ALS.TO - Altius Minerals

[Blue Macaw]

Interesting facts!

 

Coal Statistics

Coal provides around 30% of global primary energy needs, generates 41% of the world's electricity and is used in the production of 70% of the world's steel.

 

Total Global Coal Production

 

•7831Mt (2012e)

•7608Mt (2011)

•4677 (1990)

 

(Source: World Coal association)

[SharperDingaan]

Its always nice to see the stock going in the right direction  ;)

 

When we are done we will probably retain a long-term position in Alderon - entirely funded with house money. We essentially see it as an indirect; zero cost, infinite life, option on a new NA pipeline/NA recovery - with a strike around $1.40. Still the shiniest turd in the pile, but at zero cost - we can afford to relax our quality standard.

 

The galleons have put out to sea; hopefully we will see them again, & they will come back with something useful.

 

SD

 

[Blue Macaw]

Since Altius now owns 6,5 % of virginia mines we would expect some revenue from late 2014 -2015.

 

300,000 Oz and 2,2 % royalty (max 3,5%) = 6,600 Oz *1400 USD/Oz = 9,240,000 USD

 

Altius share (6,5 %) = 600,600 USD.

 

This would gradually increase up to estimated 1,900,000 USD when receiving full royalty at full production. Maybe 2018. Enough small pieces of a cake makes a whole cake in the end...

[nostradamus]

The AGM presentation on their website also mentions that they now also own 6% of Callinan, which I think works out at roughly a $5m investment and a $250,000 current dividend.

[nostradamus]

...the presentation also notes that they are "currently bidding for several production stage royalties", so could be some more near term income around the corner.

[Guest Dazel]

 

http://altiusminerals.com/uploads/AGM-2013.pdf

 

We are very pleased with where we are headed...as we have stated here in the past we expected the cash hoard to produce a good return on equity. Management is buying 50 cent dollars...they own 8% of Virgnia mines. There is a good yield on the Calinan stake.

 

We think they can generate $15m to $25m a year in cashflow from "cash"investments...the base is being built now. This is outside what they produce through project generation and existing royalties.

 

They will be cautious as we have seen until they see the "elephant". Well maybe "hippo" they are not quite Buffett's size! Virginia mines will have  a great royalty next year.

 

Dazel.

 

 

[rohitc99]

Dazel

The slides has the following comment on the Kami project

 

Second Chinese based strategic investment and off - take agreement under negotiation

 

does that mean the alderon is looking additional participation ? this derisks the project further ?

 

 

[ItsAValueTrap]

A second offtake deal would put them close to being fully financed, if not fully financed.

 

The feasibility study claims a capital cost of $1,272.9 M  (excl. sustaining capital, which isn't needed for startup)

Alderon states that it is targeting debt of $1B.  http://www.alderonironore.com/_resources/news/2013-09-12-NewsRelease.pdf

The difference is $272M.  *Mining companies are usually overly optimistic about when production will start and how much capex will be, so I'm guessing that the initial capex will turn out to be higher than $1273M.

 

Hebei spent around $183M so far on Alderon and Kami.  Initial investors should get in at a discount since the project is riskier in the earlier stages.  In the early stages, feasibility studies (and expansion and infilling drilling) have yet to uncover problems with the project.  There is permitting and political risk.  Most of that risk is behind Alderon now.

 

this derisks the project further ?

To me, "derisking" is really an euphemism for investing in a high-risk mining project and having it work out in your favour instead of blowing up.

 

A mining project is the riskiest in the earliest stages.  Risk tends to go down over time as more money is spent on figuring out the economics (and risks) of the project.  As you try to get the mine permitted, you see what the political risks and issues are.  Not every deposit will become a profitable mine (most don't).  The guys investing in that mine can say that they are "derisking" it... it would probably be more accurate to say that they are taking on risk and hoping that they will be rewarded.

 

I don't have a problem with taking risk.  Altius is involved in the highest-risk areas of mining (initial greenfield exploration).

[rohitc99]

I don't have a problem with taking risk.  Altius is involved in the highest-risk areas of mining (initial greenfield exploration).

 

ItsAValueTrap

thanks for the explanation. i agree altius is into the highest risk areas, but at the same time it does not pay much for it. it is similar to the black swan options which NN taleb talks about. just that altius is able to get them at a very low cost

[hohi]

If Altius and their partners get the Julienne Lake property and develop it as stated in the new presentation (21 mtpa) this would generate in excess of $63M per year @ $100 Fe. Huge for a company with enterprise value of about $55M right now. This could be worth a lot more than the Kami royalty and in my opinion we have a reasonable chance of winning the bid. At a 7,5% discount and 20 year mine life this royalty is worth about $500M. The market obviously doesn't understand ALS or the opportunity we have in the Julienne Lake property.

 

In my calculations we have a NPV of about $31 a share if we get the julienne lake property. The downside is close to zero, even if Kami doesn't work out and we don't get JL. $135M in Cash, $111M in Securities and the Voisey's Bay royalty are worth our complete Mcap right now.

 

I just hope Mr. Market gives me a few more month to accumulate even more of ALS. The more I look, the more I like it. And I looked deep, believe me ;).

 

Cheers

[hohi]

Oh and I also wanted to comment on our holdings in Callinan and Virginia. These two are good examples of how prudent Dalton invests our cash. Callinan holds a royalty and NPI in the 777 mine, which has an incredibly rich ore body and hopefully a very long mine life. As it is extremely difficult with underground mines to drill out a lot of reserves I would bet that this mine will produce well in excess of the current mine life. Dalton knows Butler from Callinan from the early days when they founded ALS together. Callinan is extremely undervalued and I would love to see ALS buy even more at these prices.

Virginia holds the Eleonore royalty and is possibly a take over candidate as the big royalty companies surely want a stake in this incredible asset. Kind of reminds me of the IRC situation before Royal Gold and Franco started their bidding war. Although the upside is not that big.

 

Can't wait to see them deploy more of their cash to acquire some producing or near-term royalties.

[ItsAValueTrap]

Virginia may have a lot of hidden value in their land position.  The Éléonore royalty is probably worth roughly their market cap and the land is gravy on top of that.  They also seem to have a team of some of the best geologists in the business, which is likely why Altius is in an exploration joint venture with them. 

 

What has happened historically is that big new greenfield discoveries (like Éléonore) tend to lead to more discoveries in the district.  The local geology will be similar so there will likely be more deposits found.  Because Éléonore will get built, there will be local infrastructure in the area which makes the economics of nearby deposits better.  So if you want to dream the dream, there may be several new mines developed in the district.  Virginia will likely have a piece of those mines.

 

On the other hand, not all districts work out.  Sometimes other companies explore the area and don't find any other deposits.  This has been the case with Voisey's Bay, where other companies have spent something like $200-300M looking for minerals.

 

2- I think that the big royalty companies have been overpaying for royalty assets because they could ultimately use their overpriced shares to buy royalties. 

[Guest Dazel]

Julienne lake is free at Altius. We will wait for the bidding process to be completed to put much thought to it. Whoever, gets it has a government backed asset.

Ie environmental and permitting are virtually guaranteed...drilling is done...it has great infrastructure around it...the government wants it to be developed quickly as they want the revenue.

 

Fingers crossed.

 

Dazel.

[Blue Macaw]

fingers crossed yes.....but to be honest I have a hard time seeing how they could fail on this. Only playing the cards randomly should give them the upper hand.

[Blue Macaw]

Even if they do not get it they can sell their land to whoever wins it, maybe cash and a 1,5 % gross royalty.

[Guest Dazel]

 

 

Hohi,

 

We agree with your sentiment...the best thing that can happen is the status quo. Altius has many catalysts and will not move up slowly when the market figures it out. It will move up very quickly it's a small float...at  that point the buyback is done or will be pared back significantly.

 

Dazel.

[Phaceliacapital]

Iron-Ore Forecasts Raised by Australia as China Demand Jumps (3)

2013-10-02 12:18:04.335 GMT

 

 

    (Updates iron-ore price in fifth paragraph.)

 

By Elisabeth Behrmann and Phoebe Sedgman

    Oct. 2 (Bloomberg) -- Australia, the largest iron-ore

exporter, raised its price estimates for the steelmaking raw

material as surging Chinese consumption absorbs increased

supplies of the world’s biggest commodity cargo after oil.

    Prices will average $119 a metric ton in 2014 from a $112

forecast in June, the Bureau of Resources and Energy Economics

said in a report today. The commodity will average $121 this

year compared with $117 estimated in June, the Canberra-based

bureau said. China will import 872 million tons next year, 8.3

percent more than previously forecast, and by 2018 shipments

from overseas may increase to almost 1 billion tons, it said.

    Iron ore entered a bull market in July as users in China

replenished stockpiles that shrank in March to the lowest level

since 2009. Morgan Stanley said last month that the commodity

will be supported into the first half of 2014 before a global

surplus emerges, while Citigroup Inc. and BHP Billiton Ltd. have

bearish short-term views as mining companies boost output.

    “It would take a complete collapse in Chinese steel

production for iron-ore prices to really see a major move lower

because inventory levels for iron and steel are quite low,”

said Joel Crane, a Melbourne-based analyst at Morgan Stanley.

Market conditions in the first half of next year will be similar

to those at present, and iron-ore prices are expected to average

between $110 and current levels, he said.

    Iron ore with 62 percent content delivered to the Chinese

port of Tianjin was unchanged at $134.40 a ton today, according

to The Steel Index Ltd. Prices have rallied 19 percent from this

year’s low on May 31. The bureau’s price forecasts refer to ore

with 62 percent content free-on-board Australia.

 

                        Emerging Markets

 

    Australia may ship 570 million tons of ore this year, up 16

percent from 2012, and 669 million tons in 2014, the bureau

said. The country’s exports are projected to rise at an average

annual rate of 8 percent a year from 2014 to 2018, it said.

    Emerging-markets demand and supply constraints mean it’s

premature to talk about the end of the super cycle that brought

a longer-than-average period of rising commodity prices,

McKinsey & Co. said Sept. 26. China’s growth will hold above 7

percent through 2015, forecasts compiled by Bloomberg show, and

the Manila-based Asian Development Bank said today that China

was expected to grow 7.6 percent this year.

    The global seaborne iron-ore market is seen shifting to

oversupply next year as producers from BHP to Rio Tinto Group

and Vale SA deliver capacity expansions. The surplus will reach

82 million tons in 2014 and expand through 2017, Goldman Sachs

Group Inc. said in July. Citigroup last month forecast prices at

$115 in three months on the expected surge in seaborne supply.

 

                          Steel Quality

 

    Chinese steel mills are expected to increase their reliance

on imported iron ore as local grades and production drop, and

steel producers seek to boost the quality of their output, the

bureau said. Steel output in China, the largest producer, will

expand 3.4 percent to 788 million tons in 2014, it forecast.

    Rio Tinto, the second-biggest iron-ore exporter, officially

opened the Cape Lambert wharf in Western Australia today, part

of its expansion in the Pilbara to 290 million tons of capacity,

according to a statement. Rio’s mines in Western Australia

produced a total of 239 million tons last year.

    Increased supplies have “exerted downward pressure on many

commodity markets more recently and we expect this trend to

continue over the short term,” BHP Chairman Jac Nasser said in

the Melbourne-based company’s annual report on Sept. 25. BHP is

the world’s third-largest iron-ore exporter.

    Stockpiles in China stood at 70 million tons in the week

ended Sept. 27, down from a seven-month high in the period to

Aug. 30, according to Beijing Antaike Information Development.

Inventories are still 24 percent below a year earlier.

    Iron ore can be measured in dry tons, or metric tons less

moisture. At Tianjin port moisture can account for 8 percent to

10 percent of the ore’s weight.

[Guest Dazel]

http://www.mining.com/100bn-in-private-equity-scouring-for-mining-assets-43133/

 

 

The sentiment is obviously changing...

 

Dazel.

[nostradamus]

Decision on Kami mine now with minister:

 

http://www.southerngazette.ca/News/Local/2013-10-03/article-3416780/Decision-on-Kami-mine-now-with-minister/1

 

I think this could be a real turning point for the share prices of Alderon and Altius.

[hohi]

Hey guys,

 

a possibility that wasn't mentioned as far as I know is also a special dividend once ALS sells its equity stake in Alderon. If Kami gets built I don't find it hard to believe that ALS stake will be worth >$250M and I am convinced that ALS will be selling their stake once valuations are better. Just image a nice little dividend of a few bucks... :) after that we'll see regular dividends that will just grow with the development of more royalty assets (CMB + maybe one or two of our other IronOre assets over time). Fascinating times indeed!

[Blue Macaw]

CMB will definetely be constructed, Paladin has been looking at 2018 -2020 for that. Probably the later date. French state has 200 million in security there. (Gave money up front received 60 % something of the resources). Unfortunately it will most likely not be Paladin but some other company doing that. I believe Paladin will not survive the debt situation they are in now and the current price of the uranium.

 

I do believe Julienne lake i posting the biggest possiblilty. It is better than Kami in my opinion. Fingers very crossed these months to hopefully receive the answer we want.

 

The Viriginia Mines Eleonore is very interesting and gold might go up again as the world will see more inflation.

 

The 777 mine will be in production until 2020 at least. It brings in about 15-20 million a year. Altius will get 6 % of that (or more I think they will continue buying now around 1,60 CAD)

 

Yes interesting times ahead......

 

 

[Guest Dazel]

 

 

Hohi,

 

We have considered a special dividend or a spin out of the Alderon shares To Altius shareholders which may work better for tax consequences to Altius...going forward Altius will have many options.

 

Dazel

[Phaceliacapital]

    Oct. 8 (Bloomberg) -- The biggest rally in iron-ore freight

costs since 2009 is prompting shipowners to end the industry’s

biggest scrapping program in at least three decades as older

vessels bring in more money.

    The CHART OF THE DAY shows how rates, in blue, for Capesize

ships hauling 160,000 metric tons of iron ore rose to a 34-month

high of $42,211 a day on Sept. 25. Scrapping levels are in red.

Owners have paid off debt used to buy older vessels, making them

cheaper to run, so they won’t opt for scrapping as long as the

rally allows them to profit from the ships, according to Erik

Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo.

    Chinese investment in rail, buildings and infrastructure

will rise 20 percent this year, creating demand for another 135

million tons of steel, Shanghai-based Citic Securities Co. says.

That would require 200 million tons of iron ore, used to produce

the alloy, enough to fill 180 Capesizes, according to Fearnley

Consultants A/S, a research company in Oslo.

    Capesize fleet capacity is up 75 percent since 2008, says

IHS Maritime, a Coulsdon, England-based maritime researcher.

    “Freight rates are expected to return to profitable levels

- even for older tonnage,” said Stavseth, whose recommendations

on shipping company shares returned 26 percent in the past year.

“This will potentially lead to higher net fleet growth.”

    World trade in iron ore will grow 6 percent to 1.17 billion

tons this year, with China taking two-thirds, according to

Clarkson Plc, the biggest shipbroker. Earnings for Capesize

carriers sailing to China from Brazil at a $40,000 daily rate

assuming a voyage time of 45 days will equate to $1.8 million,

spurring owners to keep trading their ships, Stavseth said.

[nostradamus]

Mamba have issued another press release regarding the Snelgrove lake project.

 

http://www.asx.com.au/asxpdf/20131011/pdf/42jythmc3cdzcd.pdf

 

I don't really have the industy knowledge to work out whether it is postive, negative or neutral. My one observation is that the tone of the release is bit less rampy than previous reports. Comments appreciated from anyone who knows more than me about interpreting press releases from mining juniors (ie everyone).

 

[ItsAValueTrap]

No assay results?  They are probably awful.