ALS.TO - Altius Minerals

[nostradamus]

Both Dalton and Eldem presented at the PDAC yesterday, which guess might explain the uptick in their share prices on no news yesterday. In the past the PDAC slides have been posted to the Altius website, but cannot see them there yet.

 

 

[Guest Dazel]

 

 

the whole sector was up yesterday....

 

Altius and Alderon will have to be tight lipped at this point.

[nostradamus]

 

 

the whole sector was up yesterday....

 

Altius and Alderon will have to be tight lipped at this point.

 

Maybe you are right and they included nothing new in their presentations, but I would like to see them in any case to make my own assessment (plus as a shareholder of Altius I think I have a right to). I think it was in their PDAC presentation last year that they "announced" that they planned to dividend out the Kami royalty. 

[hohi]

Now we know who will develop JL for us: WISCO + Xinxing. 21-24 Mtpa.

 

PDAC presentation online...

[hohi]

Also interesting:

 

- ALS claims next to JL hold ~2/3 of the resource if ALS gets the contract

- "decision imminent" on JL

- project in Chile generated

- seems like they already have someone for some of the coal projects

[EliG]

Slide 5 of PDAC presentation:

 

"Asset sales prior to closing may reduce or eliminate subordinate debt (available for sale assets include more than $110M in equities and several advanced coal projects)"

 

Hopefully they pull this off and avoid subordinate debt. Less dilution.

 

 

[SharperDingaan]

Interesting:

 

JL is about 1.5x the size of Kami. Material

ALS is about to sell something for around 50M cash. Significant

Confirmation of a 1B line for Kami. For which ADV will need a raise of around 300M. Material

Some announcements are imminent. Significant

 

... & yet the TSX does not think it significant enough to temporarily call a trading halt?

 

SD

 

[Williams406]

Hohi, Thanks for pointing out the PDAC presentation posting and noting some new details. I'll be interested to see--if the Altius consortium is awarded JL--how the initial equity pie is sliced up. That's a nice monetization option to have while waiting for production.

 

Good to know a nice chunk of the aggregate JL estimated resource is on Altius land.

 

406

[nostradamus]

Thanks Hohi for pulling out the new bits from the presentation. I thought the PDAC could be interesting.

 

Revealing their partners on JL and saying the decision is imminent, I don't think they would be highlighting these things if they thought their bid was going to be unsuccessful.

[Guest Dazel]

 

Thanks Hohi.

It's a pleasure being partners with Altius they are brilliant.

[ItsAValueTrap]

Interesting:

 

JL is about 1.5x the size of Kami. Material

ALS is about to sell something for around 50M cash. Significant

Confirmation of a 1B line for Kami. For which ADV will need a raise of around 300M. Material

Some announcements are imminent. Significant

 

... & yet the TSX does not think it significant enough to temporarily call a trading halt?

 

SD

 

Just finished reading the presentation slides.  I don't think that they released much material information.

 

They do not have 1B in debt secured for Kami.  It says that the process is underway.  I don't see how the underwriters will be able to sell debt unless there is equity lined up beforehand.  So right now it is just hot air.

 

2- The disclosure of the Chinese partners is new I think.

 

The Altius MD&A quotes a technical report regarding the size of the deposit:

 

Adjacent to an EML held by the Province of Newfoundland and Labrador. The Julienne Lake iron deposit on government land has a NI 43-101 compliant resource of 867 Mt at 33.7% iron (Measured + Indicated) and 299 Mt at 34.1% iron (Inferred) (Coates, 2012). Drilling in 2012 by Altius confirmed that the iron ore deposit extends to the northeast and southwest onto the Corporation’s mineral claims. In October 2012, the Government of Newfoundland and Labrador requested expressions of interest (“EOI”) regarding development of the designated EML. In May 2013 the Corporation, with its partners, submitted a detailed proposal to the Province to develop the EML and the adjacent claims held by the Corporation as one combined, larger open-pit operation.

That resource estimate is likely for the portion of land that Altius does not own.

 

The grades are low so it's unclear to me whether or not this deposit might be marginal or uneconomic.  But again, if it gets developed, that's additional upside for Altius.

 

3- The presentation struck me as promotional.  I guess it makes sense because Altius is planning on selling convertible debt.

 

The time to get excited about Altius is when the company is buying back shares.

 

I'll be interested to see--if the Altius consortium is awarded JL--how the initial equity pie is sliced up.

Altius is saying that they'd simply take a 3% royalty?

 

So if the margin on the mine is 15% (this is an arbitrary number), then Altius' slice of the pie would be around 20%.  Ignoring tax issues.

[hohi]

Revealing their partners on JL and saying the decision is imminent, I don't think they would be highlighting these things if they thought their bid was going to be unsuccessful.

 

Exactly. I believe they are pretty sure about it. I didn't realize that ALS' properties contain such a vast amount of resources in comparison. It would be sonsense to give JL to somebody else who would only develop a substantially smaller and shorter life mine. They published 2017 as the start of JL. That's 3 years earlier than I would have expected. Respect... You have to love these guys!

[hillfronter83]

Xinxing is a leader in Chinese iron pipe market. They just announced a deal to invest $800m in Mexico energy sector at the end of last year.

 

Now we know who will develop JL for us: WISCO + Xinxing. 21-24 Mtpa.

 

PDAC presentation online...

 

[Williams406]

ItsaValueTrap,

 

It seems unlikely to me that Altius wouldn't hold some initial equity stake as well in JL. You're right that disclosures to date have only referenced the 3% royalty. I think they are bringing too much to the table, though. We'll see.

 

406

[ItsAValueTrap]

I think that they really won't take any equity.

 

2- We could look into Altius' drill results for the property.  They may have struck lower grade iron ore that would be marginally (un)economic.

 

Some of Altius' land might contain economic ore though, so a consolidated operation would make more sense.

 

It's possible that they aren't bringing a lot to the table.

 

3- I like that Altius tries to avoid taking equity.  But they will take equity when they have to.

[SharperDingaan]

Just keep in mind that ALS does its financing outside of its capital structure; there is a very strong possibility of JL being spun off into an ADV look-alike, pending permitting, & an off-take agreement. Cash (reimbursing exploration costs) + equity in exchange for the claim. All good.

 

The absence of a cease trade order speaks only to TSX competency.

Arguably the ALS presentation did contain significant new information, & it was significant enough to raise the closing price of ALS by 2% on the day the presentation was made. As the information was not disseminated to all shareholders on an equal basis, the TSX must be feeling a little exposed.

 

Great progress!

 

SD

[Guest Dazel]

 

 

 

The biggest part of the slides that excited me was that they may not take the convertible debt. As you all know I agree with Trap on the buy backs...eliminating the convertible debt at this time is a a similar capital structure move. Prem Watsa has mastered the buy back below book value and go to the market or takeover other companies above book value. The problem with Altius is their book values are so low that the number is off. Ie Kami's cost is $2.5 m....JL will likely be less. So the market does not get the true book value until it is sold. This complicates capital structure moves like Prem has dome at Fairfax.

 

With all of the balls in the air right now...the market is saying show me. We are betting they will.

 

Dazel.

[hohi]

I remember reading about ALS getting the 3% royalty on JL + a small equity component. Why wouldn't you take the equity, trap? It'll be free for ALS, as it has been free with all the other spin-outs. That's the price ALS' partners have to "pay" to do the deal. Probably will be in the 20% range.

[Liberty]

I remember reading about ALS getting the 3% royalty on JL + a small equity component. Why wouldn't you take the equity, trap? It'll be free for ALS, as it has been free with all the other spin-outs. That's the price ALS' partners have to "pay" to do the deal. Probably will be in the 20% range.

 

It also seems to me like keeping a decent-sized equity stake in a new vehicle would allow them to steer things in a way that maximizes the chances of the royalty being worth something. They can have board seats, suggest and possibly veto partners, managers, off-take agreements and such. Seems valuable in that way on top of any value realized when they eventually sell the equity.

[hohi]

from a 9/2013 presentation

 

If the Proposal is accepted Altius will retain a consolidated royalty and a small carried project interest.

[beerbaron]

Can someone send the link to the presentation?

 

BeerBaron

[Blue Macaw]

Yes many new things in the presentation as you all have stated already.

 

Also Highvale will be a producing royalty in 2016 something I had been wondering about...

 

 

[hohi]

Can someone send the link to the presentation?

 

BeerBaron

http://altiusminerals.com/uploads/PDAC-2014-cw.pdf

[ItsAValueTrap]

Why wouldn't you take the equity, trap?

 

It depends on the situation, but usually the equity is poorly managed.  If it's your typical Canadian junior mining management team, then you have a part-time CEO who's flying around on corporate aircraft and spending lots of money on promoting the stock.  The company may throw good money after bad if exploration/development results are poor; publicly, they can keep the story going and continue to raise more money.

 

I think that many of the Chinese companies are overpaying for assets.

 

Some senior miners will chase dumb projects that are marginally uneconomic.  Most of the gold industry did this.  They should have just issued dividends instead of trying to maintain production.  (Actually they all tried to expand gold production and few succeeded.)

 

If you can, you usually want to take cash or royalties over equity.  But usually it doesn't make sense for the other party to give out cash.  They can give out a small royalty, but a high royalty burden can be problematic as an otherwise economic project can become uneconomic for the equity holders.

 

2- In the past, Altius sat on fat stacks of cash and largely didn't want to commit that cash to mining equities or to exploring its own generated prospects.  I think it's a smart move on their part.

 

Of course, there have been cases where Altius has bought shares in a junior exploration company (e.g. Virginia, Callinan).  Virginia Mines is a little promotional and probably sponsors theaureport.com.  In the past Altius sold shares in a secondary offering, so it too will play the stock promotion game.

 

It also seems to me like keeping a decent-sized equity stake in a new vehicle would allow them to steer things in a way that maximizes the chances of the royalty being worth something.

Most management teams will do it by themselves naturally.  They will spend money on dubious exploration projects when they shouldn't.  They may try to build/expand a mine when they shouldn't.

 

Mining is crazy like that.  There are a lot of people doing things that don't make sense.  All of that irrational behaviour usually benefits the royalty holder.

[hohi]

I hear you, Trap. But consider this:

 

a) ALS gets the royalty anyways

 

b) It could have been royalty + nothing. Royalty + equity is better, even if the Junior wastes money. It's free. It's extra. Nothing charged.

 

c) The chinese want a local partner.

 

d) The chinese NEED a local partner. The canadians won't tolerate a huge 100% chinese project as they would accept a JV.

 

e) It was ALS that proposed their JL plan to the government. It is unthinkable that ALS would just flip the property the same minute they get the deal. ALS is all about integrity and long term thinking. They don't want the locals to think they are just there for the fast money.

 

f) Equity has strategic value as was mentioned before. ALS holds all the Alderon shares because they think it is the best investment long term. Better even than Virginina or Callinan. That's because they can control the outcome (royalty paying) easier than by just sitting and waiting. Once the royalty is secure ALS will sell.