Author Topic: ALS.TO - Altius Minerals  (Read 1909716 times)

nostradamus

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Re: ALS.TO - Altius Minerals
« Reply #830 on: October 11, 2012, 11:15:14 AM »
Hello all

I have been following the discussion on this board for a while now and thought it was about time for me to contribute. But first a disclaimer: I have quite a sizable investment in Altius and I know next to nothing about mining. So I am both biased and uninformed.

Anyway there are a couple of things I have noticed recently that I don't think have been posted:

First off, some recent news on Julienne lake:

http://www.thetelegram.com/News/Local/2012-10-10/article-3096301/Call-for-expressions-of-Interest-for-Julienne-Lake-development/1

I guess that the Altius management had flagged that this was anticipated, but the announcement is clearly positive. As I said at the outset, I don't really know anything about mining, but if the goverment is encouraging a developer to spend a huge amount of money to turn their property into a mine, it seems to me that the developer would want to make that capex go a bit further by aquiring the right to mine the adjacent (submerged) land that altius owns as well. I assume we will hear more about this when altius reports back on the outcome of their 2012 winter drill programme.

Secondly, I came across this presentation:

http://altiusminerals.com/uploads/RIF-2012.pdf

It includes a few things that I had not seen before. 1. info on the Chile expansion, 2. a statement that they intend to dividend out the Kami royality cash flow, 3. their own NAV calculation of the current value of the Voissey Bay and Kami royalities (C$172m).

Regarding point 2. They project a royality of C$55.2m by 2017 on Kami. Divide this by the 28,759,675 shares outstanding give a dividend of C$1.91 per share, or a yeild of around 18% at current prices!

Regarding point 3. Take a look at the slide on their capital structure. I think this means that if you just consider the cash, marketable securities and two royalities (Voissey and Kami), you get a valuation of 182 + 114 + 172 = C$468m or 16.27 per share. Ie just these aspects of the business are worth about 60% more than the current share price.

Then there is all the potential from their other interests, eg CMB royalty and Julienne lake.

I think this stock might be cheap.

N.


biaggio

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Re: ALS.TO - Altius Minerals
« Reply #831 on: October 11, 2012, 02:16:20 PM »
Nostradomus, thanks for posting presentation.

If they think they will dividend out $55 million from Kami I wonder why they are allocating only $172 million to NAV (internal valuation)

Wow, $1.91 per share in dividends- I was not banking on this- I'll take it.

I am not sure where that presentation was made (made in Sept 2012) but certainly I don t think that this story is known by the market as the shares still sell in low volume without much upward price movement, not that I care. Will be fairly priced when 2015 comes when + if they have Kami operating as projected

ALS is slowly becoming one of my larger holdings.

biaggio

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Re: ALS.TO - Altius Minerals
« Reply #832 on: October 11, 2012, 02:27:58 PM »
http://altiusminerals.com/uploads/2012-Sept-Chicago.pdf

another similar presentation posted Oct 1 at "Chicago Hard Asset Conference" with similar info.

$1.90 dividend projected for 2017- who knows what will happen by then- in the long run I think hard assets are going to be worth more than today- being able to collect the royalty you don t have to worry about the increasing cost to mine the stuff.

Ross812

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Re: ALS.TO - Altius Minerals
« Reply #833 on: October 11, 2012, 02:36:09 PM »
How many tons of iron can Alderon produce? The release this morning suggested 8 million tonnes? 4.8 million tones purchased by Hebei for 95% the market cost. Lets assume $100/ton so Alderon is now making at least grosses 456 million. Altius gets 13.7 million? ($100*95%*4.8*3%) DCF discounted at 11%, 0% growth. The 3% royalty is worth 124 million on the extreme low end...
At $140 per ton 8 million per year the royalty is worth 305 million...

Voisey .3% Royalty, 2.25 million per year
0% growth, 11% discount 20 million


I came up with this a while ago. I came up with a royalty value between 125 and 300 million. At this point it's all speculation. Will kami be completed? What will the discount rate be? What is the level of production? What is the iron ore price? Your number seems on the low side of my range, so they may be being a little conservative. I'm not sure where the 55 million royalty is coming from...
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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #834 on: October 11, 2012, 02:49:25 PM »
Well there's always risk in developing mines.  A fraction of promising projects won't make it into production.  And of those that do start producing, a small number of them will actually fail within a few years because it turns out some of their assumptions were wrong.

I think that Altius is assuming that there is a chance that Alderon won't make it into production.  Alderon is more marginal than some of its peers as its ore has elevated levels of manganese.

2- A high discount rate could explain part of it.  The $172M is for both the Voisey's Bay royalty *and* the Alderon iron ore royalty.  If the Voisey's Bay royalty is worth $40M ($4m/yr times 10), then the Kami royalty is worth $132M.  This could imply that the Alderon project has a 50/50 chance of making it into production.  $55M times 10 times a 50% chance of going into production = $275M.  If you discount that to the present then it could be around $132M depending on your discount rate and when you think the project will go into production.
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Ross812

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Re: ALS.TO - Altius Minerals
« Reply #835 on: October 11, 2012, 04:43:36 PM »
55 million a year to altius at a 3% royalty implies alderon will mine 16 million tonnes at $120 a ton (including the 5% discount for hebei). 55 million a year could not possibly happen for altius until 2017-18. I think Altius is valueing alderon at roughly 130 million which implies 13 million a year give or take. This is in line with my conservative estimate. the dividend should be about .50. Sorry for the punctualtion. Im typing on a tablet.

-Ross
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Dazel

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Re: ALS.TO - Altius Minerals
« Reply #836 on: October 12, 2012, 06:31:20 AM »


Thanks for the posts.
We agree with most all that has been posted...

Altius are extremely conservative. So I would judge their internal number for royalties the same way you look at the way they have held their huge cash position. They are seasoned and have proven them selves time and again. That is why there is no mention of the cmb royalty. Their conservative royalty number still takes them over $16 a share.


There is dirt cheap capital available to those with scale who are buyers of royalties. That is why Altius has not purchased any...simple....price. Royalties are being priced at massive premiums...

So...Our question to you then is what is Altius worth to someone else in the royalty business?

Dazel.

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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #837 on: October 12, 2012, 02:02:16 PM »
LIF.UN and Mesabi iron ore trust are publicly traded royalty companies.

LIF.UN has most of its NAV in a royalty on IOC's mine, but it also owns an equity stake in IOC (which has assets in its mines and railroad).  As more companies use that railroad, IOC will receive a little more in fees.  (Unfortunately I haven't crunched the numbers of that railroad revenue.)
LIF.UN has a PE of around 12.8.

Mesabi iron ore trust is overpriced and the borrow is ridiculously expensive AFAIK.

Other royalty companies own a mix of gold, silver, and other metals. 
Anglo Pacific
Silver Wheaton
The various Sandstorm companies are royalty-esque
Franco-Nevada
Premier Gold will IPO a royalty company soon (because some people overpay for royalties)

I think that overvaluation exists for many of those companies since:
A- Many mining companies are overpriced.  The royalty companies, in comparison, look fairly priced.
B- Many mining companies and royalty companies regularly raise capital, so there is are elements of a pyramid scheme going on.  It's like tulips, real estate, telecom companies, Dot-Coms, social networking, etc.

I'd also point out that there's a big difference between iron ore valuations and gold valuations.  The iron ore miners trade at very low multiples.  CLF has a PE of 4, Goldcorp 26.  There are fears that the iron ore market may crash (which makes sense because iron ore production has gone up several times over the past few years).  There are also a lot of folks trying to short China in general (which is not in an obvious bubble), or trying to short Chinese real estate (which is in an obvious bubble).
Gold is hot right now, iron ore is not.

Personally I don't see the overvaluation in gold miners and royalties lasting for long.   The public markets are far better than our governments at printing paper.  There are no supply constraints for the equities.  There *are* supply constraints for physical gold... we haven't increased production in the past decade despite the skyrocketing price.  Similarly there are supply constraints for the mines.

Quote
So...Our question to you then is what is Altius worth to someone else in the royalty business?
Not that much?  Iron ore != gold or silver.
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beerbaron

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Re: ALS.TO - Altius Minerals
« Reply #838 on: October 12, 2012, 02:14:02 PM »
Quote
So...Our question to you then is what is Altius worth to someone else in the royalty business?
Not that much?  Iron ore != gold or silver.

Someone went to it's C++ classes...

BeerBaron

ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #839 on: October 12, 2012, 02:20:35 PM »
Hey I preach inequality!  :P
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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