ALS.TO - Altius Minerals

[linealdin]

I expect Altius Q3 royalty revenue to beat Q2’s mark of C$16.5 million.

 

Copper and zinc prices will be down for the quarter but not as much as you would expect. Altius has lag effects in its royalty pricing. The market price dump won’t kick in completely and immediately. Potash prices up.

 

Positives will be the special dividend from LIF, a double catch-up payment from Voisey’s Bay, and possibly lithium royalty payments from the Lithium Royalty Corp co-investments ($100K from the Cattlin royalty, perhaps).

 

C$18 million for Q3?

 

"I expect Altius Q3 royalty revenue to beat Q2’s mark of C$16.5 million."

 

Right on that count.

 

"C$18 million for Q3?"

 

Good bit short yet.

 

Final revenue numbers are generally trend slightly higher than these preliminary numbers. There's usually some project generation revenue that trickles in. Altius gets management fee revenue for managing exploration programs for Canex, Adia, Sail Pond etc. But point taken.

 

Why didn't Altius reach C$18 million for the preliminary numbers? No revenue yet from Voisey's Bay for some reason. The press release says there will be resumption of royalty payments in "coming quarters." I expected a double payment for Q2 (catchup) and Q3 (payable October 15th but attributed to Q3). What happened to those payments?

 

No lithium royalty payments yet. The 2 deals Altius co-invested in with Lithium Royalty Corp didn't close in Q3?

[linealdin]

"The largest factor causing the lower revenue was therefore an unusual election by LIORC to withhold a significant portion of the free cash flow that it generated during the quarter, which it has more typically paid out to shareholders as dividends."

 

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Some grousing by Altius at LIORC not paying out its usual share of free cash flow. It could have been an 80 cent dividend for the quarter, with the huge IOC dividend and excellent sales numbers. My understanding is that LIORC is rebuilding its cash position, which was drawn down maintaining the 25 cent dividend in the strike quarter, and preparing for the purchase of a copper royalty (if the bylaw change is approved by shareholders).

 

These complaints by Altius indicate they will vote NO to the proposed bylaw changes. They just want their pass-through royalty revenue from IOC. Not interested in creating a competitor.

[linealdin]

The 350,000 LIF shares purchased in Q3 could have been purchased in the C$23 to C$24 range if Altius was disciplined enough. There were numerous dips to that range in July and early August.

 

350,000 shares x C$24 a share = C$8.4 million.

 

That's a big purchase. Why buy more shares? Settlement of the strike brings labor certainty for the next 5 years. The Wabush 3 pit coming online in September extends mine life at IOC by 10 years. That's material.

 

Perhaps there is potential of a buyout or partial buyout in the near future. If Rio Tinto sells its 58.7% of IOC then LIF will likely have an opportunity to cash out its 15.1% of IOC in a tag-along deal.

 

Anglo Pacific Group stated that it bought its 4.25% stake in LIF at C$24 a share because it believes there's the potential of expansion at IOC in the near future.

[StevieV]

I expect Altius Q3 royalty revenue to beat Q2’s mark of C$16.5 million.

 

Copper and zinc prices will be down for the quarter but not as much as you would expect. Altius has lag effects in its royalty pricing. The market price dump won’t kick in completely and immediately. Potash prices up.

 

Positives will be the special dividend from LIF, a double catch-up payment from Voisey’s Bay, and possibly lithium royalty payments from the Lithium Royalty Corp co-investments ($100K from the Cattlin royalty, perhaps).

 

C$18 million for Q3?

 

"I expect Altius Q3 royalty revenue to beat Q2’s mark of C$16.5 million."

 

Right on that count.

 

"C$18 million for Q3?"

 

Good bit short yet.

 

Final revenue numbers are generally trend slightly higher than these preliminary numbers. There's usually some project generation revenue that trickles in. Altius gets management fee revenue for managing exploration programs for Canex, Adia, Sail Pond etc. But point taken.

 

Why didn't Altius reach C$18 million for the preliminary numbers? No revenue yet from Voisey's Bay for some reason. The press release says there will be resumption of royalty payments in "coming quarters." I expected a double payment for Q2 (catchup) and Q3 (payable October 15th but attributed to Q3). What happened to those payments?

 

No lithium royalty payments yet. The 2 deals Altius co-invested in with Lithium Royalty Corp didn't close in Q3?

 

FWIW, I wasn't complaining about your estimate.  Just following up on the post.  I am glad that you made one and provided the comments above about the differences.

[linealdin]

http://altiusminerals.com/uploads/2018-10-17-October-Investor-Presentation.pdf

 

Voisey's Bay revenue is included in Q3. See slide 10 above from the new presentation. Nickel from VB accounted for 2% of Q3 royalty revenue, or C$338K. And a little more royalty income from VB related to cobalt (in the other category) and copper.

[linealdin]

https://www.excelsiormining.com/news/news-2018/excelsior-mining-successfully-concludes-permitting-process

 

Excelsior now fully permitted. Now they just need to get the money to build the mine. They are aiming for initial production in 2019. That seems...ambitious.

 

Excelsior claims it can build out the infrastructure of wellfield, pipelines and evaporation ponds in about 6 months. All off-the-shelf technology. Another 3 months for commissioning of commercial production. They have a major advantage in that their processing facility is built already (Johnson Camp purchase).

 

They really should have the financing package ready to go right now. The permitting delay gave them time to obtain financing commitments pending the final permit.

 

Supposedly there are 40 workers onsite at Gunnison ready to begin construction. Why not production by July 2019?

[linealdin]

http://www.championiron.com/wp-content/uploads/2018/09/CIL_AGM_20180817.pdf

 

Excellent Champion Iron presentation from their AGM:

 

1) Champion selling price is slightly above the 65% Fe index. The 65% Fe index has moved from an average of $85.72 into the high-90's since this quarter. The July through September quarter will therefore be much more profitable.

 

2) Champion didn't even declared commercial production until the end of June. Already a cash flow machine. C$30.46 per tonne operating margin in the ramp-up period. I think they could hit C$40 or C$45 per tonne when the next quarter is reported.

 

3) Shipping costs are competitive with the Brazilian producers. US$18.57 per tonne only slightly higher than Brazil to China shipping cost of US$18.22 per tonne.

 

4) Bloom Lake was delivered ahead of schedule and under budget.

 

*

 

Conclusion: Trough iron ore is competitive with Brazilian iron ore because of the quality premiums.

 

 

[linealdin]

https://www.streetwisereports.com/article/2018/10/15/three-resource-companies-drilling-waiting-and-a-rebirth.html

 

Adrian Day writeup on Evrim and Cuale. Evrim’s C$125 million market is substantial but if you back out the value of the Ermitano royalty, Evrim’s substantial cash position, and the value of its other joint ventures, the market is only valuing Cuale at C$60 million. A discovery would value Cuale at many times that C$60 million. Senior miners are watching Cuale developments closely.

[linealdin]

http://www.rengold.com/s/NewsReleases.asp?ReportID=838289&_Type=News-Releases&_Title=Renaissance-Gold-Exploration-Update

 

Phase 2 drill results from a 1500 meter drill program at Renaissance Gold’s Jupiter property (Altius 1% royalty). Only short lengths with minor amounts of gold. Swing and a miss.

[linealdin]

LIF hits a new 52 week high of C$29.23. Altius’s 3.5 million share equity position worth C$102.3 million at that level.

 

Altius adding another ~350,000 LIF shares in Q3 was timely.

 

For the next 4 quarters I expect LIF dividends totalling C$2.65 per share (full year 2017 dividends).

 

3.5 million shares X C$2.65 = C$9.275 million annual pass-through royalty.

 

LIF is now the 3rd most important royalty in Altius’s portfolio after Chapada and Rocanville.

[linealdin]

https://www.google.com/amp/s/www.theglobeandmail.com/amp/investing/globe-advisor/article-six-stocks-with-turnaround-potential/

 

Taylor Asset Management on the bull case for LIF in the Globe and Mail today:

 

“IOC will benefit from a significant premium it receives for its higher-grade ore favoured by China’s steel mills to reduce pollution, and rising prices for pellets due to a supply shortage, he says. That should provide investors who own Labrador stock with an annual dividend of $4 to $4.50 a share, he estimates. But a possible catalyst for the stock could come soon from Rio Tinto PLC, which will decide whether to sell its 59-per-cent stake in IOC or take it public, he says. Labrador could also be a potential takeover candidate by someone interested in IOC, he says.”

 

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C$4 to C$4.50 share in annual dividends? That’s an aggressive prediction. LIF is going to be trading in the C$40 to C$50 range if it pays out those kinds of dividends.

 

C$4.50 x Altius’s 3.5 million shares = C$15.75 million Altius royalty revenue

 

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Samarco, IOC’s main competitor in the pellet market, may restart by 2020 but only at 1/3 of its previous capacity. So it looks like a nice long run for high pellet premiums, maybe 2 or 3 years.

[linealdin]

http://altiusminerals.com/uploads/Factsheet-Oct-16-2018-Final.pdf

 

Updated Altius fact sheet has the royalty breakdowns for Q3:

 

Disastrous quarter for 777 mine at C$1.9 million, down from C$3.2 million in Q2. Chapada delivered C$4.7 million (up from C$4.5 million in Q2) despite the depressed price environment.

 

Must be somewhat serious production problems at 777.

 

Voisey’s Bay delivered C$300K. Crummy.

 

Rocanville hits a quarterly record at C$2.9 million.

[linealdin]

https://www.google.com/amp/s/seekingalpha.com/amp/article/4211331-first-majestic-silver-win

 

The second thing pushing Evrim’s stock price up is the 2% Ermitano royalty. Keith Neumeyer of First Majestic, which now owns Ermitano, is talking up the property:

 

1) He emphasizes that the 40.8 million ounce silver equivalent is just a maiden resource based on 32 drill holes. First Majestic will have 3 drill rigs on the property trying to quickly expand the resource.

 

2) First mined ore from Ermitano expected by late 2019. Near term royalty income for Evrim.

[linealdin]

What’s at stake with Evrim’s drilling at Cuale: a buyout for unbelievable numbers.

 

An open pit, high sulphidation gold deposit in a good location is going to sell for at least US$165 per ounce of gold.

 

A 3 million ounce deposit sells for C$643 million.

 

A 6 million ounce deposit sells for C$1.287 billion.

 

Altius exercises its Evrim warrants and takes 15% of the buyout: C$96.45 million to C$193 million.

 

Timeframe: the next year or two.

[linealdin]

Dilution of Altius’s potental 15.6% equity position in Evrim (with exercised warrants) is not really a concern. Evrim tells me they have C$14 million in the bank, pre-drilling.

 

If the initial 3000 meter drill program is successful Evrim is fully funded to move on to a Phase 2 drill program of 20,000 meters to aggressively delineate the deposit. Another C$5 million for the Phase 2 program.

[linealdin]

https://www.canexmetals.ca/site/assets/files/4987/nr-18-8_gibson_drilling_update.pdf

 

Canex has completed 6 of 10 drill holes at the Gibson property. Sounds like they hit an interesting mineralized zone in an area that hasn’t been drilled before.

 

Historical drill results at Gibson are intriguing: 9.18 meters of 7.54 g/t gold equivalent.

 

Altius has a 2% royalty and a big equity position in Canex.

[linealdin]

http://antlergold.com/files/PR_20181017_final_re_soil_results_clean_with_figures.pdf

 

Antler Gold spent the summer soil sampling at Crystal Lake, Noel Paul and Cape Ray properties. Altius holds 2% royalties on those properties and Antler equity.

 

Antler closed a C$678K financing in August. They should be starting a Phase 2 drill program at Wilding Lake soon.

[linealdin]

http://www.aethonminerals.com/storage/presentations/aethon-minerals-oct-2018-1539876226.pdf

 

New Aethon presentation:

 

1) Sounds like they will maintain the Llanos option ($100k due November 15th) and do a Phase 2 drill program to test a deeper porphyry target.

 

2) Arcas: 1300 rock samples assayed. Best result of 13% copper. Drilling planned for 2019.

 

3) Maricunga projects: 820 rock samples assayed.

 

4) Aethon is still evaluating acquisition options. They need to pull the trigger.

[linealdin]

 

At minute 24:30 John Kaiser of Discovery Watch discusses the Mythril (formerly Lothlorien) project that came out of the Midland/Altius joint venture. Altius has a 1% royalty on the property and a growing equity position in Midland.

 

Kaiser reports that the Mythril discovery was the talk of the recent Xplor Quebec mining conference. And he suggests that Mythril may be good enough to become Midland’s version of Eleonore (a project good enough for a prospect generator to keep for itself and make into a flagship).

 

Very unusual to find such high copper/gold grades in James Bay. Will cause geologists to rethink their models of the region. Altius may be in the right spot again.

[linealdin]

https://www.teck.com/media/Q3-18-News-Release.pdf

 

Teck Q3 results, page 11:

 

“We plan to invest approximately $12 million to complete and evaluate the MacKenzie Redcap detailed design study. We expect to be in a position to make a decision on the project before year end. MacKenzie Redcap development is expected to supply approximately 1.8 million tonnes of steelmaking coal production per year and has the potential to extend production at Cardinal River Operations to approximately 2027, beyond the planned closure in 2020. Beyond 2020, that additional tonnage would add to the current planned production capacity of 27 million tonnes in the Elk Valley.”

 

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$12 million mine life extension study at Cheviot met coal is proceeding rapidly. Teck expects to make a decision by year end 2018. The strong price environment for steelmaking coal makes the decision an obvious YES.

[linealdin]

From ATCO’s Q3 MD&A. They are moving to full conversion of the coal plants. Only ~3.5 years of coal revenue left from the Sheerness complex. Crummy!

 

“ATCO is planning to be the first coal-fired generator in Alberta to end coal-fired power generation in its fleet. In the first quarter of 2018, ATCO subsidiary Canadian Utilities successfully completed a project to co-fire natural gas at Battle River unit 4, enabling the use of natural gas for 50 per cent of the unit's 150 MW generating capacity. In the next phase of this initiative, a conversion project will allow co-firing of natural gas on Battle River unit 5 for 100 per cent of its 385 MW capacity, with an expected completion in late 2019. A full conversion of Battle River unit 4 and Battle River unit 3 is under analysis.

 

“ATCO is committed to the conversion of Sheerness unit 1 and unit 2 to run on natural gas. Full conversion of Sheerness is planned to be completed in advance of firm natural gas supply, which has been secured for the second quarter of 2022.”

[linealdin]

From ATCO’s Q3 MD&A. They are moving to full conversion of the coal plants. Only ~3.5 years of coal revenue left from the Sheerness complex. Crummy!

 

“ATCO is planning to be the first coal-fired generator in Alberta to end coal-fired power generation in its fleet. In the first quarter of 2018, ATCO subsidiary Canadian Utilities successfully completed a project to co-fire natural gas at Battle River unit 4, enabling the use of natural gas for 50 per cent of the unit's 150 MW generating capacity. In the next phase of this initiative, a conversion project will allow co-firing of natural gas on Battle River unit 5 for 100 per cent of its 385 MW capacity, with an expected completion in late 2019. A full conversion of Battle River unit 4 and Battle River unit 3 is under analysis.

 

“ATCO is committed to the conversion of Sheerness unit 1 and unit 2 to run on natural gas. Full conversion of Sheerness is planned to be completed in advance of firm natural gas supply, which has been secured for the second quarter of 2022.”

 

I'm reminded that at one point the Altius website indicated that mining at the Sheerness coal mine was expected to move out of Altius royalty land by 2023, so maybe this conversion will only cost 1 year of royalty revenue. (Sandstorm Gold owns royalties on other portions of the Sheerness mine, I believe.)

[linealdin]

https://www.juniorminingnetwork.com/junior-miner-news/press-releases/878-tsx-venture/nai/53951-canex-metals-completes-drilling-at-gibson-project-british-columbia.html

 

Canex Metals completes a 10 hole, 1001 meter drill program at Gibson. New zone of mineralization discovered. Altius with a 2% royalty on Gibson and a big equity stake in Canex. Assays due in 8 to 10 weeks.

[linealdin]

Midland Exploration has risen from a low of 66 cents on September 27th to a high of C$1.14 today. Continued speculation about the Mythril property (Altius 1% royalty). Midland thinks it has made a discovery, and will drill the property themselves (no farm-out).

[linealdin]

http://www.explorationmidland.com/MediaHandler.ashx?MediaId=2aa2d26b-2812-4d22-8358-2efbfe86437d

 

Midland dedicates 14 pages of its new October presentation to Mythril. They are obviously excited about the high grade boulders and channel samples.

 

Gino Roger, CEO of Midland confirms in an email that Mythril has now become a designated project in the Altius/Midland JV. Altius now owns a 1% royalty on Mythril. Altius will receive additional Midland shares equal to the cost of its portion of Mythril exploration expenses.

 

Roger says to expect an update on Mythril next week with the results of the follow-up soil geo-chemical survey and prospecting that took place in early October.