ALS.TO - Altius Minerals

[Thrifty3000]

Yeah but with that purchase price you would be a fool not to do it.

 

This is the Gennessee coal partnership?  Altius had about $1.3 CAD in Q1 royalty.  This would add about $1.1 million/quarter at that rate.

 

I emailed investor relations to clarify if this encompasses Genesee, Sheerness, and Paintearth, or if it's a subset. Those 3 generated about $11 million in 2019, and were producing about 30% less royalty revenue in the 2nd quarter (due to Covid induced power demand reduction). About half that revenue is scheduled to end in 2024 (Sheerness), and the rest around 2030 (Genesee).

 

Even if it's just Genesee it's a really good deal. If it's just Genesee then we're talking about $40+ million of cash flow over the next 10 years.

[Thrifty3000]

Yeah but with that purchase price you would be a fool not to do it.

 

This is the Gennessee coal partnership?  Altius had about $1.3 CAD in Q1 royalty.  This would add about $1.1 million/quarter at that rate.

 

I emailed investor relations to clarify if this encompasses Genesee, Sheerness, and Paintearth, or if it's a subset. Those 3 generated about $11 million in 2019, and were producing about 30% less royalty revenue in the 2nd quarter (due to Covid induced power demand reduction). About half that revenue is scheduled to end in 2024 (Sheerness), and the rest around 2030 (Genesee).

 

Even if it's just Genesee it's a really good deal. If it's just Genesee then we're talking about $40+ million of cash flow over the next 10 years.

 

I got confirmation this encompasses all; Genesee, Sheerness, Paintearth, and Highvale! (Paintearth and Highvale are small and expire this year.)

 

This is an amazing deal. We're talking at least $50 million of royalty revenue over the next 10 years, purchased for $11 million.

 

Bravo, Altius.

[Thrifty3000]

Editorial comment: I feel like this deal nicely redeems the decision to dump $10 million of LIORC in March. Especially since LIORC (and IOC) are so fickle about paying dividends.

[Liberty]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

[Thrifty3000]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

 

I’d assume they’re more rational than dumb. Whatever they think is the value of that holding, it sounds like it’s worth more than that amount to them to exit investments that aren’t “green.” (Or maybe they have some insider info that Alberta is going to shut down coal plants even earlier than expected.)

[Liberty]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

 

I’d assume they’re more rational than dumb. Whatever they think is the value of that holding, it sounds like it’s worth more than that amount to them to exit investments that aren’t “green.” (Or maybe they have some insider info that Alberta is going to shut down coal plants even earlier than expected.)

 

Well, they both were already wrong about the investment in the first place (it was supposed to last a lot longer), so I think it's not out of the conceivable that they may still be wrong about it, or at least, that there's a lot of uncertainty that must be discounted... But I'd say that the value of it is probably closer to what ALS is paying than anything else. Otherwise, if it was worth a lot more, Liberty would've sold it to someone else for a higher price.

[StevieV]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

 

I’d assume they’re more rational than dumb. Whatever they think is the value of that holding, it sounds like it’s worth more than that amount to them to exit investments that aren’t “green.” (Or maybe they have some insider info that Alberta is going to shut down coal plants even earlier than expected.)

 

Well, they both were already wrong about the investment in the first place (it was supposed to last a lot longer), so I think it's not out of the conceivable that they may still be wrong about it, or at least, that there's a lot of uncertainty that must be discounted... But I'd say that the value of it is probably closer to what ALS is paying than anything else. Otherwise, if it was worth a lot more, Liberty would've sold it to someone else for a higher price.

 

I think your last line is a bit of a leap.

 

We are talking about an asset that is both expiring and in a disfavored industry.  I doubt declining coal royalties are a huge, liquid and efficient market. 

 

Liberty could have been driven by the desire to get a full exit of coal and dispose of an ugly asset.  A simple - let's be done with it.  If that, I'm not sure there are many parties Liberty could have turned to.

 

Seems to me as though Altius picked this up at a good price, but it's certainly possible the royalty will fade more quickly than expected.

[bizaro86]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

 

I’d assume they’re more rational than dumb. Whatever they think is the value of that holding, it sounds like it’s worth more than that amount to them to exit investments that aren’t “green.” (Or maybe they have some insider info that Alberta is going to shut down coal plants even earlier than expected.)

 

I doubt there will be the political will to close coal any sooner in Alberta. The current governing party (United Conservatives) won't end them sooner. There was hope in the industry they might reverse the current deadline, which hasn't happened, but it would be very off brand for them to accelerate the end.

 

The official opposition (and only current credible threat to the government) is the New Democrats. They were governing when the end date was put in place, and they paid a political price, as well as incurred a big economic cost to do so. I doubt they'd change the deadline if they came back to power, because it is their policy.

[Liberty]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

 

I’d assume they’re more rational than dumb. Whatever they think is the value of that holding, it sounds like it’s worth more than that amount to them to exit investments that aren’t “green.” (Or maybe they have some insider info that Alberta is going to shut down coal plants even earlier than expected.)

 

Well, they both were already wrong about the investment in the first place (it was supposed to last a lot longer), so I think it's not out of the conceivable that they may still be wrong about it, or at least, that there's a lot of uncertainty that must be discounted... But I'd say that the value of it is probably closer to what ALS is paying than anything else. Otherwise, if it was worth a lot more, Liberty would've sold it to someone else for a higher price.

 

I think your last line is a bit of a leap.

 

We are talking about an asset that is both expiring and in a disfavored industry.  I doubt declining coal royalties are a huge, liquid and efficient market. 

 

Liberty could have been driven by the desire to get a full exit of coal and dispose of an ugly asset.  A simple - let's be done with it.  If that, I'm not sure there are many parties Liberty could have turned to.

 

Seems to me as though Altius picked this up at a good price, but it's certainly possible the royalty will fade more quickly than expected.

 

Either it's a good asset for Altius, or it's not. You can't have it both ways and have it be great financially for Altius but so ugly nobody else would touch it.

 

If this is something that has a good chance of providing safe high IRRs, then the short-duration shouldn't matter and will be reflected in a DCF and priced appropriately by private equity or whatever.

[bizaro86]

Yeah but with that purchase price you would be a fool not to do it.

 

I make that deal all day. It's a no brainer. I don't like the coal royalties just as mucH as the next guy but with that price I'm glad they did it.

 

So you're saying their partners, Liberty Metals & Mining, are really dumb?

 

I’d assume they’re more rational than dumb. Whatever they think is the value of that holding, it sounds like it’s worth more than that amount to them to exit investments that aren’t “green.” (Or maybe they have some insider info that Alberta is going to shut down coal plants even earlier than expected.)

 

Well, they both were already wrong about the investment in the first place (it was supposed to last a lot longer), so I think it's not out of the conceivable that they may still be wrong about it, or at least, that there's a lot of uncertainty that must be discounted... But I'd say that the value of it is probably closer to what ALS is paying than anything else. Otherwise, if it was worth a lot more, Liberty would've sold it to someone else for a higher price.

 

I think your last line is a bit of a leap.

 

We are talking about an asset that is both expiring and in a disfavored industry.  I doubt declining coal royalties are a huge, liquid and efficient market. 

 

Liberty could have been driven by the desire to get a full exit of coal and dispose of an ugly asset.  A simple - let's be done with it.  If that, I'm not sure there are many parties Liberty could have turned to.

 

Seems to me as though Altius picked this up at a good price, but it's certainly possible the royalty will fade more quickly than expected.

 

Either it's a good asset for Altius, or it's not. You can't have it both ways and have it be great financially for Altius but so ugly nobody else would touch it.

 

If this is something that has a good chance of providing safe high IRRs, then the short-duration shouldn't matter and will be reflected in a DCF and priced appropriately by private equity or whatever.

 

I think it makes sense that Altius would be the high bidder here. Private equity would probably want to discount the cash flows more for the lack of control, but since Altius has that control they dont need to discount for it.

[Liberty]

 

I think it makes sense that Altius would be the high bidder here. Private equity would probably want to discount the cash flows more for the lack of control, but since Altius has that control they dont need to discount for it.

 

That makes sense to me, that there's a control premium. But from the POV that they're expecting an ok IRR on it, not that they made a killing and got it for a song and will make huge IRRs.

 

And if you go back to when they originally bought the asset with Liberty and what they expected then, we're already pretty far from making a killing territory, I think.

[Liberty]

Nothing here since July? Stock still in its 10-year-range around $10 CAD?

 

All normal, I guess ¯\_(ツ)_/¯

[reader]

Nothing here since July? Stock still in its 10-year-range around $10 CAD?

 

All normal, I guess ¯\_(ツ)_/¯

 

 

Sometimes it's as exciting as watching (artificial) grass grow.

This stock is oblivious to "good" news, copper up.

I like the way they allocate capital and look at this holding as a part of wider portfolio.

 

[nostradamus]

Ramping up the renewables business:

 

http://www.altiusminerals.com/storage/press-releases/2020-10-13-altius-renewable-royalties-forms-joint-venture-with-apollo-infrastructure-funds-1602589566.pdf

http://www.altiusminerals.com/storage/webcasts/2020-10-13-arr-conference-call-vpub-1602590486.pdf

 

 

[nostradamus]

Does anyone following altius have an estimate of the royalty income of the ARR royalties that are expected to come into production in the next couple of years?

[Thrifty3000]

Does anyone following altius have an estimate of the royalty income of the ARR royalties that are expected to come into production in the next couple of years?

 

Around $10 to $12 million of ARR. The plan was to invest roughly $100 million in renewables to replace the expiring coal royalties.

[nostradamus]

Does anyone following altius have an estimate of the royalty income of the ARR royalties that are expected to come into production in the next couple of years?

 

Around $10 to $12 million of ARR. The plan was to invest roughly $100 million in renewables to replace the expiring coal royalties.

 

You mean this is the revenue that is expected when the full $100m investment has been converted into paying royalities? (According to their presentation they have only invested $66m so far).

 

If so, is there any estimate on the time it takes between the money being depolyed and the 10-12% income stream beginning?

[Williams406]

Iluka (ASX listed) spinning off royalty subsidiary which has sizable Area C iron ore royalties. I note this here simply because it's a new base-metal royalty player with some scale that will be hunting for deals.

 

https://www.iluka.com/getattachment/2d4847b2-f9fd-477f-9d62-1aec66251cbc/deterra-royalties-demerger-briefing-presentation.aspx

[Thrifty3000]

Does anyone following altius have an estimate of the royalty income of the ARR royalties that are expected to come into production in the next couple of years?

 

Around $10 to $12 million of ARR. The plan was to invest roughly $100 million in renewables to replace the expiring coal royalties.

 

You mean this is the revenue that is expected when the full $100m investment has been converted into paying royalities? (According to their presentation they have only invested $66m so far).

 

If so, is there any estimate on the time it takes between the money being depolyed and the 10-12% income stream beginning?

 

Both of these questions have been asked in recent conference calls. I can't say I've walked away with a crystal clear understanding of the answers. They seem to suggest they've already made the commitments necessary to achieve the strategic goal of replacing coal royalties (so maybe the initial deals are structured to only require $66 million to replace the declining coal royalties - but that seems a little too good to be true, so I think I've misinterpreted something.). They also make it sound like the 10% to 12% ROI kicks in the day the investment is made, even though the income might not start rolling in for a couple/few years (I may have misinterpreted this one too).

 

Because they have been so transparent and executed so well I mostly give them the benefit of the doubt on the renewables income in my financial model. I make the assumption that the renewables royalty income will fully offset the expiring coal royalties.

 

I do have to commend Altius big time on their renewables strategy. Think about it. They have been innovative by inventing a brand new royalty product and achieving product/market fit. They have been completely transparent with shareholders about their strategy. And, they have executed beautifully despite economic and pandemic challenges. What the heck more could investors want from a management team? I really admire this company, and love following their progress.

[Liberty]

Q3 royalty numbers are out:

 

http://altiusminerals.com/storage/press-releases/2020-10-21-q3-royalty-revenue-final-1603282514.pdf

 

attributable royalty revenue† of approximately $16.2 million ($0.39 per share) for the third quarter ended September 30, 2020. This compares to quarterly revenues of $13 million ($0.31 per share) in Q2 2020 and $19.2 million ($0.45 per share) in the comparable quarter last year.

 

Looks like revenue is down 15.6% YoY.

[bizaro86]

Q3 royalty numbers are out:

 

http://altiusminerals.com/storage/press-releases/2020-10-21-q3-royalty-revenue-final-1603282514.pdf

 

attributable royalty revenue† of approximately $16.2 million ($0.39 per share) for the third quarter ended September 30, 2020. This compares to quarterly revenues of $13 million ($0.31 per share) in Q2 2020 and $19.2 million ($0.45 per share) in the comparable quarter last year.

 

Looks like revenue is down 15.6% YoY.

 

In fairness, the majority of the decline was lower dividends from their iron ore investment. And the underlying mine would have been hugely profitable this quarter given iron ore prices, but the operator (Rio Tinto) didn't distribute dividends, so none got flowed through to Altius. That cash should be accumulating on the IOC balance sheet, and presumably Rio will want to use their share for something, so it will flow through eventually.

 

Of course, they did have some met coal royalty from Cheviot, which is now closed (and going to zero) so that's a small offset. But if folks are looking at quarter-by-quarter revenue when IOC finally distributes their "just-in-case-pandemic-cash" you can expect a good quarter. 

[Williams406]

Article from a couple months ago regarding Deterra, the royalty spinoff from Iluka. Will be interesting to see how aggressively the new company tries to grow and whether that is via acquiring royalties/streams directly or acquisitions.

 

https://www.forbes.com/sites/timtreadgold/2020/08/25/replicating-rinehart-how-a-new-company-could-also-build-a-16-billion-fortune/#75834dd72d4e

[Thrifty3000]

http://altiusminerals.com/storage/press-releases/2020-10-28-tge-us-25-million-extension-final-1603885689.pdf

 

Another $25 mil

[Liberty]

Altius Reports Acquisition of Kami Iron Ore Project by Champion Iron

 

Altius Minerals Corporation (ALS:TSX) (ATUSF: OTCQX) (“Altius” or the “Corporation”) reports

that it has been informed by Deloitte Restructuring Inc., the Receiver overseeing the disposition of assets formerly held by Alderon Iron Ore Corp. (“Alderon”), that an acquisition proposal by Champion Iron Limited (the “Acquisition”)  has been approved by the Supreme Court of Newfoundland and Labrador following a competitive bidding process. The primary asset involved in the Acquisition is the advanced stage Kamistiatusset (“Kami”) iron ore project located in the Labrador Trough geological belt in western Labrador.

 

Altius’s Project Generation team completed an initial drilling program that broadly outlined the Kami high-grade iron ore deposits in 2008.  Altius subsequently sold the project to Alderon in exchange for a significant equity shareholding in the company and retention of a direct project interest through a 3% gross sales royalty, which has not been impacted by the receivership process. Altius then acquired additional Alderon equity in early 2018 through a purchase from a third-party shareholder and soon after that also became a minority participant in a Sprott Private Resource Lending LP secured debt funding syndicate.

 

Under the Acquisition, Altius will receive 600,000 Champion Iron shares as consideration for the sale of its portion of secured debt of Alderon.  It also expects to receive a portion of the $15 million cash consideration and the future production-based payments stemming from its 37.3% equity holding in Alderon. The amount of cash consideration will be dependent on the Receiver’s approval process for any additional creditor claims, which will rank in priority over any amounts payable to equity holders. This process remains ongoing, but the Receiver has stated that it believes there will be a substantial recovery to Alderon shareholders.

Closing of the Acquisition is subject to the consent of the Ministry of Industry, Energy and Technology of Newfoundland and Labrador, as well as other customary closing conditions. The Acquisition is expected to be completed in the fourth quarter of calendar 2020.

 

Brian Dalton, Altius CEO commented, “We are excited to learn that the Kami project has found its way to a new owner that has the proven operating experience and financial depth necessary to further its advancement to potential production.  The project is located adjacent to available infrastructure and features high-quality iron ore of a type that is in increasing global demand owing to its low impurities and inherently lower emissions profile during the steel making process.  In addition to achieving a recovery on our loan principal and benefitting from our significant equity interest in Alderon, we are excited about the renewed possibility for development of the Kami project and the implications of that relative to our fully preserved royalty interest.”

 

He then added,  “We are also pleased that communities in the Labrador West region, various aboriginal groups and indeed the Provinces of Newfoundland and Labrador and Quebec can now gain a renewed hope in the future economic and social benefits that development of the Kami project would entail and call upon all stakeholders to work diligently together to ensure this outcome. With a strong spirit of cooperation and the inherent positive economic and global sustainability features of the Kami project we share optimism for a positive result and pledge our ongoing support.”

[nostradamus]

600,000 Champion shares. Current price = 4.3 AUD per share = 2.58 million AUD = 2.46 million CAD

 

Main value in the royalty though.