ALS.TO - Altius Minerals

[linealdin]

https://www.pierceatwood.com/sites/default/files/Energy%20Infrastructure%20Symposium%202018%20-%20Panel%202%20Slides%2010.04.18.PDF

 

Great Bay Renewables presentation from October 4th, 2018. Development stage projects, where Brian Dalton says they've been finding higher IRR opportunities, are at the stage of securing land, obtaining permits, equipment deposits, and the interconnection process.

 

Great Bay is obviously well-connected and experienced. There's going to be a lot of co-investment royalty deal flow crossing Altius's desk. They just have to choose the right deals.

[mikek]

Interesting article that seems to think this new change will help coal continued to be used in Alberta quite a bit.

 

https://www.cbc.ca/news/opinion/federal-carbon-pricing-1.4905481

 

"This seemingly small change will make a heck of a difference. It has been calculated by economist Blake Shaffer that the cleanest coal plants, despite being much much dirtier than gas, and much, much, much dirtier than renewables, will only pay the equivalent of $1 per tonne. In contrast, you and I, average Canadian citizens, will be paying a rate of $20 per tonne starting in 2019. With this thumb on the scale, coal plants will be incented to run before cleaner gas plants. And why rush to build new renewable energy when coal plants are going to be cheap enough to stay in the game for the long haul?"

[linealdin]

https://ceo.ca/@newsfile/excelsior-mining-greenstone-resources-confirms-us94

 

Excelsior raises another US$9.4 million with Greenstone exercisingits anti-dilution rights. Stage 2 capex should be covered easily if Triple Flag exercises its US$65 million expansion option. Rich treasury.

[reader]

Nearing a bear market, China steel sector weighs record output, a softer economy.

 

 

https://reut.rs/2KpGWbm

[linealdin]

https://www.google.com/amp/s/www.cbc.ca/amp/1.4906461

 

Ball said a second major meeting revolved around iron ore and mining, adding it's a big commodity in the Chinese market. A deal between Alderon Iron Ore Corp. and HBIS, a Chinese steel enterprise, is in the making according to the premier.

 

"We're trying to get that deal finalized. They've made a commitment to that, and we feel they're going to live up to that commitment," he said.

 

"It's going to take some time, but it's a 'show we're ready' project, which would mean upwards to a billion dollars for Newfoundland and Labrador."

[linealdin]

A new deal with Hebei means one or more of the following:

 

1) Increased ownership by Hebei on the Kami project level (up from 25%).

 

2) Hebei letting a Japanese steelmaker cut in for a portion of the offtake and some project level ownership (15% or so). A new strategic investor would cut the risk for Hebei: another deep pocket to share the capex burden.

 

3) Hebei securing Chinese Export Credit Agency debt for Kami (US$100 million plus).

 

4) Hebei securing Chinese senior bank debt for Kami (US$300 million plus).

[linealdin]

http://altiusminerals.com/uploads/2018-11-26-Altius-Files-Compensation-Claim-for-Coal-Final.pdf

 

Altius files Genesee coal lawsuit. C$190 million total claim. Altius is 52.36% general partner, so its claim is for C$99.48 million. Costs of lawsuit likely split with the minority partners (Liberty Metals and John Tognetti).

[linealdin]

https://www.newswire.ca/news-releases/aethon-minerals-announces-resignation-of-president-and-ceo-and-appointment-of-interim-ceo-701236141.html

 

Aethon Minerals CEO Robert Davies resigns. Next option payment for Llahuin reduced and payment date extended.

[linealdin]

http://altiusminerals.com/uploads/Altius-Statement-of-Claim-Filed-23-Nov-2018.pdf

 

This is the statement of claim filed by Altius against the Alberta and Federal governments. Their attorney is Code Hunter, LLP. Boutique litigation firm, not too well known. The legal fees should be relatively modest.

 

The discovery process should be interesting. Altius will request all communication and documents related to the decision to richly compensate Capital Power but not any of the other Genesee stakeholders.

 

Alberta will at the same time be defending a C$500 million NAFTA lawsuit by Westmoreland Coal regarding the same issues. I do think there's some chance of a positive global settlement of these issues eventually. Pennies on the dollar being claimed, perhaps.

[mugwump]

labrador iron ore royalty dropped 9% yesterday

and is falling again today

any news?

http://www.labradorironore.com/Home/default.aspx

[linealdin]

labrador iron ore royalty dropped 9% yesterday

and is falling again today

any news?

http://www.labradorironore.com/Home/default.aspx

 

Overreaction to a slump in the high grade iron ore market. 65% Fe has dropped from around US$97 to around US$81.

 

LIF still makes a crapload of money with 65% Fe iron ore anywhere around US$80 because more than half its production is pellets, which receive US$50+ premium over the 65% Fe price.

 

High grade survives most price scenarios. IOC's per tonne operating cost is a little under US$50 per tonne. If high grade ore prices drop to US$50 then there's reason to worry.

[linealdin]

http://www.explorationmidland.com/en/MediaHandler.ashx?MediaId=c35b770a-6cf5-4b53-9b58-735fd744df7b

 

http://www.explorationmidland.com/en/MediaHandler.ashx?MediaId=bf3bb83f-319e-4b02-9d3d-2042d4c91c7c

 

Midland greatly increases its land position at Mythril (Altius 1% royalty) to 804 square kilometers. Soil geochemical survey has confirmed the trend. Airborne electromagnetic and ground IP surveys planned in the upcoming weeks.

 

This is the new flagship project for Midland. They have claimed all the available land around the discovery area. I expect a significant drilling program in the spring.

[mugwump]

thanks linealdin

you're really on the ball

[linealdin]

https://www.google.com/amp/s/www.cbc.ca/amp/1.4906461

 

Ball said a second major meeting revolved around iron ore and mining, adding it's a big commodity in the Chinese market. A deal between Alderon Iron Ore Corp. and HBIS, a Chinese steel enterprise, is in the making according to the premier.

 

"We're trying to get that deal finalized. They've made a commitment to that, and we feel they're going to live up to that commitment," he said.

 

"It's going to take some time, but it's a 'show we're ready' project, which would mean upwards to a billion dollars for Newfoundland and Labrador."

 

As for the Dwight Ball comments above, Altius considers the recent China meeting the first in the series of meetings with HBIS to hammer out some kind of restructuring of the project ownership, equity ownership, and offtake rights. Many options on the table, including bringing in another steelmaker as a strategic investor.

 

I hear a positive tone about the meetings, and I expect some kind of deal to get done.

 

Alderon's main constraint is that its market cap is so small it can't raise cash by issuing equity (as a part of a construction financing package). So the only solution is to bring in additional investment by selling more of the project level interest in Kami LP, and by redistributing some of HBIS's offtake rights.

 

This is all in HBIS's interest. Right now they have a 25% project interest and 60% offtake rights in a project that can't be built. Bringing in significant investment from another steelmaker would greatly enhance the project's chance of being built.

[linealdin]

https://www.cbc.ca/news/canada/newfoundland-labrador/scully-mine-lab-west-mining-iron-ore-1.4922028

 

https://www.newswire.ca/news-releases/tacora-resources-inc-announces-completion-of-scully-mine-restart-financing-701341642.html

 

Tacora Resources has successfully raised the financing to restart Scully Mine in summer 2019. Hiring and construction work as begun. Dwight Ball is speaking at a press conference.

 

Tacora failed with two IPO attempts.

 

Their solution? Staying private and obtaining US$212 million in private equity and senior secured debt financing and US$64 million in equipment debt financing.

 

The players involved in these financings are Proterra Investment Partners (private equity), Cargill (private trading house), MagGlobal (private equity). Equipment financing from Komatsu and Caterpiller. This is the smart money.

 

Maybe Alderon should be taken private. What's the point of being a publicly traded company if you can't raise money with equity issues? The mining junior equity markets are dead. Remember how hard it was for Champion to raise a measly C$20 million in equity?

 

Kami's a better project than Scully. Better quality ore, no manganese, higher NPV. There's interest from Japanese steelmakers, and likely interest from private equity groups. Combine those groups with Chinese financing (export credit agencies, banks) brought onboard by HBIS and Kami has a shot.

[linealdin]

https://projects.eao.gov.bc.ca/api/document/5be1e5e7c4337d0024da316e/fetch

 

Project Description for Allegiance Coal’s Tenas Project, filed for the environmental permitting process. Impressive document.

 

I expect no issues with permitting. Allegiance is professional and has consulted with stakeholders and experts. They’ve put in the work.

 

Tenas is going to be a mine because it ticks all the boxes: low capex, excellent joint venture partner, clear path forward in permitting process.

[linealdin]

https://www.spglobal.com/platts/en/market-insights/latest-news/metals/112718-analysis-iron-ore-pellet-demand-in-europe-supported-by-carbon-credits-met-coal-and-coke-price-rise

 

Iron ore pellet demand is stronger in Europe because of higher carbon emission pricing. Steelmakers have to use less coke and more high purity pellets to avoid carbon pricing. The Port of Sept Iles shows IOC’s bulk carriers have been heading to Europe at high rates.

 

60% or more of IOC’s sales will be pellets going forward. Specialty product. What happens in the general iron ore market is less important than what happens in the specialized pellet market.

 

LIF is oversold.

 

 

[Williams406]

I'll be interested to see if Altius takes their LIF stake toward 10% if they get good enough pricing. Now its a pass-through royalty asset for them, but closer to 10% combined with perhaps Anglo Pacific bumping up their stake--to the extent Altius and Anglo are like-minded--and strategic considerations emerge.

[linealdin]

https://www.google.com/amp/s/www.argusmedia.com/en/news/1797983-atlantic-pellet-steel-slump-rattles-2019-talks%3famp=1

 

The recent steel and iron ore slump has affected current negotiations for 2019 Atlantic pellet premiums. Will premiums for blast furnace and direct reduction pellets be US$5 or US$10 higher than the record-setting 2018 pellet premiums?

 

No indication that the premiums will go lower than 2018 levels. The pellet market is tight for specific reasons: Samarco not returning until 2020 at the earliest (at a third of capacity) and no announcements of new pellet supply capacity. LIF will prosper for the next few years based upon their royalty on pellets.

 

Altius is likely on the bid for more shares.

 

 

[linealdin]

The case for LIF paying at least a $1 dividend in Q4 remains intact.

 

LIF should have a C$62 million cash position (after receivable royalty revenue from IOC pays for the Q3 LIF dividend).

 

I expect LIF to receive C$40 in total royalty revenue in Q4, along with an IOC dividend of around C$20 million.

 

Unless LIF management does something unusual (they have been doing strange things) the cash position should decline to around C$40 next quarter. Still a high cash position based upon their history.

 

The C$22 million drawdown from the cash hoard plus the aftertax income from C$60 million in royalties and IOC dividends should easily cover a C$64 million LIF dividend payment ($1 per share).

 

*

 

If LIF is still holding more than C$60 million cash at the end of Q4 then they would likely be punishing their shareholders for being against their proposed bylaw change. Every LIF investor wants that pass through royalty income.

 

 

[linealdin]

LIF received a C$59 million dividend from IOC in Q3 (based on its 15.1% equity ownership of IOC). Part of the reason for that bumper payment was catch-up from the strike interruption (no IOC dividends paid in Q1 or Q2). Another part is the increase in rail haulage fees IOC receives from Champion (Bloom Lake had full production quarters in Q2 and Q3).

 

Champion estimates it will pay C$16.88 per tonne in rail transportation fees:

 

C$16.88 x 7.4 million tonnes = C$125 million in annual rail haulage fees.

 

Tacora Resources re-starting Scully will likely be at similar rates:

 

C$16.88 x 6 million tonnes = C$101 million in annual rail haulage fees.

 

IOC is going to enjoy an extra C$226 million in rail haulage revenue annually if these two mines are successful. Some of the profit from that revenue will eventually filter down to LIF because of its 15.1% IOC equity position.

 

(The Tata Steel DSO mine also pays IOC to use its railway.)

[bizaro86]

Surprised no one has mentioned the real royalty news on Tacora restarting. MFC Bancorp has a 7% royalty that will start paying out. Should be pretty close to half their market cap in cash flow every year. Lots of moving parts and low quality management, but that's a pretty big catalyst.

 

I wonder if they'd sell it to ALS...

[linealdin]

Surprised no one has mentioned the real royalty news on Tacora restarting. MFC Bancorp has a 7% royalty that will start paying out. Should be pretty close to half their market cap in cash flow every year. Lots of moving parts and low quality management, but that's a pretty big catalyst.

 

I wonder if they'd sell it to ALS...

 

It could be an outlandish royalty. Set to pay C$40 million a year for the next 25 years. If MFC were to auction the royalty Altius doesn’t have to have the money to pay “full” price.

 

On the other hand the royalty is worth nothing if the mine fails. Tacora is applying an innovative manganese removal technology. If it doesn’t work the economics of the mine collapses. I think the 7% royalty itself is a serious burden on the mine if we reach a low iron ore price environment.

 

Making a takeover offer for MFC is probably the safest route if Altius likes the royalty. MFC is trading at a pitiful market cap, and has a good deal of cash on the books. Strip out the cash and royalty, dispose of the rest.

[bizaro86]

Dispose of the rest would be a tall order, but potentially very value enhancing. That royalty is worth way more than 100% of MFC 's market cap.

 

The Cypriot bank, hydro assets, and European rental property probably all have positive value as well. I doubt the alberta gas plant is worth anything, and don't know about the metals assets.

 

All that said, I'd be thrilled if ALS bought them out and was able to recoup anything over the cost of shutting it down/dealing with liabilities. Market cap is only $65 MM. Even if they paid $100 MM that is a low single digits multiple of royalty revenue. Hugely value accretive.

 

 

[linealdin]

Altius project generation update: Farm-out deals for Mt. Isa and Broken Hill are in the due diligence stage and expected to close next quarter.

 

The Finland gold and nickel land has been dropped.