Author Topic: ALS.TO - Altius Minerals  (Read 1745537 times)

ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #780 on: August 23, 2012, 12:48:56 PM »
Hi value-is-what-you-get

1- When I first tried to sign up for this forum, my username was GlennC but my membership was never approved for whatever reason.  (Perhaps it is too similar to another username on this forum that also starts with Glenn.)

2- In regards to the manganese content of Alderon's ore, please refer to the technical report that Alderon filed on SEDAR and that can also be found on its website:
http://alderonironore.com/_resources/kami/PEA_Final2011.pdf

If you search for the phrase "Quality Penalties" in 16-4, you will see that the technical report anticipates a $15/t penalty.  (The technical report notes that sulfur and manganese are the two main issues.)

3- Don't get me wrong... I am bullish on Altius.  I think that they are the best managed mining-related company out there.  (Northfield Capital would be #2.)
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #781 on: August 23, 2012, 01:27:46 PM »
To add on...

4- I am just extremely cynical about juniors.  And to a lesser degree, I don't like mining stocks.  If I was forced to index, I would never want to index these stocks.  These stocks are screwed up because:
a- Even Goldcorp (a large cap) pays for people to shill for them.  Goldcorp sponsors theaureport.com
b- Gold miners should have made more money in a bull market.
c- As far as juniors go, their lack of capitalization means that they constantly have to spend money to raise money.  For some juniors, not that much money is spent on actual exploration (sometimes less than 50%).
d- Sometimes juniors will extend warrants (this is sort of like giving away free money) because it's a cheap way of raising money.  Because the alternatives have paperwork costs and you may need to pay brokers several percent.  Very few companies do rights offerings (arguably the fairest for shareholders) because it costs money to do it and it doesn't make brokers happy so they won't pump your stock.  Raising money is expensive... but they have no choice.

Rick Rule (he/Sprott is long Altius):
It is critical for gold stock speculators to remember that the junior market, in aggregate, is always overvalued. If we were to merge every gold junior in the world into one entity (let's call it Junior Goldco), that company would lose (profits and corporate acquisitions less industry expenditures) somewhere between two billion and eight billion dollars per year.
http://www.caseyresearch.com/cdd/rick-rule-why-im-excited-about-market

Harris Kupperman, hedge fund manager (no idea if he is long Altius):
Quick, what’s the world’s worst investment sector?
Airlines? Autos? Biotech? Give up? Junior mining is way worse. Airlines limp on for years in quasi-bankruptcy—so do autos. A few companies like Toyota even do well. Biotech companies sometimes find something interesting. Even if your junior mining company finds something, you still will probably lose money.
http://adventuresincapitalism.com/post/2010/03/07/Mining-worse-than-airlines.aspx
*He may be making a reference to Warren Buffett's shareholder letters where Warren points out that airlines have made no money for investors.

5- I hope you see why Altius is brilliant.  The royalty structure protects them against a lot of the problems in the mining sector.  And usually those problems work to the royalty holders advantage.

If somebody chases an uneconomic mine, the equity holders lose a lot of money but the royalty holder still makes some money.  If Alderon turns into a mine and the equity owner goes into empire building mode and expands production at the mine, the royalty benefits.

On the exploration side, sometimes juniors will keep on drilling so that they can generate news flow to raise more money to pay insiders' salaries.  Why do exploration yourself when you can get a junior to do it?

6- Assuming that everybody was rational and that juniors act in the best interest of shareholders, it doesn't entirely make sense for Altius to seek royalties on their joint venture deals.  If they took equity instead, they would be helping out more in terms of raising capital to build a mine.  Altius has a lot of cash on its balance sheet.  In theory it would make sense for it to deploy its capital into building mines.

Building mines is not that good of a business.  Altius isn't buying more shares of Alderon to push it towards production (even though it could).  It is exercising capital discipline and waiting for really high rate of return opportunities.  They are really smart.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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jjsto

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jjsto

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Re: ALS.TO - Altius Minerals
« Reply #783 on: August 29, 2012, 09:03:40 AM »
Interesting article on spread between domestic and imported iron ore prices in china:

http://blogs.ft.com/beyond-brics/2012/08/29/iron-ore-tests-the-chinese-floor-theory/#axzz24nQ97pcb

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #784 on: August 29, 2012, 10:30:47 AM »


Itsavaluetrap,

We agree on junior miners in general...we also agree that Altius are the smartest guys in the room. Rick Rule and Brent Cook refer to Altius as a merchant banker. All we care about is return on capital. Altius like Leucadia are lumpy returns for now.

We would love a return on the cash that is sitting there...we will see what happens.

Dazel.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #785 on: August 29, 2012, 10:46:02 AM »


Jjsto,

Alderon.

Thompson consolidated ramped up in a hurry at prices below $75...the cost to build the alderon project have dropped significantly  in the last 8 months...engineering, material, labor, all of the inputs have dropped because in times of uncertainty everyone stops....if they were to do the build out at $150 a ton....everything would be extremely expensive because every one would be trying to build out. We are seeing projects pull back and anyone without the right economics will hold off until the price rises. Alderon will benefit on the build out at a lower iron ore price and be able to negotiate better deals with their suppliers...They want the price high when they produce not when they build.

Dazel.

beerbaron

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Re: ALS.TO - Altius Minerals
« Reply #786 on: August 29, 2012, 06:09:20 PM »
Jjsto,

Alderon.

Thompson consolidated ramped up in a hurry at prices below $75...the cost to build the alderon project have dropped significantly  in the last 8 months...engineering, material, labor, all of the inputs have dropped because in times of uncertainty everyone stops....if they were to do the build out at $150 a ton....everything would be extremely expensive because every one would be trying to build out. We are seeing projects pull back and anyone without the right economics will hold off until the price rises. Alderon will benefit on the build out at a lower iron ore price and be able to negotiate better deals with their suppliers...They want the price high when they produce not when they build.

Dazel.

Dazel, which model are you using to state the costs have been reduced significantly? Do you have any similar examples where the drop of cost of developing the asset made the future asset more viable even if the resource price fell.

BeerBaron

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #787 on: August 29, 2012, 06:47:25 PM »

Beer baron,

Iron ore do not sell futures like copper or platinum..they used to price iron ore once a year...they may go back to this method who knows...

The future price of iron ore has not been accounted for because the contracts are in real  time...they are not futures like copper or oil for say december... They are negotiated prices between real buyers and sellers...not hedge funds or hedgers etc...No bid...guess what.. Prices plummet.

When china decides to cut inventory this is what happens...the steel makers were readily paying
$140 a ton 4 months ago....they are not now...when they need it again they will pay what is needed
to get product...it is that simple. To build a mine takes a lot of capital....but when the entire iron ore community is trying race to cash in on $140 iron ore pricing the costs to build a mine escalate. Look
at Fortescue they were a billion dollars off on their capital expansion program. They have said costs
have come down significantly....but a billion dollars off!! That is spending recklessly. Like all
producers they will cut back.

I hope that helps....when supply is cut which is what is happening already with iron ore pricing dropping like it is...it sets up for higher prices later on...that is all I am saying. There is race in Labrador to be the first "new producer" because there was limited rail room electricity etc...if Alderon does not have to compete for all of these services, labour, engineering, surveying, environmental prices for their build out will come down.


Dazel.




Dazel

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Re: ALS.TO - Altius Minerals
« Reply #788 on: August 30, 2012, 12:58:30 PM »
http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=157890&sn=Detail&pid=102055


Rogers calls the mining slowdown a blip...."buy the commodities that have fallen the most."



ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #789 on: August 30, 2012, 10:47:24 PM »
I think I'd be more bullish on nickel than on iron ore.

IRON ORE:
production has gone up several times over the past decade
price has gone up several times over the past decade
pretty easy to find... a lot of the juniors in the Labrador trough have found iron ore deposits that are economic.  Pretty much every iron ore miner has increased production at their mines and have ongoing expansion plans.  e.g. Fortescue is expanding, Bloom Lake is expanding, etc. etc.

NICKEL:
production has stayed flat over the past decade
price has gone up over the past decade, but nowhere as much as iron ore
HARD to find low-cost sulfide deposits.  None of the juniors exploring near Noront's Eagle One deposit and around Voisey's Bay have found any nickel.  In each area, there were hundreds of millions of dollars spent and 30+ juniors with staked claims.

2- All miners have seen very significant price inflation... this will drive commodity prices higher.  This is good for Altius when it owns royalties; not so great when it owns mining companies or exploration companies.

3- Jim Rogers is mostly into commodity futures and not so much into commodity stocks.  He avoids commodity stocks as futures tend to outperform commodity stocks by 3 times.  But he says that if you find the right commodity stock, you can make a lot of money.  Hopefully Altius will do that for us.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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