ALS.TO - Altius Minerals

[Dazel]

"According to the Q3 report, the Rambler stake is gone and the oil shale project is abandoned. Is there something more to either of those investments than what is apparent from the report?"

thanks you are correct......costs most be too high for the oil shale...i missed that...

I left out the Potash play as well.

 Dazel

[doc75]

Dazel,

I've been following this company on and off for ages, and agree completely with the competence of management.  (Paul van Eeden was always a very strong supporter.  I remember during the crazy uranium run that he was selling everything but keeping a core position in Altius.)

My greatest concern here is the fact that base materials like iron ore appear to be in a hell of a bubble -- or, at least, the prices are heavily (entirely?) dependent on continued construction in China, which appears to be a bubble.   I know the cash on the books provides a buffer, but clearly the value of Altius will be significantly lowered if/when commodities correct.

Management has made some astute moves in the past. Do you have any insight as to their view on base commodities?

For instance, do you think Dalton is itching to book a return on this "hot potato", or has management implied that they are believers in the "commodity super-cycle"?   

Thanks!
J

[Liberty]

My greatest concern here is the fact that base materials like iron ore appear to be in a hell of a bubble -- or, at least, the prices are heavily (entirely?) dependent on continued construction in China, which appears to be a bubble.   I know the cash on the books provides a buffer, but clearly the value of Altius will be significantly lowered if/when commodities correct.

Their model seems to deal well with that, though, no?

When things go down significantly, it allows them to pick up new projects on the cheap and if the stock also tanks, they have enough cash to do lots of buybacks.

[goldfinger]

For instance, do you think Dalton is itching to book a return on this "hot potato", or has management implied that they are believers in the "commodity super-cycle"?

In the past, Dalton has sold equity stakes conservatively and favored ownership of royalty streams and cash. I would guess he is going to sell stakes of Alderon relatively early.
I also remember that he said in an interview or shareholder letter that when the commodity cycle finally turns Altius will be ready with loads of cash and productive assets.

Yes, if there is a deep correction in the next few months to years, they will definitely be able to deploy cash into royalty streams and share buybacks. But how much higher will be the stock price when that happens also?

[doc75]

Their model seems to deal well with that, though, no?

When things go down significantly, it allows them to pick up new projects on the cheap and if the stock also tanks, they have enough cash to do lots of buybacks.

Their model certainly allows them to take advantage of swings in the commodities market, yes.  I'm just curious as to the view of management regarding the current situation.  

I think Altius is a great way to play the commodities market and I have a smallish stake that I bought around $10.   I'm just finding it difficult to buy more at a time when commodities are richly valued; ie. good value now would likely become great value if iron prices fall out of the stratosphere, which I think is more likely than not.  So I wonder if Dalton feels the same way and is itching to liquidate the Alderon equity.

[Dazel]

Leucadia seems to be a company of choice here on this board and we admire them a great deal..they have much more to lose as they
did in the last downturn...They own massive stakes in FMG and Inmet...more than half their assets...yet no one questions the cycle
with them!

That is my problem with the market's view of Altius....it is not a gold stock that is speculation....they have $330 million in cash and marketable securities
and 0 debt!!! Their resource projects trade for nothing! Is iron ore going to fall off a cliff tomorrow? no...might it go down for a while...yes. Will China, India and
Japan stop building? No.

This is not a gold stock...and we see far less risk here than Leucadia...we get that the marketb does not realize it yet and that is why we continue to buy.

Dazel.

[shalab]

Canada is not a big producer of iron ore

http://en.wikipedia.org/wiki/Iron_ore

India, the third largest exporter, has lifted a ban on exporting the ore but FT still thinks it won't impact the price by much:

http://www.ft.com/cms/s/0/fd1b30f6-5f74-11e0-bd1b-00144feab49a.html#axzz1IqI2ct8H

[Dazel]

India is fourth but who is counting....

What is important is what is going in Australia...who is the second biggest producer behind China. They have a pending 30% mining tax (summer I believe) about to go into effect. If you would like to know about the implications of this on the iron ore price take a look at FMG...Fortesque website...they are looking at stopping new production at a new mine because of the tax...
Rio Tinto and Vale are in Labrador....if the tax goes through it makes sense to go to the low cost producer.

I cut my teeth studying Fortseque to see what Leucadia saw...they were too expensive for me...their stock is being held back by the tax as is the production outlook after the tax is implemented. It makes sense to produce as much possible before it happens and then you cut back. I am not an expert in pricing but that certainly cannot hurt the iron ore price going forward.

Dazel.

[Dazel]

Brian Dalton-Response to our email...I will just give you the facts.

I asked what it would cost to buy the 10% royalty stake they have in Voisey Bay...and if it was as cheap as the market was valuing it in Altius' hands why had they not bought more?
Answers.
No one will sell to them they would buy if they could. When they did the details and metrics for  the sale of their IRC stake the Royalty price of Altius stake would be worth $200million...

The Alderon stake will be sold eventually they will stick to their plan...he explained they will not risk capital on production.
The Alderon roylaty is worth a NPV of $100million if the iron ore price were to drop in half..

He is in China so it was short..but we got the answers we wanted. We had similar numbers in our head and I think we have posted them before...using these two assets alone you almost have a double in the stock price.. we will do a detailed analysis of the values and post it soon.

Dazel.

[Liberty]

Very interesting, thanks Dazel.

I wonder what he's doing in China... Scouting for new Altius business? Hmm...