As part of the ShareBuyers’ going for growth series, we take a look into the growth prospects of Altus Strategies (AIM: ALS), a unique mining royalty generator in the precious metals space.
With the ALS share price soaring by more than 150% over the course of a year, CEO Steven Poulton joins us to provide a closer understanding of the business and why he believes investors should give it some serious consideration for their portfolios.
Firstly, please tell us a bit about Altus Strategies and its value proposition?
Altus Strategies is a unique mining royalty generator focused on precious metals with a growing, diversified portfolio of assets across Africa. We are listed on the AIM, TSX and OTCQX markets in London, Toronto and the U.S., respectively. Since our inception in 2007, we have built a portfolio of 20 projects and royalties in key mining jurisdictions.
Our differentiated model means we generate royalties on our own discoveries, as well as acquiring them through third party financing and acquisitions. With key institutional backing from global mining investor La Mancha, which has a 35% stake, Altus is exceptionally well positioned to realise considerable returns for shareholders.
The first strand of our two-part business model is project generation, where we leverage our expertise and proven ability to identify and acquire early-stage, high-value potential assets. We advance the projects through the discovery stage and attract third party capital to carry them forward through joint ventures. Our partners earn an interest once key milestones are reached and Altus receives cash and equity payments, as well as retaining a royalty on the project once it achieves production. The second strand is royalty acquisition, with the Company acquiring existing royalties to generate cash flow. We are actively focused on building this division of our business.
Unlike the typical resource company, Altus is constantly seeking to monetise its project interests, in order to re-invest the proceeds into the acquisition of new early stage prospects to create further shareholder value from the project and royalty generation process.
Through our portfolio approach we significantly reduce the potential downside for our shareholders. We diversify their exposure by jurisdiction, by commodity and by asset. In securing joint venture partners to advance our assets, we also reduce our shareholder’s exposure to capital commitments. Our model allows Altus to continually grow its portfolio, minimise shareholder dilution and generate multiple short and longer-term income streams. With this model, Altus has become the leading African royalty generator.
The current climate is presenting challenge and opportunity – how has this applied to your business?
For such an international business with operations and licenses in multiple jurisdictions, recent widespread limitations on travel have been an issue we have had to overcome. With our experienced teams on the ground in Africa and the rest of our staff able to work remotely, we have been able to continue to work efficiently throughout the current COVID-19 crisis. Our successful response in working through the pandemic has meant we have been able to drive the development of our assets simultaneously, all of which could drastically change the fortunes of the Company and transform our valuation. Despite the restrictions caused by COVID-19, we have recently seen exploration taking place simultaneously on eight of our projects across four countries in Africa.
The work has been undertaken by our in-house teams and those of our JV partners. Looking ahead, we plan to expand our operations into at least one new very high priority destination in Africa in the coming months. Our ability to continue operating without disruption is simply down to the commitment and expertise of our teams on the ground, as well as the careful construction of the business that has occurred over the last decade; somewhat unnoticed by the market but integral to the current success and potential of Altus.
We are immensely ambitious and the significant backing from La Mancha, and other highly regarded investors, illustrates a huge belief that Altus has the potential to become the leading company in this field. With the management team holding more than a 20% stake in Altus, we are fully aligned with the interests of other shareholders and, as such, are fully committed to working towards realising the highest possible value for shareholders.
Growth catalysts are crucial to business growth – what do you believe yours are?
Altus has numerous inherent catalysts; each of which we expect will lead to a significant level of growth. The strategic investment of La Mancha validates this belief. As a group they have a formidable track record in taking strategic stakes and delivering considerable returns on investment.
Our business model offers investors with optimal exposure to the precious metals sector with the minimum risk profile and capital outlay. Our involvement in numerous early stage discoveries and, with the assistance of selected JV partners, the development of these assets towards production generates numerous project technical and financial milestones. We currently have 20 project and royalty interests and we expect news flow from each of these. By way of example, from just two of our projects under JV in Mali, plus our own 100% owned asset, our shareholders have exposure to the results from almost 20,000m of drilling, in the space of just three months. We also expect significant catalysts from new projects and royalties that we expect to acquire in the coming months and years.
The rising gold price in the last few years has certainly benefitted the Company. However, our business is not predicated on a high or rising gold price. While we have exposure to any strong upward moves in gold, we also have exposure to other commodities such as copper, bauxite and iron ore that are key to global economic growth. In fact, our business model is specifically designed to embrace the highly cyclical nature of the industry. We provide investors with the assurance that due to the breadth and nature of our projects, we can realise value while being insulated from downturns as and when they inevitably occur.
What are the biggest headwinds you foresee to achieving growth in the coming months and years? How will you tackle them?
The continued impact of COVID-19 is certainly a headwind for the mining industry, but also something that has so far not had a substantial negative impact on our business. In contrast, investors rushing to safety in hard assets such as commodities, and gold particularly, stemming from the unprecedented
market conditions this year, has benefited us and the sector more broadly. While an element of risk exists in the mining industry by default, the very design of our business model if not removes then at least significantly lessens these risks. By managing numerous projects at various stages and in differing metals simultaneously, we are able to protect ourselves against the cyclical nature of the markets and commodity prices.
The most prominent headwind we face as a company is ensuring the value of our assets are realised by the market. We are aware that at first sight our portfolio approach is not as straightforward to value as a single asset resource company might be. As we continue to extol the quality of our projects and shareholders, the track record of our team and the potential game-changing nature of our pipeline of news, we believe the market will, over time, start to better recognise the overall true value of the Company.
Imagine you find yourself in a lift with Warren Buffett. What would be your ‘elevator pitch’ to summarise why he should invest in your business?
Altus captures the investment “sweet spot” of the mining sector. Our model is unique and this, combined with our team’s track record, has attracted some of the world’s most respected resource investors to join Altus. Our portfolio and partner-funded approach diversifies the well-known risks associated with our industry and our focus on generating royalties and monetising our assets provides the Company with multiple significant, short and long-term income streams.
Our focus is on Africa, where our Board and management have almost unrivalled experience and where we see immeasurable upside for growth for Altus. Africa alone has generated 24% of all discoveries in the last decade, despite having only 14% of the global exploration budget. As the continent remains vastly unexplored, discoveries are largely at or near surface, meaning that exploration in Africa is far more efficient, requiring less time and money.
Altus is run by shareholders for shareholders, with 20% of the Company owned by management. This absolute alignment of interest underscores the firm belief we have in the Company and why we feel it deserves your very serious consideration.
Please note: this discussion with Steven Poulton CEO of Altus Strategies forms part of the ShareBuyers’ going for growth series – helping companies with high growth potential to share their story. It is not a recommendation to buy or sell shares in ALS.