Liberty Posted April 6, 2011 Share Posted April 6, 2011 Dazel, do you have a sense of the likelihood of Altius getting acquired within a few years vs that they remain independent and keep growing with the model that they've used so far? Their model is so brilliant and well executed so far, I would actually be sad to see them swallowed up, even at a nice premium. Do you think that only their spin-off companies would potentially be acquired, with Altius itself staying independent? Do you have any insight on what the management thinks about these possibilities? Are they eyeing an exit the way that most startups are, or are they aiming at growing Altius indefinitely (in the same way that Watsa wouldn't sell FFH)? Link to comment Share on other sites More sharing options...
jjsto Posted April 6, 2011 Share Posted April 6, 2011 "Neighbour Consolidated Thompson got $4.9 billion for about 990 million tonnes. That's about $4.95 a tonne. $4.95 x 500 million = $2.475 billion" I have been looking through the Consolidated Thompson filings, and I think they have at least 826 million tonnes at the Bloom Lake properties and 934 million tonnes at the Lamelee & Peppler properties, for a total of 1,760... Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 6, 2011 Share Posted April 6, 2011 We have not talked to management. We have very recently sent a detailed long email to Brian Dalton outlining our thoughts and strategic directions we see Altius taking. Everyone is for sale at a price. We think it is possible for a large partner like Leucadia-Sprott to buy a big stake in the company but we do not see an outright sale. Pure speculation on our part. They need to be very smart now...because dilution is their friend and enemy at Alderon...the 5% they have diluted already has cost them about $5 million. However, raising funds are essential to moving Alderon to production. They want production for their 3% royalty to kick in. If CNR were to buy Alderon for the reserves they could sit on them for years...needs to be the right buyer. But as we know anyone will sell at a price. Now that 43-101 is out they will be negotiating with the whole iron ore world. We are extremely confident in management in this capacity. They are the expert in Labrador. We would like more resources (people-project managers) put towards their other projects as outlined previously they all have the potential of being the next Alderon. This asset was worth $1.5m on the balance sheet this time last year!!!! The market cap yesterday was $271m ($138m-3% royalty-their portion)!!!! Not a bad return already! You can see our excitement with the other projects. Dazel. Link to comment Share on other sites More sharing options...
jegenolf Posted April 6, 2011 Share Posted April 6, 2011 You guys have beat me to the punch on Alderon...you can see the excitement Altius management sees...It is early in the Alderon project but what is being missed is the 3% royalty (more on royalties later) that Altius owns in addition to it's 40% ownership of Alderon....just like Leucadia's royalty at Fortesque it was nothing and then...pure cashflow...We think that these income streams from future royalty streams are being completely ignored. example: today's prices Altius market cap $394m 0 debt. Alderon shares32m $130m cash equivalents $200m The company is trading for $64m...That looks like more of a financial company than a resource company does it not? That is what the market is pricing but what about the other assets? Royalties of interest Voisey Bay We have asked management what it would cost them to buy another 10% stake in the Labrador Nickel Royalty limited partnership that they already own. That way we will find out what it costs in the market. It covers the entire Voisey bay area so if Vale were to discover further resources, the Royalty rises with output...without any exploration cost. Voisey Bay is the low cost producer in the world with a massive resource base that Vale figures will operate for 30 years with out additional resource finds. After looking at what these royalties cost in the market place..we are convinced that this asset is being ignored. altius is an expert when it comes to royalties as shown by their astute purchase of IRC (International Royalty Corp in 2009) They made $31m on it in 6 months. How did they know it was undervalued? Because IRC was a major holder of the same partnership above. So what's the value? http://www.altiusminerals.com/lab_nickel.php Alderon So what would the 3% Alderon royalty be worth if The Consolidated Thompson model is followed through. That would likely make the royalty that is being valued at less than 0 worth more than the entire market cap of Altius. Central mineral belt 2% gross sales and 2% smelter..now owned by Paladin.. http://www.altiusminerals.com/aurora.php Cliffs Natural Resources They purchased of Consoldidated Thompson for $5 billion...Altius signed an exploration agreement with them in December..Do you think they know Alderon is next door to Consolidated Thompson? They are a big global player. Altius does not usually do projects with large companies but this relationship can't hurt. http://www.altiusminerals.com/cliffs_natural_resources.php Having said that... Rio Tinto partnership-Labrador Iron Ore http://www.altiusminerals.com/labrador_iron_ore.php Rio Tinto is a 58% owner of the The Iron Ore company of Canada, 26% Mitsibushi, 15% Labrador iron ore royalty(2.65b market cap) other the other owners. They have produced a billion tonnes of iron ore in the district which has been around since the 1950's..they have 2.5 billion tonnes in reserves...So they are in partnership with the big boys of the area and in contact. We assume that these players are very aware of what these properties are worth and these are the deepest pockets in the world. As discussed earlier New Millenium was taken out by Tata steel for big bucks in the same region. Energy opportunities at $105 oil this could be very interesting http://www.altiusminerals.com/albert_oil_shale.php NLRC has until October 2011 to sell or finace the refinery project..If they are able to pull off something of value here it would be huge for the stock price as the market still sees this as disasterous for Altius..they forgot to look at the other assets! http://www.altiusminerals.com/nlrc.php There are numerous other projects that I did not mention including many gold assets including Rambler that will start producing gold this quarter..but i do not know what they are worth..more than 0! We see the above projects as potentially huge for the company. Now that 43-101 is out for Alderon and it was extremely positive (we are not geologists!!) we have greater conviction that the $64 million the market is valuing this company at is crazy! As was said earlier it jumps off the page at us! disclosure:We are very biased! and own a large chunk of Altius... Dazel. According to the Q3 report, the Rambler stake is gone and the oil shale project is abandoned. Is there something more to either of those investments than what is apparent from the report? Link to comment Share on other sites More sharing options...
value-is-what-you-get Posted April 6, 2011 Share Posted April 6, 2011 "Neighbour Consolidated Thompson got $4.9 billion for about 990 million tonnes. That's about $4.95 a tonne. $4.95 x 500 million = $2.475 billion" I have been looking through the Consolidated Thompson filings, and I think they have at least 826 million tonnes at the Bloom Lake properties and 934 million tonnes at the Lamelee & Peppler properties, for a total of 1,760... I stand corrected - many thanks jjsto. That's why I like to divide things in half! From that scenario (i.e. reality) it looks like a reasonable price at $4 - resource being discounted about 40% as it's not a producing mine yet. As a going concern with a 500 million tonne resource it would be around $6 a share assuming a $1 billion build cost and Consolidated Thompson sale valuation per tonne would be equalled (remember that last $1 billion in value was only realized when the company was sold!! $4/share or so premium over market). We get to add about $2.75 a tonne (once produicing) for additional resource increases from here on. It certainly erodes the old MOS considerably and introduces the dreaded "if"s into the equation ("if" they increase the resource by 200, 300, 400 million, "if" they find a buyer etc etc) I completely agree with Dazel as well that the 3% royalty is the big value here. Doesn't matter how ADV dilutes or gets bought out or taken over or anything else - when the ore ships, ALS gets paid by whoever's selling it. It seemed in my initial flawed calculation that in the short term, pre-production, there was more bang to be had from ADV stock than ALS. That is not the case. There will be some pops followed by months of slow dwindle, dilutions, financings etc - so try to buy when the dwindle stops and before the pop - I generally don't do well on those! The greatest potential for large surprises to the upside clearly lies with ALS.to. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 6, 2011 Share Posted April 6, 2011 "According to the Q3 report, the Rambler stake is gone and the oil shale project is abandoned. Is there something more to either of those investments than what is apparent from the report?" thanks you are correct......costs most be too high for the oil shale...i missed that... I left out the Potash play as well. Dazel Link to comment Share on other sites More sharing options...
doc75 Posted April 6, 2011 Share Posted April 6, 2011 Dazel, I've been following this company on and off for ages, and agree completely with the competence of management. (Paul van Eeden was always a very strong supporter. I remember during the crazy uranium run that he was selling everything but keeping a core position in Altius.) My greatest concern here is the fact that base materials like iron ore appear to be in a hell of a bubble -- or, at least, the prices are heavily (entirely?) dependent on continued construction in China, which appears to be a bubble. I know the cash on the books provides a buffer, but clearly the value of Altius will be significantly lowered if/when commodities correct. Management has made some astute moves in the past. Do you have any insight as to their view on base commodities? For instance, do you think Dalton is itching to book a return on this "hot potato", or has management implied that they are believers in the "commodity super-cycle"? Thanks! J Link to comment Share on other sites More sharing options...
Liberty Posted April 6, 2011 Share Posted April 6, 2011 My greatest concern here is the fact that base materials like iron ore appear to be in a hell of a bubble -- or, at least, the prices are heavily (entirely?) dependent on continued construction in China, which appears to be a bubble. I know the cash on the books provides a buffer, but clearly the value of Altius will be significantly lowered if/when commodities correct. Their model seems to deal well with that, though, no? When things go down significantly, it allows them to pick up new projects on the cheap and if the stock also tanks, they have enough cash to do lots of buybacks. Link to comment Share on other sites More sharing options...
goldfinger Posted April 6, 2011 Share Posted April 6, 2011 For instance, do you think Dalton is itching to book a return on this "hot potato", or has management implied that they are believers in the "commodity super-cycle"? In the past, Dalton has sold equity stakes conservatively and favored ownership of royalty streams and cash. I would guess he is going to sell stakes of Alderon relatively early. I also remember that he said in an interview or shareholder letter that when the commodity cycle finally turns Altius will be ready with loads of cash and productive assets. Yes, if there is a deep correction in the next few months to years, they will definitely be able to deploy cash into royalty streams and share buybacks. But how much higher will be the stock price when that happens also? Link to comment Share on other sites More sharing options...
doc75 Posted April 6, 2011 Share Posted April 6, 2011 Their model seems to deal well with that, though, no? When things go down significantly, it allows them to pick up new projects on the cheap and if the stock also tanks, they have enough cash to do lots of buybacks. Their model certainly allows them to take advantage of swings in the commodities market, yes. I'm just curious as to the view of management regarding the current situation. I think Altius is a great way to play the commodities market and I have a smallish stake that I bought around $10. I'm just finding it difficult to buy more at a time when commodities are richly valued; ie. good value now would likely become great value if iron prices fall out of the stratosphere, which I think is more likely than not. So I wonder if Dalton feels the same way and is itching to liquidate the Alderon equity. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 6, 2011 Share Posted April 6, 2011 Leucadia seems to be a company of choice here on this board and we admire them a great deal..they have much more to lose as they did in the last downturn...They own massive stakes in FMG and Inmet...more than half their assets...yet no one questions the cycle with them! That is my problem with the market's view of Altius....it is not a gold stock that is speculation....they have $330 million in cash and marketable securities and 0 debt!!! Their resource projects trade for nothing! Is iron ore going to fall off a cliff tomorrow? no...might it go down for a while...yes. Will China, India and Japan stop building? No. This is not a gold stock...and we see far less risk here than Leucadia...we get that the marketb does not realize it yet and that is why we continue to buy. Dazel. Link to comment Share on other sites More sharing options...
shalab Posted April 7, 2011 Share Posted April 7, 2011 Canada is not a big producer of iron ore http://en.wikipedia.org/wiki/Iron_ore India, the third largest exporter, has lifted a ban on exporting the ore but FT still thinks it won't impact the price by much: http://www.ft.com/cms/s/0/fd1b30f6-5f74-11e0-bd1b-00144feab49a.html#axzz1IqI2ct8H Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 7, 2011 Share Posted April 7, 2011 India is fourth but who is counting.... What is important is what is going in Australia...who is the second biggest producer behind China. They have a pending 30% mining tax (summer I believe) about to go into effect. If you would like to know about the implications of this on the iron ore price take a look at FMG...Fortesque website...they are looking at stopping new production at a new mine because of the tax... Rio Tinto and Vale are in Labrador....if the tax goes through it makes sense to go to the low cost producer. I cut my teeth studying Fortseque to see what Leucadia saw...they were too expensive for me...their stock is being held back by the tax as is the production outlook after the tax is implemented. It makes sense to produce as much possible before it happens and then you cut back. I am not an expert in pricing but that certainly cannot hurt the iron ore price going forward. Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 9, 2011 Share Posted April 9, 2011 Brian Dalton-Response to our email...I will just give you the facts. I asked what it would cost to buy the 10% royalty stake they have in Voisey Bay...and if it was as cheap as the market was valuing it in Altius' hands why had they not bought more? Answers. No one will sell to them they would buy if they could. When they did the details and metrics for the sale of their IRC stake the Royalty price of Altius stake would be worth $200million... The Alderon stake will be sold eventually they will stick to their plan...he explained they will not risk capital on production. The Alderon roylaty is worth a NPV of $100million if the iron ore price were to drop in half.. He is in China so it was short..but we got the answers we wanted. We had similar numbers in our head and I think we have posted them before...using these two assets alone you almost have a double in the stock price.. we will do a detailed analysis of the values and post it soon. Dazel. Link to comment Share on other sites More sharing options...
Liberty Posted April 9, 2011 Share Posted April 9, 2011 Very interesting, thanks Dazel. I wonder what he's doing in China... Scouting for new Altius business? Hmm... Link to comment Share on other sites More sharing options...
Myth465 Posted April 9, 2011 Share Posted April 9, 2011 Brian Dalton-Response to our email...I will just give you the facts. I asked what it would cost to buy the 10% royalty stake they have in Voisey Bay...and if it was as cheap as the market was valuing it in Altius' hands why had they not bought more? Answers. No one will sell to them they would buy if they could. When they did the details and metrics for the sale of their IRC stake the Royalty price of Altius stake would be worth $200million... The Alderon stake will be sold eventually they will stick to their plan...he explained they will not risk capital on production. The Alderon roylaty is worth a NPV of $100million if the iron ore price were to drop in half.. He is in China so it was short..but we got the answers we wanted. We had similar numbers in our head and I think we have posted them before...using these two assets alone you almost have a double in the stock price.. we will do a detailed analysis of the values and post it soon. Dazel. Thanks again Dazel. I am very jittery about resources and the state of the markets / economy in general, but I think this is an amazing find which will compound overtime. I plan to hold, learn, and Buy the Dip. Thanks again. Link to comment Share on other sites More sharing options...
Liberty Posted April 15, 2011 Share Posted April 15, 2011 Some additional detail. I'm midway through my own valuation. Fully Diluted Shares Outstanding 29,816,395 at September 13, 2010 Cash and Liquid investments $170,000,000 (from Feb 2011 presentation by Alderon) - $5.70/share etc...etc... Hi Rolf, I know it's an older comment, but I was wondering if you ever finished your evaluation and if you could share it with us? Thanks. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 21, 2011 Share Posted April 21, 2011 It appears after some further homework that I have have made a mistake in looking at Brian Dalton's email comments on the of the Voisey bay Nickel Royalty. I had said previosly that he had indicated that the Voisey bay Royalty was worth $200m under the IRC sale. After looking at it...It looks like he was talking about the entire royalty. That would make Altius' stake substantially lower ($20m) under that evaluation. He did indicate no one would sell more to them and that they had treid to buy merge with IRC for that royalty because of the royatly. Their was a strike at Voisey Bay when this was evalauted and the world was ending. IRC's royalty rev's from Voisey bay for the 2007 were $47m!!!! So the evaluation looks ridiculous. This has us looking Royal Gold which Altius owns. Looks like they bought at the right time! After doing some homework $200m is extremely low. Altius bought their stake for $13m at $3.25 nickel. They have recieved almost $20 million from this since 2003..with a two year strike in their. The price for nickel as of today is $12.10. We think the future value of this royalty will be between $120 and $210m. future average cashflow of between $4m and $7m over 30 years gives us those amounts. Altius royalty revs before strike. 2007-$4.3m 2008-$5.16m We will post our full evaluation soon....sorry for the error... For disclosure we have not sold since this post we have been buying. Dazel. Link to comment Share on other sites More sharing options...
Liberty Posted April 21, 2011 Share Posted April 21, 2011 Thanks for the update, Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 27, 2011 Share Posted April 27, 2011 http://finance.yahoo.com/news/Alderon-Appoints-Former-Iron-iw-2428213151.html?x=0&.v=1 Alderon is loading up. interesting that his options were priced at $3.40 (300000). Happy to see that. Dazel. Link to comment Share on other sites More sharing options...
Liberty Posted May 2, 2011 Share Posted May 2, 2011 ALS has been falling quite a bit on the market lately. Anybody loading up? Link to comment Share on other sites More sharing options...
Guest Dazel Posted May 2, 2011 Share Posted May 2, 2011 We were most of the volume Friday so we will step back and hopefully get some cheaper. Dazel. Link to comment Share on other sites More sharing options...
Eric50 Posted May 3, 2011 Share Posted May 3, 2011 Dazel - It seems that you keep buying more and more since you've raised this idea. To assess the strength of your conviction, would you mind sharing how much of your total AUM do you have in ALS? Feel free to ignore my question if you do not want to share that - I'd completely understand. thanks Eric Link to comment Share on other sites More sharing options...
Guest Dazel Posted May 3, 2011 Share Posted May 3, 2011 Eric, I have a good portion of my net worth in it. This is what we like... unfortunately it is tough on some investors. It is in our best interest to be quiet...we have played out our case. If you simply add the numbers together you can see what we see. I know it is tough on investors to see investment drops...however, historically averaging down has produced our greatest winners. Remember Fairfax. The difference here is that your down side is protected by cash and 0 debt...we see little risk...we see an investment company not a commodity company...you might want to ask yourself why Leucadia has not had the same pull back. we still think that the market sees uranium and that is their mistake. good luck. Dazel. Link to comment Share on other sites More sharing options...
goldfinger Posted May 3, 2011 Share Posted May 3, 2011 we still think that the market sees uranium and that is their mistake. It could also be the correction in Alderon shares which was kind of expected. And I have noticed that a lot of resource (metals) related stocks have corrected in the last week (maybe end of QE2 approaching or something...). Link to comment Share on other sites More sharing options...
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