ALS.TO - Altius Minerals

[bizaro86]

The vast majority of the actual gold there is in a vein less than a m thick. That seems like it has the potential to be hard to mine to me, even if it is theoretically economic.

[linealdin]

The vast majority of the actual gold there is in a vein less than a m thick. That seems like it has the potential to be hard to mine to me, even if it is theoretically economic.

 

“The 5.10 m interval, beginning at a down-hole depth of 79.40 m (50 m vertically), includes two 1.0 m samples above the high-grade vein that averaged 2.89 g/t Au, as well as two 1.0 m samples below the vein which averaged 11.15 g/t Au.”

 

So the bread around the ultra high grade meat is 2 meters of 2.89 g/t gold and 2 meters of 11.15 g/t gold. Those aren’t subeconomic grades, especially for near-surface.

 

We will see assays soon for the 12.8 meter section and the 4.5 meter section outside of the sandwich. A good sign if those sections grade above 1.5 g/t gold.

[linealdin]

http://www.labradorironore.com/News-Releases/Press-Release-Details/2018/Cash-dividends-for-the-fourth-quarter-of-2018---060-per-Common-Share-comprised-of-a-regular-dividend-of-025-and-a-special-dividend-of-035/default.aspx

 

LIF declares a 60 cent dividend for Q4. C$2.1 million to Altius.

 

This is getting ridiculous. LIF left Q3 with around C$62.4 million in cash. They just received an IOC dividend of C$25 million (40 cents per share). This means IOC is very profitable at these iron ore prices. Royalty revenue will likely be around C$35 million to C$40 million for Q4. LIF is just not passing through all that cash and income to its investors.

 

LIF could have drawn cash down to C$40 million and paid a $1 plus dividend.

 

As is LIF’s cash position will be around C$85 million at the end of Q4. Way over what they carry historically in cash.

 

 

[linealdin]

LIF management has basically gone rogue. They want to become royalty players. They want to be paid like the Franco Nevada or Osisko guys. But LIF’s biggest shareholders (Altius, Anglo Pacific, institutional dividend funds) have squashed their ambitions.

 

So LIF management is now punishing their shareholders.

[linealdin]

https://www.spglobal.com/marketintelligence/en/news-insights/trending/zjamjujp6qoo6sahi-teea2

 

An interview with William McNeil, CEO of LIF, on their acquistion plans:

 

1) He believes the LIF policies not allowing equity issues or fundamental business changes without 75% shareholder approval are “outdated.”

 

2) The proposed copper royalty acquisition is on a producing asset and will cost up to C$300 million. It would be financed by a bank debt facility. McNeil calls the C$300 million purchase “bite-size.”

 

*

 

I wonder if the plan now is to withhold full payout of dividends until the LIF cash position would cover most of the C$300 million royalty purchase. Then bring the deal to shareholders for approval.

 

It wouldn’t take that long to build a massive war chest. The IOC royalty and 15% equity stake are kicking out incredible amounts of money:

 

Q3: C$44 million in royalty revenue and C$58.6 million in IOC dividends.

Q4: C$25 million in IOC dividends and around C$40 million in royalty revenue.

 

Around C$168 million total flowing to LIF in H2 2018.

[TwoCitiesCapital]

LIF management has basically gone rogue. They want to become royalty players. They want to be paid like the Franco Nevada or Osisko guys. But LIF’s biggest shareholders (Altius, Anglo Pacific, institutional dividend funds) have squashed their ambitions.

 

So LIF management is now punishing their shareholders.

 

Sounds likes high-time for shareholders to change the management then. Put in a board that will keep these ambitions in check and push for the historical payouts :/

[linealdin]

LIF management has basically gone rogue. They want to become royalty players. They want to be paid like the Franco Nevada or Osisko guys. But LIF’s biggest shareholders (Altius, Anglo Pacific, institutional dividend funds) have squashed their ambitions.

 

So LIF management is now punishing their shareholders.

 

Sounds likes high-time for shareholders to change the management then. Put in a board that will keep these ambitions in check and push for the historical payouts :/

 

The good thing is I see no path for the bylaw changes to be made. They need 75% approval. I don’t think they would even get 40% in a vote today. Same for any copper royalty purchase without the bylaw change. I don’t think shareholders would consider a C$300 million purchase “bite-size,” like McNeil does.

 

Management owns bite-size amounts of shares. McNeil owns 2000 shares. And only gets paid what a 3rd year law associate makes. He just wants to make acquisitions so he can justify a salary more befitting of the CEO of a company with a multi-billion market cap. It’s an ego thing.

 

If McNeil owned 20,000 shares he’d be much more concerned with full dividend payments every quarter.

 

So the endgame is that any excess cash hoard will be returned to shareholders. Eventually. At the end of Q4 LIF should have around C$85 million in cash, enough to pay a C$1.33 per share special dividend. Altius can’t exit the position until that capital return shakes out.

[linealdin]

McNeil in 2017 made a cash salary of C$220,000. LIF has a C$1.54 billion market cap.

 

Robert Davies (before he resigned) was set to make salary and cash bonus of C$337,500 in 2018 at Aethon Minerals. Aethon has a market cap of C$4.42 million.

 

LIF is 348X larger than Aethon yet McNeil makes less money than Davies. Same applies to the other LIF management and board members. That’s at the root of all these board agitations.

 

It would be dead simple to make LIF a $40 stock. Just pay out $4 in annual dividends and promote to the market that $4 is sustainable if high grade pellet premiums hold. LIF management is insufficiently motivated to take those two simple steps. What do they care if LIF’s share price or dividend rises? They don’t own many shares and or collect much in dividends. They can’t receive options or RSU’s because of LIF’s bylaws. Endgame for LIF management is doubling their pitiful salaries. In the world they work in (publically traded mining and royalty companies) these people are POOR.

[bizaro86]

Running LIF is a part time job. IMO $220k is perfectly reasonable for that. I have a bigger LIF position than ALS (it was really cheap!) and I honestly don't see any path for them to get approval to diversify.

 

I do see a path for an activist to make a name for themselves though. If they keep this path, the argument that new management could pay out a few dollars in special dividend would be pretty compelling to shareholders,  I would think.

[linealdin]

Altius market cap: C$510 million

 

Sandstorm Gold market cap: C$1.13 billion

 

Both companies had ~C$14 million EBITDA in Q3 2018.

 

Sandstorm has double the market cap of Altius but receives the same quarterly operating income. The market loves gold, hates coal, likes copper, is nervous about iron ore, and has no idea what the hell potash is.

[linealdin]

https://jutiagroup.com/research-and-commentary/disappointing-drilling-but-dont-give-up-on-this-company/

 

Adrian Day discusses Evrim’s drill results:

 

“Over 1,100 meters of drilling has been completed and assays of four out of five holes received and released. There was some gold (and copper), but nothing comparable with the trench results. A drill has been turning at nearby North Dome target. The company will finish that drilling and release the results, including from holes already completed. But clearly there are now low expectations. The company is re-evaluating its program, and more broadly its approach. It is unlikely to complete the second part of the planned drill program (after current holes) without further pre-drilling work and evaluation. It will also consider its participation. Evrim is a prospect generator, who drilled this project itself because of the potential and because funds could be raised (with Newmont buying 19% of Evrim shares at a premium). That may change.”

 

*

 

Sounds like a traditional farm-out agreement is a possibility for Cuale. Evrim could find someone else to finance the next phase of drilling.

[linealdin]

https://www.spglobal.com/platts/en/market-insights/latest-news/metals/121818-brazils-samarco-to-restart-in-2020-as-bf-dr-iron-ore-pellet-supplier

 

Samarco, IOC’s big competitor in pellets, could restart in 2020. About a 6 month ramp-up to reach 8 million tonnes per annum mining rate (well down from the 30.5 MTA Samarco was operating at before the accident). Permits have not be received yet for a mine restart. Let’s hope for delays and legal challenges.

 

*

 

https://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2018-12-13/bhp-s-20-billion-canadian-potash-dilemma-to-build-or-not

 

BHP with a difficult decision whether or not to build the Jansen potash mine. Building Jansen would short-circuit any bull market in potash. Billions in sunk costs but many BHP investors oppose spending billions more to build the mine. BHP itself characterizes Jansen as low risk and low return.

[mikek]

The thing is Sandstorm Gold has quite a bit more upcoming growth compared to Altius.  Not sure you can compare the two.  Maverix metals compared to Altius would be a better comp I feel to show that Altius might be undervalued.  The thing is that no one knows how long the thermal coal royalties are going to last and 777 mine will be done by 2021.  I think the market has big questions on whether Altius can replace that royalty income as those come off.

[linealdin]

The thing is Sandstorm Gold has quite a bit more upcoming growth compared to Altius.  Not sure you can compare the two.  Maverix metals compared to Altius would be a better comp I feel to show that Altius might be undervalued.  The thing is that no one knows how long the thermal coal royalties are going to last and 777 mine will be done by 2021.  I think the market has big questions on whether Altius can replace that royalty income as those come off.

 

Sandstorm is projecting revenue from Hot Maden in 2022. No significant growth projected for the next 3 years. Growth profile flat as Taylor Swift over that period. Hot Maden is a wonderful project but it’s located somewhere I wouldn’t travel with my family. Dictatorland. And Sandstorm doesn’t own a stream on Hot Maden (only a 30% equity stake and a small royalty). They are glossing over the technicalities of how they will actually squeeze huge amounts of cash out as a minority partner.

 

Altius in that 3 year period will start receiving new royalty revenue from Gunnison, Telkwa, and various lithium and renewable energy royalties. I also suspect Altius has been a LIF buyer on recent market weakness. 4 million shares of LIF, paying out C$16 million in 2019, would be nice. Chapada expansions coming. Potash price and production volume will also rise in the next 3 years. I expect the total potash package will average C$25 million a year over the next 3 years. Zero dropoff from coal or 777 until 2022 rolls in.

 

Flat versus growth.

 

*

 

Edit: Yeah Sandstorm is definitely making assumptions with Hot Maden. I was surprised to find out that the project has no bankable feasibility study and no permits. As well as no streaming deal or finalized project finance. Early days.

[linealdin]

https://globenewswire.com/news-release/2018/12/19/1669402/0/en/Alderon-Iron-Ore-Corp-2018-Year-of-Revival-and-Re-positioning.html

 

Alderon 2018 year in review:

 

“The premia garnered by the high-grade iron ore concentrates improves the Kami Project economics substantially and allows Alderon to re-enter the market and pursue financing. Capital markets are receptive to producing or substantially de-risked iron ore projects, such as Kami, and are starting to recognize the value of the Labrador Trough. Alderon and HBIS Group are focused on building capital with traditional and non-traditional sources, and are in ongoing discussions with representatives of various banks.”

 

 

[linealdin]

https://www.excelsiormining.com/images/pdf/Presentation/2018/dec/NEW_Dec_6_2018.pdf

 

Latest Excelsior Mining presentation has Altius holding 1.2% of Excelsior’s 237 million shares outstanding. That is roughly 2.84 million shares. Altius had 5.8 million shares inherited from Callinan. The shares were worth 28 cents when the Callinan acquisition closed. So Altius likely cashed out 2.96 million shares when Excelsior ran up to the $1.40’s in late 2017 and early 2018.

 

Strategy seems to be: Sell half on market strength then hold the rest of the shares as Excelsior moves to production.

 

 

[linealdin]

In the Chad Wells interview he revealed the average cost of the 3.15 million share LIF position as $17.

 

3.15 million x C$17 = C$53.55 million.

 

The 0.35 million share top up in Q3 2018 cost around C$24.86 per share.

 

0.35 million shares x C$24.86 = C$8.7 million.

 

Cost per share of the LIF position is now $17.78 per share. Total investment is C$62.25 million.

 

*

 

I do hope Altius has been buying in the last couple of weeks. Great opportunity to buy more LIF shares at C$24 or below.

 

This is becoming a special situation. Altius management says it expected, as I did, a Q4 LIF dividend of $1 or more. They believe LIF won’t be able to hoard cash forever. The huge cash position will be returned to investors as special dividends in 2019.

 

The non-nefarious explanation for the cash hoarding is that LIF is preparing for Rio Tinto to sell or IPO its IOC stake. As board members of IOC LIF would have insider info about whether a sale will actually happen. Maybe something real is progressing?

 

As to why LIF needs to hold C$85 million in cash if there’s a sale of IOC? I’m not sure.

 

[bizaro86]

Could LIF bid for more IOC equity under their current setup?

 

While that would make me very unhappy, becoming the mine operator would certainly be one way to build an empire.

[linealdin]

https://majorprojects.alberta.ca/details/Tidewater-TransAlta-Natural-Gas-Pipeline/3567

 

These are the details for the 120 km pipeline Tidewater is building for Transalta to supply the natural gas needs for the conversions at Keephills and Sundance.

 

C$150 million cost.

 

~2 year timeline. Construction began in early 2018, delivery is contracted for January 2020.

 

What does that C$150 million deliver? Only 16.7% of Transalta’s total natural gas needs at Sundance/Keephills. Additional time and capital will be necessary to triple the original pipeline’s capacity, then another C$150 million plus to build a second pipeline.

 

The 16.7% capacity to be delivered by 2020 will allow Transalta to do a modest amount of gas co-firing at its coal power plants.

 

Capital Power is facing the same issue. They are currently building a pipeline for use in 2020. But the gas capacity of that pipeline will only allow co-firing for a maximum of 35% of the Genesee complex. Additional hundreds of millions and additional years required to bring 100% gas capacity to the site.

 

I see a 5 year window with a lot of talk of co-firing but little actual damage to Altius’s electrical coal revenues. Capacity to co-fire does not mean use of 100% of that capacity. I expect around C$13 million a year electrical coal royalties for the 2019 through 2023 period (excluding Cheviot met coal).

[linealdin]

Could LIF bid for more IOC equity under their current setup?

 

While that would make me very unhappy, becoming the mine operator would certainly be one way to build an empire.

 

More IOC equity is way beyond LIF’s budget. Rio Tinto wants US$6 billion for its equity stake in IOC. Only a major could afford even half that price.

[linealdin]

https://www.pressreader.com/canada/stockwatch-daily/20181205/281590946637859

 

Additional details on Adia Resources. Altius has 10 million shares. The original prospectors have 2.5 million shares. 6 million shares are being placed right now with insiders and strategic investors for 50 cents a share. Debeers contributing C$1.5 million in services, with an option to contribute an additional C$5.5 million in services and gain Adia board seats.

 

One strategic investor is Burgundy Diamonds, a private equity fund focused on incubation of diamond projects. Peter Ravenscroft of Burgundy has an Adia board seat. Jeff Morgan, project geologist for Altius joins Marco Locascio as an Adia executive.

 

Adia should be funded for a 3500 meter drill program this winter. Drilling will help determine a location for a Phase 2 bulk sampling program.

 

I’m sure Altius would like to leave the IPO of Adia with around C$5 million to C$8 million in shares.

 

 

[linealdin]

Ravenscroft is a notable diamond expert. He has supervised resource estimates for many diamond mines in Canada. He seems to be an expert in size frequency distribution of diamonds. See the following presentation his consultancy put out:

 

http://burgundymining.com/WordPress3/wp-content/uploads/Burgundy-Mining-The-Power-of-Diamond-Size-Frequency-Distributions-Feb-2016.pdf

 

Size frequency analysis is the key early issue for Adia’s project. They will drill and sample and find many thousands of microdiamonds and a good number of macrodiamonds. The experts will determine whether enough viable diamonds will be in the deposit.

 

Ravenscroft’s Burgundy Diamonds is raising US$30 million in private equity to invest in early stage diamond projects. Their plan is to invest directly on the project level ($3 to $10 million for a 51% project stake is a target) not usually taking equity because juniors dilute too much. Having Ravenscroft and DeBeers on board as seed investors is major validation for Adia.

 

 

[linealdin]

2018 royalty revenue should come in around C$68 million, in the upper range of guidance of C$64 million to C$69 million. LIF strike and cash hoarding cost Altius C$3 million or so.

 

2019 should see growth to C$80.2 million in royalty revenue. My estimates:

 

Chapada: C$18.5 million (new recovery circuit improvement kicking in H2 2019).

777 mine: C$10 million.

LIF: C$12.25 million (3.5 million shares x C$3.50 in annual dividends; the C$85 million LIF cash hoard is reduced to normal historical levels in 2019).

Potash: C$20 million

Electrical coal: C$13 million

Cheviot: C$3.5 million

Voisey’s Bay: C$1.5 million

Coal bed methane: C$600K

Interest and investment: C$500K

Excelsior: C$365K (1 quarter of revenue).

 

[Liberty]

So, linealdin, are you buying more here?

[linealdin]

So, linealdin, are you buying more here?

 

Yes, aggressively buying. Turning a US$300K plus retirement account into ATUSF shares. My broker likes the fees.