Author Topic: ALS.TO - Altius Minerals  (Read 2072952 times)

biaggio

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Re: ALS.TO - Altius Minerals
« Reply #970 on: January 04, 2013, 07:21:15 AM »
Dazel, ItsaValueTrap, love your posts + recent debate- please continue.

This seems to be the case where nobody knows exactly how the mine will turn out i.e unknown & unknowable- it seems like the current valuation gives a lot of room for error.

I can see both your points + ALS still working out well for all of us i.e heads we win, tails we don t lose too much + probably win still -just a smaller amount





Dazel

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Re: ALS.TO - Altius Minerals
« Reply #971 on: January 04, 2013, 08:28:37 AM »

I am a business man.

So I will give you a hypothetical question on your business "bloom lake" mine.

You have made a large sum of earnings last year " 2011" because you are very profitable...

You have some operational trouble in your expansion of the mine "capital cost"....

For your 2012 year where you see that the iron ore price drops precipitously making your expansion plan that has operational issues look pretty bad...how do you book it for tax purposes?

As capital expenditure that depreciate over 25 years or do you book it as operational production cost for the 2012 and incur the full tax expenses of it in 2012?

If you are a business man you know the answer to that question. That would inflate the production cost now even though most of the work went towards expansion or capital cost for future production. It is smart business and tax strategy but it makes short term productions cost look bad...however, future production cost will fall and look stellar...making you look great. Analysts don't understand business because they have models and straightline thinking.

Anyone involved in business knows that quarterly and even yearly numbers can be massaged how you want them...and why everyone happens to hit their numbers..by a penny! That is nonsense...it is the longterm "cash production" that matters.

It's a value Trap.....I agree  with you that 80% of juniors are a ponzi scheme....producers are business people.

Dazel.




Green King

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Re: ALS.TO - Altius Minerals
« Reply #972 on: January 04, 2013, 10:47:04 AM »

I am a business man.

So I will give you a hypothetical question on your business "bloom lake" mine.

You have made a large sum of earnings last year " 2011" because you are very profitable...

You have some operational trouble in your expansion of the mine "capital cost"....

For your 2012 year where you see that the iron ore price drops precipitously making your expansion plan that has operational issues look pretty bad...how do you book it for tax purposes?

As capital expenditure that depreciate over 25 years or do you book it as operational production cost for the 2012 and incur the full tax expenses of it in 2012?

If you are a business man you know the answer to that question. That would inflate the production cost now even though most of the work went towards expansion or capital cost for future production. It is smart business and tax strategy but it makes short term productions cost look bad...however, future production cost will fall and look stellar...making you look great. Analysts don't understand business because they have models and straightline thinking.

Anyone involved in business knows that quarterly and even yearly numbers can be massaged how you want them...and why everyone happens to hit their numbers..by a penny! That is nonsense...it is the longterm "cash production" that matters.

It's a value Trap.....I agree  with you that 80% of juniors are a ponzi scheme....producers are business people.

Dazel.
Great hypothesis and all.
How do you prove that is what happened ?
GK

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #973 on: January 04, 2013, 11:37:24 AM »

GK,

Its not a hypothesis...it's what I would do if it was my business...they would be idiots if I could prove it! Cliffs shuttered production in the U.S where production costs are much lower....only time will tell at bloom lake what the production cost will look like...but a couple of quarters is ridiculous to speculate over production costs in a mine or any business. My bet is costs drop significantly for a number of reasons...this being one of them...and when that happens and they get too low...they will also be wrong! It is what they average out to be over time that matters.

I have no interest in Cliffs...

Dazel.

Green King

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Re: ALS.TO - Altius Minerals
« Reply #974 on: January 04, 2013, 12:15:50 PM »

GK,

Its not a hypothesis...it's what I would do if it was my business...they would be idiots if I could prove it! Cliffs shuttered production in the U.S where production costs are much lower....only time will tell at bloom lake what the production cost will look like...but a couple of quarters is ridiculous to speculate over production costs in a mine or any business. My bet is costs drop significantly for a number of reasons...this being one of them...and when that happens and they get too low...they will also be wrong! It is what they average out to be over time that matters.

I have no interest in Cliffs...

Dazel.

Just trying to be scientific. :) Big bath accounting has been one of the common tools just wondering if there was way to see it other than Gaming the mind of the operator.
GK

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #975 on: January 04, 2013, 01:12:11 PM »

Gk,

companies accounting is something that can be altered...usually to the companies advantage....so scientific is tough...as for a mining company...cost allocations...you can imagine the swing you could have as I pointed out.

Big bath describes it well... Does anyone care if Cliffs has production cost of $69 in the third quarter 2012? The answer is no...if they do in the first quarter 2013 with prices at $155...and they predict them falling to $60 over the year...the analysts jump up and down and raise the stock to outperform etc...it takes off...if it's high enough they go out and raise money etc...miners are cyclical...

In this case the investment community wrongly bet the cycle was over...if I am right about the Cliffs example they have loaded up future earnings during the good price environment where we are now at $155... Huge margin and cash-flow for 2013.

Short sellers jumped all over iron ore with both feet...end of the cycle...production costs too high etc...I still have not seen much on the massive upward move in iron ore prices..or in the price of the miners shares...

If Cliffs did what I think they did it will be home run at Bloom Lake this year....but no one will hear about it or care unless you were involved in the Cliffs short squeeze or profited from the raising share price on the incredible margin they pulled off. Cliffs by the way raised $500m from bond investors during this period in the blink of an eye.

The only reason I am talking about this is too help some not be afraid of the short seller headlines...do your homework...when the headlines come out...they drive the price down...no uptick rule and they cover on the fear.

Bloom Lake was brought into this short argument and Alderon was dragged in as well...as a comparison. Wrongly...in my opinion.

Altius is easy to understand...and as many here on this board have learned...it is a good way to invest in iron ore without worrying about the above games that go on in the stock market everyday.

Dazel.


ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #976 on: January 04, 2013, 07:55:05 PM »
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To take Cliffs production costs for a mine "bloom lake"  where they have had nothing but operational troubles and a change in strategy for a couple of quarters is "wrong".
I guess I am cynical... :P  There are a lot of companies that overpromise and underdeliver.  You can always blame failures on "operational troubles"... every mine has them.

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I looked at your blog...you have asia pacific production costs at half of what they are.
I don't know.  I could definitely be wrong but I don't know which part you are talking about.

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Your timing of your report is at the crash point of the iron ore market...your assumptions are on prices that are unsustainable for producers in the market globally not just the Labrador Trough.
I really don't know where iron ore prices are headed and I don't have a strong opinion on it.

Normally I'd rather not mess with iron ore because the price of iron ore and production of iron ore has gone up several times over the past few years.  This is highly unusual... theoretically you might expect a wave of overbuilding to eventually occur.  But... it's possible that iron ore prices don't crash.  Apparently China's infrastructure isn't overbuilt... even though they have too much high speed rail, real estate (their RE is the most overpriced in the world), too many malls, etc. they are lacking in other areas of infrastructure (e.g. sewers).  So I really don't know.  China is a huge anomaly in the iron ore/steel market and it could stay that way for a long time.

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Example of the Alderon bash was that they used $115 in their PEA...instead of the market price of $135 at the time of production....
"which may indicate that they think the price of iron ore is coming down over time"....should they use $170 for the feasibility study if they think it will go up from the current $155?
The standard practice is to use the 3-yr trailing average.  I believe that's what the engineers are taught in school.

If they are assuming a low iron ore price, it makes the economics of the project look worse than if you assumed a higher commodity price.  So the technical report may potentially be understating the economics of the project.

At the end of the day... my thesis is that the Alderon/Kami mine will have economics slightly worse than Bloom Lake (take Bloom Lake's opex and add $15/ton).  That is my wild ass guess.  We'll see what happens...!  At current prices, I think I would rather be long Alderon than short it if I was forced to pick a side.

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As for the bloom lake and Alderon bashing you have been doing...I will give you the benefit of the doubt as you and everyone else that joined the crowd in being wrong on iron ore pricing in August to October...
I don't really know where iron ore prices are headed.

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We are talking about nothing when prices are this high...bloom lake production costs will come down and Alderon will be a successful mine.
I don't think Bloom Lake's opex will come down much.  I don't think that they will find operational efficiencies because they should have found them all after a few years of operation.  Larger operations (BL is expanding) will reduce opex since there are some economies of scale to larger operations.

Over time, opex will likely go up due to cost inflation, a higher strip ratio (*depends on the geometry of the deposit and the pit), lower grade ore, etc.  Inflation in mining costs has been much higher than the CPI over the last decade and I expect this trend to continue.  We are only finding lower quality deposits... they take more people and machinery to mine.  Higher demand for people and machinery is pushing up costs.  There hasn't been major technological advances that have pushed down exploration or mining costs (e.g. technology like what 3-d seismic did for oil/gas, shale exploitation for natural gas).

I do think that a Kami mine will be built.

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And in your genius you will make a fortune on Altius!!!!
Yes we are both long Altius... why are we arguing!!  ;)

Cheers
"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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GlennAS

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Re: ALS.TO - Altius Minerals
« Reply #977 on: January 04, 2013, 08:34:47 PM »
Dazel and ItsAValueTrap, like Biaggio, I must say I really appreciate the back and forth. After holding off for months now on taking a position in Altius, I established a full position this week at an average cost around $10.30.

Looking very forward to Alderon's cc next week. Excellent value in Altius shares, and now seems like as good a time as any to go "all in".

Kind regards,
glenn

original mungerville

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Re: ALS.TO - Altius Minerals
« Reply #978 on: January 05, 2013, 02:26:01 AM »
I echo those comments and am also thankful - I'm into Altius as well as of this week for a around 10.20 avg purchase price.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #979 on: January 05, 2013, 06:55:12 AM »

It's a value trap,


I appreciate your time and effort...and I would like you to continue to speak your mind. That is what this board is all about...I think it is likely the one of he best educational mining conversations on the planet.

Thankfully, we both own Altius which is not really a mining company but the lowest cost royalty company on the planet....

Having said that...my point is t hat Alderon " may" be a 5 to 10 bagger...Thompson consolidated was a 20 bagger....so if you think that Kami's economics are a little worse than Bloom Lake well I can live with that. Bloom Lake was sold when the price of iron ore was $190 a ton in 2011. Cliffs immediately tried to expand it to take advantage of high prices...there is no way to know what was capex and what was production cost so I feel the cash production costs are wrong for now..the mine does not have scale yet.

Either way Kami gets built....Altius collects a royalty  in their estimates at $115 is around $30m a year...double that at a full 16  mta production. I will not bother to do the math on the price now at
$155 a ton. That as we know is nirvana to the stock price.

Kami will gain world interest as did Consolidated Thompson...I do not know that Altius equity investment will be another 5 bagger...or exactly what their cash cost will be...however, there is an extremely good chance with the rebound in iron ore prices against everyone's belief.... that Altius and Alderon are home run's. Right place right time and ton of work pardon the pun.

Dazel