Author Topic: ALS.TO - Altius Minerals  (Read 1778406 times)

Liberty

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Dazel

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Re: ALS.TO - Altius Minerals
« Reply #761 on: August 15, 2012, 06:25:25 AM »
http://finance.yahoo.com/news/paladin-energy-ltd-long-term-110000145.html


Paladin has secured $200m in a prepayment for future uranium output...the deal is secured by 60.1% of their Canadian asset "Michelin project." This is indeed very good news for Altius....it confirms the value of the project for Paladin. That is a large prepayment in this market and security in this asset means they would likely want to deliver the uranium from The Michelin project. The michelin project is the old Aurora project that Altius sold at a $200m profit.

It would be great to see this project get some more attention not only for the future royalty stream to Altius but the other uranium assets they hold. We know that Altius has built valuable ties to China and we know that China has resumed their ambitious nuclear program...Connecting the two seems like the logical next step.

Dazel.

Dazel.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #762 on: August 16, 2012, 06:00:09 AM »
http://finance.yahoo.com/news/alderon-amends-hebei-agreement-052400649.html


Not sure why the change....it looks like more investment in the kami project itself and little less in the shares of Alderon.
It also looks like there has been no change to the $3.42 subscription price which should be very positive for the stock.

Dazel.

value-is-what-you-get

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Re: ALS.TO - Altius Minerals
« Reply #763 on: August 16, 2012, 06:17:29 AM »
It looks like the price has indeed changed! 

"Under the terms of the amended Subscription Agreement, Hebei will subscribe for common shares at a price per share equal to C$2.41. Upon closing of the Private Placement, Hebei will acquire approximately 25,828,305 common shares for gross proceeds to the Company of C$62.2 million representing 19.9% of the issued and outstanding shares of Alderon. "

 . . . and then bumping up the investment in Kami for the same ownership percentage.  This could well be optics and approval-related - why pay 40% more than the quoted price?  In addition, the end use for the money is Kami anyway so the net result is the same, but without overt stock price disparities.

« Last Edit: August 16, 2012, 06:22:30 AM by value-is-what-you-get »

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #764 on: August 16, 2012, 07:39:12 AM »
Thx did not see that release.

Get the cash....the project economics will take care of the rest.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #765 on: August 16, 2012, 07:54:57 AM »
Alderon will raise a lot of debt...as did Thompson...it appears that management has chosen accordingly. I would argue that their partners are much stronger than Thompson's. Thompson had to raise money at a terrible time as well.

The opportunity in all of this is that the price of all of the components to construct the mine have come down substantially as well. We see Alderon now raising towards production as Thompson did. However, we see Alderon advantaged over Thompson by two major factors.

1. They have much larger institutional backing

2. The investment community has already seen Thompson do it. They also see all of the winners from that process.
-shareholders
-lenders (the whole investment banking world is looking for yield)
-fees...investment banks to insurers (Liberty) ...government
-jobs and economic activity...big winner
-infrastructure build outs....power to rail..huge for Quebec and Labrador expect quick permitting to make sure the project gets done.

Dazel.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #766 on: August 16, 2012, 08:29:47 AM »

Value is what you get,


Thanks for correcting me so quickly...only looked at the first part of the release quickly...on vacation.

For us...it is the agreement itself that matters..the continuity of the project is all we care about...yes altius's stake received some dilution from the $3.42 to $2.42 level. But more importantly to us is they raised the project financing. they will raise about $1 billion in debt and equity from here so dilution will continue over the next few years...we would pay up for the stability as Alderon did...

We see Altius's value in the royalty as we have stated many times....Paladin and Alderon have raised significant capital in a brutal financing market...well done to both companies.

Dazel.

ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #767 on: August 16, 2012, 09:17:15 AM »
The rest of the money is contingent on positive results from a feasibility study.  There is an option embedded in there.

If the feasibility study is negative, then Hebei may have overpaid for Alderon shares and Alderon gets to hang onto the money from the share subscription.  You can make the argument that this is fair since Hebei is getting some very good terms to its deal.  By committing to buying 60% of Alderon's ore at a discount of 5% (I still don't know how they will handle smelter/quality deductions and they will be significant), it's like Hebei has a royalty of 3%.  But I believe it's actually worth more than 3%.  The benchmark price is for iron ore delivered to China, so presumably it's Alderon that will pay for the shipping.  It would make more sense if the purchase price was benchmarked to a Quebec port, but no such benchmark exists AFAIK.

Suppose shipping costs $20/ton.  The maximum upside for Alderon is $20/ton if drybulk rates drop to $0/ton.  Whereas in the past, drybulk rates have exceeded the cost of the ore itself (!!!).  So Alderon is exposed to risks from the fluctuation in shipping costs... there is little upside and a lot of downside.
Hebei also has an option to take the rest of the ore at the benchmark price without any discount.  This option is worth something too.  If funky things happen with drybulk rates (they are extremely volatile) then that option could be worth a lot.

2- Liberty probably realized that they were getting shafted a little.  Hebei gets all sorts of options (and something worth a little more than a 3% "royalty") while Liberty does not.  So adjusting their subscription price down makes some sense.
This is somewhat bad for Alderon as shareholders get diluted.  Obviously existing shareholders would like to see Alderon sell shares at a high price.  There is a big difference between #/42 and $2.42.

3- Alderon is no Consolidated Thompson in my opinion.  Alderon's ore will be penalized for manganese content.  I think that Hebei did protect itself by stipulating deductions for deleterious minerals in its off-take agreement (it's a pretty standard practice).  Otherwise Alderon could cut corners on mineral processing costs (e.g. not spend the electricity and mill capacity on grinding the ore finely) and ship a product with high levels of silica, manganese, etc.
« Last Edit: August 16, 2012, 09:22:01 AM by ItsAValueTrap »
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value-is-what-you-get

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Re: ALS.TO - Altius Minerals
« Reply #768 on: August 16, 2012, 09:58:17 AM »
I have a couple of questions for Itsavaluetrap:

Wouldn't all suppliers including South America and Australia (70+% of global supply) have similar exposure to dry goods shipping rate fluctuations?

Is .60% manganese considered to be a high level?




ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #769 on: August 16, 2012, 11:24:41 AM »
Usually it's the purchaser who pays for the shipping.

On second thought I don't think that the risk from shipping cost fluctuations is a huge issue.  Alderon should be able to hedge its risk by entering into long-term freight contracts.  I don't believe that there would be significant counterparty risk to Alderon... I believe that it is the charterer who is the most likely to default.  I'm guessing that the shipping company will want to be compensated for credit/counterparty risk so there would be a minor cost to this hedge.

2- If Alderon could sell to non-Chinese customers, then Hebei's option on 40% of their output could hurt them a little.  After adjusting for shipping costs, it could be possible that Alderon should sell to local customers rather than Chinese customers.  But Alderon's technical report suggests that it will likely sell to Chinese customers only due to the lower quality of its ore.

Quote
Wouldn't all suppliers including South America and Australia (70+% of global supply) have similar exposure to dry goods shipping rate fluctuations?
Yes.  Brazil to China is a longer route than Australia to China.  Shipping costs are a big reason why Vale decided to build unusually large ore carriers (larger than capesize).  The larger vessels are more efficient.  And owning its vessels reduces their exposure to shipping costs.
(I'm not saying that Vale's decision is a good one necessarily.  Some people say that there has been a huge wave of overbuilding in the drybulk sector.)

Quote
Is .60% manganese considered to be a high level?
Yes.  According to the technical reports, sulfur is also a little on the high side.

I don't know enough about iron ore to know what level of deduction Alderon's ore may receive.
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