ALS.TO - Altius Minerals

[Mungerville]

Did I mention that I'm in on this one, so when I finally make money on it (maybe sometime after the upcoming market crash), it will be Dazel's fault.

[goldfinger]

Looks like just a standard yearly buyback program announcement. Doesn't seem to necessarily mean they will buy anything back this year only that now that they got the disclosure out of the way, they could be opportunistic at any time this year. Just seems like good standard practice and not necessarily an indication of absolute intention to buy back.

Don't get too excited.

I do not get too excited. But knowing Dalton's history he must be seeing some undervaluation here.

[Liberty]

Excellent thread. Thanks everybody, and especially Dazel!

Update: Okay, I took the plunge and initiated a small position in ALS. You guys are making it very hard for me to stick to my initial game plan by having so many good ideas! 

[Dazel]

http://finance.yahoo.com/news/Alderon-Announces-Initial-iw-998138306.html?x=0&.v=1

Alderon has under promissed and over delivered...their stated public goal was 400 to 500 million tonnes at grades of 28 to 30 %...their 43-101 released this morning came in at over 600 million tonnes at grades above 30%. This is extremely positive as they are now drilling for the next update expected in June 2011...Their stated goal was to bring the resource estimate to 600 to 800 million tonnes. They will be starting at the 600 million tonne estimate...

more later.

Dazel.

[Liberty]

I'm not quite sure how to evaluate the value of the difference, but it does sound like a pretty big deal (in a positive way). Thanks for the update.

[value-is-what-you-get]

wrt Alderon value, I did a real simple comparison and as Buffett says "it sort of jumped off the page" at me.

Neighbour Consolidated Thompson got $4.9 billion for about 990 million tonnes.  That's about $4.95 a tonne.  $4.95 x 500 million = $2.475 billion

Consolidated are a producing mine so I looked at the cost of building that to be around $1 billion.  Leaves $1.475 billion.

Then I figured that because I probably made some incorrect assumptions and would like a nice margin of safety  I'll divide that in half.  Leaves $737.5 million for 500 million tonnes. 

That's about 2.5x current market cap and that's when it just sort of jumped off the page!

Any further resource increase is just more Margin of Safety above that figure.

Downside is if Iron Ore tanks - who knows??  Not me, but it looks pretty good so far!

[Myth465]

wrt Alderon value, I did a real simple comparison and as Buffett says "it sort of jumped off the page" at me.

Neighbour Consolidated Thompson got $4.9 billion for about 990 million tonnes.  That's about $4.95 a tonne.  $4.95 x 500 million = $2.475 billion

Consolidated are a producing mine so I looked at the cost of building that to be around $1 billion.  Leaves $1.475 billion.

Then I figured that because I probably made some incorrect assumptions and would like a nice margin of safety  I'll divide that in half.  Leaves $737.5 million for 500 million tonnes. 

That's about 2.5x current market cap and that's when it just sort of jumped off the page!

Any further resource increase is just more Margin of Safety above that figure.

Downside is if Iron Ore tanks - who knows??  Not me, but it looks pretty good so far!

I really like the way you look at things.

[Liberty]

I really like the way you look at things.

I second that!

[Thrifty3000]

On its website Consolidated Thompson has a nice timeline/summary of how the $4.9 billion dollar deal played out.  I find it a useful reference for understanding Alderon's process and prospects:  http://www.consolidatedthompson.com/s/History.asp

[Dazel]

You guys have beat me to the punch on Alderon...you can see the excitement Altius management sees...It is early in the Alderon project but what is being missed is the 3% royalty (more on royalties later) that Altius owns in addition to it's 40% ownership of Alderon....just like Leucadia's royalty at Fortesque it was nothing and then...pure cashflow...We think that these income streams from future royalty streams are being completely ignored.

example: today's prices
Altius market cap     $394m 0 debt.
Alderon shares32m   $130m
cash equivalents      $200m
The company is trading for $64m...That looks like more of a financial company than a resource company does it not? That is what the market is pricing but what about the other assets?


Royalties of interest
Voisey Bay
We have asked management what it would cost them to buy another 10% stake in the Labrador Nickel Royalty limited partnership that they already own. That way we will find out
what it costs in the market. It covers the entire Voisey bay area so if Vale were to discover further resources, the Royalty rises with output...without any exploration cost. Voisey Bay is the low cost producer in the world with a massive resource base that Vale figures will operate for 30 years with out additional resource finds. After looking at what these royalties cost in the market place..we are convinced that this asset is being ignored. altius is an expert when it comes to royalties as shown by their astute purchase of IRC (International Royalty Corp in 2009) They made $31m on it in 6 months. How did they know it was undervalued? Because IRC was a major holder of the same partnership above. So what's the value?
http://www.altiusminerals.com/lab_nickel.php

Alderon
So what would the 3% Alderon royalty be worth if The Consolidated Thompson model is followed through. That would likely make the royalty that is being valued at less than 0 worth more than the entire market cap of Altius.


Central mineral belt
2% gross sales and 2% smelter..now owned by Paladin..
http://www.altiusminerals.com/aurora.php
                           
Cliffs Natural Resources
They purchased of Consoldidated Thompson for $5 billion...Altius signed an exploration agreement with them in December..Do you think they know Alderon is next door to Consolidated Thompson? They are a big global player. Altius does not usually do projects with large companies but this relationship can't hurt.
http://www.altiusminerals.com/cliffs_natural_resources.php

Having said that...
Rio Tinto partnership-Labrador Iron Ore
http://www.altiusminerals.com/labrador_iron_ore.php

Rio Tinto is a 58% owner of the The Iron Ore company of Canada, 26% Mitsibushi, 15% Labrador iron ore royalty(2.65b market cap) other the other owners. They have produced a billion tonnes of iron ore in the district which has been around since the 1950's..they have 2.5 billion tonnes in reserves...So they are in partnership with the big boys of the area and in contact. We assume that these players are very aware of what these properties are worth and these are the deepest pockets in the world. As discussed earlier New Millenium was taken out by Tata steel for big bucks in the same region.

Energy opportunities
at $105 oil this could be very interesting
http://www.altiusminerals.com/albert_oil_shale.php

NLRC has until October 2011 to sell or finace the refinery project..If they are able to pull off something of value here it would be huge for the stock price as the market still sees this as disasterous for Altius..they forgot to look at the other assets!
http://www.altiusminerals.com/nlrc.php

There are numerous other projects that I did not mention including many gold assets including Rambler that will start producing gold this quarter..but i do not know what they are worth..more than 0! We see the above projects as potentially huge for the company. Now that 43-101 is out for Alderon and it was extremely positive (we are not geologists!!) we have greater conviction that the $64 million the market is valuing this company at is crazy! As was said earlier it jumps off the page at us!
disclosure:We are very biased! and own a large chunk of Altius...

Dazel.