SharperDingaan Posted January 25, 2014 Share Posted January 25, 2014 As much as we might not like it; discounting PV is not really useful here. We have no idea when commodity prices will boom & bust, or how often it will occur during the mines expected life. Todays discount rate may also be very different from what we use tomorrow. However, over a 1 year period (when the crystal ball fogs up), we can usually assess direction pretty well - all else equal. So how much more might todays stock add, 1 year out - in 5 variables or less. - Probability of occurrence x mv of Kamli - Probability of occurrence x mv of JL - Probability that the total royalty stream average commodity price, significantly declines over the year - Probability of occurrence x change in the valuation multiple - Probability of occurrence x any potential new share issuance. We all have our own idea on what these are, & how soon they will occur; and as long as the net addition/share is positive, the analysis says that we should stay. We would suggest to you that if ALS had a option market, you would position yourself very differently. SD Link to comment Share on other sites More sharing options...
giofranchi Posted January 26, 2014 Share Posted January 26, 2014 Todays discount rate may also be very different from what we use tomorrow. As far as discount rates are concerned, I like to keep it simple: and I ask myself “is this business better than the average S&P500 company?”, my answer is almost always “Yes”. Then I fetch the last AL by Mr. Buffett and look on page 1 at the compounded annual gain from 1965 to the present day of the S&P500… and I use that number as my discount rate. Period. Gio Link to comment Share on other sites More sharing options...
kirkomi Posted January 26, 2014 Share Posted January 26, 2014 I have been investing for only 4 years now and I accept my failings and consider myself less seasoned compared to some of the posters here e.g., Dazel, Gio, Twacowfca, Prasad, Packer etc. So, my view might be too simplistic for some of you. But I ask you to bear with me. I have been following the discussion on the last few pages and I suggest that *maybe* the big picture is getting lost in all the details. I have read almost *everything* I could find on Brian Dalton. He is an upstanding person, is very honest in his shareholder letters, and has shown astuteness and clarity of thought few managements can boast of. The business model of the company is also "different" and few will argue that the model is failing at the moment or is going to fail because of so and so in the near future. Thus, I agree with Gio when he says: I ask myself “is this business better than the average S&P500 company?”, my answer is almost always “Yes”. I ask you to put yourself in place of a business owner, owning the entire company. Would you sell it to buy something else because you think that someone is paying you 150% of the *current value* of the company ? I will not. It is my opinion that you don't sell a company because it is a bit overvalued. If I sell even a part of this, I will have to find a business which has a better management AND is better valued. As long as Altius is not wildly overvalued (for example, it starts selling at CAD$30 and there is no change in the underlying business), I would not consider selling the stock. If I sell even a part of it I would have to find a new company with better management AND better value. Not an easy task. Link to comment Share on other sites More sharing options...
giofranchi Posted January 26, 2014 Share Posted January 26, 2014 It is my opinion that you don't sell a company because it is a bit overvalued. I couldn’t agree more! I am a big advocate of owning the right business with the right management through thick and thin for a very long time (unless it gets wildly overvalued!). :) Gio Link to comment Share on other sites More sharing options...
jouni1 Posted January 26, 2014 Share Posted January 26, 2014 It is my opinion that you don't sell a company because it is a bit overvalued. I couldn’t agree more! I am a big advocate of owning the right business with the right management through thick and thin for a very long time (unless it gets wildly overvalued!). :) Gio haven't your heard that investing in quality businesses doesn't work anymore? net-nets and distressed microcaps is the only way to make any gains anymore, i have been told. apparently if you invest in quality, you have much higher risk of losing most of your investment! ::) Link to comment Share on other sites More sharing options...
Crip1 Posted January 26, 2014 Share Posted January 26, 2014 Todays discount rate may also be very different from what we use tomorrow. As far as discount rates are concerned, I like to keep it simple: and I ask myself “is this business better than the average S&P500 company?”, my answer is almost always “Yes”. Then I fetch the last AL by Mr. Buffett and look on page 1 at the compounded annual gain from 1965 to the present day of the S&P500… and I use that number as my discount rate. Period. Gio Discount rate has been the topic of debate in the value investing community forever. Of all the thoughts expounded, this one is the most lucid and logical. -Crip Link to comment Share on other sites More sharing options...
kirkomi Posted January 26, 2014 Share Posted January 26, 2014 haven't your heard that investing in quality businesses doesn't work anymore? net-nets and distressed microcaps is the only way to make any gains anymore, i have been told. apparently if you invest in quality, you have much higher risk of losing most of your investment! ::) 8) The macro-environment may be precarious and I understand the lure of net-nets and micro-caps. They look like you are buying something worth $1 for $0.25. Who can reject such an offer ! The situation of being Altius shareholders is a very privileged one. If/when the macro environments change for the worse and the stock price is suffering because of that -- I will welcome the opportunity. I could not be happier. In fact, I wish that I could buy Altius for CAD$5. As long as there is no "permanent" damage to the business, I don't see why one is worried about such a scenario. If the price of the stock keeps running up, I don't find myself in a worse situation either. The third situation is when the stock moves sideways. In this case, I probably don't add to my position and keep holding what I have. The only thing one needs to be vigilant about is the "permanent damage" to the business itself. Everything else, in my opinion, is noise. Obviously, if you are planning to get in, you need to go through the drill and ask questions on the forum. But if you are already a shareholder, worrying about the noise is detrimental and leads you to psychological biases humans are prone to. Link to comment Share on other sites More sharing options...
jouni1 Posted January 26, 2014 Share Posted January 26, 2014 i absolutely agree and am thinking of starting a position here. it was just a misplaced joke, hence the ::) dalton seems like he could be the next who ever, worth a small bet in my opinion. i'm just kicking myself for not reading this thread before the big royalty deal. maybe i should suck it up and start buying. Link to comment Share on other sites More sharing options...
kirkomi Posted January 26, 2014 Share Posted January 26, 2014 i absolutely agree and am thinking of starting a position here. it was just a misplaced joke, hence the ::) The joke was perfect and I put in a 8) because of that. It is hard to do this by writing, but such is life. :P Fortunately, I read the thread and put nearly 10% of my portfolio around CAD$11. I would have bought more but I decided that 10% is almost my full position unless the price goes further down. If I was at your place, I would start a half position and buy more if it goes down. Good luck ! Link to comment Share on other sites More sharing options...
giofranchi Posted January 27, 2014 Share Posted January 27, 2014 Todays discount rate may also be very different from what we use tomorrow. As far as discount rates are concerned, I like to keep it simple: and I ask myself “is this business better than the average S&P500 company?”, my answer is almost always “Yes”. Then I fetch the last AL by Mr. Buffett and look on page 1 at the compounded annual gain from 1965 to the present day of the S&P500… and I use that number as my discount rate. Period. Gio Discount rate has been the topic of debate in the value investing community forever. Of all the thoughts expounded, this one is the most lucid and logical. -Crip Thank you Crip, very kind of you! :) Gio Link to comment Share on other sites More sharing options...
phil_Buffett Posted January 27, 2014 Share Posted January 27, 2014 http://www.cbc.ca/news/canada/newfoundland-labrador/alderon-says-clock-ticking-on-need-for-hydro-line-1.2509399 Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 27, 2014 Share Posted January 27, 2014 It is not just Alderon that needs the power line...Carol Lake, , Bloom Lake expansion, Julienne Lake etc...They all need it. It will be green lighted soon. Link to comment Share on other sites More sharing options...
phil_Buffett Posted January 27, 2014 Share Posted January 27, 2014 It is not just Alderon that needs the power line...Carol Lake, , Bloom Lake expansion, Julienne Lake etc...They all need it. It will be green lighted soon. yeah i think it will. hopefully soon. Link to comment Share on other sites More sharing options...
nostradamus Posted January 27, 2014 Share Posted January 27, 2014 Sorry for the basic question, but can someone clarify the difference between the 3% "gross sales royalty" that ALS has on Kami and the 3% "gross mine gate royalty" that ALS may have on Julienne Lake? Does the latter mean that ALS get 3% of whatever the market value of the product is when it leaves the mine? And does the former mean that they get 3% of the sales? (ie all things being equal the sales price may be lower than the market value if the mine operator has entered into an agreement to sell the iron ore at discount, as Kami has with Hebei as part of the financing agreement) N. Link to comment Share on other sites More sharing options...
SharperDingaan Posted January 27, 2014 Share Posted January 27, 2014 "We need this done now," Morabito told CBC News. "Otherwise Alderon is going to have to go into care a maintenance mode until it gets a power commitment. Unlike Vale or Exxon or other big companies, we don't have any revenue. The line will cost about $300 million. Alderon says it is offering to pay $60 million toward the cost, which it describes as its "fair share" of the tab." Good on them, on getting ahead of this .. & doing it early. SD Link to comment Share on other sites More sharing options...
SharperDingaan Posted January 27, 2014 Share Posted January 27, 2014 "gross sales royalty" means you get a % of whatever the ore sold for at the time. Could be the contract rate, spot rate, or a mix of both. "gross mine gate royalty" means you get a % of whatever the ore sold for - less all processing & selling costs up to the time the processed ore leaves the mine gate. For practical purposes; no shipping costs, & only some of the total selling costs are included in the deduction against the gross sales royalty. SD Link to comment Share on other sites More sharing options...
FFHWatcher Posted January 27, 2014 Share Posted January 27, 2014 Tom Marshall recently took over as the Premier for NFLD & Labrador. He was formerly the Finance Minister and prior to that, the Minister of Natural Resources in NFLD. He is therefore not unfamiliar with the mining industry and the need for electricity. On top of that, he was a supporter of Muskrat Falls and stated that he wanted NFLD/Labrador to have an even greater independence from the high cost of using oil to create electricity. Premier Danny Williams appointed Tom Marshall to various posts in the gov't over his terms as premier. Marshall and NFLD/Labrador has a history of fiscal surpluses due to being a Natural Resources rich province. As many of your know here, Danny Williams is on the Board for Alderon Iron Ore. Yesterday the current Natural Resource Minister who took over for Tom Marshall was quoted as saying.... 'In that vein, Natural Resources Minister Derrick Dalley told reporters Friday morning that he’ll make a decision on a third power line from Churchill Falls to Labrador West within the next week or so — a costly infrastructure project expected to facilitate mining development in the region. All the above seems to be positive for Alderon/Altius. Overall, Tom Marshall as the Premier seems to be a positive move, even if it is for just a few months. Link to comment Share on other sites More sharing options...
phil_Buffett Posted January 27, 2014 Share Posted January 27, 2014 Tom Marshall recently took over as the Premier for NFLD & Labrador. He was formerly the Finance Minister and prior to that, the Minister of Natural Resources in NFLD. He is therefore not unfamiliar with the mining industry and the need for electricity. On top of that, he was a supporter of Muskrat Falls and stated that he wanted NFLD/Labrador to have an even greater independence from the high cost of using oil to create electricity. Premier Danny Williams appointed Tom Marshall to various posts in the gov't over his terms as premier. Marshall and NFLD/Labrador has a history of fiscal surpluses due to being a Natural Resources rich province. As many of your know here, Danny Williams is on the Board for Alderon Iron Ore. Yesterday the current Natural Resource Minister who took over for Tom Marshall was quoted as saying.... 'In that vein, Natural Resources Minister Derrick Dalley told reporters Friday morning that hell make a decision on a third power line from Churchill Falls to Labrador West within the next week or so a costly infrastructure project expected to facilitate mining development in the region. All the above seems to be positive for Alderon/Altius. Overall, Tom Marshall as the Premier seems to be a positive move, even if it is for just a few months. sounds good Link to comment Share on other sites More sharing options...
giofranchi Posted January 27, 2014 Share Posted January 27, 2014 Tom Marshall recently took over as the Premier for NFLD & Labrador. He was formerly the Finance Minister and prior to that, the Minister of Natural Resources in NFLD. He is therefore not unfamiliar with the mining industry and the need for electricity. On top of that, he was a supporter of Muskrat Falls and stated that he wanted NFLD/Labrador to have an even greater independence from the high cost of using oil to create electricity. Premier Danny Williams appointed Tom Marshall to various posts in the gov't over his terms as premier. Marshall and NFLD/Labrador has a history of fiscal surpluses due to being a Natural Resources rich province. As many of your know here, Danny Williams is on the Board for Alderon Iron Ore. Yesterday the current Natural Resource Minister who took over for Tom Marshall was quoted as saying.... 'In that vein, Natural Resources Minister Derrick Dalley told reporters Friday morning that he’ll make a decision on a third power line from Churchill Falls to Labrador West within the next week or so — a costly infrastructure project expected to facilitate mining development in the region. All the above seems to be positive for Alderon/Altius. Overall, Tom Marshall as the Premier seems to be a positive move, even if it is for just a few months. Very good to know! Thank you! :) Gio Link to comment Share on other sites More sharing options...
Williams406 Posted January 27, 2014 Share Posted January 27, 2014 FFHWatcher, Thanks for the info. Not sure I like a minister with the last name of "Dalley" though, when a time-sensitive project is in the balance as I was always told to not dally when my parents wanted me to get moving. Better than "Brigand" or "Leach" I suppose. SD, You were discussing involved companies getting hit up for additional capital contributions. Point taken. 406 Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 27, 2014 Share Posted January 27, 2014 http://www.edmontonjournal.com/business/Lamphier+Uranium+stocks+rise/9409590/story.html Uranium is a forgotten asset at Altius....since the Fukushima disaster uranium stocks have been decimated. So the violent move up in uranium prices that everyone is predicting would be a pleasant surprise for Altius shareholders we certainly are not paying for their uranium assets. It is an Interesting asset as Japan and China do not have any choice but to go nuclear. Taken from the story above...there are now more nuclear reactors in the planning stage than before Fukushima. Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 27, 2014 Share Posted January 27, 2014 Ffhwatcher, Thanks for the Info...it was inferred from the press that Ms Dunderdale and Danny Williams were not getting along....I don't know what that means if anything however, as you noted this change appears to be positive for both Alderon and Altius. Anyone know who makes the final decision on Julienne Lake? That decision would appear to follow the third power line green light. Dazel. Link to comment Share on other sites More sharing options...
original mungerville Posted January 28, 2014 Share Posted January 28, 2014 So let me get this straight. Julienne needs the same third power line as Kami, and the government wants Julienne to go ahead because they are asking for bidders on it. Now Kami is trying to go forward a couple years earlier than Julienne would start production. So the cost to the government and others of the power line for Kami is not $300 million, rather its the cost to move $300 million forward by a couple of years. So that's whatever rate the government can borrow at times a couple of years - maybe something like a cost of $30 million (ie 3% cost of interest for 3 years?) to get this done on time for Kami? And Alderon is saying they are ready to pay $60 million - so $30 million to get this done now, and $30 million or 10% of the cost of ultimately getting it done (because it will get done because Julienne needs to go ahead). Is this what we are looking at here? Or am I missing key pieces... Link to comment Share on other sites More sharing options...
hohi Posted January 28, 2014 Share Posted January 28, 2014 Put some of my DD into a little presentation for you guys. Hope you get something out of it... http://www.ihre-hoheit.de/ALS.pdf Link to comment Share on other sites More sharing options...
giofranchi Posted January 28, 2014 Share Posted January 28, 2014 Put some of my DD into a little presentation for you guys. Hope you get something out of it... http://www.ihre-hoheit.de/ALS.pdf Very good presentation! Thank you very much! :) Gio Link to comment Share on other sites More sharing options...
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