Riding the Electrification Wave with Prime Copper Royalty

Elemental Altus Royalties is a precious metals-focused royalty company listed on the TSX Venture Exchange. In this recent interview, CEO Frederick Bell provided updates on the company's portfolio optimisation efforts, dealmaking, and strategy. Key themes included monetising non-core assets through partnerships, acquiring royalties on producing mines, and positioning the company to capitalise on opportunities in the current market downturn.

Caserones Copper-Gold Royalty

• Elemental recently increased its 0.4% royalty interest in the Caserones mine in Chile to 0.495%, after acquiring an additional 0.098% royalty from Regal Resources.
• This acquisition came right before Lundin Mining acquired a majority stake in Caserones from Yamana Gold and Pan Pacific Copper. Bell believes Lundin's operational expertise and regional presence will bring synergies and enhance the asset.
• Caserones is a large, long-life copper-gold porphyry mine, with ore reserves supporting a 32-year mine life. However, Bell notes there has been limited recent exploration, providing upside.
• As a cornerstone holding, Bell highlights Caserones' exploration potential, large production scale, and long mine life. The royalty provides uncapped leverage to copper prices, production growth, and technological improvements.
• The electrification trend and copper's key role position Caserones well going forward. As an existing operation with billions invested, it's rare for a junior royalty company like Elemental to have a high-quality royalty on such an asset.

Ethiopia Portfolio Monetisation

• Elemental sold its Ethiopian exploration portfolio to privately held ANS Mining Share Company for upfront cash, staged payments, a 5% equity interest in ANS, and an equity interest in ANS' parent upon listing.
• Bell sees this structure as optimal to advance the assets while outsourcing expenditures and retaining the upside. Identifying technically and financially strong partners is crucial.
• Elemental's expenditures recoup some costs, but the key upside driver is retaining royalty interests. The goal is maximising royalties while minimising ongoing expenditures.
• Bell explains they took projects to this stage over the years, establishing targets and in-country operations. Outsourcing to capable developers unlocks the next exploration stage without additional expenditure.

Mali Portfolio Monetisation

• Similarly in Mali, Elemental sold its Diagou project adjacent to Allied Gold's 10Moz Sadio mine for $6M upfront and staged payments, while retaining a 5% NSR royalty.
• Bell highlights Allied's infrastructure and operating synergies to fast-track oxide production and exploration upside from Diagou's defined resource. Allied's regional expertise allows for accelerating resource growth and mine development.
• The royalty provides Elemental uncapped upside from resource expansion and continued production from what could be a multi-million-ounce asset. The upfront cash and payments are secondary to the long-term royalty value.

Portfolio Strategy

• Across its portfolio, Elemental focuses on maximising value and minimising expenditures by bringing in capable partners to advance early-stage assets. This allows redirecting capital to acquire royalties.
• Bell believes the current bear market provides attractive royalty investment opportunities. However, Elemental remains selective in deploying capital accretionally given lower valuations.
• With its producing royalties generating cash flow, Elemental is positioned to be counter-cyclical and acquire royalties during the downturn, when opportunities are best.

Market Outlook

• Bell expects further M&A consolidation in both mining and the royalty space, continuing trends from 2014-15 and 2017-2020. There are now gaps and opportunities in the sub-billion-doll royalty space.
• The current market presents quality royalty opportunities for investment. But Elemental will be cautious and accretive in deploying capital given lower industry valuations.
• In challenging markets, cashed-up Elemental can maximise value by partnering assets at the right stage. This also demonstrates portfolio value to investors.

Portfolio Optimisation

Elemental Altus Royalties is focused on portfolio optimisation and maximising asset value while retaining key royalty upside. Selective deal-making has strengthened its financial position. With sector consolidation expected, Elemental sees opportunities to accretively acquire royalties given its counter-cyclical strengths. Recent asset monetisations demonstrate the potential to crystalise value while advancing development through partnerships. For investors, Elemental provides leveraged exposure to exploration upside and long-life-producing assets.

Here are some key reasons why investors may want to consider buying Elemental Altus Royalties stock:

Leveraged Exposure to Commodities Upside

• Elemental's royalty portfolio provides leveraged exposure to potential upside in copper and gold prices, without the risks and costs of operating mines. Its royalties are uncapped, meaning more revenue as commodity prices rise.

Cash Flow Generating Producing Assets

• The company has around 10 producing royalties that are generating diversified cash flow today. This includes cornerstone royalties like its stake in the Caserones copper mine. Cash flow funds further acquisitions.

Exploration and Resource Expansion Upside

• Many of Elemental's royalty assets have significant exploration potential and resource expansion upside, like at Caserones and Diagou. Positive results can increase reserves and extend mine life.

Strong Partners Advancing Development

• Elemental is partnering early-stage development assets with technically and financially capable miners like Lundin and Allied Gold. This advances projects while retaining royalty upside.

Potential for Royalty Portfolio Growth

• The current market downturn presents opportunities for Elemental to accretively acquire additional royalties and grow its portfolio. Management is selectively deploying capital.

Takeout Potential in Consolidating Sector

• Further consolidation is expected in the royalty space. Elemental could be an attractive takeover target for a larger royalty company looking to add quality copper and gold royalties.

Strong Management Team

• An experienced management team is focused on value creation through monetising assets, deal-making, and portfolio growth during the market downturn.

Undervalued Relative to Peers

• Elemental is trading at a lower Price/NAV valuation than royalty peers, presenting an opportunity for investors to take a long-term view on commodities upside.

Elemental offers investors attractive leveraged exposure to commodity prices, exploration upside, diversified cash flow from producing royalties, and significant growth potential - all under the leadership of a strong management team.