"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."
I was just trying to come up with a number for the value of this royalty. Using pretty conservative assumptions of: 1) 8MT annual production, 2) long-term $100/ton 66% iron price in Canada, 3) production starts in 2015, 4) 25 year mine life and 4) a 12% discount rate, I get a present value of around $120m today (and $190m in 2015), unless my math is wrong. I guess for the Royalty it doesn't really matter if they follow the "CLM" model for the financing, all that matters is that the mine actually goes into production. So, at this point, considering the location, management, low capex etc...what would you estimate the probability is that the mine doesn't go into production? Aside from a sudden collapse in iron-ore prices and/or the economy what other event(s) would prevent development? I am having a hard time coming up with scenarios that would stop continuing development...
Also, Dazel, do you have any idea what type of financing Alderon will wind up getting? I feel like in this environment they should be getting a deal similar to or better than what CLM got with WISCO, but I really have no idea...either way, it seems like Altius will sell the shares at some point, and just keep the royalty??
and, yeah, if iron ore prices stay where they are now, and the mine goes into production, then in 2014 or so, the Royalty could be worth more than the entire market cap...