04/iron-ore-surges-toward-bull-market-as-china-supercharges-steel

 

Iron ore 62% benchmark jumps 3.7% to US$72.68. Now officially in a bull market (up 20% from low in October).

 

One of these bright young sparks making commodity price predictions for an investment bank said recently to Bloomberg the iron ore price would be at US$50 by the end of 2017. I guess he still has a couple weeks to be right.

[nostradamus]

December 04, 2017 08:13 ET

 

Adventus Zinc Announces C$10 Million Bought Deal Private Placement

 

Adventus Zinc Corporation ("Adventus Zinc" or the "Company") (TSX VENTURE:ADZN) has today entered into an agreement with a syndicate of underwriters co-led by Cormark Securities Inc. and Haywood Securities Inc. (the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a "bought deal" private placement basis 11,363,637 common shares of the Company (the "Shares") at a price of C$0.88 per Share (the "Offering Price"), representing total gross proceeds of C$10,000,000.56 (the "Offering"). It is anticipated that Adventus Zinc's strategic shareholders including Altius Minerals Corporation, Greenstone Resources LP and Resource Capital Funds will participate in the Offering. Closing is expected on or about December 21, 2017 and is subject to regulatory approval including that of the TSX Venture Exchange and the securities regulatory authorities.

 

In addition, the Company has granted the Underwriters an option (the "Underwriters' Option"), exercisable in whole or in part, on the closing date, to purchase up to 1,704,546 additional Shares at the Offering Price. In the event that the Underwriters' Option is exercised in its entirety, the aggregate gross proceeds of the Offering will be C$11,500,001.

 

The net proceeds of the Offering will be used by the Company to fund the Curipamba Project in Ecuador and its Ecuadorian Exploration Alliance, general and administrative expenses, corporate activities as well as working capital for the Company.

 

The Shares will be offered for sale on a private placement basis pursuant to applicable exemptions from the prospectus and registration requirements in the following jurisdictions in all of the Provinces of Canada and elsewhere.

 

[linealdin]

December 04, 2017 08:13 ET

 

Adventus Zinc Announces C$10 Million Bought Deal Private Placement

 

Adventus Zinc Corporation ("Adventus Zinc" or the "Company") (TSX VENTURE:ADZN) has today entered into an agreement with a syndicate of underwriters co-led by Cormark Securities Inc. and Haywood Securities Inc. (the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a "bought deal" private placement basis 11,363,637 common shares of the Company (the "Shares") at a price of C$0.88 per Share (the "Offering Price"), representing total gross proceeds of C$10,000,000.56 (the "Offering"). It is anticipated that Adventus Zinc's strategic shareholders including Altius Minerals Corporation, Greenstone Resources LP and Resource Capital Funds will participate in the Offering. Closing is expected on or about December 21, 2017 and is subject to regulatory approval including that of the TSX Venture Exchange and the securities regulatory authorities.

 

In addition, the Company has granted the Underwriters an option (the "Underwriters' Option"), exercisable in whole or in part, on the closing date, to purchase up to 1,704,546 additional Shares at the Offering Price. In the event that the Underwriters' Option is exercised in its entirety, the aggregate gross proceeds of the Offering will be C$11,500,001.

 

The net proceeds of the Offering will be used by the Company to fund the Curipamba Project in Ecuador and its Ecuadorian Exploration Alliance, general and administrative expenses, corporate activities as well as working capital for the Company.

 

The Shares will be offered for sale on a private placement basis pursuant to applicable exemptions from the prospectus and registration requirements in the following jurisdictions in all of the Provinces of Canada and elsewhere.

 

 

Will cost Altius C$2.7 million of this offering to keep its current 27% position in Adventus.

 

Adventus had C$6.7 million in cash at the end of September, and they aren't drilling anywhere yet, so this is just taking advantage of the unusually high stock price. Opportunistic. With the bought deal they will be cashed up for the next 2 years.

[TwoCitiesCapital]

December 04, 2017 08:13 ET

 

Adventus Zinc Announces C$10 Million Bought Deal Private Placement

 

Adventus Zinc Corporation ("Adventus Zinc" or the "Company") (TSX VENTURE:ADZN) has today entered into an agreement with a syndicate of underwriters co-led by Cormark Securities Inc. and Haywood Securities Inc. (the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a "bought deal" private placement basis 11,363,637 common shares of the Company (the "Shares") at a price of C$0.88 per Share (the "Offering Price"), representing total gross proceeds of C$10,000,000.56 (the "Offering"). It is anticipated that Adventus Zinc's strategic shareholders including Altius Minerals Corporation, Greenstone Resources LP and Resource Capital Funds will participate in the Offering. Closing is expected on or about December 21, 2017 and is subject to regulatory approval including that of the TSX Venture Exchange and the securities regulatory authorities.

 

In addition, the Company has granted the Underwriters an option (the "Underwriters' Option"), exercisable in whole or in part, on the closing date, to purchase up to 1,704,546 additional Shares at the Offering Price. In the event that the Underwriters' Option is exercised in its entirety, the aggregate gross proceeds of the Offering will be C$11,500,001.

 

The net proceeds of the Offering will be used by the Company to fund the Curipamba Project in Ecuador and its Ecuadorian Exploration Alliance, general and administrative expenses, corporate activities as well as working capital for the Company.

 

The Shares will be offered for sale on a private placement basis pursuant to applicable exemptions from the prospectus and registration requirements in the following jurisdictions in all of the Provinces of Canada and elsewhere.

 

 

Will cost Altius C$2.7 million of this offering to keep its current 27% position in Adventus.

 

Adventus had C$6.7 million in cash at the end of September, and they aren't drilling anywhere yet, so this is just taking advantage of the unusually high stock price. Opportunistic. With the bought deal they will be cashed up for the next 2 years.

 

I know that 2.7M isn't much, but if that is the case, I would prefer Altius let itself be diluted instead of increasing a commitment to a company who is simply looking for a cash grab.

 

Would much rather see an announcement from Adventus in the next month or two about some development that requires the use of these proceeds that would show that at least Altius provided for some growth opportunity as opposed to putting money in Adventus' bank account.