ALS.TO - Altius Minerals

[mugwump]

canstar,adventus, altius deal completed

https://ceo.ca/@nasdaq/canstar-resources-adventus-zinc-and-altius-minerals

[linealdin]

linealdin you are way too cerain about things if you are able to only invest in things you are certain about. That would leave you with zero investable securities. I can assure you that is not how Buffet invests.

 

Explain how he actually invests. When Buffett bought Coke shares he didn’t feel “certain” the company would do really well?

 

I take Buffett at his word. He’s very clear. He only wants to deal in things he’s certain about.

[wachtwoord]

linealdin you are way too cerain about things if you are able to only invest in things you are certain about. That would leave you with zero investable securities. I can assure you that is not how Buffet invests.

 

Explain how he actually invests. When Buffett bought Coke shares he didn’t feel “certain” the company would do really well?

 

I take Buffett at his word. He’s very clear. He only wants to deal in things he’s certain about.

 

Cigarbutt explained it quite clearly earlier this thread, as have others. No Buffet wasn't certain. If he were that would imply is incompetent. The world is messy, very few things are certain.

 

Buffet does like investments with a higher degree of certainty. That is not the same as certainty.

[linealdin]

linealdin you are way too cerain about things if you are able to only invest in things you are certain about. That would leave you with zero investable securities. I can assure you that is not how Buffet invests.

 

Explain how he actually invests. When Buffett bought Coke shares he didn’t feel “certain” the company would do really well?

 

I take Buffett at his word. He’s very clear. He only wants to deal in things he’s certain about.

 

Cigarbutt explained it quite clearly earlier this thread, as have others. No Buffet wasn't certain. If he were that would imply is incompetent. The world is messy, very few things are certain.

 

Buffet does like investments with a higher degree of certainty. That is not the same as certainty.

 

Now we are well and truly in the land of semantics.

 

1) Buffett felt a high degree of certainty about his investment in Coke.

 

2) Buffett felt certain about his investment in Coke.

 

Both sentences mean the same thing. The first sentence is a just a little nerdier. I’m fine with how Buffett expressed himself at the 1998 general meeting.

 

[linealdin]

As for certainty requiring a high burden of proof, Why? We’re not in a courtroom or a scientific lab. Buffett is against the false aura of precision many financial types try to create. When Buffett says he only deals in things he’s certain about he using “certain” the way an normal human being would use the word in conversation.

 

Not absolute scientific certainty.

[SharperDingaan]

linealdin you are way too cerain about things if you are able to only invest in things you are certain about. That would leave you with zero investable securities. I can assure you that is not how Buffet invests.

 

Explain how he actually invests. When Buffett bought Coke shares he didn’t feel “certain” the company would do really well?

 

I take Buffett at his word. He’s very clear. He only wants to deal in things he’s certain about.

 

Cigarbutt explained it quite clearly earlier this thread, as have others. No Buffet wasn't certain. If he were that would imply is incompetent. The world is messy, very few things are certain.

 

Buffet does like investments with a higher degree of certainty. That is not the same as certainty.

 

Now we are well and truly in the land of semantics.

 

1) Buffett felt a high degree of certainty about his investment in Coke.

 

2) Buffett felt certain about his investment in Coke.

 

Both sentences mean the same thing. The first sentence is a just a little nerdier. I’m fine with how Buffett expressed himself at the 1998 general meeting.

 

Under certainty, P(success) = 100%

Under high degree of certainty, P(success) = 80% (maybe!)

 

There is always the possibility that you may be wrong. Wise men simply recognise they aren't perfect, and make allowances.

 

SD

 

[wachtwoord]

 

Under certainty, P(success) = 100%

Under high degree of certainty, P(success) = 80% (maybe!)

 

There is always the possibility that you may be wrong. Wise men simply recognise they aren't perfect, and make allowances.

 

SD

 

Exactly this.

[linealdin]

I’m going to end my participation in the discount rate discussion with the original Buffett quote which sparked my interest.

 

“Don't worry about risk the way it is taught at Wharton. Risk is a go/no go signal... We don't discount the future cash flows at 9% or 10%; we use the U.S. Treasury rate. We try to deal with things about which we are quite certain. You can't compensate for risk by using a high discount rate." - Warren Buffett at the 1998 Berkshire Hathaway (BRKa) Shareholder Meeting

[mugwump]

wolfden update

https://ceo.ca/@newswire/wolfden-adds-to-high-grade-mineralization-in-deep-drilling

[linealdin]

https://ceo.ca/@fscwire/follow-up-drilling-commences-on-renaissance-golds

 

Renaissance Gold and its partner Ramelius Resources start a 1524 meter follow up drill program at the Jupiter gold project in Nevada. Best result in initial drilling was 9.1 meters of 1.1 g/t gold. Promising enough for Ramelius to fund another round of drilling, I guess.

 

Altius holds a 1% royalty on Jupiter, and a share position in REN.

[petec]

Thanks all and linealdin well done for bringing us back on topic.

 

Here's how I am currently valuing each royalty, fwiw.

 

777: 3x 2q18 annualised

Chapada: 2q18 annualised, discounted at 15% for 25 years.

IOC: same as Chapada.

Thermal coal: 4x 2q18 annualised.

Potash: 20x 2q18 annualised.

 

It does seem to me that to get to the current price you either need some of the exploration options to work or you need higher potash prices. That's what this boils down to IMHO.

 

[linealdin]

Thanks all and linealdin well done for bringing us back on topic.

 

Here's how I am currently valuing each royalty, fwiw.

 

777: 3x 2q18 annualised

Chapada: 2q18 annualised, discounted at 15% for 25 years.

IOC: same as Chapada.

Thermal coal: 4x 2q18 annualised.

Potash: 20x 2q18 annualised.

 

It does seem to me that to get to the current price you either need some of the exploration options to work or you need higher potash prices. That's what this boils down to IMHO.

 

This is utter bullshit. I will detail why, with evidence.

[petec]

Thanks all and linealdin well done for bringing us back on topic.

 

Here's how I am currently valuing each royalty, fwiw.

 

777: 3x 2q18 annualised

Chapada: 2q18 annualised, discounted at 15% for 25 years.

IOC: same as Chapada.

Thermal coal: 4x 2q18 annualised.

Potash: 20x 2q18 annualised.

 

It does seem to me that to get to the current price you either need some of the exploration options to work or you need higher potash prices. That's what this boils down to IMHO.

 

This is utter bullshit. I will detail why, with evidence.

 

Thanks.

[wachtwoord]

Btw Linealdin I appreciate your contributions to this thread!

 

The only reason for the strong discussion on discount rates is because that's something I think you're wrong at and to help you back so you also get value from this thread.

 

Of course you're completely free to disagree. No hard feelings :)

[linealdin]

Btw Linealdin I appreciate your contributions to this thread!

 

The only reason for the strong discussion on discount rates is because that's something I think you're wrong at and to help you back so you also get value from this thread.

 

Of course you're completely free to disagree. No hard feelings :)

 

It’s Warren Buffett’s method, not mine. Take it up with him at the next AGM.

[linealdin]

 

Chapada: 2q18 annualised, discounted at 15% for 25 years.

IOC: same as Chapada.

 

 

This is going to be fun! First on IOC.

 

Q2 2018 annualized = C$3.15 million. Discounted at 15% for 25 years = NPV of C$20.26 million

 

That’s what PeteC claims Altius’s LIF position is worth: C$20.26 million. I could argue using the Q2 2018 revenue annualized is biased because IOC was on strike in Q2 2018 and thus producing zero royalty revenue for LIF. I could argue about the 62 year total resource life at IOC. I could argue that using a 15% discount rate on royalties from a long-established producing mine run by Rio Tinto is absurd.

 

But I don’t need to do that. We know what the net present value of Altius’s LIF position is: the market value of its 3.15 million shares. This morning they are worth C$78 million.

 

Do you see kind of bullshit that is produced when you misuse high discount rates?

[petec]

Wow. That got unfriendly quickly.

 

In order:

 

Fair point on the strike. I'd forgotten that among the deluge of other info on this thread.

 

You could indeed argue about the 62 year total resource life but as you said yourself, only discount cash flows about which you are fairly certain, and I haven't dug deep enough to have that certainty.

 

You can argue whatever you like about the discount rate but I aim to double my portfolio every 5 years, which requires a 15% compounded return, and that requires me to pay prices that will allow me that return. I'm not discussing what these assets are worth, but what I'd be prepared to pay for them.

 

Somehow I'd managed to miss that the IOC royalty was through a listed equity - thanks for the lesson there - but that doesn't mean that the equity is properly valued. Its share price today is irrelevant unless Altius plans to sell today.

 

Keep 'em coming, if you have the time. I appreciate it.

[linealdin]

Potash: 20x 2q18 annualised.

 

 

Any particular reason why 20 years is used for mines with hundreds and hundreds of years of 43-101 compliant reserves and measured & indicated resources? Are you really claiming Nutrien and Mosaic will stop operations in 20 years at their flagship mines? After they just invested over $10 billion to expand nameplate capacity and reduce operating costs to the lowest end of the global curve? How do Nutrien and Mosaic earn a return on the money they spent?

 

Any particular reason these cash flows don’t have a discount rate? Or should a 15% discount rate be applied?

[petec]

Potash: 20x 2q18 annualised.

 

 

Any particular reason why 20 years is used for mines with hundreds and hundreds of years of 43-101 compliant reserves and measured & indicated resources? Are you really claiming Nutrien and Mosaic will stop operations in 20 years at their flagship mines? After they just invested over $10 billion to expand nameplate capacity and reduce operating costs to the lowest end of the global curve? How do Nutrien and Mosaic earn a return on the money they spent?

 

Any particular reason these cash flows don’t have a discount rate? Or should a 15% discount rate be applied?

 

They do have a discount rate: 5%. 20x cash flows = 5% discount rate if the cash flows are virtually perpetual, which you have made a good case that these are.

 

So then the question is, if I was to lay money out now for a perpetual stream of cash flows that is a) likely to be inflation linked over the very long term and b) has some nice optionality around volume growth and cyclical price increases, then I need some way to think about how much to pay.

 

As we have discussed, that can be expressed as a discount rate or as a margin of safety - the two are mathematically and conceptually identical - and regardless of which you choose, the number you alight on is subjective. I find it easiest to visualise that number as a % rate of return, and 5% feels like the right number to me given that I can buy other inflation-linked perpetuities (in world class, long lived companies) on a 5% free cash flow yield. Others might pay more or less - that's their right.

 

EDIT: the fact that a company trades at 20x earnings doesn't mean it is expected to stop producing in 20 years (if it did, investors would be investing to make a return of their money, not on it). Same should go for a mine.

[linealdin]

Wow. That got unfriendly quickly.

 

In order:

 

Fair point on the strike. I'd forgotten that among the deluge of other info on this thread.

 

You could indeed argue about the 62 year total resource life but as you said yourself, only discount cash flows about which you are fairly certain, and I haven't dug deep enough to have that certainty.

 

You can argue whatever you like about the discount rate but I aim to double my portfolio every 5 years, which requires a 15% compounded return, and that requires me to pay prices that will allow me that return. I'm not discussing what these assets are worth, but what I'd be prepared to pay for them.

 

Somehow I'd managed to miss that the IOC royalty was through a listed equity - thanks for the lesson there - but that doesn't mean that the equity is properly valued. Its share price today is irrelevant unless Altius plans to sell today.

 

Keep 'em coming, if you have the time. I appreciate it.

 

Then we’re talking past each other. I thought we were discussing what the assets were worth. Sorry for the misunderstanding. My apologies.

 

You’re discussing what you would like to pay for those assets. You’d like to pay C$6.43 a share for LIF. Me too!

[petec]

Wow. That got unfriendly quickly.

 

In order:

 

Fair point on the strike. I'd forgotten that among the deluge of other info on this thread.

 

You could indeed argue about the 62 year total resource life but as you said yourself, only discount cash flows about which you are fairly certain, and I haven't dug deep enough to have that certainty.

 

You can argue whatever you like about the discount rate but I aim to double my portfolio every 5 years, which requires a 15% compounded return, and that requires me to pay prices that will allow me that return. I'm not discussing what these assets are worth, but what I'd be prepared to pay for them.

 

Somehow I'd managed to miss that the IOC royalty was through a listed equity - thanks for the lesson there - but that doesn't mean that the equity is properly valued. Its share price today is irrelevant unless Altius plans to sell today.

 

Keep 'em coming, if you have the time. I appreciate it.

 

Then we’re talking past each other. I thought we were discussing what the assets were worth. Sorry for the misunderstanding. My apologies.

 

You’re discussing what you would like to pay for those assets. You’d like to pay C$6.43 a share for LIF. Me too!

 

It's an important distinction. I'm trying to decide what I would pay for Altius - or, to put it another way, I'm trying to decide what price Altius has to be to offer a return equal to my next best option. If that price is $18, then wahey, I'll buy at $13. If it's $10, then I'll wait.

 

The other option is to accept the market price for everything, in which case we're all out of business!

[petec]

FWIW, given the the strike and LIF's equity holding in IOC, I'll happily concede that the market price for LIF is closer to reality than my uninformed maths was. But that's because I made mistakes, not because the market price is necessarily right.

[linealdin]

The potash royalty package is worth C$305 million under your calculation. That feels about right, if we’re being conservative.

 

My view is that we’re still near trough prices for potash. I expect C$20 million per year, not the current annualized C$15.52 million, over the longterm. That long term will include bumper years of C$50 million and ugly trough years of C$10 million, I’m sure. Commodity cycles are brutal and spectacular.

[petec]

The potash royalty package is worth C$305 million under your calculation. That feels about right, if we’re being conservative.

 

My view is that we’re still near trough prices for potash. I expect C$20 million per year, not the current annualized C$15.52 million, over the longterm. That long term will include bumper years of C$50 million and ugly trough years of C$10 million, I’m sure. Commodity cycles are brutal and spectacular.

 

Yes, I'm totally happy with that thinking. And yes, I'm deliberately being conservative. I'm well aware that they could be worth much more, although the price will have to rise for the market to value them much higher - hence my comment about needing potash to rise or exploration success for Altius to "work".

[linealdin]

Chapada is hard to value. There’s the rate reduction from 3.7% to 1.5% after 75 million pounds are delivered. What’s the copper price going to average during the 3.7% near term period? What’s the copper price going to average in the 1.5% period?

 

Yamana is planning an expansion from 23 MTA  to 32 MTA. I predict a neutral effect b/c of the expansion incentive rate reduction to 2.65%.

 

But the run up to expansion, the rampup period and the 150 day run-rate proving period, will pay out at 3.7%. That should be a bumper year.

 

Expansion should improve annual revenues for the 1.5% tail, but also reduce the remaining mine life.

 

Too many variables.