Author Topic: ALS.TO - Altius Minerals  (Read 1095746 times)

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5300 on: December 07, 2017, 11:15:55 AM »
When Altius bought the Prairie royalties for C$240.9 million in their internal valuations the coal asset and potash assets were valued equally. The coal assets paid out more quickly but the potash assets paid out forever.

So in their minds they paid C$120.45 million for the coal royalties and C$120.45 million for the potash royalties. I believe that bifurcation helps us understand just how well the assets are performing.

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First potash (excluding CDP potash) purchased for a notional C$120.45 million. The potash royalties in 3.5 years (to the end of October) have paid back C$18.25 million. Which doesn't sound too impressive except that 3.5 years after the purchase the NPV of the potash royalties is still around C$120.45 million. It's basically a perpetual royalty that will keep paying steady income but won't decline in NPV value. NPV for the potash royalties in 25 years will still be the same.

I actually think the NPV of the potash portfolio will rise once the potash price cycle changes (potential C$10 million to C$15 million in annual potash revenue) but we will discuss that when it happens.

Regardless Altius LOVES this deal. The market may not understand it because the revenue is so long dated. 

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The Prairie Coal Royalties purchased for a notional C$120.45 million have paid back an astonishing C$58.764 million (to the end of October). 49% of the purchase price paid back in just 3.5 years. As much drama as the coal royalties have made in the news, the payback rate has been extraordinary.

100% payback will be achieved in another 3.5 years or so. Let's say May 2021. Interesting to see whether the coal royalties will be paid back before the first CTG conversion plant in Canada is commissioned. Should be a close race. The profit on the deal will be however much coal royalty revenue comes in after that date. I think there will be significant profit from tail revenue from Genesee and Sheerness. But who knows? It may be a smaller amount of profit if coal gets wiped out in 2025, not 2030.

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It's amusing that Altius gets criticized for the Prairie purchase because of the constant flow of bad Alberta coal news. At worse Prairie will be a profitable but lower IRR deal; at best, if potash prices ever move, it will be a home run. Altius's peers in the same time period were destroying money. Sandstorm Gold gave US$75 million to Colossus Minerals, and got back ZERO when Colossus went bankrupt.   
« Last Edit: December 07, 2017, 11:43:39 AM by linealdin »


linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5301 on: December 07, 2017, 06:31:43 PM »
Lots of mixed signals from Capital Power in today’s investor day presentation re: coal to gas conversion.

1) Adamant they have extensively studied all conversion options. Silence does not equal inactivity.

2) Have decided not to announce conversion schedule until 2020, when they will have all relevant info.

3) Plan is to stage the conversions. This means spacing the conversions several years apart? Also burners that can handle both gas and coal.

4) Management also very proud of their investment in Genesee efficiency. Millions spent replacing rotors and experimenting with biofuel mixed in with coal. Subcritical plants are now as efficient as the supercritical plants. More efficiency = less coal per unit of electricity, and therefore less emissions.

They love these coal plants and claim their coal plants will still rank well in the merit order even with the federal carbon tax kicking in in 2022.

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I suppose 2020 isn’t bad. That gives Altius at least 2 or 3 years of worry-free revenue from Genesee. And once Capital announces the conversion schedule in 2020 it will be another 3 years before the first gas plant comes online.

Maybe 2023 for Genesee 1, 2026 for Genesee 2, then finally Genesee 3 converted in 2030?
« Last Edit: December 07, 2017, 06:37:27 PM by linealdin »

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5302 on: December 08, 2017, 08:36:18 AM »
Excelsior is putting together its construction financing package now. Should be around US$70 million, 50/50 debt and equity.

Altius could contribute C$5 million for its 0.5% royalty option, and another C$10 million structured as a convertible debenture (debt). Gunnison is mostly derisked in terms of permitting. I like the risk/reward of offering them some short term debt.

8% interest with the option to convert to Excelsior shares at C$0.90 cents. Debt ultimately secured by an additional royalty. Something like the Champion debenture.

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5303 on: December 08, 2017, 11:01:43 AM »
https://www.capitalpower.com/InvestorRelations/Events/Documents/2017%20Capital%20Power%20Investor%20Day.pdf

Capital Power's Investor Day presentation pdf.

I have the sense that Capital Power likes their relatively new, state-of-the-art coal plants and wants to figure out how to operate them, as primarily coal-burning plants, in the new anti-carbon regime. Their tactics:

1) Significant investment in the Genesee Performance Standard (GPS). 2017 was the first year of GPS implementation, and investment will be accelerated to create earlier savings. Efficiency of operation cuts carbon emissions. New low pressure rotors will be installed at Genesee 1 in 2019 and Genesee 2 in 2020 at a total cost of C$28.8 million. Targeting a 10% reduction in GHG emissions and C$35 million per year in savings in 2022 and beyond (savings on carbon tax and fuel costs).

2) Definitely some interest in co-firing coal and gas, or coal and biomass, at one or more of the Genesee plants. See page 57: "Co-firing provides greatest fuel flexibility through 2030."

Genesee complex has total capacity of 1266 MW, but has ability currently to co-fire 250 MW of natural gas. If they can obtain the enough gas supply this is probably the cheapest way to lower carbon emissions. No conversion or outages necessary. Just add a little gas into the fuel mix.

Biomass and coal co-firing experiments performed in 2016-17. Biomass could make up 10% to 15% of the fuel mix.

3) All of this is a totally different approach from Transalta's. Transalta wants to convert their coal plants asap, and they've made concrete plans to obtain enough gas supply to make that happen in the 2021 to 2022 period.

Capital Power is hedging their bets at Genesee. If they can get away with carbon mitigations, like GPS or co-firing, I think that is their preferred solution.

But this all depends on what the environment looks like in 2020 when Capital Power will announce their staged coal conversion schedule. A new conservative government should win office in 2019 for Alberta. A large part of their platform is anti-carbon tax and pro-coal. From Kenney's website:

"Jason Kenney will stand up for Alberta coal on the national stage. He will defeat the NDP and take the fight for our province’s coal industry right to Trudeau’s doorstep. Jason’s plan to bring back the Alberta Advantage, which includes defending Alberta coal and cancelling the NDP’s job-killing carbon tax, will make our province a leader again."
« Last Edit: December 08, 2017, 11:09:34 AM by linealdin »

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5304 on: December 08, 2017, 11:52:41 AM »
Increased pace of activity in the Voisey's Bay litigation in the St. John's Trial division. There was an application proceeding yesterday, and another application proceeding next Wednesday, Dec. 13th. Pre-trial motions?

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5305 on: December 10, 2017, 07:39:03 AM »
Champion debenture interest payments.

On June 1st Altius received C$400K in advance interest payments for the June through November period (as well as C$40K covering its transaction fees for the debenture).

On December 31st Altius is due C$266K for interest in the December 2017 through March 2018  period.

The payment structure—interest paid far in advance—increases the effective received interest rate. Great negotiated terms.
« Last Edit: December 10, 2017, 11:56:25 AM by linealdin »

Cigarbutt

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linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5307 on: December 11, 2017, 06:40:27 AM »
Michael O’Keeffe is promoting heavily in the Australian papers.

1) Believes Fortescue’s announced intention to move to 60% plus iron ore confirms the structural nature of the quality premiums. Fortescue is getting hammered for its low quality ore and is afraid the pain will continue indefinitely unless it changes its product mix. O'Keeffe doesn’t know "where the hell" Fortescue will find that 60% plus ore.

2) Discusses possibility of a “sweetener” for Champion shareholders in 2018. I assume a special dividend. Depends on the iron ore price holding firm.

3) Likes IOC’s assets in the Trough but they probably won’t be cheap enough to buy in the near future. No interest in Cliffs Western Australia iron ore assets.

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A Champion dividend in 2018? Buying IOC (or other attractive assets in the Trough)? I love this guy’s ambition.
« Last Edit: December 11, 2017, 07:34:26 AM by linealdin »

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5308 on: December 11, 2017, 08:01:22 AM »
http://www.stockhouse.com/news/press-releases/2017/12/11/excelsior-announces-private-placement-of-c-26-million

Excelsior Mines announces a non-brokered private placement to raise up to C$26 million (US$20.2 million). Issuance of up to 26 million shares priced at C$1.

Capex for Stage 1 is US$46.9 million, including a 15% contingency. If this capital raise is successful it will cover 43% of the capex. Debt financing to follow, I'm sure.

Does Altius participate for a few million?

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These capital raises are easier to announce than to complete. Champion had a hell of a time trying to raise equity ($50 million initial announced raise, then after months of delay, a $20 million raise was completed).
« Last Edit: December 11, 2017, 08:18:29 AM by linealdin »

linealdin

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Re: ALS.TO - Altius Minerals
« Reply #5309 on: December 11, 2017, 08:30:01 AM »
From Excelsior's ceo.ca board. Eric Coffin from Hard Rock Analyst talked to Excelsior management about the capital raise (and who has been selling down the stock in recent weeks):

"I just talked to them.  They told me they went to London/Oslo because those guys were more aggressive. They did some North American roadshows with the usual suspects on the brokerage side and found those were not that effective and they had someone selling into their market all the while.  They do have their suspicions about the seller but its unlikely they will be able to confirm it. They may keep whomever they suspect out of this round though.  They said the debt negotiations are pretty far along but, yes, can't be closed until the EPA permit is in hand. They are not worried about that at all but were surprised at how many people they met on recent roadshows, especially in the US, still see the EPA permit as a big risk.  They don't expect this to take more than a couple of days to close. A couple of large lead orders in hand already."