ALS.TO - Altius Minerals

[linealdin]

Market loves the LIF quarterly results. Broke through the C$30 barrier, and a morning high of C$31.32. Altius's LIF position worth C$109.62 million at today's high.

 

Investors getting in position for what's likely to be a $1 plus dividend in Q4.

 

One analyst, quoted in the Globe and Mail, believes LIF will deliver C$4 to C$4.50 in dividends over the next 4 quarters. LIF will be a $40 to $45 stock if that becomes reality. Major upside.

[nostradamus]

Anything interesting/new on the Q3 conference call today? (I didn't manage to sign in)

[linealdin]

The Aussie zinc/lead/silver projects, Broken Hill and Mount Isa, are now listed on the "Vended Projects" section of the Altius website. New farm-out deals set to close?

 

The Finnish gold and nickel projects have disappeared from the website. Abandoned or impaired? C$576,000 in exploration assets were written down in Q3.

[linealdin]

http://altiusminerals.com/uploads/2018-11-07-Q3-Conf-call-presentation-FINAL.pdf

 

From the Q3 results presentation:

 

“Excelsior US$75 million project finance package recently announced, with a construction timeline and first copper production now in sight for our next producing copper royalty; Altius also has an option to purchase additional royalty exposure on this project, which it expects to exercise.”

 

If Excelsior can recover 2 billion pounds of copper over the life of the mine the additional 0.5% royalty will net Altius 10 million pounds of copper.

 

Cost of additional 0.5% royalty = C$5 million

 

Potential return: 10 million pounds x US$3 per pound x 1.3 USD/CAD = C$39 million.

 

I liked the cheaper royalty options that Altius turned down a couple of years ago: 0.5% royalty for C$3 million. But Excelsior was in a much more precarious situation in 2016.

 

 

[mikek]

Regarding the conference call, it sounds like Altius will be filing some legal action regarding the thermal coal royalties against the government. Probably a waste of time and money with that one. Regarding 777, according to the call the sales had a lag so if that is true that is good because I was concerned that something might have changed there. Q4 is definitely setting up to be 20+ if that statement is true. Glad they are taking the half percent royalty on Excelsior.

 

Sounds like Altius is no longer contributing the thermal coal royalties to Blue Sky. Probably Blue Sky wasn't going to really give anything due to the high uncertainty of those cash flows. Sounds like the plan is to allocate the thermal coal cash flow directly to renewables and hopefully replace the thermal coal as it disappears. Seems they feel if Alderon is ever going to be built now is the time. Brian is heading to China. Good luck with that. I know they feel Alderon is the biggest possible value creation for Altius which is true but the facts remain that Alderon isn't getting built as a standalone project. Probably just wasting time with that one. Sounds like possible deals could be announced with LRC and blue sky, seems they feel the royalty returns in those two sectors make more sense right now. That was about all I took away from the call.

[linealdin]

https://www.google.com/amp/s/seekingalpha.com/amp/article/4220047-altius-minerals-corp-atusf-ceo-brian-dalton-q3-2018-results-earnings-call-transcript

 

Here’s a (poor) transcription of the Altius earnings call. Additional tidbits:

 

1) IPO for Adia Resources will follow the initial winter drill program. Marco LoCascio, former hedge fund manager of Mason Hill (very large shareholder of Altius), will be the CEO. Similarities to the hire of Kargl-Simard at Adventus. Both were capital organizers, not geologists. Juniors need access to cash and LoCascio has the connections.

 

2) Altius is against amendment of bylaws at LIF. Sounds like they would consider selling their position if a bylaw change were passed.

 

3) Altius Q4 will likely include a double Voisey’s Bay payment for royalty revenue from Q3 and Q4. The C$351K for Voisey’s was related to the quarter ending June 30th. Additional buildup for a possible C$20 million Q4 for Altius.

[linealdin]

Thermal coal lawsuit filing will be a bid to open up negotiations with the new government coming into Alberta. Conservative Jason Kenney is very likely to be the next premier.

 

Ideally there’s some kind of market-based solution that ends up with Altius investing a settlement for lost thermal coal revenue into new renewable energy royalties in Alberta. That’s one reason the Blue Sky vehicle was set up, I think. The proposal is: Give us a fair settlement and we will match every dollar and reinvest big in Alberta energy (along with our partners at Great Bay Renewables).

[linealdin]

I estimate Altius will receive another C$75 million in thermal coal revenue before 2030 (this doesn’t include the met coal revenue from Cheviot). I hope the renewable energy business is good enough to invest every dollar of that C$75 million in accretive royalty deals.

 

Dalton mentioned on the conference call that Altius and its partners at Blue Sky and Lithium Royalty Corp are seeing value in development stage projects. Producing royalties are too expensive.

[linealdin]

More from the earnings call:

 

1) Lithium prices have been trending downwards in 2018 (halved in the Chinese battery grade lithium market). Thus making it a good market for royalty buyers, like Lithium Royalty Corp.

 

2) Dalton indicates the strategic market for Kami is better than the overall market. I think there's a good chance Alderon receives a new investment from a strategic investor (private equity, royalty/streamer, Japanese trading house, etc.) in the next few months. The feasibility study will be the basis of the investment.

 

Would a strategic investment change overall market sentiment towards the stock? Yes, if it's big enough, C$20 million or larger.

[linealdin]

Triple Flag will be receiving a 3.5% stream at full production at Gunnison.

 

If Excelsior recovers 2 billion pounds of copper over the life of mine then Triple Flag nets 52.5 million pounds (after paying 25% of the market price per pound). Triple Flag pays US$65 million for that 52.5 million pounds, worth US$157.5 million at $3 copper.

 

Altius nets 30 million pounds of copper from its 1.5% royalty on Excelsior’s 2 billion pounds of production. That 30 million pounds is worth US$90 million at $3 copper.

 

Altius paid a small percentage of the Callinan purchase price (Excelsior royalty worth little in 2015) and C$5 million for that 1.5% royalty. Maybe C$6 million, or US$4.54 million, total.

 

Summary:

 

Altius pays US$4.54 million for a potential US$90 million total royalty revenue.

 

Triple Flag pays US$65 million for a potential US$157.5 million total net stream revenue.

 

Getting in early leads to spectacular returns.

 

 

[linealdin]

https://canexmetals.ca/site/assets/files/4991/nr-18-10_summary_of_gibson_drilling_final.pdf

 

Canex summarizes its 10 hole drill program at Gibson (Altius 2% royalty and equity). "Some holes hit up to 5 separate quartz sulfide veins showing multiple veins within the main Gibson zone." Assays in 5 to 6 weeks.

[linealdin]

https://www.excelsiormining.com/news/news-2018/Excelsior%20Provides%20Pre-Production%20Progress%20Report

 

Excelsior gives a report about pre-construction. Sounds like they are ready to roll as soon as the Triple Flag US$75 million financing closes in a week or two. 31 employees at the Johnson Camp Mine facility. General contractor selected and wellfield drill contracts signed. Detailed engineering and construction plans complete. Early equipment and vehicles purchased.

 

If construction proceeds expeditiously Altius could be seeing royalty income from Gunnison in early Q3 2019.

 

Excelsior is cash-rich. They had US$22.3 million at the end of June 2018, they're raising US$75 million from Triple Flag, and another C$5 million from Altius from the 0.5% royalty sale.

 

Stage 1 capex is only US$49 million (that includes a 15% contingency). Excelsior should have double that at the beginning of construction. They are very well positioned to handle any construction/wellfield issues.

[linealdin]

http://www.allegiancecoal.com.au/irm/PDF/1478_0/Section10OrderReceived

 

Allegiance passes first permitting hurdle, receipt of a Section 10 order. Itochu, their JV partner, will make an initial C$1.5 million payment for 5.3% of the Telkwa project.

[linealdin]

http://www.allegiancecoal.com.au/irm/PDF/1439_0/2018AnnualReport

 

The Allegiance annual report, dated June 30th, 2018 is crystal clear on the Altius royalty. It is a sliding scale 3% to 4.5% royalty:

 

“In addition to the above, Altius will receive a 3% gross sales royalty on coal sold where the benchmark coal price is less than US$100 per tonne; 3.5% where the benchmark coal price is US$100-US$109.99 per tonne; 4% where the benchmark coal price is US$110-US$119.99 per tonne; and 4.5% where the benchmark coal price is greater than US$120 per tonne.

 

“In December 2017, TCL entered into an agreement to acquire from Altius 100 percent ownership of all the rights to coal licences that make up the Telkwa Project (Acquisition). Up until the Acquisition, as set out above, TCL had earned 20 percent project ownership. In consideration for the issue to Altius of 40.6 million ordinary shares in the Company, with a deemed fair value of $1.2 million, and the continued performance of the milestone obligations (as set out in the table below), Altius agreed to transfer full ownership of the Telkwa Project to TCL. As security against the performance of the milestone obligations, TCL has provided a charge over the Telkwa Project. The charge shall be subordinated to Project debt finance.

 

“Altius remains entitled to the royalty as described above.”

[linealdin]

https://www.streetwisereports.com/article/2018/11/15/royalty-companies-move-ahead-justifying-their-premiums.html

 

Adrian Day discusses recent developments at Altius, Evrim, and Midland’s Mythril discovery (Altius 1% royalty).

[linealdin]

http://www.sokomaniron.com/news/2018/11/16/sokoman-iron-cuts-24-90-m-of-33-56-g-t-au-at-eastern-trend-nl

 

Sokoman hits a spectacular follow-up hole at Moosehead: 24.90 meters of 33.56 g/t gold. (Altius holds a 2% royalty and a lot of equity in Sokoman).

 

Geology is complex. They missed on the other holes. But the grades x lengths of the two holes that hit are clearly worldclass..

 

Some analysis:

 

https://palisade-research.com/sokoman-iron-deposit-confirmed/

 

[mugwump]

wolfden drill results

https://ceo.ca/@newswire/wolfden-adds-to-high-grades-and-mineralized-zones-at

[linealdin]

wolfden drill results

https://ceo.ca/@newswire/wolfden-adds-to-high-grades-and-mineralized-zones-at

 

Wolfden Zinc delivers again. 15 meters of 14.5% zinc, 5.5% lead, 1.1% copper, 155.9 g/t silver, 1.0 g/t gold. That's a worldclass poly-metallic intercept.

 

Here's the new Wolfden presentation:

 

https://www.wolfdenresources.com/wp-content/uploads/2018/11/WolfdenPickettMtweb.pdf

 

The catalysts for the Wolfden stock going forward:

 

1) Delivery of the initial 43-101 resource for Mt. Pickett in Q4 2018. I want to see 5 million tonnes of ~20% zinc equivalent. I believe that would be close to an economic underground deposit, even with no further expansion or discoveries.

 

2) Discovery of one additional, significant VMS lens. Anomaly A, on page 16 of the presentation, looks intriguing. And hole 31, discussed in the press release, could be indication of an undiscovered lens.

 

[linealdin]

http://adventuszinc.com/news/122515

 

Adventus Copper and Gold launches an airborne geophysical survey of Pijili and Santiago, secondary properties in the exploration alliance with Salazar. Preparing to drill in early 2019.

[linealdin]

Stage 2 of Gunnison, a 75 million pound annual operation, is potentially already financed. Look at the math:

 

Excelsior will have US$98 million after the Triple Flag stream and Altius 0.5% royalty option deal closes this month.

 

Stage 1 capex is US$49 million. If Stage 1 is delivered on time and on budget that leaves Excelsior a cash buffer of US$49 million.

 

Excelsior adds that US$49 million to Triple Flag's stream expansion option payment of US$65 million = US$114 million.

 

Stage 2 capex is only US$117 million. That US$3 million shortfall and general corporate operating costs should be covered by positive cash flow from a successful Stage 1 operation. No debt to pay off. No reason to go begging to the market for equity financing (unless the terms are really attractive).

 

Altius's 1.5% royalty is much more attractive if Excelsior manages to quickly reach 75 million pounds of annual production.

 

 

 

[linealdin]

The Excelsior royalty could bring in total revenue surpassing the gross cost of the Callinan acquisition (not even backing out the significant cash and equity investments Callinan had).

 

The Cuale royalty has the potential to do the same.

 

Roland Butler was making remarkable royalty deals during his time at the head of Callinan. Now they are coming to fruition for Altius. I understand Butler has reunited with Altius as an "advisor." Not sure how formal that status is.

 

 

[linealdin]

Globe and Mail reports Westmoreland Coal has filed a $500 million NAFTA lawsuit over the Alberta early coal phaseout. The Canadian utilities got a billion in compensation but Westmoreland got nothing for its Alberta operations. Not sure if Altius is joining this lawsuit or if they are filing their own.

 

The province will be forced to justify the disparate treatment at trial. Why were insiders (longtime Alberta utlities) compensated while outsiders (U.S. and Newfoundland companies) were shafted? Is there a legal basis for the disparate treatment? Or was it just pure discrimination?

[linealdin]

https://www.alderonironore.com/news/2018/511-alderon-files-ni-43-101-updated-feasibility-study-technical-report-for-the-kami-project-on-sedar-2

 

Alderon, Brian Dalton from Altius, and Newfoundland Premier Dwight Ball meet with HBIS top level execs in Beijing.

 

“Creative ideas put forward”: that is, how to raise a billion dollars when you’re a microcap junior.

[bizaro86]

Interesting. Canada has lost quite a few of those. Although I thought I had heard that got weakened when they switched NAFTA to USMCA or whatever they're calling it now...

 

The legal basis is that the government didn't shut down the mines, and didn't expropriate Altius's coal or land. They are welcome to dig it out of the ground (and could probably get subsidies to do so). The utilities aren't allowed to burn it in Alberta though.

 

But the government would love it if they exported the coal or used it to produce some other saleable product.

[linealdin]

Interesting. Canada has lost quite a few of those. Although I thought I had heard that got weakened when they switched NAFTA to USMCA or whatever they're calling it now...

 

The legal basis is that the government didn't shut down the mines, and didn't expropriate Altius's coal or land. They are welcome to dig it out of the ground (and could probably get subsidies to do so). The utilities aren't allowed to burn it in Alberta though.

 

But the government would love it if they exported the coal or used it to produce some other saleable product.

 

The utilities own some of the coal mines. Transalta owns and operates Highvale coal mine, Capital Power owns 50% of the Genesee coal mine. Were the utilities specifically compensated for damage to their coal mine interests? Depends on the specific terms of the $1 billion settlement agreement. If so then Westmoreland deserves compensation, too. And perhaps Altius deserves compensation to its coal interests.

 

The government didn’t shut down the power plants, either. The utilities can burn gas or biomass or whatever after 2029. We’ll see how interested the province is in taking their chances at trial. Put the pressure on.