Elemental Altus Royalties - A High-Quality Royalty Company with Significant Revenue Growth

• Elemental Altus Royalties is a royalty company with 10 producing assets and projected revenue of approximately $17 million for 2023.
• The company has been active in acquiring new royalties and making deals for existing projects in 2023, with a total of 8 transactions in 2023.
• CEO Frederick Bell emphasizes the importance of quality in their investments, including the quality of the management team, underlying assets, and the ability to raise capital for projects.
• Bell discusses the role of royalty companies as alternative financing options for mining companies and highlights the potential benefits of royalty financing in a challenging market.

About Elemental Altus Royalties

Elemental Altus Royalties (TSXV: ELE) is a Canada-based gold royalty company with a market capitalization of around $170 million USD. The company is focused on acquiring royalties on producing assets and currently has 10 producing assets generating around $17 million in annual revenue. Since 2017, Elemental Altus has grown its royalty revenue base from under $500,000 to approaching $20 million in 2023. The company has over 70 royalties across its portfolio.

Interview with President & CEO, Frederick Bell

Latest Portfolio Additions

Elemental Altus Royalties Corp. has completed a major royalty acquisition, purchasing two royalties from RCF Opportunities Fund L.P. for $10 million paid entirely in shares.

The key royalty acquired is a 0.68% net smelter return on the Cactus Copper Project located in Arizona and owned by Arizona Sonoran Copper Company. The Cactus project is a large copper development project currently undergoing a pre-feasibility study expected to be complete in Q1 2024, with a definitive feasibility study planned for H2 2024. Arizona Sonoran recently announced plans to significantly expand the project scope and throughput.

The addition of the Cactus royalty provides Elemental Altus with exposure to a sizable copper project in a top-tier mining jurisdiction. It also further diversifies the company's royalty portfolio across commodities and geographies.

The second royalty acquired is a 0.5% gross revenue royalty on the early-stage Nyanga Copper-Nickel Project in Gabon held by Armada Metals.

With this latest acquisition, Elemental Altus has now completed five separate royalty purchases year-to-date, continuing to execute on its growth strategy focused on acquiring high-quality royalties on production, development and exploration stage assets.

In addition to the two royalty purchases, Elemental Altus provided an update on Allied Gold, which recently listed on the Toronto Stock Exchange after completing a major $267 million financing. Allied Gold owns the producing Sadiola gold mine in Mali. Earlier this year, Elemental Altus sold the Diba Lakanfla gold project located near Sadiola to Allied while retaining a royalty. This transaction provides Elemental royalty exposure in Mali without any further expenditures required, consistent with the company's project generation model.

The Diba Lakanfla project hosts a near-surface oxide gold resource that Allied plans to sequence through the Sadiola mill. The Elemental team expresses optimism around Allied's progress and ability to enhance value at Sadiola and on the royalty lands.

The latest acquisitions, transactions and third-party developments continue to demonstrate Elemental Altus' execution on its royalty-focused growth strategy. The Cactus copper royalty in particular provides upside exposure to a sizable development project expanding in a top mining jurisdiction.

Disciplined Acquisition Strategy Focused on Quality Assets

Elemental Altus continues to pursue an aggressive yet disciplined acquisition strategy, targeting high-quality royalties on assets operated by proven management teams.

As CEO Frederick Bell explains, "The key characteristics for us have always been quality – quality of the management team, quality of the underlying asset. And then in this market we’ve also got to factor in their ability to raise capital." With eight transactions completed year-to-date in 2023, Elemental Altus is actively acquiring new royalties and expanding royalties on existing projects. This compares to around two transactions per year historically and reflects the buyer-friendly environment.

However, Bell emphasizes maintaining strict due diligence on potential royalty acquisitions: "Where skill comes in is filtering through the opportunities because we are in a market today where it is possible projects will tread water for a year or two in a difficult environment."

Elemental Altus focuses its acquisitions on producers and advanced development assets, where there is clarity on the pathway to production and cash flow. As Bell explains, "We put a lot of faith in the fact that we have 60 institutional shareholders – professional investors in the mining industry who will be supportive, with us for a long time...that is sort of a good indicator of the quality of our underlying assets."

In addition to acquisitions, Elemental Altus also actively works to organically expand its royalties through buybacks and royalty-upsizing deals on existing portfolio projects.

Royalties Offer a Win-Win Financing Solution

In the current market environment with restricted access to capital, Bell sees a significant opportunity for royalty and streaming financing to fund mining projects.

As Bell notes, "In the difficult times, conventional funding is not available, so companies are more inclined and open to royalties and streaming."

Royalties offer a flexible, non-dilutive financing solution for mining companies where cash payments to the royalty company are contingent on production. This aligns incentives and provides certainty on costs for the royalty company. For miners, royalties enable capital to be deployed directly into asset development while avoiding dilution from equity issuances. Bell explains that combining a royalty with equity financing can be an optimal structure in many cases.

Constructive Outlook for Gold Amidst Inflation

Despite recent weakness in gold prices, Elemental Altus remains constructive on the gold outlook. Inflation has severely lagged the rise in mining costs, compressing miner margins. However, with gold having an intrinsic inflation hedge, Elemental Altus expects this backdrop to be supportive for gold over the next 2-3 years. In the meantime, the company continues actively adding royalty exposure to quality development and exploration assets, positioning its portfolio for significant cash flow growth when the cycle turns.

With its focus on high-quality cash-flowing royalties, revenue set to nearly double on the back of Allied Gold's Bougouni development, and a robust pipeline of acquisition opportunities, Elemental Altus Royalties represents an attractive investment in the gold royalty space. The disciplined yet aggressive acquisition strategy employed by Elemental Altus' experienced management team provides investors with leveraged exposure to exploration upside and emerging mine development while avoiding many of the risks associated with operating mines.

For investors seeking inflation protection, gold price leverage, and near-term revenue growth, Elemental Altus Royalties warrants consideration. The company offers a portfolio of quality royalty assets run by proven operators with the potential to deliver strong cash flow as projects advance and gold prices strengthen.

Investment Thesis

Backed by rising gold production, exploration success, and disciplined acquisitions, Elemental Altus Royalties is primed to deliver strong shareholder returns:

• Inflation protection and leverage to rising gold prices. With royalties tied to gold production and revenue, Elemental Altus offers exposure to gold upside.
• Near-term revenue growth. The Bougouni royalty alone boosts Elemental Altus' revenue by nearly 100% starting in 2024. More production growth is expected from its portfolio of 10 cash flowing royalties.
• Reduced mining risk. By focusing on royalties operated by proven teams, Elemental Altus avoids the risks of operating mines directly.
• Exploration upside. The royalty model provides discounted exposure to new discoveries and resource expansions on royalty lands.
• Emerging cash flow. As projects advance through development, Elemental Altus’ royalties will steadily convert into revenue streams.
• Portfolio diversification. With a broad portfolio of royalties across several countries, Elemental Altus mitigates concentration risk.