ALS.TO - Altius Minerals

[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...

[Myth465]

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.

Thanks again Dazel. I am very jittery about resources and the state of the markets / economy in general, but I think this is an amazing find which will compound overtime. I plan to hold, learn, and Buy the Dip.

Thanks again.

[Liberty]

Some additional detail. I'm midway through my own valuation.

Fully Diluted Shares Outstanding

29,816,395 at September 13, 2010

Cash and Liquid investments

$170,000,000 (from Feb 2011 presentation by Alderon) - $5.70/share

etc...etc...

Hi Rolf,

I know it's an older comment, but I was wondering if you ever finished your evaluation and if you could share it with us? Thanks.

[Dazel]

It appears after some further homework that I have have made a mistake in looking at Brian Dalton's email comments on the  of the Voisey bay Nickel Royalty. I had said previosly that he had indicated that the Voisey bay Royalty was worth $200m under the IRC sale. After looking at it...It looks like he was talking about the entire royalty. That would make Altius' stake substantially lower ($20m) under that evaluation. He did indicate no one would sell more to them and that they had treid to buy merge with IRC for that royalty because of the royatly. Their was a strike at Voisey Bay when this was evalauted and the world was ending.
IRC's royalty rev's from Voisey bay for the 2007 were $47m!!!! So the evaluation looks ridiculous. This has us looking Royal Gold which Altius owns. Looks like they bought at the right time!

After doing some homework $200m is extremely low. Altius bought their stake for $13m at $3.25 nickel. They have recieved almost $20 million from this since 2003..with a two year strike in their. The price for nickel as of today is $12.10. We think the future value of this royalty will be between $120 and $210m.
future average cashflow of between $4m and $7m over 30 years gives us those amounts.
Altius royalty revs before strike.
2007-$4.3m
2008-$5.16m


We will post our full evaluation soon....sorry for the error...

For disclosure we have not sold since this post we have been buying.

Dazel.

[Liberty]

Thanks for the update, Dazel.