Panelists:
Joe Mazumdar, Economic Geologist, Exploration Insights
Glen Parsons, CEO, Awalé Resources
Hugh Stuart, CEO, Montage Gold
Heye Daun, CEO, Osino Resources
Steven Poulton, CEO, Altus Strategies
Joe Mazumdar:
I’m going to kick-off the discussion by asking each of our participants the following question: over the past year, has it become easier to raise funds for an Africa-focused company?
Glen Parsons:
Awalé started as greenfields exploration, so we have a very diverse investor base. Institutions wouldn’t come in at the really early stages for a greenfields explorer like us.
But we’ve seen the market react to developments we’ve made on the ground, and it’s given us the ability to attract investors. When we did raise, it was in June and July, which was a good time to raise and we took advantage of that. And then we went through an election period in Côte d’Ivoire going into October, which was where we saw more volatility coming through our stock. It didn’t have any effect on the actual raise, but it had a follow-on effect in terms of West African uncertainty. It would have had a bigger impact if we were to raise money around October or November at that time.
Joe Mazumdar:
Montage Gold recently acquired assets in Côte d’Ivoire and previously you were with Orca in Sudan. How does raising funds to advance a development project in Sudan compare with what you’re doing now with Montage Gold in Côte d’Ivoire?
Hugh Stuart:
Orca was primarily funded by insiders due to the politics of Sudan and we were waiting for the country to be removed from the State Sponsors of Terror list.
It took us a while to decide and to acquire the assets in Côte d’Ivoire, as we tried to work out the best way of doing it without creating just another cash-struck junior. We finally got there in 2019 by building up a background of strategic investors – not just for the first round of financing, but the later financing as well. We listed Montage in October a couple of weeks before the election, which was a relatively hard time to do it. But I think if you have that backing, if you have a decent project, if you have the management team behind it and a country that is popular, like Côte d’Ivoire, it is a bit easier to raise the money.
Joe Mazumdar
Côte d’Ivoire seems to be popular. But when you get a different part of Africa, like Namibia, how do you let people know that this country is different – that Africa is not just one big, monolithic place of geopolitical risk?
Heye Daun:
Although most people are familiar with Namibia, it certainly helps that Namibia is perceived to be in a more favourable corner of Africa. If you’ve got the right team, the right project, the right strategic backers, in our case Ross Beaty, then things come together. Not long ago, we were more at the exploration stage. And I found it significantly more difficult to raise money then. But as the project gets better defined, it seems to be getting easier.
Joe Mazumdar:
Altus Strategies uses other people’s money predominantly to fund projects and is diversified throughout Africa. But now you’ve added a strategic investor. From your point of view, Steven, how do you work that geopolitical risk?
Steven Poulton:
I think we have good diversification. We’re effectively in six countries in Africa. Geographic and political diversification is important, but so is asset stage diversification.
We offer our shareholders a balanced portfolio approach, not just pure exploration.
We are a royalty generator, so we’re as focused on the discovery as the backend when you get paid from the eventual production from the mine. We want to make the discovery using third-party capital to advance the assets. This allows us to look at other projects.
Joe Mazumdar:
How much time do you each spend promoting what you’re doing?
Steven Poulton:
The past eight or nine years prior to 2020 were fairly horrific. Promotions didn’t
really make any difference to your share price if you were listed, or your ability to raise capital if you were private. It all came down to having a core set of strong shareholders who were willing to support you as a team and believed that the cyclical nature of industry meant that the market would turn and assets would go back to being either fair value or ideally at a premium.
It’s important to have core shareholders. This goes without saying in a downturn, but it’s also essential during better markets. Promotion is critical. You have to get your message out there, but you can go too far. Companies that focus too much on promotion, arguably for the right reasons, get downgraded slightly. You have to deliver consistently over the long term.
Heye Daun:
Getting the message out there is important. I try to do as much as I can, including talking to individual retail investors, etc. Then there is the other side of promotion, which we’ve seen from the cannabis and Bitcoin sectors. Even our own sector has a dirty side of promotion, however I don’t believe in the ramping of stocks.
Hugh Stuart:
I think you’ve got to go out pretty hard from the start and to make sure you cover your liquidity. A lot of North American investors are more nervous about parts of Africa. You have to make sure people get the message that it’s often just a perception and generally not the reality.
Joe Mazumdar:
How important is having an initial strategic investor? Do you need that even more if you’ve got an African-based asset?
Heye Daun:
I think the strategic opens doors, but often he doesn’t necessarily write the lead orders for the full-on financings. Having that strategic gives you the cache to attract the attention that you need, unless you’ve got an unbelievable winning project that sells itself.
Joe Mazumdar:
La Mancha is a big investing firm that’s going to put $200 million into the Endeavour-Teranga deal. How did La Mancha change Altus’s strategy?
Steven Poulton:
It was transformational in all the right ways. They needed to take a stake that was meaningful in terms of percentage of the company and they also needed to deploy some capital that was meaningful to us, but our share price was not where it should have been. We felt the market conditions would improve over the next couple of years, but we couldn’t foresee how it would improve so dramatically so quickly. We had to make a decision. Was the dilution counterbalanced by the strategic nature of the investor? Would it be net-accretive to shareholders? We decided as a board that it would be, and it has proven to be so far.
The benefit is not just the firepower and the capital that it gives us. It enables us to go into countries that we previously might not consider, allows us to look at bigger deals, giving us the vision and the foresight to see how we can make this a company that one day they can put $200 million into Altus.
That has changed us dramatically for the better. Some people worry that having strategic investors might represent a blocking vote or that it may prevent value creation. In the end, we’re comfortable in the way that La Mancha approach their business and how they do their strategic investments.
Joe Mazumdar:
Heye, how do you look at share structure and issuing warrants when you’re raising money?
Heye Daun:
It’s an inexact science, but it’s a balance of looking after your shareholders. Most shareholders don’t like dilution. But as the CEO, and also as a significant shareholder, you also have to employ prudence. It essentially means you have to make sure that the company is funded so that you can see through your programmes. And often you have to overfund a little bit just to be sure so you can get yourself over some bad markets.
Last year we raised around $25 million, which gave us the confidence to kick off a major technical programme. We’ve got 10 drill rigs running. We would have never been able to do that without the confidence that extra capital in the treasury gives us. That’s why I think that as a CEO, you’ve got to strike that balance.
Glen Parsons:
It’s a bit more difficult in our situation because we’ve got a low market cap. And so the ability to raise money at the quantum required to really push hard becomes difficult to manage. We had a discovery at the end of 2019, which is coming together quite nicely and so we had a story on the back of that to be able to fund. June spiked up as we were going to go into drilling in the second half of the year. Then obviously we just have to keep on managing the programmes and hopefully get the market cap up to a level that you can actually sustain a proper raise.
Joe Mazumdar:
In terms of raising money, do you see any new sources of funding?
Glen Parsons:
We have been able to attract a broader audience of investors. In the past we’ve been more self-funded, or insider and strategically funded, but as the story grows, you start pushing out and that’s where our marketing comes to the fore.
Hugh Stuart:
We had a fairly significant president’s list, which we felt was good. Having Lundin, Sandstorm, Ross Beaty, and other investors, it does make a difference. We had a reasonable retail component, but the bulk of it was institutional. I think one of the problems when you have strategic investors is a lot of the stock gets tied up. We only got close to 50% of the stock tied up with sort of major investors between Orca, Lundin, Sandstorm, and the others. Having that retail component is important because it’s one of the ways you’re going to generate some liquidity in the stock.
Joe Mazumdar:
Heye, you’ve raised twice, bought deals, so the brokerage firms brought you the clients, but do you see now with your ownership, more institutional, more retail, a good mix? Are you happy with your liquidity, given who’s got your shares?
Heye Daun:
Yes, we have a good mix. We have about a third insiders, which includes Ross Beaty and RCF, a third conventional funds and institutions, and about a third high net worth and retail. So generally speaking, you want investors that buy your shares and hold them, but you want liquidity as well. And with retail, it seems to ebb and flow at the moment, at least in our stock it seems to be ebbing. Moving forward, I think we’ll try to attract more institutions, but at the same time, I think retail is still extremely important.
Joe Mazumdar:
Steven, has bringing in La Mancha helped or hindered Altus’s liquidity?
Steven Poulton:
It certainly increases the visibility of the company, which essentially increases your exposure to new investors – potentially resulting in more liquidity. We probably do need to increase the number of institutional investors on our register, but there’s been a chicken and egg situation in that that they would traditionally not invest in the company at the size it was a year ago. They need to have a larger market cap in order to make it meaningful for themselves. So, you have to get bigger in order to attract the right kind of institutional investors.
We’re now at that sort of scale. I think that’s probably something we look to achieve in the next 12 – 24 months, to try and get them onto our register in some shape or form. Nothing beats good news flow. It gets you into the press, and it gets people to recognize that you’re an undervalued stock, and they then buy your shares, triggering further liquidity. Before you know it, the chat boards are talking about you, and people are making noise about your stock, and people are following you.
Joe Mazumdar:
So what can we expect in 2021?
Steven Poulton:
I think that most people on the panel would agree that gold is probably in a good space right now, and we expect that to continue to be the case. There’s lots of stimulus around from all different quarters that’s going to result in significant anticipation of inflation, if not inflation directly.
And then you’ve got the EV battery metals, copper primarily, where we think we’ll do particularly well, but so will the rare earth elements, nickel, and other such metals. So we’re quite bullish for a good commodities outlook. We’re quite bullish for an Africa outlook. We think there’s lots of new capital, new drill rigs are turning in Africa, and new discoveries are going to be made, which is going to drive some appetite and Altus wants to be right at the centre of all of that.
Heye Daun:
I think last year was good, and this year should be the same or better. The macro picture is wonderful, and I think it is only just unfolding. But, at the same time, I think internally, we will have a big year and a very exciting year because we’re gearing up to put out our maiden resource in the next month or two.
Hugh Stuart:
We’re just a few weeks away from our next resource calculation. We’ve got a PEA due at the end of March. We did take a little bit more money off the table than we needed to make sure that we could go through the whole of this year and into the next year when we do the IPO. So, it’s going to be busy.
Glen Parsons:
We’re operating on two fronts, one on the Western side, and one on the Eastern side. We have the early-stage discovery at Odienné up in the northwest. We know it’s mineralized. There’s some new anomalies coming out of that and we need to be ready to drill those again. And then on the northeastern side, from a discovery perspective there, we really do think we in the gold camp and the potential for at least one, possibly two discoveries, we’ll put our heads on the block for that, and we think we can do it. So that’s exciting times for us.
