ALS.TO - Altius Minerals

[Guest Dazel]

 

 

Muscleman,

 

Take a look at the companies history.

Their earnings in the past have been lumpy ala Leucadia, Fairfax and Bekshire in the early days. Going forward their cash flow base will grow exponentially. If you look at their past they have generated returns in the same ball park if not better than the above mentioned companies (30%plus-annually over 17 years!). It has been handicapped as a miner in the market which it is "NOT". It is a royalty-merchant banking business that also has the geological expertise to find and create royalty-equity positions on brownfield projects. it will jump off peoples screens this year as they start earning royalties...it will look like their cash-flow came out of nowhere this year not unlike what Leucadia has done in the past.

 

We just don't see anything like it anywhere...for cheapskates like us we can buy a buck for 50 cents with best business in the world very rare indeed.

 

Dazel.

 

 

[muscleman]

 

 

Muscleman,

 

Take a look at the companies history.

Their earnings in the past have been lumpy ala Leucadia, Fairfax and Bekshire in the early days. Going forward their cash flow base will grow exponentially. If you look at their past they have generated returns in the same ball park if not better than the above mentioned companies (30%plus-annually over 17 years!). It has been handicapped as a miner in the market which it is "NOT". It is a royalty-merchant banking business that also has the geological expertise to find and create royalty-equity positions on brownfield projects. it will jump off peoples screens this year as they start earning royalties...it will look like their cash-flow came out of nowhere this year not unlike what Leucadia has done in the past.

 

We just don't see anything like it anywhere...for cheapskates like us we can buy a buck for 50 cents with best business in the world very rare indeed.

 

Dazel.

 

Thank you! I will take a deeper look to understand it. What is your price target? It seems like you believe this is a buy and hold for 10 year stock? :D

[Phaceliacapital]

Almost a year ago I wrote a report which might interest you.

 

With the largest game changer, in my opinion, the acquisition that happened a couple of days ago.

 

Altius_Minerals.pdf

[muscleman]

Almost a year ago I wrote a report which might interest you.

 

With the largest game changer, in my opinion, the acquisition that happened a couple of days ago.

 

 

Thank you! Your valuation approach is quite similar to what I found in this article:

http://seekingalpha.com/article/1913871-altius-minerals-an-excellent-business-trading-at-a-discount

 

Could you please help me with these two questions?

1. The sum of parts valuation assumes that Altius does not have operating expenses, which it does. Well, I do agree that you have used a discount to the future cash flow, so we can probably say the value of these parts are reasonable. Other than that, if we also include the operating expenses, then the total value after 20 years would have been less. It seems that their quarterly operating expense is in the 1.6-2.4 Million range. If we assume the annual operating expense is 8 million, then the value of the sum of parts after 20 years would have been 398 million - 8*20 = 268 million instead. Am I right here?

2. What is your wild estimate of the potential of the other projects as free real options?

[naboo]

If ADV can get EA approved in Feb 2014, I hope ALS sell ADV equity, use those cash to pay off the debt and keep the royalty.

 

Don't forget ALS has no cash after the new deal, that worries me a little.

[Blue Macaw]

Yes this was an interesting deal.

 

The way to cut the debt will be by selling Alderon shares which will happen during 2014 in my opinion. Hopefully they will be worth something after february and the environmental decision that we are awaiting.

 

This also gives us a good look at what the Kami royalty can be worth which is in the range 8-10 CAD per share.

 

The Potash future could bring an increase of 35 % as stated by the presentation by 2018. The coal I don´t know but according to me coal is still a huge part of the future and it will be for a very long time ahead. A great deal was made by Altius here. The bad part is that we have to wait and see if we still get the Geneese royalty since a party has a first refusal. That would make the royalty come in around 23-24 million a year and not 30.

 

The income for 2014 should look something like:

 

New royalties  approx. 27 million

Voisay bay  3 million

777 mine  0,9 million

 

Total 31 million

 

Cost around 6+6 million (regular cost and finance cost) = 12 million

 

Left over 19 million and tax on that gives us around 13 million to play with or 0,47 per share.

 

The big kick is still Alderon.......

[Guest Dazel]

Naboo,

 

Fairfax calls cash and marketable securities the same thing. They still have $100 million plus in marketable securities...or cash.

 

Dazel.

[Guest Dazel]

 

 

Muscleman,

 

Not sure where your expense numbers  are from but cut them in half and you will be closer. Brian Dalton has tried to keep expenses in line with the Voisey Bay royalty and if you check compensation no one has made any money in the company options  since  the 2009 year.

 

 

 

 

[Guest Dazel]

 

Blue,

 

Virginia mines ' Goldcorp partnership comes on this year....they own 8%.

 

[Guest Dazel]

 

Musleman,

 

2. Wild estimate is a billion... If they win juliienne Lake ($350m) Anglo American partnership, Mamba, Century ($200m), uranium royalties $50m, Alderon (Kami)and all the rest are $450m....Alderon is coming soon  we will see with Juiienne Lake would be a huge win.

[phil_Buffett]

 

Musleman,

 

2. Wild estimate is a billion... If they win juliienne Lake ($350m) Anglo American partnership, Mamba, Century ($200m), uranium royalties $50m, Alderon (Kami)and all the rest are $450m....Alderon is coming soon  we will see with Juiienne Lake would be a huge win.

 

dazel is there a date terminate when we will finally know wheter they win Julienne lake or not?

[Guest Dazel]

 

 

Phil,

 

There is no date for Julienne Lake...

[phil_Buffett]

 

 

Phil,

 

There is no date for Julienne Lake...

 

ok thanks. but probably i think it will be in 2014

[Blue Macaw]

The deal was very good for Altius in two respects:

 

1. That we now are a cash flow positive company instead of one that constantly loses money quarter after quarter. The deal might have been a fair one, with right valued numbers so in that respect Altius has not "earned" anything with the deal but we will now have the eyes of many investors that will take a second look at the company.

 

2. The deal will make it easier to value the rest of the businesses that Altius has. For example I would value the royalties at around 7,5 -10 CAD just by looking at the numbers after tax and with a p/e of 15-20. Apart of that we have 33 million Alderon shares which would be valued at about 2 CAD per share, Cranberry investments about 1 CAD, Virginia mines at about 1 CAD per share, Century Iron shares at about 0,1 CAD per share and so on.......

 

Current valuation according to above would then be in the span 11,6-14,1 not including any other royalties like Kami, Julliene lake, Paladin, Mamba,  etc. We should see some increase in share price if Kami comes thorough. Not the whole 10 CAD but a gradual increase from start next year to production start 2015. If Julienne lake gets built it is a whole new ball game. (I would value that to about 20 CAD per share)

 

I am very optimistic about 2014-2018. I will add during downturns.

[rohitc99]

The deal was very good for Altius in two respects:

 

1. That we now are a cash flow positive company instead of one that constantly loses money quarter after quarter. The deal might have been a fair one, with right valued numbers so in that respect Altius has not "earned" anything with the deal but we will now have the eyes of many investors that will take a second look at the company.

 

 

page 4 of the investor presentation seems to show that they got these royalties at a good valuation (possibly due to weakness in the commodities). am I missing something ?

[muscleman]

 

Musleman,

 

2. Wild estimate is a billion... If they win juliienne Lake ($350m) Anglo American partnership, Mamba, Century ($200m), uranium royalties $50m, Alderon (Kami)and all the rest are $450m....Alderon is coming soon  we will see with Juiienne Lake would be a huge win.

 

Thank you! That is a big potential upside then. :)

[Blue Macaw]

The deal was very good for Altius in two respects:

 

1. That we now are a cash flow positive company instead of one that constantly loses money quarter after quarter. The deal might have been a fair one, with right valued numbers so in that respect Altius has not "earned" anything with the deal but we will now have the eyes of many investors that will take a second look at the company.

 

 

page 4 of the investor presentation seems to show that they got these royalties at a good valuation (possibly due to weakness in the commodities). am I missing something ?

 

It appears that the deal was great if you look at page four. I wouldn´t know yet. We will see. But I am very thrilled about the fact that they bought coal since I am a believer we will have it around for some time and that the price on coal downwards has eased. At least the deal was low in the respect of multiples and the coal royalties are paid by the ton and not by revenue. The coal royalties are gold worth according to me. Just hoping now that we get all the royalties and that the first refusal doesn´t get exercised.

[Guest Dazel]

http://lakecharlescleanenergy.com/leucadia-energy/

 

Leucadia would like to build gasification plants that convert coal into clean energy. China and General electric have made huge steps in their gasification technologies. We know if Leucadia is doing it then it is feasible...

With the high cost of energy in the world..Altius is buying a truly distressed asset in coal...I am referring to the CDP assets...Ontario teachers have the right of first refusal. These are smart investors...they will partner with Altius because they will benefit from Altius expertise and dealmaking acumen. I would love to see Altius cultivate a close relationship with Teachers Pension through CDP and other projects as well.

For those that unaware of the Ontario Teachers Pensionfund-They are one of the most powerful pension funds around as their investing track record is excellent. They have $130 billion in assets.

 

http://en.wikipedia.org/wiki/Ontario_Teachers'_Pension_Plan

[Blue Macaw]

Dazel

 

Interesting stuff. Did not know about it..neither thing. So you believe they will go with Altius? Sure hope so because those were huge assets that I don´t want to miss  out on. What about the Geneese royalty? Do you know anything about that first refusal?

[muscleman]

 

Musleman,

 

2. Wild estimate is a billion... If they win juliienne Lake ($350m) Anglo American partnership, Mamba, Century ($200m), uranium royalties $50m, Alderon (Kami)and all the rest are $450m....Alderon is coming soon  we will see with Juiienne Lake would be a huge win.

 

So what is the wild guess probability of these projects being won? 90%? 50%?

[Guest Dazel]

 

Blue,

 

Yes I believe that teachers will go with Altius...wouldn't you? How else will they get 12 billion tonnes of coal monetized? Altius' deal making prowess will now come into the spotlight. I would be surprised Altius had not contacted teachers with a plan....That is their style.

This will become the largest opportunity in the Altius stable behind Kami and Julienne Lake in my opinion..and no one cares...remember coal is dead if you read the headlines. Distress.

 

Genesee right of first refusal is likely to be passed up...because no one has any spare cash sitting around like Altius...and again "everyone" hates coal.

[Guest Dazel]

 

 

Muscleman,

 

I don't want to speculate...

 

1.Kami is next...when financed it is worth  $8 to $10 a share to Altius...

 

2.Julienne Lake has to be won..will speculate after that.

 

3.CDP could be a wonderful opportunity as well...

The rest is longer term...

[hohi]

Just came back from my holidays and went through the numbers. Pretty nice, although I don't like the debt. But I am sure Dalton and his team have an eye on that and will pay it back as soon as possible.

 

Honestly I have my problems with the potash royalties. Not with the assets, but with the calculation of the actual royalty revenue. Anyone wants to share some wisdom there?

 

Love the quality of the assets, especially the potash ones. And you must love the solidity of the electrical coal ones!

 

I see the biggest upside in the CDP properties though. Over the next 10 years we might hit a jackpot there...

 

Also I would like to know if ALS sold some of its equity holdings in Mamba or cut back their investment in Cranberry - anyone contacted ALS yet?

[tengen]

I agree that coal is a "distressed asset", which is probably a big factor in the price Altius will pay to buy the CDP. However, I wouldn't leap to the conclusion that coal gasification is feasible just yet. The Leucadia project will use petcoke (a waste product produced by refineries), not coal. I imagine that similar technology may be applicable to coal, but I think we're looking at a pretty long time horizon (e.g 20 years) for that to turn into something concrete. One positive is that the Alberta government is a big supporter of coal and will probably provide major support for things like gasification or carbon sequestration.

[Guest Dazel]

http://www.theglobeandmail.com/news/politics/under-fire-over-emissions-alberta-banks-on-unproven-coal-gasification/article591101/#dashboard/follows/

 

 

http://www.elp.com/articles/2012/03/ge-deploys-coal-gasification-technology-at-two-china-plants.html

 

Here is an old article on the subject with money from the Albeta government helping the progression of the gasification of coal underground and one underscoring the advances in technology that GE is providing in China.