ALS.TO - Altius Minerals

[linealdin]

I think that 15% equity could be assigned a value approaching C$1 billion in a successful public listing.

 

That would value Rio's stake at $3.9bn. If they couldn't sell a control stake for $3.5-4bn, why do you think minorities investing via the stock market would value it that high?

 

USD to CAD conversion. Sales price was US$3.5 billion. No one bit.

 

This sales process was in late 2013, early 2014 with the iron ore price dropping precipitously with no countervailing quality or low alumina price premiums for Trough ore.

 

I believe IOC is better situated now than it was in 2014. IOC EBITDA has been robust in recent non-strike quarters. See Rio Tinto financials.

[petec]

Second time I’ve made that mistake!

[hohi]

Hey there, long time I didn't post anything, but I am still a very hungry reader. Thanks for the great work and keep the info coming... I listened to the CC and as always wrote done some notes, so I'll post them here, maybe someone benefits (starts after Financials):

 

Overview

first quarter where higher VOLUMES instead of PRICES moved the needle

→ proof of option potential!

 

Chapada

ahead of schedule

improved metal recovery

exploration success → ALS believes it’s a district, not just a mine

 

777

decline in Cu/Zn mined

Hudbay indicated an extra year to 2021; potentially further mine life extentions

 

Voisey’s

Vale did streaming deal → project will go ahead

another 15 years of prod’n

royalty hasn’t paid for a while; court hearing in 1 month

 

Potash

first quarter of full royalties

Mosaic / Nutrien both talked about pos. future; incentive prices etc.

 

Cheviot

Teck studies extending mine to 2029

 

IOC, Champion / Through projects

9 weeks of strike had an even bigger impact as premiums widened further

IOCs products are the best in the world; lowest impurities

premium spread widens

Champion had excellent results → good for debenture, but even better for other TROUGH projects, e.g. KAMI

in Q & A: ALS watches iron ore very closely for 20 years

Re-Start of Bloom Lake very important (Teck lost A LOT OF money)

now champion scaled back, less frantic operation

Profound impact on Alderon if Bloom Lake is successful

high iron ore content, but recently more important LESS Alumina

Geothite Bay: not lot of activity, no development planned; Wabush 3 first, in the VERY LONG RUN Geothite Bay is expected to be mined; they pretty much defined a deposit …

 

Junior Resource Market

better deal flow → broader market is almost no-existent at this point

expect to close on some deals

put $7M into lithium royalty for 12% equity of private company, 1 board seat

→ signed 1 royalty deal, expect to sign another one soon

→ Management of Lithium Royalty are experts in lithium

 

 

RENEWABLES - BLUE SKY

discussions underway with counterparts

ALS thinks about funnelling coal into renewables

in Q & A: no fixed timeline; new model, have to educate operators about royalty model; lots of term sheets flying around; think this can become a real business;

partners have a couple of small royalties in their portfolio; they don’t move the needle, hundred of thousands instead of millions…

partners will do on-the-ground work

 

Exploration

hunger for properties is highest in ALS history, something one would not expect when looking at the Junior indices

27 positions in junior equity portfolio

excellent results from some, especially

El Domo (Adventus), in-fill drilling

Moosehead (Sokoman), discovery hole

In Q & A: Bitterroot: have lands extention to Lundin’s EAGLE mine → its for the Nickel Market; they wait until the nickel market turns

Ireland: Project with First Quantum is for a new type of copper deposit that hasn’t been found/mine before there, more conceptual, early exploration...

 

[linealdin]

http://m.miningweekly.com/article/red-5-divests-of-mt-cattlin-royalty-2018-06-18/rep_id:3861

 

Lithium Royalty Corp’s first royalty purchase deal was signed in June. A$11 million for a A$1.50 per tonne royalty per tonne of ore processed (not per tonne of lithium actually produced or sold) at the Mt. Cattlin lithium mine in Australia. Red 5 Limited owned the royalty; Galaxy Resources is the miner. Traditional open pit hard rock operation. 1.6 million tonnes annual processing capacity.

 

At the beginning at 2018 there was 19.2 million tonnes of total resources, including surface stockpiles. About 12 years of mine life remaining at current production rates.

 

1.6 million tonnes of ore processed x A$1.50 per tonne royalty = A$2.4 million. A$2.4 million in annual royalty revenue x 12 years = A$28.8 million.

 

I assume there’s potential for further mine life extensions. That’s the juice.

 

*

 

Altius paid C$7 million for 12% of the equity of Lithium Royalty Corp, and 10% direct participation rights on royalty purchases. On the Mt. Cattlin deal Altius would be paying A$1.1 million for A$240,000 in annual royalty revenue for the next 12 years. I will confirm the terms with Altius.

 

No exposure to the ups and downs of the lithium price. The A$1.50 per tonne is a kind of tolling fee per tonne of ore processed. The lithium market just has to be healthy enough to keep the mine in operation for as long as possible.

[linealdin]

https://www.asx.com.au/asxpdf/20180323/pdf/43snt32ncn2262.pdf

 

This is Galaxy Resources’s latest reserve and resources statement for Mt. Cattlin. 19.28 million tonnes of total resources. It is based upon a year of operation and 10,000 plus meters of RC drilling they did last year.

 

Galaxy recently completed another 15,000 meters of drilling (results not yet announced), and plans a Phase 2 brownfields drilling program of another 15,000 meters. A regional greenfield exploration program (targets in close proximity to existing operations) of 60,000 meters is planned for the next 2 years.

 

The resources will grow with all that drilling. The excitement for Lithium Royalty Corp and Altius is seeing how much upside there can be. More mine life + recently announced plans by Galaxy to increase production capacity.

 

Counterparty strength is pretty good. Galaxy has an A$1.1 billion market cap on the ASX. Certainly not a major but also not a risky microcap resource junior. Galaxy could be classified as a mid-tier producer.

[linealdin]

The Mt. Cattlin royalty deal is solid enough I wish Altius bought the whole thing.

 

Why give Wolfden Resources $11 million for exploration when you can pay $11 million for a nice producing royalty?

 

(Of course LRC likely did the legwork, due diligence and negotiations to secure the deal. Altius is getting a portion of the royalty without committing the time of its employees.)

 

Once LRC gains enough weight by making accretive royalty deals the gameplan will likely be a listing of a pure play lithium royalty company on the TSX, taking advantage of a hot market for lithium. Hopefully Altius has a chance to monetize its C$7 million seed equity position for many times its original investment. It can be good to get in early.

[linealdin]

From First Majestic Silver’s MD&A filed today:

 

“Evrim has improperly refused to give effect to the exercise of the option and the Company has therefore commenced arbitration proceedings against Evrim during the first quarter of 2018. Evrim and First Majestic are currently in negotiations for a settlement, which is expected to be reached by the third quarter of 2018.”

 

Evrim has a discovery at Ermitano that was optioned by First Majestic. The ore can feed into First Majestic’s Santa Elena processing facility. Near-term  royalty income for Evrim, and possibly more depending on the terms of the settlement. I expect First Majestic to pony up a million or two in cash to Evrim.

[petec]

The resources will grow with all that drilling.

 

How confident are you that the royalty will cover the new resources?

[linealdin]

The resources will grow with all that drilling.

 

How confident are you that the royalty will cover the new resources?

 

The 40k meters of brownfield drilling are in the current operating mine area. Expansion and upgrading of reserves and resources on LRC/Altius royalty land. 100% certainty.

 

As for the 60k meters of greenfield drilling? Who knows? Depends on on how far afield they roam. But most of the targets seem to be near mine, so likely royalty land.

[linealdin]

https://ceo.ca/@nasdaq/champion-iron-corporate-update-strong-fy2019-first

 

Champion immediately profitable in the ramp-up period (full commisioning happened only at the end of June).

 

Realized price of C$86.61 per tonne (FOB Pointe Noire)

 

Costs of C$56.15 per tonne.

 

That works. Q3 will see a realized price in the $90’s and the costs per tonne declining (full production).

 

*

 

Phase 2 expansion plans from the MD&A:

 

“The Champion Iron board of directors has approved a budget to undertake initial work regarding a Bloom Lake mine production expansion. The funds will be invested towards a pre-feasibility study. The expansion would mainly involve the completion of construction work on a processing plant and other supporting infrastructure which was interrupted in November 2012 by the previous owner. The expansion would produce 7,5M tons of high grade 66% Fe concentrate. If approved, construction is expected to resume in 2019-20 with first production expected in 2021. The mine would create over 500 jobs during construction and 200 permanent operational jobs.“

[petec]

The resources will grow with all that drilling.

 

How confident are you that the royalty will cover the new resources?

 

The 40k meters of brownfield drilling are in the current operating mine area. Expansion and upgrading of reserves and resources on LRC/Altius royalty land. 100% certainty.

 

As for the 60k meters of greenfield drilling? Who knows? Depends on on how far afield they roam. But most of the targets seem to be near mine, so likely royalty land.

 

useful, thanks

[linealdin]

Altius has elected to do 10% direct participation on some but not all of the LRC royalty deals currently in the works. Details will be confirmed once the deals are finalized. The Aussie Foreign Investments agency still has to approve the Mt. Cattlin royalty deal (Canadian company purchasing royalty from Aussie company).

[linealdin]

https://ceo.ca/@nasdaq/midland-and-altius-discover-new-copper-gold-molybdenum-silver

 

Midland and Altius stake 2 new projects based on high grade copper, gold, silver and molybdenum surface showings in James Bay, Quebec.

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/02009427.pdf

 

PolarX drills 55 meters of 2.8 g/t gold and 0.6% copper, from near surface. Gold grade is fine but copper grade is lower than the visuals of the drill core suggested.

[linealdin]

https://www.google.com/amp/s/news.sky.com/story/amp/rio-tinto-approaches-bidders-for-6bn-canadian-iron-ore-stake-11473410

 

Rio Tinto is attempting to monetize its 58.7% equity position in IOC for US$6 billion (a “high but not inconceivable” price). ArcelorMittal and Teck possible bidders.

 

LIF’s 15.1% equity position worth US$1.54 billion, or C$2 billion, at that valuation. Even if you give a discount for it being a minority position that’s still significantly more than LIF’s current C$1.5 billion market cap.

 

The market only gives LIF credit for its 7% royalty on IOC. The value of the equity position has been mostly ignored. The market has made a mistake.

 

If a bidder is will to pay for 58.7% of IOC surely they’d be interested in buying another 15.1%. LIF has to consider joining the sales process. Would be a huge win for its shareholders.

 

[linealdin]

What would a deep-pocketed company do after paying for a control stake in IOC? Immediate expansion to 30 MTA and beyond. A successful expansion makes it a much more accretive transaction, even if you pay US$6 billion.

 

IOC has previously studied an expansion up to 50 MTA. The railway and port can handle that traffic with a relatively modest investment.

 

The consequences for LIF’s royalty would be spectacular in any expansion scenario.

 

[petec]

LIF has to consider joining the sales process.

 

Agreed, although it might be more tax efficient to spin the stake to shareholders.

 

Why is Rio selling if the prospects look so good?

[linealdin]

LIF has to consider joining the sales process.

 

Agreed, although it might be more tax efficient to spin the stake to shareholders.

 

Why is Rio selling if the prospects look so good?

 

Why does Rio sell?

 

1) To fund more divvies and buybacks. Rio’s been selling a lot of assets recently to do that.

 

2) IOC already relegated to Rio Tinto’s Energy and Metals division, not its crown jewel Iron Ore division.

 

3) No synergy with the Aussie iron ore operations.

 

4) Only 58.7% ownership. Rio wants 100% or nothing?

 

5) IOC encumbered by huge 7% royalty unlike the Aussie operations.

 

6) IOC is robustly profitable but Rio Tinto’s 58.7% of IOC is a fairly small amount of production on a global basis. It just isn’t big enough to move the needle.

[linealdin]

Why would Teck buy IOC? To diversify away from met coal, which is much too large in its portfolio.

 

Why would ArcelorMittal? Synergies with its existing Labrador Trough iron ore operations. Control both railways and ports.

[linealdin]

Full terms of the Wolfden royalty agreement. Altius is well-protected:

 

Pursuant to the Royalty Agreement, Altius has the option to purchase an additional 0.50% gross sales royalty at any time before the first anniversary of commercial production for US$7,500,000. In addition, the Corporation granted Altius certain rights to convert the Pickett Mountain Royalty to equity under certain terms, or to exchange the royalty for a similar royalty on the Corporation's Orvan Brook property. Furthermore, the Corporation agreed to use its best efforts to transfer the timber rights in connection with the Pickett Mountain Project (the "Timber Rights") as soon as practicable. The gross proceeds to be received by Wolfden from the sale of the Timber Rights must be at least US$5,000,000 or such other amount as agreed to by Wolfden and Altius, acting reasonably (the "Timber Proceeds"). Upon such transfer, Wolfden is required to pay Altius 20% of the Timber Proceeds (such 20% amount being the "Timber Rights Consideration"), and deposit into escrow the amount equal to the greater of: (i) US$2,000,000, and (ii) 50% of the difference between the Timber Proceeds and the Timber Rights Consideration (the "Escrowed Proceeds"). The Escrowed Proceeds will be released in accordance with the terms of the Royalty Agreement. Any remaining Escrowed Proceeds will be released from escrow and paid to Wolfden within two business days after the occurrence of any of the following: (i) the first date of commercial production on the Pickett Mountain Project, provided that Wolfden has obtained all the required permits for commercial production on the Pickett Mountain Project; or (ii) the expiry of the Call Right Exercise Period (as defined below). Pursuant to the Royalty Agreement, Altius has a call right, conversion right and exchange right. Each is summarized below.

 

Call Right

For the period commencing 36 months following the transfer date of the Timber Rights and ending on the date that is 60 months following such transfer date (the "Call Right Exercise Period"), Altius will have the right to receive the Escrowed Proceeds upon the occurrence of a Trigger Event. A "Trigger Event" means the occurrence of any of the following events, as determined by Altius, acting reasonably: (i) the cancellation or revocation of any material permit required in connection with the Pickett Mountain Project, subject to a 30 day cure period; (ii) the delay of issuance or effectiveness of any permit required in connection with the Pickett Mountain Project for more than 30 days after the date on which Wolfden advised Altius that such permit was expected or required to be issued or effective; (iii) a change in applicable laws which materially adversely affects the Pickett Mountain Project; (iv) the failure to rezone the Pickett Mountain Project as required in connection with the Pickett Mountain Project prior to the date that is 30 months following the date of the Royalty Agreement; (v) Wolfden fails to diligently conduct, or ceases to diligently conduct, as applicable, exploration activities on the Pickett Mountain Project; or (vi) Wolfden fails to incur exploration expenses in respect of the Pickett Mountain Project of not less than US$5,000,000 in aggregate during the three year period ending on the third anniversary of the date of the Royalty Agreement.

 

At any time after November 14, 2023, and, if the Timber Rights have not been transferred prior to November 14, 2018, at any time after November 14, 2018, Altius will have the right to convert the Pickett Mountain Royalty, in accordance with the terms of the Royalty Agreement, to cash or Common Shares, or a combination thereof (the "Conversion Right"). Upon the exercise of the Conversion Right, the Common Share consideration to be received by Altius will be equal to the lesser of: (a) the number of Common Shares that is equal in Royalty Value; and (b) the number of Common Shares that does not exceed 19.99% of all outstanding Common Shares on a partially diluted basis. The remaining balance of the Royalty Value is to be paid to Altius in cash. Under the Royalty Agreement, "Royalty Value" means an amount equal to the aggregate of: (i) all amounts paid by Altius to Wolfden (including the purchase price consideration paid by Altius) in respect of the Pickett Mountain Royalty, minus (ii) all Escrowed Proceeds received by Altius, minus (iii) all other payments received by Altius in respect of the Pickett Mountain Royalty. The Common Share conversion price is the greater of: (i) $0.05 per Common Share; and (ii) the volume weighted average trading price of the Common Shares on the TSXV (or any other principal exchange on which the Common Shares are trading) for the twenty consecutive trading days immediately preceding the date of the exercise of the Conversion Right. Upon the exercise of the Conversion Right and satisfaction of the payment thereof by Wolfden, any remaining Escrowed Proceeds will be released to Wolfden.

 

Exchange Right

Under the Royalty Agreement, Altius has the right to exchange the Pickett Mountain Royalty to a gross sales royalty in respect of the Orvan Brook property, which will be calculated and payable on the same terms as the terms of the Pickett Mountain Royalty in effect on the date of exchange, mutatis mutandis.

 

[linealdin]

Altius paid US$6 million for the Wolfden royalty. If the timber rights get sold Altius should get a few million back immediately. If the timber rights aren’t sold by this November then Altius has the right to ask for the return of that US$6 million in the form of Wolfden shares and cash (maximum of 20% of equity and the rest in cash).

 

I expect a timber deal to close before the November deadline.

[linealdin]

http://www.reveloresources.com/content/771/RVLNRAugust152018Final.pdf

 

Revelo hits long intercepts of low grade silver at Loro. 338 meters of 7.7 g/t silver.

 

Silver halo is an encouraging start. Target is El Penon-type precious metals vein system.

[petec]

http://www.reveloresources.com/content/771/RVLNRAugust152018Final.pdf

 

Revelo hits long intercepts of low grade silver at Loro. 338 meters of 7.7 g/t silver.

 

Silver halo is an encouraging start. Target is El Penon-type precious metals vein system.

 

Polite reminder: Please include a brief explanation of why each of these data points is relevant!

[linealdin]

http://www.reveloresources.com/content/771/RVLNRAugust152018Final.pdf

 

Revelo hits long intercepts of low grade silver at Loro. 338 meters of 7.7 g/t silver.

 

Silver halo is an encouraging start. Target is El Penon-type precious metals vein system.

 

Polite reminder: Please include a brief explanation of why each of these data points is relevant!

 

Altius and its Chilean partners own a 2% royalty on precious metals on the Loro property. They also own equity in Revelo Resources (which doesn’t show up in the junior equity portfolio because they are held in a joint venture vehicle, same as the Aethon shares).

 

Hochschild Mining funded the 2972 meter drill program, which ended up on the high end of the estimated 1500 to 3000 meters. I think Hochschild continues funding another round of drilling. Low grade silver halos are typical of the targeted precious metals vein system. Revelo is hunting in the right place.

[mugwump]

anglo pacific buys 4% of labrador iron ore royalty

https://ceo.ca/@fscwire/purchase-of-a-425-shareholding-in-labrador-iron-ore