Author Topic: ALS.TO - Altius Minerals  (Read 1762443 times)

nostradamus

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Re: ALS.TO - Altius Minerals
« Reply #850 on: October 26, 2012, 01:57:24 AM »
Does anyone have any views on what the 3rd Quarter results for Cliffs means for the viability of Kami?

I am particularly thinking of the cost per ton of nearby mining operations:

Cash cost per ton in Eastern Canadian Iron Ore was $106.06, up 21% from $87.37 in the year-ago quarter. The increase reflected higher cash costs at Wabush Mine of $132 per ton, up 25% from the prior year's comparable quarter, due to higher labor costs and increased spending related to maintenance and repairs. Additionally, third-quarter 2012 cash costs at Bloom Lake Mine were $88 per ton, up 18% from the year-ago quarter, primarily driven by higher fuel, contract labor, and maintenance and supply costs. Cliffs indicated Bloom Lake Mine's cash costs per ton have improved over second-quarter 2012 results primarily due to increased production throughput rates at the mine.

http://ir.cliffsnaturalresources.com/releasedetail.cfm?ReleaseID=716089



ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #851 on: October 26, 2012, 05:01:02 AM »
Bloom Lake's opex was $88 per ton for the quarter.

The Wabush mine has ore that is very high in manganese content.  I'm not sure but I think that Cliffs may be mixing the cleaner ore from BL with the Wabush ore to have a product that is reasonable in manganese levels.  So maybe you could just assume that Kami's ore will sell at a similar price to Cliffs' Eastern Iron ore operations...?  *BUT* that price is for 1/3 of the product being pellets, which has a higher price than fines.  With Cliffs, the operations produce a lot of (super) fines that are turned into pellets.  Kami may get a lower price without a pellet plant.

Revenue for the quarter was $110 per ton

Royalties and offtake will be at least $7 (it's 6% at 8MT/yr, slightly higher if it turns out to be like BL and production turns out to be 7MT/yr)

----
Capital cost of $989M, mine life 15.3 years. 
http://www.alderonironore.com/projects/kami/

simple D&A calculation
$1000M / 15 years / 8MTperYear = $8.33/ton D&A
-production might end up at 7MT
-cost inflation may push capex higher (actually you could probably read consolidated thompson's financials and cliffs' financials and figure out the real capex)
-mine life may be longer than 15 years

So at current prices:
$110 revenue
$88 opex
$6.6 royalty+offtake
$8.33 D&A

You have a profit of about $7.07 / ton on revenue of $117.  At 6% profit margin, I don't think this will go into production...?

Of course I am probably off by a lot... this is just a rough back of the envelope calculation.  Alderon will spend at least several million dollars on feasibility studies.  A real mining company would do due diligence that retail and institutional investors aren't doing if they wanted to buy this.
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Ross812

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Re: ALS.TO - Altius Minerals
« Reply #852 on: October 26, 2012, 07:42:14 AM »
Regarding Manganese content from Alderon Iron Ore Corp. NI 43-101 Technical Report:

The chemical analysis for the Kami concentrate, previously presented in Table 13.11, offers
mostly positive characteristics having a low concentration of the most typical gangue elements.
Silica levels are in line with those for concentrates from Mount Wright (4.5%) and Carol Lake
(4.2%). The sulfur level of 0.053% is indicated to be marginally higher than the acceptable limit
in Europe which is 0.050%. The Mn level is elevated and exceeds acceptable levels in many BF
operations. The expected MnO and S levels of the Alderon concentrate will make this product
difficult to market in Europe.

Stantec's Conclusions:

19.8 Conclusions
Considering that:
 The Kami concentrate may contain a higher proportion of fines than what is normally used
as a sinter feed;
 The Kami concentrate can be considered as a standard quality concentrate, with normal
silica levels, high-end sulfur levels and higher than standard manganese content;
 The Chinese market is the largest consumer of sinter feed material and the fastest growing
in demand;
 The Chinese market has the least quality restrictions.
It can be concluded, at this stage of the Project, and based on the information available to date,
that the most appropriate marketing strategy for Alderon is to actively explore and pursue
commercial opportunities with potential Chinese Customers.
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Ross812

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Re: ALS.TO - Altius Minerals
« Reply #853 on: October 26, 2012, 08:39:15 AM »
Table 21.2: Total Estimated Average Operating Cost ($/t concentrate)

Mining                                              20.36 $
Concentrator                                     6.28 $
Site Infrastructure (incl. Garage)          0.55 $
General Administration                       1.77 $
Environmental and Tailings Management 0.32 $
Rail Transportation                            13.51 $
Port Facilities                                    2.08 $
TOTAL                                             44.87 $

The accuracy range for the Capital Cost Estimate and the Operating Cost Estimate developed in this
Study is -20%/+30%.

So lets assume +30% = $58.33/ton OPEX + Royalties 6% of $120/ton = $65.53/ton

Bloom Lake's opex was $88 per ton for the quarter.

The Wabush mine has ore that is very high in manganese content.  I'm not sure but I think that Cliffs may be mixing the cleaner ore from BL with the Wabush ore to have a product that is reasonable in manganese levels.  So maybe you could just assume that Kami's ore will sell at a similar price to Cliffs' Eastern Iron ore operations...?  *BUT* that price is for 1/3 of the product being pellets, which has a higher price than fines.  With Cliffs, the operations produce a lot of (super) fines that are turned into pellets.  Kami may get a lower price without a pellet plant.

Revenue for the quarter was $110 per ton

Royalties and offtake will be at least $7 (it's 6% at 8MT/yr, slightly higher if it turns out to be like BL and production turns out to be 7MT/yr)

The Washburn Mine produces Hematite which is much harder (i.e. more expensive) to concentrate than Alderon's ore which is 70% magnetite.

This may help:
http://www.mineralresource.info/2012/08/24/iron-ore-looking-beyond-grade/
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Ross812

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Re: ALS.TO - Altius Minerals
« Reply #854 on: October 26, 2012, 08:58:30 AM »
Kami ore is also 65.5% Fe which means it would be priced at a premium to the 62% Platt price. This is about +$5-5.50/%. Which means Kami ore could fetch a price at Platt + $17.5. Hebei was smart when they locked in a price at 95% Platt. Manganese levels do not particularly matter when selling to China. Sulfur levels are just outside the range of what is acceptable in Europe (6% too high), but they are not selling to Europe anyway. Prices for ore are negotiated directly; Hebei gets preferential treatment at 95% Platt. I donít think other companies are going to get this sweet heart deal. I would look for Platt + $5-17 for everyone else. 
« Last Edit: October 26, 2012, 09:26:35 AM by Ross812 »
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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #855 on: October 26, 2012, 12:02:36 PM »
The same technical report calls for quality deductions of $15/ton.  Unfortunately, it seems like nobody on this forum knows how smelter/quality deductions are calculated.

2- The big issue is that these technical reports are a joke.  BBA did technical report work for Consolidated Thompson when it owned Bloom Lake and before Cliffs bought out CT.  The BBA technical report wasn't even close... it projected opex below $40/ton.  This quarter it is around $88/ton.  (How cash costs and operating costs are defined can make a difference... but does not explain the entire difference.)

Guess who is doing technical report work for Alderon?  BBA.

*I also own Altius.
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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #856 on: October 26, 2012, 12:19:13 PM »
Opex of $44/ton would put Kami among the lowest-cost deposits in the world (ones with grades far higher than Kami and requiring less or no beneficiation) and HALF of what Bloom Lake's opex is.  This is extremely unlikely.

If anything you would figure that Kami will come in with opex a shade higher than BL as it will spend more money on the metallurgy to get the manganese content down. 

*I don't like juniors.  So many lies.
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biaggio

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Re: ALS.TO - Altius Minerals
« Reply #857 on: October 26, 2012, 12:31:30 PM »
added some @ $10.20 this afternoon.

Further weakness in price to follow I am sure. Hope to average in a bit more.

I like the net cash

I like the royalties (protection from the eventual inflation)

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #858 on: October 29, 2012, 02:59:54 AM »

Cliffs natural have had operational issues at their eastern iron ore mines...the bloom lake operations have changed their longterm marketing strategy to producing a higher end premium product. This change took cash costs above $100 per ton in the second quarter...because of the costs and lower volume....that came down to $88 per ton this quarter and will continue downward. In other words they had problems with production and have changed operational focus at Bloom Lake...management does not like to say we "screwed up" but it looks like they have and are coming back from that....with cash cost dropping considerably this quarter...

The operators matter as we know...taking a rough patch from a mine and saying  those cash costs are the normal is just silly. Things go wrong equipment malfunctions etc...and we had a huge drop in the price of iron ore during the same period...as an operator you are not going to try to push through more volume...you slow production and take the time to fix problems.

Dazel.

Ross812

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Re: ALS.TO - Altius Minerals
« Reply #859 on: October 29, 2012, 06:53:04 AM »
The same technical report calls for quality deductions of $15/ton.  Unfortunately, it seems like nobody on this forum knows how smelter/quality deductions are calculated.

2- The big issue is that these technical reports are a joke.  BBA did technical report work for Consolidated Thompson when it owned Bloom Lake and before Cliffs bought out CT.  The BBA technical report wasn't even close... it projected opex below $40/ton.  This quarter it is around $88/ton.  (How cash costs and operating costs are defined can make a difference... but does not explain the entire difference.)

Guess who is doing technical report work for Alderon?  BBA.

*I also own Altius.

I did a looked into your reference to $15 quality deductions. You got that from Table 16.2 Pit Optimization Parameters. $15 for quality deductions is actually the cost of beatification of the ore. This is not a cost deduction to the processed ore. The $15 quality deduction is accounted for in table 21.2 I previously cited. Table 16.2 is identical to table 21.2, just in a different form. To read the pit optimization table:

Add the operating costs for the mined raw ore:
Mining Cost (Ore, Waste) $2.10 + Mining Cost (OB) $1.05 + Processing Cost $1.95 + General and Administration (G&A) $1.13 = 6.23 $/t raw unprocessed ore.

The weighted recovery is 37%. Divide the unprocessed ore by 37% to get to processed ore cost per ton:
$6.23/0.37 = 16.84 $/t processed 30% Fe

Now its time to beneficiate (concentrate) the ore to take it from ~30% Fe to 65.5% Fe:

$16.84 + $15 (Quality Penalty Ė smelter deduction) = 31.84 $/t FeCon

Add in Port $3/t and Rail $10/t costs and we get 44.84 $/t which is the estimated cost in table 21.2.

Hebei is not stupid. They would not have negotiated a price of 95% Platt if they could get Platt - $15. The Platt price is based off 62% Fe. Alderon ore is 65.5% which would fetch a premium of Platt + $5/%Fe if pricing gets really competitive. Using Platt for the product price assumption seems pretty reasonable and a little conservative.
« Last Edit: October 29, 2012, 07:42:09 AM by Ross812 »
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