ALS.TO - Altius Minerals

[hohi]

Maybe this is interesting to some of you who follow the resource sector for some time (like me) to understand better where Altius and Mr. Dalton are coming from:

 

When Altius was founded Mr. Dalton was still a very young man in his early twenties and had not the company in mind that we know today. The real mastermind behind Altius was Rick Rule (the famous resource investor). Rule is very, very smart and an excellent capital allocator and he invented what is today known as the "project generator business model". He basically told Mr. Dalton that if he wanted to get financed by him, he had to adopt the business model of a project generator/royalty generator. So we have to thank Rick Rule for setting the early course of Altius to where we are now. I have huge respect for Mr. Rule and am extremely pleased to have him still on board as one of the largest shareholders (even if he bought in at $ 0.2 i think). Of course now Brian Dalton is a superb asset allocator himself, but I am pretty sure that Rick Rule still has some valuable advice to give. Paul van Eeden is also a Rick Rule protegé by the way. He is by himself a great investor with deep knowledge of the resource sector.

 

With all that being said, it is very clear to me that we have management and insiders with an extremely deep understanding of the sector. Quite comforting indeed ;).

[giofranchi]

 

Gio,

 

To save you time go to the Altius website...read their annuals...look at their presentations...this thread got out of hand for many pages on grades of iron ore, china, iron ore prices etc....

The new Altius deal for PMRL changes the game for Altius...it combines steady cashflow with the lumpy earnings of the past at Altius and diversified cash-flow. There is valuable discussion on the thread but realistically Altius is now a different company than it was a month ago with the PMRL deal. Management hit a home run.

 

Dazel.

 

I will surely do, and I appreciate your help very much!! :)

 

Thanks again,

 

Gio

 

[giofranchi]

Maybe this is interesting to some of you who follow the resource sector for some time (like me) to understand better where Altius and Mr. Dalton are coming from:

 

When Altius was founded Mr. Dalton was still a very young man in his early twenties and had not the company in mind that we know today. The real mastermind behind Altius was Rick Rule (the famous resource investor). Rule is very, very smart and an excellent capital allocator and he invented what is today known as the "project generator business model". He basically told Mr. Dalton that if he wanted to get financed by him, he had to adopt the business model of a project generator/royalty generator. So we have to thank Rick Rule for setting the early course of Altius to where we are now. I have huge respect for Mr. Rule and am extremely pleased to have him still on board as one of the largest shareholders (even if he bought in at $ 0.2 i think). Of course now Brian Dalton is a superb asset allocator himself, but I am pretty sure that Rick Rule still has some valuable advice to give. Paul van Eeden is also a Rick Rule protegé by the way. He is by himself a great investor with deep knowledge of the resource sector.

 

With all that being said, it is very clear to me that we have management and insiders with an extremely deep understanding of the sector. Quite comforting indeed ;).

 

Great! Thank you very much! :)

 

Gio

[original mungerville]

Gio,

 

Rick Rule is a long-term value investor specialized in commodities. His US firm was recently bought by Sprott (a few years ago), so its not a surprise Sprott participated in the deal with convertible bonds.

 

(These days Sprott has bet the farm on precious metals while Rick Rules's US subsidiary is more diversified across commodities.)

[giofranchi]

Gio,

 

Rick Rule is a long-term value investor specialized in commodities. His US firm was recently bought by Sprott (a few years ago), so its not a surprise Sprott participated in the deal with convertible bonds.

 

(These days Sprott has bet the farm on precious metals while Rick Rules's US subsidiary is more diversified across commodities.)

 

Good to know! Thank you again! :)

 

Gio

[kirkomi]

Gio,

 

This is an article which was published pre-PMRL deal. It gives a nice history of the company, along with a lot of direct quotes from Brian Dalton.

 

http://seekingalpha.com/article/1913871-Altius-Minerals-An-Excellent-Business-Trading-At-A-Discount

 

Enjoy !

-Krish

[Libs]

To the extent Altius is reliant on Hebei, this is not encouraging. WSJ article below.

 

Cliff's notes:

 

China wants steel production cut 25% in the province.

Local governments have not enforced this.

Hebei Iron has essentially thumbed their nose and jacked up production anyway. ( See March comment from Hebei steel chairman)

Central gov't is cracking down.

Chairman of Hebei Steel was sacked 12/9.

( By the way Hebei Steel produced 71MM tons last year; so Alderon at 8MM production is material to Hebei)

 

Given the above, what are the odds Hebei bags the deal?

 

 

http://online.wsj.com/news/articles/SB10001424052702304773104579267930186015534

[Guest Dazel]

Thanks HoHi.

 

Rick rule got a lot of coverage in the early days of this thread. He is an investing legend in the commodity sector. But I love his approach more than anyone including Eric Sprott.

 

He learned his craft from Peter Cundill. I will post more on this later as I recently just reread "There's Always something to do" The Peter Cundill Investment Approach. For those interested this board was created from Sanjeev Parsad and bunch of silly investors that thought Fairfax financial was a steal and the short campaign that had destroyed it's value would pass. All of us including myself bought up every last share we could as did Peter Cundill...we did pretty well! Actually we killed it.

 

Anyways....the foreword for Peter Cundill's book is from Prem Watsa who we all know as the Warren Buffett of the north. Prem had great allies in Peter Cundill and Mason Hawkins during those times and they have remained partners at Fairfax for a decade now...more on that later...

 

Warren Buffett who Rick Rule also follows and Worships said that Peter Cundill would be someone he would consider to take over control  Berkshire Hathaway's investment management.

 

Rick Rule is one of the only people we trust to look at in the commodity sector if not "the" only one.

[Guest Dazel]

 

 

Libs,

 

This is old news and the thread has addressed it. Pease do your homework...it sounds like you are slinging crap like your post on how Altius  had bought back 13% of their shares yet the float had only dropped a few percent.

I do not recall a thank you from you for correcting your very incorrect and material mistake.

 

Dazel.

[Liberty]

I'll join the chorus thanking Dazel for all the work on this idea. I'm very happy to keep holding it for the long-term :)

 

Speaking of Rick Rule, does anyone know what his long-term track record is? I don't think I've ever seen his compounding rate mentioned...

[hohi]

He is worth a few hundred million if not over a billion dollars. In his private partnerships (investing in junior exploration/development/small producer companies) he made his co-investors hundreds of percents of profits in a few years. As Dazel I think Mr. Rule is the most knowledgeable value investor in the sector today. He has a deep understanding of the cyclical nature of the sector and the huge risks associated with resource investing.

[Liberty]

He is worth a few hundred million if not over a billion dollars. In his private partnerships (investing in junior exploration/development/small producer companies) he made his co-investors hundreds of percents of profits in a few years. As Dazel I think Mr. Rule is the most knowledgeable value investor in the sector today. He has a deep understanding of the cyclical nature of the sector and the huge risks associated with resource investing.

 

I believe that too and I've read many of his interviews. But still, I'd love to see his actual track record if anyone has it.

[tengen]

I think the only blemish on the Altius track record is the Newfoundland & Labrador Refining Corporation, which was a company set up to build a refinery in Newfoundland. The project went belly up during the financial crisis and Altius had to write off the investment. NLRC is now in limbo, a ghost on the ALS balance sheet.

 

 

[Guest Dazel]

 

Tengen,

 

Ya agreed...the first and last time Altius put out money into one of their projects...it is the only time they have raised capital in the last decade at $28 per share...NLRC is valued at 0 on the balance sheet but they hold the debt so when it moves through bankruptcy they will control all of it. It remains unlikely but possible that they will recoup the money back. I believe that NCRL was due to list on the NYSE when Bear Sterns blew up and the project was moth balled as the financial markets froze.

I would not have had a shot at Altius if they had been able to IPO NCRL as they would likely never have come down from $25 to $30 it traded at then. They would have filled their war chest with more cash than they already had.

 

 

[Libs]

 

 

Libs,

 

This is old news and the thread has addressed it. Pease do your homework...it sounds like you are slinging crap like your post on how Altius  had bought back 13% of their shares yet the float had only dropped a few percent.

I do not recall a thank you from you for correcting your very incorrect and material mistake.

 

Dazel.

 

Your acerbic reply is surprising...and well below your usual standards....

 

Re the share count - you said 13%; I (rather sloppily) thought it was ~7%; looks like it's 11%..... I'm not slinging anything, I'm trying to figure out if I want to buy more of this stock. I did appreciate your response, though, it was helpful.

 

I have read this 168 - page thread twice and failed to notice the issues from today's WSJ article previously discussed. I was surprised to read it. Maybe someone can help. The Hebei arrangement is critical and as I've written, if it falls through it's a big deal. IMO.

 

 

 

 

[original mungerville]

I can't remember where this Hebei issue was addressed on the thread either. But then again, my wife says I can never find things in plain sight in our house!

[Phaceliacapital]

Gio, I would also like to refer to the below quote to give you an idea of the capital allocation skills there:

 

From Dalton's letter:

 

Altius has maintained an excellent capital structure throughout its history and this has been bolstered over the past five years by share buybacks totaling ~13.6%. We can now also begin to consider other means of returning capital to our shareholders. Our first task however is to properly analyze the various options available to us to reduce and eliminate the debt incurred in relation to this important acquisition.

 

I like this guy. already looking to get rid of debt.

 

BeerBaron

 

and read this letter: http://www.altiusminerals.com/uploads/Altius-Letter-to-Shareholders-Dec24.pdf

 

 

[Guest Dazel]

Libs,

 

Sorry for the harshness holiday hang over obviously...this information is in the threads somewhere too lazy to look. WSJ is recycling an article from late November that short traders are using to take Cliffs price down.

 

-China's steel complex ran at 72% in 2012...a 25% cut would not even take them to equilibrium...It makes sense to get rid of high cost highly polluting plants...Hebei like the rest of China are starting this process...it will be slow like anything of this nature...and it is supposed to be gradual...

 

do you know how much iron Ore it takes produce 71m tonnes of steel? 140 million tonnes of Ore. Does Hebei need the ore the answer is yes...is their lowest cost alternative Alderon the answer is yes...Alderon is material to Hebei and they will do very well in the partnership.

 

the Chairman of Hebei left on December 12th they had big send off for him thanking him for the great job he did....

 

if you google China's 25%  steel production cut you will get many old articles as it is old news....Most of the articles which I also discussed make the mistake of Hebei production cuts. That is the Province of Hebei not Hebei iron and Steel.

 

Dazel

 

 

 

 

 

 

 

 

[Libs]

<Sorry for the harshness holiday hang over obviously>

 

Hopefuly your huge recent gains will help with this problem 8)

 

Appreciate your reply, especially:

 

<how much iron Ore it takes produce 71m tonnes of steel? 140 million tonnes of Ore.>

 

 

 

 

[Guest Dazel]

 

Libs,

 

I had friends relatives at my house for 10 straight days....I am decompressing. While it is nice to see a little pop in our position...and I do enjoy it!!! My enthusiasm for where Altius is sitting and going is unmatched since I bought my first share.

 

Getting recharged so any questions you have fire away.

 

Dazel

[matts]

Thoughts on Glenn's latest blog post?

 

http://glennchan.wordpress.com/2014/01/05/alderon-iron-ores-paid-stock-promotion/

 

 

[netnet]

To the extent Altius is reliant on Hebei, this is not encouraging. WSJ article below.

 

Cliff's notes:

 

China wants steel production cut 25% in the province.

Local governments have not enforced this.

Hebei Iron has essentially thumbed their nose and jacked up production anyway. ( See March comment from Hebei steel chairman)

Central gov't is cracking down.

Chairman of Hebei Steel was sacked 12/9.

( By the way Hebei Steel produced 71MM tons last year; so Alderon at 8MM production is material to Hebei)

 

Given the above, what are the odds Hebei bags the deal?

 

 

http://online.wsj.com/news/articles/SB10001424052702304773104579267930186015534

 

This tidbit plus rather extensive portions of this 169 page thread entirely miss the point.  Iron ore predictions for the next quarter, the necessarily imprecise valuing of Voisey Bay royalty, etc.  That is all noise.  I repeat all noise.

 

The signal: you have a proven (30% per annum) capital allocator, who (seems totally) honest, shareholder friendly and stays within his circle of competence with a tremendous business model.  And you are getting this at a discount.  Come on.  If Alderon goes to zero, highly improbable but not impossible, this is not "cheap" but it still would be a buy, given the management AND the business model.

 

(And don't complain about the refinery.  Like Buffett, airlines and department stores, Dalton makes mistakes AND both lived to tell the tale.)

[tengen]

Thoughts on Glenn's latest blog post?

 

http://glennchan.wordpress.com/2014/01/05/alderon-iron-ores-paid-stock-promotion/

 

Sounds a lot like a certain contributor to this discussion thread. ;-)

 

As the author notes, many Canadian mining companies pay for stock promotion. While I find that distasteful, I don't think it's the kind of red flag it might be in other circumstances.

 

Disclaimer: own ALS, don't own any Alderon

[matts]

Thoughts on Glenn's latest blog post?

 

http://glennchan.wordpress.com/2014/01/05/alderon-iron-ores-paid-stock-promotion/

 

Sounds a lot like a certain contributor to this discussion thread. ;-)

 

As the author notes, many Canadian mining companies pay for stock promotion. While I find that distasteful, I don't think it's the kind of red flag it might be in other circumstances.

 

Disclaimer: own ALS, don't own any Alderon

 

Still, Dalton is on the board of Alderon. If he's half the investor this board thinks he is, he should be telling them "Stop wasting time and money on this BS. Work on the mine and the stock will take care of itself." Maybe he is saying it but does not carry enough weight, something to be concerned about?

[tengen]

To be honest, I don't think a company director would get involved in approving/disapproving this sort of thing. It's not like anyone is pretending that Grandich is an independent analyst and the cost is a tiny fraction of their G&A overhead. I understand where the blog writer is coming from but I just don't see it as a concern for Altius. On the other hand, I wouldn't feel comfortable investing directly in Alderon (or any other junior mining stock).