Elemental Altus' Diba Royalty Update, $US50 Credit Facility Extension - Growth in Gold Royalties Sector

• Expected maiden production from Diba royalty shows promise with ongoing exploration as Elemental Altus owns a 3% NSR royalty on the first 226,000 ounces produced
• Elemental Altus' Credit Facility with National Bank of Canada and Canadian Imperial Bank of Commerce is extended to June 2027 with improved terms and reduced debt
• The company's also shared reduced share capital through cancellation of 814,321 surrendered shares, additional payments received from Ming gold stream and Egyptian asset sale

Diba Development & Exploration: A Promising Horizon

One of the most exciting developments in Elemental Altus's portfolio is the progress at the Diba royalty. Allied Gold Corp has announced a substantial 12,000-meter drilling program aimed at extending the Mineral Resources at Diba. This exploration initiative is particularly significant as it prioritizes near-mine oxides, building upon the previously announced initial Proven and Probable Reserves of 280,000 ounces of gold at 1.43 g/t, which sits within the larger 377,000 ounces of gold in Measured and Indicated Resources announced in February 2024.

The Diba project is expected to contribute materially to production at Sadiola from mid-2024. Allied's decision to fast-track Diba into production this year while simultaneously undertaking aggressive exploration to expand the Resource underscores the project's potential. This approach aligns perfectly with Elemental Altus's strategy of focusing on near-term producing assets with exploration upside.

Elemental Altus holds a significant royalty position on Diba, owning a 3% Net Smelter Return (NSR) royalty on the first 226,000 ounces produced and an uncapped 2% NSR royalty on all subsequent production. This tiered royalty structure provides the company with substantial exposure to the project's success, both in the near term and long term.

Moreover, the Diba deal includes multiple production-based milestones totaling up to US$6 million. Elemental Altus has already received the first US$1 million payment, with further payments anticipated later this year. This milestone-based structure provides investors with clear markers of progress and additional value creation beyond the base royalty.

Credit Facility Extension & Debt Repayment

In a move that significantly enhances its financial flexibility, Elemental Altus has successfully extended the maturity date of its credit facility. The up to US$50 Million Credit Facility with National Bank of Canada and Canadian Imperial Bank of Commerce, originally set to mature in December 2025, has been extended to June 2027. This extension not only provides the company with a longer runway for strategic growth but also comes with improved commercial terms compared to the original agreement from December 2022.

Concurrent with the facility extension, Elemental Altus demonstrated its commitment to maintaining a strong balance sheet by making a further repayment of $5 million on the facility. This strategic move reduced the drawn balance to $20 million and increased the unutilized amount to $20 million, with an additional US$10 million available under certain conditions.

The company's proactive approach to debt management is evident in its repayment of US$10 million in the first half of this year. Management has expressed its intention to continue actively paying down outstanding debt when not engaged in new acquisitions. This prudent financial strategy, coupled with over US$5 million cash remaining on hand, positions Elemental Altus well for future growth opportunities while maintaining financial discipline.

Optimizing Share Structure: Share Surrender & Cancellation

In a move that benefits all shareholders, Elemental Altus has acquired and cancelled 814,321 common shares in the capital of the company. These Surrendered Shares, representing 0.42% of the company's issued share capital prior to cancellation, were surrendered by certain former and current management personnel to satisfy tax obligations related to the prior exercise of performance stock units.

This action effectively reduces the total number of issued and outstanding common shares to 195,176,071. While the immediate impact on share price may be minimal, this reduction in share count can potentially lead to improved per-share metrics and demonstrates management's alignment with shareholder interests.

Realizing Value from Diverse Assets

Elemental Altus continues to demonstrate the value of its diverse royalty and streaming portfolio through various payment streams. Following a settlement of certain outstanding claims, the company received an additional US$0.3 million in June related to its Ming gold stream. This comes on top of an initial US$2.3 million received in shares of Firefly Metals Ltd (ASX: FFM) in February 2024. Looking ahead, Elemental Altus is set to receive a further approximately US$9.8 million, split equally between cash and equity, in April 2025.

The company expects to shortly receive a further US$0.4 million from In2Metals Explorer S.à r.l. in respect of its sale of Akh Gold Ltd's Egyptian licenses. This payment is part of a larger transaction that included a US$10 million exploration commitment, a 1.5% NSR royalty on Egyptian licenses and license applications totaling 1,914km², and various cash payments. Additionally, as mentioned earlier, the company anticipates further payments related to the Diba project milestones.

While not detailed in this update, the company has previously mentioned potential future payments related to its Ethiopian assets. These diverse payment streams highlight Elemental Altus's ability to monetize its assets across different stages of development and geographies, providing investors with exposure to multiple value-creation opportunities.

Market Position & Growth Strategy

Elemental Altus Royalties Corp. is positioning itself as a growing force in the gold royalty sector. The company's strategy of focusing on uncapped royalties and streams over producing or near-producing mines operated by established counterparties provides a balance of current income and future growth potential.

The company's portfolio, which includes 10 producing royalties alongside pre-production and discovery stage assets, offers investors exposure to various stages of the mining lifecycle. This diversification helps mitigate risk while maintaining significant upside potential.

Elemental Altus's membership in the Discovery Group, a collection of public companies focused on the mining sector, may provide additional networking and deal flow opportunities, potentially leading to future accretive acquisitions.

Industry Outlook

While the press release doesn't directly address broader market conditions, it's important for investors to consider the gold royalty sector's position within the larger precious metals industry. Gold prices have shown resilience in recent years, driven by factors such as economic uncertainty, inflationary pressures, and geopolitical tensions.

The royalty and streaming business model offers several advantages in the current market environment:

1. Inflation hedge: Gold is often viewed as a hedge against inflation, and royalty companies provide leveraged exposure to gold prices without the operational risks of mining.
2. Capital efficiency: In a rising interest rate environment, royalty companies can often provide capital to miners at competitive rates, potentially leading to more deal opportunities.
3. Portfolio diversification: Companies like Elemental Altus, with their diverse asset base, offer investors a way to spread risk across multiple projects and jurisdictions.
4. Exploration upside: As demonstrated by the Diba project, royalty companies can benefit from exploration success without incurring additional costs.

Conclusion

Elemental Altus Royalties Corp. presents an intriguing opportunity for investors seeking exposure to the gold sector through a royalty model. The company's recent developments demonstrate progress on multiple fronts. The advancement of the Diba project showcases the potential for near-term production growth and exploration upside. The extension of the credit facility and ongoing debt reduction efforts indicate prudent financial stewardship. Continued monetization of assets through various payment streams highlights the value embedded in the company's diverse portfolio. Moreover, the company's strategy of focusing on uncapped royalties over quality assets positions it well for future growth.

For investors considering Elemental Altus, key factors to watch include progress at the Diba project, including production commencement and exploration results, ongoing debt reduction and utilization of the credit facility for potential acquisitions, further portfolio payments and potential new royalty acquisitions, gold price movements and their impact on the company's producing royalties, and geopolitical developments in the company's operating jurisdictions.

While the company faces risks common to the mining and royalty sectors, its diversified portfolio, focus on near-term production, and prudent financial management provide a solid foundation for potential growth. As with any investment in the mining sector, thorough due diligence and an understanding of the broader precious metals market are essential. Elemental Altus Royalties Corp. appears to be positioning itself as a dynamic player in the gold royalty space, offering investors a blend of current income, near-term growth prospects, and longer-term exploration potential. Elemental Altus warrants careful consideration as part of a diversified investment portfolio for those bullish on gold and seeking exposure through a royalty model.