ALS.TO - Altius Minerals

[linealdin]

Royalty revenue growth will push Altius’s market cap upwards. In the near term.

 

Next Wednesday they will announce a preliminary Q1 royalty number in striking range of C$20 million. Maybe C$19.5 million. The final Q1 total revenue number, with project generation revenue included, will crack C$20 million.

 

Final total revenue for 2019 will be C$80 million or more. Then the march to C$100 million annual revenue begins.

[TwoCitiesCapital]

Royalty revenue growth will push Altius’s market cap upwards. In the near term.

 

Next Wednesday they will announce a preliminary Q1 royalty number in striking range of C$20 million. Maybe C$19.5 million. The final Q1 total revenue number, with project generation revenue included, will crack C$20 million.

 

Final total revenue for 2019 will be C$80 million or more. Then the march to C$100 million annual revenue begins.

 

I don't doubt royalty revenue may increase, but it's been increasing. Dramatically. And the share price hasn't. I fail to see what makes this quarter different.

 

It's a show me market. Until Altius shows the market an appreciable dividend, I have to believe the royalty revenue per share growth rate will continue to outpace the share price growth rate - as has been the case for years.

[mikek]

I agree that we can see 80 million in royalty revenue this year also but I agree that I am also of the opinion that I don't see why the market is suddenly going to care about that. Anyone can see that Altius has a decent chance of hitting 80 million this year in royalty revenue. I don't think Altius is suddenly going to rerate due to something that most people that know the stock can clearly see happening.

[Dazel]

 

Altius has done all the right things....

There are three factors holding back the valuation

 

1.Coal-Their longlived wonderful cash cow royalties got side swiped by the government...is there a change in government coming? Has anyone followed Doug Ford? This is a wild card but the downside of coal phase out is priced in.

 

2. They have entered renewable energy and the market is not trusting of success here.

 

3. They do not play in the gold sector and that is where money flows...no one likes base metals unless you are a LIF shareholder which Altius is.

 

1. May change with government overhaul not likely but possible....2. Is a wait and see 3.Altius will not enter that market too expensive...

 

In order for any of the projects to get the green light they will have to be exceptional or we have a commodities bull market...both are possible and would take the share price to the sky. Alderon missed by 6 months as the iron ore bull market ended and that disappointing episode has all weary of looking at the upside. It would have doubled Altius stock.

 

At these prices downside is protected and upside is large...is that not what we are all looking for. Frustrating for sure...I can sympathize with all.

 

Best of luck to all!

 

Dazel

[cwericb]

I appreciate this discussion but unfortunately it does little to raise my enthusiasm for Altius. While I think it is a great company, at least for management, but I don’t know if I have the patience to wait for something that may never come. I am getting the impression that my money would be better in deployed in something boring like GICs.

 

Yes, if ALS can keep pushing the royalty income upwards share price may eventually reach where it was four or five years ago. Should I be excited about that?

 

In the end I will probably stick around here simply because I hate to admit defeat.

 

PS. Jeez Dazel, I thought you were a ghost.  :)  As far as downside being protected, I wish I had that confidence - in 2016 share price dipped briefly to $8.

 

Here is the stock price chart (U$D) for the past nine years that shows the dismal stock price performance.

[Liberty]

I don't doubt royalty revenue may increase, but it's been increasing. Dramatically. And the share price hasn't. I fail to see what makes this quarter different.

 

What makes a stock move over time isn't increased revenues, it's value creation. The question is, what have they traded in exchange for those revenues, how durable are these revenues, and can they re-invest the cashflow that comes back at high ROIC to compound? You need to answer all these questions to know how much value is being created (or not).

[hohi]

New Interview with Brian Dalton on BNN

https://www.bnnbloomberg.ca/commodities/video/power-shift-altius-minerals-creates-subsidiary-for-renewable-energy-royalties~1658255

[bizaro86]

It's interesting, I've held varying amounts of ALS since they bought the Potash/Coal royalties, which I thought was a great deal. I still think that, but the market's appraised value of Kami has come way down during that timeframe. One of my worst performers on an opportunity cost basis over that time, as the rest of my portfolio is considerably better in aggregate.

 

On the other hand, following them into investments has been extremely lucrative. I'm over a double in each of Labrador Iron and Champion. The only other one I've followed them into was Renaissance Gold (which is the smallest of the positions as its by far the most speculative not being an operating mine). I'm still holding a bit of that, so we'll see.

 

I'm starting to come around to the idea that these guys might be great geologists and mining investors, which one would think should eventually show up in the ALS share price... I agree they probably need a big dividend (or consistent dividend growth) to get a better multiple.

 

Edited: I lied - I went back to start selling my CIA, and it looks like I'm up ~65% there. Starting to layer out, as good news for the iron ore sector can't continue forever...

[cwericb]

Perhaps you make a good point there bizaro. My past experience in following FFH's investments has made me gun shy of doing that. These guys are in a different game and this could be a sound idea. 

[bizaro86]

Perhaps you make a good point there bizaro. My past experience in following FFH's investments has made me gun shy of doing that. These guys are in a different game and this could be a sound idea.

 

Small sample size though - both of the ones that were a success went well largely because of a huge run up in the price of iron ore...

[linealdin]

Yamana sells Chapada mine to Lundin Mining for $1 billion or so. Implications for Altius:

 

1) Lundin is a much larger company (by market cap) than Yamana. They have more financial resources to fund the $250 million expansion projects at Chapada (throughout increase and Sucupira pit pushback).

 

2) Lundin is a copper-focused company. Chapada is primarily a copper mine with significant gold credits. Lundin spends a lot of money aggressively exploring for copper at its properties. The Yamana copper reserves and resource growth will likely ramp up under Lundin's exploration team.

[petec]

 

I'm starting to come around to the idea that these guys might be great geologists and mining investors, which one would think should eventually show up in the ALS share price...

 

 

This is more or less the entire argument, if you ask me. Just can take a LOOOOONG time to play out given how long cycles last and how long it takes to get a mine from idea to production.

[linealdin]

http://www.explorationmidland.com/en/MediaHandler.ashx?MediaId=f67200ed-0a95-4d53-b34b-840ca9681de2

 

BHP makes a strategic investment in Midland, way above current market price. C$5.9 million raised at 1.70 a share.

 

BHP gets right of first offer on Mythril. If the drilling hits BHP wants the project because it is potentially a very large copper deposit (based upon the IP surveys).

[linealdin]

Yamana sells Chapada mine to Lundin Mining for $1 billion or so. Implications for Altius:

 

1) Lundin is a much larger company (by market cap) than Yamana. They have more financial resources to fund the $250 million expansion projects at Chapada (throughout increase and Sucupira pit pushback).

 

2) Lundin is a copper-focused company. Chapada is primarily a copper mine with significant gold credits. Lundin spends a lot of money aggressively exploring for copper at its properties. The Yamana copper reserves and resource growth will likely ramp up under Lundin's exploration team.

 

Lundin conference call emphasizes that they have no capital constraints compared to Yamana. They plan to bring copper production forward in an aggressive manner. I expect the gold-only Suruca deposit to be shelved, while Chapada expansion timeline will be accelerated. Yamana had been slowplaying the major expansion spending to try to keep a cash flow positive profile for a few years.

[linealdin]

Conservatives win big in Alberta election, securing 62 of 87 seats in the provincial legislature. Jason Kenney will be next premier of Alberta. The conservatives made campaign promises to:

 

1) Slow down the Alberta coal power phaseout

 

2) Repeal the carbon tax

 

I can imagine the conservatives putting political pressure on the utilities to delay the coal power plant conversions a few years to save thousands of coal mine or coal power plant related jobs. Phaseout is inevitable but the exact timing is still up in the air, especially for the Genesee plants.

 

[linealdin]

Wolfden Resources cutting timber for forest management has been kicking out revenue to Altius. Altius gets 20% of the sales receipts from timber sales. Altius received C$92,232 in timber revenue in 2018, and has received C$66,299 so far in 2019. See Wolfden’s most recent MD&A. I believe these sales receipts become part of Altius’s project generation revenue.

 

These regular sales are separate from what will eventually be a total sale of the Mt. Pickett timber rights (for at least US$5 million).

 

Because the total sale of timber rights didn’t happen by November 2018 Altius can now, at any time, demand the return of what it paid for the Mt. Pickett royalty, C$7.663 million, in cash or shares of Wolfden.

 

Wolfden was a speculative royalty deal but Altius built some excellent protections into the deal.

[mikek]

Strong Q1 performance and raised guidance. Potash is performing very well.

 

http://altiusminerals.com/uploads/2019-04-17--Altius-Reports-Q1-Royalty-Revenue-and-Increases-Revenue-Guidance-FINAL.pdf

[linealdin]

Strong Q1 performance and raised guidance. Potash is performing very well.

 

http://altiusminerals.com/uploads/2019-04-17--Altius-Reports-Q1-Royalty-Revenue-and-Increases-Revenue-Guidance-FINAL.pdf

 

Altius should be in striking range for C$90 million total revenue in 2019 (royalty and project generation revenue). This preliminary Q1 royalty number doesn’t include ~C$300K from Voisey’s Bay and PG revenue (timber sales etc). LIF must keep paying out and Chapada should have a big second half of the year with the improved recovery circuits installed this quarter. Maybe a couple hundred thousand extra revenue from Excelsior in Q4.

[mikek]

90 million would be quite a reach. I will stick with 80 million for the year. Lundin buying Chapada, UCP win, highest quarter royalty revenue record, raised guidance and Altius barely moves. I think CapitalCities comment about the market not caring sums it up nicely.

[linealdin]

90 million would be quite a reach. I will stick with 80 million for the year. Lundin buying Chapada, UCP win, highest quarter royalty revenue record, raised guidance and Altius barely moves. I think CapitalCities comment about the market not caring sums it up nicely.

 

With Voisey’s royalty revenue and PG revenue added in Q1 total revenue should be around C$22.2 million. C$22.2 million x 4 quarters = C$88.8 million. And Altius has seasonal effects in their royalty portfolio (Chapada H2 more production than H1, IOC not shipping as much in Q1 with frozen waterways etc.).

 

IF commodity prices hold at today’s level Altius will likely hit C$90 million total annual revenue. A big if, of course. If prices rise significantly then C$100 million is possible in 2019.

 

I think a dividend increase is coming sometime in 2019. It’s time.

 

 

[linealdin]

Brian Dalton talks recently with Dan Ferris of Stansberry Research. Search “How to Collect Income from Gold” in your podcast app. Great interview.

 

Extreme confidence from Dalton as to how well the fundamental Altius business is doing. How to raise the stock price? Continue making gobs of money and compound it at high rates.

[linealdin]

https://www.championiron.com/wp-content/uploads/2019/04/champion-ceonewsletter-april2019-v8.pdf

 

Champion Iron’s newsletter on conditions in the iron ore market. Insights and charts you usually have to pay for.

 

Argues that we haven’t seen huge price spikes yet because Vale has been drawing down inventory to satisfy customer contracts post-disaster and Chinese steelmakers, worried about lower margins, have been keeping lower stockpiles on hand. This situation won’t last forever.

 

Alumina discount is now US$5.2 per 1%. Underrated factor for why Trough iron ore is competitive for the world market. Aussie iron ore with typical 2.5% alumina, meaning a US$13 per tonne haircut off of the benchmark price.

 

C3 shipping costs down 25% since Vale disaster. Record margins for Champion. If C3 shipping costs decline the Aussie freight advantage to China diminishes.

[linealdin]

 

John Kaiser on BHP’s strategic investment into Midland and Mythril:

 

1) BHP knows everything about copper but Mythril’s deposit style is something they’ve never seen before. And because Mythril also has the potential to be very large and high grade BHP felt it needed to be in the play. Kaiser keeps banging the drum on Mythril’s potential to be a world class copper deposit.

 

2) BHP nows owns 5% of Midland shares but the deal has an unusual option giving them the right to take up all the shares in any subsequent Midland financing (bringing BHP’s position in Midland to a maximum of 19.9%).

 

3) Midland has C$20 million in the bank and is financed to drill 100,000 meters at Mythril. The first drill program is wrapping up. First assay results in 4 weeks. Gino Roger has ordered a couple of drills for a Phase 2 drill program starting in June.

[petec]

 

John Kaiser on BHP’s strategic investment into Midland and Mythril:

 

1) BHP knows everything about copper but Mythril’s deposit style is something they’ve never seen before. And because Mythril also has the potential to be very large and high grade BHP felt it needed to be in the play. Kaiser keeps banging the drum on Mythril’s potential to be a world class copper deposit.

 

2) BHP nows owns 5% of Midland shares but the deal has an unusual option giving them the right to take up all the shares in any subsequent Midland financing (bringing BHP’s position in Midland to a maximum of 19.9%).

 

3) Midland has C$20 million in the bank and is financed to drill 100,000 meters at Mythril. The first drill program is wrapping up. First assay results in 4 weeks. Gino Roger has ordered a couple of drills for a Phase 2 drill program starting in June.

 

Apologies for the ignorance but what's Altius' interest if any?

[linealdin]

 

John Kaiser on BHP’s strategic investment into Midland and Mythril:

 

1) BHP knows everything about copper but Mythril’s deposit style is something they’ve never seen before. And because Mythril also has the potential to be very large and high grade BHP felt it needed to be in the play. Kaiser keeps banging the drum on Mythril’s potential to be a world class copper deposit.

 

2) BHP nows owns 5% of Midland shares but the deal has an unusual option giving them the right to take up all the shares in any subsequent Midland financing (bringing BHP’s position in Midland to a maximum of 19.9%).

 

3) Midland has C$20 million in the bank and is financed to drill 100,000 meters at Mythril. The first drill program is wrapping up. First assay results in 4 weeks. Gino Roger has ordered a couple of drills for a Phase 2 drill program starting in June.

 

Apologies for the ignorance but what's Altius' interest if any?

 

Altius has a 1% royalty on Mythril and an equity position in Midland. They also have a joint exploration agreement that allows them to pay for their share of exploration expenses and receive an appropriate amount of Midland shares as compensation.

 

Altius benefits in different ways if drilling at Mythril hits a world class copper deposit.