ALS.TO - Altius Minerals

[linealdin]

more assays from sokoman

https://ceo.ca/@fscwire/sokoman-receives-western-trend-assays-at-moosehead

 

As expected from the Western Trend: narrow, high grade and shallow gold mineralization. The market will disregard 1.05 meters of 207.5 g/t gold. (Market much prefers 207.5 meters of 1.05 g/t gold, even though the narrow high grade vein should be cheaper to mine.)

 

The real game is the 10,000 meter drill program to follow up on the recent discovery hole.

[linealdin]

https://banyanhill.com/nutrien-capture-market-grow-earnings/

 

Good overview of the potash market from its peak of US$900 tonne in 2008 to today. Everybody loved potash in 2008. Fortunes were made in the run-up to $900. Reminder that today we are still near the bottom of the potash commodity price cycle.

 

SQM, a Chilean potash producer, was so discouraged by the potash bear market it became a lithium producer.

 

Nutrien (Rocanville) took advantage of the low prices to grow its market share. As the lowest cost producer it survives while its upstart competitors die in the development process. Nutrien now supplies 25% of the world’s potash demand.

 

Nutrien believes it has the market power to manipulate the potash price to a level that will be robustly profitable for Nutrien but will keep BHP from investing the $5 billion to build its Jansen potash mine (which will likely take until the mid-2020’s to deliver new supply to the market).

 

US$350 is probably the ideal price for Nutrien. (BHP needs US$400 to sanction Jansen.) I expect further incremental supply restrictions from Nutrien’s higher cost mines until we reach a market price of $350.

[linealdin]

Altius adds the Cuale gold-silver royalty to the Altius website’s “development stage” royalties section (along with Gunnison, CMB uranium and Kami), despite zero meters having been drilled on the property. They obviously really like the Newmont investment.

[bizaro86]

Altius adds the Cuale gold-silver royalty to the Altius website’s “development stage” royalties section (along with Gunnison, CMB uranium and Kami), despite zero meters having been drilled on the property. They obviously really like the Newmont investment.

 

Seems fair, as I think Cuale becomes a mine sooner than the uranium... I'm kind of hoping Cuale gets built, Vale loses the lawsuit, and ALS trades a precious metals royalty to Royal Gold for a bigger piece of Voisey's Bay and Allen (potash) royalties. I think there would probably be an accretive transaction there for ALS somewhere.

[linealdin]

Exploration season at Altius’s Manitoba diamonds project is over at the end of October. They need to get moving with the diamond spinout if a bulk sampling program is to be completed in 2018. I expect news imminently.

[linealdin]

https://www.google.com/amp/s/www.bloombergquint.com/business/2018/08/30/how-rising-prices-of-iron-ore-pellets-are-helping-indian-steelmakers.amp

 

“Current offers for pellets in the exports market is $140-150 a tonne compared to $120-125 a tonne in the previous quarter. That’s because of huge European demand due to force majeure at LKAB, said Amit Dixit, analyst at Edelweiss.”

 

Iron ore pellet prices currently up roughly 18% over Q2. 54% of IOC’s sales were pellets in 2017. With this kind of pellet demand IOC will likely try to achieve pellets as 60% of total sales volumes in H2 2018.

[linealdin]

Adventus up to $1 this morning on huge volume (500K share block trade). Altius equity position worth C$15.55 million at that level.

 

The Curipamba PEA to be delivered by February 2019 is the next key turning point for Adventus. The Salazar PEA from 2015 for Curipamba was based on 2000 tonnes per day production. The 2000 tonnes per day was an artificial limit to keep Curipamba from being windfall taxed as a “large” mining operation under the previous tax regime. Kargl-Simard is targeting the largest size operation possible, something between 2500 and 3500 tonnes per day.

 

The Salazar PEA had US$88 million in pre-production capex and a US$87 million NPV (10% discount rate), and 30% IRR. The Adventus PEA should have a modestly higher capex but NPV should be US$200 to US$300 million. Higher production rates, better grades for the resource, revised Ecuadorian tax code for miners.

 

[linealdin]

If Adventus can deliver a US$100 million capex and US$200 million NPV then it becomes of matter of when the Curipamba mine will be built, not if it will be built. Permitting will be the only remaining challenge.

 

That level of pre-production capex won’t be a problem with private equity investors like Greenstone and Resource Capital Funds on board, and with Wheaton itching to sign a stream finance deal.

 

Does Adventus build the mine or do they sell the deposit to a mid-tier copper producer? Investment bankers like Kargl-Simard would probably prefer to transact rather than slog 5 years building a mine.

[linealdin]

https://www.google.com/amp/s/seekingalpha.com/amp/article/4203133-nutrien-potash-markets-swing-producer

 

Detailed analysis of potash market, and Nutrien’s potential to be a swing producer with the ability to control the market price. Key takeaways:

 

1) Very slow ramp-up of new potash mines. Every one of these new mines seems to have water inflow problems and is operating far, far below their targets.

 

2) Potash market could be undersupplied until 2023.

[linealdin]

https://www.marketwatch.com/press-release/canex-metals-announces-financing-2018-08-30

 

Canex Metals announces a C$350K financing, with C$100K lead order by Altius. Canex had working capital of C$432K at the end of June. This financing should be enough to finance a 3000 meter drill program at Gibson (Altius 2% royalty).

 

Best historical drill result at Gibson: 9.18 meters of 7.54 g/t gold equivalent. Fairly shallow.

 

The Ace property has been dropped from the 5 property deal with Canex announced in June because of property access issues.

 

Canex’s market cap is currently a measly C$1 million. Altius getting in at right at the bottom. Any hint of a good drill hole multiples the stock price.

[linealdin]

https://www.thereminder.ca/news/local-news/remnant-strategy-could-extend-777-lifespan-hudbay-1.23413414

 

Hudbay discusses with a local paper its remnant mining strategy for extending 777 past 2021:

 

Hudbay is proposing a new strategy that could extend the life of Flin Flon’s main mine. The strategy includes pursuing reserves with remnants, or small pockets of ore found underground.

 

“They are spread out, smaller in size and more expensive to extract than the ore that is being mined right now,” said Scott Brubacher, Hudbay director of corporate communications.

 

The 777 Mine is currently slated to end production in 2021, but the remnants strategy has become one of the company’s main hopes for extending the mine past 2021.

 

Hudbay teams have found and identified remnant areas at 777 that would require drilling.

 

There is one big obstacle that needs to be overcome in this process, however – whether or not it would be profitable for Hudbay to pursue remnants during the latter years of 777.

[linealdin]

https://www.thereminder.ca/news/local-news/hudbay-working-hard-to-find-new-mines-in-north-1.23413418

 

Another local story about the C$15 million exploration program Hudbay is doing in 2018 to find its next mine in Manitoba. Some of the exploration work is “at and around the 777 mine.”

 

Altius has a 4% royalty on the original 942 hectares of Schedule A 777 mine claims, and has a 3% royalty on 3,111 hectares of surrounding Schedule B claims. (See Settlement of claims between Callinan and Hudbay in December 2014.)

 

Hudbay’s been exploring and mining in Flin Flon for about 100 years. I’m betting they find another deposit on the 4053 hectares of Altius royalty land.

 

The key will be exploring deeper. The top of the 777 deposit is 900 meters deep and goes to 1600 meters deep. The next Flin Flon discovery wuill be that deep.

[linealdin]

https://www.google.com/amp/s/beta.theglobeandmail.com/amp/canada/alberta/article-notley-scraps-plans-to-raise-albertas-carbon-tax-following-court/

 

Alberta premier Rachel Notley scraps the federal climate plan and carbon tax hike in response to Trans Mountain oil pipeline being held up in the courts.

 

Lower carbon tax = more competive position for Alberta’s coal power plants

 

Pipeline not being built = conservatives will return to power in Spring 2019 elections.

 

Conservatives want to scrap the current $30 carbon tax, as well as avoiding the increase to the federal $50 carbon tax.

[linealdin]

Evrim compares Cuale to two other HSE gold deposits in Mexico, La India and El Sauzal, both discovered by Alain Charest, Evrim’s current VP of exploration. Those two mines establish the benchmarks for what a sale of Cuale would reap.

 

La India was sold at 1.2 million ounces gold to Agnico-Eagle for C$275 million in 2011.

 

El Sauzal was sold at 1.75 million ounces to Glamis Gold (later Goldcorp) for C$344 million in 2002.

 

If 1.5 million ounces can be established at Cuale then C$300 million is a reasonable sales price.

 

Altius, with exercise of 2 million warrants and possible minor participation in future financings, should be able to maintain 15% equity in Evrim. A C$300 million sale would net Altius a C$45 million windfall.

 

*

 

The 1.5% precious metals royalty on Cuale is somewhat less valuable. 1.5 million ounces of production at the current gold price and exchange rates would net Altius only C$35 million over the total mine life (over a 10 or 15 year period).

 

Chapada might bring in C$20 million in revenue this year. The scale of base metal and bulk commodity mines is just so much larger compared to most gold mines. A reason to dislike the gold royalties business.

 

 

[linealdin]

A couple of details about recent potash acquisitions I had missed:

 

1) The net price of the Liberty Potash portfolio was C$63.437 million, not the C$65 million headline price. The acquired joint venture vehicle came with a little over C$1.5 million in cash.

 

Makes the deal even better.

 

2) Altius spent C$740K acquiring additional potash royalty interests from 3rd parties during Q2. See the Q2 MD&A “Investing Activities” section.

 

These unitized royalty areas for Rocanville and other mines have many different owners. Altius is consolidating these interests while the potash price is still fairly close to the bottom of the cycle. I love how much they love potash.

[linealdin]

https://luminagold.com/projects/exploration-concessions/anglo-american-earn-in

 

Adventus signed the Curipamba deal in September 2017, right before mining property values in Ecuador started to skyrocket (because of changes to the mining tax code). Adventus signed a deal paying US$25 million for a 75% interest in Curipamba, a property with a significant 8.8 million tonne resource at high grades.

 

6 months later Anglo-American signed a deal with Lumina Gold for property surrounding Curipamba. Right next door, but no resource, no drilling results. Anglo had to pay US$57.3 million in staged payments for 60% interest in the property.

 

More than double the price, for a lower interest, in a property with no established resources.

 

Adventus’s timing was very, very lucky. The price they sell Curipamba for will prove that.

[linealdin]

A note from Cormark Securities about Evrim Resources:

 

“A little junior we recently marketed (Evrim – EVM CN) just got a no-strings-attached injection ($7 MM) from Newmont at a 39% premium. Evrim is a prospect generator (existing deals with First Majestic, Coeur, Newmont, Vale) and backed by Altius (largest shareholder). The stock has been a huge performer this year off the back of its “Cuale” discovery (13.17 g/t Au over 106 m in a trench). Cuale Evrim is permitting to drill the maiden hole at Cuale discovery (Mexico)… the current surface sampling footprint is 300 m x 700 m… looks like a flat-lying vein with strong Au/Ag grades. Based on the topography (and lack of base metals) Cormark thinks it’s a fairly well preserved high-level epithermal system. If they can show at least some depth extend (~10 m) we are looking at a >1 MMoz + oxide high grade (>2-3 g/t) pit.”

 

*

 

1 million+ ounces at 2.5 g/t gold of a high sulphidation epithermal system, at surface open pit, will be very attractive to a major. C$250 million?

 

Cormark’s take is that the mineralization only needs to be 10 meters thick to establish 1 million ounces. I will be watching the drill assay results at Cuale with that in mind.

 

[linealdin]

These are the grades for the deposits Cuale is compared to.

 

Agnico-Eagle’s La India: 0.88 g/t gold

 

Alamos Gold’s Mulatos: 1.64 g/t gold

 

Goldcorp’s El Sauzal: 3.37 g/t gold

 

*

 

For this type of high sulphidation deposit, flat-lying at surface open pit, easy to process, even 1 g/t gold is economic. No need for bonanza grades.

 

Any drill assays approaching the trench grades at Cuale would be a home run.

[linealdin]

Paul Gait of Bernstein Research (London) is making a call that 2018 and benchmark prices of US$60 to US$65 are a bottom for the iron ore price cycle. Gait sees increasing iron ore demand and decelerating production in the 2019 to 2025 period. A contrarian call.

[linealdin]

 

2) Altius spent C$740K acquiring additional potash royalty interests from 3rd parties during Q2. See the Q2 MD&A “Investing Activities” section.

 

These unitized royalty areas for Rocanville and other mines have many different owners. Altius is consolidating these interests while the potash price is still fairly close to the bottom of the cycle. I love how much they love potash.

 

The C$740K was paid to various royalty holders in Unit 2 of Rocanville. The landowners were offered the same terms (in a letter campaign) as McChip Resources received for its royalty land in Unit 2.

 

McChip closed in November 2017. Potash prices have risen significantly since then. Getting the same deal as McChip may not be a such a great deal for these landowners. But Altius is offering the hard cash and is probably the only bidder.

 

The Unit 2 royalty area was only created in 2011. This is a new production area for Rocanville and production has been modest so far. So the landowners haven’t been spoiled by a long history of royalty payments.

 

Altius is bidding aggressively because eventually Unit 2 will replace a mined out Unit 1 as the primary source of ore for Rocanville. Unit 2 is 28% larger than Unit 1 so it is the future.

 

[linealdin]

Evrim pops to C$1.40. Altius total equity position (with 2 million exercised warrants) would be worth C$18.85 million at that level. How high does it go with a good drill hole at Cuale?

 

There’s an easy path to a nice C$50 million to C$75 million cash out for Altius based on the sale of Cuale.

 

My contention is Altius will take out C$500 million hard cash from the project generation portfolio during a long bull market. Cuale will be the first chip.

[mugwump]

why does sokoman need an investor relations firm?

https://ceo.ca/@fscwire/sokoman-iron-retains-chf-capital-markets

money down the drain

[nostradamus]

 

2) Altius spent C$740K acquiring additional potash royalty interests from 3rd parties during Q2. See the Q2 MD&A “Investing Activities” section.

 

These unitized royalty areas for Rocanville and other mines have many different owners. Altius is consolidating these interests while the potash price is still fairly close to the bottom of the cycle. I love how much they love potash.

 

The C$740K was paid to various royalty holders in Unit 2 of Rocanville. The landowners were offered the same terms (in a letter campaign) as McChip Resources received for its royalty land in Unit 2.

 

McChip closed in November 2017. Potash prices have risen significantly since then. Getting the same deal as McChip may not be a such a great deal for these landowners. But Altius is offering the hard cash and is probably the only bidder.

 

The Unit 2 royalty area was only created in 2011. This is a new production area for Rocanville and production has been modest so far. So the landowners haven’t been spoiled by a long history of royalty payments.

 

Altius is bidding aggressively because eventually Unit 2 will replace a mined out Unit 1 as the primary source of ore for Rocanville. Unit 2 is 28% larger than Unit 1 so it is the future.

 

Hey Linealdin,

 

Could you help explain how the potash royalties work in terms of scope of land covered? I see from the Altius website that Rocanville generated $4.5m in royalty revenue during 2017 and that the mine has an estimated life of 52 years. Which sounds great, but then I start to get a bit confused when I see that Altius is spending money to buy royalty areas that are not yet in production. Does this mean that there are areas of the mine that are not covered by the existing royalties of Altius? Ie is there a risk that during the 52 year period the mine moves out of areas covered by the Altius royalty and so the royalty revenue drops? Or is it the case that the Altius royalty covers everything, but the additional royalties it is purchasing (McChip and recent C$740K purchase) only cover specific areas? Ie, there will be an increase in royalty revenue when these additional areas are being mined, and a decline when the mine moves on to other areas.

 

As you can see, I'm pretty confused. Any help you can provide will be much appreciated.

 

Cheers

 

N.

[linealdin]

On Rocanville:

 

First of all please disregard C$4.5 million 2017 Rocanville income. The game has changed.

 

Q2 2018 Rocanville, including the Liberty Potash income, came to C$2.509 million, or over C$10 million on an annual basis. Maybe higher once some of the new incremental Rocanville acquisitions (which are continuing this quarter) are incorporated.

 

Currently there are two royalty areas for Rocanville, Unit 1 and Unit 2. The original Prairie/CDP  Royalties package had interests in both units. But there are many other small royalty holders in both units, who receive royalties on a unitized basis depending on how much royalty land they own. Altius’s recent efforts have focused on consolidating royalties from Unit 2 (McChip and the letter campaign to small owners).

 

Unit #1 is where most of the 52 year reserves are currently located. It is obviously nowhere near mined out. But Nutrien, for various reasons, has developed a shaft in the heart of Unit 2, and started expanding the mining area. Most of Unit 2 is indicated or inferred resources at the moment.

 

Over the long term a Unit 3 royalty area will likely be created. Altius also has royalty land over what would be Unit 3.

 

The best overview of Rocanville, including maps of the royalty units, and maps of reserves/resources, is a technical report filed by Nutrien on SEDAR in February.

[linealdin]

Will Altius royalty income from Rocanville rise or drop once the majority of the ore is mined from Unit 2 instead of Unit 1? That I’m not sure of. The tipping point from Unit 1 to Unit 2 is a long ways away.

 

Altius is doing its best to secure all the future mining areas for Rocanville. If Rocanville is in operation in 100 years Altius will be getting a healthy royalty.