ALS.TO - Altius Minerals

[hohi]

Someones listening...

 

"ALTIUS RE-ESTABLISHES NORMAL COURSE ISSUER BID "

 

http://altiusminerals.com/uploads/ALTIUS-RENEWAL-OF-NCIB-Aug-20-2018-FINAL.pdf

[linealdin]

Someones listening...

 

"ALTIUS RE-ESTABLISHES NORMAL COURSE ISSUER BID "

 

http://altiusminerals.com/uploads/ALTIUS-RENEWAL-OF-NCIB-Aug-20-2018-FINAL.pdf

 

NCIB is almost always on. Not really news. They won’t be making significant buybacks until the stock price is under C$11 (when they purchased last year).

 

Also very target rich environment. Resource juniors have been hammered, the capital markets are closed them. They have to sell royalties to survive. New royalty deals, already signed, should close soon for both the renewable energy and lithium partnered vehicles.

 

A lot of royalty term sheets flying around. Altius just needs to choose the best deals. That’s where the cash is headed during this period of commodity market weakness. Opportunities abound for those with liquidity and courage.

[no_free_lunch]

Linealdin, since you are such a prolific poster, do you mind sharing your thoughts / model on valuation?

[linealdin]

Linealdin, since you are such a prolific poster, do you mind sharing your thoughts / model on valuation?

 

There was an extensive discussion of valuation with Petec and others recently in the thread.

 

I’m not interested in fine-tuned financial models. I can recognize when something is cheap. I believe the potash royalties were worth Altius’s market cap last week (C$500 million). That’s an audacious statement today but when potash prices rise to US$500 or US$600 per tonne during this bull cycle it will become accepted wisdom. Everything else Altius owns I get for free.

[linealdin]

Timelines for royalty investments to close (from Dalton’s remarks on the conference call):

 

1) Multiple royalty and equity deals being negotiated with cash-constrained juniors during Q2. Altius surprised that the broader market offers no competing sources of financing for these high quality projects. They expect to close several smaller deals in H2 2018. I expect Wolfden-size deals, around C$10 million.

 

2) Discussions with renewable energy producers and developers ongoing. No set timeline.

 

3) One lithium royalty co-investment closed, one more in advanced discussions.

 

4) Strategic investments into the diamond spinout and planned IPO will be revealed in the next few weeks.

 

*

 

This period of market weakness will help Altius close this flurry of smaller royalty deals before the commodity bull market starts marching upwards again and valuations rise. We will thank Trump for scaring everyone with a fake trade war.

[linealdin]

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/878-tsx-venture/nai/51114-canex-metals-commences-exploration-program-on-british-columbia-property-portfolio-recently-optioned-from-altius-minerals.html

 

Canex sends a 3 person crew to do surface exploration on the 5 recently acquired Altius properties in British Columbia. Mapping and soil sampling.

 

Canex had only C$175K in cash at the end of March. Canex hasn’t been able to issue shares and raise cash since March 2016 (when it was named Northern Abitibi and raised C$230K). It is starving but the equity markets are closed.

 

Canex will probably pay these 3 prospectors three thousand each for a couple months of work. Can’t afford more than that.

 

*

 

Altius is negotiating now with juniors with promising development projects who are as shut out of the equity markets as Canex is. Altius will easily dictate good terms.

[Gregmal]

I'm somewhat new to this company, but can anyone provide a valid reason why the company will not repurchase shares? I've always found that managers love talking about how great the company is, and how cheap it is, but unless they are repurchasing shares and actively buying stock themselves, it's typically all salesman bullshit.

 

Is there any metric they've provided that can demonstrate significantly better risk adjusted returns via their current capital allocation strategy?

[linealdin]

https://www.google.com/amp/s/www.nasdaq.com/article/nutrien-steers-potash-recovery-as-bhp-waits-in-the-wings-20180820-00517/amp

 

Excellent Reuters piece on the complex dynamics of the potash space. Nutrien intends to actively deploy its 8.1 million tonnes of unused capacity to beat down the potash price if it rises too high and thus attracts new competitors, most importantly BHP and its Jansen mine. Jansen supposedly needs at least US$400 per tonne potash long-term to justify the massive capex.

[linealdin]

I'm somewhat new to this company, but can anyone provide a valid reason why the company will not repurchase shares? I've always found that managers love talking about how great the company is, and how cheap it is, but unless they are repurchasing shares and actively buying stock themselves, it's typically all salesman bullshit.

 

Is there any metric they've provided that can demonstrate significantly better risk adjusted returns via their current capital allocation strategy?

 

Altius does re-purchase shares. It has a very, very long history of significant buybacks, and their timing is usually spot-on (catching the bottom). Check SEDI. I’m sure they’ve bought back more shares, on a percentage basis, over their 20 years of existence than most companies in the royalties/resources space.

 

Buybacks are one tool in the arsenal. Altius uses that tool well.

[Gregmal]

I'm somewhat new to this company, but can anyone provide a valid reason why the company will not repurchase shares? I've always found that managers love talking about how great the company is, and how cheap it is, but unless they are repurchasing shares and actively buying stock themselves, it's typically all salesman bullshit.

 

Is there any metric they've provided that can demonstrate significantly better risk adjusted returns via their current capital allocation strategy?

 

Altius does re-purchase shares. It has a very, very long history of significant buybacks, and their timing is usually spot-on (catching the bottom). Check SEDI. I’m sure they’ve bought back more shares, on a percentage basis, over their 20 years of existence than most companies in the royalties/resources space.

 

Buybacks are one tool in the arsenal. Altius uses that tool well.

 

Ok thanks. Perhaps I misread an earlier poster's comment. Been briefly looking at this and Birchcliff as potential investments and in the early stages of DD. This thread is pretty informative, just really long.

[linealdin]

Last buyback was this March, under C$12. As to why Altius hasn’t been buying shares since then?

 

1) The stock price was higher. Altius likes to buy cheap, even their own shares.

 

2) They may have bought during the dip below C$12 last week. Who knows? Transactions aren’t reported immediately.

 

3) There were other uses of liquidity and corporate concerns in recent months. Altius just closed a C$65 million royalty purchase, took on C$65 million in debt and opened an expanded credit facility.

 

4) You really don’t want Altius focused on buying royalties now that the resource market is cash-constrained and in turmoil? Really?

[Gregmal]

Last buyback was this March, under C$12. As to why Altius hasn’t been buying shares since then?

 

1) The stock price was higher. Altius likes to buy cheap, even their own shares.

 

2) They may have bought during the dip below C$12 last week. Who knows? Transactions aren’t reported immediately.

 

3) There were other uses of liquidity and corporate concerns in recent months. Altius just closed a C$65 million royalty purchase, took on C$65 million in debt and opened an expanded credit facility.

 

4) You really don’t want Altius focused on buying royalties now that the resource market is cash-constrained and in turmoil? Really?

 

I think it all really depends on what they are getting and the potential ROI's.

 

I am new to this completely, so I probably don't have the same insight you or others do yet. But just because the market is cash restricted doesn't mean that buying royalties vs buying their own shares is the best risk adjusted return for shareholders.

 

For example, a company I have invested in called Geospace is notoriously conservative. Yet they sat around and made excuses for the past year why they won't buyback stock when the shares are trading at generational lows and significantly below IV; while the company holds a robust balance sheet. Something I call "conservative bc you're stupid". Too scared to act. Vs "conservative bc you're smart" which is seen no better example than WEB who's conservatism is seen justified when there's blood in the streets and he's firing off bazookas and loading up on tremendous deals. Maybe this is what these guys are doing. I'd lean towards saying it is. I've just never been able to reconcile how management teams talk about how their stock is cheap when they arent buying it both personally and with company resources. If they think it's worth $20, and it's at $12, well you better be getting some pretty damn good royalty deals otherwise it seems you are just "buying royalties cuz we're a royalty biz and that's just what company's like ours are supposedta do".  I feel like any competent management group should be prioritizing share repurchases when even a modest undervaluation exists simply because it should be the assets they know best and have the most control over.

[linealdin]

I agree with the above. Except debt has to be the first priority of any truly conservative management team. Debt can kill if it isn’t managed correctly.

 

Altius has C$125 million in traditional debt. It must be serviced quarterly, with extra principal payments when possible. Appropriate cash to debt ratios must be maintained to satisfy lender convenants. No one wants penalty interest rates kicking in or loans being called in for convenant violations.

 

Buybacks will happen but only at lower prices, and in modest increments. There are other pressing uses for cash.

[mscotten]

I’ve noticed in watching altius over the years that they start to buy back their own shares when the price drops below 12. About 24 months ago, they used to buyback anytime the stock dropped below 10. I think they have an arrangement with their broker to buyback whatever they can below 12. There’s not much volume so this limits their buyback volume.

[linealdin]

Thought experiment. It’s December 2013. Instead of using C$200 million and a lot of debt to purchase a bunch of coal, potash, copper, iron ore and zinc royalties over the next 5 years Altius decides to use the C$200 million to repurchase half of its own stock over the next couple of years. It’s debt free and its remaining shareholders have a much greater portion of the world class Voisey’s Bay royalty which pays C$3 million annually. And there’s an operating Kami to look forward to.

 

It all works fine until Vale stops paying the Voisey’s Bay royalty and Kami flames out. Altius drops to a C$15 million market cap.

 

*

 

Diversification (which happens when you purchase lots of royalties) is a good thing.

 

Size can be a good thing. You need to gain weight (C$70 million annual royalties is a start) so that banks take you seriously and give you C$225 million credit facilities. The best operators in mining are very large organizations. You need to gain weight (cash hoard and solid credit) to finance Tier 1 mines run by worldclass operators.

 

That’s the future I see for Altius: a diverse royalty portfolio and enough weight and credibility to pull off C$1 billion royalty deals on Tier 1 mines (syndicated with pension funds or other big hitters).

 

 

[linealdin]

Altius in 2013 was valued based upon its Voisey’s Bay royalty, its Alderon equity/royalty, and its cash position. Two of those 3 were worth very little a few years later. Altius narrowly avoided extreme danger by buying a lot of excellent producing royalties.

[linealdin]

https://www.google.com/amp/s/www.cbc.ca/amp/1.4710499

 

Derek Wilton, professor at Memorial University, is mentor to the Altius founders. He comments that Vale will likely find more ore bodies once they start mining underground at Voisey's Bay. Altius always expected Voisey to be a very long life mining district, like Norilsk which has been mined for nearly a century.

 

“So Vale is going underground, where ore bodies about the same size as the Ovoid have been found. And there's significant upside on the exploration front, with the potential for more expansion in the future.

 

“Vale has estimated the mine's lifespan will be extended by 15 years, but many believe that's a very conservative number.

 

‘They've got 15 years worth of minable reserves right now but when they get underground they're probably going to find a lot more,’ said Wilton.”

[linealdin]

https://s21.q4cdn.com/266470217/files/doc_presentations/2018/18-06-11-Voisey's-Bay-Acquisition-FINAL.pdf

 

See slide 11 of this Silver Wheaton presentation on underground exploration targets at Voisey’s Bay.

 

The discovery holes are already there. They just need more drilling to convert these areas to resources and reserves. They are spectacular drill holes:

 

50.2 meters of 1.8% nickel, 0.9% copper

33.4 meters of 2.1% nickel, 0.8% copper

37 meters of 1.4% nickel, 0.9% copper

29.5 meters of 1.6% nickel, 0.6% copper

 

If a junior press released assay results like this their stock price would multiply and there would be a staking rush around the discovery claims. All the drill holes cited above are in current non-resource areas.

 

Vale is certainly going to find more ore bodies underground the size of the Ovoid open pit currently being depleted. It’s just a matter of committing the drill holes. It will be easier for Vale to drill in deeper areas once the underground mine workings for Eastern Deeps and Reid Brook are completed.

 

I believe Voisey’s Bay has a chance to still be operating in the next century. That’s why the royalty trial starting on September 10th is crucial.

[linealdin]

Altius paid C$13 million for the Voisey’s Bay royalty. They’ve received C$32.131 million in royalty revenue over a 10 year period (payments began in 2006 and ended in early 2016.)

 

If Voisey’s Bay operates for as long as I think it will (another 50 to 80 years) then Altius is set to receive another C$150 million to C$250 million in royalty revenue over the life of the mine.

 

It doesn’t seem fair to pay so little and gain so much but that’s how royalties work.

 

 

[linealdin]

The original Voisey’s Bay royalty agreement that Chris Verbiski and Al Chislett signed with Diamond Fields, which Altius and Royal Gold will try to enforce in a Newfoundland court next month, is a completely standard net smelter royalty agreement.

 

The same type of NSR agreement, with the same or similar contractual language, has been signed by thousands of prospectors, mining companies large and small, and even provincial governments. The net smelter royalty is one of the building blocks of resource exploration in Canada.

 

If a Newfoundland court applies a radical interpretation of the Voisey’s Bay NSR, allowing Vale to deduct the capital expenses of building its nickel processing plant, it will shake the foundations of the mining industry in Canada. It would create the precedent for thousands of royalty-related lawsuits. Pure chaos.

 

Somehow I don’t think that’s going to happen. Not in Newfoundland.

 

[linealdin]

https://www.streetwisereports.com/article/2018/08/15/prospect-generator-got-away-but-now-returns.html?utm_medium=feed

 

Adrian Day on Evrim and Cuale specifically:

 

“The drill permit has been delayed for a minor environmental report, but results from the trenching and geophysics are expected soon. This might provide an idea of the extent of the outcropping mineralization at the first zone, La Gloria; the potential for new zones, including on nearby hills; and an idea of potential at depth. Drilling will commence as soon as the company receives its permit, perhaps next month. The proof of the pudding will be in the drilling, of course. As a high sulphidation system, ounces could grow quickly; it's no surprise that several majors are looking at the project already. Other similar systems have been gobbled up very early in the exploration process, one after 20 holes, another after just seven.”

 

*

 

1) Drill permit for Cuale delayed until perhaps September because an environmental report is required.

 

2) That does give Evrim a breather to examine the results of the recent trenching and geophysics program which will be released soon. Those results should help with drill targeting.

 

3) No rush to drill. The climate of Cuale, near the resort of Puerto Vallarta, is temperate and the exploration season is year-round.

 

4) Majors looking to buy Cuale if drill results confirm a high sulphidation gold deposit. A sale could happen as early as after the first 3000 meters of drilling by Evrim.

 

5) Day estimates the Ermitano 2% royalty could bring in C$30 million in revenue to Evrim over the life of the deposit if First Majestic feeds the ore into the Santa Elena processing plant.

[linealdin]

Ermitano has a maiden resource of 40.8 million ounces of silver equivalent, or 562,000 ounces of gold equivalent. At current gold/silver prices and USD/CAD exchange rates I calculate only C$16 million or C$17 million in potential royalty revenue going to Evrim.

 

Of course First Majestic has continued to get excellent drill results since the maiden resource for Ermitano was announced in April. The resource will grow.

[linealdin]

If Evrim can sell Cuale to a major for US$100 million or more they will have some interesting choices:

 

1) Dividend the big score directly to shareholders. Altius benefits by being a big shareholder of Evrim (17% including warrants).

 

2) Keep the cash and try to transition into becoming a gold royalty company by buying royalty assets.

 

3) Sell all of Evrim to the major, not just Cuale, for the highest price possible.

[linealdin]

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSKCN1L61DM

 

BHP confirms that Samarco iron ore mine is unlikely to restart in 2019. A deal to build a new tailings dam system has to be reached with Brazilian prosecutors first. No timeline offered for that.

 

Samarco had 30.5 million tonnes of direct reduction pellet capacity before the environmental disaster. They were IOC’s main competitor in the pellet market.

 

Now IOC has a clear runway to enjoy years of record-breaking pellet premiums.

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/02011446.pdf

 

PolarX hits some modest grades starting 100 meters below the current Zackly resource:

 

25.5 meters of 0.6% copper, 1.1 g/t gold, 5.5 g/t silver

13.9 meters of 0.6% copper, 1.1 g/t gold, 4.7 g/t silver

4.7 meters of 1.3% copper, 2.1 g/t gold, 10.6 g/t silver

 

Zackly’s resource should expand with more infill drilling at depth and along strike, though the grades remain modest. Altius holds a 2% royalty on the precious metals and a 1% royalty on the copper.