Perpetual JV Machine - Here is why...LABRADOR NICKEL ROYALTY LIMITED PARTNERSHIP
Voisey's Bay Royalty
Altiusowns a 10% interest in the Labrador Nickel Royalty Limited Partnership(LNRLP), which owns a 3% net smelter return (NSR) royalty in theVoisey's Bay nickel district.
Altius' royalty entitles it to ashare of revenues less certain costs incurred after concentrates leavethe mine site for final processing. The costs of mining or onsiteprocessing are not deducted from our share of revenues. CVRD INCO'smost recent estimated cost of nickel production, net of byproductcredits and subject to sensitivity analyzed disparities that includeits cost of energy, is $0.90 per pound.
Theacquisition of this royalty is strategic to Altius both from theperspective of its inherent attributes as well as the positive impactit will have on Altius' existing exploration business.
2006 was the first full year of mining operations at Voisey’s Bay and Altius realized in excess of $4 million in revenues.
Inherent Value
The royalty interest is expected to generate a significant long-term return on investment for the Company.
Conservativelong-term metal price forecasts of $3.25 / lb nickel, $7.00 cobalt and$0.90 copper generate internal revenue estimates that well exceed $1million per year over an initial 25-year mine life.
Inherent Upside
Altiusbelieves the exploration potential of the area captured by the royaltyto be exceptional. This exploration upside is especially significant toAltius because not only does the royalty apply to the known mines andore reserves at Voisey's Bay it applies to the entire Voisey's Baydistrict! Further, the exploration potential comes at zero effectiverisk to Altius shareholders, as exploration expenditures are notdeductible against royalty payments.
The Voisey's Bay projectis at a very early stage of its exploration and development historycompared to other world-renowned nickel districts like Sudbury andNoril'sk which dramatically grew in scale over the initial decadesfollowing discovery. For instance, over the past 2 years, CVRD-INCO hasbeen delineating a significant new high-grade mineralized zone at theReid Brook where early drill intersections included: 75.4 metresgrading 2.9% Ni, 1.2% Cu, & 0.20% Co, and 61.6 metres grading 2.9%Ni, 1.5% Cu, & 0.20% Co. More recently CVRD-INCO has beenexploring a new large claim area south of Voisey's Bay that is believedto feature many geological similarities to the producing district. Thisrenewed exploration commitment by CVRD-INCO will almost certainly leadto future discoveries in the district.
The Nickel Market
Nickelis widely cited by industry analysts as having the most favourablemarket fundamentals of the major base metals. Forecasts of supplydeficits through the next several years are the general consensus. Thecurrent LME spot price for nickel is around US $15 per pound. The lifeof project average cost of production at Voisey's Bay was estimated byInco at US $1.10 to US $1.15 per pound of nickel.
Adds Value to Existing Business
Alsoimportant to Altius is the effect that the expected revenue from theroyalty interest will have on its existing project generation businessmodel. Altius' exploration business is now effectively fully financedfor at least the next quarter century. Access to sufficient explorationcapital, without onerous capital share structure dilution, is arguablythe main impediment to success in the world of mineral exploration.Altius shareholders have now seen this risk virtually eliminated withthe commencement of production in this world class mining district.