ALS.TO - Altius Minerals

[linealdin]

http://www.labradorironore.com/News-Releases/Press-Release-Details/2018/Labrador-Iron-Ore-Royalty-Corporation---2017-Results-of-Operations/default.aspx

 

IOC is fundamentally a very robust and economic operation.

 

IOC received an average of C$108 per tonne (FOB Sept-Iles) for concentrate and pellets, while the cost per tonne decreased by $5 in 2017 compared to 2016.

 

There’s room for incremental volume expansion. Only 20.2 million tonnes were produced in 2017, while the goal was 22 million tonnes. Some bad luck in 2017 with power outages, conveyor belt breakdown, and pellet line refurbishment.

 

2018 goal is 22.2 million tonnes of concentrate production.

 

The labor issue will be settled in a month or two. LIF seems undervalued to me.

[linealdin]

I hope Altius is buying more shares of LIF today. It is cheap. A labor disruption, if it even happens, will be 6 weeks at most. A blip in the larger scheme. A strike posture is now the norm for new contract negotiations.

 

IOC can use any production halt to perform deferred maintenance on their plant and equipment.

 

Once the contract is settled LIF will be due a bumper dividend from IOC in Q2.

[linealdin]

Assays for the next 4 drill holes at Wolfen’s Mount Pickett deposit will be released within a week or so.

 

The timberland rights Wolfden holds costs them $2400 a year in real estate taxes. Low holding costs. If all else fails Altius gets paid back for its US$6 million royalty investment through the sale of the timber.

[linealdin]

A couple of presentations from the pre-PDAC Metal Investor Forum:

 

 

Paddy Nicol on Evrim Resources. The potential of Cuale and Ermitano.

 

 

JJ Jenex on Excelsior Mines and the promises they’ve made and kept.

 

*

 

These are the right juniors for Altius to have equity and royalty investments with.

[linealdin]

Altius on February 8th buys back around 6200 shares at a little under $12 per share.

[linealdin]

First boatload of ore from Bloom Lake scheduled to leave the Port of Sept-Iles on March 24th, 2018. The ship is the Magnus Oldendorff, a bulk carrier which will ship 196,000 tonnes. This is about 2.6% of what Champion is targeting to ship over a calendar year.

 

Lots of insider buying from Champion execs with the recent stock price weakness. Over 400,000 shares purchased at the beginning of March.

 

*

 

Business as usual for IOC, which has 8 ships scheduled to load ~700,000 tonnes of its ore in March. Hopefully they've got a stockpile at the dock ready to ride out any labor disruptions. The rail and dock loading workers are in a different union (with a contract in place) from the workers at the processing plant threatening to go on strike.

[linealdin]

Excelsior back up to $1.36 with optimism about the last EPA permit being delivered at the end of April or early May. Altius sold some of its original 5.8 million share position but now's the time to exit completely.

 

Excelsior was trading at only 28 cents a share when the Callinan acquisition closed. Take the money and run.

 

Rick Rule's take on Excelsior on one of those BNN call-in shows:

 

https://www.bnn.ca/investing/video/rick-rule-discusses-excelsior-mining~1340848

 

Nervous about process technologies he doesn't understand. Gunnison not a Tier 1 copper asset compared to Ivanhoe Mines's Kamoa-Kakula deposit, which is giant and high grade.

 

Hears good things about the people at Excelsior and Arizona is a favorable jurisdiction for copper.

[linealdin]

http://www.afr.com/street-talk/terms-out-for-riversdale-resources-ipo-20180313-h0xfr9

 

IPO for Michael O’Keeffe’s Alberta coking coal project. Resource Capital Funds will be a big shareholder. The IPO will raise A$132.7 million and the new company will be valued at half a billion market cap when it begins trading on the ASX in April.

 

O’Keeffe’s a winner so anything he does will get a premium. But I still think this is very good news for the coal projects Altius has stashed away. Coal is not dead.

 

 

[linealdin]

https://www.google.com/amp/in.mobile.reuters.com/article/amp/idINKCN1GQ0GB

 

The growing iron ore stockpiles at Chinese ports are made of the low grade ore slung by Fortescue. High grade ore isn’t joining the stockpile, it’s being sold.

 

To reduce the stockpile the low grade producers will have to accept deeper discounts to get rid of the product. It’s Fortescue’s problem.

 

IOC and Champion will sell and receive a premium for every ounce of ore they offer to the market.

[mikek]

Regarding M&A today

 

A pleasant surprise regarding Esterhazy.

 

The Corporation received a retroactive pricing adjustment on royalties for the Esterhazy mine during the current period amounting to $2,600,000. This adjustment resulted from a one-time true up from the operator in relation to higher prices which should have been applied to volumes mined from certain royalty lands over the past four years.

 

Regarding Champion Debenture-

Subsequent to December 31, 2017, the Corporation agreed to extend the maturity date of the loan to December 31, 2018.

 

Nothing else really new that I saw, pretty boring.

[linealdin]

“During the eight months ended December 31, 2017, parcels of land in Alberta were sold for proceeds of C$2.085 million.”

 

There’s some freehold land in that CDP portfolio (see old Sherritt annual reports). Even if it’s just raw land in the middle of nowhere it can still be sold as farmland or to the gas drillers if they need the surface rights. Land is always valuable.

 

Altius sold another parcel of Alberta land for nearly $2 million a few years ago.

 

How much land is left to be monetized?

 

[linealdin]

Some credit for the one time $2.6 million adjustment from Esterhazy should probably go to Stephanie Hussey and Mark Raguz, the new hires who oversee the royalty division. It takes eagle eyes (and a CPA) to keep track of these royalty shenanigans. These producers will cheat on the royalties just like ordinary people cheat on their taxes. Audits are key.

[linealdin]

Attributable revenue for the 2 month period was C$14 million for the 2 month period (C$21 million over a 3 month quarter, or C$84 million on an annual basis).

 

That’s likely the most attributable revenue Altius has ever made in a 2 month period in company history. Spectacular performance.

[linealdin]

Credit to Altius for paying the full 4 cent dividend for the shortened 2 month quarter. I had expected a pro-rated dividend of 2.66 cents. They made the right choice.

[zippy1]

Altius Reports Revenue of $47.4M and Adjusted EBITDA of $38.2M for 8 Month Fiscal Period

 

ST. JOHN’S, Newfoundland and Labrador--(BUSINESS WIRE)-- Altius Minerals Corporation (“Altius” or the “Corporation”) reports attributable royalty revenue(1) of $46.7 million for the eight month period ended December 31, 2017 compared to $46.0 million for the 12 month period ended April 30, 2017. Revenue for the two month period ended December 31 2017 was $14.0 million. The abbreviated current reporting periods are as a result of a change to the Corporation’s year end to December 31 to better align its reporting with the majority of its underlying royalty paying counterparties.

 

The strong pro-rata revenue growth, with the 8 month total exceeding the prior 12 month total, reflects further improved commodity prices for most base metal and bulk mined commodities and also a retroactive pricing adjustment of $2.6 million related to prior payment periods for the Esterhazy potash royalty.

 

Adjusted EBITDA(1) of $38.2 million for the eight months represents a margin of approximately 81%, and compares to $34.7 million or 75% for the year ended April 30, 2017. Net earnings for the eight months improved to $18.2 million or, $0.42 per share This compared to a net loss of $65 million in the year ended April 30, 2017 that included a $72 million non-cash impairment.

 

Higher copper prices and production volumes at Chapada and higher copper and zinc prices at 777 increased base metal royalty revenue to 44.5% of total royalty revenue. Thermal coal royalty revenue declined to 20.2% as mine sequencing at Sheerness moved on to lower paying royalty lands. Potash royalty revenue increased to 15.8% on continuing volume improvements mainly related to production ramp ups at Rocanville and improving prices but also on receipt of the retroactive Esterhazy royalty payment. Iron ore related revenue increased to 13% on increased ownership of Labrador Iron Ore Royalty Corporation (“LIORC”) and increased pricing for the high quality iron ore products for which it receives royalties. These factors are discussed in more detail in the Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A).

 

The Corporation’s junior equities portfolio value of $44.1 million at year end compared to $33.4 million at May 1, 2017 and to $22.5 million at May 1, 2016. In addition, Altius holds a $10 million, 8% debenture that is convertible into Champion Iron Ore common shares at $1.00 per share.

 

Balance sheet liquidity was strong at year end with approximately $62 million in cash after debt repayments of $12.5 million. Combined cash and revolving credit facility availability stood at approximately $130 million, which does not include the junior equity portfolio referenced above or an approximately $85.7 million equity holding in LIORC.

https://seekingalpha.com/pr/17102546-altius-reports-revenue-47_4m-adjusted-ebitda-38_2m-8-month-fiscal-period

[linealdin]

A couple of notes from today’s conference call:

 

1) The Esterhazy true up payment of $2.6 million really comes from Mosaic settling a royalty dispute with the provincial tax authorities. Altius gets paid royalties on the same basis Mosaic pays its Crown royalties.

 

This settlement leads to increased Esterhazy royalties in the future.

 

2) Altius seems to be getting ready to actually sue Alberta over the electrical coal royalties.

 

I only support this if Altius is getting the cheapo rate from John Baker’s law firm. Chance of success is nil. Though sometimes you have to litigate just as a warning to other parties thinking of pulling the same move. And maybe it spurs some kind of settlement once the conservatives are back in power in Alberta.

 

3) Dalton expects the potash price to eventually double or triple to reach the incentive rate to build new capacity. Tripling the potash price Altius is currently receiving = C$918 per tonne.

 

4) Any labor disruption at IOC is immaterial when the mine’s expected 40 year plus mine life is considered. Again, they are talking like the LIF position will be held permanently.

 

For 2018 Altius is expecting C$2.25 to C$2.50 per share in LIF dividends. That’s roughly C$7.09 million to C$7.88 million in annual revenue.

 

5) Production at Cardinal River met coal is expected to increase in 2018 after a down year in 2017.

 

6) Altius accepts the public guidance of its producers like Yamana in creating its own guidance of C$60 million to C$65 million in 2018 royalty revenue. But Yamana was pretty conservative in guiding only 120 million pounds of copper production. I expect the actual production at Chapada to be closer to 130 million pounds, which would provide some upside.

 

I expect Altius to achieve C$70 million in revenue in 2018.

[linealdin]

Extending the Champion debenture maturity date from June 1st to December 31st is a win. Altius potentially earns an additional C$466K in interest over those 7 months. And the optionality is ideal. There’s no reason to convert when the CIA stock price is stuck around $1.20.

 

This gives the CIA stock price all of 2018 to run up to $2 or more and give Altius a double. If the stock price doesn’t move then Altius takes its C$10 million back to invest in other deals. No downside.

[mikek]

I don't think the market cares whether they get 60 or 70 million. Only thing that will move this stock is big exploration hits, VB settlement, and possible restart of Kami. Everything else is pretty much noise and the market can careless to be honest. Exploration hits I'm not counting my breath, VB settlement is likely and I think they definitely made the right move on switching leadership on Alderon but that could take awhile. Success of Bloom Lake will definitely give it a much better chance if Bloom Lake turns out to be a success but I wouldn't count on this being a near term catalyst.

 

The only good thing regarding the coal to gas conversions is that Transalta is the first ones doing it in Canada and the large paying coal royalties aren't part of those. If there is any company that could possibly mess up badly I would put the Transalta team at the top of that list. If there was one team that I would give a decent chance of messing up I would say it's them.

[linealdin]

Slow progress in project generation but some light at the end of the tunnel. Sokoman Iron (Moosehead Gold), Canstar (Daniel’s Harbour zinc) and Aethon Minerals should all close in April. This will add around C$4 million in shares to the PG portfolio.

 

A couple more vend-out deals are in the hopper.

[linealdin]

The market seems to only get excited about what scams billionaire Eric Sprott is investing in (Novo and Garibaldi). Whatevs.

 

I agree a lot is up in the air. Drilling is high risk. Trials can be lost. Morabito could sit on Kami for another 20 years. Bloom Lake could go bankrupt again.

 

But the debt elimination process seems inevitable and near-term. What the hell are they going to do with the C$30 million they’ve been spending annually on interest and principal repayments? I think the plan is to send most of it back to investors.

 

I wouldn’t be shocked if Altius were paying $1 per share in dividends a few years from now.

[linealdin]

To me, every dollar counts. The difference between C$60 million and C$70 million is huge! Especially because Altius has so few shares out compared to its competitors.

 

They could take that extra C$10 million and distribute 23 cents per share to every shareholder. That would be a hell of a Christmas bonus for my household.

[linealdin]

Sorry, the only way debt elimination isn't inevitable is if they make a huge royalty purchase that costs more than the C$62 million cash they have on hand. A C$120 million purchase would blow up the debt profile.

[linealdin]

http://www.portsi.com/wp-content/uploads/2018/03/2018-03-Courrant.pdf

 

The next two boatloads for Bloom Lake are on the port schedule for April 7th and April 23rd. Both will carry 180,000 tonnes.

 

Along with the first boat in March that’s 7.5% of Bloom Lake’s 7.4 million annual shipping target. They are rolling.

[mikek]

I appreciate all you do Linealdin but unfortunately we would have been better off throwing some darts at the s&p 500 or throwing the money in the fire pit. Fact is, this stock just truly blows, no way around it, it has been dead money for quite awhile. Opportunity cost does matter even if I have no plans to sell, longer the underperformance goes on the harder it's to catch up. Fact is, stock price does matter whether we like it or not. I agree the fundamentals look good but the detractors on this company have been 100 percent correct even if the actual performance of the company has been good.

 

One thing that has bothered me is that Altius management acts like the stock is undervalued yet you basically sold shares again at 15. They didn't need to pull that 50 million from fairfax. You don't think fairfax would have extended the deal to the end of 2018? Now they basically have 70 million cash on the balance sheet that they probably didn't need unless they have some deal lined up. Sorry but you can't say equity is undervalued if you are willing to sell at 15. It doesn't really line up. This is coming from a huge supporter of Dalton but I'm not a fan of these decisions at this time. When I say management feels equity is undervalued I'm talking about some of the slides in presentations against peers.

 

[linealdin]

I appreciate all you do Linealdin but unfortunately we would have been better off throwing some darts at the s&p 500 or throwing the money in the fire pit. Fact is, this stock just truly blows, no way around it, it has been dead money for quite awhile. Opportunity cost does matter even if I have no plans to sell, longer the underperformance goes on the harder it's to catch up. Fact is, stock price does matter whether we like it or not. I agree the fundamentals look good but the detractors on this company have been 100 percent correct even if the actual performance of the company has been good.

 

You know me. I’m focused on process, not the stock price. Actually I’m hoping the stock price goes much farther down and soon. I’ve got another $11K to plug into the IRA accounts. Hoping to buy at $10 to $12 along with Altius management.

 

My goal is to find companies with great “actual performance” and shitty stock price movement.

 

But my investment timeframe is much, much longer than the average investor. I’m dying with my shares, then they go to the children.

 

Again I see a clear path to $1 per share in dividends in the next 5 years. For me that’s going to be life-changing money. I assume the stock price will move up with the dividends but who the hell knows.