YouSaid · the spoken record

Dan Ferris

lines on the record: 32
first: 2019-12-01
most recent: 2019-12-01
sittings or episodes: 1
sources: podcast

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“You can go to www.investorhour.com. That'll tell you everything you want to know about the Stansbury Investor Hour. And if you want to learn about the Extreme Dial newsletter, you can go to StansburyResearch.com and poke around on the website and find out about it. Thank you very much. I really enjoyed being here. And I just want everybody to know, listening, I love we study billionaires. I think it's like one of the very few financial podcasts on the planet. I really like it. I feel like I discovered something really cool when I found you guys.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Times the net debt to Ebities, it was like five times. Now it's like south of two. A little north of one, not much farther north of one put a huge range here. Say it's worth 16 to 20. Just do that. And you're at 11. Fantastic deal.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A funk right now amongst natural resources companies that are not precious metals firms. I think they're being lumped in with that. One thing people don't realize, like it's your dream to find something that stays relatively cheap for quite an extended period of time. It's going to continue to throw off the cash that it makes, and I think they're going to continue to raise the dividend over time. And you're whatever it is right now, I think it's like 1% or 2% or something. But over time, I think you're going to eventually be making like a double digit yield over your cost. And certainly if you got in when I first told people to, you know, at like seven bucks way back in 2009 and even now at 11, it's not much higher. And yet the value of the thing has just, and they've managed it brilliantly. I mean, they used to have five.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We're shutting down all the coal mines in 2030. And so we impaired them and then Altius came out and impaired them a little more. Since their impairment is higher, we use theirs. It's about $1.75-ish air. So, you know, net of that impairment, all liabilities were around $900 million and the fully diluted share counts around 42, slightly south of 43 million. And it gets us up around 21 bucks a share, which sounds insane. But the insane part, if you think I'm insane, is my revenue royalty on the royalties. So you can impair that how you like. And I think you won't get very far south of 15 or 16 bucks. If you really want to stick it to them and say, well, the market doesn't like them right now, so I'm going to cut that multiple way down. And the thing is 11. And there's also...”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I've got about 31 million in cash, and I'm calling the equity portfolio 75 million. They call it 65, but I'm including a $10 million debenture that they have that instrument. I take the low end of the royalty range, which right now for this year is $77 million. And I kind of multiply it by 13. I think that's a reasonable market multiple. And then I've got some other assets here. They have a thing called the carbon development partnership, unless the value of some royalties that came out of that. And I get a gross asset value somewhere in the neighborhood of a billion. And then total liabilities are $173 million on the very latest balance sheet. So I get this net asset value of around $990 million. We impaired the coal royalties because the Canadian government says that”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Let's maybe just call it a 15 year or 20 year, really shoot the works. 15 or 20 year mine life, or would you rather have those potash royalties I described? And you're getting paid in a dollar of royalty revenue. So what do you care where it comes from? It's a little loony that people go so crazy for gold royalties and they've let all these minerals get this cheap. It's a little weird.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The market gaps of all the gold mining companies one is five times bigger than the other. So there's a lot more to do in the diversified space than there is in the gold space. Everybody thinks gold royalties are the thing to have. Actually, there's no such thing as a cheap royalty of any kind, really. Royalties are valuable and they always trade hands at solid prices. But people are a little extra crazy about gold royalties, you know. Frankenvada routinely trades it north of 20 times royalties. Whereas Altius, the Canadian market cap, you were talking about the US market cap 360, Canadian market caps around 470. And the guidance is for 2019, which is almost over, is 77 to 81 million in royalty revenue. In the neighborhood of like six times. And let me ask you, would you rather have a gold situation?”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, I would say almost zero, this is not a play on higher metals prices for me. Not at all. It's a play on long-term value creation by a highly competent management team over the full cycle. And I think the revenue growth, the 13x revenue growth that we've seen, I think this is just the beginning. And I've said I thought this stock had multi-bagger potential for some time and people kind of scratched their heads and say, you're kidding me, you know. But I'm not. Their goal is to become kind of the Franco-Nevada of the diversified mining space, right? They're the non-precious metal version. They want to be the non-precious metal version of that. And there isn't one. And there has never been one. So that's pretty cool, I think. And I think it's a good goal because if you look at the market caps of all the diversified mining companies versus...”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“If you're going to invest in Alteus and you're going to look at these financial statements, you have to get on the phone and ask questions. That's all there is to it. You know, when you see these things where they go from getting revenue from a partnership, which is how the potash and the coal royalty started out, to getting the revenue directly because now they own the whole thing. That's a big change in the financials. So you need to call them up and just ask them what's going on. Why is this thing called other revenue? And then they explain, well, it's coming from a partnership. That's why it's other revenue. And then you just learn things like that over the years. And pretty soon, I won't say it ever starts to look normal, but you start to be able to figure it out. And sure, I'm saying call the company. I'm not saying you're always taking the company's word for everything. You have to keep asking questions until you're satisfied.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“On the hook for operating expenses. You're never on the hook for capital expenses. And if you get an expanding volume where the mine volume can expand like with the potash I was describing, wonderful. And that's what they look for. They look for those opportunities, the optionalities of being able to expand the mine and grow the revenue. And it all comes without any incremental investment, right? That expansion, all the CapEx is out of the mining company, not out of Altius.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A couple of guys within Altius were like, Hey, Brian, is it time yet? Is it time yet? Is it time yet? And he was like, nope, wait. And he kept saying, don't wait. You know, don't worry. She'll turn. She'll turn. She'll turn, meaning the market, the cycle, you know. And it did. She's just like, you know, it was a thing of beauty to see that kind of discipline and somebody who really is willing to kind of put their money where their mouth is. And it was rare. I started getting much higher conviction about these guys. In the downturn, right? When things are going swimmingly well, everybody looks good. And the business model is so capital efficient. It's not a mining company, right? They're at either end of the spectrum. They take something off the top of the mining revenue on the royalty side and they are the first guys in in the prospect generation side with little amounts of capital. And, you know, the royalty side is a thing of beauty in itself, right? You get this royalty.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The insider zone about, I think, 10% at this point, and capital structure is not weird. They have some debt. They have some little bit of preferred stock that was sold to Tremwatza, the Warren Buffett of Canada. But I don't see anything weird, certainly in the capital structure. And certainly the folks invested in it are non-insiders. You know, the only potential red flag is the one you point out. I am close with these guys. I mean, I'm friendly with them. That could mean that I am biased to, you know, maybe not wanting to sell the thing. But I don't know. You tell me you find a company that goes 13-fold on the revenue and weights six years till the cycle bottoms out before they start putting money to work. I mean, you know how this works. Money burns holes in people's pockets. Cash burns holes in people's pockets, especially in these little companies where they feel like they have to impress someone.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Most of the time, you don't want to get too close. But in the mining industry, you want to sit down and have a drink with these guys on a regular basis. You want to recreate with them. I went up to Labrador and went fishing for a week with these guys. You want to get to know them. You want to just talk to them and find out who they are and what they do. Because there's just so many weird characters in the mining business. I'm telling you. And there's a lot of shenanigans in the mining business too. So I hear you. And it's true. We don't sit down and recreate with the managements of hardly of any other companies. These are the only ones where we do. It is my personal opinion that you really shouldn't do it any other way. You really need to know who you're dealing with. You know, more so than any other industry that I can think of.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Or something back then. It's like closer to 70 million now. If you include their debenture in there, it's worth about 10 million. It's worth about $75 million if you include that now. So that business, it pays for itself, which is really cool.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And take, you know, in one case, hundreds of millions of dollars out or tens of millions of dollars. And I've seen them invest equity in other, just sort of pick and choose one or two other equities. They put money into Virginia mines that was run by Andre Gomon, which was eventually bought out. And there's a really nice royalty there that's owned by another company called Cisco. And they made tens of millions. I think they made about $30 million off of that. I guess my point here is there's a lot of really cool stuff going on on both sides of the business. And right now, like starting in 2016, that prospect generation side, they've done like 57 deals. They've done 57 deals in which they took out a royalty or got some equity too. And their equity portfolio was like 20 million.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We were at a mining conference. He said, You look around, everybody's saying they're a prospect generation firm, but they're not. They're not really doing the model right. Because if you're doing the model right, you find your prospect, you spend as little money as possible, then you get that partner in and do that deal and you move on. But all these guys at this conference we were at, he says, look at this guy and this guy and this guy and this guy, they're talking about their flagship asset. There's no flagship asset. That's like a red flag, you know, in the prospect generation business. Somebody says, we're a prospect generation. We have three assets and this is the one we're putting all our money into it. That's not the way the model is really supposed to work, right? So I got an education and I just happened to be getting an education from the best people in the business. And if you ask around other companies will tell you that they want to be like Altius Mineral. So over time, I've seen them do this. I've seen them just spend little bits of money.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Back then was a lot more important, and that is the prospect generation business. So there's the royalty business and the prospect generation business. There's constantly these two lines of business. And the first thing you notice is that they're at opposite ends of the mining value chain, right? So at the very beginning is prospect generation. You take a little bit of money and you take out an original mineral prospect, then you bring a partner in and have them spend their money and earn their way into a bigger share of it to drill it out and see what you got there. You're finding these prospects and then getting someone else to take the lion's share of the risk. And you just keep doing that. You keep doing it over and over and over again. And part of the secret to this business, which Ulti is head of exploration, Lawrence Winter taught me years ago. He said, damn, these prospects.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Which is a little weird when you've got a depleting asset, but it's just so large and over time they can expand and meet increased demand for potash fertilizers as the global population increases. And it's just a really cool asset. And that's the one they were targeting. And they got it. They own 100% of it today. And that alone, I think the consensus net asset value in that these days is like maybe 220 some million and they've pulled about 36 million in after tax cash out of it. And their cost is like $138 million. So, you know, and this is like just the first few years of literally centuries to come. And this is one asset. And then there's another side of the business, which.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“All in potash royalties. And that's just one deal, but they've made a bunch of them over the years, and they waited. They started in 2014. They put some money to work through 2018 or so. And just that one deal, I mean, the potash royalties are a thing of beauty. So with mining, like the average gold mine that you'll find today, they'll tell you that the life of the mine will be maybe like if you're really lucky, like 12, 15 years, maybe more if you've got a really good one. But these potash mines in Canada, the royalties on these lines, this is like something like a fifth of the world's potash production that Altius has a royalty arm. The mind lives are like 800, 900 well. Excess of a thousand years.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Because, of course, by 2014, the cycle is way down and there were debt crises in the mining industry and people were having to cough up assets to raise cash, et cetera, et cetera. You know, you probably remember companies like Cleveland Cliffs and the company they bought from share it. Share it was a company that was having trouble and they needed to disgorge some assets and they had a really cool mining royalty portfolio that contained some wonderful potash royalties. It also had some coal royalties, so they kind of had to take the two together to get the whole deal. And they partnered up with Liberty Mutual, an insurance company that had a history of investing in mining. And they bought this thing, I think the total purchase price was like $262 million on Altia side. In 2018, Liberty Mutual got tired of the mining industry and Altiaus wound up buying the other piece of it. So they own all of these.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Waiting for things to come to them. They wanted to be you always want to be the liquidity provider at the moment when liquidity is at a premium. But then they really built it into something. So, you know, $3 million a year after a few acquisitions and a decade later is probably going to wind up close to 80 million a year in royalty revenue this year. I mentioned insurance companies a moment ago. All the insurers want to say we have discipline. We have underwriting discipline, right? And it's the same with all the prospect generators in the mining industry. You know, they want to say we have discipline. But of course they don't all have discipline. But these guys really do. They waited and waited and waited. They sat on that money. They got it in like 2008. They sat on it until 2014. And then they found a deal to do.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Royalty. They have like 15 of them now. And they had one paying royalty that was making them 3 million a year that was covering their GNA, right? So they were paying the bills on this royalty. So because early in their history, the founder Brian Dalton said, you know, I hate this, you know, digging holes and diluting shareholders model that everyone pursues. And so they had a big winner early on. They put 600,000 bucks into a uranium deposit and sold it for 200 million. So when I found them, they had put 600 grand into this uranium deposit. They sold it for 200 million. They were hanging on to, you know, after taxes, they wound up with like 150 million or so or something. And they were hanging on to it and making a list of all the premier royalty assets they wanted to own. And they were taking their time and they were...”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, it's transformed since 2009. When I bought this thing, I had known the management team because I had owned the stock, but I kind of lost track of it. And the financial crisis ensued and the thing was 30 and then it was like five or something. And so I started paying attention to it again. But at that time, what I was looking at was something that was trading at a discount to cash and liquid investments. That's all I was doing. It was like a net net to me. And I had owned it. I thought the guys were honest and would run a good business and not run it into the ground. And I thought, okay, well, you know, net, spring of 2009, things don't get much uglier than this. So here we go. And they were doing like 3 million a year or something. And they had one paying.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Jurisdiction, but that move from fossil fuels to renewables, that's kind of a big deal. You can't ignore it, even if you disagree with it. You cannot ignore it.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, at this point, we're looking at a major change in the way people want their electricity generated, right? Lots of people, they just hate coal. They hate it. And in Canada, they're going to shut down all the coal mines in 2030. So, you know, they better come up with something else. And a lot of that something else will be so-called renewable sources, the solar and the wind and the hydro. That's something that once you spend that money, especially like hydro, once you spend that money and the thing is going, it can go for a very, very, very long time. There's no reason to kind of go back the other way. That's secular. That's kind of one directional. That's a big one that affects mining, I think. Otherwise, since the mining deposits and the mines are all over the world, you know, political changes can be brutal. You can get wiped out on those. So you got to be careful about that.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“When the guys who are spending $1,500 to mine an ounce of gold are making money because gold is $1,900 an ounce, that is a pretty clear sign. When anybody can finance any piece of garbage moose pasture anywhere on earth that you know darn well will never become a mine because it's in the wrong place and the geology is screwy. It kind of becomes obvious. That's the hit-the-head moment. And as I said, when people who are not familiar with mining are calling you on the phone,”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Financed. Nobody wants to hear about mining. They refuse to even think about it. So for me, tracking cycles, I want to see extremes. I don't even think very much about them in between, but whether it's in the overall stock market, the S&P 500, or the mining cycle or anything, man, the extremes just hit you over the head. It's hard to miss them.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There are basically three places in any cycle, right? There's the extreme top, the extreme bottom, and the middle. I stay away from trying to read the middle. And you kind of know when you're getting near those extreme tops and extreme bottoms. At extreme tops, everybody on Earth, you know, your brother-in-law is calling you and saying, hey, I just found this cool mining stock. It's going to go up 1,000% next week. So it's just anecdotally, it's really not very different from looking at overall cycles in an economy, a country's economy, or any stock market index or anything else. But trying to put too fine a point on it is probably a mistake. And believe me, if you've been around the block at all, you know what those moments like late 2015, early 2016, you know, the bottom of the cycle look like and smell like. Nobody can get anything.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Of them and figuring them out. Just figuring out what they're really paying to pull an ounce of metal or a pound of metal or a ton of metal out of the earth can get really tricky. It can be difficult. So that's something that's a little different than other industries. Those are some things that are a little bit different. And in the mining industry, as in some other industries, for example, just another example that comes off the top of my head is something like banking or insurance. You really want to understand the management team well, like really well. You really want to know who they are and where they've been and what they've done and what kind of people they are. Especially the smaller the company, the better you know those people. Because as we probably all know, there's a lot of shady stuff in the mining world. There just is. And you have to accept that as sort of not a cost of doing business, but a cost of doing your research.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so financially, it's all the same stuff, right? Financial statement is a financial statement in any business and in any business you want something that you can regularly pull cash out of that literally makes more money than they know what to do with. So if you're investing in mines, actual mining companies, you will want to know the state of the industry. If you are investing in a company that owns copper mine, you will want to know the global state of the copper mining industry. Where are we in the cycle? How does your mining company compare to other mining companies in terms of the margins and the cash costs per pound of copper? That's extremely important with any mined commodity. Cash cost bounce of gold per pound of copper, et cetera, a ton of iron ore. You always want to know those things. And it can be very complicated getting inside.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Costs and things, and you've got to take whatever price the market gives you. It's just kind of Warren Buff. It's nightmare, the mining business. That's why he never wants anything to do with it. And I don't blame him. I never want to own a mining company. And neither does Altius minerals for that matter.”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Just straight to your question, the mining sector is rough. It's a rough business. And I actually don't like to invest in regular mining companies because they are extremely capital intensive. Before you earn a single penny of revenue to build a mine that's worth building, and we're talking probably a couple of billion dollars usually, maybe several billion. So up front before one penny of revenue, right? The process, in fact, you know, from discovering the mineral prospect to getting the permits and getting everything built and getting the financing, et cetera, et cetera, it can take a couple of decades. So, you know, it's highly cyclical. For that reason, over a couple decades, prices go up and down and up and down and projects are on and off. And it's just, you're never setting the price. You've got all these upfront costs and”
2019-12-01 · We Study Billionaires · TIP271: An Intrinsic Value Assessment w/ Dan Ferris (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT