Altius Minerals

[Guest Dazel]

 

Altius Minerals-als on the tsx

 

I find it very hard to play in the resource sector. I have spent a great deal of time trying to understand the pricing of mines, resources etc. To me it is has cost me dearly in a few names I could not pull the trigger on (looked at Teck resources at $6, Hudbay at $3, Quadra at $4!!!!) so I do not pretend to be an expert in the field. I still have an extreme liking for cash and liquidity and I hate capex. Obviously to a fault!

 

However, Altius Minerals is run by a 35 year old (Brian Dalton) who to me has created a mining company the way I would. They do not mine. They purchased the land rights of numerous mines back in the late 90's and early 2000's. For those that love "Leucadia" on this board they have done the same thing on a smaller scale. They were also a lot earlier than Leucadia. If lyou ook at what Leucadia did with Inmet in Spain you will see what Altius Minerals has done in eastern Canada. They purchased the mining rights for pennies on the dollar and have brought miners in to develop the properties and have taken a piece of the company and royalty payments. They also own a Royalty on the Voisey Bay Nickel mine. This Royalty alone paid out $5 million all in cash in 2008 and 2007...it is on the books at $11 million and it has a 25 year life...

 

They have compounded growth at 37% a year clip over the last 10 years.

*see their presentation on their website dated Feb 2010.

*Rick Rule (he is a value investor in the resource sector and has partnered with Eric Sprott...he is a big holder and bigger supporter of the company)...he has several bnn interviews where he discusses the company.

Altius is loaded in cash on a per share basis with no debt (margin of safety)....but it is their properties and      royalties that offer the upside. They purchased over 10 percent of their shares back during the downturn where the other miners were issuing shares.

 

mkt cap

$305 million

$205 million-cash equivalents after making $30 million in gains in IRC in 6 months (it was sold to Royal Gold with Altius securing the deal with the tender of their 10 percent position)...the market has not seen     

this gain in their financial results but it has been disclosed.

$100m for the company after backing out the cash

 

$100m-The Voisey bay royalty is worth at least this over 25 years..$4m a year is low...Nickel is hitting new    highs for the year...Voisey bay is on strike right now so the market is forgetting it. This is an all cash payment made by Vale.

 

When you back out the cash and the Royalty Altius is free or less than free as we think the Royalty could be worth much more.

 

What's left for free?

Look at the website they do a great job of describing their projects...I suggest you look at the Aurora uranium project and how they did it...2006

13 projects are ongoing

 

Alderon is the one with the greatest near term potential. Their value in the market on conversion (not guaranteed) is in the $80m range. $2.50-they would own 34m shares on conversion if drilling supports what Alderon thinks. Alderon is made up of the former managment of Thompson Consolidated (iron ore) which is located very close to the Alderon sites. I wish we had owned Thompson it has gone from about 20 cents to over $10 bucks! They are producing iron ore this year.

 

They have a $29m claim in court against Vale for underpayment on their royalty in Voisey Bay

 

The biggest call option is NLRC...which they have written off to 0 on the balance sheet. It is the first refinery project that has been fully permitted in North america in a generation which also has some heavy hitters on board (Harry Dobson a billionaire from Scotland). They have a great deal invested in this project. With the financial crisis and suppliers troubles having put the project is in doubt (it has been through court proceedings) I am confident in the ability of the ceo Brian Dalton to salvage some value from it...If he can pull it off it as homerun. I like to speculate when it is free!

 

For what it is worth we own the shares...we have purchased as low as $5.70 and we are the high for the year I believe  at $10.75.

 

Dazel.