ALS.TO - Altius Minerals

[Green King]

Economics is unknown unless the mine is built and all the ores mined out. what you are giving is evidence of possible problem with the source of estimation of economics. It does not make all the data wrong nor does it make it true.

 

Repeating it does not make it more or less true. Only time will tell.

 

What you are doing is the creation of fear from with partial information. which to the initiated is purely noise. Those that are not creates fear making those who does not understand what you are talking about confused and irrational. (which in my view are not ways of to do things.)

 

 

[ItsAValueTrap]

I think you're confusing facts and data with estimates.  Development-stage mining involves lots of estimates.

 

I think that Kami will be higher on the cost curve than Bloom Lake, Fortescue, Vale, and BHP.  That is an estimate.

Kami's feasibility study largely says the opposite of my prediction above.  That is an estimate.  (Their estimate may be saying that Kami will have even lower costs than the first-class assets owned by Vale and BHP.)

Kami's technical report projects that the concentrate grade will be 66% or whatever it is.  That is an estimate.  The actual figure might be different... it could be higher, it could be lower.

 

2- I've already said that I am long Altius.  If you feel that I am creating fear then... I really can't help you.

 

There is value in Kami.  If I thought that Kami was a complete scam (it is not), then I wouldn't own Altius.  Hopefully I haven't overestimated Kami's economics; I really haven't done my due diligence on it because I don't have a team of specialized engineers and access to data.  (An acquirer would likely apply that level of due diligence to Kami.  Perhaps Hebei has done their DD and they aren't crazy.)

[Guest Dazel]

Trap,

 

Not a few hours after you said you would no longer post on Kami. You did. But like always you did not post on Kami you posted on Bloom lake AGAIN. BloomLake came on stream in awful hurry when projects were going billions over budget. In the Minas Rio case which you did not return comments on they were billions and billions over budget in their buildout. It is very possible Bloom Lake took short cuts to race into production at $180 mta in iron ore prices in 2011. If this were the case and knowing the Quebec tax rates on mining income...It would make sense to that  if Bloom lake had to complete the buildout (they changed strategy midstream as you will remember and started to mine higher premium ore) that they would expense money immediately that should have been capitalized...this would make cash cost look higher and capital expenses (look lower). In other words profitability is down as the expense is brought forward instead of depreciating as capital depreciation over the life of the mine. Bringing the tax bill to 0.

 

 

Kami has commented on some of the flaws in Bloom Lake's design (conference call) and why costs are so high....They also have commented publically on their plans to copy what they have already

done at Carol Lake (same Alderon management that did the expansion there). It matters who is

building anyone in business knows this.

 

If you stop posting on your speculation of Kami I will stop rebutting "your speculation" of the estimates...it is tiring and futile....Green King has a point and this is why I am quick to rebutt "some" of it. As always, have said your intelligence does not warrant this so I wonder "why".

 

I am looking for a middle of the road Mine that is economical and well run...similar to Carol Lake. When that happens trap I will still be around and we can find something else to argue about.

 

You have to admit it will be a lot more fun to argue with Altius shares with a 2 or 3 in front of them!

 

 

Benjamin Graham was not like Warren Buffett. When he taught at Colombia he gave the classes live examples of stocks that they were dissecting of what he was investing in. I am a pea in comparison to Mr. Graham. However, i feel the joy of the feeling that in a small way I may have had something to do with board members having been able to make some money here. I think Brian Dalton and his team are a great business story and we are proud to be in their camp. I have made no excuses for my bullishness here my conviction is obvious...as a long term investor I expect to be here a long time....and therefore Kami matters to me Trap.

Dazel.

[SharperDingaan]

We added a trade tranche to our position on Friday …

 

In less than a month we will know if we have a new power line. Most would argue the probability of success is well above 50%, it is a game changer, & that it is worth $5-6/share depending on POV.

 

All kinds of risks go into building a mine, but they narrow as the mine gets into production. At inception, we have no idea as to whether valuation estimates are over/under optimistic. But we do know that Mr. Market will give us a bid, & we can either accept it - or let it go.

 

Kami is not the only ALS asset that would rise in value. Furthermore, over the longer term; most would also expect the ALS valuation multiple itself to increase, as they will no longer be a junior resource company.

 

Hopefully, a power line by Valentine Day.

 

SD

 

[ItsAValueTrap]

As always, have said your intelligence does not warrant this so I wonder "why".

 

It's been my experience with junior mining that I have been overly naive and optimistic.  I didn't understand how bad the corporate governance was.  I didn't understand that the engineers can release inflated numbers and never get into trouble for it.  They can commit fraud and not get into trouble for it.  That situation is a magnet for fraud.  That is why I do my own valuation work on Kami.

 

this would make cash cost look higher and capital expenses (look lower).

 

In other words profitability is down as the expense is brought forward instead of depreciating as capital depreciation over the life of the mine. Bringing the tax bill to 0.

 

Your interpretation of cash costs, GAAP accounting, and taxes are funny.  That's not how those things work. 

[Guest Dazel]

 

Trap,

 

-I had a different message here that was a little harsh it is obviously modified. I have been a little hard on you here and awhile back not knowing that you had a blog may have disrespected you personally...I did not make the connection. Nor is it my attention to offend your ideas...that is not what this board is about.

 

Dazel.

 

[Guest Dazel]

 

SD,

 

 

I agree with you...I was adding to Alderon last week...

 

Dazel.

[Green King]

We added a trade tranche to our position on Friday …

 

In less than a month we will know if we have a new power line. Most would argue the probability of success is well above 50%, it is a game changer, & that it is worth $5-6/share depending on POV.

 

All kinds of risks go into building a mine, but they narrow as the mine gets into production. At inception, we have no idea as to whether valuation estimates are over/under optimistic. But we do know that Mr. Market will give us a bid, & we can either accept it - or let it go.

 

Kami is not the only ALS asset that would rise in value. Furthermore, over the longer term; most would also expect the ALS valuation multiple itself to increase, as they will no longer be a junior resource company.

 

Hopefully, a power line by Valentine Day.

 

SD

 

Always the nicest stuff.

 

+1

[SharperDingaan]

Brief comment on engineering studies & depreciation.

 

Engineering studies are akin to commissioning a marketing strategy to sell XYZ product. Yes the practitioners are optimists (you would not hire a pessimist) so cut the numbers by 10-15%, & accept that there will be some company spin (to get financing); but recognize that these studies are done by experts in what they do.

 

An engineering study does not give absolute assurance as to grades, throughputs, etc. The study is there to give reasonable assurance as to what the optimal mine for that specific ore body is; how long it would take to open; what would be required to open it - & the expected cost; and an assessment as to whether the mine would be economic at todays projected revenues and operating costs. Expectation gap.

 

Depreciation is a non-cash operating cost. As the depreciation cost, per the income statement, is a lot lower that what the company is using for tax purposes (& why there is a DTA), just adding IS depreciation back to income to get to EBITDA - is to understate EBITA, & significantly; especially when all the equipment is new. You need to straight line the DTA, & add that back to EBITDA as well ;)

 

SD

[ItsAValueTrap]

 

Trap,

 

-I had a different message here that was a little harsh it is obviously modified. I have been a little hard on you here and awhile back not knowing that you had a blog may have disrespected you personally...I did not make the connection. Nor is it my attention to offend your ideas...that is not what this board is about.

 

Dazel.

 

I was waiting until you guys would figure it out LOL  ;)

 

Cheers

 

Yes the practitioners are optimists (you would not hire a pessimist) so cut the numbers by 10-15%

I'd do it on a case by case basis.

 

In rare cases, totally uneconomic projects are misrepresented as being economic.  Sometimes you have to cut by 100% because the project will be a disaster.

 

Sometimes resource estimates are too low.  Virginia Mines' Elenore (I forget how to spell it) deposit may turn out to be bigger than expected.  Voisey's Bay I believe is turning out to be bigger than expected.

[hohi]

VGQ just announced a spin-out of their Coulon deposit. Maybe this was one of the reasons for the recent run up...

 

http://minesvirginia.com/en/index.php/press-en/virginia-mines-inc-major-development-for-the-coulon-project2014-02-03/

[Ross812]

Ross812,

 

Thank you for explaining my short comings as always a well informed and excellent post. Is it "fair" to say that after the processing of the ore in The Labrador Trough (which you explained very well) that it is of higher iron content then most in the world other than the big three mentioned in the article? 

 

Dazel.

 

The iron ore coming from Canada has Fe content higher the DSO coming from the majority of other sources. Good DSO is very rare after 100+ years of mining. A very profitable mine in Australia today would be producing 60-62% Fe content DSO. The highest grade Platt specifies contains 65% Fe.

 

Keep in mind, to process Magnetite a great deal of power and therefore infrastructure is needed (ex- Muskrat Falls). Canada is one of the few geographies that has access to both ore and cheap power.

 

The most important point to stress is Hebei is buying this ore to blend with Asian ore. The mine, in Hebei's case, is more about securing a source to ore than making a profit at the mine. Hebei can continue entering contracts with Australian producers for good quality 60% Fe ore and continue having to compete with their competitors bidding up the contracts, or they can secure a source of 8B tons of 65.5% Fe ore at 95% of Platt and blend it with 55% Fe DSO from west China bought competition free. 

 

Also keep in mind that all these quality problems with Kami ore are an issue if you were selling it on the open market. This is why the ore will be difficult to sell to anyone (i.e. outside of China) who does not have a source of sulfur free low %Fe iron to blend with the Kami ore.

 

I think Dazel has understood this for a long time!

 

On the pricing of the ore. I would just model 95% of Platt 62% price for the ore sold to Hebei (as stated in their contract) with no premium for high Fe content or quality deductions for Sulfur. Arguing the price of ore right now is like arguing what BNSFs dividend will be when Berkshire spins it out. A shot in the dark of a situation that doesn't even exist yet.

 

Ross,

I am curious: does your professional background have something to do with metallurgy, or do you really develop such deep technical knowledge in any sector you invest? :o

 

Gio

 

Gio,

I was in materials engineering for a while but switched to geotechnical engineering. Learning an overview of the mining industry wasn't too hard as I had a good knowledge base to build on. I've also been a shareholder for close to 4 years so I've been slowly learning along the way.

 

It seems like everyone has been a little hard on ValueTrap with his estimate bashing. It is important to take the estimates as ESTIMATES (and often in error which I think is Trap's whole argument). In my opinion, I would not jump to saying the engineering team is out and out committing fraud, but one has to remember engineering team is given 100 borrings (a .0001% sample size of the area) and asked to characterize the entire field. We are truly in the dark when it comes to the engineering reports as we are not given all the data or talked with drillers and engineers with decades of experience about their gut feeling on Kami. In this case, I would trust that Hebei has done their due diligence in making sure they are not throwing away $100M. I'm comfortable with it because Hebei's engineering team who has no doubt spent 1000's of man hours verifying this play against others and they are putting their livelihoods on the line by allowing this deal to proceed.

 

ValueTrap's blog is excellent and so far I have made far more money off his ASPS idea than Altius!       

 

 

 

[giofranchi]

ValueTrap's blog is excellent and so far I have made far more money off his ASPS idea than Altius!

 

Hi Ross!

I have no doubt ValueTrap is an excellent analyst and good investor! And I am trying to follow his discussion with Dazel, though sometimes it gets a bit confusing… I mean: is a royalty business a good business? Yes. Will the mining business be subject to some kind of disruptive change in the foreseeable future? No. Then, long-term investment returns depend exclusively on the quality of the owner / manager. Is Altius in good and capable hands? I think so. Besides price, but no one thinks Altius is overvalued (not even ValueTrap, otherwise he would not hold a significant long position in the company), what else do I really need to know? Because when I invest, it is always for the very long run.

 

I don’t know ASPS… but I am always very eager to learn! ;)

 

Gio

 

[phil_Buffett]

http://www.cbncompass.ca/News/Local/2014-02-03/article-3601213/Slow-response-on-Labrador-power-line-risking-investment/1

 

 

[Guest Dazel]

 

 

Pretty sure Trap and I are done boring all of you!

 

I saw Doug Kass promote this one ( ASPS) pretty heavy a while back...I am sorry I missed it on Traps Blog....great business and good timing...

 

 

Well done guys.

 

 

 

 

[hohi]

http://www.cbncompass.ca/News/Local/2014-02-03/article-3601213/Slow-response-on-Labrador-power-line-risking-investment/1

 

For what it's worth - I think it's just noise. It is good to put some pressure on the politicians but for my taste Morabito sounds as if he is too easily offended. The powerline will get built, but the sooner it gets announced, the sooner Alderon can complete the financing package. Expect the Julienne Lake decision in the weeks after the power line announcement.

[ItsAValueTrap]

I saw Doug Kass promote this one ( ASPS) pretty heavy a while back...I am sorry I missed it on Traps Blog....great business and good timing...

 

Didn't Doug Kass also promote AAMC? 

 

AAMC is hilarious.  I agree with the short thesis on it (though the shorts forgot that AAMC has a nice piece of Altisource's ridiculously profitable title insurance flow).  But some poor souls on ValueInvestorsClub.com decided to short AAMC...  :o

 

Here's how you value AAMC:

Title insurance: $300m is probably a generous valuation

Being the asset manager for RESI: Probably not worth that much more than RESI's market cap.

 

AAMC- $2.9B market cap

RESI - $1.22B market cap

 

Then again... AAMC was probably a multi-bagger for Kass.  So maybe I shouldn't criticize.

[Guest Dazel]

 

 

Trap,

 

I am not a Kass follower....but occasionally I will check in with him and Cramer for market sentiment which means I will look to do the opposite of them usually which is why I did not do any homework ASPS...I am disappointed I missed yours. The reason it sticks out as he touts it as his greatest stock pick ever...from 2009... Although I could be wrong...

I will follow your blog... Great ideas are very hard to come by...and great businesses with honest management for a good price are almost non existent.

 

Dazel

[Crip1]

 

 

Pretty sure Trap and I are done boring all of you!

 

 

 

Nonsense!

 

-Crip

[Guest Dazel]

 

I have to agree with SD...the more I look at the transmission line and the dynamic change for the whole region is enormous. It completes the infrastructure and it is not just Altius, Alderon, Julienne Lake effected...from the research we are doing into the region (Labrador west)...It appears that there is a large amount of pent up demand. All of the bidders for Carol lake (Rio Tinto) down the road  From Alderon and Julienne Lake would know about the transmission line and it's importance. Junior activity in the region has also picked up...Century, champion-mamba, Golden dory etc...

 

$5 to $6 is completely reasonable for Altius on the sequence of events that follows the transmission line go ahead....

It is human nature for us all to want it "now"...but in a year or two it will look like a blip of time! The whole region of Labrador west will take off with the approval...Altius and Alderon have the most to gain in the short term.

 

Dazel.

[SharperDingaan]

It is also highly likely that the involvement of all those other people, is why it is taking a bit to get an announcement  ;)

May we all do well.

 

SD

 

[Blue Macaw]

It is also highly likely that the involvement of all those other people, is why it is taking a bit to get an announcement  ;)

May we all do well.

 

SD

 

I think the power line will be approved but it will drag about for a bit. Maybe in march -april. I don´t know if it is because Morabito is bitching around or other things but if I was a serious politician I would just hold on the decision to make him sweat a bit. Everone knows about all the stuff he is talking about! And he goes to the papers.... Hopefully he is better at other things.

[Guest Dazel]

 

 

I think the drag has been Alderon's negotiations on terms with their existing and possibly "new" partners with respect to the buildout and concessions they are seeking for upfront money in building the transmission line...and timelines.

It is a holiday this week in China for their New Years celebration.

[cwericb]

 

Since the present Premier of NFLD is only an interim leader and the powerline is a major and somewhat controversial project, is there a possibility that Government would like to hold off making a decision until a new Premier comes into office? That will not be until July 5th.

 

I also have seen a number of negative comments questioning the amount of power available for the transmission line.  Is this a legitimate concern?

 

Here is another view on potential problems for this project.

 

http://rocksolidpolitics.blogspot.ca/2014/02/can-alderon-iron-ore-have-their-power.html

 

Given the delays on this “imminent” announcement, there certainly seems to be something going on in the back rooms that we do not know about. Lets hope it gets worked out quickly.

 

[Guest Dazel]

 

That guy from the blog is being sued by Alderon for defamation...he tried to have Muskrat falls stopped because there was a sunken German sub found near the site....anyways enough said on his credibility.

 

The project is certainly not all just about Alderon...in fact Alderon may be a small percentage of the power used with the other players in Labrador west. They are the ones making headlines.

SD....is likely correct that the other parties are also likely in negotiation with the government on their part in the transmission line. But there is probably no question that the chinese holiday has slowed down negotiations.