linealdin Posted March 22, 2018 Share Posted March 22, 2018 Doubling down on boredom! Very safe and very sensible. Nobody knows what potash is and nobody will care that Altius bought more potash royalties. It’s the price of being contrarian. The market will care a little more once potash shoots up to $800 per tonne. Potash as a commodity is not very far off of its cyclical lows. Former potash juniors, from the last cycle, are becoming blockchain marijuana companies (yes, both). It’s still the right time to be a buyer. Operator risk is very low. These mines have been producing for decades. Rocanville and Esterhazy are among the lowest cost potash mines the the world. They will be solid through all parts of the price cycle. The rights of first refusal of the partners to buy each other’s shares were negotiated into the original Prairie Royalty purchase documents. I’m sure Altius wants John Tognetti’s 2.7% share of Prairie also. Amusing that Altius didn’t buy Liberty’s Prairie Coal royalties. Altius sick of being tagged as a coal company. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 I had been predicting around $70 million in revenue for 2018. With this purchase kicking in additional revenue for 3/4 of the year I think Altius will hit C$74 million for 2018. Given the size of the true-up payment from Esterhazy it looks like that royalty was underpaid by about C$710K a year. That should be factored in when considering how much the Liberty royalty will deliver in future years. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 I wonder why Liberty is selling so quickly... Liberty Mutual, the parent company, made $1 billion in net income in 2016, but only $17 million net income in 2017. All those hurricanes, some problems in its commercial auto policy division, and a charge associated with the federal tax overhaul. So they are struggling for cash. The lady who made the Prairie (and Alderon) purchases was fired a while ago. New management given a mandate to cash in and start over? That’s my guess. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 Fairfax $100 million is now spent: $33 million on LIF, $10 million on Champion, $11 million on Wolfden, $3 million (upfront) on McChip, and the rest on Liberty potash. So the money didn’t burn a hole in their pockets for too long. Heavy focus on iron ore and potash, bulk commodities still a lot closer to their recent cyclical bottoms than to their previous cyclical highs. Link to comment Share on other sites More sharing options...
Williams406 Posted March 22, 2018 Share Posted March 22, 2018 Two releases from Altius and it's not even afternoon yet: https://ceo.ca/@businesswire/altius-to-increase-holdings-in-alderon-iron-ore-to Liberty selling more assets. Link to comment Share on other sites More sharing options...
Gamecock-YT Posted March 22, 2018 Share Posted March 22, 2018 Two releases from Altius and it's not even afternoon yet: https://ceo.ca/@businesswire/altius-to-increase-holdings-in-alderon-iron-ore-to Liberty selling more assets. Dalton and O'Keefe coming, Morabito Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 In 2012 Liberty bought 15 million of those Alderon shares originally for C$2.67 a share, then another 3 million for C$2.41 a share. Six years later it is selling out to Altius for 27 cents a share. Brutal investment. Liberty still has the key chip in the Kami game, a C$22 million debenture due at the end of 2018. * What is Altius up to? Regaining control of the Kami project? Preparing to vote in a new Chairman or board of directors for Alderon? They certainly have the votes to make a move. A soft takeover of Alderon would be allowing Michael O’Keeffe to pay off the debenture in exchange for a big equity position in the company, board positions and replacing Morabito as Chairman. Link to comment Share on other sites More sharing options...
nostradamus Posted March 22, 2018 Share Posted March 22, 2018 Just bought some Alderon. It's probably a crazy thing to do given that I'm already heavily exposed through my Altius position. I have held back until now because I was always worried that shareholders could be diluted down to nothing as a result of the liberty debenture. But, with Altius buying shares, this now seems like a remote risk. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 After closing, Alderon equity ownership: Altius 39% Hebei 20% Management 2% Retail 39% Management makes too much salary but owns too few shares. Gravy train over soon. Link to comment Share on other sites More sharing options...
mikek Posted March 22, 2018 Share Posted March 22, 2018 I like the potash purchase very much, that is a fantastic purchase and I feel Liberty is just getting out of some positions. I don't really care for the Alderon purchase but I will trust that Dalton has a plan for Alderon. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 If you own 39% of a company the only likely positive exit is some kind of company sale/merger. Very hard to sell all those shares on the open market. The worst case for Kami, as a fully permitted deposit, is to become a feeder pit for the operations at IOC or Bloom Lake. Kami is closer to IOC’s processing facilities than IOC’s inferred resource peripheral deposits (which Altius also has a 3% royalty on). It would only cost IOC $70 million in capex to develop Kami as a feeder pit. As long as the royalty pays out this worst case scenario is a perfectly acceptable outcome for Altius. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 With the Liberty addition I expect C$13 million in annual potash revenue at current prices and production rates. When potash hits its cyclical highs during this cycle Altius could see C$30 million per year in potash revenue. Link to comment Share on other sites More sharing options...
Williams406 Posted March 22, 2018 Share Posted March 22, 2018 After closing, Alderon equity ownership: Altius 39% Hebei 20% Management 2% Retail 39% Management makes too much salary but owns too few shares. Gravy train over soon. And "Retail" is probably mostly SD and Nostradamus at this point. I like seeing Altius make a move on Alderon that doesn't involve too much capital. Good stuff. Maybe it is nothing more at this point than a break shot in billiards to shake things up, we'll see. Alderon is one of the key assets Altius has that could really transform the company not too far down the road. I'm still not holding my breath on that, but this is a step. Great potash royalty deal. I remember when PMRL deal was announced wishing that Altius could have purchased more of the potash royalties. They have found a way to up their stake. Link to comment Share on other sites More sharing options...
nostradamus Posted March 22, 2018 Share Posted March 22, 2018 :) If I did own such a large stake in Alderon I would be lobbying Dalton to get Morabito to move on. Altius are spending $5m to increase their stake, I'd be surprised if this was just to shake things up. We shall see. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 Alderon popped to 33 cents after the trading halt, now at 30 cents. Started the day at a crummy 24 cents per share. The market likes the shakeup. I’m sure Dalton and O’Keeffe have discussed what would be an acceptable takeover offer. We all know O’Keeffe is one of the few people around (outside of the majors) who could actually move mountains and get the mine built. Will the other stakeholders, especially Hebei, agree? With today’s move Liberty is out of the picture, which makes things simpler. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 Market would prefer Altius buy a gold royalty set to last 15 years over a potash royalty set to last 50 years. Even at the same exact purchase price, and with the same expected annual royalty revenue. This is just a primal thing about gold being shiny and potash looking like dirt. Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 Why Dalton called into last week’s investor conference call: he was in Boston negotiating with Liberty Metals. Link to comment Share on other sites More sharing options...
SharperDingaan Posted March 22, 2018 Share Posted March 22, 2018 Alderon popped to 33 cents after the trading halt, now at 30 cents. Started the day at a crummy 24 cents per share. The market likes the shakeup. I’m sure Dalton and O’Keeffe have discussed what would be an acceptable takeover offer. We all know O’Keeffe is one of the few people around (outside of the majors) who could actually move mountains and get the mine built. Will the other stakeholders, especially Hebei, agree? With today’s move Liberty is out of the picture, which makes things simpler. Most would expect that the discussion would have included the Liberty convert. Our own view is that it will probably be allowed to convert (& dilute), and the new party will pick the shares up out of the market. We assume ALS is adding primarily to maintain its 25% interest. At this point Kami is a 'platform' investment in future poduction. Buy in today, lock up off-take agreements, and essentially put it in 'stasis' until a future date. Ore is also about to start crossing the loading pier, which will give them a modest cash flow to maintain essential operations. The real value of Kami/JL is its iron content, long life, proximity, and the other mines around it. Ability to deliver to Asia via the Northern Sea Route will be a game changer, but needs a few more years of ice free passage first. Hence our longer term view on this. SD Link to comment Share on other sites More sharing options...
linealdin Posted March 22, 2018 Share Posted March 22, 2018 The debenture will be allowed to convert? How generous of Alderon management! The only problem is the conversion price for Liberty is $2.376 per share. Not going to happen. Alderon will have to pay back every dollar (unlikely) or give a large chunk of the company to someone who will pay off the $22 million. I don’t think Liberty wants equity anymore, they just want their money back. Whoever comes up with the $22 million will install new management of their choice. Link to comment Share on other sites More sharing options...
linealdin Posted March 23, 2018 Share Posted March 23, 2018 And just stop with this nonsense about Alderon getting income from its port agreement. It is a lie. I’ve read the port agreement. It is a liability, not an asset. Alderon is slowly having its deposit drained to zero, then its obligations to the port will be over. That was the negotiated settlement. There’s no port rent paid to Alderon! Link to comment Share on other sites More sharing options...
nostradamus Posted March 23, 2018 Share Posted March 23, 2018 The debenture will be allowed to convert? How generous of Alderon management! The only problem is the conversion price for Liberty is $2.376 per share. Not going to happen. Alderon will have to pay back every dollar (unlikely) or give a large chunk of the company to someone who will pay off the $22 million. I dont think Liberty wants equity anymore, they just want their money back. Whoever comes up with the $22 million will install new management of their choice. I guess the way it could work is that O'Keefe buys the Liberty debenture and agrees with Altius and the other major shareholders to covert it into shares. Alderon currently has a market cap of a about $40m giving an EV of $62m. They could agree to give O'Keefe his portion of that, ie 35% (=22/62) in new shares. Significant dilution of ownership for current shareholders, but a debenture free Alderon controlled by O'Keefe, Altius and Hebei (in that order). All uniformed speculation. But, I'm convinced that Altius has a plan. Link to comment Share on other sites More sharing options...
linealdin Posted March 23, 2018 Share Posted March 23, 2018 IOC union strike vote today postponed. Back to the table to discuss new contract offer from management. Link to comment Share on other sites More sharing options...
linealdin Posted March 23, 2018 Share Posted March 23, 2018 Exchange approves the 43-101 property report and the Sokoman Iron deal for Moosehead Gold has finally closed. Altius on March 16th received 7.754 million shares and 1.429 million warrants as compensation for Moosehead. The warrants are exercisable at 5 cents until 3/17/21. Altius’s total Sokoman holding is 9,182,942 shares (some legacy shares inherited from Callinan acquisition). PG equity portfolio grows another inch. Sokoman is a $2 million market cap company, of which Altius owns 20%. This is getting in at the basement level. Not much downside left, and any good drill result turns Sokoman into a $10 million or $20 million market cap. Just in time for the drill season in Newfoundland. Phase 1 drill program of 1500 meters expected to begin in late May or early June. C$500K is first year exploration commitment. Sokoman should have around $900K cash. Here’s the press release: https://www.juniorminingnetwork.com/junior-miner-news/press-releases/2558-tsx-venture/sic/44180-sokoman-iron-corp-and-altius-resources-inc-complete-moosehead-option-agreement.html Link to comment Share on other sites More sharing options...
linealdin Posted March 23, 2018 Share Posted March 23, 2018 https://ycharts.com/indicators/potassium_chloride_muriate_of_potash_spot_price Check out the potash spot prices. Potash bottomed at $214 in February and March 2017. At the end of February 2018 it was $226. A $12 improvement! Sentiment’s improved slightly for the potash sector but in terms of commodity price we are still right at the bottom of the cycle. Contrarians buy at the bottom. We are far below the incentive price for new builds of potash mines. This deal is going to look really good in 3 to 5 years. * Liberty Metals made out fine. They squeezed a total of C$80 million out of its Potash Royalty and Alderon positions. That’s going to help the bottom line of their parent company Liberty Mutual, whose insurance business is struggling. Link to comment Share on other sites More sharing options...
linealdin Posted March 23, 2018 Share Posted March 23, 2018 I’m sure Liberty wanted Altius to buy the debenture, too. That would really give Altius the keys to Kami. But $22 million is a lot of money and Alderon has no obvious way of paying the debt back. Ideal scenario is Bloom Lake does very well; eyes then towards Kami; cashed up suitors come calling with takeover/merger plans. Altius with 39% of the equity chooses the offer it likes. Market doesn’t trust current management. They paid themselves too much money and they failed miserably in the last cycle. Any kind of management change would give the stock a shot of adrenaline. All of this takes place in 2018 because of the maturity date of the debenture. Link to comment Share on other sites More sharing options...
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