DPM Metals Inc. (DPM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Dundee Precious Metals acquisition of INV Metals. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Monday, May 31, 2021. I would now like to turn the conference over to Jennifer Cameron. Please go ahead.

Thank you, and good morning. With us today are David Rae, President and Chief Executive Officer; Hume Kyle, Chief Financial Officer; Michael Dorfman, Executive Vice President, Corporate Development; and Nikolay Hristov, Vice President, Sustainability and External Relations. Before we begin, I'd like to bring to your attention the fact that we will be making forward-looking statements during this presentation, which are subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. I'll now turn the call over to David Rae.

Thanks, Jennifer. Good morning, everybody, and thank you for joining us. Earlier this morning, we were pleased to announce that we've reached an agreement with INV Metals to acquire all of the issued and outstanding shares that DPM does not currently own in an all-share count. We're taking advantage of a unique opportunity to consolidate our current 23.5% ownership in INV and add a high-quality advanced-stage growth project to our portfolio that has the potential to add meaningful growth to our production profile. This project fits extremely well with our core strengths, and we believe there's significant potential for us to unlock value from this quality asset on behalf of our stakeholders. On Slide 4, we've outlined the key terms of the transaction. The acquisition is structured as a plan of arrangement, whereby each of the issued and outstanding shares of INV that DPM does not currently own will be exchanged for 0.091 of a DPM common share. The exchange ratio implies consideration of an $0.80 per INV share based on DPM's 5-day volume-weighted average price on the TSX, represents a 63% premium to the closing price of INV on May 28. The implied equity value of the transaction is equal to approximately $132 million for the portion not owned by DPM or $104 million on a 100% and fully diluted basis. We expect to issue 10.6 million new shares for this transaction, which will equate to approximately 6% of DPM's common shares after the closing of the transaction. We have voting support agreements in place with IAMGOLD, which holds approximately 36% of INV's common shares as well as directors and certain officers of INV, representing a further 11%. Together with the shares that DPM already holds, this represents approximately 70% of INV's issued and outstanding shares to be voted in support of the transaction. There are a number of reasons why we see this as a strong strategic fit for DPM and we decided to move ahead at this time. The Loma Larga project is a great fit with our core strengths and unique capabilities where DPM has a proven track record of unlocking value. The project has similar geology, mining method and processing flow sheet to our Chelopech underground mine, which we developed into world-class operation. We see significant potential to benefit the project with additional engagement with local stakeholders, as was also the case in the initial stages of development for Ada Tepe, which is now a highly successful DPM operation that enjoys strong support from local communities. And Loma Larga will produce a complex concentrate, which DPM would be able to process at our Tsumeb smelter in Namibia or other outlets. This transaction leverages our strong track record of developing industry-leading ESG solutions at all of our operations to unlock significant value. We're acquiring a high-quality, low-cost asset with the potential to add meaningful growth to our production profile at attractive valuation metrics representing 0.2 of the NPV in the feasibility study and $38 per gold equivalent ounce of reserve. This, in turn, has the potential to be highly accretive to DPM shareholders. And finally, the size of this transaction maintains our balance sheet's strength and financial flexibility, allowing us to pursue additional growth opportunities and maintain our disciplined approach to capital allocation, which includes continuing the return of capital to our shareholders. With respect to timing, we believe that it is the right time to consolidate our ownership in the project, following the submission of the EIS, allowing us to bring our depth of experience to the permitting process and to ensure close alignment with our process and standards. I'd like to take a few minutes to elaborate on these points in a bit more detail. DPM brings a depth of experience to the project in terms of our strong track record as an environmentally and socially responsible company. When we commenced production at Ada Tepe in 2019, it became the first new mine in Bulgaria and The Balkans in over 40 years, a significant milestone we were able to achieve, in large part, due to our approach to engaging with our stakeholders and our commitment to the highest standard of environmental stewardship. Across our portfolio, our operations have had a significant positive impact on local communities, generating social and economic benefits, and we have developed innovative solutions to minimize our environmental impact. Our focus on innovation has also demonstrated our ability to unlock value as we have realized a number of benefits from implementing best-in-class technologies that have increased safety, lowered mining cost, improved performance and reduced our impact on the environment. We are excited to be adding this high-quality project to our development pipeline. Located in the Azuay province of Ecuador, Loma Larga is an advanced-stage project that has been designed as a top strategic project by the government. INV completed a feasibility study in 2020 and recently submitted an environmental impact study. Overall, we consider Loma Larga a very robust project given its potential to contribute meaningful low-cost production growth to our profile, its strong economic returns and its potential to be a leading example of how to develop an environmentally sound operation with a low-carbon footprint. Based on INV's feasibility study for the project, Loma Larga has the potential to produce approximately 200,000 gold ounces per year in the first 5 years. The life of mine production is estimated to be approximately 170,000 gold ounces per year at a low all-in sustaining cost of below $630 per ounce. Loma Larga adds approximately 2.6 million gold equivalent high-grade mineral reserves to our portfolio, which supports an initial 12-year mine life with strong economic returns, including a 28% IRR at a $1,400 per ounce gold price. Relative to other development projects, it is clear that Loma Larga offers significant scale with peer-leading operating costs at an attractive valuation. As mentioned, we expect the deal to be accretive to our shareholders on our reserves per share and net asset value per share basis. It also fits well within our portfolio, adding significantly to our production profile and maintains our attractive cost structure. Finally, the size of this whole share transaction preserves our financial strength and flexibility. As we've indicated many times, we intend to optimize and grow our business in a disciplined manner that is consistent with our capital allocation framework. Following the transaction, we will continue to have a strong cash position and maintain our ability to pay an attractive quarterly dividend. We will be taking a disciplined approach to advancing the Loma Larga project, and we'll have the ability to minimize upfront spending during the permitting process while we prioritize engagement with local communities to ensure international best practices, and we also plan to explore additional optimization opportunities for the project. As well, we will work to secure an investor protection agreement with the Ecuadorian government prior to committing to making any significant capital commitments. To conclude, with this transaction, we believe we are capitalizing on a unique opportunity to acquire a high-quality asset for our portfolio that adds meaningful low-cost growth production for an attractive valuation. We can leverage our core strengths and unique capabilities to unlock future value, and while at the same time, preserve our financial strength and our disciplined capital allocation framework. Overall, we believe that DPM is the right company to take Loma Larga forward, following many years of hard work by the INV team. We have the technical depth, the financial resources and the ability to deliver innovative solutions for the benefit of all stakeholders. I'd now like to open the call up for any questions.

[Operator Instructions] First question comes from Cosmos Chiu at CIBC.

I guess my first question is on permitting here. Loma Larga, what used to be called Quimsacocha, it's been around for a long time. And so maybe can you talk about -- I know the EIA has been submitted. But what's the time line here in terms of the permitting process? What are some of the key challenges in terms of the permitting process? Could you maybe talk a bit more about that?

Sure, Cosmos. The permitting time line is laid out in the feasibility study, and communications from INV has indicated that, that could be completed in this year in 2021. We think that's optimistic, and it's going to be necessary to do more in terms of local engagement and engagement in-country to be able to run through the different concerns and look at potential solutions in terms of how we advance the project. In our view, it could take up to 2 years to permit the project, which moves the time line for production back accordingly into the 2024 to 2025 window. We anticipate that the bulk of the concerns are going to be around water, and that's going to be a clear focus for us. On the other hand, we do have a number of things that we'll be looking at as value opportunities, which will provide ESG-centric improvements to the overall project delivery. I don't know if that answers the question, Cosmos. If you had any other question?

Yes. Yes, I think that's great. And I'm just wondering if in the past, have they tried to permit it in the past? Was it a case of kind of like Krumovgrad, where it was sort of in permitting limbo for a long time and then you came in and was able to change a flow sheet a little bit and then got it done? I'm just wondering if it's one of those situations. I was never that close to Quimsacocha, so I'm just wondering if it was one of those situations where it was in permitting limbo for a long time, and then now you kind of come in and things have changed.

As I understand, INV did a good job of changing the initial approach. The initial approach was going to be an open pit local cyanidation option and changed that to an underground asset with local treatment, which involved producing a flotation concentrate or 2 flotation concentrates for sale. So that part of the work is already done. And where INV has advanced the project is to the point where now the EIS has been submitted. And what we're now waiting for is for the formation of the group within the government, which I believe has been done, and for them to reach out to us. And that will initiate a process of going through questions from the government, community consultation and so on. So we think this is a very good time for us to come into this process.

For sure. And then following up on that, David. A big project that was permitted in Ecuador was Lundin Gold, FDN. Any kind of parallels that you can draw between INV and what the permitting process was like at Lundin Gold at FDN?

So it is a different province, and therefore, a slightly different situation in terms of stakeholder engagement. What I would say is that the government indicated that it's important for foreign direct investment as part of their intent to take the country forward. And our project is 1 of the top 5, and in fact, I believe, the #3 project in-country targeted with the idea of generating that foreign direct investment. So from that point of view, the parallels are that both projects were seen as important. In terms of what was necessary in terms of stakeholder engagement, I think we're just starting that process now, really. What we anticipate is that there has been an accumulation of concerns around water, and those will need to be addressed in terms of how exactly we intend to manage water on the project. We believe that will be the main focus.

And then not so much Ecuador, but other countries. When companies try to permit projects in other countries in LatAm, ILO 169 was something that they've talked about in other countries, indigenous engagement. Is that something that we need to be aware of as well for Loma Larga?

We see engagement as fundamental to any of our projects. It's been the key to Ada Tepe. It was key to what happened with Namibia. So it's just one of the things that you can't avoid. So dealing with the stakeholders, can be a broad group including indigenous groups, local communities, looking at what it is that the government in total sees. It's important to engage with all of those stakeholders and pay attention to what it is that -- where they have concerns and where there are opportunities.

Okay. And maybe switching gears a little bit. You first put a total hold position in INV back in October 28, 2019. Since that time, could you maybe talk about the process? What gave you more comfort in terms of today making a 100% acquisition of the company?

So we've had a close engagement with INV. We have had an opportunity to do a couple of due diligence at the site so we're very familiar with the asset. And I'm on the Board of Directors, of course, of INV and Nicky Hristov, who is going to be managing the next phase of activity targeted at stakeholders and engagement and permitting. Nicky is on the Technical Committee. So we're very familiar with the project. It's just been a question of working to the point where we had a transaction which both parties were interested in taking forward. So in the meantime, we've continued to derisk the project with the new feasibility, the new government coming into place and so on. So we felt this was the right time given the next part of the project is where we believe it's so fundamental, the engagement with the stakeholders.

Yes. And David, following up on that, I guess, the total hold position that you made was at CAD 0.40 per share. Clearly, a lot of has changed. The gold price is a lot higher today. And as you mentioned in your presentation, David, you're still paying a discount for these ounces in the ground. But could you comment on the $0.40 paid back in 2019 versus the $0.80 along with a premium that's paid today?

Yes. It's obviously a key question, why do we think it's appropriate to pay a premium of this nature. However, it takes an amount of money to be paid to get people over the line, and we look at the fundamentals of the project. And it's very clear that this transaction is highly accretive in our view on a reserves per share basis and a NAV share basis. So I've given the numbers in the presentation so I won't repeat them. But if you had any particular questions, happy to do that. The other thing is that we see upside potential in Loma Larga, and we believe it just fits with our core strength. So therefore, this is obviously a very important consideration internally as well, the first $0.40 payments. I think the second was at $0.45 to get to our 23% -- 23.5% share. So yes, so that's why we believe that it is highly accretive. And as a consequence, we were able to get over the premium that we were paying and focus on the value of the project to DPM and our shareholders.

Next question comes from Li Hua at Scotia Capital.

Actually, most of my questions have been answered. But maybe just one follow-up on the community concerns you were talking about. Do you think the key to working with the local community is just education and outreach? Or do you envision needing to modify the project? And along those lines, is the project flexible in terms of being able to modify it, such as what you did with Ada Tepe?

Li, so the project has already been modified in a significant way, which we believe should go a good way towards whatever is necessary with the communities. You talked about, is it necessary to educate? So I wouldn't so much say educate as we need to be ready to inform so that when we're having a conversation, we're doing so on a basis of understanding what it is that is offered from the project and how it is that we're going to manage any impacts. But the first thing I think we have to do is listen. So it's very important that we understand the concerns. So rather than just go in and talk about how good the project is, we should be hearing, okay, what are people's concerns and how that will impact livelihoods and other elements. So the process that I mentioned, the EIS has been received. We're waiting now to commence the to and fro with government and then the community consultation, where we'll get the opportunity to hear what it is that the communities have concerns over and how it is that we may be able to address these. I believe that a large part of those have been addressed, and it's just important to understand the nature of some of those other elements and consider those. So we will be optimizing the project. We're going to take the opportunity to do that while we're going through this permitting process. And it's quite possible that coming from the process itself and the outreach with the communities, that there will be things where we realize there are opportunities to improve. As I mentioned, we're committed to the highest standards with environmental, but it also includes the engagement of stakeholders and making sure that we understand where it is that they see opportunities, where it is that they have concerns and doing what we can to address those.

Next question comes from Don DeMarco at National Bank Financial.

David, does this mean that you're done with M&A and you feel comfortable that you provided an adequate bridge beyond the limited mine life at Ada Tepe?

So I mean, a few different things. We've also -- we've been accelerating our exploration activity with an intent to extend the lives of our existing assets, particularly Chelopech. Does this mean that we're done? That depends on how this project progresses. We would be open to opportunistic activity on acquisitions or investments. And this basically preserves our ability to do that. But we're very -- as you know, we're very focused on our capital allocation, so that includes reinvestment, margin improvement projects, exploration and the possibility of M&A. So we're not done with M&A, but it would be a part of the toolkit. This preserves our ability to do that. But obviously, we're very intent on taking this project forward. It does make a meaningful difference to the company going forward.

Okay. Now, talk -- you spoke about water and some of the permitting topics and so on. And we saw a few months ago that mining has been banned in the páramo ecosystem near Cuenca. But can you speak to the -- how the project has grandfathered exemptions to this? Obviously, in acquiring it, you would have felt very comfortable about those exemptions.

Yes. So -- and the first thing is there was a ruling by the Supreme Court that projects that have been moved forward historically will be grandfathered. You're correct in saying that. We believe that this should not affect the recharge areas of the specific rivers that were the concern. However, we are very focused on our projects of making sure that we act in everybody's best interest in terms of what we need to do with energy, energy efficiency, greenhouse gas emissions, all of the other sort of climate change sort of parameters. And water is one that is a real touch point. So we'll be making sure that we do what we can to minimize our footprint. We're not going to rely on the fact that we've been grandfathered. We'd like to think that it's not just a case of, "We'll forget about that." We've done what we need to. We want to make sure that, that relationship is constructive. We understand the concerns. The government has yet to do some things, which will clarify the recharge area. So we're not reliant on that at the moment. And we'll be continuing to act in what we believe is the right approach to management of water around this project.

Okay. Your slide deck indicates that the project is designated as a strategic project by the Ecuadorian government. What does that mean?

So what it means is it's a project that's targeted to be a part of what's going to happen with foreign direct investments and how that might impact economically on the country, locally, in terms of jobs and supply chain and other things; and I think more globally, as to what that's going to do in terms of the additional taxes and revenue that will come in from the project. So it's targeted within that framework as one that will make a meaningful difference to the country.

Okay. So does that -- can we take that to imply that there are groups within the country that are very supportive of this project and potentially provide some offset to those that are -- have that -- may have environmental concerns?

Too early for us to say that. So what we need to do is get more into that conversation, and we plan to do that over the next couple of months as we're working through the EIS with the interested parties, stakeholders and the government.

Okay. And so from a modeling perspective, how much do you expect to spend on the project in the next year on permitting or maybe some exploration or whatever else you might need to spend?

Don, we have a view on that. But what we indicated is that we've got a process going on to review that, and I prefer to come back to you when we have the Q2 close. Michael, is there anything that you wanted to add to that from our side?

Yes, Don, I think the expectation from INV over the balance of the second half of the year was a budget of approximately CAD 15 million to CAD 20 million. So we'll be taking a close look at that to see how that might change under our ownership. But we'd be looking to minimize the spend during the upfront permitting phase.

[Operator Instructions] Next question from Dalton Baretto at Canaccord.

I want to start by asking about the stated rationale for this transaction. You mentioned similarities to Chelopech. You mentioned early engagement with stakeholders and you mentioned the ability to place the complex con at Tsumeb. Can you kind of ballpark wrap that up for me in terms of potential economic impact of the project? I'm trying to compare that versus the premium paid as well as any impact on a delay to the feasibility study.

Sure. So I mean, if you go from the feasibility study where we talked about $216 million of initial capital, $71 million sustaining, $454 million NPV and a 28% IRR. So we look at the project and we say, okay, is there anything that's going to be missing from this in terms of CapEx? Are there additional items that we're going to bring? And then what are the mitigating items? So for instance, it's not just that this is a similar type of ore body in terms of how we would go about the extraction of the resource and reserve. It's also the fact that we have so many things that we've identified with Chelopech, which are synergies beyond just a single asset. So for instance, we've got a smart center at Chelopech which has the ability to do the planning. It already does so for Ada Tepe. It could do that for a third-party or current third party in-house after this transaction. So if we build behind the Loma Larga asset, one of the things that we could do is we could get synergies from the provision of HR, supply chain, planning, scheduling, maintenance. We've got all sorts of things that we can do with our expertise in terms of the availability of people during the development of this project and the development of all of the sort of skills that we will need to bring everybody up to the performance opportunity for Loma Larga. We can actually utilize and leverage our strengths at Chelopech and Ada Tepe with this asset, so things like that. We've also got, for instance, the opportunity to implement alternative types of fleet. At the moment, it's envisaged that, that would be a diesel fleet. And actually, Loma Larga was considered to be a place where there could be an electric fleet. And at that time, that was rejected as an option. We believe that's still something that's very viable. And again, that gives us an opportunity, given the remote control, to be able to do more from our existing facilities. So there are many different areas just looking at it from a mining point of view. You can reduce some of your overhead. You can leverage the expertise that we have to bring people up to a performance objective that's going to allow us to realize more value from that asset. So I would say, though, as you mentioned, we'd obviously be looking at the current capital expectation. There's potentially going to be some creep on that. But at the same time, we're looking to offset that with the opportunities that we might bring from our experience of building these projects plus the leverage that we've got from our other operations. There's much more that I can say on this, but maybe I'll stop there, Dalton.

No, that's great color, David. And so then, is it your intention post the deal to refresh the feasibility study to incorporate some or all of this? Or are you just going to move forward with the current feasibility as the base case and optimize on the fly?

We do want to basically move forward with the existing feasibility and optimize it on the fly. As I mentioned, we haven't really started the engagement as part of the EIS. So there is going to be some need to come back and revisit some of the elements, some of those baseline assumptions in terms of what we're doing with the construction and operation of the project. So what we'll do is we'll go ahead and trigger some optimization studies, which we already have some in mind. There will be more over the course of the next 6 to 8 weeks. And then we'll take that into the conversations, the stakeholder engagement. And then from that, we'll come up with what may be a review of the current feasibility study. But at this point, I would say we're progressing with the feasibility study unless we see something significant that requires us to restate that.

Okay. And then we've talked a fair bit about permitting in the Q&A here. But maybe just one question for me, and perhaps you've already answer this in all your commentary. But the feasibility study says that the mining concessions lie within protected forest areas. And so does that mean you'll need a special exemption from the government above and beyond what would typically be considered a permitting track?

So it's not unusual for us to have assets which are in protected areas. So if you have a look in Bulgaria, for instance, in the Natura 2000 zone in which we built Ada Tepe, so that's not unusual for that type of thing. Nicky, did you want to comment on the view in terms of how that's considered?

Thanks, Dave. So no, there will not be any specific other than the sort of the normal permitting regime. The mining activities in that type of protected area is allowed. And it won't be different to what we have done in Ada Tepe mine, where we've put a special biodiversity plant in place to manage the biodiversity aspects of the protected area. So we have a good experience in dealing with such type of things.

Okay. And just maybe 2 quick questions on Ecuador. First of all, my understanding is that the current regime in Ecuador states that the government must accrue more than 50% of the benefits from any mining project. And then when I look at the feasibility study, it basically states that based on the commodity prices assumed there, there's no adjustment payment triggered. Would that payment be triggered at current commodity prices? And have you factored that into your estimates?

We factored in the current requirements -- Michael, did you want to talk to this?

Yes. I don't believe that the -- there would be any adjustment at current commodity prices, but we can come back to you in terms of sensitivity at what point that, that comes into play.

Okay. Great. And then just maybe one last one, the investor protection agreement you guys are going to negotiate. So is it fair to assume that what you're going to try and do is lock in the existing royalties and tax payments and that sort of stuff? And then in terms of a dispute resolution mechanism, is it fair to assume that would just be your typical international arbitration?

Go ahead, Michael.

So yes. The question is on the investor protection agreement, yes, so we would be looking to -- that process is actually well underway. INV has started engagement on that process. And we expect that there's good opportunity to actually get that completed over the course of this year, as you outlined.

And you're looking to lock in with the current terms?

Correct. Correct, yes.

The next question is a follow-up from Cosmos Chiu at CIBC.

David and team, sorry, I just have 2 follow-ups here. I guess, number one, David, as you talked about similar geology and processing here as it is to Chelopech. So in your economic analysis for this acquisition, was it considered? And what might be the cost savings in terms of shipping your concentrate from Loma Larga to Tsumeb?

I wouldn't consider that to be a saving. The way I would look at that is the same way we look at it with Chelopech, where it's an ability for us to have a home for that concentrate. So there can be situations where it changes in governmental expectations with the place where you're shipping it, where they restrict or have more onerous requirements in terms of the delivery of that concentrate. It just means that we've got a confirmed home for that concentrate at Tsumeb. So it wasn't so much an optimization as making sure that we can place that concentrate with the associated gold value.

Yes, you're right. That leads in well to my second question as well. Just to confirm, because in our Q1 sort of discussion, David, we talked about the fact that it was actually a bit more efficient for you to play some of that Chelopech ore at third-party smelters versus Tsumeb. And so I guess that was considered as well.

That's correct.

Okay. And then the second question here, following up on the M&A strategy here. Today, you acquired 100% of a total hold position. You have other 2 total hold positions in Velocity and also Sabina. Any kind of read-through from today to those other investments that you can comment on?

So Sabina is a great asset. But I think as we've said historically, it's a large asset and it is not one which is a direct fit with our core strengths in terms of underground mining, small, high-grade open pit. It's not a fit. Also, Arctic location. However, it is a terrific project. So at this point, we retain that position. We're supportive of management in terms of the way they're taking Sabina forward -- the asset forward. In terms of Velocity. Velocity is obviously 40 kilometers away from Ada Tepe. And it's an early-stage opportunity for something that could be treated at Ada Tepe. So that's the reason why we -- it's 20 kilometers -- as the crow flies, 40 kilometers by road. So we're continuing to look at that asset with a potential interest as a supply going forward either in partnership or with potential ownership of that project. It's early days on that. I would say between the 2, obviously, Velocity is more of a strategic fit with the organization.

Next question comes from Bereket Berhe, Beacon Securities.

Congratulations, David. Most of my questions are actually answered. But I have one last question on M&A, and this is probably outside of your control anyway. Despite the uptick of you paying 63% of premium, this is a relatively small transaction. If you look at it from U.S. dollar point of view, it's probably $80 million for whatever shares you do not own. And I noticed that the break fee is so small, about $4.5 million. And given the quality of the assets and the amount of gold equivalent resource, you're literally paying somewhere around $20 per ounce on ground. Do you think the break fee or the premium itself disincentivize somebody else from making a bid for this asset?

No, it's not really the reason for it all. Keep in mind that there was a 35% shareholder in this organization and others who we needed to get over the line. So at the end of the day, there was -- this is not the first conversation that we've had. This is a process that's been ongoing in phases over time. And this was what was necessary. This was the sweet spot in order to complete the transaction. But you're right, at the end of the day we looked at this. And obviously, our investors would prefer a no premium activity, if at all possible. And that was not possible in this case. So what we did then was rationalized, exactly as you said, that is this acceptable as an investment. It was 5.5% of the future company in terms of the scale of the transaction, just a little over CAD 100 million. And we came to the conclusion that it was going to be accretive on a net asset value basis per share. So -- and as a consequence, we decided to move ahead.

Okay. And then -- well, I think you misread my question. I was thinking that the premium is not subsequently large enough to persuade others for making a bid.

Do you want me to answer that one? Sorry, I misunderstood your question.

Yes.

So we basically have -- it's necessary to get 66 and 2/3 percentage points of the shareholder meeting for INV and then follow that up with a majority, which is a 50% plus 1 vote for the group excluding DPM. And currently, we have locked up 70% of shareholders. And if you basically take IAMGOLD, plus people inside INV, we're beyond the mid-50% when you exclude DPM. So we believe that's a very strong position. So is it possible that someone else may try and approach this? Of course, because that could always happen. We did not position this with that in mind. And the break fee, by the way, is 3.5%, which is not unusual for this type of transaction.

Congratulations again.

And you had another question?

No. They're really all answered, to be honest with you. But like if you could comment on the new President in Ecuador and the sort of tone he's setting for the industry. And also, I noticed he appointed a new Mines Minister as well as a new Environment Minister, both of them affiliated to the mining industry or at least exploration industry. And I was wondering if that's signaling coming from the President's office, and your interpretations on that.

Well, we certainly think this is an exciting start for Ecuador with the new governance and the relationship that's been required to form a government. It's an interesting coalition. More interesting still, the President of the National Assembly is actually a Pachakutik member, Guadalupe Llori. So we think this is really interesting. It's clear that the government is going to be challenged to do something after COVID to revitalize the economy, and we'd like to be a part of that. What's happened so far is that the President has made a couple of statements about what he envisages. But I think it's still early in the formation of the new coalition, and we're looking forward to hearing more about the plan. At this point, we believe that the progression of Loma Larga is one of the things he mentioned is strategic in country. We believe that, that's still part of what's required supporting Ecuador moving forward.

Next question is a follow-up from Dalton Baretto at Canaccord.

I'm sorry. Just one question for me here. If -- once the deal closes, David, if we assume, let's call it, an 18 months or later permitting, how should we think about sequencing Loma Larga versus Timok?

So we have the ability to build both projects. So we've looked at this from a point of view of the ability to finance both projects, and we can do that. So we don't have to sequence the projects. So we have flexibility in this. So if both projects have the capability of moving forward -- understand that the Serbian senior leadership within government has expressed an interest in making that project happen faster and doing what is possible to make sure that the time line is tight in terms of the permitting process. So -- and I would hope that that's going to be the same in Ecuador. So therefore, there's going to be an expectation that we move at the pace that the projects can progress. So that being the case, we did look at this thing and took into account our expected future cash flows and what would happen in terms of that cash balance both for the current projects and also something that may be a little more optimized. So we've taken all that into consideration, and we have no constraints in terms of our cash flow and the ability to build both projects at the time that they're ready to be constructed.

Got it. So you'd have no issue going forward with 2 construction projects in kind of 2 separate continents?

No.

Thank you. There are no further questions on the line. You may proceed.

Okay. Thank you, everyone, for joining us. If there are any further questions, please feel free to reach out, and we look forward to keeping you updated.

Thanks very much, everybody. Bye-bye.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.