Quick Update on Two Basic Materials Stocks - Altus Strategies & Strategic Minerals

Summary

• Altus Strategies announced the start of the drilling programme at Lakanfla gold project in Western Mali.
• The drilling programme includes 18 holes of 3,800 metres that would be funded by Marvel Gold Limited.
• Strategic Minerals announced the completion of an independent study of the Redmoor project by Wardell Armstrong International.
• As per the recent evaluation, better economics of the project were reported than the previous study.

Altus Strategies PLC (LON:ALS) and Strategic Minerals PLC (LON:SML) are two basic materials stocks listed on the FTSE AIM All-Share index. Shares of ALS were up by close to 2.71%, and shares of SML were down by around 5.65% from their last closing price (as on 7 October 2020, before the market close at 1:00 PM GMT+1).

Altus Strategies PLC (LON:ALS) - Holds net smelter return of 2.5% in Lakanfla gold project

Altus Strategies PLC is a UK based company that is engaged in mineral discoveries. It is a project & royalty generator and has an interest in mining projects in Africa. The Company is involved in the exploration phase of the project that includes drilling and resource definition, in return for an equity interest in the projects. The Company gets royalty payment on production milestones.

Royalty Portfolio of Altus Strategies

(Source: Company website)

Update on Lakanfla gold project, Western Mali

As on 6 October 2020, Altus Strategies announced the start of a 3,800 metres drilling programme including 18 holes at Lakanfla gold project in Western Mali. Marvel Gold Limited would fund the drilling programme, and it is conducted under the joint venture with Altus. Marvel would earn an equity interest of 33% of financing the drilling programme. At the Lakanfla project, Altus holds a 2.5% net smelter return (NSR) gold royalty. The drilling programme is targeting a karst style geological model that is similar to Yatela and FE3/FE4 deposits in Sadiola.

The geological model at Lakanfla has around 7 kilometres long gravity-low that surrounds a granite invasion. The Lakanfla gold project has hard rock artisanal gold working that has an intersection of 5.1 grammes per tonne of gold over 26 metres and 4.3 grammes per tonne of gold over 18 metres. The interested parties also plan to conduct a passive seismic geophysical survey across the karst style target.

A multipurpose drill rig would be used for the project that is capable of reverse circulation (RC) and diamond drilling (DD); however, reverse circulation is more suitable to collect the maximum amount of sample in the karst target areas. As per the JV for the project, Marvel could increase its equity interest up to 80% in the Lakanfla gold project by financing four phases of exploration, participating in a definitive feasibility study and making some cash payments to Altus. Adjacently, Altus has the right to dilute its stake in the project to co-finance the project. Altus Strategies can reduce its net smelter return (NSR) gold royalty to 1.0% for payment in between USD 9.99 million and USD 15.0 million from Marvel.

Altus Strategies compared to the peer group

(Source: Company website)

Share Price Performance Analysis

1-Year Chart as on October-7-2020, before the market close (Source: EODHD/Others, Thomson Reuters)

Altus Strategies PLC's shares were trading at GBX 60.60 and were up by close to 2.71% against the previous closing price (as on 7 October 2020, before the market close at 1:00 PM GMT+1). ALS's 52-week High and Low were GBX 84.75 and GBX 17.98, respectively. Altus Strategies had a market capitalization of around £41.35 million.

Strategic Minerals PLC (LON:SML) - Raised USD 1.48 million via equity issue

Strategic Minerals PLC is a UK based mineral production and development company. It is mainly involved in the business of battery metals, and it has an interest in projects such as Leigh Creek Copper Mine, Cobre Magnetite Stockpile, Redmoor Tin Tungsten and CARE Nickel.

Projects owned by Strategic Minerals

(Source: Company website)

Update on Redmoor project

As on 6 October 2020, Strategic Minerals announced that Cornwall Resources, a wholly-owned subsidiary of the Company has received a mining scoping study and financial assessment from Wardell Armstrong International (WAI). In August 2020, Cornwall Resources appointed WAI to conduct the independent analysis of Cornwall's Redmoor project. As per the recent evaluation an internal rate of return (IRR) of 29% and net present value (NPV) of USD 128 million at 8% discount rate is estimated, which is better than the 2019 estimates. WAI has indicated that on changing the proposed mining schedule, high-grade production that was confirmed during the most recent drilling programme and resource estimate could be achieved. The project is expected to produce 600,000 tonnes per annum with a potential life of mine for over ten years with 7.2 million tonnes of feed. The Company is in advanced talks with NRG Capital for further development on the Redmoor project.

H1 FY2020 results (ended 30 June 2020) as reported on 15 September 2020

In H1 FY20, Strategic Minerals reported revenue of USD 1.64 million that was better than USD 1.02 million reported in H1 FY19. The profit before tax was USD 0.26 million, which improved from the loss before tax of USD 0.98 million in H1 FY19. The Company reported a profit for the period of USD 0.07 million in H1 FY20. In June 2020, Strategic Minerals raised around USD 1.48 million via the issue of 266.66 million shares at 0.45 pence per share. At the end of the reporting period, it had cash of USD 0.53 million.

Share Price Performance Analysis

1-Year Chart as on October-7-2020, before the market close (Source: EODHD/Others, Thomson Reuters)

Strategic Minerals PLC's shares were trading at GBX 0.401 and were down by close to 5.65% against the previous closing price (as on 7 October 2020, before the market close at 1:00 PM GMT+1). SML's 52-week High and Low were GBX 0.95 and GBX 0.30, respectively. Strategic Minerals had a market capitalization of around £7.43 million.

Business Outlook

The Company is hopeful over the potential of the Redmoor project and its ability to produce world-class tungsten and tin. The improved economics reported in mining study has validated the resilience of the project. The Company expects the full operations at Leigh Creek Copper Mine to start in 2021 after which the financial performance is expected to improve. It expects healthy demand for the Cobre Magnetite project and anticipates that US legal cost and charge for share-based payment will fall in H2 FY20.