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.phpAlderon
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.phpHaving said that...
Rio Tinto partnership-Labrador Iron Ore
http://www.altiusminerals.com/labrador_iron_ore.phpRio 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.phpNLRC 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.phpThere 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.