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Guest Dazel

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The Chinese workers will come in eventually. It is like it was with the workers from eastern europe here in Sweden about 10-15 years back. An enormous resistance... and today all the major infrastructure companies use foreign workers.

 

What are the unions going to say? The ore is getting to expensive and they are not competitive anymore. The Chinese are the only ones that are willing to invest. The Chinese need to in order to supply a growing and hungry country with 1,500 million people 2030. Their own iron ore deposit are not of quality anymore thus also getting too expensive. They need to find the ore in other places. Africa, Austraila and Brazil can provide a lot but it will not be enough. There is a reason we see Wuhan steel, Minmetals, Hebei, Northern Star in the area. They will take over and China will be the next super power which means people will be crawling on their knees to do business with them. They are already.....

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The federal government issued today its Comprehensive Assessment of the Kami project and is inviting public comments by 27 November.

 

The full report is available here: http://www.ceaa-acee.gc.ca/050/documents/p64575/95715E.pdf

 

The key phrase from the executive summary is: "The Agency concludes that the Project is not likely to cause significant adverse environmental effects, taking into account the implementation of mitigation measures described in this comprehensive study report."

 

So far so good.

 

N.

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http://www.bloomberg.com/news/2013-10-29/audley-s-treger-targets-coal-mines-for-anglo-pacific-royalties.html?cmpid=yhoo

 

 

Looking to buy copper, iron ore, zinc and uranium royalties...anyone know a company with those type assets?

 

While we thought it very possible that Altius was going to get a take out offer in the last couple of years and to be honest we would have welcomed it. We think Altius will become the acquirer as no one will be able to afford their shares soon....and management really has done a great job in their business. They have been patient yet concise in both development of projects and the acquisition of good prices in the market place. Better yet they have remained liquid and relatively risk free. All of the pieces are there for an incredible growth story. It is by far our most exciting asset.

 

Dazel.

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http://www.anglopacificgroup.com/pdf/130905%20-%20Anglo%20Pacific%20Group%20PresentationV1.pdf

 

 

For those shareholders that feel like getting excited take a look Anglo Pacific's royalties, investments and cash level and cost base...

 

Then compare them with Altius...we are trading  at least a 50% discount in comparison. What would Anglo Pacific do for the Altius cash war chest right now? The market is missing it.

 

Dazel.

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Funny you bring up Anglo Pacific.

 

I did a lot of DD on Anglo Pacific (APF) as well as Altius and as much as I like APF, I really came to the conclusion that Altius offers everthing APF offers, plus a big Cash cushion plus so many other opportunities.

What I like about APF is the dividend and longevity of the assets. ALS doesn't pay a dividend. That being said, I am pretty sure that they will in a few years and the yield will be higher than APF's plus you got all the upside in exploration and the Prospector business model.

 

For diversification in the Resource sector I would still recommend APF though. Great company, just not as great as our jewel ALS!

 

btw: anyone know when the Julienne Lake news will come out of Labrador?

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So what royalty revenue can we expect in the future??

 

2014

Voisey bay  $3 million

777 mine    $1 million  ( 6 % of 16 million)

 

2015

Voisey bay  $3million

777 mine    $1 million

Eleoneore    $ 0.8 million  ( 8 % of 9.2 million, 2,2 % of 300,000 ounces)

 

2016

Voisey bay  $3 million

777 mine    $ 1 million

Eleoneore    $ 1,7 million  ( 8 % of 21,7 million, 2,55 % of 600,000 ounces)

Kami            $ 13,2 million ( 4 million produced first year)

 

..........

 

So in 2016 we should reach revenue of approx. 18,9 million, cost around 5 million and tax 30 % ??? = 9,73 million/ 28 million shares = 0,5 per share.

 

Future after that could look bright.

 

2017

Kami reaches 8 million tons produced in 2017. Eleoneore would reach 2,75 % of 600,000 ounces - net earning around $1/share

 

And if you are allowed to dream a bit..

 

2018-2020

Julienne lake 21 million tons $ 69,3 million per year ( 3 % of 110*21)

CMB $8 million

 

At this point Fosse, Stellar, Estelle, Mamba property could be quite evolved.

 

If you stay around you might be highly awarded. But then again if Kami does not come thorugh we are in for a rough ride.....

 

 

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Thanks Blue...

 

But more reality then your dream scenario is Kami at 16mt...And add another $100m in cap gains from the cash reserve and project venture equity positions.

 

Ya I know...share price would skyrocket!

 

 

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Is Millrock the next up an coming royalty company? Any thoughts on the company and the property? At 6,5 Million Market cap this should be a complete buy for Altius according to me. some of the properties will of course never go anywhere but Stellar and Estelle are very interesting. Also one of the properties in Arizona.

 

Thoughts?

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Does anyone have a opinion on Miranda Gold ( Ticker: MRDDF). It has $0.11 cash per share and it is trading at about $0.11. I know that Paul Van EeDen has lot of positive comments about the managment. Anybody have any views or analysis on this company? I thought how bad it can be, if I can buy at its cash level.

 

http://www.theaureport.com/pub/na/brent-cook-t-te-t-te-with-paul-van-eeden

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I'm guessing that Altius is buying it via Cranberry Capital, managed by van Eeden.

 

I bought some (a very small position) to swing trade.  I don't know if it's a good idea.  I have a very large position in Altius Minerals, which trades at a discount.  If you buy Altius, you're kind of buying all these beaten down mining stocks at a discount.  Alderon ran up to over $1.8, so the discount might be reasonably large right now.

 

 

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I think Alderon is valued at 2,02 per share in Altius balance sheet so we have a bit more to go to break even. I think we will see Altius selling their shares in Alderon to an asian company soon. Just a gut feeling. That would give enough money to keep buying royalties stakes at these prices.

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I think Alderon is valued at 2,02 per share in Altius balance sheet so we have a bit more to go to break even. I think we will see Altius selling their shares in Alderon to an asian company soon. Just a gut feeling. That would give enough money to keep buying royalties stakes at these prices.

 

Alderon is carried at MTM in Altius Book. The gain to be expected in Q3 from Alderon should be about 20M$, interestingly Altius market cap only gained 10M$ in Q3. If the spread widen a bit more it can become a nice arbitrage.

 

BeerBaron

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Taken from latest financials:              July 31 2013            April 30 , 2013

 

Investments in associates 7              72,697                      73,223

 

 

Under note 7 the value of Alderon, Synodon and Sparkfly add up to this number. Alderon itself stands at 68,461. Amount of shares 32,869,006. This gives me a carried value of 2,08 CAD per share.

 

The market value at the time was 37,799 or 1,15 CAD per share.

 

Have I missed something?

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Blue is correct....Altius consolidated Alderon at two bucks....we did not see the upswing in mark to market when we hit the $4 range at Alderon and we did not see the down move at a buck. The earnings releases headline big losses but they are Mostly from Alderon because they account for Alderon on an equity basis. This will likely change down the road.

 

We see a lot of mistakes to the low side on Altius marketable securities and cash numbers because of this. Alderon is not included in marketable securities...so the Alderon equity position is added to marketable securities and cash for liquidity.

 

This is accounting of course...actual book value Of Altius cost of Alderon is a little over a $1m...and the 3% NSR on Kami is not on the Altius balance sheet.

 

We think book value at Altius is ridiculously artificially low from an accounting perspective...If the assets were marketed for sale one by one...the current book value is laughable.

 

Dazel.

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FYI

 

Alderon lists the Altius royalty on Kami at over $700m over the 30 year life of the mine in their  feasibility study as an operating cost. I am not sure how the balance sheet at Altius will account for the royalty since their actual cost is 0. How do you like their business now?

 

Dazel.

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http://www.metalbulletin.com/Article/3276761/Iron-ore-and-coking-coal/Spot-635-iron-ore-prices-end-week-higher.html

 

http://www.alderonironore.com/_resources/media/Bloomberg_Article_-_Julyy_2013.pdf

 

 

As some of you will remember the article above from Hebei that prices would rise to $140 in the fall to the end of the year....they also said it would be steady without any spikes or declines...it was not taken seriously at the time...we are around that number now.

 

Seems like Hebei knows what they are talking about...

 

 

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I think that if kami gets started and we reach 8 million tons 2017 + including all the other smaller royalty incomes (777 mine, Eleonore and Voisey bay) and with a net earning per share of $ 1 we could value those to about $20 per share (p/e 20).

 

But we have other things apart of this.

 

CMB royalty + other royalties in the future

Rio Tinto joint venture 30 %.

Julienne lake

33 million shares Alderon (even though I think at this point the shares have been sold)

20 % of Mamba M

5 million shares (at least. Depending on resources up to 35 million shares)

5 million shares Millrock

Other Paul van Eden investments

 

But the key is really Kami. So I would say if Kami goes the way we want we will have a share price that is 3 times higher than today. If not I think we would see a correction to about 3 dollars less than the current value,depending on when Altius sell their shares and to what price. if they keep them and kami is lost than we will loose the 68 million Altius has valued Alderon shares to.

 

I would like to see Altius sell their share quite soon but hopefully more than 2,08 that it is valued today. Would lessen the risk.

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http://labradorironore.com/News-Releases/Press-Release-Details/2013/Labrador-Iron-Ore-Royalty-Corporation---Results-for-Third-Quarter-Ended-September-30-2013/default.aspx

 

The more I look at IOC and Labrador iron ore royalty the more I like it. Even with forest fires in June and July their numbers look good. Carol Lake has very different numbers from bloom lake. I am not sure how the other mines locally perform....

 

If Alderon were to turn out anywhere near Carol Lake....than Alderon and Altius would be home runs...I think this is the billion dollar question happening with global players now...IOC is likely effectively off the table for a sale as Rio is no idiot...they know the value. The final federal permitting will open up the partnership and "possible" takeover process. We would like to see an IOC type situation....3 or 4 global partners to build a world class mine....because this is in all longterm stakeholders best interests...especially Altius because of the royalty.

 

Cliffs won a bidding war for a mine that was built in a hurry to sell....we would like to see best in class get involved here with a view toward the long term like IOC...a bidding war for Alderon would seem great short term but the value to Altius is in the 30 years of royalty returns of a world class mine at 16mta and then later up to IOC's 23 mta.

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In mining, I don't think that good management teams can work magic on a deposit.  There just isn't a lot of room for mining engineers to get costs down and create value.  They can't magically turn a low-margin deposit in a high-margin deposit.  I've never seen it happen.

 

The better management teams will run a tight ship and keep corporate G&A costs down.  Alderon is currently on the high side of corporate G&A, doing crazy stuff like paying for shills (e.g. grandich.com), high insider salaries, etc.

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Trap,

 

We disagree.

There is always a difference in the grade of commodity being mined that has obvious differences in costs....yes.

But there is an obvious huge discrepancies in how a mine is built and managed. Why does Cliffs have to boat iron from one dock from a smaller ship to another to other bigger ships? Who knows how many other errors they made....contractors etc.

 

Management in any business is paramount...Rio has remote control operating trucks in some of their mines. Who makes that decision....cost of capital, labour costs, workers conditions, unions, environmental, there are so many variables...

Mines do not run themselves...innovation etc....

 

 

You have "never" seen it happen...so have a look and a good read of where Barrick came from...Peter Munk was bankrupt twice before he worked with Robert Smith...management transformed Barrack's mines through innovation and technology.

 

http://mininghalloffame.ca/inductees/s-u/robert_m._smith

 

 

 

 

Dazel.

 

 

 

 

 

 

Dazel.

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trap,

 

Smith "in 90 days transformed the mines cost from $290 per ounce to $212 of Gold. They say it was magic...do you believe that Trap?

 

Dazel.

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Yes there are lots of magic out there isn´t it......

 

Great management and great project management can be a huge difference at least when it comes to infrastructure projects where I am involved. It should apply to some extent to any kind of field I assume but Trap is right that the deposit is crucial. You can only get that much out of a great team. If the fundamentals are not there then that is it even for a great team.

 

Carol lake is a better deposit than Kami and Bloom Lake. From my understanding Kami is closer to Bloom lake than Carol lake but it is my true belief that the Chinese will make this better and cheaper than Bloom lake. ( I say chinese because it will soon be owned completely by them).

 

Altius should sell their shares in Alderon to Hebei or other interested. Only keeping the royalty would be better in my opinion. Take the money and buy Callinan.

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Blue,

 

No disrespect to you or Trap...all opinions greatly appreciated and Trap is a smart camper..however, he is not saying it is the deposit difference he is saying that construction and management do not make a difference "any" time that he has ever seen. That is absolutely incorrect.

 

As for what Altius does with Alderon shares...we are in good hands with this managemnent...have you seen anyone else that did not get greedy and are sitting on this kind of cash hoard per share other than Fairfax (unfortunatey the Prem hedged)...so as I have stated many times here we expect a very good return from that cash and we know they have deployed some...

 

Exciting times.

 

Dazel.

 

Dazel.

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The following article explains Smith's transformation:

http://www.republicofmining.com/2008/12/31/the-northern-miner%E2%80%99s-1993-%E2%80%9Cmining-man-of-the-year%E2%80%9D-barricks-munk-and-robert-smith-%E2%80%93-by-olav-svela/

 

It seems that the different processing techniques were added (adding heap leaching, and sending refractory ore to an autoclave).  I still stand by what I said earlier.  In most cases, the processing techniques have been around for a long time and are fairly well understood by now.  It's only in nickel laterite processing where there is a lot of innovation happening.  With the Mercur mine, it looks like they took some (minor???) technological risk and it paid off for them.  Vale's Goro project is one where the engineers took technological risk... and it has been pretty bad so far.

 

2- Personally I think that Chinese companies are the dumb money.  Some of the deals they have made weren't that smart (e.g. Yunnan Chihong may have overpaid for the last 50% of Selwyn's Yukon project).  I don't know how good they are at operating a mine, though it's irrelevant in this case since it looks like Alderon's current management will be doing it.

 

It will be costly (in terms of legal fees and so on) for a Chinese company to take over a Canadian company since the government may block the deal.

 

3- I don't think that Altius can liquidate their stake right now.  If they sell, it will make it difficult for the mine to get financed due to the bad PR over insider selling.  They are also insiders and may get sued if they sell and then the stock collapses afterwards.

 

If the mine gets financed, I expect Altius to sell their Alderon shares in a secondary offering like they have done in the past for another one of their holdings.

 

4- Virginia Mines seems like a better stock than Callinan???

 

Callinan is small, so its G&A overhead is a bit of a drag for them.

Virginia seems to have a excellent geological team.  Their land position may be very, very good.  Other companies will want to find another deposit like Eleonore.  The area could turn into a mining district.

 

In any case, Altius is probably buying shares of both.

 

5- In general, I do not want to be involved with management teams that are super promotional and waste money on blatant stock promotion (e.g. where the promoters state how much they were paid to be shills).  These pump and dumps are not a good idea. 

 

 

Cheers

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