ALS.TO - Altius Minerals

[linealdin]

How do we know Altius doesn’t have deals lined up for the remaining Fairfax money? These major royalty deals and auction processes can take a while to close.

 

I am thrilled by the use of the first $50 million from Fairfax. They got the LIF shares super cheap and it looks like they plan to hold the royalty permanently. Champion deal was smartly structured and profitable. Rocanville and Wolfden deals also look very promising.

[Cigarbutt]

mikek,

Have no actual position for or against Altius but have shown some colors and will submit an opinion about your last post.

If Altius (and Fairfax) are right that the timing is good to play offense, then the price will catch up with fundamentals (and more).

 

There is a lot to like about Altius but commodity investing is tough and I submit that the previous statement should guide you in your decision to hold or not.

 

Reflecting on my past mistakes (mostly omissions), if your reasoning is sound and if your assumptions are solid, a persisting divergence between fundamentals and market price should not, in itself, be a decisive factor to avoid the investment or to sell.

 

FWIW, I remember Logistec (cargo handling services). The share price went "nowhere" for a while during a time where I could reasonably foresee a doubling of earning power. Then in 2013, in a few months, earnings reached its intrinsic trend and the PE doubled. An easily missed four-bagger and plus. If you fundamentally think that the stock is going sowewhere, the fact that the market seems to indicate that it's going nowhere should not make you sway.

 

I am on the sidelines but I also appreciate linealdin's contribution.

 

[mikek]

I'm definitely not going anywhere but I felt I needed to rant. If I didn't like the companies actual performance I would have been gone a long time ago. Definitely staying long.

[linealdin]

http://www.yorktonnews.com/news/local-news/transforming-esterhazy-mosaic-s-esterhazy-k3-project-since-reaching-potash-1.23202478

 

Esterhazy K3 shaft will eventually expand to 21 million tonne capacity. Only 5.3 million tonnes when Altius bought Prairie Royalties. This is happening in the next few years.

[cwericb]

Guess I’m with Cigarbutt & Mikek.

 

I have held Altius for several years and have gotten nowhere. It is frustrating, but more than once I have dumped a stock after holding it for a few years only to see it take a large jump shortly after I sold out. So if you have faith in management and where the company is headed, might as well stick around and wait it out. However, I wouldn't be disappointed to see a bit more of promotion of the company.

 

As the old saying goes... Dance with the one what brung you.

[linealdin]

http://www.reveloresources.com/content/701/RVLNR02March142018web.pdf

 

Good progress at Loro silver/gold property in Chile by Revelo and its joint venture partner Hochschild Mining. Soil sampling program has led to a decision to drill.

 

1500 to 3000 meters of drilling is planned to begin by the end of April.

 

Altius owns a royalty on Loro from its 4 property farm-out deal with Revelo in 2015.

[linealdin]

Altius just reported C$14 million in attributable revenue for a two month period. That’s an incredible number, better than any two month period in Altius’s history. Look it up. Can I really ask for better performance than that?

 

If the market wants to sell off because of the record performance then it will do that. I encourage irrational behavior.

 

I’m excited to see Altius crack $20 million in revenue for a regular 3 month quarter. Should happen later this year once IOC’s labor issues are settled. LIF is going to get a huge catch-up dividend from IOC and will pass it on to its shareholders. $1.25 per share LIF divvy in Q3 or Q4.

[linealdin]

The structure of the original Callinan deal with Excelsior in 2013 should be emulated:

 

Callinan bought 6.25 million shares of Excelsior for 16 cents each, spending C$1 million.

 

Callinan paid another C$5 million for a 1% royalty on Gunnison.

 

If Altius, Callinan’s successor, has any kind of market timing it should be able to sell the shares and pay off the total C$6 million transaction price, and make around C$2 million in profit.

 

Excelsior plans to mine 2.2 billion pounds of copper out of its 5 billion pound resource. Altius’s 1% royalty yields C$87.3 million over the life of the mine (at current spot prices and exchange rates).

 

The returns can be thrilling when you get in early and into the right project.

[StevieV]

linealdin,

 

I am wondering if you could elaborate a little bit on how you are thinking about valuation here.  I believe you are using CAD numbers in your posts, including the $1 payout in 5 years.  One of the nice things about Altius is that it turns most of its revenue into EBITDA.  It looks to me as though they are trading at about 10x 2018 EBITDA, but that the real key is future growth.  I would also expect the margins to improve a little bit more with scale.

[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?

 

Got some great clarification from Altius about the recent C$2.085 million Alberta land sale. It is being sold as farmland, and the recent sale went to multiple parties, one of which was a large buyer. Selling farmland can be a long process because of the negotiations with individual farmers.

 

I was told there is “a lot” of Alberta coal land left that could potentially be monetized.

 

*

 

My own observations:

 

1) Alberta farmland went for C$2500 an acre in 2016. A sale of C$2.085 million at $2500 an acre = 830 acres sold.

 

2) CDP only cost Altius C$42 million. I believe farmland sales alone from CDP total C$4.8 million since 2014.

 

3) The big question is how many potential farmland acres are left in the CDP portfolio? 5000 acres? 10,000 acres? 50,000 acres? These land sales could become a long-term source of income.

[linealdin]

linealdin,

 

I am wondering if you could elaborate a little bit on how you are thinking about valuation here.  I believe you are using CAD numbers in your posts, including the $1 payout in 5 years.  One of the nice things about Altius is that it turns most of its revenue into EBITDA.  It looks to me as though they are trading at about 10x 2018 EBITDA, but that the real key is future growth.  I would also expect the margins to improve a little bit more with scale.

 

Yes, all numbers in CAD.

 

I expect C$70 million in revenue in 2018, and C$57 million EBITDA. Guidance is conservative.

 

It’s up to the market whether they want to value Altius at 10X EBITDA, or 17X EBITDA (royalty company average) or 5X EBITDA (financial world meltdown). Who the hell knows?

 

*

 

I focus on dividends because they are controlled by Altius management (as opposed to the stock price). We know exactly how much Altius has been paying in interest and principal repayments in recent years. We know the debt has been reduced significantly and will disappear soon (if no major royalty purchases are made).

 

We know Dalton’s stated intention is to turn Altius into a “Wayne Gretzky” income stock, a long term compounding machine like Fairfax.

 

I see an enormous amount of free cash flow once the debt is eliminated in 2 or 3 years. It will start flowing to shareholders. Yes, 16 cents a year dividend can turn into $1 a year.

 

P.S. Sell if you don’t want to own a dividend compounder. The decision’s already been made for Altius.

[StevieV]

linealdin,

 

I am wondering if you could elaborate a little bit on how you are thinking about valuation here.  I believe you are using CAD numbers in your posts, including the $1 payout in 5 years.  One of the nice things about Altius is that it turns most of its revenue into EBITDA.  It looks to me as though they are trading at about 10x 2018 EBITDA, but that the real key is future growth.  I would also expect the margins to improve a little bit more with scale.

 

Yes, all numbers in CAD.

 

I expect C$70 million in revenue in 2018, and C$57 million EBITDA. Guidance is conservative.

 

It’s up to the market whether they want to value Altius at 10X EBITDA, or 17X EBITDA (royalty company average) or 5X EBITDA (financial world meltdown). Who the hell knows?

 

*

 

I focus on dividends because they are controlled by Altius management (as opposed to the stock price). We know exactly how much Altius has been paying in interest and principal repayments in recent years. We know the debt has been reduced significantly and will disappear soon (if no major royalty purchases are made).

 

We know Dalton’s stated intention is to turn Altius into a “Wayne Gretzky” income stock, a long term compounding machine like Fairfax.

 

I see an enormous amount of free cash flow once the debt is eliminated in 2 or 3 years. It will start flowing to shareholders. Yes, 16 cents a year dividend can turn into $1 a year.

 

P.S. Sell if you don’t want to own a dividend compounder. The decision’s already been made for Altius.

 

Thanks linealdin.  I don't own a position, but think it is starting to get interesting.  I like the royalty model for the mining/resource space, for obvious reasons, and a dividend compounder would be great.

 

As you point out, when a business improves, but the stock price remains range-bound, that can create an opportunity.  Ideally, I'd buy it cheaper, but it has pulled back a good bit from its early in the year highs already. 

[linealdin]

Since acquisition of CDP Altius has sold 4,159 acres as farmland or grazing land. Total price of a little more than $4 million. So they aren’t getting the Alberta average of $2500 per acre for farmland sales. Which makes sense because some of this land is very near coal mines or coal deposits, not the ideal location for your gentleman’s farm.

 

We should expect more land sales in the coming years.

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/01963478.pdf

 

PolarX establishes a JORC compliant resource at Zackly: 3.4 million tonnes at 1.2% copper, 2 g/t gold, and 14 g/t silver. More drilling planned for Q2.

 

Altius holds a 2% royalty from the Millrock deal.

[linealdin]

Early results for Q1 should be press released in a 3 weeks or so. I'm looking for:

 

1) Debt paydown. C$66.163 million debt left at the end of December. A mandatory principal repayment of C$3.25 million was made on the term facility at the end of January. So that gets the debt down to C$62.913.

 

How much of a voluntary payment will they make on the revolver? I'm hoping at least US$2.5 million, or C$3.27 million. Which takes the total debt to C$59.64 million.

 

2) More LIF shares purchased. I want another 500K shares. This sale won't last forever. The long-term case for LIF is intact despite any short-term labor disruptions (which shouldn't have a big effect on IOC's operations given that the stockpile at the dock will keep feeding the ships).

 

3) C$15 million in revenue. LIF dividend is light at 35 cents in Q1, and seasonal effects will keep Chapada production down.

[linealdin]

http://www.allegiancecoal.com.au/irm/PDF/1322_0/DrillingandBulkSamplingProgrammeCompleted

 

Drilling and bulk sampling completed at Telkwa. Samples of coal will be sent to two Japanese steel mills and one South Korean steel mill to undergo coke oven tests at their facilities.

 

An Asian joint venture investor is sorely needed. Offtake deal is not enough.

[linealdin]

https://www.bnn.ca/video/rick-rule-discusses-altius-minerals~1255731

 

Rick Rule on BNN saying nice things about Altius: world-class capital allocator, prospect generator, and merchant banker. Must own for any junior portfolio.

 

Downside: coal exposure and Altius is a very boring company.

[linealdin]

Evrim up 30% today to close at 53 cents. Altius owns 11.45 million shares and some warrants.

 

Warrant overhang just removed and probably some good news coming.

[linealdin]

https://docs.wixstatic.com/ugd/8d6671_0166425717aa45b9a32c716405f3e535.pdf

 

Emu has a RC drill contractor working at Vidalita, along with the original aircore drills which are contracted to deliver 6000 meters. Three drills are currently working on site. I’m sure there will be cost overruns but it looks like some results will be obtained. That’s all that matters for Altius.

[linealdin]

http://www.mining.com/glencore-snatches-rios-australian-coal-mine-1-7bn-deal/

 

Glencore’s spent US$2.8 billion in the last year buying coking coal mines from Rio Tinto. It’s a contrarian, decisive move and indicates Glencore believes this will be a long and prosperous bull market for coking coal.

[linealdin]

https://www.google.com/amp/www.cbc.ca/amp/1.4587114

 

IOC makes a final contract offer to the union before the strike vote on March 23rd.

 

The two sides aren’t even fighting over salaries. The issue is sick days and a two-tier pension system. Seems resolvable.

[Williams406]

Altius buying potash interests from Liberty Mutual:

http://altiusminerals.com/

[Williams406]

Short new presentation at altius.com in the "Corporate Presentation" section on the acquisition of additional potash interest.

[nostradamus]

Thanks Williams406 for the heads up on the presentation (http://altiusminerals.com/uploads/Potash-Royalties-Acquisition-Deck-(March-21-2018)-FINAL.pdf).

 

Altius paid $65m for 38.9% of PR.

LTM revenue from PR = $12.1

Altius' share of LTM revenue = $4.7

Yield on investment = 7.2% (=4.7/65)

 

Seems good to me given the growth potential.

 

[Liberty]

I wonder why Liberty is selling so quickly...