Guest Dazel Posted February 7, 2013 Share Posted February 7, 2013 Agreed. There is no advantage to rushing things...it does not touch the timeline of the build out and will give great credibility to the process. We are talking about a 30 plus year marriage and Hebei are smart people...They are going to want to see the numbers in the feasibility study and compare to the operational numbers to know how things things have played out and cover their jobs with their own analysis. We expected this with Chinese new year. It is a much bigger deal than any holiday time we see in North America... Iron ore prices are holding strong at $157 a ton...the project remains an incredible opportunity for Hebei. Dazel. Link to comment Share on other sites More sharing options...
original mungerville Posted February 7, 2013 Share Posted February 7, 2013 There is an advantage to Hebei doing what they said they would do by the time they said they would do it which they are not doing. That press release raises a lot of questions. Feasibility came out 11 January, in the press release, Alderon has said, after discussion with Hebei, that they have agreed with themselves to extend to 15 March. That is either a poorly written press release or something weird is going on. Chinese New Year is one week of vacation. 11 January to 15 March is 9 weeks. They said they would be it done in 3 weeks after the feasibility was released. Further, the feasibility released 11 January was already delayed from an earlier timeline giving Hebei even more time. You can't spin this positively. I hope their project management isn't this bad. Link to comment Share on other sites More sharing options...
zippy1 Posted February 7, 2013 Share Posted February 7, 2013 There is an advantage to Hebei doing what they said they would do by the time they said they would do it which they are not doing. That press release raises a lot of questions. Feasibility came out 11 January, in the press release, Alderon has said, after discussion with Hebei, that they have agreed with themselves to extend to 15 March. That is either a poorly written press release or something weird is going on. Chinese New Year is one week of vacation. 11 January to 15 March is 9 weeks. They said they would be it done in 3 weeks after the feasibility was released. Further, the feasibility released 11 January was already delayed from an earlier timeline giving Hebei even more time. You can't spin this positively. I hope their project management isn't this bad. I agree. I actually work at a large semiconductor company in this part of the world handling customers locating in North America, Japan and Europe. I have seen people here using CNY as the reason for a few days delay. But this is the first time I see people use it as the reason to push it out by 5 -6 weeks. More importantly in my mind is what if Hebei wants to change the terms of the contract in timing or amount of money? Can AXX really go sell this thing to a higher or at least different bidder? If I were to be Hebei, I will try to squeeze AXX if I could get away with it. Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 7, 2013 Share Posted February 7, 2013 Agreed. Certainly not putting anything positive on this other than the original contract is a little stupid. Fifteen days really?! It is not just $120 million...after you spend the first $190 million ( equity investment included) you are going to spend the other $200 million to get your discounted ore and keep your 25 % stake in the project for over 30 years. So do you think you would have some questions when you are putting in almost half a billion dollars? And all this going on around Chinese New Year...silly...you need more time. Alderon was stupid with their press on this and rumour has it they have fired their PR team over it. Hebei's normalized market cap is around $50 billion. This is as big as AIG!!!! 15 days...what were they thinking? Dazel Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 7, 2013 Share Posted February 7, 2013 Maybe the 15 days was reasonable. Presumably, Alderon could have been sharing the results of the feasibility study with Hebei beforehand. What you really need to do is to double-check Alderon's work and see if their assumptions are correct... this goes far beyond what is printed in the technical report that they file on SEDAR. I think that the real reason for the delay is that Hebei may be having cold feet. Everybody else is cutting their expansion plans (e.g. Cliffs) due to the drastic drop in iron ore pricing. The mining industry tends to exhibit herd behaviour. If Alderon was overcapitalized and could build the mine themselves, they should kick Hebei to the curb and therefore get rid of the option that they gave/sold to Hebei. Instead, they are effectively extending Hebei's option to invest in Alderon... it's sort of like giving away free money. If Hebei doesn't invest in Alderon, it's a vote of no confidence and might make it very difficult for Alderon to raise capital. Dalton and Baker are on Alderon's board... I am sure they know what's going on. Altius is sitting on a lot of cash and has slowed down its repurchases and hasn't been buying Alderon stock. 2- In general, juniors will often extend options/warrants (and effectively give away free money to the options/warrant holders) because they badly need financing. Extending options/warrants has less fees than an underwriting or a rights offering. (Even a rights offering can be very expensive if you need somebody to backstop the warrants; on top of that, the brokers don't like it when you do a rights offering and won't pump your stock.) 3- To some degree, you need to be greedy when others are fearful. You want to buy when share prices are really low and fears are overblown. (Too bad Altius ran up and isn't as good a buy as it was before.) Link to comment Share on other sites More sharing options...
original mungerville Posted February 8, 2013 Share Posted February 8, 2013 I would not hold Alderon stock. This is just one example of my earlier point (several comments ago) that the main value Altius holds is the royalty not the investment in Alderon stock. The latter will suffer dilution, etc as financing is raised whereas the former will not. Then the former will attract a higher P/E. Anyway. Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 8, 2013 Share Posted February 8, 2013 Mungerville, While we see big value in Alderon at these prices...we agree that Altius business model is exceptional...we do not see a better business on the planet than a royalty company especially in this environment (inflation protected). The problem... like any great company is that once the royalties are established the companies trade at such a huge premium we are unable to pay up for them. Altius will be priced like this we agree with you.... Dazel. Link to comment Share on other sites More sharing options...
no_free_lunch Posted February 9, 2013 Share Posted February 9, 2013 Canadian National Railway Co has halted a study into the feasibility of building a C$5 billion ($4.99 billion) rail line to ship iron ore from northern Quebec to port, the railroad said on Friday, as miners delay projects due to low prices. .. Iron ore prices plunged to $86.70 a tonne in September from above $180 a tonne in September 2011. Prices have since recovered to about $155 a tonne. http://www.reuters.com/article/2013/02/08/cnrail-ironore-idUSL1N0B8FQS20130208 Price of iron ore is going to be volatile but if volatility causes investment in capacity to drop this can lead to a supply shortage. Not that we are anywhere near one at this point but it is that line of thinking that can help to support pricing in the long-term. Link to comment Share on other sites More sharing options...
Liberty Posted February 12, 2013 Share Posted February 12, 2013 Alderon up almost 18% right now. There's this news: http://www.alderonironore.com/_resources/news/ADVNR20130212.pdf Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 14, 2013 Share Posted February 14, 2013 http://finance.yahoo.com/news/alderons-environmental-assessment-kami-property-113000964.html Good timing.... Hebei will contribute the $350 million needed...$120 million by march 15th...for the build out of Kami...because the timeline is on schedule and they know if they don't someone else will. Fortes cue and all the majors stock prices are recovering...and they are printing cash. Everyone is looking for a deal and right now Alderon and Kami are up for grabs at these prices. Fortes cue has an enterprise value of $27 billion right now! Andrew Forest made a large bet buying up more shares at the bottom in September which continues to pay off...those operators that know what they are doing will be fishing in this market we expect to see a lot of action in iron ore this year! Dazel. Link to comment Share on other sites More sharing options...
biaggio Posted February 14, 2013 Share Posted February 14, 2013 I agree with your thinking. I am biased as I am betting that you re right. But Hebei could change there mind if they don t think there is enough value there for them i.e. environmental assessment was needed, but ultimately they could back out if they don t think its a good deal or if they think they can get a better deal Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 14, 2013 Share Posted February 14, 2013 Biaggio, Hebei rightly is checking things out at Kami....remember if Alderon gets bought out Hebei still owns 25% of Kami....as Wisco does at Bloom Lake. Hebei is making plans for a major iron ore source for 30 plus years...most of the value is in the resource and it's location as we know...execution is next..when this financing is done...it is full speed ahead...this is your best opportunity to gather information on the resource and it's composition and where Hebei will have their iron ore shipped etc...once this is done they are in....Alderon regains it's strong position and they together start this same process as a team...negotiating on outside financing, equipment, labour etc. We will like Hebei a whole lot better when they confirm they are our partner nice to have a giant multinational when they are on your side! Dazel. Link to comment Share on other sites More sharing options...
jch548 Posted February 14, 2013 Share Posted February 14, 2013 Has anyone seen Cliff's Bloom lake cash costs of $116 per ton last qtr? What are the relative dynamics between Bloom Lake and Alderon's Kami? Both are located in the same area. Shouldn't cash costs be a worry? Why would Alderon's be lower. Thanks. Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 14, 2013 Share Posted February 14, 2013 Jcb584, I would suggest you scroll back through the thread to get some answers...Alderon addresses this directly in it's feasibility study conference call transcript...Alderon's management team is from IOC other than the chief geologist who was at Bloom Lake and is responsible for IOC's succesful expansion...they are not copying Bloom Lake the are copying Carol Lake. Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 18, 2013 Share Posted February 18, 2013 http://www.metalbulletin.com/Article/3156656/Iron-ore-and-coking-coal/Spot-635-Fe-iron-ore-prices-hit-160-per-tonne-cfr.html Price update for iron ore. Dazel. Link to comment Share on other sites More sharing options...
Liberty Posted February 22, 2013 Share Posted February 22, 2013 food for thought from a VIC writeup: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/87387 Iron Ore/Steel It is instructive to look at the solar industry over the last two years for what is about to play out in the steel industry. In both cases, there is an industry where demand was being artificially boosted by government stimulus that has faded away, but not before the industry and supply chain totally mistook this non-normal boost of demand as an indication of an ongoing growth trend. The industry built out supply for growth rates off unsustainable demand levels creating a mistaken ramp up of supply with a long lead time. Compounding the problem as the dynamic starts to shift, will be unprofitable bad actors in China that exacerbate the issue and make it more difficult for the market to find a natural bottom. The core of the problem is that if China needed 100 million tons of steel and a mill produced 5 Mtpa, they would build 20 mills, forgetting that there was a year 2 (let alone year 10) of production. This pretty well sums up China in a whole but steel is perhaps the core of this problem. The dirty secret on iron ore is that it is not a commodity that is becoming rarer or even much more expensive and harder to extract; the world is still awash in iron ore. It is just particularly capital intensive with long lead times to build out mines given the scale and infrastructure needed. 2013 is the turning point when the time to market and capital barriers end and a deluge of supply starts flooding the market. For a non-rare commodity where supply becomes unconstrained, prices should revert to the marginal cost. Iron ore prices were persistently in the mid $30s before the recent bubble. If prices revert as all bubbles do, the long term iron ore price should be at best in the $60s. It should be noted that the cost curve should shift down as the boom ends and cost pressures ease. The supply chart below illustrates the massive supply that begins to hit next year. This chart is from October and it doesn’t factor in the 40Mt Fortescue Kings expansion that is not technically in the queue at the moment but will be restarted given the incremental cost vs project economics. The production is likely to hit the market near the end of 2014. This graph only shows the major producers and thus leaves almost 100Mt of ancillary global supply additions that is still expected in the next four years. Except for some of the FMG and the MMX, this is all the very low cost supply that given how far along construction is, will be economical to complete in any scenario. Note: I'm posting it because I find it interesting, not necessarily because I agree with it. Saw this on VIC while browsing recent stuff. Personally have no idea where iron ore prices are going, though I'd expect that over time they will go up with inflation and the developing work building out (though there can be all kinds of swings in the short term). Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 22, 2013 Share Posted February 22, 2013 Comparing iron ore to solar is just stupid...I have not seen any data to support how the supply of iron ore would be maintained in an environment of price drops that short traders that are looking for a quick buck are talking about...the cost of production is way higher than anyone is talking about. We have seen in Septemeber...a price drop like we had cancelled many projects...Chanos has shorted so everyone is following him... http://en.wikipedia.org/wiki/Iron_ore I would suggest that you look at the iron ore resource sector section.. it is stated that at 2% growth iron ore resources will be depleted in 64 years...these short traders think supply is going to grow at 15%! What will that do to the amount of resources that are economical? Dazel. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 23, 2013 Share Posted February 23, 2013 The dirty secret on iron ore is that it is not a commodity that is becoming rarer or even much more expensive and harder to extract; the world is still awash in iron ore. It is just particularly capital intensive with long lead times to build out mines given the scale and infrastructure needed. 2013 is the turning point when the time to market and capital barriers end and a deluge of supply starts flooding the market. For a non-rare commodity where supply becomes unconstrained, prices should revert to the marginal cost. Iron ore prices were persistently in the mid $30s before the recent bubble. If prices revert as all bubbles do, the long term iron ore price should be at best in the $60s. It should be noted that the cost curve should shift down as the boom ends and cost pressures ease. I really have no idea where iron ore prices are headed. I would be extremely cautious with iron ore since: A- The price has gone up several times over the past decade. B- Production has gone up several times over the past decade. Eventually this should lead to a wave of overbuilding. I would expect history to repeat itself. On the other hand, I would make the following points about that bearish thesis on iron ore: 1- VIC is value investors club. Do you really want to get macro advice from a site that is supposed to be about value investing/special situations??? (Of course the irony is that people talk about macro on there a lot. Probably because they work on Wall Street and there is a bit of herd behaviour going on.) 2- I don't think iron ore is in the author's circle of competence. The cost of mining has gone up significantly... and it doesn't look like it's going down any time soon. The price of oil has gone up. There are shortages of labour. Labour costs have gone up. The lead times on equipment has gotten a lot longer. (You can check this through looking at public companies like Caterpillar. Many juniors report the lead times on equipment.) The marginal cost is a lot higher than the author thinks it is. 3- The costs to mine iron ore are all over the place. I believe that China has a lot of old mines with terrible grade (e.g. 15%). These mines are still open because there is still margin left and it makes sense to keep mining as long as you make a profit. Small drops in pricing will take out that production. Or simply look at Cliffs' cash costs... they are all over the place. Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 23, 2013 Share Posted February 23, 2013 I would be interested to see if the VIC has any info on the value investing greats that are heavily invested in iron ore. There certainly is not a lot of press out there on them...there is negativity abound yet iron ore trades at $160...$115 is Altius Long term price target. Ken Fisher has half a billion in Vale alone Seth Klarman and Gratham also own Vale....we know that Gratham has down his homework likely more than anyone else out there...these guys are legends of value investing...what are they seeing that everyone else is missing? Dazel. Link to comment Share on other sites More sharing options...
LTVALUE Posted February 27, 2013 Share Posted February 27, 2013 Mamba Minerals who is developing Altius' Snelgrove Lake property up 22.2% today....could be the next project to be developed in the labrador trough. Any insights? Link to comment Share on other sites More sharing options...
LTVALUE Posted February 27, 2013 Share Posted February 27, 2013 After Alderon of course.... ;) Link to comment Share on other sites More sharing options...
Guest Dazel Posted February 27, 2013 Share Posted February 27, 2013 http://www.bloomberg.com/news/2013-02-27/glencore-said-to-build-stake-in-brazil-iron-ore-producer-ferrous.html Link to comment Share on other sites More sharing options...
Guest Dazel Posted March 6, 2013 Share Posted March 6, 2013 http://canadianinsider.com/node/7?ticker=ALS Average price of buy back $11.95...25,000 shares. Link to comment Share on other sites More sharing options...
hohi Posted March 7, 2013 Share Posted March 7, 2013 http://canadianinsider.com/node/7?ticker=ALS Average price of buy back $11.95...25,000 shares. Thanks, Dazel. Any Info about last month' purchases? Thanks! Link to comment Share on other sites More sharing options...
Guest Dazel Posted March 8, 2013 Share Posted March 8, 2013 http://www.mining.com/commodities-supercycle-will-last-another-15-years-jp-morgan-85593/ Link to comment Share on other sites More sharing options...
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