BUSINESS REVIEW
Results
The Group delivered a strong
financial performance in the first half of the year reporting a
total portfolio contribution of $51.3 million (H1 23: $44.5
million). This was driven by the performance of Kestrel where
saleable production from the Group's private royalty area during H1
was at the top end of full year guidance for 2024. There is no
material contribution expected from Kestrel in H2 2024.
Cobalt prices have remained at
cyclically low levels, with an H1 2024 average price received for
the sale of Voisey's Bay cobalt of $16.0/lb (H1 2023: $16.5/lb).
The majority of our cobalt deliveries are alloy grade and attract a
premium versus the standard grade price which averaged $13.2/lb in
the period. Historically, approximately 80% of the cobalt delivered
under the Voisey's Bay stream has been to alloy grade
specification, which currently realises a premium of approximately
$4/lb to the FastMarkets Metal Bulletin standard grade
price.
On 27 March, the Group announced
an updated capital allocation framework, and in conjunction a $10
million share buyback programme. The capital allocation framework
seeks to maintain balance sheet strength, while continuing to
provide an attractive dividend yield relative to the royalty sector
peers and retain the flexibility to allocate capital for further
growth. The capital allocation framework also considers
opportunistic share buybacks if the Group's shares are trading at a
sizable discount to estimated net asset value.
This is the first period in which
the Group will declare its dividend under the revised framework,
with dividend distributions based on a percentage of average free
cash flow across the previous two half year periods. Across H2 2023
and H1 2024 the average free cash flow totalled $12.7
million. The Board has determined that the H1 2024 dividend
will be 1.70 cents per share which equates to 33% of average free
cash flow during the prior two half year periods and is towards the
upper end of the stated 25-35% payout range.
On 1 July the Group announced the
acquisition of a 0.85% Gross Revenue Royalty on the Phalaborwa Rare
Earths Project in South Africa. The project is operated by Rainbow
and in connection with the royalty acquisition, the Group
subscribed for $1.5 million of ordinary shares in Rainbow on 28
June 2024.
In January, the Group announced
that it had amended and extended its $150 million revolving credit
facility agreement with its existing syndicate of Scotiabank, CIBC
and RBC. The agreement includes an uncommitted accordion feature of
up to $75 million to be used to fund royalty acquisitions which
would take the borrowing capacity up to $225 million. There are no
fixed amortisations or step downs associated with the facility and
maturity has been extended to January 2027 at the
earliest.
The Group ended the period 30 June
2024 with net debt of $86 million. This is expected to reduce
meaningfully in the next 18 months (absent acquisitions, assuming
current commodity prices and operator volume guidance) as the Group
has no firm funding commitments beyond the payment on completion of
the $8.5 million for the Phalaborwa royalty. Leverage at the end of
June was 1.43x, well below the 3.5x permitted under the
facility.
Adjusted earnings in the period
increased to $26.6 million (H1 2023: $23.4 million) generating
adjusted earnings per share of 10.38c (H1 2023: 9.06c).
Outlook
The second half of the year is
expected to be weighted towards the Group's portfolio ex-Kestrel,
with Kestrel operations moving outside the Group's royalty area
before returning in H1 2025 at current mining rates. Based on H1
operating partner production levels, we continue to expect
year-on-year underlying production volume growth across our royalty
portfolio in 2024 and as well as 2025.
The Voisey's Bay underground mine
expansion was 96% complete as of the end of Q2 2024, with the
mining of the underground Reid Brook and Eastern Deeps deposits now
ramping up such that the Group expects to receive eight to twelve
deliveries of cobalt in H2 2024 and between 20 and 28 deliveries of
cobalt in 2025. At life of mine average production levels, expected
to be reached by the end of 2026, the Group will receive around 40
deliveries of cobalt per annum.
At the start of H2 2024, mining
activities at Kestrel have moved outside the Group's private
royalty area and are expected to stay outside for the remainder of
the year before returning in late Q1 2025. With Kestrel and
Voisey's Bay volumes for 2025 expected to be higher than in 2024,
the Group is well positioned to deliver a strong financial
performance in 2025 (at constant commodity prices).
We were pleased to see Capstone
publish an updated Feasibility Study for the Santo Domingo project
which confirmed the robust economics of the project which could
contribute approximately $30 million per annum (on analyst
consensus volumes and pricing) to Ecora once it enters production.
It was disappointing to see BHP temporarily suspend the
construction of the West Musgrave nickel-copper project, but we are
confident in the project's potential as a low-cost producer of
nickel and copper.
A final investment decision by
Brazilian Nickel on the Piauí project is not expected before 2025,
which would trigger the right, but not obligation, to invest a
further $62.5 million in the project to part fund construction
capital costs.
We believe that the capital we
have deployed in the past four years has given us the assets that
will become the cornerstone of our portfolio well into the next
decade and beyond. While our short-term focus is on high-quality
acquisitions that are producing, or close to production, and from
which we would have a clear path to de-leveraging, we will also
look at earlier stage opportunities that are high quality but
smaller ticket sizes, in line with our capital allocation framework
which prioritises the maintenance of a strong balance
sheet.
PORTFOLIO REVIEW
Producing
Royalties
Voisey's Bay (Cobalt)
Attributable deliveries under the
Voisey's Bay cobalt stream totalled 56 tonnes (H1 2023: 84 tonnes)
during the period (four 20 tonne deliveries of which 70% is
attributable to the Group), realising an average sales price of
approximately $16.00/lb (H1 2023: $16.54/lb).
Cobalt deliveries in Q2 were
impacted by annual planned maintenance at the Long Harbour
refinery. Between 8 and 12 deliveries are expected during H2 with
one having been received, one at port and two due to be shipped
imminently.
Kestrel (Steelmaking
coal)
Production from Kestrel was within
the Group's private royalty area for the majority of H1 2024 with
saleable production volumes of 2.0Mt at the top end of FY 24
guidance (1.8-2.0 Mt). There are expected to be minimal volumes
from the Group's private royalty area in H2 2024, leaving FY 24
guidance at c. 2.0 Mt.
Operations are expected to move
back inside the Group's private royalty area during H1 2025 and
overall volumes in the Group's royalty area in 2025 are currently
anticipated to be higher than the 2.0 Mt guided to in
2024.
Mantos Blancos (Copper)
Total copper production of 21.0kt
(H1 2023: 25.8kt) was lower than the operator guidance of 23- 28kt
due to localised geotechnical issues impacting the mine sequence in
Q2 which resulted in lower grades and recoveries.
Capstone is anticipating higher
throughput rates in H2 following the final installation,
commissioning and tie in of new tailings pumping infrastructure.
During June mill ore throughput averaged 17ktpd, a monthly record,
and the final tie in of the new infrastructure was completed in
July with the ramp up to 20ktpd expected during Q3.
Other
Largo Inc. focused on reducing
operating costs and improving productivity at the Maracas Menchen
mine during H1 2024, to navigate a period of lower vanadium prices
which reduced to $6.59/lb compared to $9.97/lb in H1 2023.
V2O5 production was impacted in Q1 by
unplanned kiln maintenance resulting in H1 2024 sales totalling
4,418 tonnes (H1 2023: 4,544 tonnes). Largo has reiterated full
year production guidance of 9,000 -11,000 tonnes.
Throughput at the McClean Lake
Mill increased by 16% as output from the Cigar Lake mine increased
by 21% to 5.1Mlbs (H1 2023: 4.2Mlbs). Cameco's full year 2024 Cigar
Lake production guidance remains 18Mlbs.
The Group sold down the majority
of its equity holding in LIORC for proceeds of CA$11.1 million
($8.1 million). Ecora now holds a total of 57,390
shares.
Advanced Development Stage
Royalties
Santo Domingo (Copper)
Capstone published an updated
feasibility study for the fully permitted Santo Domingo project in
Q3 2024. The updated Feasibility Study enhanced the mine's
economics with low capital intensity and first quartile costs.
Capstone is now focusing on optimising the financing structure of
the project and in parallel will advance the detailed engineering
of the project. Ecora owns a 2% Net Smelter Return ("NSR") royalty
over part of the Santo Domingo project that covers the highest
copper grade portion of the mine plan. In the initial six to seven
years of production in the Group's royalty area, annual production
is expected to be 106ktpa of copper and 4.7 Mtpa of by products
(including gold and iron).
West Musgrave
(Nickel-copper)
BHP announced in February 2024
that it was reviewing the plans for its Western Australia nickel
operations, which include the West Musgrave nickel-copper project,
at the same time it stated that on a standalone basis West Musgrave
could still generate reasonable returns. In July 2024, BHP
announced that it would be temporarily suspending the construction
of the West Musgrave project in October 2024 with the decision to
be reviewed by February 2027.
Piauí (Nickel)
Brazilian Nickel has completed the
detailed engineering studies that were incorporating the learnings
from the small-scale plant with a view to optimising the flow sheet
ahead of advancing financing discussions for the construction of
the project. A final investment decision is not expected before
2025 which would trigger the Group's right, but not obligation, to
invest a further $62.5 million to part fund construction of the
project. This investment would increase the royalty rate from
1.60%, which at current commodity prices would generate a material
portfolio contribution, to 4.25%.
Nifty (Copper)
In May 2024, Cyprium Metals
Limited announced the results of the Nifty Surface Mine Scoping
Study. The results of the study show an expected average annual
production of 36,000 tonnes of copper. Nifty is a brownfield
development and the Board of Cyprium has approved the advancement
to a Pre-Feasibility Study. The Group holds a 1.5% Realised Value
Royalty over the Nifty project.
Early Stage
Royalties
SW2 (Uranium)
In March 2024, NexGen Energy Ltd
announced the discovery of a new intense uranium zone on its SW2
property located around 3.5km east of its world class Arrow Deposit
in Saskatchewan, Canada. Ecora has a 2% Net Smelter Return Royalty
on parts of the SW2 Rook 1 property which contain the new
discovery. In August 2024 NexGen provided an update on the results
of its drilling programme which confirmed that the footprint of the
new discovery is larger than Arrow's at the same stage of metres
drilled and shows all the signs of being another world class
discovery.
Canariaco (Copper)
In June 2024, Alta Copper Corp.
filed a new Technical Report and Preliminary Economic Assessment
("PEA") for the Canariaco Copper Project over which the Group holds
a 0.5% NSR royalty. The PEA outlines a project producing an average
of 158ktpa of copper in the first ten years and with a total mine
life of 28 years at an estimated upfront capital cost of $2.1
billion. Additional drilling in a number of defined areas has
the potential to delineate additional mineral resources.
Amapá (Iron Ore)
In March 2024, Cadence Minerals
announced results of an optimisation study for the Amapá Iron Ore
Project which delivered material capital savings to the project. In
July 2024, Cadence announced an updated PFS-level economic study
with an increased NPV for the project of $1.145 billion. Ecora owns
a 1% GRR over a majority of the project area.
FINANCE REVIEW
The first half of the year saw
increased portfolio contribution owing largely to the 2.0Mt in
production from the Group's private royalty lands at Kestrel, which
was higher than expected and at the upper end of the Group's full
year guidance. As a result, the Group's portfolio contribution
increased from $44.5m in H1 2023 to $51.3m in H1 2024. Other
notable highlights saw the Group refinance its borrowing facility,
which extends maturity to Q1 2027 at the earliest, with no step
downs or amortisation requirements. This facility reinforces the
balance sheet and provides capital for the Group to continue making
acquisitions.
The second half of the year will
see an increase in deliveries from the Group's Voisey's Bay cobalt
stream following the successful installation of the materials
handling unit at the Reid Brook deposit. This is a key milestone
for the ramp up of the underground mine which is expected to result
in 40 deliveries annually once the mine reaches steady state
production, a significant increase from the 12-16 deliveries being
forecast in the current year.
Absent further acquisitions, the
second half of the year should see a reduction in net debt from its
peak of $86m at the end of June, with more significant deleveraging
envisaged in 2025. Although borrowings are running higher than
previous reporting periods, the leverage ratio remains very
comfortable at 1.43x which is well within the 3.5x limit in the
borrowing facility.
The Group's new capital allocation
policy was announced at the end of March and along with the payment
of the 2023 final dividend, the Group executed a $10m share buyback
program. In addition, the Group entered into a $10m financing
package with Rainbow Rare Earths which resulted in a 0.85% royalty
for $8.5m along with a $1.5m equity subscription.
With modest and manageable levels
of leverage and significant headroom on the Group's borrowing
facility the Group remains in a strong financial position and is
well capitalised to continue to execute its growth
strategy.
Results
The Group's portfolio contribution
increased by 15% to $51.3m for the six months ended 30 June 2024
(H1 2023: $44.5m). The increase in portfolio contribution combined
with the $23.9m fair value loss on the revaluation of the Kestrel
royalty, which reflects resource depletion in the first half of the
year and slightly lower forward-looking pricing inputs, resulted in
an H1 2024 profit after tax of $11.5m (H1 2023: loss of $7.5m),
generating basic earnings per share of 4.48c for the first half of
2024 (H1 2023: loss per share 2.90c). Adjusting for the
royalties from EVBC, valuation movements, non-cash items and the
tax effect of these adjustments, resulted in H1 2024 adjusted
earnings of $26.6m (H1 2023: $23.4m) and adjusted earnings per
share of 10.38c (H1 2023: 9.06c).
The key driver for the increase in
the Group's portfolio contribution during H1 2024 was the expected
increase in volumes from Kestrel as production returned to the
Group's private royalty lands, compared to H1 2023. Slightly
offsetting the higher volumes at Kestrel was the combined impact of
slightly weaker coal prices, which declined from $242/t in H1 2023
to $222/t in H1 2024, and the corresponding decrease in the average
royalty rate from 20.45% in H1 2023 to 19.09% in H1 2024, resulting
in total royalties of $40.8m (H1 2023: $31.8m).
Production at Voisey's Bay in H1
2024 reflects the ongoing transition from the open pit mine and
ramp-up to full production of the underground mine. As a
result, cobalt deliveries reduced by 33% to four in H1 2024 (H1
2023: six). In addition to the reduction in cobalt deliveries
in the first half, the cobalt price remained depressed with the
Group realising an average sales price of $16.03/lbs in H1 2024 (H1
2023: $16.54/lbs).
The combination of both lower volumes and lower
cobalt prices resulted in the contribution from the Group's
Voisey's Bay stream, net of metal stream cost of sales, decreasing
to $1.6m (H1 2023: $2.4m).
Elsewhere, volumes at Mantos
Blancos were impacted by localised geotechnical issues resulted in
a 15% reduction in royalties for H1 2024, despite the stronger year
on year copper price, with royalties totalling $2.8m (H1 2023:
$3.3m). At Maracas Menchen, the sustained weakness in the vanadium
price resulted in royalties reducing by 35% to $1.1m for H1 2024
(H1 2023: $1.7m), despite volumes remaining flat year on
year.
Whilst not included in portfolio
contribution, the Group has continued to benefit from the price
linked contingent consideration in conjunction with the Narrabri
disposal. The Group is entitled to a $/t payment should the thermal
coal price exceed $90/t. The Group received $0.1m in price linked
payments for H1 2024, increasing total price linked payments to
date to $2.3m. This is in addition to the $14.8m fixed payments
received since 31 December 2021, with a further $2.0m to be
received in January 2025 before final payments of $2.0m and $2.8m
are received in January 2026 and December 2026 respectively. In
addition to the price linked contingent consideration, the Group
will be entitled to a further $5m at the point when the Narrabri
South Extension receives permitting.
1.
Basis of
preparation
These condensed consolidated
interim financial statements of Ecora Resources PLC are for the six
months ended 30 June 2024. They have been prepared in accordance
with United Kingdom adopted International Accounting Standard 34
'Interim Financial Reporting'. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group for the year ended 31 December
2023.
This condensed consolidated
financial information does not comprise statutory accounts within
the meaning of Section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2023 were
approved on 26 March 2024. Those accounts, which contained an
unqualified audit report under Section 495 of the Companies Act
2006 and which did not include a reference to any matters to which
the auditors drew attention by way of emphasis and did not make any
statements under Section 498 of the Companies Act 2006, have been
delivered to the Registrar of Companies in accordance with Section
441 of the Companies Act 2006.
1.1 Going concern
The financial position of the Group
and its cash flows are set out on pages 16 and 20. The Directors
have considered the principal risks of the Group which are set out
on pages 63 to 67 of the 2023 Annual Report, and considered key
sensitivities which could impact on the level of available
borrowings. As at 30 June 2024 the Group had cash and cash
equivalents of $13m and borrowings under its revolving credit
facility of $99m leaving $51m undrawn as set out in note
14.
Subsequent to the period end, the
Group made a partial repayment of $10m and borrowed a further $5m
to partially fund the acquisition of the Phalaborwa Rare Earths Project royalty detailed in note 23. As a result of these
transactions, total borrowings under the Group's revolving credit
facility as of the date of this report are $94m. Subject to
continued covenant compliance, the Group has access to a further
$56m through its secured $150m revolving credit facility as at the
date of this report.
The Directors have considered the
Group's cash flow forecasts for the period to the end of 30
September 2025 under base case and downside scenarios, including
the demand for the commodities produced and the prices realised by
the underlying operations of the Group's royalty and stream
portfolio, and the ongoing operations themselves, including
production levels. In all of the scenarios modelled (including
price and volume reductions of 10% and a 10% adverse movement in
foreign exchange), the Group continues to operate within its
banking covenant limits with no debt redemption or amortisation
commitment within the 12-month period from the date of approval of
these interim condensed consolidated financial
statements.
The Board is satisfied that the
Group's forecasts and projections, taking into account reasonably
possible changes in trading performance and other uncertainties,
together with the Group's cash position and access to the revolving
credit facility, show that the Group will be able to operate within
the levels of its current facilities for the period assessed. For
this reason, the Group continues to adopt the going concern basis
in preparing its condensed interim financial statements.
1.2
Alternative Performance Measurers
The condensed consolidated interim
financial statements include certain Alternative Performance
Measures (APMs) which include adjusted earnings per share, adjusted
dividend cover, net debt, free cash flow per share and portfolio
contribution. The directors believe that disclosing alternative
performance measures provides benefit to the users of the financial
statements and aligns to the Group's internal monitoring of key
performance indicators. These APMs are defined on page 4 of this
half yearly financial report and are reconciled to GAAP measures in
the notes 5, 6, 14, 19 and 21 respectively. The APM definitions are
consistent with those disclosed in the consolidated financial statements of the Group for the year
ended 31 December 2023 on the inside front cover.
1.3
Changes in accounting policies
The accounting policies applied are
materially consistent with those adopted and disclosed in the Group
financial statements for the year ended 31 December
2023.
The following accounting standards,
amendments and clarifications were adopted in the period with no
significant impact:
-
Lease Liability in a Sale and Leaseback (Amendments to IFRS
16)
-
Amendments to IAS 1 Presentation of Financial
Statements
-
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS
7)
The Group has not early adopted any
other amendment, standard or interpretation that has been issued
but is not yet effective. It is expected that where applicable,
these standards and amendments will be adopted on each respective
effective date.
1.4
Key sources of estimation uncertainty and critical accounting
judgements
Key areas of critical accounting
judgement and estimation uncertainty that have the most significant
effect on the Group's consolidated financial statements remain as
disclosed in note 4 of the consolidated financial statements of the
Group for the year ended 31 December 2023.
2
Royalty and metal stream related revenue
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Royalty revenue
|
46,400
|
|
37,733
|
|
Stream revenue
|
1,978
|
|
3,063
|
|
Interest from royalty related
financial assets
|
809
|
|
940
|
|
Dividends from royalty financial
instruments
|
271
|
|
999
|
|
|
49,458
|
|
42,735
|
Interest from royalty related
financial assets for the six months ended 30 June 2024 of $0.8m (30
June 2023: $0.9m) relates to interest earned on the Group's 13-year
amortising loan of C$40.8m with an interest rate of 10% per annum,
to Denison Mines Inc ("Denison"), which is classified as
non-current other receivables (note 13).
Dividends from royalty financial
instruments for the six months ended 30 June 2024 of $0.3m (30 June
2023: $1.0m) relates to the dividends received from the Group's
investments in Labrador Iron Ore Company (2024: $0.2m; 2023: $0.9m)
as described in note 9, together with the dividends received from
the Group's investment in Flowstream Vintage (2024: $0.1m; 2023:
$0.1m), an unquoted oil and gas streaming company.
3
Finance costs
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Professional fees
|
(760)
|
|
(687)
|
|
Revolving credit facility fees and
interest
|
(4,156)
|
|
(2,115)
|
|
|
(4,916)
|
|
(2,802)
|
Professional fees represent legal
and arrangement fees relating to the Group's revolving credit
facility. These fees are initially capitalised as deferred
financing costs (note 12) and amortised over the term of the
facility.
4
Other
losses
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Provision for royalty revenue
receivable
|
-
|
|
(1,170)
|
|
Other (losses)/gains
|
(1,308)
|
|
506
|
|
|
(1,308)
|
|
(664)
|
At 30 June 2023 management assessed
the recoverability of the Q1 and Q2 2023 royalties owing from the
operator of EVBC to be inherently uncertain and fully provided for
the $1.2m receivable in light of the sustained margin pressures and
operational constraints at the mine at the time. In the second half
of 2023 the Group reached an agreement with the operator and
recovered the royalties owing in full which resulted in the
provisions being reversed.
Included in other losses is a loss
on revaluation of the contingent consideration receivable related
to West Musgrave (note 13) of $1.1m (2023: gain of
$0.5m).
5
Earnings/(loss) per share
The disclosures in this note
include certain Alternative Performance Measures (APMs). For more
information on the APMs used by the Group, including the
definitions, please refer to page 4.
Earnings/(loss) per ordinary share
is calculated on the Group's profit after tax of $11.5m for the six
months ended 30 June 2024 (30 June 2023: loss of $7.5m) and the
weighted average number of shares in issue during the period of
256,291,853 (2023: 257,888,523).
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
|
$'000
|
|
$'000
|
|
Net profit/(loss) attributable to
shareholders
|
|
|
|
|
Earnings/(loss) - basic
|
11,486
|
|
(7,476)
|
|
Earnings/(loss) -
diluted
|
11,486
|
|
(7,476)
|
|
|
|
|
|
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
Weighted average number of shares in issue
|
|
|
|
|
Basic number of shares
outstanding
|
256,291,853
|
|
257,888,523
|
|
Dilutive effect of Employee Share
Option Scheme
|
527,226
|
|
-
|
|
Diluted number of shares outstanding
|
256,819,079
|
|
257,888,523
|
|
|
|
|
|
|
Earnings/(loss) per share -
basic
|
4.48c
|
|
(2.90c)
|
|
Earnings/(loss) per share -
diluted
|
4.47c
|
|
(2.90c)
|
Adjusted earnings per share
Adjusted earnings represent the
Group's underlying operating performance from core
activities. Adjusted earnings is the profit/loss attributable
to equity holders plus the royalty receipts from the EVBC royalty,
less all valuation movements and impairments (which are non-cash
adjustments that arise primarily due to changes in commodity
prices), amortisation and depletion charges, unrealised foreign
exchange gains and losses, and any associated deferred tax,
together with any profit or loss on non-core asset disposals as
such disposals are not expected to be ongoing.
|
|
|
|
|
|
Diluted
|
|
|
|
|
Earnings
|
|
earnings
|
|
|
Earnings
|
|
per share
|
|
per share
|
|
|
$'000
|
|
c
|
|
c
|
|
Net profit attributable to shareholders
|
|
|
|
|
|
|
Profit - basic and diluted for the
six months ended 30 June 2024
|
11,486
|
|
4.48c
|
|
4.47c
|
|
|
|
|
|
|
|
|
Adjustment for:
|
|
|
|
|
|
|
Amortisation and depletion of royalties and streams
|
3,071
|
|
|
|
|
|
Receipts
from royalty financial instruments
|
510
|
|
|
|
|
|
Revaluation of royalty financial instruments
|
(8,465)
|
|
|
|
|
|
Revaluation of coal royalties (Kestrel)
|
23,858
|
|
|
|
|
|
Revaluation of contingent consideration
|
1,308
|
|
|
|
|
|
Unrealised
foreign exchange (gains)/losses
|
839
|
|
|
|
|
|
Tax effect
of the adjustments above
|
(5,991)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings - basic and
diluted for the six months ended 30 June 2024
|
26,616
|
|
10.38c
|
|
10.36c
|
|
|
|
|
(Loss)/
|
|
Diluted
|
|
|
(Loss)/
|
|
earnings
|
|
(loss)/
earnings
|
|
|
earnings
|
|
per share
|
|
per share
|
|
|
$'000
|
|
c
|
|
c
|
|
Net profit attributable to shareholders
|
|
|
|
|
|
|
Loss - basic and diluted for the
six months ended 30 June 2023
|
(7,476)
|
|
(2.90c)
|
|
(2.90c)
|
|
|
|
|
|
|
|
|
Adjustment for:
|
|
|
|
|
|
|
Amortisation and depletion of royalties and streams
|
4,665
|
|
|
|
|
|
Receipts
from royalty financial instruments
|
1,170
|
|
|
|
|
|
Revaluation of royalty financial instruments
|
(3,011)
|
|
|
|
|
|
Revaluation of coal royalties (Kestrel)
|
43,820
|
|
|
|
|
|
Revaluation of contingent consideration
|
(506)
|
|
|
|
|
|
Unrealised
foreign exchange (gains)/losses
|
(1,674)
|
|
|
|
|
|
Tax effect
of the adjustments above
|
(13,631)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings - basic and
diluted for the six months ended 30 June 2023
|
23,357
|
|
9.06c
|
|
9.05c
|
In calculating the adjusted
earnings per share, the weighted average number of shares in issue
takes into account the dilutive effect of the Group's employee
share option schemes in those periods where the Group has adjusted
earnings. In periods where the Group has an adjusted loss,
the employee share option schemes are considered anti-dilutive as
including them in the diluted number of shares outstanding would
decrease the loss per share, as such they are excluded.
The weighted average number of
shares in issue for the purpose of calculated basic and diluted
adjusted earnings per share are as follows:
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
Weighted average number of shares in issue
|
|
|
|
|
Basic number of shares
outstanding
|
256,291,853
|
|
257,888,523
|
|
Dilutive effect of Employee Share
Option Scheme
|
527,226
|
|
199,179
|
|
Diluted number of shares outstanding
|
256,819,079
|
|
258,087,702
|
6
Dividends
The disclosures in this note
include certain Alternative Performance Measures (APMs). For more
information on the APMs used by the Group, including the
definitions, please refer to page 4.
On 14 February 2024, an interim
dividend of 2.125c per share was paid to shareholders ($5.4m) in
respect of the year ended 31 December 2023.
The Board recommended and the
Company's shareholders approved a final dividend in respect of the
year ended 31 December 2023 of 2.125c at the Annual General Meeting
on 2 May 2024. The final dividend totalling $5.4m was paid on 5
June 2024.
Under the updated capital
allocation policy, the dividend is now calculated based on a payout
ratio of the average free cash flow generated in the immediate two
preceding six-month periods. The averaging of the two periods is
designed to smooth out quarterly volatility from the Kestrel
royalty as it moves in and out of the Group's private royalty
lands.
The H1 2024 free cash flow of
$12.6m (note 19) combined with the H2 2023 free cash flow of $12.8m
results in an average free cash flow over the two periods of
$12.7m. The Board has determined to pay an interim dividend of 1.70
cents per share for the first six months of 2024. This equates to a
payout ratio for the first half of 33%, which is at the top end of
the 25-35% ratio in the revised policy. The H1 2024 dividend will
be paid on 31 January 2025, to all shareholders on the Register of
Members on 3 January 2025.
7
Coal royalties (Kestrel)
|
|
$'000
|
|
At 1 January 2023
|
106,669
|
|
Foreign currency
translation
|
(2,101)
|
|
Loss on revaluation of coal
royalties
|
(43,820)
|
|
At 30 June 2023
|
60,748
|
|
Foreign currency
translation
|
1,306
|
|
Gain on revaluation of coal
royalties
|
15,300
|
|
At 31 December 2023
|
77,354
|
|
Foreign currency
translation
|
(2,069)
|
|
Loss on revaluation of coal
royalties
|
(23,858)
|
|
At 30 June 2024
|
51,427
|
The carrying value of the Group's
coal royalty of $51.4m (A$77.3m) is based on a valuation completed
during June 2024 by an independent coal industry advisor, amended
for management's assessment of the nominal discount rate and future
commodity price assumptions. The independent coal industry
advisor's assumptions relating to volumes and foreign exchange
rates were not changed.
The valuation is based on a net
present value of the future pre-tax cash flows from Kestrel
discounted at a nominal rate of 10.5% (30 June 2023: 10.5%; 31
December 2023: 10.5%). The key assumptions in the valuation
other than discount rate relate to price and foreign exchange
rates.
Price assumptions
The independent coal industry
advisor's price assumptions were based on the June 2024 Consensus
Economics forecast of U$257/t for the second half of 2024. Given
the volatility in the commodity prices management have assumed an
average price for the second half of 2024 of U$234/t based on the
Australian Premium Coking Coal FOB Financial Future price, before
reverting to consensus pricing collated by RBC which decreases to
an average nominal price U$223/t between 2025 and 2028, and a
long-term flat nominal price of U$199/t.
Foreign exchange rate assumptions
The independent coal industry
advisor's AUD:USD exchange rate assumptions
used in the 30 June 2024 valuation assume a strengthening in the
Australia dollar from a short-term rate of 0.67 to a long term rate
of 0.73 against the US dollar.
The net royalty income from this
investment is taxed in Australia at a rate of 30%. The
revaluation of the underlying Australian dollar asset is recognised
in the Income Statement with the retranslation to the Group's USD
presentation currency recognised in the foreign currency
translation reserve.
Were the coal royalty to be carried
at cost the carrying value would be $0.3m (2023: $0.3m).
8
Metal streams
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Cost
|
175,585
|
|
175,585
|
|
Contingent consideration
|
2,978
|
|
2,978
|
|
Gross carrying amount
|
178,563
|
|
178,563
|
|
Depletion and impairment
|
(18,317)
|
|
(17,123)
|
|
Carrying amount
|
160,246
|
|
161,440
|
The metal stream and contingent
consideration are being depleted on a units-of-production basis
over the total expected deliveries to be received of 16.7Mlbs (30
June 2023: 16.9Mlbs; 31 December 2023: 15.5Mlbs). During the period
to 30 June 2024, the Group received 0.12Mlbs of cobalt resulting in
a depletion charge of $1.2m (30 June 2023: 0.26Mlbs resulting in a
depletion charge of $2.6m; six months to 31 December 2023: 0.22Mlbs
resulting in a depletion charge of $2.4m).
The contingent consideration in
relation to the acquisition is determined by reference to minimum
production thresholds and cobalt prices, and has been classified as
a financial liability that is carried at fair value based on the
discounted expected cash outflows. The fair value of the contingent
consideration is remeasured at each reporting date,
such that the gross carrying amount is equal to
the sum of amounts paid to date and expected future payments and
depreciated on a units-of-production basis over the total expected
deliveries to be received from the metal stream.
As at 30 June 2024 the fair value
of the contingent consideration for future periods has been
determined to be nil as the minimum production and price thresholds
are not expected to be achieved in the period to 30 June 2025 (31
December 2023: nil).
9
Royalty financial instruments
The details of the Group's royalty
financial instruments, which are held at fair value are summarised
below:
|
|
|
Royalty
|
|
|
30 June
2024
Carrying
value
|
31 December
2023
Carrying
value
|
|
|
Commodity
|
rate
|
Escalation
|
Classification
|
$'000
|
$'000
|
|
EVBC
|
Gold,
silver, copper
|
0.50%
|
Up to 3%
gold >$2,500/oz
|
FVTPL
|
-
|
-
|
|
Dugbe 1
|
Gold
|
2.00%
|
2.5%
>$1,800/oz and production <50,000oz/qrt
|
FVTPL
|
5,414
|
1,402
|
|
McClean Lake
|
Uranium
|
-
|
22.5% of
tolling milling receipt on production >215Mlbs
|
FVTPL
|
4,914
|
2,865
|
|
Piauí
|
Nickel-cobalt
|
1.60%
|
-
|
FVTPL
|
19,785
|
18,329
|
|
Labrador Iron Ore
|
Iron
ore
|
7.00%
|
-
|
FVOCI
|
1,218
|
10,233
|
|
|
|
|
|
|
31,331
|
32,829
|
The Group's royalty instruments are
represented by four royalty agreements, EVBC, Dugbe 1, McClean Lake
and Piauí which entitle the Group to either the repayment of
principal and a net smelter return ("NSR") royalty for the life of
the mine or a gross revenue royalty ("GRR") where the project
commences commercial production or the repayment of principal where
it does not. All four royalty agreements are classified as
fair value through profit or loss ('FVTPL').
The Group's entitlements to cash by
way of the repayment of the principal and the NSR royalty or the
GRR have been classified as fair value through profit or loss in
accordance with IFRS 9 and are carried at fair value in accordance
with the Group's classification of royalty arrangements
criteria adopted in the last annual
financial statements for the year to 31
December 2023.
The Group's fifth royalty financial
instrument is its equity investment in Labrador Iron Ore Company
('LIORC'), which entitles the Group to a share of the 7% GRR LIORC
receives from the Iron Ore Company of Canada ('IOC') mine and
distributes to its shareholders via dividends. As LIORC is a
single asset company, holding the GRR over the IOC mine, which is
owned and operated by Rio Tinto. The Group has classified its
equity investment in LIORC as a royalty financial instrument and
made an irrevocable election to designate it as FVTOCI.
The Group sold 367,200 shares in
LIORC in the first half of 2024 generating C$11.1m ($8.1m) in
proceeds and retained 57,390 shares. The
Group's partial sale of its holding in LIORC in 2024 resulted in a
capital gain of C$2.2m ($1.6m) which was transferred directly to
retained earnings, net of C$0.3m ($0.2m) in income tax arising from
the gain.
The resulting dividends from the
Group's investment in LIORC have been classified as royalty related
revenue (refer to note 2) as a result of LIORC's primary source of
income being the 7% GRR described above.
At the reporting date, the fair
value of the Group's investment in LIORC has been determined by
reference to the quoted bid price of the
instrument.
The Group's remaining royalty
financial instruments are valued based on the net present value of
pre-tax cash flows discounted at a pre-tax nominal rate between
10.50% and 16.50% at reporting date.
For those royalty financial
instruments not in production, the outcome of this net present
value calculation is then risk weighted to reflect management's
current assessment of the overall likelihood and timing of each
project coming into production and royalty income arising. This
assessment is impacted by news flow relating to the underlying
operation in the period, in conjunction with management's
assessment of the economic viability of the project based on
commodity price projections.
The table below outlines the
discount rate and risk weighting applied in the valuation of the
Group's royalty financial instruments:
|
|
|
30 June
2024
|
31 December
2023
|
|
|
Classification
|
Discount
Rate
|
Risk
Weighting
|
Discount
Rate
|
Risk
Weighting
|
|
EVBC
|
Fair Value through Profit or
Loss
|
11.50%
|
0%
|
12.00%
|
0%
|
|
Dugbe 1
|
Fair Value through Profit or
Loss
|
16.50%
|
25.00%
|
35.00%
|
32.50%
|
|
McLean Lake
|
Fair Value through Profit or
Loss
|
10.50%
|
60%
|
10.00%
|
60%
|
|
Piaui
|
Fair Value through Profit or
Loss
|
13.00%
|
42.5% -
100%1
|
17.50%
|
55%-100%1
|
1 A risk weighting of 42.5% (2023:55%) is applied to the
probability of Piaui's expanded 24Ktpa plant reaching commercial
production, as compared to the risk weighting of 100% (2023: 100%)
applied to the 1Ktpa plant which has already achieved
production.
10
Royalty and exploration intangible assets
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Royalty interests
|
325,030
|
|
332,570
|
|
Contingent consideration
|
8,655
|
|
11,115
|
|
Exploration and evaluation
costs
|
919
|
|
919
|
|
Gross carrying amount
|
334,604
|
|
344,604
|
|
Amortisation and
impairment
|
(71,638)
|
|
(74,803)
|
|
Carrying amount
|
262,966
|
|
269,801
|
Impairments of royalty intangible assets
All intangible assets are assessed
for indicators of impairment at each reporting date. Where an
impairment indicator has been identified, the recoverable amount of
the asset has been estimated at 30 June 2024 with no impairment
charges recognised (31 December 2023: no impairment charges
recognised). The Group's intangible assets will be assessed
for indicators of impairment again at 31 December 2024.
Impairment sensitivity
The Group considers the
announcement by BHP on 11 July 2024 to suspend the construction of
West Musgrave project from October 2024 with the decision to be
reviewed by February 2027, as an indicator of impairment as at 30
June 2024. Having reviewed the recoverable amount of the West
Musgrave royalty at 30 June 2024 and concluded that no impairment
charge should be recognised, the Group has reviewed the sensitivity
of its assessment concluding the following:
·
A 10% decrease in the underlying commodity prices
would result in an impairment charge of $6.6m being
recognised.
·
A 1% increase in the discount rate applied to the
expected future cash flows from the West Musgrave royalties, would
result in an impairment charge of $6.6m being
recognised.
Contingent consideration
On 19 July 2022, the Group acquired
the West Musgrave, Santa Domingo, Nifty and Carlota royalties from
South32 Royalty Investments Pty Ltd ("South32") for a fixed
consideration of $185m with further contingent consideration of up
to $15m. The deferred consideration has been paid in full, with the
last payment made in January 2024 of $9.2m.
Contingent consideration is payable
subject to future nickel prices and minimum production levels at
West Musgrave post commencement of production and has been
classified as a financial liability that is carried at fair value
based on the discounted expected future cash outflows. After
initial recognition the contingent consideration is measured at
fair value at the end of each reporting period, with any fair value
gains or losses recognised in the royalty intangible assets
balance. As at 30 June 2024, the fair value of the contingent
consideration payable is $8.7m based on a pre-tax nominal discount
rate of 11.0% (31 December 2023: fair value of $11.1m on a pre-tax
nominal discount rate of 10.5%).
Amortisation of royalty intangible assets
The amortisation charge for the
period, of $1.9m (30 June 2023: $2.1m) relates to the Group's
producing royalties, Mantos Blancos, Maracás Menchen, Carlota and
Four Mile. Amortisation of the remaining interests will
commence once they begin commercial production.
11 Mining and
exploration interests
Total mining and exploration
interests are represented by:
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
Quoted investments
|
1,806
|
|
296
|
|
Unquoted investments
|
2,496
|
|
2,495
|
|
|
4,302
|
|
2,791
|
|
|
|
|
|
|
Number of investments
|
8
|
|
7
|
On 28 June 2024, the Group
subscribed for 10,442,427 new ordinary shares at
a price of 11.3652 pence per share in Rainbow
Rare Earths Ltd for $1.5m, which was paid after the period end.
Rainbow Rare Earths Ltd is listed on the London Stock Exchange. The
share subscription was executed in connection with the royalty
acquisition over the Phalaborwa Rare Earths Project which was
completed after the reporting period (refer to note 23).
12 Deferred
costs
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
Deferred acquisition
costs
|
400
|
|
341
|
|
Deferred financing costs
|
1,497
|
|
-
|
|
|
1,897
|
|
341
|
Deferred financing costs
As at 30 June 2024 deferred
financing costs of $1.5m represent the unamortised costs associated
with the Group's $150m revolving credit facility which was amended
and extended in January 2024 (note 14). These deferred financing
costs are amortised over the three-year term of the
facility.
13
Trade and other
receivables
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
Non-current
|
|
|
|
|
Denison financing
agreement
|
14,836
|
|
17,135
|
|
Deferred consideration
|
4,310
|
|
6,311
|
|
Contingent consideration
|
8,326
|
|
10,149
|
|
Other receivables
|
120
|
|
113
|
|
|
27,592
|
|
33,708
|
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
Current
|
|
|
|
|
Income tax receivable
|
173
|
|
276
|
|
Prepayments
|
420
|
|
383
|
|
Royalty receivables
|
18,759
|
|
5,042
|
|
Deferred consideration
|
2,000
|
|
2,000
|
|
Contingent consideration
|
1,160
|
|
1,122
|
|
Other receivables
|
965
|
|
826
|
|
|
23,477
|
|
9,649
|
Denison financing agreement
For the period ended 30 June 2024,
the Group earned $0.8m in interest revenue and received total toll
milling receipts of $1.7m, resulting in a principal repayment of
$2.5m (30 June 2023: $0.9m in interest revenue and total toll
milling receipts of $1.3m, resulting in a principal repayment of
$2.3m).
Deferred consideration
The Group disposed of its 1% gross
revenue royalty over the Narrabri mine to the operator, Whitehaven
Coal Limited, for fixed consideration of $21.6m of which $4.4m was
received on completion with the balance payable in annual
instalments until 31 December 2026 and further contingent
consideration also payable over the period to 31 December 2026. $2m
of fixed consideration was received in the six months ended 30 June
2024.
Contingent consideration
Contingent consideration receivable
comprises of contingent consideration in relation to the West
Musgrave acquisition as well as the Narrabri disposal (as described
above).
As described in note 10, under the
West Musgrave Royalty the Group is entitled to a A$10m payment on
commercial production being achieved at West Musgrave, which is
distinct from and separate to the net smelter return royalty and is
accounted for as a financial asset and measured at fair value
through profit or loss. As at 30 June 2024, the fair value of the
contingent consideration receivable is $5.7m (31 December 2023:
$6.8m).
The contingent consideration
receivable from the disposal of Narrabri consists of $5.0m,
receivable in instalments, upon the approval of the Narrabri South
extension project by state and federal authorities in Australia,
prior to 31 December 2026. In addition, the Group is entitled to
receive bi-annual contingent payments linked to future realised
coal prices during the period from closing to 31 December 2026.
Subject to realised prices exceeding $90/t the Group will be
entitled to $0.05/t, increasing to $0.25/t if realised prices
exceed $150/t. Both elements of the contingent consideration in
relation to the sale of the Narrabri royalty have been classified
as a financial asset that is carried at fair value based on
discounted expected cash flows. $0.2m of contingent consideration
was received in the six months ended 30 June 2024.
As at 30 June 2024, the Group
assessed the probability of the Narrabri South Extension being
approved at 50% (2023: 50%) and applied this to the discounted
future cash flows with an 11% (2023: 11%) pre-tax nominal discount
rate resulting in a fair value of $2.3m (2023: $2.1m) for this
element of the contingent consideration. The price and sales volume
linked contingent consideration was also valued by applying an 11%
(2023: 11%) pre-tax nominal discount rate to the expected future
cash flows, resulting in a fair value of $1.5m (2023: $2.1m) for
this element of the contingent consideration.
Royalty receivables
Royalty receivables comprise
amounts relating to royalties receivable from Kestrel, Mantos
Blancos, Maracás Menchen, EVBC and Carlota for the last quarter in
each period, together with dividends declared but not yet received
from LIORC. These amounts were received in full after the period
end.
14
Borrowings
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Secured borrowing at amortised cost
|
|
|
|
|
Revolving credit
facility
|
98,962
|
|
82,400
|
|
|
98,962
|
|
82,400
|
The disclosures in this note
include certain Alternative Performance Measures (APMs). For more
information on the APMs used by the Group, including the
definitions, please refer to page 4.
In January 2024 the Group entered
into an amendment and extension of its $150m revolving credit
facility agreement largely on the same terms as the previous
facility and subject to SOFR plus a ratchet between 2.25% and
4.00%, depending on leverage levels. The amended and extended
facility also includes an uncommitted accordion feature of up $75m
to be used to fund royalty acquisitions which, if implemented,
would take the potential borrowing capacity up to $225m. The
Group's facility is secured by way of a floating charge over the
Group's assets and is subject to a number of financial covenants,
all of which have been met during the period ended 30 June
2024.
The facility has a maturity
date of January 2027 and subject to lender consent, can be extended
twice by up to 12 months on each occasion.
The Directors consider that the
carrying amount of the Group's borrowings approximates their fair
value.
The Group's net debt position after
offsetting interest bearing liabilities against cash and cash
equivalents is as follows:
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Revolving credit
facility
|
(98,962)
|
|
(82,400)
|
|
Cash and cash
equivalents
|
12,980
|
|
7,850
|
|
Net debt
|
(85,982)
|
|
(74,550)
|
15
Deferred tax
The following is the analysis of
the deferred tax balances (after offset) for financial reporting
purposes:
|
|
|
30 June
2024
|
|
31 December
2023
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
(24,237)
|
|
(28,126)
|
|
Deferred tax assets
|
|
36,128
|
|
37,451
|
|
|
|
11,891
|
|
9,325
|
The following are the major
deferred tax liabilities/(assets) recognised by the Group and the
movements thereon during the period:
|
|
Revaluation
|
|
Revaluation
|
|
Accrual
of
|
|
|
|
|
|
|
|
|
of
coal
|
|
of
royalty
|
|
royalty
|
|
Other
|
|
Tax
|
|
|
|
|
royalty
|
|
instruments
|
|
receivable
|
|
revaluations
|
|
losses
|
|
Total
|
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
At 1 January 2023
|
32,001
|
|
567
|
|
3,061
|
|
1,406
|
|
(32,810)
|
|
4,225
|
|
Charge/(credit) to profit or
loss
|
(13,146)
|
|
544
|
|
(281)
|
|
152
|
|
(97)
|
|
(12,828)
|
|
Credit to other comprehensive
income
|
-
|
|
(253)
|
|
-
|
|
-
|
|
-
|
|
(253)
|
|
Exchange
differences
|
(630)
|
|
21
|
|
(79)
|
|
(42)
|
|
-
|
|
(730)
|
|
Effect of change in tax
rate:
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
- income
statement
|
-
|
|
-
|
|
-
|
|
-
|
|
(617)
|
|
(617)
|
|
At 30 June 2023
|
18,225
|
|
879
|
|
2,701
|
|
1,516
|
|
(33,524)
|
|
(10,203)
|
|
Charge/(credit) to profit or
loss
|
4,590
|
|
(1,465)
|
|
(1,842)
|
|
(352)
|
|
(105)
|
|
826
|
|
Credit to other comprehensive
income
|
-
|
|
(371)
|
|
-
|
|
-
|
|
-
|
|
(371)
|
|
Exchange
differences
|
391
|
|
(26)
|
|
23
|
|
36
|
|
(1)
|
|
423
|
|
At 31 December 2023
|
23,206
|
|
(983)
|
|
882
|
|
1,200
|
|
(33,630)
|
|
(9,325)
|
|
Charge/(credit) to profit or
loss
|
(7,157)
|
|
1,765
|
|
4,138
|
|
(451)
|
|
32
|
|
(1,673)
|
|
Credit to other comprehensive
income
|
-
|
|
(69)
|
|
-
|
|
-
|
|
-
|
|
(69)
|
|
Partial disposal of LIORC
recognised in equity
|
-
|
|
(211)
|
|
-
|
|
-
|
|
-
|
|
(211)
|
|
Exchange
differences
|
(621)
|
|
38
|
|
17
|
|
(33)
|
|
(14)
|
|
(613)
|
|
At 30 June 204
|
15,428
|
|
540
|
|
5,037
|
|
716
|
|
(33,612)
|
|
(11,891)
|
Uncertain tax positions
The Group operates across many tax
jurisdictions. Application of tax law can be complex and
requires judgement to assess risk and estimate outcomes,
particularly in relation to the Group's cross-border operations and
transactions. The evaluation of tax risks considers both
amended assessments received and potential sources of challenge
from tax authorities. In some cases, it may not be possible
to determine a range of possible outcomes or a reliable estimate of
the potential exposure.
Tax matters with uncertain outcomes
arise in the normal course of business and occur due to changes in
tax law, changes in interpretation of tax law, periodic challenges
and disagreement with tax authorities. Tax obligations
assessed as having probable future economic outflows capable of
reliable measurement are provided for. As at 30 June 2024 the
Group recognised a provision for uncertain tax positions of $4.0m
(30 June 2023: $3.8m; 31 December 2023: $4.0m).
The Group does not currently have
any material unresolved tax matters or disputes with tax
authorities. Recent changes to and the interpretation of tax
legislation in certain jurisdictions where the Group has
established structures may however, be a potential source of
challenge from tax authorities. Due to the complexity of
changes in international tax legislation, the Group has taken local
advice and has recognised provisions where necessary. None of
these provisions are material in relation to the Group's assets or
liabilities.
16
Trade and other
payables
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
Non-current
|
|
|
|
|
Contingent consideration
|
8,656
|
|
11,115
|
|
Lease liability
|
2,918
|
|
2,918
|
|
Other taxation and social security
payables
|
404
|
|
428
|
|
|
11,978
|
|
14,461
|
|
|
30 June
2024
|
|
31 December
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Current
|
|
|
|
|
Other taxation and social security
payables
|
307
|
|
151
|
|
Trade payables
|
464
|
|
414
|
|
Accruals and other
payables
|
5,259
|
|
3,172
|
|
Lease liability
|
440
|
|
440
|
|
Deferred
consideration
|
-
|
|
9,167
|
|
|
6,470
|
|
13,344
|
As at 31 December 2023, current
deferred consideration payable and non-current contingent
consideration payable is in relation to the acquisition of West
Musgrave as detailed in note 10. The final instalment of the
deferred consideration payable was paid in January 2024.
17
Share capital, share premium and merger reserve
|
|
Number of
|
|
Share
capital
|
|
Share
premium
|
|
Merger
reserve
|
|
Total
|
|
|
shares
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
Group and Company
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of 2p each at 1 January 2023
|
257,856,157
|
|
6,761
|
|
169,212
|
|
94,847
|
|
270,820
|
|
Utilisation of shares held in
treasury on exercise
of employee options (a)
|
47,244
|
|
1
|
|
-
|
|
-
|
|
1
|
|
Ordinary shares of 2p at 30 June and 31 December
2023
|
257,903,401
|
|
6,762
|
|
169,212
|
|
94,847
|
|
270,821
|
|
Share buy-back (b)
|
(9,491,317)
|
|
(239)
|
|
-
|
|
-
|
|
(239)
|
|
Utilisation of shares held in
treasury on exercise of employee options (c)
|
185,809
|
|
5
|
|
-
|
|
-
|
|
5
|
|
Ordinary shares of 2p at 30 June 2024
|
248,597,893
|
|
6,528
|
|
169,212
|
|
94,847
|
|
270,587
|
(a)
On 26 February 2023, the Company utilised 47,244 ordinary shares of
2p each from treasury, to settle awards to employees under the
Deferred Share Bonus Plan that had vested.
(b)
The Company acquired in aggregate 9,491,317 ordinary shares of 2p
each between 27 March 2024 and 30 May 2024 for a total
consideration of U$10m under a share buy-back programme. The
ordinary shares repurchased under the programme are held in
treasury.
(c)
On 25 June 2024, the Company utilised 185,809 ordinary shares of 2p
each from treasury, to settle awards to employees under the
Long-term Incentive Plan that had vested.
As at 30 June 2024, the Group held
13,134,660 shares in treasury (31 December 2023:
3,829,152).
18
Segment information
The Group's chief operating
decision maker is considered to be the Executive Committee. The
Executive Committee evaluates the financial performance of the
Group based on a portfolio view of its individual royalty
arrangements. Royalty income and its associated impact on
operating profit is the key focus of the Executive Committee. The
income from royalties is presented based on the jurisdiction in
which the income is deemed to be sourced as follows:
Australia:
Kestrel, Crinum, Four Mile,
Pilbara, West Musgrave, Nifty
Americas:
Voisey's
Bay, McClean Lake, Mantos Blancos, Maracás Menchen, LIORC, Ring of
Fire, Piauí, Canariaco, Ground Hog, Flowstream, Amapá,
Carlota, Santo Domingo and Vizcachitas
Europe:
EVBC,
Salamanca
Other:
Dugbe I, Corporate and also includes the Group's mining and
exploration interests (excluding Flowstream)
The following is an analysis of the
Group's results by reportable segment. The key segment result
presented to the Executive Committee for making strategic decisions
and allocation of resources is operating profit as analysed
below.
The segment information provided to
the Executive Committee for the reportable segments for the six
months ended 30 June 2024 is as follows (noting that total segment
operating profit corresponds to operating profit before
revaluations which is reconciled to profit/loss before tax on the
face of the consolidated income statement):
|
|
Australia
|
|
Americas
|
|
Europe
|
|
All other
|
|
|
|
|
Royalties
|
|
Royalties
|
|
Royalties
|
|
segments
|
|
Total
|
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty and stream related
revenue
|
42,133
|
|
7,325
|
|
-
|
|
-
|
|
49,458
|
|
Amortisation and depreciation of
royalties and streams
|
(40)
|
|
(3,031)
|
|
-
|
|
-
|
|
(3,071)
|
|
Mineral streams cost of
sales
|
-
|
|
(368)
|
|
-
|
|
-
|
|
(368)
|
|
Operating expenses
|
(1,911)
|
|
(67)
|
|
-
|
|
(3,786)
|
|
(5,764)
|
|
Total segment operating profit/(loss)
|
40,182
|
|
3,859
|
|
-
|
|
(3,786)
|
|
40,255
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
184,932
|
|
406,996
|
|
243
|
|
23,156
|
|
615,327
|
|
Total assets include:
|
|
|
|
|
|
|
|
|
|
|
Additions to non-current assets
(other than financial instruments and deferred tax
assets)
|
-
|
|
-
|
|
-
|
|
2
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment liabilities
|
51,424
|
|
86,679
|
|
-
|
|
9,067
|
|
147,170
|
The segment information provided to
the Executive Committee for the reportable segments for the six
months ended 30 June 2023 is as follows:
|
|
Australia
|
|
Americas
|
|
Europe
|
|
All other
|
|
|
|
|
Royalties
|
|
Royalties
|
|
Royalties
|
|
segments
|
|
Total
|
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty and stream related
revenue
|
32,427
|
|
10,308
|
|
-
|
|
-
|
|
42,735
|
|
Amortisation and depreciation of
royalties and streams
|
(47)
|
|
(4,618)
|
|
-
|
|
-
|
|
(4,665)
|
|
Mineral streams cost of
sales
|
-
|
|
(725)
|
|
-
|
|
-
|
|
(725)
|
|
Operating expenses
|
(2,060)
|
|
(59)
|
|
-
|
|
(2,844)
|
|
(4,963)
|
|
Total segment operating
profit/(loss)
|
30,320
|
|
4,906
|
|
-
|
|
(2,844)
|
|
32,382
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
193,619
|
|
413,021
|
|
-
|
|
12,433
|
|
619,073
|
|
Total assets include:
|
|
|
|
|
|
|
|
|
|
|
Additions to non-current assets
(other than financial instruments and deferred tax
assets)
|
-
|
|
-
|
|
-
|
|
54
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment
liabilities
|
78,804
|
|
54,185
|
|
-
|
|
7,022
|
|
140,011
|
The segment information for the
twelve months ended 31 December 2023 is as follows:
|
|
Australia
|
|
Americas
|
|
Europe
|
|
All other
|
|
|
|
|
Royalties
|
|
Royalties
|
|
Royalties
|
|
segments
|
|
Total
|
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty and metal stream related
revenue
|
42,698
|
|
19,202
|
|
-
|
|
-
|
|
61,900
|
|
Amortisation and depletion of
royalties and streams
|
(81)
|
|
(7,386)
|
|
-
|
|
-
|
|
(7,467)
|
|
Metal streams cost of
sales
|
-
|
|
(1,338)
|
|
-
|
|
-
|
|
(1,338)
|
|
Operating expenses
|
(4,134)
|
|
(374)
|
|
-
|
|
(6,381)
|
|
(10,889)
|
|
Total segment operating profit/(loss)
|
38,483
|
|
10,104
|
|
-
|
|
(6,381)
|
|
42,206
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
207,288
|
|
417,327
|
|
112
|
|
11,550
|
|
636,277
|
|
Total assets include:
|
|
|
|
|
|
|
|
|
|
|
Additions to non-current assets
(other than financial instruments and deferred tax
assets)
|
-
|
|
20,407
|
|
-
|
|
112
|
|
20,519
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment liabilities
|
61,246
|
|
78,803
|
|
-
|
|
14,209
|
|
154,258
|
The amounts provided to the
Executive Committee with respect to total segment assets are
measured in a manner consistent with that of the financial
statements. These assets are allocated based on the operations of
the segment and the physical location of the asset.
The amounts provided to the
Executive Committee with respect to total segment liabilities are
measured in a manner consistent with that of the financial
statements. These liabilities are allocated based on the operations
of the segment.
The royalty related income in
Australia for the six months ended 30 June 2024 of $42.1m (2023:
$32.4m) is substantially derived from the Kestrel royalty, which
generated $40.8m for the six months ended 30 June 2024 (2023:
$31.8m). The royalty and stream related income derived from the
Kestrel royalty represent greater than 10% of the Group's revenue
for the six months ended 30 June 2024 and 30 June 2023.
The royalty related income in the
Americas for the six months ended 30 June 2024 of $7.3m (2023:
$10.3m) is substantially derived from the Voisey's Bay metal stream
sales of $2.0m (2023: $3.1m), Mantos Blancos royalties of $2.8m
(2023: $3.3m) and dividends received from the Group's investment in
LIORC of $0.2m (2022: $0.9m).
The royalty and metal
stream-related revenue for the six months ended 30 June 2024 from
Voisey's Bay of $2.0m (2023: $3.1m), together with $1.1m from
Maracás Menchen (2023: $1.7m), $2.8m from Mantos Blancos (2023:
$3.3m), $1.4m from Four Mile (2023: $0.6m) and $0.4m from Carlota
(2023: $0.3m), represents revenue recognised from contracts with
customers as defined by IFRS 15.
19
Free cash flow
The disclosures in this note
include certain Alternative Performance Measures (APMs). For more
information on the APMs used by the Group, including the
definitions, please refer to page 4.
The structure of a number of the
Group's royalty financing arrangement, such as the Denison
transaction completed in February 2017, result in a significant
amount of cash flow being reported as principal repayments, which
are not included in the income statement. As the Group
considers the dividend payout by reference to the free cash flow
generated by its assets, management have determined that free cash
flow per share is a key performance indicator.
Free cash flow per share is
calculated by dividing net cash generated from operating
activities, proceeds from the disposal of non-core assets and
repayments under commodity related financing agreements, less
finance costs paid, by the weighted average number of shares in
issue. The free cash flow per share for the period ended 30 June
2023 has been restated to include the proceeds on disposal of
Narrabri as a non-core asset. This change is in line with the
Group's updated Capital Allocation Framework as disclosed on page
17 of the 2023 Annual Report.
|
|
6 months
ended
|
|
Free cash
flow
|
|
|
30 June
2024
|
|
per share
|
|
|
$'000
|
|
c
|
|
Net cash generated from operating activities
|
|
|
|
|
Net cash generated from operating
activities for the period ended 30 June 2024
|
13,215
|
|
|
|
|
|
|
|
|
Adjustment for:
|
|
|
|
|
Proceeds from disposal of non-core
assets
|
2,201
|
|
|
|
Finance income received
|
103
|
|
|
|
Finance costs paid
|
(4,624)
|
|
|
|
Repayments under commodity related
financing agreements
|
1,714
|
|
|
|
|
|
|
|
|
Free cash flow for the period
ended
|
12,609
|
|
4.92c
|
|
|
6 months
ended
|
|
Free cash
flow
|
|
|
30 June
2023
|
|
per share
|
|
|
$'000
|
|
c
|
|
|
(restated)
|
|
|
|
Net cash generated from operating activities
|
|
|
|
|
Net cash generated from operating
activities for the period ended 30 June 2023
|
18,293
|
|
|
|
|
|
|
|
|
Adjustment for:
|
|
|
|
|
Proceeds from disposal of non-core
assets
|
4,761
|
|
|
|
Finance income received
|
3
|
|
|
|
Finance costs paid
|
(2,164)
|
|
|
|
Repayments under commodity related
financing agreements
|
1,312
|
|
|
|
|
|
|
|
|
Free cash flow for the period
ended
|
22,205
|
|
8.61c
|
The weighted average number of
shares in issue for the purpose of calculating the free cash flow
per share is as follows:
|
|
30 June
2024
|
|
30 June
2023
|
|
|
|
|
|
|
Weighted average number of shares
in issue
|
256,291,853
|
|
257,888,523
|
20
Financial risk management
The Group's principal treasury
objective is to provide sufficient liquidity to meet operational
cash flow and dividend requirements and to allow the Group to take
advantage of new growth opportunities whilst maximising shareholder
value. The Group's activities expose it to a variety of
financial risks including liquidity risk, credit risk, foreign
exchange risk and price risk. The Group operates controlled
treasury policies which are monitored by management to ensure that
the needs of the Group are met while minimising potential adverse
effects of unpredictability of financial markets on the Group's
financial performance.
Financial instruments
The Group held the following
investments in financial instruments (this includes investment
properties):
|
|
|
30 June
2024
|
|
31 December
2023
|
|
|
|
$'000
|
|
$'000
|
|
Investment property (held at fair value)
|
|
|
|
|
|
Coal royalties (Kestrel)
|
|
51,427
|
|
77,354
|
|
|
|
|
|
|
|
Fair value through other comprehensive
income
|
|
|
|
|
|
Royalty financial
instruments
|
|
1,218
|
|
10,233
|
|
Mining and exploration
interests
|
|
4,302
|
|
2,791
|
|
|
|
|
|
|
|
Fair value through profit or loss
|
|
|
|
|
|
Royalty financial
instruments
|
|
30,113
|
|
22,596
|
|
Contingent consideration -
receivable
|
|
9,366
|
|
11,070
|
|
|
|
|
|
|
|
Financial assets at amortised cost
|
|
|
|
|
|
Trade and other
receivables
|
|
40,990
|
|
31,427
|
|
Contingent consideration -
receivable
|
|
120
|
|
201
|
|
Cash at bank and on hand
|
|
12,980
|
|
7,850
|
|
|
|
|
|
|
|
Financial liabilities at amortised cost
|
|
|
|
|
|
Trade and other payables
|
|
464
|
|
414
|
|
Borrowings
|
|
98,962
|
|
82,400
|
|
Deferred consideration
|
|
-
|
|
9,167
|
|
Lease liability
|
|
3,358
|
|
3,358
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
|
Contingent consideration -
payable
|
|
8,656
|
|
11,115
|
Cash and cash equivalents comprise
cash and short-term deposits held by the Group treasury
function. The carrying amount of these assets approximates
their fair value.
The Directors consider that the
carrying amount of trade and other receivables, trade and other
payables and deferred consideration approximates their fair
value.
Liquidity and funding risk
The objective of the Group in
managing funding risk is to ensure that it can meet its financial
obligations as and when they fall due. As at 30 June 2024,
the Group had borrowings of $99.0m (31 December 2023: $82.4m) and
cash and cash equivalents of $13.0m (31 December 2023:
$7.9m).
Subsequent to the period end, the
Group made a partial repayment of $10m and borrowed a further $5m
to partially fund the acquisition of the Phalaborwa Rare Earths Project royalty detailed in note 23. As a result of these
transactions, total borrowings under the Group's revolving credit
facility as of the date of this report are $94.0m. Subject to
continued covenant compliance, the Group has access to a further
$56.0m through its secured $150m revolving credit facility as at
the date of this report. Further details on the Group's revolving
credit facility are included in note 14.
Credit risk
The Group's principal financial
assets are bank balances, royalty financial instruments (excluding
the investment in LIORC), non-current other receivables and trade
and other receivables. These represent the Group's maximum exposure
to credit risk in relation to financial assets and total $94.2m at
30 June 2024 (31 December 2023: $73.8m).
Foreign exchange risk
The Group's transactional foreign
exchange exposure arises from income, expenditure and purchase and
sale of assets denominated in foreign currencies. With royalty income from Kestrel accounting for
over 80% of the Group's income (30 June 2023: over 75%), the
Group's primary foreign exchange exposure is to the Australian
dollar, in which these royalties are denominated. In addition
to the Group's exposure to the Australian dollar, it is also
exposed to the Canadian dollar through the royalty related revenue
from LIORC and McClean Lake which is denominated in Canadian
dollars and accounted for 2% of the Group's income (30 June 2023:
4.2%).
The Group's hedging policy allows
foreign exchange forward contracts to be entered into with a
maximum exposure of 70% of forecast Australian and Canadian dollar
denominated royalty revenue expected to be received during a period
not exceeding 12 months from contract date to settlement.
There are no outstanding forward contracts at 30 June 2024 and 31
December 2023.
Price risk
The royalty and metal stream
portfolio exposes the Group to other price risks through
fluctuations in commodity prices, particularly the prices of coking
coal, cobalt, vanadium, copper, iron ore, gold and uranium. The
Directors obtain independent commodity price forecasts, the
generation of which takes into account fluctuations in prices,
which are utilised in the valuation of royalties - refer to note 7
and 9.
In addition to the commodity price
risk, the Group is exposed to share price risk in respect of its
mining and exploration interests which include listed and unlisted
equity securities, together with its investment in LIORC which is
classified as a royalty financial instrument (note 9). No specific
hedging activities are undertaken in relation to these interests
and the voting rights arising from these equity instruments are
utilised in the Group's favour.
Fair value hierarchy
The following table presents
financial assets and liabilities measured at fair value in the
statement of financial position in accordance with the fair value
hierarchy. This hierarchy groups financial assets and liabilities
into three levels based on the significance of inputs used in
measuring the fair value of the financial assets and
liabilities. The fair value hierarchy has the following
levels:
· Level
1: quoted prices (unadjusted) in active markets for identical
assets and liabilities;
· Level
2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
· Level
3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level within which the
financial asset or liability is classified is determined based on
the lowest level of significant input to the fair value
measurement. The following tables present the Group's assets and
liabilities that are measured at fair value at 30 June
2024:
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Group
|
Notes
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Coal royalties (Kestrel)
|
7
|
|
-
|
|
-
|
|
51,427
|
|
51,427
|
|
Royalty financial
instruments
|
9
|
|
1,218
|
|
-
|
|
30,113
|
|
31,331
|
|
Mining and exploration interests -
quoted
|
11
|
|
1,806
|
|
-
|
|
-
|
|
1,806
|
|
Mining and exploration interests -
unquoted
|
11
|
|
-
|
|
2,496
|
|
-
|
|
2,496
|
|
Contingent consideration -
receivable
|
13
|
|
-
|
|
-
|
|
9,366
|
|
9,366
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration -
payable
|
16
|
|
-
|
|
-
|
|
(8,656)
|
|
(8,656)
|
|
Net fair value
|
|
|
3,024
|
|
2,496
|
|
82,250
|
|
87,770
|
The following tables present the
Group's assets and liabilities that are measured at fair value at
31 December 2023:
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Group
|
Notes
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Coal royalties (Kestrel)
|
7
|
|
-
|
|
-
|
|
77,354
|
|
77,354
|
|
Royalty financial
instruments
|
9
|
|
10,233
|
|
-
|
|
22,596
|
|
32,829
|
|
Mining and exploration interests -
quoted
|
11
|
|
296
|
|
-
|
|
-
|
|
296
|
|
Mining and exploration interests -
unquoted
|
11
|
|
-
|
|
2,495
|
|
-
|
|
2,495
|
|
Contingent consideration -
receivable
|
13
|
|
-
|
|
-
|
|
11,070
|
|
11,070
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration -
payable
|
16
|
|
-
|
|
-
|
|
(11,115)
|
|
(11,115)
|
|
Net fair value
|
|
|
10,529
|
|
2,495
|
|
99,905
|
|
112,929
|
There have been no significant
transfers between Levels 1 and 2 in the reporting
period.
Fair value measurements in Level 3
The methods and valuation
techniques used for the purposes of measuring fair value of coal
royalties, royalty financial instruments and contingent
consideration receivable and payable remain as disclosed in note 34
of the consolidated financial statements of the Group for the year
ended 31 December 2023. A description of
the valuation process for Coal Royalties is provided in note 7
which describes the assumptions that the valuations are most
sensitive to. Note 9 describes the sensitive assumptions affecting
the valuation of Royalty financial instruments, alongside commodity
price forecasts.
The Group's financial assets and
liabilities classified in Level 3 uses valuation techniques based
on significant inputs that are not based on observable market
data.
The following table presents the
changes in Level 3 instruments for the six months ended 30 June
2024.
|
|
|
Royalty financial
instruments
|
|
Coal royalties
(Kestrel)
|
|
Contingent consideration -
receivable
|
|
Contingent consideration -
acquisitions
|
|
Total
|
|
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
At 1 January 2024
|
|
22,596
|
|
77,354
|
|
11,070
|
|
(11,115)
|
|
99,905
|
|
Revaluation gains or losses
recognised in:
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement
|
|
8,465
|
|
(23,858)
|
|
(1,308)
|
|
-
|
|
(16,701)
|
|
Royalty intangible and
metal stream
|
|
-
|
|
-
|
|
-
|
|
2,193
|
|
2,193
|
|
Royalties due or received from
royalty financial instruments
|
|
(510)
|
|
-
|
|
-
|
|
-
|
|
(510)
|
|
Reclassified to current
receivables/payables
|
|
-
|
|
-
|
|
(120)
|
|
-
|
|
(120)
|
|
Foreign currency
translation
|
|
(438)
|
|
(2,069)
|
|
(276)
|
|
266
|
|
(2,517)
|
|
At 30 June 2024
|
|
30,113
|
|
51,427
|
|
9,366
|
|
(8,656)
|
|
82,250
|
The following table presents the
changes in Level 3 instruments for the year ended 31 December
2023.
|
|
|
Royalty financial
instruments
|
|
Coal royalties
(Kestrel)
|
|
Contingent consideration -
receivable
|
|
Contingent consideration -
acquisitions
|
|
Total
|
|
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
$'000
|
|
At 1 January 2023
|
|
18,290
|
|
106,669
|
|
12,650
|
|
(10,058)
|
|
127,551
|
|
Contingent consideration
received
|
|
-
|
|
-
|
|
(1,351)
|
|
-
|
|
(1,351)
|
|
Revaluation gains or losses
recognised in:
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement
|
|
(3,088)
|
|
(28,520)
|
|
(666)
|
|
-
|
|
(32,274)
|
|
Royalty intangible and metal stream
|
|
-
|
|
-
|
|
-
|
|
(1,037)
|
|
(1,037)
|
|
Royalties due or received from
royalty financial instruments
|
|
(718)
|
|
-
|
|
-
|
|
-
|
|
(718)
|
|
Additions
|
|
7,774
|
|
-
|
|
-
|
|
-
|
|
7,774
|
|
Foreign currency
translation
|
|
338
|
|
(795)
|
|
437
|
|
(20)
|
|
(40)
|
|
At 31 December 2023
|
|
22,596
|
|
77,354
|
|
11,070
|
|
(11,115)
|
|
99,905
|
There have been no transfers into
or out of Level 3 in any of the reporting periods.
The Group measures its entitlement
to the royalty income and any optionality embedded within the
royalty instruments using discounted cash flow models. In
determining the discount rate to be applied, management considers
the country and sovereign risk associated with the projects,
together with the time horizon to the commencement of production
and the success or failure of projects of a similar
nature.
21
Portfolio contribution
The disclosures in this note
include certain Alternative Performance Measures (APMs). For more
information on the APMs used by the Group, including the
definitions, please refer to page 4.
Portfolio contribution represents
the funds received or receivable from the Group's underlying
royalty and stream related assets. A number of the Group's
royalty financing arrangements result in a significant amount of
cash flow being reported as principal repayments, which are not
included in the income statement. In addition, royalty receipts
from those royalty financial instruments classified as FVTPL such
as EVBC, are reflected in the fair value movement of the underlying
royalty rather than recorded as royalty and stream related revenue.
The Group considers total portfolio contribution as a means of
assessing the overall performance of the Group's underlying royalty
and metal stream related assets.
Portfolio contribution is royalty
and stream related revenue (note 2), less metal stream cost of
sales, plus royalties received or receivable from royalty financial
instruments carried at FVTPL and principal repayment received under
the Denison financing agreement (note 13) as follows:
|
|
Six months
ended
|
|
|
30 June
2024
|
|
30 June
2023
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Royalty and stream related revenue
(note 2)
|
49,458
|
|
42,735
|
|
Royalties due or received from
royalty financial instruments
|
510
|
|
1,170
|
|
Repayments under commodity related
financing agreements (note 13)
|
1,714
|
|
1,312
|
|
Mineral streams cost of
sales
|
(368)
|
|
(725)
|
|
|
51,314
|
|
44,492
|
Metal streams costs of sales
represent the cost of cobalt purchases under the Voisey's Bay
stream agreement, marketing costs and insurance. The cost of cobalt
purchases is 18% of an industry cobalt reference price until the
original upfront amount paid for the stream, by its original
holder, of $300m is reduced to nil (through accumulating credit
from 82% of the cobalt reference price), increasing to 22%
thereafter.
22
Share-based payments
On 26 February 2023, the Company
utilised 47,244 ordinary shares of 2p each from treasury, to settle
awards to employees under the Deferred Share Bonus Plan that had
vested.
On 25 June 2024, the Company
utilised 185,809 ordinary shares of 2p each from treasury, to
settle awards to employees under the Long-term Incentive Plan that
had vested.
23
Events occurring after period end
On 28 June 2024, the Group entered
into an agreement to acquire a 0.85% Gross Revenue Royalty over the
Phalaborwa Rare Earths Project located in South Africa for a total
cash consideration of $8.5m. The royalty
rate steps up by 0.1% to 0.95% if commercial production does not
occur prior to 1 October 2027. If commercial production does not
occur prior to 1 July 2028, then the royalty rate steps up by a
further 0.15% to 1.10%.
Payment of the $8.5m royalty
consideration was 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; and
· execution and delivery of certain security documents to
Ecora.
Exchange control authorisation
from the South African Reserve Bank Financial Surveillance
Department was received on 25 July 2024. As at the date of this
report the execution and delivery of the required security
documents has not yet occurred and therefore, ownership of the
royalty had not passed to the Group at 30 June 2024
and is not included in the balance
sheet.
24
Availability of financial statements
This statement will be sent to
shareholders and will be available at the Group's registered office
at Kent House, 3rd Floor North, 14-17 Market Place,
London W1W 8AJ.
INDEPENDENT REVIEW REPORT TO ECORA RESOURCES
PLC
Conclusion
We have been engaged by the Company
to review the condensed set of financial statements in the half
yearly financial report for the six months ended 30 June 2024 which
comprises the Condensed Consolidated Income Statement, Condensed
Consolidated Statement of Comprehensive Income, Condensed
Consolidated Balance Sheet, Condensed Consolidated Statement of
Changes in Equity, Condensed Consolidated Statement of Cash Flows
and the related notes 1 to 24. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
set of financial statements in the half yearly financial report for
the six months ended 30 June 2024 is not prepared, in all material
respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in
accordance with International Standard on Review Engagements 2410
(UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As disclosed in note 1, the annual
financial statements of the group are prepared in accordance with
UK adopted international accounting standards. The condensed set of
financial statements included in this half yearly financial report
has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or
that management have identified material uncertainties relating to
going concern that are not appropriately disclosed.
This conclusion is based on the
review procedures performed in accordance with this ISRE, however
future events or conditions may cause the entity to cease to
continue as a going concern.
Responsibilities of the directors
The directors are responsible for
preparing the half yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
In preparing the half yearly
financial report, the directors are responsible for assessing the
Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly
report, we are responsible for expressing to the Company a
conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our
Conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion paragraph of this report.
Use of our report
This report is made solely to the
Company in accordance with guidance contained in International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our work, for this report, or
for the conclusions we have formed.
Ernst & Young LLP
London
3 September 2024
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.