TIDMARCL
RNS Number : 6049D
Altus Resource Capital Limited
18 May 2012
ALTUS RESOURCE CAPITAL LIMITED
Interim Management Statement for the period 1 January 2012 to 18
May 2012 (the "Period").
Overview
Altus Resource Capital Limited (LSE:ARCL) (the "Company") is a
Guernsey registered, closed-ended investment company which listed
on the Specialist Fund Market of the London Stock Exchange on 30
June 2009 and the Channel Islands Stock Exchange on 22 December
2009.
The Company announces that the unaudited net asset value at the
end of the Period was GBP67.0 million, representing a decline of
5.6% over the Period and a rise of 77.6% since the Company's launch
on 30 June 2009.
Investment Objectives and Policy
The Company's objective is to realise capital growth from a
concentrated portfolio of junior resource equities and to generate
a significant capital return to shareholders.
The Company invests in companies engaged in the exploration,
development and mining of metals and minerals with a focus on
companies that operate in the gold sector. Portfolio companies will
be predominantly, but not exclusively, listed or quoted on either
UK markets or other recognised stock exchanges including the
Canadian and Australian markets.
Financial Highlights and Investment Review by Altus Capital
Limited
The unaudited net asset value of the Company was GBP67.0 million
or GBP1.69 per share at the end of the Period, representing a 5.6%
fall since the beginning of the Period and a 77.6% rise since the
Company's launch on 30 June 2009.
At the end of April 2012, the Company's portfolio comprised 25
holdings in junior mining and exploration companies, exposure to
gold via exchange traded funds (ETFs) and an investment in Altus
Global Gold Limited which is an open-ended vehicle seeded by the
Company and focused on the mid-tier gold sector. The Company has
acquired its positions in the market and through participating in
new equity issues.
Global capital markets continue to be dominated by political and
economic uncertainty.
Metal prices, after a strong January, generally ended the Period
in positive territory with the gold price gaining 6.4% to close the
Period at US$1,664 per ounce and copper and zinc gaining 12.4% and
11.6% respectively. The FTSE 350 Mining Index closed the Period up
5.0% but the FTSE Gold Mines Index closed down 12.4%. This
continues the trend of gold equities underperforming the underlying
commodity witnessed throughout 2011 where the gold price gained
10.2% whilst the gold equities index lost 15.9%.
There have been a number of factors contributing to this poor
performance of gold equities. Investors remain wary of equities
following the financial crisis of 2008/2009 and, with the advent of
ETFs (exchange traded funds), can gain exposure to gold directly.
During 2011, the gold price spiked temporarily to over US$1,900 per
ounce leading to a number of commentators calling the end of the
gold bull market. The increased volatility in the gold price
coincided with the negative trend suffered by gold equities as
investors became less willing to hold gold equities whilst
commodity price volatility remained so high.
Companies have also been punished by the market when they have
failed to either meet their operational targets or manage their
capital and operating costs, which have come under significant
inflationary pressure. An example of this is provided by mid-tier
gold miner Kinross Gold which acquired Red Back Mining for US$8.4
billion in September 2010 primarily for the Tasiast gold deposit in
Mauritania. Delays and changes in the total capital expenditure for
the project led to Kinross taking a US$2.5 billion write down on
the asset. At the time of the acquisition the pro forma market
capitalisation of the combined group was US$21.7 billion. Nineteen
months later following the write-down at Tasiast and a failure to
gain favourable fiscal terms at its Fruta del Norte gold asset in
Ecuador, the company is valued at C$8.9 billion, fractionally more
than the value it paid for Red Back and a fall of almost 60% from
its post-deal value despite the gold price being up over 20% or
US$268 per ounce.
While there are a number of examples similar to Kinross of poor
project delivery and returns to investors becoming squeezed, the
Manager's analysis suggests that across the mid-tier and major gold
mining sector as a whole operating margins increased to the end of
2011. Cost pressures will continue, as illustrated in some of the
first quarter operating results, to be a valid concern for
investors and an issue that the industry as a whole needs to
manage.
With the continued political and economic uncertainty and the
underperformance of gold equities, the Manager has maintained a
cautious approach and a cash position of 16.0% of assets under
management at the end of the Period. The portfolio remains gold
focused with 56.4% of assets under management invested in gold and
gold equities but has benefited from a diversified portfolio
including bulk minerals, iron ore and mineral sands and base
metals, copper and zinc. The Company continues to seek investments
in companies generating cash flow with further growth potential as
well as high-quality late stage exploration and development
companies that are either fully financed to production or whose
assets have significant grades and size that project financing risk
is minimised.
The Company continues to hold Endeavour Mining and Perseus
Mining as core positions. Both West African focused companies, and
the Altus Global Gold portfolio, provide the Company with exposure
to gold production with further fully-funded growth. Detour Gold, a
Canadian development company is also a core holding and fully
financed to production of over half a million ounces of gold per
year. The company has fixed the cost of the majority of their
capital items and therefore should be able to avoid any significant
cost over-runs. All three of these core holdings are, based on the
Manager's analysis, significantly under-valued relative to their
fair values and their peers. During the Period new investments were
made in Northland Resources, a Scandinavian iron ore developer, and
Beadell Resources who owns a major gold development project in
Brazil. Both companies are fully financed to production, have
high-quality assets, strong management teams and, based on the
Manager's analysis, remain significantly undervalued. A number of
holdings have been partially or fully liquidated during the Period
following poor operational delivery and increased financing risk.
Proceeds of these sales have been reinvested into the companies
with higher quality assets, proven management teams and solid
balance sheets.
Outlook - As provided by the Investment Manager, Altus Capital
Limited
At the time of writing there was significant doubt about
Greece's likelihood of remaining within the Eurozone and
speculation of the impact a Greek departure would have. With the
anti-austerity movement sweeping across Europe, politicians may be
forced to abandon or water-down austerity in favour of growth with
the most likely outcome being further quantitative easing. Whether
this is the optimal solution for the heavily indebted Eurozone is
open to debate, however, the impact on the gold price is
anticipated to be positive. Further support for the gold price may
result from the fiscal loosening that is underway in China as a
response to the slowing economy and potential further quantitative
easing in the US that has not been ruled out.
During March the IMF released news that the central banks of a
number of emerging economies had continued to increase their gold
reserves and retail demand for gold from the burgeoning middle
classes of China and other BRIC economies looks set to support a
floor price for gold.
The volatility of the gold price has been steadily declining and
that, coupled with strong base demand for the metal from emerging
market retail and central bank buyers, should improve the outlook
for gold equities. This demand for gold exposure is demonstrated by
the recent acquisition of a 5% stake in Polyus, Russia's largest
gold producer, by Chinese sovereign wealth fund, China Investment
Corp, with a further 2.5% stake being sold to VTB, the Russian
state bank.
With equity valuations at such depressed levels, further
non-traditional investment and corporate activity in the gold
sector is expected. During the Period mid-tier producer IAMGold
announced the C$600 million acquisition of Trelawney, a junior with
a large, low grade gold project in Canada. Further M&A is
anticipated and will help to support higher valuations of the
companies with world-class assets that are likely to attract the
interest of the larger capitalised producers.
However, political and economic uncertainty will remain until
there is a satisfactory resolution of the current Eurozone debt
crisis and markets are expected to remain subdued until after the
northern hemisphere summer. The Manager will continue to adopt a
conservative approach and seek to refine and rationalise the
Company's portfolio to ensure optimal exposure to the top quality
junior resource equities that will benefit first and most from the
anticipated uplift to fair value.
Investment Allocation
At 30 April 2012, the Company's assets were allocated in the
following approximate proportions:
Asset Allocation by Commodity Asset Allocation by Geography
Gold 56.4% Africa 35.6%
Silver 0.8% Europe 9.3%
Bulk Minerals 12.8% North America 11.7%
Base Metals 10.4% South America 7.0 %
Energy Minerals 2.7% Central Asia & Russia 0.0%
Platinum Group Metals 0.0% Asia - Other 7.6%
Diamonds 0.8% Australasia 2.6%
Other 0.0% Other (ETFs) 10.2%
Cash 16.0% Cash 16.0%
Asset Allocation by Development
Stage
Production 37.4%
Development 28.2%
Exploration 14.7%
ETF 3.8%
Cash 16.0%
Note: There may be overlap between the holdings of the Company
and Altus Global Gold Ltd. These common holdings are not
consolidated in the asset allocation splits above.
Material events
Other than the information set out above, the Board is not aware
of any events during the Period, which would have had a material
impact on the financial position of the Company.
Investor Information
The latest available information on the Company can be accessed
via www.altrescap.com.
This document has been issued by, and is the sole responsibility
of, Altus Resource Capital Limited (the "Company") and is for
information purposes only. It is not, and is not intended to be an
invitation, inducement, offer, or solicitation, to deal in the
shares of the Company. The price of shares in the Company and the
income from them may go down as well as up and investors may not
get back the full amount invested on disposal of shares in the
Company. An investment in the Company should be considered only as
part of a balanced portfolio of which it should not form a
disproportionate part. Prospective investors are advised to seek
expert legal, financial, tax and other professional advice before
making any investment decision.
By order of the Board
Altus Resource Capital Limited
Administrative Enquiries: Investment Manager: Shareholder
Enquiries:
Anson Fund Managers Limited Altus Capital Limited Nimrod Capital
LLP
Tel: +44 (0) 1481 722 260 Tel: +44 (0) 1235 511767 Tel: +44 (0)
20 3355 6855
info@altus-cap.com info@nimrodcapital.com
E&OE - In Transmission
END OF ANNOUNCEMENT
This information is provided by RNS
The company news service from the London Stock Exchange
END
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