ALS.TO - Altius Minerals

[linealdin]

http://aethonminerals.com/projects/llanos

 

New project page for Aethon's recently acquired Llanos copper/gold project. Looks like the most drill ready project in their portfolio. The preliminary legwork has been done. The evidence indicates there could be a large buried copper/gold/moly porphyry system.

 

The first 4 drill holes (scheduled for the next 6 months) should prove or disprove the thesis. It's not one of those elusive high-grade targets, and Aethon won't waste too much money chasing it. Either the porphyry system exists or it doesn't.

[linealdin]

 

Paddy Nicol’s presentation on Cuale at this week’s MIF. Cuale is the best of the 300 plus projects Evrim’s reviewed over the course of its existence.

[nostradamus]

http://www.northernpen.ca/business/alderon-closing-in-financing-for-new-mine-project-in-labrador-west-215532/

 

[linealdin]

ross beatty talks about renewable energy and mining

 

Thanks Mugwump. Very compelling presentation from the serially successful Ross Beaty. Copper and silver as energy metals. Utility scale batteries will solve the intermittancy problem for wind and solar. Saudi Arabia, the world’s largest hydrocarbon producer, is investing $200 billion in a solar farm big enough to supply all of Canada’s electricity demand. The world is changing quickly.

 

The opportunities for Altius will likely be in wind and solar. The best hydro opportunities are built already.

[linealdin]

https://www.hellenicshippingnews.com/iron-ore-de-commoditizes-as-china-pollution-helps-shake-price-diffs-singapore-exchange/

 

“De-commoditization” in iron ore. There is no one iron ore commodity anymore. Now the market is a range of products segmented by grade, impurity levels, and direct charge use (types of pellets).

 

This huge market shakeup began in 2016. Not that long ago. Have all market participants fully absorbed what the changes mean? Altius caught a piece of the wave with the LIF royalty purchase and the Champion debenture. Once the financiers see the free cash flow that Bloom Lake is reaping with quality premiums Kami will be much easier to finance.

 

Need to see 2 quarters of CIA financials. They will hit full production this month, so the July through December financials will tell the story.

[linealdin]

Two more bulk carriers added to the Bloom Lake port schedule for early June: Berge Arctic and Centennial Harmony. By June 15th Champion will have shipped 1.8 million tonnes, or 24.3% of its annual target of 7.4 million tonnes.

 

Of the 8 ships already loaded, two are heading to Port Said, Egypt and one to Rotterdam. The trip to Europe or the Middle East is 1/3 to 1/2 as long as the trip to Asia. Shorter shipping distance = much better profit margins, assuming the customers pay the same price for 66% ore in Rotterdam as they do in Qingdao.

 

It hasn’t been emphasized much in the marketing materials (which are focused on Asian steelmakers as offtake partners) but Europe/Middle East is a very profitable destination for Canadian iron ore. Just a quick hop across the water.

[linealdin]

There is going to be a long open window for the Kami financing:

 

1) Iron ore benchmark isn’t going crashing below $60 for too long because below-$60 prices would put many marginal producers out of business.

 

2) Vale promises to unleash new supply if the benchmark rises too close to $100 (which would attract lots of new marginal production).

 

3) The growing consensus is that the quality and impurity premiums are now a permanent part of the iron ore market.

 

4) So Kami should be in a stable price environment for the next 5 years or so. Its premium product should receive US$80 to US$90 per tonne in the marketplace. Its feasibility study claims Kami can be mined for US$30 per tonne. Add another US$15 to US$20 for capesize shipping costs. Those numbers work.

 

It is understandable why Kami failed in the last cycle. A run up to US$190 a tonne brought every iron ore project on the planet to the banks asking for financing. Then the fall to US$35 a tonne destroyed all those investments and scarred everyone in the sector. Pure chaos.

 

The financing process this cycle will be a lot more orderly and sensible. I think Alderon will get it done.

 

5) We just have to wait for the financiers too forget the unmitigated disaster of the Cliffs version of Bloom Lake (cash costs of US$89 per tonne). And for them to start feeling greedy when they see the free cash flow from the Champion version of Bloom Lake.

[mikek]

Hopefully Altius is almost done putting together the new loan package. That would be what my main focus would be right now. As for Alderon, I don't think this thing is getting built for 1 billion capex. That former CEO made two huge mistakes. He first picked Glencore as a off take partner instead of a direct user and obviously the true disaster was how the Wabash situation was handled. That was completely unacceptable and was where the game was truly lost. I see two outcomes, most likely is Alderon gets bought out and combined with an operation near by or they start this project out at a much smaller operation with way lower initial capex. This thing isn't getting built at 1 billion capex. That would truly be a miracle to get banks to lend that amount. If they are trying to do this I feel they are just wasting their time.

[linealdin]

If Altius takes out the $22 million Liberty loan due in December (somebody has to) then it should receive a package of shares AND a new royalty.

 

Let’s say 20 million IRON shares and a new 1% royalty on Kami.

[linealdin]

Hopefully Altius is almost done putting together the new loan package. That would be what my main focus would be right now. As for Alderon, I don't think this thing is getting built for 1 billion capex. That former CEO made two huge mistakes. He first picked Glencore as a off take partner instead of a direct user and obviously the true disaster was how the Wabash situation was handled. That was completely unacceptable and was where the game was truly lost. I see two outcomes, most likely is Alderon gets bought out and combined with an operation near by or they start this project out at a much smaller operation with way lower initial capex. This thing isn't getting built at 1 billion capex. That would truly be a miracle to get banks to lend that amount. If they are trying to do this I feel they are just wasting their time.

 

It won’t be a billion. Hebei owns 25% of Kami and is already responsible for 25% of capex. They’ve got the money. The next step is Hebei either upping its Kami ownership towards 50% or allowing another steelmaker to buy in (giving them some of their offtake or a portion of offtake from a Phase 2 expansion to 16 million tonnes).

 

Those are both quick ways to chop down the debt package needed from the banks. Even in a situation where Alderon’s Kami ownership went down to 25% there’s still plenty of money to be made if the mine is built.

 

Alderon should bring in a posse of strategic investors the same way Champion did. Only two of Champion’s strategic investors got offtake rights. The rest got equity, warrants, project level interests, senior debt and/or debentures.

 

Stream financing should be on the table. Take $150 million from BaseCore Metals. Sell another royalty. Hook or by crook.

 

If they do some so-so deals to drag the mine into existence they can make it up with better deals with the Phase 2 expansion.

 

 

[linealdin]

https://in.reuters.com/article/asia-ironore/update-1-china-iron-ore-futures-rise-on-mine-closures-inventories-stay-high-idINL3N1T734C

 

Hebei Province (home of Alderon’s JV partner) plans to close 226 iron ore mining operations. Fight to battle pollution and illegal mining continues. There’s no reason for the Chinese domestic mines to be digging up 10% to 15% Fe ore with high impurities.

 

In related news an explosion at an iron mine in another part of China has killed 11 miners and trapped 25 more. Lack of safety standards. These kind of deadly accidents happen frequently. China will reform.

 

The key for China’s steel industry will be sourcing high quality seaborne iron ore at a reasonable price.

[mugwump]

adventus/salazar drill results

wow!! 7% copper!!

https://ceo.ca/@newswire/adventus-and-salazar-announce-additional-2018-drill

[linealdin]

adventus/salazar drill results

wow!! 7% copper!!

https://ceo.ca/@newswire/adventus-and-salazar-announce-additional-2018-drill

 

Beautiful drill results. Some strikingly thick intersections (Curi-266 has nearly 38 meters of good grades).

 

I think of El Domo as another 777 deposit (very similar grades) but the resource is much closer to surface so the majority of the deposit can be open pit. Advantage in economics.

 

El Domo has total resources of 11.4 million tonnes. When 777 went into production it had a total resource of 15.5 million tonnes. Catching up.

 

What’s an open pittable version of 777 worth?

 

Forget zinc. Adventus is positioning El Domo as a copper-rich deposit with significant gold and silver. In 3 years the copper market will be in a deep deficit situation if current projections are correct. Copper could be $4 to $6. Adventus by then will have El Domo completely drilled out with a feasibility study indicating modest capex and a huge NPV. Ready to auction off the project for US$300 million or more.

 

 

 

 

[linealdin]

http://www.adventuszinc.com/storage/presentations/adzn---corporate-presentation---june-2018-final-1528292055.pdf

 

New Adventus presentation. The last slide compares some of the 2018 drill results at Curipamba to other copper drill results from globally known deposits like Timok and Cascabel.

 

Also notes that the historic 323 meters of 0.48% copper equivalent (from surface) at the recently acquired Santiago project stacks up well compared to copper peers. I think Kargl-Simard quietly stole an open pit copper-gold porphyry deposit while no one was paying attention. Santiago has similar grades to Chapada, just needs to be drilled out.

[linealdin]

https://investingnews.com/daily/resource-investing/ecuador-renaissance-mining-attractiveness/

 

Ecuador as one of the last frontiers for potential discovery of Tier 1 deposits. Makes the case Ecuador is past the bottom and the investment environment is rapidly improving. Lundin Gold (Fruta del Norte), Solgold (Cascabel), and Adventus as contrarian pioneers.

 

With some quotes from Sam Leung of Adventus.

[linealdin]

I do think things are breaking Alderon’s way. Changes in the last year or two:

 

1) Consolidation of China’s steel sector. Eliminating smaller steelmakers that run dirty. Mandating that the large steelmakers that remain, like Hebei, run their plants efficiently and avoid pollution. High quality iron ore requires burning much less dirty coal to make steel.

 

Air pollution has become a source of political unrest. China’s central government has the instinct for self-preservation. They will do whatever is necessary to clean up the skies to eliminate the political threat.

 

2) Rationalization of China’s domestic iron ore production. Outlawing illegal producers of low quality, high impurity ore. Discounts for low quality ore dissuades the legal producers from mining 15% Fe.

 

3) The large Chinese steelmakers maximize their profits and minimize their pollution by using the highest quality iron ore. The supply of high quality ore is limited and mainly comes from Brazil, South Africa and Canada.

 

4) Limited supply and high demand = competition to finance new sources of high quality supply. Watch how easily Champion secures partners in 2018 for their Phase 2 production. Watch Alderon surprise the market with an accretive deal with another strategic investor or steelmaker in 2018.

[bizaro86]

That all sounds good, except for possibly the part about low grade Chinese mines shutting down. My thought was that a bunch of the high grade demand comes from the need to blend high grade imported ore with cheap low grade domestic ore to make it work. Effectively, the discount on the low grade paying for the premium on the high grade.

 

If the Chinese swap out 15% Fe domestic with Australian 60% (or whatever), it seems to me that might actually reduce demand for high grade to blend.

[linealdin]

What Altius has bandied about is that Trough ore is perfect for blending with lower quality Aussie Pilbara ores. No idea what the 10% or 15% Fe Chinese domestic ore is blended with. Maybe that’s what the wildcat, semi-illegal steel operations were using before the environmental crackdown?

[linealdin]

http://www.championiron.com/wp-content/uploads/2018/06/2018-05-QIO-Corporate-Presentation-Champion.pdf

 

New Champion Iron presentation. Shows pictures of the Phase 2 processing plant which is already 70% complete. Cliffs began construction on the plant before it went bankrupt. Feasibility study on the Phase 2 expansion due in Q2 2018.

[linealdin]

https://www.platts.com/latest-news/metals/moscow/analysis-high-grade-iron-ore-premiums-surge-closing-26969345

 

Price for 65% Fe is 29% higher than the 62% Fe benchmark. The premium is at an 8 month high.

 

Platts also notes that the penalty for alumina has surged to US$6 per every 1% of alumina.

 

Bloom Lake deposit has 0.3% alumina. Kami even lower at 0.1% alumina. One primary Australian iron ore product averages 2.25% alumina.

 

The Trough ores will command a ~US$12 per tonne premium to the Aussie ore just based on alumina penalties/premiums. That’s a big margin.

[linealdin]

http://www.mining.com/web/miners-creep-legal-minefield-brazilian-scales-tip/

 

Wood Mackenzie predicts the Samarco iron ore and pellet operation in Brazil won’t come back online until 2020. Samarco is one of IOC’s only competitors in the direct reduction pellet market. With Samarco out of the game for up to two more years IOC is going to be able to charge high premiums to its desperate pellet customers. The Platts article above notes that pellet premiums have reached US$50 per tonne.

 

The Minas Rio iron ore mine in Brazil should be shut down for the rest of 2018 because of a pipeline accident. It produced high quality direct reduction pellet feed (68% Fe, 1% silica, 0.3% alumina) for a customer in the Middle East. See slide 9 of this presentation:

 

http://www.metalbulletin.com/events/download.ashx/document/speaker/8604/a0ID000000ZOoeiMAD/Presentation

 

I believe Champion has stepped in to supply this former Minas Rio customer with its high grade pellet feed. Two of its bulk carriers are headed to Port Said, Egypt. (Champion’s original plans had focused on customers in Asia.)

 

I expect some very good margins in Champion’s Q2 financials. The two Middle East shipments have much lower shipping costs than the long trip to Asia. More profit to the producer. Lucky break for Champion.

[linealdin]

Notes on Champion’s proposed Phase 2 expansion:

 

1) Cliffs already spent US$1.5 billion on Phase 2 expansion at Bloom Lake. US, not Canadian dollars. An astonishing investment.

 

2) Because of all that investment Champion has a mining fleet capable of moving 30 million tonnes of material annually.

 

3) The second concentrator is 70% complete. The building looks beautiful.

 

4) There’s a spare parts inventory worth C$43 million, ready to be used for Phase 2.

 

5) The Phase 2 expansion when Cliffs planned it was supposed to reduce overall operating costs by $15 a tonne. I assume Champion’s expansion plans will also aim to significantly reduce opex for the overall Bloom Lake complex. Reduced opex will help Bloom Lake survive through the low points of the iron ore cycle. Anti-fragile.

 

6) Where does Champion obtain the port capacity for Phase 2? New Millenium sold 6.5 million tonnes of port capacity to Tacora but still retains 8.5 million. Alderon has 8 million tonnes. LIM had capacity but went bankrupt and defaulted on its port payments.

 

7) What about rail capacity? Still plenty left on the QNS&L but there will be a squeeze eventually. I believe IOC will start studying an expansion towards 30 MTA soon. They see the demand for high grade ore and pellets.

[linealdin]

Fortescue and Mineral Resources fighting over Atlas Iron’s coveted 13 MTA of port capacity. Will Alderon’s 8 MTA of port capacity come into play eventually?

 

An Alderon takeover would solve Champion’s Phase 2 port capacity issues. And add a billion tonnes of ore to their portfolio located right over the provincial border. Plenty of optionality for future expansions. Don’t underestimate O’Keeffe’s ambitions. I think a Phase 3 expansion to 21 million tonnes is on his mind.

[linealdin]

http://www.mining.com/copper-price-surges-highest-since-january-2014/

 

Copper hits $3.32, a 4.5 year high. Escondida, the world’s largest copper mine, looks poised for a strike.

[linealdin]

https://www.google.com/amp/s/www.barrons.com/amp/articles/copper-prices-could-triple-in-10-years-1528399817

 

A case for $10 copper during a multi-stage bull market over the next 5 to 10 years.

 

$10 copper means Chapada would bring in over C$60 million annually. Something to dream about.