ALS.TO - Altius Minerals

[reader]

linealdin,

We miss you.
The Altius thread is not the same without you.

Maybe a teaser, though I'm sure you're up to date.

Mosaic cuts potash production at Esterhazy mine

"The Mosaic Company (MOS) announced today that it will temporarily curtail production at its Esterhazy mine, which when combined with a previously announced potash curtailment, brings total curtailments to up to 600,000 tonnes. The curtailment is not expected to impact the pace of development at the Esterhazy mine K3 project. The increased curtailment is based on increasing inventories as a result of a short-term slowdown in global potash markets and increased risks of a delay in Chinese contract settlement."

http://bit.ly/33jvcj5

From yesterdays results release:

" The company accelerated development of the Esterhazy K3 potash mine by an additional year, allowing the closure of the K1 and K2 shafts and elimination of brine management costs by mid-2022, as well as lower cost of production."

"The Colonsay, Saskatchewan potash mine was temporarily idled in August. In the fourth quarter of 2019, the Esterhazy, Saskatchewan potash mine will be temporarily idled, bringing the company’s total 2019 potash curtailment to 600,000 tonnes. The curtailment is not expected to impact the pace of development at the Esterhazy K3 mine project."

Looks like MOS realized combined potash  $264.8 per ton in Q3.

http://bit.ly/33irNRQ

[reader]

Altius Subsidiary Adia Resources Reports Drill Program Results for Lynx Diamonds Project

TEST Business Wire Releases•November 26, 2019


https://www.businesswire.com/news/home/20191126005296/en/


The drilling results real meaning are above my cursory reading grade
but this PG prospect passes De Beers threshold for phase 2 drill campaign so it's at least a mild positive in my book.

"This was the first drilling program on the project. It consisted of three drill holes completed during the winter of 2019 at the Eastern Bay zone. The analysis of drill core samples was carried out by De Beers Group ("De Beers") under the terms of the equity support and participation agreement between Adia and De Beers.
While the abundance and distribution of microdiamonds throughout the thick and extensive ultramafic units is encouraging at this early stage of work, future exploration will focus on zones within the ultramafic package that host coarser diamonds with the potential for commercial value.
The company is fully permitted for a planned Phase 2 drill campaign for winter 2020 to test for further extensions of the unit and to better define the internal stratigraphy and diamond distribution of the Eastern Bay zone. The program will also include the first drill holes to test the diamondiferous Western Bay zone."

[Spekulatius]

The we study billionaires podcast had a nice episode on Altius:
https://podcasts.apple.com/us/podcast/we-study-billionaires-the-investors-podcast-network/id928933489?i=1000458309550

[Liberty]

New renewable energy royalty:

http://altiusminerals.com/uploads/2019-12-17-Altius-Tri-Global-Energy-Announcement-FINAL.pdf

I kind of skimmed the release, but seems to me like there's not much detail on the economics of the deal. There's not a single dollar-amount in the whole thing.

[bizaro86]

New renewable energy royalty:

http://altiusminerals.com/uploads/2019-12-17-Altius-Tri-Global-Energy-Announcement-FINAL.pdf

I kind of skimmed the release, but seems to me like there's not much detail on the economics of the deal. There's not a single dollar-amount in the whole thing.

This is part of their original tri-global deal I think. Basically, they estimated they would get ~10-13% cash on cash. Irr will be lower, because the cash flow doesn't start for a few years after they make the investment (project startup) and while the project lives are long they aren't perpetuities. There was some limited disclosure here: https://www.triglobalenergy.com/news/altius-announces-first-renewable-energy-royalty-transaction

Basically, I think this is a low risk way to earn mid to high single digits irr. I'm not too excited about that, I think the biggest potential upside would be building a full portfolio and selling it to a low cost of capital investor (pension/sovereign wealth) based on a low single digits IRR.

[Liberty]

New renewable energy royalty:

http://altiusminerals.com/uploads/2019-12-17-Altius-Tri-Global-Energy-Announcement-FINAL.pdf

I kind of skimmed the release, but seems to me like there's not much detail on the economics of the deal. There's not a single dollar-amount in the whole thing.

This is part of their original tri-global deal I think. Basically, they estimated they would get ~10-13% cash on cash. Irr will be lower, because the cash flow doesn't start for a few years after they make the investment (project startup) and while the project lives are long they aren't perpetuities. There was some limited disclosure here: https://www.triglobalenergy.com/news/altius-announces-first-renewable-energy-royalty-transaction

Basically, I think this is a low risk way to earn mid to high single digits irr. I'm not too excited about that, I think the biggest potential upside would be building a full portfolio and selling it to a low cost of capital investor (pension/sovereign wealth) based on a low single digits IRR.

Who goes to Altius for mid-single digits IRRs? I don't understand why they're doing this... seems like they have few good opportunities and have to go into these mediocre deals just to redeploy capital and avoid it doing nothing on the balance sheet. You'd think that they'd be able to find better things in their sector, since commodities have been so beaten down for so long.

[bizaro86]

New renewable energy royalty:

http://altiusminerals.com/uploads/2019-12-17-Altius-Tri-Global-Energy-Announcement-FINAL.pdf

I kind of skimmed the release, but seems to me like there's not much detail on the economics of the deal. There's not a single dollar-amount in the whole thing.

This is part of their original tri-global deal I think. Basically, they estimated they would get ~10-13% cash on cash. Irr will be lower, because the cash flow doesn't start for a few years after they make the investment (project startup) and while the project lives are long they aren't perpetuities. There was some limited disclosure here: https://www.triglobalenergy.com/news/altius-announces-first-renewable-energy-royalty-transaction

Basically, I think this is a low risk way to earn mid to high single digits irr. I'm not too excited about that, I think the biggest potential upside would be building a full portfolio and selling it to a low cost of capital investor (pension/sovereign wealth) based on a low single digits IRR.

Who goes to Altius for mid-single digits IRRs? I don't understand why they're doing this... seems like they have few good opportunities and have to go into these mediocre deals just to redeploy capital and avoid it doing nothing on the balance sheet. You'd think that they'd be able to find better things in their sector, since commodities have been so beaten down for so long.

Presumably nobody, although the royalty business has the potential to be a low cost of capital type enterprise I think.

I wouldn't do those deals if I was ALS, way prefer for them to keep the money in mining. If they are opportunity short there I'd have preferred oil and gas royalties, as that sector is capital starved in Canada right now.

I think in many ways it's probably greenwashing. Their last credit facility had a "no spending this money on coal" clause, and I bet they were worried about losing access to capital if they were viewed as a "carbon bad actor." So some wind farms at decent but not spectacular returns is probably at least partially a risk mitigation strategy.

[TwoCitiesCapital]

New renewable energy royalty:

http://altiusminerals.com/uploads/2019-12-17-Altius-Tri-Global-Energy-Announcement-FINAL.pdf

I kind of skimmed the release, but seems to me like there's not much detail on the economics of the deal. There's not a single dollar-amount in the whole thing.

This is part of their original tri-global deal I think. Basically, they estimated they would get ~10-13% cash on cash. Irr will be lower, because the cash flow doesn't start for a few years after they make the investment (project startup) and while the project lives are long they aren't perpetuities. There was some limited disclosure here: https://www.triglobalenergy.com/news/altius-announces-first-renewable-energy-royalty-transaction

Basically, I think this is a low risk way to earn mid to high single digits irr. I'm not too excited about that, I think the biggest potential upside would be building a full portfolio and selling it to a low cost of capital investor (pension/sovereign wealth) based on a low single digits IRR.

Who goes to Altius for mid-single digits IRRs? I don't understand why they're doing this... seems like they have few good opportunities and have to go into these mediocre deals just to redeploy capital and avoid it doing nothing on the balance sheet. You'd think that they'd be able to find better things in their sector, since commodities have been so beaten down for so long.

Presumably nobody, although the royalty business has the potential to be a low cost of capital type enterprise I think.

I wouldn't do those deals if I was ALS, way prefer for them to keep the money in mining. If they are opportunity short there I'd have preferred oil and gas royalties, as that sector is capital starved in Canada right now.

I think in many ways it's probably greenwashing. Their last credit facility had a "no spending this money on coal" clause, and I bet they were worried about losing access to capital if they were viewed as a "carbon bad actor." So some wind farms at decent but not spectacular returns is probably at least partially a risk mitigation strategy.

My thoughts. I don't think these deals were done so much for the economics. There's something to be said for long-lived assets that produce even in a down turn, but I think this is the bigger motivation.

Especially since their coal assets have been prematurely impacted by govt and they're suing - seems like having some green deals behind them and a commitment to no more coal could have them seen more favorably than coal barons demanding blood.

[Thrifty3000]

On their last conference call they said something along the lines of:

- the market for renewable royalties is likely much larger than originally expected
- they will invest around $100 million in renewables to replace the coal royalties that are running off over the next few years
- they expect to earn about $12 million annually on the $100 million invested
- if the renewables royalty market does prove to be much bigger than $100 million - which they think it will - they are considering spinning the renewables business off as its own public company (to realize higher valuation)

The CEO also said he wouldn’t be surprised if a decade from now the potash royalties alone are worth more than the company’s current market cap. He’s also suggested the potash royalties may prove to be the most valuable royalty asset on the planet.

[Spekulatius]

On their last conference call they said something along the lines of:

- the market for renewable royalties is likely much larger than originally expected
- they will invest around $100 million in renewables to replace the coal royalties that are running off over the next few years
- they expect to earn about $12 million annually on the $100 million invested
- if the renewables royalty market does prove to be much bigger than $100 million - which they think it will - they are considering spinning the renewables business off as its own public company (to realize higher valuation)

The CEO also said he wouldn’t be surprised if a decade from now the potash royalties alone are worth more than the company’s current market cap. He’s also suggested the potash royalties may prove to be the most valuable royalty asset on the planet.

They don’t have any edge so serving renewable, in fact I would say they are at a disadvantage, because their cost of capital is going to be higher than for an investment grade company like ENB for example.