Author Topic: ALS.TO - Altius Minerals  (Read 1933943 times)

ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #850 on: October 26, 2012, 12:19:13 PM »
Opex of $44/ton would put Kami among the lowest-cost deposits in the world (ones with grades far higher than Kami and requiring less or no beneficiation) and HALF of what Bloom Lake's opex is.  This is extremely unlikely.

If anything you would figure that Kami will come in with opex a shade higher than BL as it will spend more money on the metallurgy to get the manganese content down. 

*I don't like juniors.  So many lies.
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biaggio

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Re: ALS.TO - Altius Minerals
« Reply #851 on: October 26, 2012, 12:31:30 PM »
added some @ $10.20 this afternoon.

Further weakness in price to follow I am sure. Hope to average in a bit more.

I like the net cash

I like the royalties (protection from the eventual inflation)

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #852 on: October 29, 2012, 02:59:54 AM »

Cliffs natural have had operational issues at their eastern iron ore mines...the bloom lake operations have changed their longterm marketing strategy to producing a higher end premium product. This change took cash costs above $100 per ton in the second quarter...because of the costs and lower volume....that came down to $88 per ton this quarter and will continue downward. In other words they had problems with production and have changed operational focus at Bloom Lake...management does not like to say we "screwed up" but it looks like they have and are coming back from that....with cash cost dropping considerably this quarter...

The operators matter as we know...taking a rough patch from a mine and saying  those cash costs are the normal is just silly. Things go wrong equipment malfunctions etc...and we had a huge drop in the price of iron ore during the same period...as an operator you are not going to try to push through more volume...you slow production and take the time to fix problems.

Dazel.

Ross812

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Re: ALS.TO - Altius Minerals
« Reply #853 on: October 29, 2012, 06:53:04 AM »
The same technical report calls for quality deductions of $15/ton.  Unfortunately, it seems like nobody on this forum knows how smelter/quality deductions are calculated.

2- The big issue is that these technical reports are a joke.  BBA did technical report work for Consolidated Thompson when it owned Bloom Lake and before Cliffs bought out CT.  The BBA technical report wasn't even close... it projected opex below $40/ton.  This quarter it is around $88/ton.  (How cash costs and operating costs are defined can make a difference... but does not explain the entire difference.)

Guess who is doing technical report work for Alderon?  BBA.

*I also own Altius.

I did a looked into your reference to $15 quality deductions. You got that from Table 16.2 Pit Optimization Parameters. $15 for quality deductions is actually the cost of beatification of the ore. This is not a cost deduction to the processed ore. The $15 quality deduction is accounted for in table 21.2 I previously cited. Table 16.2 is identical to table 21.2, just in a different form. To read the pit optimization table:

Add the operating costs for the mined raw ore:
Mining Cost (Ore, Waste) $2.10 + Mining Cost (OB) $1.05 + Processing Cost $1.95 + General and Administration (G&A) $1.13 = 6.23 $/t raw unprocessed ore.

The weighted recovery is 37%. Divide the unprocessed ore by 37% to get to processed ore cost per ton:
$6.23/0.37 = 16.84 $/t processed 30% Fe

Now its time to beneficiate (concentrate) the ore to take it from ~30% Fe to 65.5% Fe:

$16.84 + $15 (Quality Penalty – smelter deduction) = 31.84 $/t FeCon

Add in Port $3/t and Rail $10/t costs and we get 44.84 $/t which is the estimated cost in table 21.2.

Hebei is not stupid. They would not have negotiated a price of 95% Platt if they could get Platt - $15. The Platt price is based off 62% Fe. Alderon ore is 65.5% which would fetch a premium of Platt + $5/%Fe if pricing gets really competitive. Using Platt for the product price assumption seems pretty reasonable and a little conservative.
« Last Edit: October 29, 2012, 07:42:09 AM by Ross812 »
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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #854 on: October 29, 2012, 11:52:40 AM »
Quote
Add the operating costs for the mined raw ore:
1a- Mining Cost (Ore, Waste) $2.10 + Mining Cost (OB) $1.05 + Processing Cost $1.95 + General and Administration (G&A) $1.13 = 6.23 $/t raw unprocessed ore.
There is a difference between $/t mined, $/t milled, and $/t FeCon.

Of everything that is mined, some of it is waste and goes to the waste pile.
Of everything that is milled, some of it is waste tailings and goes to the tailings storage.
And then you have your iron ore concentrate.

1b- The mining costs are different for ore/waste and overburden.  You don't add both costs up together.

2- The pit optimization may use more conservative assumptions than the economic assessment.  This is so if the ore price falls, you won't have a pit that was optimized for a higher price and you lose even more money.

Quote
Hebei is not stupid. They would not have negotiated a price of 95% Platt if they could get Platt - $15. The Platt price is based off 62% Fe. Alderon ore is 65.5% which would fetch a premium of Platt + $5/%Fe if pricing gets really competitive. Using Platt for the product price assumption seems pretty reasonable and a little conservative.
The way the benchmark pricing works is that it is a price for iron ore of a certain quality.  It will have limits for the levels of impurity in the product... Alderon's ore likely exceeds that.

What normally happens is that the price will be reduced for impurities (e.g. smelter deductions) and increased/decreased for iron content above/below the 62% level.  The smelter deductions will be linked to the level of impurities.  We don't know what the exact level of impurities will be (since there are uncertainties as to resource estimation and metallurgy).  The level of impurities may vary from shipment to shipment (it varies within the ore deposit).  So if Hebei is smart, they will link their price to the level of impurities in the ore.  This will protect them.

Otherwise Alderon could buy extremely low-quality ore from somebody else and sell that to Hebei.

So basically, Hebei will be getting 95% of Platt + adjustment for iron content - quality penalties / smelter deductions for manganese (and sulfur).

I don't know if the quality penalties will be $15/ton.
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Ross812

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Re: ALS.TO - Altius Minerals
« Reply #855 on: October 29, 2012, 01:08:43 PM »
Quote
Add the operating costs for the mined raw ore:
1a- Mining Cost (Ore, Waste) $2.10 + Mining Cost (OB) $1.05 + Processing Cost $1.95 + General and Administration (G&A) $1.13 = 6.23 $/t raw unprocessed ore.
There is a difference between $/t mined, $/t milled, and $/t FeCon.

Of everything that is mined, some of it is waste and goes to the waste pile.
Of everything that is milled, some of it is waste tailings and goes to the tailings storage.
And then you have your iron ore concentrate.

1b- The mining costs are different for ore/waste and overburden.  You don't add both costs up together.

2- The pit optimization may use more conservative assumptions than the economic assessment.  This is so if the ore price falls, you won't have a pit that was optimized for a higher price and you lose even more money.

Quote
Hebei is not stupid. They would not have negotiated a price of 95% Platt if they could get Platt - $15. The Platt price is based off 62% Fe. Alderon ore is 65.5% which would fetch a premium of Platt + $5/%Fe if pricing gets really competitive. Using Platt for the product price assumption seems pretty reasonable and a little conservative.
The way the benchmark pricing works is that it is a price for iron ore of a certain quality.  It will have limits for the levels of impurity in the product... Alderon's ore likely exceeds that.

What normally happens is that the price will be reduced for impurities (e.g. smelter deductions) and increased/decreased for iron content above/below the 62% level.  The smelter deductions will be linked to the level of impurities.  We don't know what the exact level of impurities will be (since there are uncertainties as to resource estimation and metallurgy).  The level of impurities may vary from shipment to shipment (it varies within the ore deposit).  So if Hebei is smart, they will link their price to the level of impurities in the ore.  This will protect them.

Otherwise Alderon could buy extremely low-quality ore from somebody else and sell that to Hebei.

So basically, Hebei will be getting 95% of Platt + adjustment for iron content - quality penalties / smelter deductions for manganese (and sulfur).

I don't know if the quality penalties will be $15/ton.

You're right here is the corrected Pit Optimization Costs:

Let’s look at the system as a whole:

From Table 16.6, Applying Costs from 16.2:

Step 1 - Remove overburden:
46,766 Kt * 1000 t/Kt * 1.05 $/t = $49 million

Step 2 – Mining Ore and Waste Rock:
Kt Mined Ore + Kt Mined Rock= (335,128 + 711,853) * 1000 t/Kt * 2.10 $/t = $2.198 Billion to produce 335,128 Kt of Ore

Step 3 – Process the Ore:
335,128 Kt * 1000 t/Kt * (1.95+1.13) $/t = $1.032 Billion to produce:

335,128 Kt * 37% Weighted Recovery = 123,997 Kt of FeCon

So adding all this up we get:
$49M + $2198M + $1032M = $3279M to produce 123,997 Kt of FeCon so production OPEX is:

$3279M/(123997 Kt * 1000 t/Kt) = 26.44 $/t

This is equal to Table 21.2 Mining + Concentrator Cost (20.36+6.28) = 26.64 $/t (within rounding error)
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Ross812

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Re: ALS.TO - Altius Minerals
« Reply #856 on: October 29, 2012, 02:10:36 PM »
Smelter deductions as far as I can tell don’t really come into play with respect to iron ore. Smelter credits/deductions are given to compensate the smelter for waste above a certain benchmark. For iron smelting this is usually in the form of credits or deductions above an agreed upon %Fe. The factory has to use the same amount of energy regardless if 58% Fe or 64% Fe ore is used and the recovery from 58% Fe ore is lower and waste higher so a credit/debit is given in the form of $5/%Fe to compensate. Sulfur and Manganese are not smelter deductions because they are actually incorporated into the steel (not a waste product).  Quality deductions may come into play. Most European iron ore contracts I could find state a max allowed sulfur % at 0.05. As far as Manganese goes, 0.4-1.1% is desirable. Alderon ore will have 1.6% Manganese and .053% sulfur which means it will probably be blended with lower manganese/sulfer/fe content ores during sintering. The ore as-is is acceptable to make steel in China, but blending a lower quality 60% Fe Indian ore with Alderon’s 65.5% Fe ore would create a product that could be sold in Europe. Manganese does not start affecting the quality of the steel produced until ~4%. 65.5% Fe 1.6% Mn or can only produce 2.45% Mn steel. Sulfur and the grain size distribution are the two main detractors to this ore’s marketability. 
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ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #857 on: October 29, 2012, 03:11:04 PM »
Quote
Manganese increases hardenability and tensile strength of steel, but to a lesser extent than carbon. It is also able to decrease the critical cooling rate during hardening, thus increasing the steels hardenability much more efficient than any other alloying elements. Manganese also tends to increase the rate of carbon penetration during carburizing and acts as a mild deoxidizing agent. However when too high carbon and too high manganese accompany each other, embrittlement sets in. Manganese is capable to form Manganese Sulphide (MnS) with sulphur, which is beneficial to machining. At the same time, it counters the brittleness from sulphur and is beneficial to the surface finish of carbon steel.
 
For welding purposes, the ratio of manganese to sulphur should be at least 10 to 1. Manganese content of less than 0.30% may promote internal porosity and cracking in the weld bead, cracking can also result if the content is over 0.80%. Steel with low Manganese Sulphide ratio may contain sulphur in the form of iron Sulphide (FeS), which can cause cracking (a “hot-short” condition) in the weld
http://www.leonghuat.com/articles/elements.htm

It seems that the ideal level of manganese is different for different types of steel?  For steel that will be welded, manganese should be lower than 0.8%.  There are other types of steel where more manganese is better.... most of the world's manganese mined is used as a additive for steel.

2- The Platts index specifies sulphur below 0.02% for one of its indexes but not the others.
PDF of the specification here:
http://www.platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/ironore.pdf

Beyond that the index would make some kind of adjustment to normalize for the difference in quality.

3- Strathcona wrote a report for the government regarding the Wabush mine and problems with the manganese content in its ore.

Quote
The manganese content in the ore, which is a specific characteristic of the Scully Mine deposits,
is the primary market limitation to exploiting more of the remaining resources than is currently
planned and that are not included in the most recent reserve estimates.
Cleveland-Cliffs Inc., as the managers of the Wabush Mines joint venture, have been examining
the possibility of installing a manganese reduction plant and if feasible this project could allow the
current blend of pellet products to be produced through to 2021.  Encouragement and support for
this endeavour should be given by all stakeholders because of the significant benefits of extended
mine life for the employees of Wabush Mines and the community of Wabush

Cliffs bought out its other partners in the mine and installed a manganese separation plant.
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Green King

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Re: ALS.TO - Altius Minerals
« Reply #858 on: October 29, 2012, 03:26:40 PM »
Quote
3- Strathcona wrote a report for the government regarding the Wabush mine and problems with the manganese content in its ore.

http://www.nr.gov.nl.ca/mines&en/publications/wabush-memo-v3.pdf

Can you explain again how the high manganese matter ?

If you can just blend or build one of those plants for 40 million ?
sorry i am very new to the sector. It was very hard to keep up. :(
« Last Edit: October 29, 2012, 03:47:45 PM by Green King »
GK

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #859 on: October 29, 2012, 03:52:45 PM »
"Cleveland-Cliffs have previously examined the possibility of installing a manganese reduction plant
that would reduce the manganese content of ore processed to allow production of the current pellet
products to continue, with their manganese content of either 1.2% or 2.0%, from ores that would
contain up to 4.0% manganese."

from with in the old Strachcona report.

Alderon is at 1.6% maganese well with in the range of 1% or 2 % that Cliffs is desiring at Wabush. It explains their high cost 40 year
old mine ($125 cash cost a ton last quarter) with very little desirable reserves left without the additional cost and hence why they bought Thompson Consolidated...where once they get operations on track they will do very well.

Not sure why Wabush is being compared to Alderon or Bloom lake very different.

dazel.