Altus is a Project Generator focused on Africa.
Our business model is to cost-efficiently explore multiple projects simultaneously, prior to entering joint ventures with third parties who fund the next phases of exploration and development in return for an equity interest in each discovery.
We aim to generate multiple returns on capital by minimising shareholder dilution, diversifying risks, monetising returns and maintaining upside exposure to a diversified and growing portfolio of high quality assets.
Strengths of the Project Generator model
As a project generator, having completed reconnaissance exploration and defined targets, our business model is to attract joint venture partners to fund what the Company considers to be the highest risk phases of exploration which include drilling and resource definition, in return for an equity interest in the individual projects.
Illustration: Altus provides investors with exposure to a diversified portfolio of discoveries
The Project Generator business model is well understood in Canada and Altus provides investors in the London market with the opportunity to participate in the substantial benefits that it can offer including:
- participation in the value creation from making multiple discoveries simultaneously;
- minimising dilution of the Company’s share capital by JV funding at the project level;
- farming-out the capital at risk on any one individual project;
- maintaining upside exposure to long term value creation by retaining co-funding rights;
- growing the Company’s project pipeline for undertaking further JVs;
- diversifying the ubiquitous technical, commodity, country and management risks;
- prioritising the growth of net asset value per share, versus net asset value;
- income generation through JV payments, asset sales and royalty streams; and
- aligning the interests of the Company’s management with those of its shareholders.
Targeting superior risk-adjusted returns
We believe the Company’s business model delivers superior returns to shareholders, compared to investments in traditional exploration companies which can expose investors to excessive risks including:
- shareholder interests being concentrated in too few projects, commodities or countries;
- the general and administrative costs per 'exploration dollar' being excessive;
- being too reliant on capital markets, resulting in excessive dilution; and
- management teams not having the latitude or desire to drop poor quality projects.
Traditional exploration companies tend to offer speculative returns geared to commodity price movements and / or the outcomes of relatively high risk exploration programmes.
With a strategy of financing and diluting at the project level through joint venture partnerships, Altus is able to advance multiple projects from one efficient overhead. This allows more targets to be tested per 'shareholder dollar', thereby increasing the likelihood of exploration success and growing valuable discovery optionality. Our strategy diversifies the inherent risks presented by any one project, commodity or jurisdiction and allows us to be less reliant on the benevolence of the capital markets for funding, especially during cyclical downturns.
How the Project Generator model works
Altus selects prospective geological targets based on the systematic analysis of remote sensing data. We then secure mineral exploration licences where available and undertake preliminary prospecting. Following this initial phase of work, we prioritise our licences based on their apparent potential to host an economic ore body. Where this is interpreted to be unlikely, a licence is dispassionately relinquished to protect capital and save time. Licences which are maintained are advanced to the next stage of exploration. JV partners are then sought to fund the next phases of exploration with Altus providing technical and management support where appropriate.
Illustration: A disruptive business model designed to accumulate assets while mitigating key risks
The Project Generator model allows Altus to be more commercially disciplined when making strategic calls on how best to allocate our shareholders capital.
Embracing the cyclical nature of the mining sector
The mining sector is exemplified by cyclical swings, from irrational exuberance to short sighted despair. The cyclical extremes lead assets to be severely mispriced and Altus embraces this opportunity. The most recent bear market has caused many traditional juniors to go out of business, or their shareholders have suffered from deeply discounted share placements. During downturns, the mid-cap and major companies tend to focus on maintaining profitability or minimising losses rather than invest in exploration. As these cuts filter down and affect project pipelines, commodity markets become cyclically undersupplied meaning the demand and value of new discoveries rises as the mid-caps and majors compete to replenish their resources.
Illustration: Altus embraces the highly cyclical nature of the mining sector
Africa - where deposits can still be discovered cropping out at surface
Altus is focused on the continent of Africa where, due to the relative lack of exploration using modern techniques compared to many other parts of the world, economic mineral deposits can still be discovered cropping out at surface. It is reported that 24% of all discoveries in the last decade were found on the continent, despite receiving only 14% of the global exploration budget (source: MinEx Consulting). According to the same survey, deposits in Africa (excluding South Africa) are being discovered at average depths of just 9m, which is much shallower than average global depths of 78m; in Canada and the USA the average discovery depths are even greater, at 125m and 198m respectively.
This opportunity to make discoveries across Africa without recourse to expensive subsurface exploration technologies or extensive drilling programmes, means that our shareholder capital can potentially generate more value and at greater speed if applied to exploration in Africa than it might in many other parts of the world, thus increasing the discovery potential per Altus share. Given the collective geographical, geological and operational expertise of our management and advisor team, we believe Altus is well positioned to exploit this opportunity.
Illustration: Discoveries in Africa are made much closer to the surface than the rest of the world
Our diversified portfolio
Altus has established a portfolio of precious and base metals exploration assets in distinct jurisdictions. These include a bauxite discovery adjacent to an operating rail line in central Cameroon, which is being advanced under JV with ASX-listed Canyon Resources, and a copper-silver project in Ethiopia where the three phases of drilling have been funded by our previous JV partner JOGMEC (Japan Oil, Gas and Metals Corporation). In Morocco, Altus has established three separate projects for copper, tin, tungsten, gold, silver and zinc. In Cameroon, Altus is advancing a major shear hosted gold project with mineralisation mapped over at least 15km of strike along the shear. In Liberia, Altus holds a licence where multiple hard rock and alluvial artisanal gold workings have been mapped.
Our most advanced project, by resource status, is the high grade Bikoula colluvial iron ore project located in southern Cameroon, which is close to a maintained road and a proposed rail line for access to a newly constructed deep sea port. Altus has six distinct gold projects in the key Birimian gold belts of western and southern Mali and a Joint Venture with Resolute Mining earning in on one of the properties. The Company has most recently expanded its portfolio of projects into Ivory Coast, where it has a highly prospective Birimian gold licence in the southeast of the country.
Altus’ exploration teams are actively generating new opportunities to feed into the Company’s project pipeline.
Altus aims to position its shareholders in the ‘sweet spot’ of the mining sector, with the opportunity to participate in the potentially exceptional value creation that is available from the discovery process, but with significantly reduced downside risks than investors may otherwise be exposed to by investing in one or more traditional juniors. Our proven ability for actively managing multiple exploration teams and joint venture partnerships under one cost-effective corporate umbrella during a cyclical downturn, is testimony to the business model that Altus has adopted and the capacity of the Altus team.
We will continue to be opportunistic, leveraging our geographical, commercial and technical expertise to grow our balanced portfolio of projects across Africa, through grassroots licence applications and the acquisition of, or investment in selected projects.
Acquisitions are most likely to be undertaken where a company, which could be either private or listed, is considered to have insufficient management or financial capability to realise the value form their project and / or where the market has mispriced the value of its assets. Such acquisitions could be made for cash, equity or a combination of the two and be transacted at either the project or parent company level. These projects will continue to be advanced through the discovery stage through new JV partnerships which will fund their future growth.
Over time we aim to establish a significant portfolio of project interests, which will include direct ownership in projects, royalties on those projects, equity in divested subsidiaries, or equity of our JV partners. We intend to monetise these interests when appropriate, with the proceeds being returned to our shareholders or re-invested into the acquisition of new early stage prospects to create further shareholder value from the discovery process.