24 July 2024
Ecora Resources
PLC
("Ecora"
or the "Group")
Q2 2024 Trading
Update
Ecora Resources PLC (LSE/TSX: ECOR)
issues the following trading update for the period 1 April to 30
June 2024.
Ecora is the leading royalty company
focused on supporting the supply of industrial commodities
essential to creating a sustainable future. The Group has a
portfolio which combines volume growth in 2024 and 2025 from its
currently producing royalty portfolio with an extensive pipeline of
high-quality development projects that are expected to drive
material medium term revenue growth.
Marc Bishop Lafleche, Chief Executive Officer of Ecora,
commented:
"We are pleased to have substantially beaten market
expectations in the first half of the year. Kestrel was the primary
contributor; in the second half we expect to see an increase in the
number of deliveries from Voisey's Bay as the underground
operations have started the ramp-up towards steady state production
levels which should be achieved in 2026. Although a weak nickel
price environment has resulted in BHP pausing the construction of
the West Musgrave nickel-copper project, we remain confident in the
project's potential as a low-cost operation over a 25 year mine
life with the possibility of further extension.
"Further to our recent Phalaborwa rare earths royalty
acquisition, we continue to see opportunities to diversify and grow
our royalty portfolio in line with our stated investment criteria
and will balance growth with the maintenance of a strong balance
sheet."
Highlights:
· US$31.8
million portfolio contribution for Q2 2024, up 63% on Q1 2024 due
to higher than expected saleable production volumes in the Group's
private royalty area at Kestrel, with the rest of the portfolio
performing in line with expectations.
· US$51.3
million portfolio contribution for H1 2024 (H1 2023: US$44.5
million) driven mainly by sales volumes at Kestrel of 2.0Mt, at the
top end of guidance for FY 2024.
· Q2 2024
saleable production volumes within the Group's private royalty area
at Kestrel totalled 1.3Mt, generating royalty income of US$26.3
million.
·
Two cobalt deliveries from
Voisey's Bay were received during the period, at an average
realised sales price of US$16/lb, taking the number of deliveries
received in H1 to four:
o FY
guidance remains unchanged at 12-16 deliveries of cobalt (each
delivery being a 20t lot of which 70% is attributable to the
Group)
o Vale
has provided guidance that underground production at Voisey's Bay
has started to ramp up and is expected to reach steady state
production levels in 2026, at which point Ecora expects to receive
c. 40 deliveries of cobalt per annum on a life-of-mine average
basis
· Final
investment decision ('FID') to construct the Piauí project by
Brazilian Nickel is not expected before 2025, which would trigger
the Group's right, but not obligation, to invest a further US$62.5
million to part fund the construction of the project. This
investment would increase the royalty rate from 1.60% to
4.25%.
· The
Group continues to expect year-on-year production volume growth at
operations underlying its producing royalty portfolio in 2024 and
2025.
·
Realised CA$11 million from
selling down a portion of its Labrador Iron Ore Royalty Corporation
investment; Ecora now holds a total of 57,390 shares.
·
Completed the US$10 million
share buyback acquiring a total of 9,491,317 ordinary shares at a
volume weighted price of approximately 83.77 pence per
share.
·
Net debt as at 30 June of US$86
million; expected to reduce meaningfully in the next 18 months
(absent acquisitions, assuming current commodity prices and
operator volume guidance).
Post-period end events
·
On 1 July 2024, the Group
announced the acquisition of a 0.85% Gross Revenue Royalty (GRR)
over the Phalaborwa rare earths project located in South Africa,
operated by Rainbow Rare Earths, for a cash consideration of US$8.5
million1. This is one the highest quality rare earths
projects globally and is expected to generate strong cashflows
throughout the commodity cycle with production targeted to commence
in 2027. Ecora also subscribed for US$1.5 million of shares in
Rainbow Rare Earths.
·
On 11 July 2024, BHP announced
that it will temporarily suspend the construction of the West
Musgrave project in October 2024, with the decision to be reviewed
by February 2027.
·
Capstone Copper is anticipated
to release an updated feasibility study on the Santo Domingo copper
project in the coming weeks. This is expected to provide an updated
technical study and economics for the project along with a timeline
to FID.
Portfolio contribution
|
Q2 2024
|
|
Q1 2024
|
Q2 2023
|
|
US$m
|
QoQ
|
US$m
|
US$m
|
Core
portfolio
|
|
|
|
|
Voisey's Bay (cobalt)
|
1.0
|
-
|
1.0
|
1.5
|
Mantos Blancos (copper)
|
1.5
|
15%
|
1.3
|
1.5
|
Maracás Menchen (vanadium)
|
0.4
|
(43%)
|
0.7
|
0.8
|
Four Mile (uranium)
|
0.7
|
-
|
0.7
|
0.2
|
Other (copper)
|
0.3
|
200%
|
0.1
|
0.1
|
|
|
|
|
|
Royalty and stream income
|
3.9
|
2%
|
3.8
|
4.1
|
|
|
|
|
|
Dividends - LIORC &
Flowstream
|
0.1
|
-
|
0.1
|
0.6
|
Interest - McClean Lake
|
0.4
|
-
|
0.4
|
0.5
|
|
|
|
|
|
Royalty and stream related revenue
|
4.4
|
2%
|
4.3
|
5.2
|
|
|
|
|
|
EVBC (2)
|
0.3
|
50%
|
0.2
|
0.5
|
Principal repayment - McClean
Lake
|
1.0
|
43%
|
0.7
|
0.6
|
|
|
|
|
|
Less:
|
|
|
|
|
Metal streams cost of
sales
|
(0.2)
|
-
|
(0.2)
|
(0.4)
|
Total portfolio contribution from core
assets
|
5.5
|
10%
|
5.0
|
5.9
|
|
|
|
|
|
Near
term run-off portfolio
|
|
|
|
|
Kestrel (steel making
coal)
|
26.3
|
82%
|
14.5
|
8.8
|
Total near term run-off portfolio
|
26.3
|
82%
|
14.5
|
8.8
|
|
|
|
|
|
Total portfolio contribution
|
31.8
|
63%
|
19.5
|
14.7
|
|
|
|
|
|
1Transaction is conditional
upon receipt of exchange control authorisation from the South
African Reserve Bank Financial Surveillance Department (customary
for transactions of this nature), expected within 6 to 8 weeks of
submitting the application.
2 Under IFRS 9, the royalties
received from EVBC are reflected in the fair value movement of the
underlying royalty rather than recorded as royalty
income
For further information
About Ecora Resources
Ecora Resources is a leading royalty
company focused on supporting the supply of commodities essential
to creating a sustainable future.
Our vision is to be globally
recognised as the royalty company of choice synonymous with
commodities that support a sustainable future by continuing to grow
and diversify our royalty portfolio in line with our
strategy. We will achieve this through building a
diversified portfolio of scale over high quality assets that drives
low volatility earnings growth and shareholder
returns.
The mining sector has an essential
role to play in the energy transition, with commodities such as
copper, nickel and cobalt - key materials for manufacturing
batteries and electric vehicles. Copper also plays a critical role
in our electricity grids. All these commodities are mined and there
are not enough mines in operation today to supply the volume
required to achieve the energy transition.
Our strategy is to acquire royalties
and streams over low-cost operations and projects with strong
management teams, in well-established mining jurisdictions. Our
portfolio has been reweighted to provide material exposure to this
commodity basket and we have successfully transitioned from a coal
orientated royalty business in 2014 to one that by 2026 will be
materially coal free and comprised of over 90% exposure to
commodities that support a sustainable future. The fundamental
demand outlook for these commodities over the next decade is very
strong, which should significantly increase the value of our
royalty portfolio.
Ecora's shares are listed on the
London and Toronto Stock Exchanges (ECOR) and trade on the OTCQX
Best Market (OTCQX: ECRAF).
Cautionary statement on
forward-looking statements and related information
Certain statements in this
announcement, other than statements of historical fact, are
forward-looking statements based on certain assumptions and reflect
the Group's expectations and views of future events.
Forward-looking statements (which include the phrase
'forward-looking information' within the meaning of Canadian
securities legislation) are provided for the purposes of assisting
readers in understanding the Group's financial position and results
of operations as at and for the periods ended on certain dates, and
of presenting information about management's current expectations
and plans relating to the future. Readers are cautioned that such
forward-looking statements may not be appropriate other than for
purposes outlined in this announcement. These statements may
include, without limitation, statements regarding the operations,
business, financial condition, expected financial results, cash
flow, requirement for and terms of additional financing,
performance, prospects, opportunities, priorities, targets, goals,
objectives, strategies, growth and outlook of the Group including
the outlook for the markets and economies in which the Group
operates, costs and timing of acquiring new royalties and making
new investments, mineral reserve and resources estimates, estimates
of future production, production costs and revenue, future demand
for and prices of precious and base metals and other commodities,
for the current fiscal year and subsequent periods.
Forward-looking statements include
statements that are predictive in nature, depend upon or refer to
future events or conditions, or include words such as 'expects',
'anticipates', 'plans', 'believes', 'estimates', 'seeks',
'intends', 'targets', 'projects', 'forecasts', or negative versions
thereof and other similar expressions, or future or conditional
verbs such as 'may', 'will', 'should', 'would' and 'could'.
Forward-looking statements are based upon certain material factors
that were applied in drawing a conclusion or making a forecast or
projection, including assumptions and analyses made by the Group in
light of its experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors that are believed to be appropriate in the
circumstances. The material factors and assumptions upon which such
forward-looking statements are based include: the stability of the
global economy; the stability of local governments and legislative
background; the relative stability of interest rates; the equity
and debt markets continuing to provide access to capital; the
continuing of ongoing operations of the properties underlying the
Group's portfolio of royalties, streams and investments by the
owners or operators of such properties in a manner consistent with
past practice; no material adverse impact on the underlying
operations of the Group's portfolio of royalties, streams and
investments from a global pandemic; the accuracy of public
statements and disclosures (including feasibility studies,
estimates of reserve, resource, production, grades, mine life and
cash cost) made by the owners or operators of such underlying
properties; the accuracy of the information provided to the Group
by the owners and operators of such underlying properties; no
material adverse change in the price of the commodities produced
from the properties underlying the Group's portfolio of royalties,
streams and investments; no material adverse change in foreign
exchange exposure; no adverse development in respect of any
significant property in which the Group holds a royalty or other
interest, including but not limited to unusual or unexpected
geological formations and natural disasters; successful completion
of new development projects; planned expansions or additional
projects being within the timelines anticipated and at anticipated
production levels; and maintenance of mining title.
Forward-looking statements are not
guarantees of future performance and involve risks, uncertainties
and assumptions, which could cause actual results to differ
materially from those anticipated, estimated or intended in the
forward-looking statements. Past performance is no guide to future
performance and persons needing advice should consult an
independent financial adviser. No statement in this communication
is intended to be, nor should it be construed as, a profit forecast
or a profit estimate.
By its nature, this information is
subject to inherent risks and uncertainties that may be general or
specific and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate; that assumptions may not be correct and that
objectives, strategic goals and priorities will not be
achieved.
A variety of material factors, many
of which are beyond the Group's control, affect the operations,
performance and results of the Group, its businesses and
investments, and could cause actual results to differ materially
from those suggested by any forward-looking information. Such risks
and uncertainties include, but are not limited to current global
financial conditions, royalty, stream and investment portfolio and
associated risk, adverse development risk, financial viability and
operational effectiveness of owners and operators of the relevant
properties underlying the Group's portfolio of royalties, streams
and investments; royalties, streams and investments subject to
other rights, and contractual terms not being honoured, together
with those risks identified in the 'Principal Risks and
Uncertainties' section of our most recent Annual Report, which is
available on our website. If any such risks actually occur, they
could materially adversely affect the Group's business, financial
condition or results of operations. Readers are cautioned that the
list of factors noted in the section herein entitled 'Risk' is not
exhaustive of the factors that may affect the Group's
forward-looking statements. Readers are also cautioned to consider
these and other factors, uncertainties and potential events
carefully and not to put undue reliance on forward-looking
statements.
The Group's management relies upon
this forward-looking information in its estimates, projections,
plans and analysis. Although the forward-looking statements
contained in this announcement are based upon what the Group
believes are reasonable assumptions, there can be no assurance that
actual results will be consistent with these forward-looking
statements. The forward-looking statements made in this
announcement relate only to events or information as of the date on
which the statements are made and, except as specifically required
by applicable laws, listing rules and other regulations, the Group
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated
events.
This announcement also contains
forward-looking information contained and derived from publicly
available information regarding properties and mining operations
owned by third parties. This announcement contains information and
statements relating to the Kestrel mine that are based on certain
estimates and forecasts that have been provided to the Group
by Kestrel Coal Pty Ltd ("KCPL"), the accuracy of which
KCPL does not warrant and on which readers may not rely.