Guest Dazel Posted January 28, 2014 Share Posted January 28, 2014 Original Mungerville, You are missing key pieces....It is Labtador West's government that is pushing for the lines...because it is not just Kami and Julienne Lake that need the power. Carol Lake is expanding....Bloom Lake need power for expansion not to mention the others in the region that may expand or build. Labrador west also needs the power for residential use as the other two transmission lines that are connected to Churchill Falls are maxed out they power the entire region. Kami is being used by the government of Labrodor west to push the timeline that is "already" in place. You will see from the article below that Nalcor has already awarded the construction contract for the transmission line from Muskrat falls to Churchill Falls and that construction will begin shortly. Kami does not need the power from Muskrat falls unless it expands above 8mta per annum (churchill falls has excess capacity)The other projects in Labrador west need the "additional" power from the Muskrat falls that will run through the new transmission line from Churchill Falls. So we know it will be built...It is essential to all of Labrador west...I do not think that Alderon will need to contribute $60m. http://www.thecoaster.ca/Business/2013-12-20/article-3550475/Due-diligence-being-done-on%E2%80%88Lab-west-hydro-line,-minister-says/1 Link to comment Share on other sites More sharing options...
phil_Buffett 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 thanks hohi! great work as always :) Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 28, 2014 Share Posted January 28, 2014 Hohi, Thanks for the presentation. Dazel. Link to comment Share on other sites More sharing options...
original mungerville Posted January 28, 2014 Share Posted January 28, 2014 Dazel, Just so I've got this straight. Seems like I have the main story line straight but am mixing up governments. But I was missing this I think: you are saying Kami doesn't need the third power line for the first part of the project as there is enough power...they only need it for the Kami expansion. Sorry I understand this is a basic question, but it wasn't quite clear to me. Cheers. Link to comment Share on other sites More sharing options...
original mungerville Posted January 28, 2014 Share Posted January 28, 2014 Hohi, Nice presentation! Gives me a very good picture of the company's business model and various assets. Link to comment Share on other sites More sharing options...
hohi Posted January 28, 2014 Share Posted January 28, 2014 Hohi, Nice presentation! Gives me a very good picture of the company's business model and various assets. Of course you have to think about the probabilities of the various scenarios playing out. Those are just my estimates for the base case. Link to comment Share on other sites More sharing options...
SharperDingaan Posted January 28, 2014 Share Posted January 28, 2014 A little fun with numbers .... Assume a Kami MV of 159M, & 27.62M shares o/s (Hohi #'s). Share close price of 15.08 (01/27/2014), & $60M to finance. Most would argue that the capital raise would also include something for costs & general corporate expenses. Be conservative. Assume it is 100% equity, & add 25%. $75M. New MV with Kami included = 575.5M [(27.62*15.08)+159] Assume a new issuance in shares of 4.143M New Share Count = 31.763M [27.62+4.143] New MV/New Share Count = $18.119 [575.53/31.763] New equity raise = $75.066M [4.143*18.119] So.. if this power line goes through... the share price goes to around $18; 20% above where we are at now. What am I missing here? SD Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 28, 2014 Share Posted January 28, 2014 Original Mungerville, It is a transmission line...they already have two transmission lines that go from Churchill Falls to Labrador west. (the government is Newfoundland Labrador)There is enough access power at the generation station left but the transmission lines are at full capacity so they need another one to get the power from Churchill to Labrador where Kami can use it. (there is enough for 8mta at Kami without Muskrat falls coming online) They are building Muskrat falls now and they have already started the transmission line to Churchill Falls from Muskrat. When that is done there will be a lot of power that will be added to that third transmission line...enough for Kami to expand to 16mta, Julienne Lake etc... Link to comment Share on other sites More sharing options...
Liberty Posted January 28, 2014 Share Posted January 28, 2014 Thanks Hohi! Last slide made me smile :) Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 28, 2014 Share Posted January 28, 2014 SD, I will offer a different theory...and you can do math on a capital raise higher for Altius. Everyone has put in probabilities etc on Altius different projects....We will use Alderon specifically and extrapolate... They are trading a significant discount to value because this transmission line has not been approved and rightly so. There is a hint from the $60m that Alderon has offered to fork out to speed up the process. They have already spent $3 or $4 million with Nalcor in this project....I am speculating but I think they already have an off take agreement in hand as soon as the transmission line gets the go ahead. This money will not need to be raised by Altius...it is possible they will get their ownership position diluted not unlike the Hebei deal but the value of Alderon will rise significantly by both the transmission line discount gone and the financing. As for Altius all of their projects immediately go up in value...the infrastructure around their projects that has been discussed as a competitive advantage has not been priced in. It is one thing to tout the cheap power access (with Muskrat Falls it will be there)....It is quite another when you have actual access to it. The multi national players know what they are doing...you do not finance billion dollar projects until the pieces are in place...Hebei included a clause on the transmission line in their financing. I would not be surprised to see Alderon make leaps and bounds in hurry once they reach this milestone. Altius will benefit in tandem as it will not only take their Alderon equity position higher and the value of their Kami royalty it will have a great effect on all of their projects and their future values. Link to comment Share on other sites More sharing options...
hohi Posted January 28, 2014 Share Posted January 28, 2014 A little fun with numbers .... Assume a Kami MV of 159M, & 27.62M shares o/s (Hohi #'s). Share close price of 15.08 (01/27/2014), & $60M to finance. Most would argue that the capital raise would also include something for costs & general corporate expenses. Be conservative. Assume it is 100% equity, & add 25%. $75M. New MV with Kami included = 575.5M [(27.62*15.08)+159] Assume a new issuance in shares of 4.143M New Share Count = 31.763M [27.62+4.143] New MV/New Share Count = $18.119 [575.53/31.763] New equity raise = $75.066M [4.143*18.119] So.. if this power line goes through... the share price goes to around $18; 20% above where we are at now. What am I missing here? SD I would be surprised if ALS puts one more dollar into Alderon or Kami. If Kami cannot finance itself it would be a huge mistake to think that by pouring more money into it, ALS could protect their equity in Alderon or the royalty on Kami. Management knows that and thus wouldn't imagine putting more money into Alderon. Just my opinion of course ;). Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted January 28, 2014 Share Posted January 28, 2014 SD, I will offer a different theory...and you can do math on a capital raise higher for Altius. Everyone has put in probabilities etc on Altius different projects....We will use Alderon specifically and extrapolate... They are trading a significant discount to value because this transmission line has not been approved and rightly so. There is a hint from the $60m that Alderon has offered to fork out to speed up the process. They have already spent $3 or $4 million with Nalcor in this project....I am speculating but I think they already have an off take agreement in hand as soon as the transmission line gets the go ahead. This money will not need to be raised by Altius...it is possible they will get their ownership position diluted not unlike the Hebei deal but the value of Alderon will rise significantly by both the transmission line discount gone and the financing. As for Altius all of their projects immediately go up in value...the infrastructure around their projects that has been discussed as a competitive advantage has not been priced in. It is one thing to tout the cheap power access (with Muskrat Falls it will be there)....It is quite another when you have actual access to it. The multi national players know what they are doing...you do not finance billion dollar projects until the pieces are in place...Hebei included a clause on the transmission line in their financing. I would not be surprised to see Alderon make leaps and bounds in hurry once they reach this milestone. Altius will benefit in tandem as it will not only take their Alderon equity position higher and the value of their Kami royalty it will have a great effect on all of their projects and their future values. I seem to recall recently reading an article where Alderon's CEO said everything was taken care of and they were just waiting for the power lime approval. I took this to mean any additional financing had already been lined up and they're just waiting for the approval to officially announce anything as I imagine that the counterparties' agreements were conditional. I would be very surprised on any negative news at Kami at this point. Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 28, 2014 Share Posted January 28, 2014 Zachmansell, Perception and reality are different things...If it were a done deal (meaning power lines and off take) Alderon would be in the $4-$5 range possibly higher and it would open up a whole new set of options for them and Altius... Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 28, 2014 Share Posted January 28, 2014 http://www.juniorminingnetwork.com/junior-miner-news/news-releases/424-tsx/vgq/23871-virginia-to-complete-a-ca-7-m-flow-through-share-private-placement.html#.UugFbqM8KSM http://wallstreetsectorselector.com/2014/01/eric-lemieux-2014-hold-metals-2/ Virgina mines (Altius owns about 9% of the company) just raised flow through capital at $21 which is a very large premium to the around $14 they are trading at(above article). The other piece describes their management and an explanation why the stock is hitting 52 week highs daily. The guy being interviewed says Goldcorp has hit another large vein in Virginia's royalty area that could double the size of the Elenore royalty... How happy are we that Altius is doing our investing in this field for us. Dazel. Link to comment Share on other sites More sharing options...
bizaro86 Posted January 28, 2014 Share Posted January 28, 2014 Hi All, I'm new to the board and am an Altius shareholder. I get concerned when I see people throwing around 90% probabilities for Kami getting built on time. They need politicians to get along enough to build them a powerline, they need iron ore prices to cooperate, they need to raise a huge amount of capital, and they need to execute on a giant construction project in the middle of nowhere. I probably wouldn't by Alderon shares as an individual, so I'm uncomfortable buying them as part of Altius. I do love the royalty on Kami. Does anyone know if Alderon shares are shortable? I'm considering hedging out some of the equity exposure to Alderon and keeping the royalty exposure. I checked IB, and they don't qualify for shorting there... I also love the Alberta coal royalties. My experience with giant projects in the middle of nowhere comes from the Alberta oilsands, and I've seen power demand forecasts from credible sources that suggest to me coal will be a part of the Alberta power mix for a lot longer than people think. If a new coal plant could get approved anywhere, Alberta would be a good guess. High and deregulated power prices with a gov't friendly to industry. I actually think a power producer could get the carbon fund to pay for the cost of scrubbers/CO2 capture on a new coal gen. If that happens, it'll be at an existing coal plant site, probably one where the royalties apply. I'm also not worried about the right of first refusal. It's at a very high price, so if its exercised the rest of the deal just gets better. Honestly, if I could buy an IPO of just the Sherritt deal at the price Altius paid, it'd be a punchcard position for me, probably in the 50% range. The only other thing that give me pause is how the market took the deal. Westmoreland, Altius, and Sherritt are all up substantially from the Dec 24th. It seems unlikely to me that both buyers and the seller got a great deal... Also, I'm having a hard time figuring out how to value the management factor. They have a great track record, but how do you account for that in valuation? Just assume they earn their G&A? Or do you use a higher multiple/lower discount rate, or add $XX million to your estimate of value for great management? Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 28, 2014 Share Posted January 28, 2014 The only other thing that give me pause is how the market took the deal. Westmoreland, Altius, and Sherritt are all up substantially from the Dec 24th. It seems unlikely to me that both buyers and the seller got a great deal... Sherritt may be up due to activism by Clarke (CKI). I really don't know much about Sherritt though. I get concerned when I see people throwing around 90% probabilities for Kami getting built on time. They need politicians to get along enough to build them a powerline, they need iron ore prices to cooperate, they need to raise a huge amount of capital, and they need to execute on a giant construction project in the middle of nowhere. The biggest risk IMO is somebody trusting them and financing the mine. The property is in a mining region with lots of nearby infrastructure. It isn't exactly in the middle of nowhere. Does anyone know if Alderon shares are shortable? I'm considering hedging out some of the equity exposure to Alderon and keeping the royalty exposure. I checked IB, and they don't qualify for shorting there... You can probably get a borrow for the shares that trade on American exchanges. The shares are dual listed. Link to comment Share on other sites More sharing options...
bizaro86 Posted January 28, 2014 Share Posted January 28, 2014 You can probably get a borrow for the shares that trade on American exchanges. The shares are dual listed. Thanks! It looks like IB does have the US shares available to borrow. I never really short anything, but in this case I might try to hedge out some of the risk on the Alderon shares, which are my least favourite Altius asset by far. I have to think that if Altius could sell down their Alderon position without moving the stock/reducing the chance of financing occuring they would. My little hedge won't cause either of those problems. Link to comment Share on other sites More sharing options...
Blue Macaw Posted January 29, 2014 Share Posted January 29, 2014 Hohi Very nice presentation! One point that I noticed, Altius has 5 million shares of Century and not 2. So better for us. One thing. Could the fact that almost all Altius land take around Julienne lake is in the actual lake be a problem? Is that causing the delay? If mined they will change the whole lake area and therefore more studies are needed regarding the environmental aspects. Also read some geological report on Kami. There it was stated that it is more like Bloom´s and Scully mine and NOT Carol lake in its mineral structure. This makes it very important to read the reports that come out of Cliffs´ Blooms lake. Too low a iron ore price and we will have a delay in the building of the mine. (However good that the CAD is low now). Interesting times ahead. Link to comment Share on other sites More sharing options...
hohi Posted January 29, 2014 Share Posted January 29, 2014 Hi All, I'm new to the board and am an Altius shareholder. Hey, welcome to the board! I get concerned when I see people throwing around 90% probabilities for Kami getting built on time. They need politicians to get along enough to build them a powerline, they need iron ore prices to cooperate, they need to raise a huge amount of capital, and they need to execute on a giant construction project in the middle of nowhere. I don't mind you getting concerned, because I really am not. As stated before everyone has to crunch his own numbers. Also as states many times it is the strategic value that will get Kami built, not just the economics. If you see Kami without Hebei, you don't really see the big picture in my opinion. Powerline? Come on... Iron ore prices? could probably drop 50% and won't matter (to Hebei) Financing? ... the chinese Nowhere? ... well it is one of the best, if not the best project near infrastructure out there. So please... But keep digging out supposed dirt, at least we'll have to question ourselves from time to time. Link to comment Share on other sites More sharing options...
hohi Posted January 29, 2014 Share Posted January 29, 2014 Hohi Very nice presentation! One point that I noticed, Altius has 5 million shares of Century and not 2. So better for us. Didn't notice that, thanks! One thing. Could the fact that almost all Altius land take around Julienne lake is in the actual lake be a problem? Is that causing the delay? If mined they will change the whole lake area and therefore more studies are needed regarding the environmental aspects. The lake is not very deep and I don't see a big problem there. But we'll have to wait for a bankable feasability study there to know exactly. Link to comment Share on other sites More sharing options...
hohi Posted January 29, 2014 Share Posted January 29, 2014 Alderon says China corruption probe won’t affect mine http://www.cbc.ca/news/canada/newfoundland-labrador/alderon-says-china-corruption-probe-won-t-affect-mine-1.2513813 The new Hebei chairman on Kami "In a letter that he sent to [Guy Saint-Jacques], he re-iterated his 100 per cent commitment to Alderon and the project indicating that Kami is integral to their long-term strategy," Link to comment Share on other sites More sharing options...
Guest Dazel Posted January 29, 2014 Share Posted January 29, 2014 Anyone that is hedging Altius positions which I do understand...I must disclose I may be on the other end buying the shares you are selling.... I think Alderon shares are undervalued...the negativity will subside a lot of it really is noise and some very unintelligent...I agree with Hohi. The whole industry is painted with the same brush. Jim Rogers has said you can truly get rich with the right mine...I will be happy with middle of the pack for Kami. In world of Tesla's, Netflix, amazon, salesforce.com etc...they are in a balloon not a bubble... to believe what people are thinking and doing. Tesla's latest billion dollar market cap move up in the market was on their china push! now that is ironic to me. The other irony is the perception of risk...the crowd does not like resources they like whatever has been going up the longest whatever that is. Link to comment Share on other sites More sharing options...
giofranchi Posted January 29, 2014 Share Posted January 29, 2014 Anyone that is hedging Altius positions which I do understand...I must disclose I may be on the other end buying the shares you are selling.... I think Alderon shares are undervalued...the negativity will subside a lot of it really is noise and some very unintelligent...I agree with Hohi. The whole industry is painted with the same brush. Jim Rogers has said you can truly get rich with the right mine...I will be happy with middle of the pack for Kami. In world of Tesla's, Netflix, amazon, salesforce.com etc...they are in a balloon not a bubble... to believe what people are thinking and doing. Tesla's latest billion dollar market cap move up in the market was on their china push! now that is ironic to me. The other irony is the perception of risk...the crowd does not like resources they like whatever has been going up the longest whatever that is. +1 Gio Link to comment Share on other sites More sharing options...
bizaro86 Posted January 29, 2014 Share Posted January 29, 2014 Hey, welcome to the board! But keep digging out supposed dirt, at least we'll have to question ourselves from time to time. Thanks for the welcome hohi! I will definitely keep looking for holes in all my longs. (Shorting doesn't interest me except rarely as a specific hedge, so I don't spend any time on things I think are structurally flawed). I thought the board might be interested in this article about the Labrador trough region: http://business.financialpost.com/2013/09/16/northern-promise-mining-projects-spark-much-need-sept-iles-port-expansion/?__lsa=d905-2f1e It's a few months old, and was the first time I'd heard of Alderon/Kami. It's generally a bullish piece, focusing on the potential. A couple of things I found interesting as potential negatives: Railway transport is also an issue. At present, there is only one rail link — the IOC-owned Quebec North Shore and Labrador Railway — for producers to get their mineral the hundreds of kilometres down to Sept-Îles. Although the line has enough capacity to handle near-term growth, another railroad will be needed if the Labrador Trough is to reach its full producing potential. Kami is close to the rail line, which is a huge advantage, and offsets some of the "middle of nowhere" factor. Does anyone know whether they have the firm ability to use the rail line, and how much capacity it has left? Cleveland-based Cliffs, which owns the Bloom Lake iron ore play in Quebec, is currently embroiled in a legal dispute with the port over the company’s plans to improve its own dock facilities. The port needs the Cliffs lands for access to its multi-user dock expansion. Mining executives interviewed said privately they don’t expect the dispute to derail the project; Does anyone know if this got resolved? Alderon has put up money for the multi-user dock in exchange for discounted access. I would imagine the port would expropriate the Cliff's land if necessary to access the dock, but that could mean legal delays. Link to comment Share on other sites More sharing options...
hohi Posted January 29, 2014 Share Posted January 29, 2014 Alderon has rail and port capacity. Link to comment Share on other sites More sharing options...
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