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Wednesday, 15 June 2022

An all-Sawiris mining merger

Sawiris-backed Altus Strategies is merging with Toronto-listed gold royalty company Elemental Royalties in an all-stock transaction, the companies said in an LSE disclosure (pdf) yesterday. In what they’re dubbing a “merger of equals,” the transaction will see Elemental give Altus shareholders 0.594 shares in the new company for every Altus share they hold. This will give Elemental shareholders 52.9% of the firm and Altus shareholders the remaining 47.1%.

Bigger + more diverse: The merged entity will have a combined portfolio of 69, primarily gold assets across 13 top-tier jurisdictions, 11 of which are in production. The company will have an estimated combined revenue of USD 19.6 mn in 2022 and USD 24.6 mn next year.

Sawiris owns shares in both companies: Naguib Sawiris’ La Mancha fund holds significant stakes in Altus and Elemental. It acquired a 35% stake in Altus in 2020 and 9.3% of Elemental in April.

And backs the merger: La Mancha and other institutional investors from both sides are supporting the merger.

What they said: “Our enlarged scale and combined revenues will not only enhance our access to further high-quality royalties, but will also potentially reduce our cost of capital going forward,” Altus CEO Steven Poulton said. “As we succeed, we look forward to targeting medium-term capital distributions, as well as participating in further accretive consolidation opportunities in the royalty sector,” he added. Poulton will become the executive chair of the new company, while current Elemental chief executive Frederick Bell will be the CEO.

Altus has a footprint in Egypt: Altus subsidiary Akh Gold has four gold concessions across the Eastern Desert in Egypt, two of which were just awarded to the firm last month. The company said the two blocks cover 349 sq km, bringing the company’s total land holding to 1.9k sq km. The company said last month that it made multiple “high grade” gold discoveries of up to 100g of gold per ton.

The market reaction: Altus shares fell 5.4% in London yesterday while Elemental stock slipped 0.7% in Toronto.

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