Altus Strategies PLC (LON:ALS) Chief Executive Officer Steve Poulton caught up with DirectorsTalk for an exclusive interview to discuss their business model, their Letter of Intent with Raptor Resources and looking ahead to more deals.
Q1: Steve, could you explain to us your business model as it seems to be unique in the exploration sector in London?
A1: You’re right. We are a so-called project generator company and what that basically boils down to is that our focus is on making exploration discoveries and then partnering those discoveries with industry group who take those projects forward hopefully into production.
I guess you could describe is as a portfolio approach to traditional exploration, what we try and do is diversify the risks that our shareholders may suffer if they were to invest in just one or two exploration projects. What we do is we diversify by commodity and by jurisdiction, so we’re currently have about 18 projects in 6 countries.
Q2: What’s your background to the group, team and shareholders? Is this a business model that you have a lot of expertise in?
A2: The whole team here are technical by background but also, they have a number of years of experience in the sector and predominantly in Africa.
Myself and Matt Grainger have been in the business for 20 years and we’ve been managing various exploration companies through those years. Our Chairman is an individual called David Netherway who’s a mining engineer and he’s been involved in the construction of a number of gold and other mines around the world, 3 or 4 of which have been in Africa. One of our other directors is Woody Milroy who’s is a specialist financial but also a resource individual who’s based in Guernsey and is very strong on the compliance and commercial elements of the business. We then have our final director, an individual called Michael Winn and Michael is also a geologist and has a long track record in the junior exploration sector, specifically and also working in project generator and royalty businesses.
So, between us, as a team, we have a good track record in exploration and development, we have a strong understanding of operating in Africa and in making discoveries and then monetising those discoveries.
Within the group, we have about 16 or 17 geologists in total spread across the UK and the 6 countries that we’re operating in. We’re very active as a team and we’re very proud of the work that our team are doing in making discoveries. It’s a part of our industry that has been neglected over the last 10-15 years with much focus and capital going towards more advanced staged and ended mine projects. Exploration has been traditionally perceived as being very high risk and very low return which is clearly not that attractive to investors but what we’re doing with our business model is hopefully addressing those problems.
As a group, as a Board, as a team we currently own around 45% of the shares of the company so there’s an incredibly strong alignment of interest between the Altus team and the shareholders, we’re literally putting our money where our mouth is.
Q3: Now, we saw your news on the Letter of Intent with Raptor in Morocco, can you provide us with a little back ground on this and how it fits in with Altus Strategies’ business model?
A3: Certainly, that was something we announced on 4th September. Raptor is a private company which is seeking to list on the Australian Stock Exchange, what we are proposing to do in our announcement with them is to allow them to earn an initial interest in our Moroccan exploration business and up to 100% interest in our Moroccan exploration business. We currently have four exploration projects in Morocco, it’s a country we’ve been working in for the last 4 years and we’ve been working there very successfully. It’s an excellent destination to invest in, it has a fantastic geological endowment and there’s not a huge amount of competition from traditional exploration groups for making discoveries there.
So, we’ve had a very good run and we’ve made some very exciting finds and the Board and team at Raptor have taken note of what we’ve done there and they would like to take it on board from us. We are very keen to do that, as I said at the top our business model is to make discoveries and then partner with other groups. As part of this transaction, we would expect to end up with some share equity in Raptor once they are listed, we would expect to receive a cash payment from them in advance and we’d also expect to have an x amount of return royalty on the projects that we’re vending in.
So, from the point of our shareholders, they’ve taken some risk with us in making those discoveries, and being a first-mover, and then they’ll benefit from the shareholding and the other elements of the deal that we do with Raptor. I guess it comes quite quickly on the back of some news from our other joint venture partner which is currently ASX-listed, a company called Canyon Resources.
Without diverting too much, we were an early-mover into Cameroon, in the mid-2000’s we moved in there, but in 2010 we staked some bauxite exploration licenses and a number of years later we entered a joint venture with Canyon Resources on that property. Canyon were recently awarded a large bauxite concession in Cameroon and we’re in the processing of vending in our joint venture into Canyon for equity. As part of that transaction, we undertook very limited exploration for bauxite, we spent of the order of AU$150,000 only and we received a cheque from them upfront of AU$150,000 and we also received 8 million shares in canyon Resources as part of the initial joint venture deal with them. Those shares now have a value of around C$2 million, just over £1 million for a property that we spent AU$140,000 on and received our money back from. So, we’re looking forward to that deal coming up and to talking more about that once we’re able to.
I guess the Raptor deal is following in that same pathway of doing early stage exploration and then monetising it.
We’re very busy now, as you can imagine, with 18 projects in 6 countries. We’ve been in a space where there’s not been much appetite for investing in exploration, it’s been a bear market, it’s been unavoidable, it’s been very difficult to manage an exploration business that’s so diversified and has so many properties. We’ve been very lucky to have a number of significant investors in the company, a number of high-net worth individuals and sophisticated investors as well as the management team and we also are very pleased to have the backing of Sprott, as a major shareholder they have about 13% stake in the company. Amongst all of us, we’ve been able to do our exploration business, we’ve been able to make discoveries through the downturn and we’re hopeful that over the next 2 or 3 years, we’ll do a lot more transactions, a lot more of the monetising as well as the making of discoveries.
Q4: Looking ahead, do you foresee many deals going forward for Altus Strategies?
A4: Yes, is the straightforward answer. I think the phrase that would sometimes be used is that ‘the cupboards are bare’, the major companies and the mid-tier have really under-invested in the exploration space, quite remarkably. Now, it’s apparent that those decisions that have been made to high-grade deposits and to cut costs and to try and make margins work mean that people have taken their eyes off the future. Mining is one of those few businesses where your modus operandi is to make your assets smaller and you can only do that for so long before you have to get more projects.
Our business has been predicated on using the downturn to be entrepreneurial and dynamic and aggressive in the sense of making those discoveries and generating those projects in the expectation that there will come a point where companies will need to work out where their pipeline deals and projects and cash flow is going to from.
We do see that transition happening and it’s probably something we noted about a year ago. We actually undertook a transaction to acquire a company called Legend Gold which was a TSX venture listed company, we acquired them in January this year for a stunning portfolio of gold projects that had in Western Mali and southern Mali along with a joint venture with Resolute Mining in Southern Mali. On the back of closing that transaction, we raised C$4 million and we also then subsequently dual-listed on the Toronto Venture Exchange.
So, we have been getting a bit of a higher profile having been formed in 2007 and staying private for the best part of 10 years, we are a bit more of people’s radars. That said, we have certainly noticed in the last year a very strong uptake in enquiries regarding our projects and we went from a situation maybe 2 years where we would have one enquiry perhaps every 3 months to a situation where we probably have three enquiries every month. These are genuine and serious enquiries.
So, that’s a very strong position for us to be in and from that point of view, the future is very bright.