ALS.TO - Altius Minerals

[TwoCitiesCapital]

altius transfer interest in lynx project to adia

https://ceo.ca/@businesswire/altius-transfers-lynx-diamond-project-to-adia-resources

 

Nice! De Beers! Seems like big news.

 

A 2.5% royalty should be a nice addition to the revenues if this turns into something.

[mugwump]

wolfden drill results

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

[linealdin]

wolfden drill results

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

 

I really like this drill hole. It’s a spectacular amount of zinc and silver, backed by economic grades of copper and gold. The drill hole is deeper than historic drilling so the total resource should expand.

 

The highest estimate of the historic resource is 3.2 million tonnes at 11.25% zinc, 4.82% lead, and 1.45% copper. See: http://www.gsmmaine.org/wp-content/uploads/2010/02/A-History-of-non-ferrous-metal-mining-and-exploration-6.pdf

 

The 43-101 resource update, due in Q4, has to significantly increase beyond that 3.2 million tonnes to put the deposit in play. 5 million tonnes would be a start, and discovery of another VMS lens on the property is probably necessary.

 

Wolfden is drilling highly economic rock, they just have to find more of it to justify the expense of building an underground mine.

 

Expect Wolfden to complete the minimum US$5 million timber sale by this November 14th. Otherwise Altius gains a powerful conversion right: they can ask for return of the US$7.5 million they paid for the Pickett royalty (up to 20% of the equity of Wolfden and the rest payable in cash, or even all cash). Money back guarantee.

[linealdin]

https://wcsecure.weblink.com.au/pdf/PXX/02025830.pdf

 

https://wcsecure.weblink.com.au/pdf/PXX/02024223.pdf

 

A couple more solid drill holes from PolarX:

 

47 meters at 3.1 g/t gold, 0.6% copper, and 3.3 g/t silver.

 

15 meters at 2.2 g/t gold, 2.3% copper and 11.9 g/t silver.

 

The Alaska Range project has a chance to be something interesting. Altius holds a 2% royalty.

 

 

 

[linealdin]

Adia Resources blue sky potential:

 

Sandstorm Gold bought a 1% royalty on Diavik, a large Canadian diamond mine, a few years ago. They expect US$7 million or US$8 million in annual revenue from that royalty.

 

If the Lynx project becomes a mine it will likely be larger than Diavik (size of the diamond-bearing unit is potentially much larger). Altius’s 2.5% royalty would yield C$25 million a year or more if Lynx is the size of Diavik. Maybe a 20 to 25 year mine life.

 

There are no small diamond mines in Canada. It will either be big or it won’t be developed.

 

And before any construction or production one of the diamond majors involved as strategic investors would have to buy Altius’s controlling equity stake (currently 50%, likely below 40% after the IPO). Potential to net hundreds of millions in that sales process.

 

All of this blue sky potential will start to materialize if the bulk sample (which should happen in 2019) contains economic grades of diamonds.

[linealdin]

https://www.releases.gov.nl.ca/releases/2018/exec/0925n03.aspx

 

“Today, the Honourable Dwight Ball, Premier of Newfoundland and Labrador, and Clayton Walker, President and CEO, Iron Ore Company of Canada, officially opened Wabush 3 in Labrador West. Also attending the event was the Honourable Siobhan Coady, Minister of Natural Resources and Graham Letto, Parliamentary Secretary for Natural Resources and MHA for Labrador West.

 

“Wabush 3 is a new open pit that will extend the life of the current mine by approximately 50 years, maintain production of high quality grade iron ore concentrate and pellets, and secure employment.”

 

*

 

Wabush 3 pit extends IOC another 50 years taking the mine life to September 2068. Current Altius presentation shows only 25 years of reserves at IOC. The reserves understate the potential mine life.

 

And Wabush 3 is just one pit! IOC has more deposits, including direct Altius 3% royalty land (Goethite Bay discovery). If the world still needs quality iron ore in the next century it’s likely IOC will still be in operation in the next century.

 

From what I remember of news stories from last year Wabush 3 will be cheaper to mine (less waste material) thus making IOC more competitive on a cost basis. It will also help IOC ramp up to full production at 23 MTA. (Only 20.2 million tonnes of total concentrate production in 2017.)

[linealdin]

http://avrupaminerals.com/news/index.php?content_id=289

 

Terrible drill results from the Alvito IOCG prospect (Altius 1.5% royalty and Avrupa equity position).

 

Best results: 86.3 meters of 0.16% copper and 44.65 meters at 0.21% copper.

 

Does Oz Minerals fund deeper drilling or do they drop the property?

[linealdin]

http://www.adventuszinc.com/storage/presentations/adzn---corporate-presentation---sept-2018-final-1537796284.pdf

 

Updated Adventus presentation:

 

1) Permits for small scale mining (1000 tonnes per day) have already been obtained for Curipamba. This will be considered as a low capex, fast track operation.

 

Already permitted! I love Ecuador as a jurisdiction. Permitting a lot easier than Canada.

 

2) Pijili drilling could begin as early as Q4 2018.

 

3) Updated global copper drill hole benchmarks. 4 of Adventus’s drill holes rank very high.

[mugwump]

evrim trench results

https://ceo.ca/@nasdaq/evrim-extends-outcropping-gold-mineralization-at-cuale

[linealdin]

http://www.evrimresources.com/s/news-releases.asp?ReportID=837039

 

This version of the Evrim PR has cleaner pictures:

 

1) Trench results are as expected. Long and moderate economic grades.

 

2) The CSAMT survey results are exciting. 200 to 300 meter thick ore body beneath the discovery trenches. 400 to 450 meter thick ore body beneath the Wifi zone, the northwest extension to the discovery trench area. Plus North Dome and various deep feeder zone targets.

 

3) Drill targeting should be easy with the CSAMT survey. Drill permits are taking longer than expected. It took Evrim 5 years to secure ownership of Cuale after it was staked in 2012 in the Callinan Generative alliance. This is why Mexico is low-ranked by the Fraser Institute mining district attractiveness index. Slow permitting and the threat of cartel violence.

 

*

 

I think we’re looking at a multi-million ounce gold deposit grading 1 to 2 g/t. Perfectly economic because it is high sulphidation epithermal and open pit.

[linealdin]

https://www.alderonironore.com/images/pdf/2018/20180926_IRON_Alderon_Releases_Updated_Feasibility_Study_FINAL.pdf

 

Kami updated feasibility study results:

 

Initial Capex: US$982.4 million

Post-tax NPV(8% discount rate): US$866 million

Post-tax IRR: 18.2%

Opex: US$30.72 per tonne

FOB Sept-Iles sales price: US$73.17 per tonne

 

*

 

Fails the rule of thumb that the post-tax NPV should exceed the initial capex.

 

I like the operating margin (FOB price minus opex) of US$42.45 per tonne.

 

Capex is still too high. If it were cut to US$675 million then Kami would probably be built.

 

*

 

Immediate task for Alderon: Taking the updated feasibility study on a road show for potential strategic investors. Sign up a couple of new private equity funds in the next 6 months. Pay back the US$14 million loan to Sprott/Altius. The stock will run up with new strategic investments.

 

[linealdin]

Alderon up 15% to 31.5 cents. Altius position is worth C$16.546 million.

 

Evrim up 7% to C$1.54. Altius total potential position (including exercised warrants) is worth C$20.736 million.

 

The market approves of these developments.

[mikek]

Looks like Alderon just threw away some more money. That feasibility study looks pretty much like the last one. Is that like the 3rd or 4th feasibility study that these guys have done? No one is going to look at that study and say - wow, I think we should put our capital here!

 

Shouldn't the value of Champion Iron show that Alderon has absolutely no hope of raising 1 billion US to get that built?  Why do they keep wasting money with these studies.  Bloom Lake and Alderon aren't the same projects/ economics but I'm not seeing the logic behind anyone paying that amount to get that built.  These aren't completely different projects/locations.  What am I missing?

[linealdin]

The Cattlin lithium royalty purchase did close in July. If Altius did its optional 10% participation it would have paid A$1.1 million.

 

I estimate Altius’s annual royalty take at A$260K at current production levels.

 

Under the terms of the deal Altius receives all of the Q3 Cattlin royalty entitlement and 2/3 of the Q2 royalty. So Altius gets around A$108K royalty payout in their current quarter.

 

The C$7 million lithium investment Altius paid for was Lithium Royalty Corp equity AND for two 10% co-investment royalty deals.

 

The current quarter will also see payments for both Q2 and Q3 of Voisey’s Bay.

 

Should be an excellent quarter.

[linealdin]

I think Altius paid around C$5 million for its 12% founding equity stake in Lithium Royalty Corp. This values LRC as a private company at C$41.67 million. LRC, once it gains enough royalty revenue, will attempt to IPO at a double or triple that valuation. It’s going to be a public company.

 

I believe the additional C$2 million of the total C$7 million lithium investment was allocated to the A$1.1 million Cattlin royalty purchase and one other undisclosed royalty purchase.

 

We should see some confirmation in the Altius Q3 financials.

 

 

[linealdin]

Looks like Alderon just threw away some more money. That feasibility study looks pretty much like the last one. Is that like the 3rd or 4th feasibility study that these guys have done? No one is going to look at that study and say - wow, I think we should put our capital here!

 

Shouldn't the value of Champion Iron show that Alderon has absolutely no hope of raising 1 billion US to get that built?  Why do they keep wasting money with these studies.  Bloom Lake and Alderon aren't the same projects/ economics but I'm not seeing the logic behind anyone paying that amount to get that built.  These aren't completely different projects/locations.  What am I missing?

 

Champion’s at a half a billion market cap and just achieved full ramp-up at the end of June. We’ve yet to see what kind of profits Champion is making at full commercial production. Champion will likely reach a C$1 billion market cap over the next year. Don’t judge too soon.

 

Alderon’s not going to raise $982 million. Agreed. But it will attract additional strategic investment. The Sprott/Altius loan will be paid back. And the likely endgame will be a modest sale to its neighbors Champion, IOC or Tasca Resources. Something in the C$40 million to C$80 million range. The sale will be supported by the feasibility study just delivered.

 

Altius will do fine in that sale because of its high ownership percentage and incredibly low cost basis. Their royalty will pay no matter who operates the eventual mine.

[StevieV]

Their royalty will pay no matter who operates the eventual mine.

 

However, there needs to be an eventual mine.  Perhaps I misunderstand, but if the CAPEX is too high compared to the NPV, how does the mine get built?  Why would Champion, IOC, etc. build it?  Would their CAPEX costs not be similar?  Sorry if you've addressed this before.

[linealdin]

Their royalty will pay no matter who operates the eventual mine.

 

However, there needs to be an eventual mine.  Perhaps I misunderstand, but if the CAPEX is too high compared to the NPV, how does the mine get built?  Why would Champion, IOC, etc. build it?  Would their CAPEX costs not be similar?  Sorry if you've addressed this before.

 

Geography. Kami is close enough to Bloom Lake, IOC and Wabush’s operations to be a satellite pit for any of their operations.

 

Blow it up, crush it with an in-pit crusher, then transport by conveyor belt to existing processing facilities. Can reduce capex by a lot.

 

Even if the acquirer wanted to build a separate processing facility for Kami the existing producers can take advantage of cost saving synergies. For example, Champion could built one processing plant for Kami and their Moire Lake deposit which almost borders Kami.

 

Why buy Kami? Bloom Lake is likely doing a Phase 2 expansion to 14.8 million tonnes and is even considering a Phase 3 expansion to 22 million tonnes per annum. IOC has studied expansion to 30 MTA and beyond. They will need near-mine, fully permitted resources to support those expansions.

 

 

[linealdin]

All the northern Labrador Trough iron ore deposits (Labmag, Kemag, Attikamagen, Lac Otelnuk, Snelgrove Lake, etc) are true stranded assets. They have to wait for infrastructure to come to them.

 

Kami isn’t. It is surrounded by producers. Once Alderon management gives up its hopes for glory (Tayfun Eldem wants to build and run an iron ore mine) then a rational sales process can begin.

 

Alderon’s port rights, permits, and well-located ore body have modest but real value. They will be monetized during this cycle.

[linealdin]

https://www.alderonironore.com/images/Presentation/2018/Alderon_Corporate_Presentation_September_26_v2_2018.pdf

 

New Alderon presentation. Slide 20 has a new project financing schedule.

 

They want to close a new strategic investment by year end 2018. I assume private equity fund. Lots of PE funds that are cashed up and ready to spend. I think this is going to happen.

 

Chinese Export Credit Agency funding by the end of H1 2019. Can Hebei Steel secure this kind of funding for Kami? It would be a game-changer.

 

Hebei is the second largest steelmaker on the planet. It is state owned. Does it need Kami to be built? Is it important enough to China strategically?

 

If the answer is no then Kami isn’t built (by its current management anyway).

 

If the answer is YES then Kami has a shot. Hebei can push a Chinese ECA to give Alderon a US$250 million loan contingent on Alderon organizing the rest of the capex.

 

[linealdin]

https://www.royhill.com.au/wp-content/uploads/2014/03/Roy-Hill-Secures-Debt-Finance-Agreement1.pdf

 

Roy Hill was the last big new iron ore mine built by a non-major. This is the US$7.2 billion debt financing package secured in 2014 before the bottom really fell out of the iron ore market. Alderon is basically following the same financing model, on a much smaller scale.

 

US$10 billion capex, 70/30 debt to equity financing.

 

Roy Hill owns 70% on the project level, a consortium of Asian steelmakers own 30%. (Alderon and Hebei own Kami on a 75/25 basis.)

 

The US$7.2 billion in debt was cobbled together from loans and loan guarantees from 5 Korean and Japanese export credit agencies and a consortium of 19 international commercial banks. One of the lead arrangers: BNP Paribas. (BNP Paribas was lead arranger for Alderon’s failed construction financing attempt in 2014. Alderon plans to secure loans and loan guarantees from at least one Chinese export credit agency and a consortium of banks.)

 

*

 

You can’t compare the capex of an iron ore mine to that of a gold mine. Apples to apples Kami is not particularly expensive compared to other global iron ore development projects. Like Roy Hill just about every iron ore project needs a long new railway and a new port. Kami has those essential things already therefore its capex is comparatively low. US$982 million is low capex for a major industrial operation.

 

If China and the world needs another independent source of high quality iron ore then Kami is a strong candidate. Do Hebei and the Chinese state need an independent source of supply or are they happy to buy high quality ore from Vale?

 

Hebei has to press the button for a Chinese export credit agency to provide the initial loans and loan guarantees. That changes everything.

 

 

[linealdin]

Kami’s projected capex per tonne (US$982.41 million capex / 7.84 million tonnes annual production) is US$125.3 per tonne. That is in the bottom quartile of recent global iron ore projects (developed and undeveloped).

 

http://blackiron.com/wp-content/uploads/2017/11/201711_BKI_CorpPres-new-PEA-2.pdf

 

See slide 16 of this 2017 Black Iron presentation. Kami decreased from US$128 to US$125 per tonne with the updated feasibility study.

 

Is it possible none of the undeveloped projects are ever built? Sure, maybe the world has all the iron ore it needs.

 

But if the world does ever need new sources of iron ore, especially high quality ore, then Kami is competitive on a global basis.

 

 

 

[linealdin]

The latest feasibility study projects that Kami will be significantly less capital intensive than recently built mines like Rio Tinto’s Pilbara mines, BHP’s Rapid Growth Projects in Western Australia, or Anglo-American’s Minas Rio mine.

 

That surprised me. I thought the majors had all these cost advantages. Not true. The majors just have access to capital to build what they want to build.

 

But Kami as good or better than those projects by objective measures.

[linealdin]

https://www.linkedin.com/pulse/polar-x-continues-extend-high-grade-zone-zackly-cu-au-daniel-bloor?trk=portfolio_article-card_title

 

Interesting article examining how PolarX’s Zackly copper equivalent drill results stack up to other copper drill results in 2018.

 

Zackly median copper equivalent grades come in 3rd (right after Curipamba) and are at a relatively low depth (open pit).

 

Curipamba’s top drill results at 7% copper equivalent stand out far above peer results. And the low depth of all its drill results are also highly positive.

 

I like Curipamba a lot better (super high grade and easier development environment) but Zackly stacks up nicely. Good that Altius has royalties on both.

[hohi]

Curipamba’s top drill results at 7% copper equivalent stand out far above peer results.

 

Don't get me wrong, those are good results. But they are not the best results worldwide. Just have a look at Ivanhoe Mines Kakula. That's a Tier1 deposit. Or some of the Norilsk deposits. They have both tonnage and grade. However, Curi is a great asset. Just wanted to put it into perspective.

 

Keep it coming linealdin, you provide fantastic information and I really appreciate it.