Elemental Altus Royalties - A High-Growth Royalty Company with a Diversified Portfolio

• Elemental Altus Royalties (TSXV:ELE) is a fast-growing royalty company with 10 producing assets and a portfolio of about 70 royalties.
• The company has consistently increased its royalty revenue over the last five years, with a Q2 revenue of $4.7 million, reaching a H1 2023 revenue of $8.5 million.
• The two largest royalties, Casserones and Carlawinda, contribute over half of the company's revenue, with assets in Australia, Chile, Mexico, and other diverse regions.
• The company's strategy focuses on diversification across jurisdictions to mitigate risk, with an interest in emerging mining jurisdictions for exploration upside.
• Elemental Altus recently acquired a royalty on the Arizona Sonoran's Cactus project, showing its active acquisition approach and ability to use equity to fund deals without depleting cash reserves.

About Elemental Altus Royalties

Elemental Altus Royalties is a fast-growing royalty company focused on acquiring and managing a diversified portfolio of royalties. With a track record of increasing royalty revenue for five consecutive years, Elemental Altus offers investors exposure to a unique mix of producing assets and earlier stage exploration projects.

Founded in 2018, Elemental Altus Royalties has quickly built a portfolio of approximately 70 royalties. The company expects 2023 to mark another record year for royalty revenue. Elemental Altus is weighted towards Australia, with its largest royalties being the Caserones mine in Chile and the Carlawinder mine in Australia. However, the portfolio includes assets across the Americas, Australia, Africa and other regions. This diversification mitigates risk and provides revenue stability.

Interview with CEO & Executive Director, Frederick Bell

Strong Financial Performance

Elemental Altus reported record financial results for the second quarter of 2023. Revenue hit $2.6 million, up 25% year-over-year. Adjusted revenue, including the Caserones royalty, reached $4.7 million, representing 127% growth compared to Q2 2022. The company also generated record attributable production of 2,377 gold equivalent ounces (GEOs), up 109%.

The robust Q2 results were driven by strong performances at several key royalty assets. Notably, the producing Karlawinda gold mine in Australia saw record annual production in the year ending June 2023. Elemental Altus receives a 2-3% royalty on a portion of Karlawinda. Another major royalty, the Wahgnion gold mine in Burkina Faso, maintained steady throughput as mining progressed into a higher grade zone.

During the quarter, Elemental Altus continued acquiring additional royalties on the large-scale Caserones copper mine in Chile. With Lundin Mining now the majority owner and operator of Caserones after completing its acquisition, there is potential for further optimization and increased production.

With revenue scaling rapidly, Elemental Altus remains on track to achieve its full year guidance of 9,000-10,200 GEOs weighted towards the second half of 2023. Backed by rising production at key royalty assets, strong commodity prices and an expanded portfolio, the company appears poised to meet or potentially exceed guidance. The Q2 results provide further confirmation that Elemental Altus offers investors excellent leveraged exposure to an array of producing mining assets.

Adding a Top Tier Copper Royalty

Elemental Altus continues expanding and upgrading its royalty portfolio. In August 2023, the company announced it is acquiring an existing 0.68% NSR royalty on the Cactus Project in Arizona for $10 million in shares from Resource Capital Funds (RCF).

The Cactus Project is a past-producing copper mine owned by Arizona Sonoran Copper Company. Between 1974-1984, Cactus generated 200,000 tons of copper alongside gold and silver. With extensive infrastructure in place and permits secured, Arizona Sonoran is now looking to restart production.

A preliminary feasibility study expected in early 2024 will incorporate a large adjacent deposit called Parks/Salyer. This aims to substantially increase production potential to 45,000-50,000 tons of annual copper over a 30 year mine life. The addition of the Parks/Salyer deposit could be a game changer for the scale of the project.

As CEO Frederick Bell highlighted, the royalty provides exposure to a uniquely de-risked copper asset in a top tier mining jurisdiction. The U.S. is the world's 7th most attractive country for mining investment according to the Fraser Institute. Cactus also benefits from being located on private land rather than federal land.

The transaction brings in RCF as a major new shareholder, validating the value of the royalty. RCF plans to take the entire $10 million purchase price in Elemental Altus shares. With Elemental Altus expecting significant production growth at Cactus after the PFS, RCF’s willingness to get shares underscores their confidence.

Disciplined Growth Strategy

Elemental Altus has been highly active in 2023, completing seven transactions in eight months. This includes acquiring royalties on the Hope Brook, Pickle Crow and Arizona mines. The company has balanced acquiring cash flowing royalties with earlier stage exploration assets. The recently announced Cactus Mine royalty provides exposure to a large, high-quality copper project in Arizona. Taking the royalty consideration entirely in shares, Resource Capital Fund is becoming a major shareholder. This validates the royalty’s value and provides another knowledgeable mining investor.

Elemental Altus has also demonstrated portfolio management skills through asset sales. By monetizing non-core royalties in Mali and Ethiopia, the company can recycle capital into higher return opportunities. With additional acquisitions planned for 2023, Elemental Altus offers investors leveraged exposure to an expanding royalty portfolio.

Attractive Entry Point for Investors

Despite a standout year operationally, Elemental Altus shares have pulled back 30% from 52 week highs. With strong financial results, royalty portfolio growth and increased scale, current prices present an attractive entry point. As the company continues executing, royalty cash flows should expand rapidly. Elemental Altus offers investors a unique opportunity to gain exposure to emerging mining jurisdictions paired with the stability of producing royalties.

Conclusion

For investors seeking leveraged exposure to precious metals and mining, Elemental Altus Royalties checks all the boxes. With diversified royalty assets, disciplined growth and a focus on shareholder value, Elemental Altus is poised to continue generating peer-leading returns. As the company reaches critical scale, now is the time for investors to take a close look at this high-quality royalty vehicle.