TIDMARCL
RNS Number : 3861T
Altus Resource Capital Limited
19 November 2013
ALTUS RESOURCE CAPITAL LIMITED
Interim Management Statement for the period 1 July 2013 to 19
November 2013 (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 31
October 2013 was GBP33.1 million, representing a rise of 15.6% to
31 October and a fall of 12.2% 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 GBP33.1 million
or GBP0.83 per share at 31 October 2013, representing a 15.6% rise
since the beginning of the Period and a 12.2% fall since the
Company's launch on 30 June 2009.
As at 31 October, the Company's portfolio comprised 26 holdings
in junior mining and exploration companies, exposure to gold,
silver, platinum and palladium metals 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.
Major global indices performed strongly to 31 October with the
FTSE 100 rising 8.3% and the S&P 500 and the Dow Jones
Industrial Average both breaking new highs during October with
gains of 9.4% and 4.3% respectively to 31 October 2013. This market
rise was despite the political brinkmanship dominating US politics,
causing the federal shutdown and taking the country perilously
close to default, reflecting the market's expectation of further
loose monetary policy. The US Dollar Index lost 3.5% to 31 October
as a result. Conversely commodity prices generally performed
positively with the gold price gaining 7.2%, copper rising 7.6% and
the Commodities Research Bureau US Spot Metals Index gaining 7.9%
to 31 October. Major precious metals equities performed broadly in
line with the FTSE Gold Mines Index and S&P/ TSX Gold Index
rising 7.7% and 9.6% respectively whereas the Market Vectors Junior
Gold Miners Index rose 2.6%. The major diversified miners
outperformed with the FTSE 350 Mining Index rising 17.6% whilst
their smaller counterparts represented by the FTSE AIM Basic
Resource Index gained 8.6% to the end of October.
The Company's net asset value performed strongly rising 15.6% to
31 October. Part of this rise is accounted for by portfolio
holdings recovering from lows suffered during June, however, a
number of core holdings have significantly outperformed as a result
of meeting or exceeding market expectations operationally.
-- Alpha Minerals, which is defining the extremely exciting high
grade Paterson Lake South uranium discovery in Canada's Athabasca
Basin, rose 40.8%;
-- Aureus Mining announced that it had raised the necessary
project finance to build its New Liberty gold project in Liberia
and gained 77.8%;
-- Beadell Resources gained 86.9% as it mined the extremely high
grade Duckhead gold deposit on its Tucano project in Brazil;
-- Guyana Goldfields continued to advance its Aurora project in
Guyana, announcing the finalisation of the debt package to build
the project in early November, and rose 83.1% to the end of
October;
-- Kennady Diamonds continues to define a diamond resource in
Canada with initial results suggesting the grade of the deposit may
significantly exceed previous expectations and gained 254.5% to 31
October;
-- Mineral Deposits rose 58.2% as it continues to advance the
Grande Cote mineral sands project in Cote d'Ivoire towards
production; and
-- Panoro Minerals announced a significant 40% increase in the
resource of its Peruvian Cotabambas copper project and gained
62.5%.
Outlook - As provided by the Investment Manager, Altus Capital
Limited
The Manager anticipates that the gold price will remain volatile
with short-term price moves dominated by speculation over when the
US Federal Reserve will begin tapering its quantitative easing
programme and uncertainty over the resolution to the US debt
ceiling negotiations in February 2014.
With the economic recovery in the US apparently on track,
tapering is expected by many market participants to be introduced
over the coming months and the general consensus is that this will
have a negative impact on the gold price. This is a somewhat
perverse argument given that the gold price has historically shown
a strong correlation with money supply and therefore if the rate of
growth of money supply diminishes through tapering, it would seem
logical that the gold price should continue to rise but just at a
slower rate. If quantitative easing was stopped altogether or
indeed reversed, the inference would be that the gold price would
stop rising or indeed decline. However, it is unlikely that
quantitative easing would be stopped unless it is to curb
significant inflationary pressure which itself is a major driver of
gold demand.
During September and early October, the market anticipated a
swift resolution to the US debt ceiling negotiations and the gold
price softened as a result. However, as brinkmanship almost took
the country to a possible default, the US Dollar weakened and the
gold price responded positively. Again the reaction of the gold
price over the short-term is somewhat counter-intuitive. Increasing
the debt ceiling should be a positive for gold as a hard asset,
since it is an inflationary action. This also makes it positive for
the broader equities markets and it is thought that some gold was
sold to fund equity purchases. However, as the deadline for the
debt ceiling approached and the risk of a US default become more
real, the dollar perversely strengthened as investors seemingly
valued the liquidity from holding the current global reserve
currency.
Uncertainty over the US monetary policy will continue to hang
over the market and is expected to dominate short-term price moves
in the paper traded gold market. Meanwhile, demand for physical
gold, as determined by import data, from China and other emerging
economies continues to rise at startling rates. Reports suggest
that if the current rate is maintained, mainland China will import
approximately 1,185 tonnes, representing approximately 50% of the
entire 2013 global gold production through Hong Kong. This number
excludes production of approximately 400 tonnes from within China
itself, making it the largest gold producer in the world.
With demand driven by both the desire to preserve and express
new wealth, the burgeoning middle classes of China and other
emerging economies now have a major influence on the demand for
gold. Coupled with this demand strength, a number of major projects
are being curtailed due to ever increasing capital costs or social
and political issues. The most prominent of these is Barrick Gold's
Pascua Lama project which has seen construction activity suspended
saving approximately US$1 billion of capital in 2014. Other
commodities including base metals, uranium and diamonds, also offer
the potential for significant price appreciation with strong demand
being maintained and supply dwindling with major mines nearing the
end of their lives and few new discoveries to replace them.
Miners and gold producers in particular have been struggling to
bring their cost structures down, reduce non-essential capital
expenditure, and shore-up their balance sheets. Third quarter
financial results to the end of September of a number of the larger
gold producers have shown a dramatic improvement on previous
quarters suggesting that these companies are making headway. Their
share prices have responded positively as a result. Companies that
have not had the flexibility in their operations to adapt to the
lower gold price and are struggling to generate free cash flow and
concurrently investors see little value in their shares.
Junior equity valuations have lagged their larger counterparts
although often, with only a single development stage asset, these
companies have much greater flexibility to adapt and modify their
businesses, focusing on smaller, higher grade operations requiring
less capital. Many companies are actively optimising their projects
to bring down the capital cost and improve the economics. As larger
companies curtail mega-projects with mega-capital, they are seeking
higher economic returns that more modest projects may be able to
generate. The Manager therefore anticipates that this will lead to
an increase in M&A activity, driving up the value of the best
junior resource equities.
The portfolio remains focused on high quality development and
production companies. A number of portfolio companies continue to
trade at valuations close to their cash backing with no value being
attributed to their high quality assets. The Manager believes the
Company is well-positioned to benefit from a re-rating of these
holdings as the market recognises the value of the underlying
assets or they become the targets of corporate M&A
activity.
Investment Allocation
At 31 October 2013, the Company's assets were allocated in the
following approximate proportions:
Asset Allocation by Commodity Asset Allocation by Geography
Gold 41.1% Africa 36.2%
Silver 1.6% North America 14.5%
Bulk Minerals 14.7% South America 10.3%
Base Metals 13.4% Asia - Other 3.7%
Energy Minerals 4.0% Australasia 5.9%
Other (incl. commodity
Platinum Group Metals 2.6% exposure) 13.7%
Diamonds 6.7% Cash 15.8%
Cash 15.8%
Asset Allocation by Development
Stage
Production 28.8%
Development 29.7%
Exploration 19.0%
Commodity Exposure 6.6%
Cash 15.8%
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, 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 7382 4565
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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