ALS.TO - Altius Minerals

[Dazel]

Glenn,

"-255mt at mill lake not incuded in the study...When management was asked if there is upside to the 30 years. "absolutely" "

This makes me giddy for Altius!

Dazel

[zippy1]

Alderron is actully down almost 9% right now.  Wow! so expectation must be really high there.

[PullTheTrigger]

Duetsche Bank Commodities Outlook:

http://www.commodities-now.com/news/power-and-energy/13497-deutsche-bank-commodities-outlook-2013-.html

Bulk Commodities: Iron ore markets have moved sharply higher over the past month and we believe that prices could reach USD170/tonne over the next quarter.  This reflects a combination of expected re-stocking in China and possible weather issues affecting supply in Brazil over the next few weeks.

[Dazel]

The market was expecting Hebei to release the $120m...thinking that Alderon would have already submitted the study 15 business days ago to them....I may "personally speculate" with a short term trade on Alderon...

Hebei will gladly fork over the $120 m...they are going to do very well on their transaction.


Dazel.

[Phaceliacapital]

Thanks Dazel, very informative.

What are the chances that a call transcript will be available??

On a TA side of view: ADV crossed its 200 DMA at 2.2, I think atm algos and other TA traders are "testing" this level, its down to 11%, there is no rational explanation.

[Phaceliacapital]

The market was expecting Hebei to release the $120m...thinking that Alderon would have already submitted the study 15 business days ago to them....I may "personally speculate" with a short term trade on Alderon...

Hebei will gladly fork over the $120 m...they are going to do very well on their transaction.


Dazel.

Thinking the exact same thing but I would have to move cash around, upside at, 20% ST?

[ItsAValueTrap]

The feasibility study states operating costs of $42.17 per ton of concentrate.  This includes transportation costs to Port of Sept-Iles and loading/port costs ($25.98/ton without those costs).  This would make Alderon one of the lowest-cost iron ore mines in the world.  Yeah right.
This will likely be a repeat of history considering BBA authored this report.  Real-world operating costs will likely be slightly above those of Bloom Lake.  (If you compare BBA's reports for Kami versus Bloom Lake, Kami has slightly higher opex and quality deductions.)

If you simply compare Kami to Bloom Lake/Consolidated Thompson, I think Alderon's stock still looks undervalued.

2- Hebei's investment in Alderon is a big vote of confidence in it in my opinion.  They likely have done a very high level of due diligence on Alderon.  Technical reports by BBA are a joke... Hebei likely did their own homework.

[biaggio]

The feasibility study states operating costs of $42.17 per ton of concentrate.  This includes transportation costs to Port of Sept-Iles and loading/port costs ($25.98/ton without those costs).  This would make Alderon one of the lowest-cost iron ore mines in the world.  Yeah right.
This will likely be a repeat of history considering BBA authored this report.  Real-world operating costs will likely be slightly above those of Bloom Lake.  (If you compare BBA's reports for Kami versus Bloom Lake, Kami has slightly higher opex and quality deductions.)

If you simply compare Kami to Bloom Lake/Consolidated Thompson, I think Alderon's stock still looks undervalued.

2- Hebei's investment in Alderon is a big vote of confidence in it in my opinion.  They likely have done a very high level of due diligence on Alderon.  Technical reports by BBA are a joke... Hebei likely did their own homework.

Trap, thanks for balancing discussion.

"the Feasibility Study ("FS") on the Rose Deposit of the Kamistiatusset ("Kami") Iron Ore Property in western Labrador. The FS was completed by BBA Inc. ("BBA") located in Montreal, Quebec, Stantec Consulting Ltd. ("Stantec") located in St. John''s, Newfoundland & Labrador and Watts, Griffis and McOuat Limited ("WGM") located in Toronto, Ontario, and is effective as of December 17, 2012 "

-would having 3 different firms involved in the evaluation  not help with the validity of the analysis, roughly speaking. Am I naive to think that a smart (I assume), sophisticated buyer like Hebrei would do a very thorough evaluation i.e. personally I am banking on Dalton + recent buy in by Hebrei that there is a very good project there.

[ItsAValueTrap]

Here's how a senior miner would usually do due diligence on the project:

A- Re-assay some of the drillcore.  Freeport Mcmoran essentially did this when they wanted to buy out Bre-X... that is why they didn't get burned unlike the institutional investor community.

B- Check that the resource model is appropriate.  You need a copy of their computer files and a competence resource modelling engineer.
Oftentimes, companies have overly aggressive resource models.  The drillholes only sample a very tiny % of a resource body.  Everything else is a guess.  There is room to get pretty crazy with that guess.  Peter George / Barkerville would be an extreme example.  (Oh yeah... he is not in jail.  The bar to actually end up in jail is extremely high so there is a lot of bad behaviour that you can get away with.)

C- Check the engineering assumptions.  You need to a copy of all their work and a team of specialized engineers (metallurgy, infrastructure, mining, etc.).
There is a lot of room here to get overly optimistic.  Remember that any errors in predicting the economics of a mine can be multiplicative (is that a real word???)... so you could throw out some crazy numbers without getting into legal trouble.  Like what happened with Bloom Lake / Consolidated Thompson / BBA and the mythical <$40/ton opex.

D- Check that the title to the property is good.  Which requires a lawyer.

Clearly... I am not doing this level of due diligence.  I don't have a copy of all the technical data.  In theory I could calculate esoteric stuff such as whether or not Alderon's pit slope angle is reasonable (this affects mine economics)... but to do that, you would need information on soil characteristics (how elastic it is, etc.).
And I do not have a team of specialized engineers.

Am I naive to think that a smart (I assume), sophisticated buyer like Hebrei would do a very thorough evaluation

In rare cases, companies don't actually do due diligence when buying a junior.  There was some example in Pierre Lassonde's book on gold which I forget.

Crazy Eddie (the electronics retail mega-fraud) is an example of private equity not doing enough due diligence.

Warren Buffett bought GenRe... got burned on their derivatives unit.

You can't always assume that the buyer did thorough due diligence.

Can you tell the board why IOC has costs in the range that Alderon is talking about? And go through the points from the conference call that describe the high cost structure at Bloom Lake.

I didn't listen to the conference call... hopefully there is a transcript.

Because I don't have access to technical data and a team of specialized engineers... I don't have a very good idea about what the Kami project's potential economics will look like.

Regarding Alderon versus Bloom Lake... you could always make claims about Alderon/Kami having better economics even if it were the other way around.  Many of the economic assumptions are *subjective* and you won't end up in jail for being ridiculously optimistic.

[Dazel]

I erased a message for you Trap...i will send later..i don't want to waste your time...we are both Altius backers and production for 30 plus years is well
a home run...enough said.

I feel it is important to relay the message that Alderon shareholders were given today...Alderon is an IOC copycat not Thompson Consolidate or Cliffs...is $42 costs possible? not likely for a long time...I think you would add the discounts you often refer to the costs...They have taken them off revenues..bringing them to $107 and $102...so likely add $8 and $13 to costs.


*Alderon also had Bectel engineers look at the study ( conference call)...

I will post some IOC information for us all...I have seen their margins...they are impressive. As an Altius investor it is in our best interest for management to build out Kami and stay on as operators...One problem with Bloom Lake is that all the operators got rich and left. Cliffs hired third party contract operators with nothing at stake...as you will note they fired many of them recently.

Dazel.