Elemental Altus Royalties Expands Portfolio with Strategic Tungsten Acquisition

Elemental Altus Royalties Corp. (TSXV:ELE) is a leading income-generating precious metals royalty company with a diverse portfolio of assets. The company focuses on acquiring uncapped royalties and streams over producing or near-producing mines operated by established counterparties. With 10 producing royalties and a range of pre-production and discovery stage assets, Elemental Altus aims to build a global gold royalty company that offers investors superior exposure to gold with reduced risk and strong growth potential.

The Acquisition: A Strategic Entry into Critical Minerals

On July 22, 2024, Elemental Altus revealed its binding agreement to acquire two existing royalties from Cornish Metals Inc. The centerpiece of this acquisition is an uncapped 4% net smelter return (NSR) royalty on the Mactung Project in Canada, currently being advanced by Fireweed Metals Corp., a well-financed Lundin Group company. Additionally, the deal includes an uncapped 1% NSR royalty on the high-grade Cantung Project, a formerly operating tungsten mine also located in Canada.

The total consideration for this acquisition is US$4.5 million, structured in two tranches: an initial payment of US$3 million in cash upon closing, followed by a second payment of US$1.5 million due 12 months after the closing date. As part of the transaction, Elemental Altus will also assume an obligation to pay a C$1.5 million deferred payment to Teck upon an investment decision being made to progress the Mactung Project.

The Mactung Project: A World-Class Tungsten Asset

The Mactung Project stands out as the crown jewel of this acquisition. Located on the border of Yukon and Northwest Territories, this advanced-stage exploration project is one of the largest and highest-grade tungsten deposits outside of China. The project's strategic importance is underscored by several key factors:

• Exceptional Resource Base: The updated Mineral Resource Estimate from July 2023 outlines an Indicated Resource of 41.5Mt at 0.73% WO₃ and an Inferred Resource of 12.2Mt at 0.59% WO₃. These figures place Mactung among the world's premier tungsten deposits.
• Advanced Development Stage: Extensive work has already been completed on the project, including drilling, engineering, metallurgy, and geotechnical studies. A feasibility study conducted in 2009 outlined an 11-year underground mining scenario, for which a conditional mining permit was approved by the Yukon Territorial Government in 2014.
• Strong Operator: Fireweed Metals, backed by the renowned Lundin Group, brings substantial financial resources and an experienced management team with a track record of securing funding for mine development.
• Near-term Catalysts: Fireweed is expected to release a new Preliminary Economic Assessment (PEA) in 2024, building on the updated Mineral Resource Estimate from 2023. This could potentially accelerate the project's development timeline and unlock significant value.
• Strategic Importance: With over 80% of global tungsten production currently concentrated in China, Mactung represents a rare opportunity to establish a reliable Western source of this critical mineral. This strategic positioning could attract government support and fast-track the project's development.

The Cantung Project: Additional Upside Potential

While the Mactung Project is the primary focus of this acquisition, the Cantung Project adds further depth to Elemental Altus' tungsten exposure. Key highlights of the Cantung royalty include:

• Historical Production: Cantung operated intermittently from 1962 until 2015, demonstrating the project's ability to produce high-grade tungsten.
• Significant Resource Potential: Historical estimates indicate substantial remaining resources, including Indicated Resources of 3.8Mt grading 0.97% WO₃ and Inferred Resources of 1.4Mt grading 0.8% WO₃.
• Competitive Grade: The remaining resource at Cantung is of a size and grade competitive with other small, high-grade tungsten projects globally.
• Redevelopment Potential: Currently under the ownership of the Northwest Territories Government, the project is seeking new ownership, presenting potential opportunities for redevelopment.

Frederick Bell, CEO of Elemental Altus, expressed enthusiasm about the acquisition, stating,

"We are excited to add these two exceptionally high-grade royalties to the portfolio, specifically Mactung, which is being developed by Fireweed Metals with the support of the Lundin Group. The transaction with Cornish Metals builds our development pipeline with the potential for material revenue from a Tier 1 jurisdiction in the medium term."

Bell further emphasized the strategic importance of tungsten and the potential for government support, noting,

"Recent world events have sharpened the focus of western governments on critical metals, creating an opportunity at Mactung to establish a rare, reliable western source of tungsten which may attract government funding and fast track the project."

Positioning for the Critical Minerals Boom

Elemental Altus' decision to acquire these tungsten royalties reflects a strategic move to capitalize on the growing importance of critical minerals in the global economy. Several factors underpin the strategic rationale for this acquisition:

• Exposure to Critical Minerals: Tungsten is classified as a critical mineral by the European Union, United States, and Canada due to its economic importance and supply risks. This acquisition provides Elemental Altus shareholders with exposure to this strategically important sector.
• Diversification of Portfolio: While maintaining its focus on precious metals, this transaction demonstrates Elemental Altus' ability to identify and acquire compelling royalties in other strategic sectors, enhancing overall portfolio diversification.
• Tier 1 Jurisdiction: Both the Mactung and Cantung projects are located in Canada, a stable and mining-friendly jurisdiction, aligning with Elemental Altus' focus on low-risk geographies.
• Potential for Significant Revenue: The high-grade nature of these deposits, combined with the strategic importance of tungsten, positions these royalties as potential sources of material revenue for Elemental Altus in the medium term.
• Alignment with Global Trends: Recent geopolitical events have heightened Western governments' focus on securing reliable sources of critical minerals, potentially accelerating the development of projects like Mactung.

Risks and Considerations

While the acquisition presents significant opportunities, investors should also be aware of potential risks:

• Development Risk: Both Mactung and Cantung are currently non-producing assets. There is no guarantee that these projects will advance to production or meet projected timelines.
• Commodity Price Volatility: The value of the royalties is tied to tungsten prices, which can be volatile and influenced by various global economic factors.
• Operator Risk: The success of the projects depends on the capabilities and decisions of the operators, Fireweed Metals for Mactung and potentially new owners for Cantung.
• Regulatory and Environmental Factors: Mining projects, especially in sensitive northern environments, can face regulatory hurdles and environmental challenges that may impact development timelines.
• Buy-back Clause: The Mactung royalty includes a 50% buy-back option for C$2.5 million, which, if exercised, would reduce Elemental Altus' exposure to the project.

Conclusion for Investors

For investors considering Elemental Altus Royalties Corp., this acquisition represents a significant strategic move that could reshape the company's growth trajectory:

• Portfolio Diversification: The addition of high-grade tungsten royalties complements Elemental Altus' existing precious metals focus, providing shareholders with exposure to the critical minerals sector.
• Growth Potential: The Mactung Project, in particular, offers substantial upside potential as one of the largest and highest-grade tungsten deposits outside of China.
• Strategic Positioning: By gaining exposure to a critical mineral in a Tier 1 jurisdiction, Elemental Altus is aligning itself with global trends towards securing strategic resource supply chains.
• Near-term Catalysts: The expected release of a new PEA for Mactung in 2024 could serve as a significant value driver for the royalty.

While the full value of these royalties may take time to materialize as the projects advance towards production, the acquisition positions Elemental Altus as a player in the critical minerals space. For investors seeking exposure to both precious metals and strategic resources, Elemental Altus now offers a unique investment proposition.

As with any mining investment, careful consideration of the risks and potential rewards is essential. However, for those bullish on the long-term prospects of critical minerals and the ability of Elemental Altus' management to execute their growth strategy, this acquisition could mark the beginning of an exciting new chapter in the company's development.