Ecora Resources PLC (ECRAF) Earnings Call Transcript & Summary

Good afternoon, and welcome to today's Ecora Resources investor presentation. Today, we are joined by Marc Bishop Lafleche, Chief Executive Officer; and Kevin Flynn, Chief Financial Officer. Questions are encouraged throughout this webinar and can be submitted via the Q&A box situated on the panel on the right-hand side of your screen. I will now hand over to Marc to begin the presentation.

Well, good afternoon to those joining us from the U.K. We are very excited to present the half year results that we've recently announced. We saw during the period very strong volume growth from our base metals portfolio and more generally, growth in our critical minerals asset base. We saw during the period, very strong ramp-up at Voisey's Bay, strong performance at Mantos Blancos, and during the period, we also acquired a producing copper stream, which has begun to contribute to our earnings. We've also announced following the end of the period, a transaction to sell a noncore development stage gold royalty, the Dugbe Royalty. This transaction has the potential to realize up to $20 million, of which $16.5 million is payable at completion, which will, as Kevin will discuss later in the presentation, accelerate the deleveraging of this business following the drawdown on our debt facility to buy the Mimbula copper stream in late Q1. I think, as you'll see on this slide, it's really an exciting time for the Ecora portfolio and its evolution from our history in 2020 when the critical minerals portfolio generated less than $20 million. 2025 is expected to be the first year in the history of Ecora, where more than half of our revenue is expected to be generated from the critical minerals asset base. And as you fast forward to the end of 2030, we expect growth beyond the current levels of volumes in our portfolio to drive 2 dimensions. First, just around $50 million of income potentially from our producing asset base and then beyond that with a path to $100 million from our development-stage portfolio. I think the Dugbe transaction, and it's very exciting to get across, unlock that value for development stage royalty, as I mentioned. And that sale also allows us to, in time, potentially reallocate that capital to producing royalties in commodities that are better fit with our wider strategy, but also potentially more advanced in the development curve and have the possibility of contributing to our earnings and revenue growth in the shorter period. The Dugbe sale also highlights the substantial value that exists in the portfolio with the equity price where it is today. And with that, I'll hand it over to Kevin.

Thanks, Marc. Hello, everyone. The first slide here summarizes our financial performance in the first half of the year. I think the very obvious point to notice at the outset is that in 2023 and '24, you'll see the dark blue boxes representing the first half of the year. The light blue boxes represent the second half of the year. And effectively, in each of those 2 years, we saw the vast majority of the Kestrel volumes coming through in the first half of the year. This year, it's the other way around. So effectively, the green box that you see on these pages is more comparable to the light blue boxes in the 2 preceding years and we kind of have illustrated that by adding to the right-hand side, what the broker consensus numbers are for the second half of the year just to see how that catch-up is expected to come through given the seasonality associated with the Kestrel royalty. But what's very important not to overlook is that the second half of the year will not just be Kestrel. The first half of the year, we saw a fantastic growth and momentum in our base metals portfolio, which was up 81% in the period. And that momentum is set to come through again in the second half of the year, and really meaningfully add growth into the portfolio and some of those catch-up metrics will come through as well. In terms of adjusted earnings, what you can't quite see here is the quality of those earnings come through in the first half. What I mean by that is that the Kestrel asset attaches quite a high effective tax rate to it, given it's got a nil cost base in our Australian group. And without that, actually, our effective tax rate in the first half of the year is only 10%. And that really does give a flavor for what this portfolio is going to be able to achieve once Kestrel leaves our private royalty area materially in the next 2 years' time. Our dividend now is formulaic based on a payout ratio of 25% to 35% of free cash flow. And in the first half, we announced a $0.06 dividend representing approximately 25% of our free cash flow. As Marc said, we're on a path to where our portfolio can organically grow and increase earnings and income. And as such, the dividend, how we see the dividend under our capital allocation policy is that the dividend should naturally grow as indeed we grow our income line. Looking at H1 in a little bit more detail. And I think the real focus here is on our core base metals portfolio. The 2 outstanding performance within this Voisey's Bay and Mantos Blancos and just to touch on each of those individually. At Voisey's in the period, we saw 140 tonnes of cobalt delivered that compared to 56 tonnes in the previous period. And what's really exciting here is that in the first 2 months alone of Q3, we've received the equivalent tonnage than what we received in the first half as a whole. So really good momentum coming through at Voisey's in line with the ramp-up that we've been speaking to for some time. That ramp-up and the transition to the underground mine is now firmly established. The other side of the coin with Voisey's has been the cobalt price. Here, we've seen some weakness in the cobalt price over the last number of years, and this resulted in an announcement by the DRC government at the beginning of the year to enforce a cobalt export ban to really address pricing weakness through very substantial oversupply. That ban was extended to the end of this month, where a lot of commentators believe there will be further price support mechanisms put in place. And what we've seen is the cobalt price trade up from about $13 per pound at its low point to a range of about $18.25 to $20 a pound for alloy grade product of which Voisey's Bay does produce. So some really good tailwinds at Voisey's Bay as we enter into the second half of the year. Mantos has now achieved 3 record quarterly volume production force, which very much is in line with what we really invested into at the time we acquired this royalty in 2019, the debottlenecking and the expansion phase. And that's now really starting to bear fruit for us. At the same time, as copper is trading towards $4.50 a pound, I think it's worth remembering that when we acquired this royalty in 2019, our long-term pricing assumption for copper was only $3 a pound. So some very good performance achieved from Mantos in the period. And Mimbula is our most recent acquisition, and this really doesn't tell the full story at the half year. The accounting treatment for Mimbula dictates that we effectively cash account given that the product that we received here is only recognized in the income statement when it's sold. So we've already sold our product from Q2, which was $1.4 million. So if this was accounted for on accruals basis, we would have seen about $2.1 million in the period. Just selectively touching on a couple of the other ones. Four Mile is similar to Mimbula and that it is accounted for on a cash receipts basis. And again, this doesn't really tell the full story in the period because the normalized levels of sales recommenced at Four Mile in the first quarter of this year, which only got reported in the second quarter. So what we'll see as we go through the second half of the year, is much greater levels of income being recognized from Four Mile. Conversely, in the second half of last year, we saw no revenue from this asset. So we should report some pretty significant growth year-on-year for Four Mile. Looking further down, it's not to be forgotten, we do have some gold exposure in the portfolio through our EVBC royalty. This performed really well in the first half of the year, which is unsurprising given the gold price momentum throughout the course of 2025. And that momentum has really continued as well into the third quarter of this year. Gold is now trading above 3,600 an ounce. So we will be the recipient of some of that benefit in the second half of the year as well. And not to be forgotten, of course, is Kestrel. Kestrel is now a short-life asset for us. It's got about 2 years of meaningful cash flow ahead for us. But it's not to be forgotten that we still expect about 10% growth in volumes to come from Kestrel. And as I said earlier, most of that is going to come through in the second half of this year. And that will also help and accelerate our deleveraging. And speaking of the deleveraging, this slide here shows our net debt position. Again, this is a snapshot at the end of June, and so is a little bit outdated given the Dugbe disposal that we recently announced. Net debt did increase in the period. This was largely due to the Mimbula acquisition, which we funded from the balance sheet. We were very confident to step up into our net debt to finance Mimbula, not least because it was an income-producing asset, but also the way it was structured, afforded us some very good protection mechanisms around the ramp-up profile as well. At the same time, as we announced Mimbula, we also agreed with the owner of our former Narrabri royalty to accelerate some earn-out payments associated with its sale a couple of years ago. And in addition, with contractual payments from that sale, we received $11.5 million in the period. If we added the $16.5 million we received from Dugbe to that, that effectively has refinanced 56% of our Mimbula acquisition. And that really is from portfolio management, which very few people had any visibility or insight into. So we're very pleased with the performance from portfolio management in the period. At 30th of June, our leverage did increase to 2.5x. On a pro forma basis with the Dugbe disposal, that would have been closer to 2.1x. And with the Kestrel cash flow and the other cash flow we should see from the portfolio in the second half of the year, we think we're still on track to achieve very significant deleveraging by the end of this year. On consensus price numbers, there's a box on the bottom right of this page, which shows where our net debt could end. On consensus, that would be $90 million at the end of this year. And that's broadly in line with where we opened the year having invested $50 million into the Mimbula stream. So we're very pleased with that level. And more importantly, as we go into 2026, we'd expect to see our leverage ratio given commodity prices and latest production guidance to kind of hit 1.5x and below by midyear. So all in all, with our $180 million revolving credit facility with no amortizations or step downs on that facility until early 2028, we remain in a really good position and well capitalized to continue the growth journey. And back to Marc.

Thank you, Kevin. We've included on this slide quite a lot of separate data points in terms of the near term and the medium term. Quite a few are actually covered later on in the presentation. So I'll just pick up a few. Pick number one, Santo Domingo, Capstone has stated that a decision point is expected in the second half of the year with regards to a minority financial partner to part fund and join in the development of the Santo Domingo project. In many ways, this is a cookie-cutter approach to the development of Santo Domingo that was utilized at the very nearby Mantoverde mine that we see as, sort of, part of a 3-step derisking sequence with regards to the Santo Domingo royalty. The first being, as I mentioned, the strategic partner, the second being a final investment decision, which Capstone has indicated the project that will be ready as early as, sort of, mid-2026 and then from their first production. What we've also seen is a financing from Cyprium Metals to part fund or largely fund the restart of oxide production and that funding is entirely sufficient for the restart of the oxide circuit and will be used according to Cyprium as a strategy to part fund the restart of a mining operation, which could see the production of approximately 38,000 tonnes of copper per year. So both very positive developments, but they're not covered later in the presentation. So we thought to just draw them out right now. Well, at Voisey's Bay, as Kevin mentioned, this is an asset that we've always known is capable of doing so much more in terms of generating its cash for Ecora, but as a result of a slower ramp-up, we really haven't seen the asset demonstrate its potential. And as a result, we're just really happy to see in 2025, this asset hit its stride. What we're seeing is a very steep ramp-up curve when you combine H1 and H2. And in fact, from a production perspective, 2 months into Q3, we've received 140 tonnes already of cobalt, which is actually the same amount as we've received in the entirety of the first half of the year. So we really have now a line of sight on this asset hitting its steady-state production capacity, which over the life of the mine is expected to average around 560 tonnes annually of cobalt to Ecora. Beyond that, there's certainly potential for production expansion, and it seems more likely than not that we'll see the life of mine being expanded as a result of further exploration, which is entirely captured by our royalty. On the right-hand side of the slide, we've included historical cobalt pricing, and Kevin touched on this, so we won't go into huge detail here. Suffice to say that we've seen some pretty sharp price acceleration from historically low levels at the beginning of 2025, but on a relative basis, the price levels as of the way are now are still actually quite low cyclically. We've seen cyclically levels go from -- on the alloy grade anyways of recent history around $13, $14 per pound, highs in excess of $40 per pound. So we're definitely not at levels by any means on a cyclical basis where you think that the cobalt price is toppy and there does appear to be on the back of strong demand growth, continued price appreciation potential into the future. At Mantos, we won't dwell on this slide. Suffice to say, we're absolutely delighted to see this asset deliver and in fact, the Capstone team has done a phenomenal job on the operational side, just getting this asset to really hit the stride in the past 3 quarters. The operations throughput has met or at least in the Q1, has met and they're exceeded the actual nameplate capacity of the mine. And in the past 3 quarters, we saw record -- consecutive record royalty income generation. So with that operation really hitting its stride as it stands, I think the next focus for Capstone is to further evaluate the possibility of a Phase II brownfield expansion. And this expansion is really interesting for 2 reasons. I think number one, it's interesting because it allows Capstone to utilize existing and underutilized equipment and thus, the expansion potentially achieves very low capital cost for relatively high incremental copper production relative to global copper operations and thus is the type of projects that mining executives really like to pursue. I think it's an interesting second because it contemplates usually retreating existing waste material, which as part of the royalty model is, of course, captured by our royalty, but certainly highlights the optionality that comes with the right royalties, assets that are good quality tend -- not always, but certainly tend to get bigger or produce more or run for longer than expected just as a result of their quality. And the Phase II expansion certainly demonstrates that. We acquired the Mimbula at copper stream in late Q1. This is, in our minds, the perfect next deal for Ecora. It's producing. And thus, it's structured in a way to not only provide immediate cash flow to our P&L, but also to accelerate the revenue profile to contribute fairly materially in the first 6 to 7 years of the stream in a way also with a ratchet that reduces the volatility of the income of the asset as the asset moves from production levels last year through the Phase II expansion to targeted capacity levels of 56,000 tonnes of copper per year. We've included this slide with regards to Kestrel, as it's somewhat unusual for a royalty company to have the equivalent of seasonality with the royalty. And the Kestrel royalty by virtue of the Ecora entitlement doesn't cover the entirety of the mine, and that certainly goes a long way visually to explaining why there are periods of the year where Ecora receives some royalty income, and there are periods of the year, Ecora does not receive any royalty income. You can see on the left-hand side, a section of the mine that's circled in red, that is the area we understand where mining is currently occurring at Kestrel and mining entered that area towards the end of the second quarter. And thus, we have a fair amount of confidence and certainty that mining operations will stay in our royalty area in the second half of the year. Patterson Corridor East is an asset within our portfolio that perhaps is a bit less well understood, and we're really excited to daylight this exciting new uranium discovery. NexGen resources is approximately USD 5 billion market cap, Canadian-listed uranium developer and historically, the focus at NexGen has really been around the Arrow projects. And you can see on the slide in the map on the right, there's a yellow star labeled Arrow. That project has been outside of our royalty area. But what's -- and recently, what NexGen has, as a result of exploration drilling, come back with what I can only describe as frankly, geologically exceptional drill hole results. In some instances, local measuring uranium grades of close to 16%, which is actually a level of radiation. That's just dangerous to humans. Many uranium deposits measure grade in parts per million. And that's 16% grade is quite spectacular by way of comparison. NexGen has announced a drilling program this year to further delineate that deposit, a total of 46,000 meters are planned. And just at the time of the half year, approximately half of that program has been completed. I think the NexGen's public disclosures are really, really encouraging. And to date suggests the possibility of a discovery of a generational uranium deposit. I think this is an asset that really complements the longer end of our development portfolio, but certainly has the potential in time to become a Kestrel-like asset. In other words, an asset with very little upfront capital invested and the potential to generate meaningful amounts of royalty income over a long period of time. And just to further illustrate that, if you -- based on the disclosures by NexGen, the Patterson Corridor East deposit is demonstrating similarities to the Arrow deposit. And so if you just extrapolate, well, what could that mean, the Arrow deposit is expected to generate approximately GBP 30 million a year initially of uranium. If you assume a long share of price of uranium of $100 per pound and Ecora NSR interest of 1%, that implies sort of $30 million a year, which is an incredible source of potential cash flow well into the future, far beyond the immediate ramp-up growth profile that we discussed earlier into the -- earlier in the presentation. The past few years have been years where we've seen almost nonstop headlines in relation to critical minerals strategy and policy by governments. And in recent months, I think we've seen a real acceleration in tangible action, in particular, in the United States. That's manifested first as stockpiling. The United States Department of Defense has entered into an agreement with U.S. rare earth producer, MP Materials to stockpile effectively or offtake rare earths produced under a 10-year term. And we've also seen the U.S. Department of Defense tender for cobalt purchases for a strategic stockpile. That tender is framed as up to $500 million. So at this stage, it's not totally clear how much cobalt will actually flow into the tender or how fast as the tender is structured as over potentially a 5-year period. But nevertheless, I think it really demonstrates the strategic nature of our Voisey's Bay alloy grade cobalt units, given that there are only 4 mines globally that produce alloy-grade cobalt that qualify for this tender. Two of those operations are Vale, one is Glencore and one is Sumitomo. And then I think another dynamic we've seen is the rise of public-private partnerships. We've seen it in Intel, but you've also seen it in MP Materials, where the U.S. by way of equity subscription has now become the largest shareholder in MP Materials. But within the wider Ecora portfolio, there are a number of touch points to public-private partnerships, one of those includes Rainbow Rare Earths and the Phalaborwa project, which is expecting to produce mostly NdPr products with some heavy rare earth elements. And the U.S. government already is indirectly a large shareholder of Rainbow Rare Earths and via TechMet has the ability to part fund the construction of that project. I think the third dimension we've seen is a potential acceleration of the development of mineral products in Canada and in the One Canadian economy as contemplated in the One Canadian Economy Act of Bill C-5, NexGen's Rook I project is highlighted as a project of maximum significance with a view to accelerate development time line. And similarly, in the Ring of Fire development project is certainly attracting a lot of attention as a potential project to include within that same category at a federal level and provincially and the government of Ontario is certainly looking to accelerate that project. So both those actions have the potential to really unlock potentially a lot of value from assets that are currently sitting in the longer end of the development phase in our portfolio that could be accelerated. So in short, bringing it all together, I think for Ecora, this H1 represents potentially a major inflection point for this business, where historically, the focus was very much around Kestrel and the wind off at Kestrel. I think what we've seen in the H1, which is expected to continue in the second half of the year and beyond, is an initial demonstration of the cash generation potential that exists in this portfolio, starting really from the sharp end of the spear, so to speak, starting with producing assets. The next phase of growth we see as those beyond just ramp-up in volumes from assets that are already in production is potential for brownfield expansions. And then last, of course, is new development assets coming online, and our portfolio provides a really strong growth profile. We focus in the presentation on the next 5 years, but that growth profile does carry forward into the next decade. So with that, thank you very much for joining us for our presentation, and we're happy to take any Q&A.

[Operator Instructions] Our first question, Voisey's Bay cobalt deliveries were strong in H1. How confident are you in meeting the full year guidance given the planned maintenance later in the year?

Well, thank you for your question. Volumes certainly improved in H1. They've been much stronger in H2 to date, and we anticipate having just recently as part of these results, upgraded the low end of our range. We did it on the basis of quite a lot of confidence in the volumes for this year. And I think more generally, the performance year-to-date from our perspective anyways, gives a lot more certainty on the pace of the ramp-up and the likelihood of Vale achieving what's targeted as full production capacity at some point next year.

Has there been any thought to giving guidance on production at Voisey's Bay as is done at Kestrel? The holder of another stream on the asset noted in their conference call that ramp-up has been lumpy, but they are aware of this in advance due to the 3-month transit to Germany. With this royalty being proportionately larger to Ecora, would be -- would serve a purpose in keeping shareholders appraised of ups and downs in due time?

Yes. So I think from our perspective, we've fully disclosed volumes. We've provided volume guidance for this year, for H2 as well as the long-term steady-state production capacity. So to the degree to the person, if there's anyone who has been unable to find that information or finds it unclear, I'd encourage you to reach out, and we can guide you to that. The correct e-mail address would be [email protected]. And from there, we can certainly give you more information.

How would the P&L be affected if the DRC lifts the ban on cobalt exports?

The outlook at this time suggests that the DRC government is expecting to either extend the ban or implement an export quota regime. I think generally, most industry participants are of the view that there may be a further extension of the ban to be followed by a cobalt regime later -- an export quota regime later in the year. I think in the background, what we've seen is fairly substantial year-on-year cobalt demand growth in an absolute sense. And that certainly was overshadowed in 2024 by cobalt capacity additions. Nevertheless, on the demand side, we saw cobalt increase by certain estimates in the high single digits, other estimates in the low double digits and thus, in the background of the cobalt export ban this year, I think there's just been a continued catch-up on that demand side from what was a very choppy supply additions in 2024.

Our next question, there have been various news stories about cobalt being something to phase out rather than increase due to environmental and ethical concerns. Can you speak to how you view this matter and also in relation to our cobalt stream from the Voisey's Bay mine in Canada and why this mine may be a better source for diligent buyers?

Yes. There's a few points to make here. So I'll just take them one by one. So starting with the question of providence from Canada. Well, I think it's important to note that not all cobalt products are fungible. And by that, I mean there's alloy-grade cobalt, there's cobalt sulfate, the standard grade cobalt. So in other words, metals, precursor materials for batteries and there's a much bigger mix than that. What's kind of unique about the Voisey's Bay cobalt is its providence, of course, is also its carbon intensity, which is amongst the lowest of any cobalt product produced in the world, but third is the product specification. And that product certainly can flow into a battery precursor -- flow into a battery supply chain as battery precursor material. But typically, most alloy-grade cobalt flows into industrial applications, in particular, the aerospace sector, where cobalt's very high meeting -- melting point makes it a great alloy agent in certain applications. To give you an example, jet engine turbine blades across civilian and military end markets. More generally, on the cobalt thrifting question, I think the pressure to substitute cobalt from nickel-based battery chemistries is often a function of price. And the incentive to do so as a battery maker is not static. It can flow as a much stronger incentive when cobalt prices are high and arguably a much weaker incentive when cobalt prices are low. As I mentioned, cobalt prices historically on the alloy grade anyways have ranged from 13 to about 40 or a standard grade product from 10 to slightly less than 40. And where we are today on the standard grade in the mid-teens or the high teens for alloy grade, that incentive is actually far less potent. And if you look at the nickel-based chemistries, actually in the last 12 to 18 months, we've seen actually an uptick in cobalt loadings away from an 811 nickel-based battery chemistry back to chemistries with higher cobalt loadings, which appear to be a function of safety. The trade-off is very much between price and safety. And when cobalt prices are low, that the market seems to be shifting more towards safety.

How are you positioning the portfolio to reduce reliance on any single asset or operator?

Yes, that's certainly not something that happens overnight, but it's something Kevin and I have been, frankly, very focused on for the better part of a decade. 10 years ago, if you looked at Ecora, the business in terms of its value and revenue was almost entirely concentrated in Kestrel. And actually, in that regard is why we see it as such an important milestone for this business and its portfolio in 2025 to first cross the threshold where for the first year ever, you have potentially less than 50% of your revenue generated from Kestrel. And even more than that, we're shifting within the next few years to a portfolio that's much more diversified in terms of its sources of income in terms of counterparties, commodities, jurisdictions. But we're seeing mining operations that have mine lives measured in year -- in decades, excuse me, as opposed to Kestrel, where the mine life was always measured in years. So I think holistically, and as we've taken this business from what it was to where it is today to where it's going, actually, this business has never been in position to be more better diversified.

How are you stress testing your assumptions on commodity prices, operator performance and resource estimates? And which risks do you see as most significant to achieving guidance?

Yes. So I'll take this question in the context of when we think about making capital investments. And to the degree the question is not quite on the market as we answer it, please again don't hesitate to reach out. When we make investments, obviously, we have a very well-defined investment process. And to name a few of the criteria we seek: number one, high-quality ore bodies. And by that, we mean ore bodies have the potential or are resulting in low-cost mining operations. I think the main reason for that is that a mine that produces with high operating cash flow or high margins is far more likely to stay in production through commodity price cycles than a mine that has much higher cost and a down cycle could be squeezed. And with respect to development stage royalties, the logic is a higher -- a lower cost ore body or lower-cost project is by extension, is more likely to generate the best economics. And the projects with the best economics are those to be most likely come into production and also most likely to do it quickly relative to other projects in the same commodity. We also spend a lot of time thinking about the commodity price outlook. And one thing we've really sought to do is target entry points in commodities where through cycle on average, you're more likely to do better than your baseline assumption at the time of the investment. And I think if you go back, Kevin touched on this, our copper entry points historically have been quite in hindsight, well timed. As Kevin mentioned, the Mantos Blancos royalty, the long-term price there was $3 at the time. If you fast forward about 5 or 6 years today, the long-term price is just under $4.50, so approximately almost a 50% price uplift.

Our next question, what's the risk if one operator of a royalty asset underperforms operationally? Do you have recourse?

Well, I think the royalty model in many ways is a mix between equity and debt. And it's equity-like in that when we deploy capital, like an equity investor, our risk on volumes is subject to the mining operations performance. I think it's less debt like, obviously, in many -- less equity-like in the sense that the royalty cannot be diluted through equity issuances. And the income received to the royalty operator is not subject to the operating leverage and financial leverage that may exist in a mining operation. And so by that, I mean, the royalty payment is calculated with reference to the value of the metal produced and is not directly impacted by the cost of extracting that material from the ground and processing it into a sellable form or from any of the financing costs from debt, for example, or interest payments that have been incurred as part of the capital structure of that mining project.

How resilient are your royalty cash flows to commodity price volatility?

I think actually, that's a really interesting question when you think about Ecora because the Kestrel royalty is one that actually, by its nature, is quite volatile. So to give you a bit more detail by what we mean on this, the Kestrel royalty is entitled to 7% of revenue on any prices, on sales of product up to 7%, up to AUD 100. So let me take that one again, excuse me. 7% of any sales on the first AUD 100 per tonne in Aussie terms and 40% on any sales above AUD 300 per tonne. And, therefore, as you move through price cyclicality with steelmaking coal, the income generated by that royalty can move quite substantially. I think as we move forward in the portfolio, however, and we see the ramp-up of the critical's minerals portfolio, this business is on track to be much more diversified in terms of its sources of income and thus, one commodity might be up, one might be down. On average, you're in the same place to make a very simplistic example. But then as a result of price volatility, you become much more sort of linear. So, I think, actually, it's a very good thing for this business in some ways to be moving away from a ratchet source of income with Kestrel to a much more linear source of income if your objective is to have a low volatility source of portfolio contribution. And I think that's something that will likely become more and more apparent in the coming quarters and years as the critical minerals portfolio continues to ramp up.

Now you've reduced coal exposure, but do you still receive material revenues from coal assets?

Yes. So the Kestrel royalty is certainly expected to contribute less than it has in the past, although in 2025 and '26, less so, but certainly material income from the Kestrel royalty. And I think to say that we've reduced the coal exposure with Kestrel royalty is not necessarily a proactive decision point. It's rather that mining operations at the Kestrel [indiscernible] mine are moving outside of the core royalty entitlement area.

You described 2025 as a pivotal year with growing exposure to critical minerals. What other opportunities are you pursuing to expand into battery and transition metals?

Yes. From a commodity selection perspective, what we're seeking to do is to assemble a portfolio with the core in copper and base metals that is positioned to benefit from growth in electricity demand. And whether that's a function of digital infrastructure, more grid investments, so in other words, power distribution, whether it's a function of EVs, whether it's a function of renewable energy generation, general GDP growth, increased urbanization or all of the above or some. So these are really strong underlying trends that suggest the outlook for electricity demand is likely to continue to grow at a fairly strong pace. And our portfolio centered in copper is in part a function of the fact that copper is a conductive element. At any point of that value chain, you can find high copper loadings. When we think about what's next for the business, we're targeting probably for a next material transaction, one that would be similar in its nature to Mimbula. So in other words, one stream or a royalty over a mine that's a fairly advanced stage, if not already cash flow generating, one where we have a very strong line of sight on that cash flow generation in the short term. And then, in terms of the wider commodity complex, we have evaluated -- we continue to evaluate a very broad set of commodities. And frankly, it's easier to say what we don't pursue than what we do. What we don't pursue are precious metals as part of our strategy and hydrocarbons or fossil fuels. And that has allowed us to some degree, some flexibility to move laterally between commodities depending on cyclical price points of the various commodities to find good entry points. I think the Rainbow Rare Earths example last summer was a great example of a cyclical entry point, where in the last 12 months, we've seen spot prices increased 60% to 70% for the NdPr products with a lot of potential upside beyond that.

Now the interim dividend is set at USD 0.006 per share, around 25% of free cash flow. How flexible is the payout ratio if free cash flow rises meaningfully in H2?

Kevin, do you want to?

Yes, sure. As part of our capital allocation policy that we announced last year, the dividend was set to a payout ratio of between 25% to 35% of the free cash flow generated in the portfolio. But given the seasonality with Kestrel, what we did was we took the 2 preceding 6-month periods and average those to effectively try to smooth out any spikes or dips associated with Kestrel. Given that our priority post Mimbula has been to delever, and we've been able to successfully accelerate that with the Dugbe disposal. I think at the half year, we were reasonably comfortable to pay out just over 25% of free cash flow at $0.006. I think our imperative in the second half of the year is to remain focused on deleveraging. And I think more broadly with our dividend, with the portfolio that we have and the meaningful path that we have to see portfolio contribution growing in the coming years from the assets that Marc described earlier, the dividend should increase in line with that. In other words, the business has been set up to increase our dividend when the portfolio contribution is increasing at the same time. And within that range, depending on where we are in the cycle, we'll look at whether that's towards the top end or the lower end of the payout ratio.

How do you evidence influence over ESG standards if you're not operating the mines?

That's actually a really interesting question. It's something we ourselves think quite a lot about. And our conclusion is that the strongest influence we actually have is at the point of investment. We can certainly -- and we do include certain provisions in our investments where possible to the best of our ability, encourage operators to run mines responsibly. But actually, the most influence is whether to invest or not to invest. And as a result of that, I think what you've observed when you look at the investments we've made historically, jurisdiction is a strong contributing factor. In other words, certain jurisdictions have very strong statutory frameworks around labor, environment and other key areas of ESG impact or sustainability impact. And then, as we look to the future, I think in many ways, I think 5 years ago, the mining sector in some ways was perceived as part of the problem. And it's been really exciting to see that narrative evolve and the wider sustainability framework and perspective expand to the idea that the mining sector and the raw materials it produces is fundamental to a much more sustainable world of the future.

Have you considered dual listing to attract North American institutions that follow the royalty sector more closely?

So Ecora is dual listed. Ecora trades on the London Stock Exchange with the ticker ECOR, but also on the TSX with the ticker of ECOR and also trades on the U.S. OTCQX platform with the ticker ECRAF.

Would you consider royalties in new economy commodities such as lithium, nickel or rare earths, even if outside your historic focus?

We absolutely would. We have today royalties over very high-quality nickel projects. One of them, we're the largest shareholder in directly is actually a U.S. government agency. We have a royalty in rare earths, the Phalaborwa project owned by Rainbow Rare Earths. We've always sought to keep the core of our portfolio in copper and base metals, but that certainly is much broader. The wider commodity basket that we target is certainly much wider than only base metals and copper.

Can you give more color on how you expect the portfolio mix between copper, cobalt and other commodities to evolve by 2027?

Yes, we can. So to give you some guidance, I'll refer to the current research analyst consensus forecast. The copper as a percentage of total income by 2030 is expected to represent 50% of income and cobalt is approximately 20% of income. If you have more detailed questions beyond that, I'd encourage you again to reach out. The e-mail address would be [email protected]. And my colleague, Jeff, will be happy to provide you with further information.

We have a couple more questions. Recent company presentations show revenue growth coming down over 2024 to '26 to circa $50 million and then, a large jump up to circa $100 million in 2030. The most recent shows only 2025 and then 2030. Is it possible to give a little more color on the trajectory and whether it's linear or large jumps in certain years as shareholders, the lack of any detail over the next 2 to 3 years is just concerning.

Yes. So let's go back to the slide then so that folks on the line who aren't familiar with the background to the question can follow along with the answer. So I think the individual is referring to the slide here where we show income from -- on a portfolio basis in 2020 and break it out into coal, which is sort of the dotted box, specialty metals and uranium and base metals to where we are in 2025 and where we're expected to be in 2030. I think the answer to the question is that the producing portfolio is -- follows a much more linear path to 2030. The development stage portfolio, which on the right is the dotted, sort of shaded blue line is quite a bit more lumpy. And in many ways, that's driven off of new projects expected to come into production. I think from where we sit today, pinning down an exact year on some of these projects is a bit difficult. And actually, in many ways, why we're very excited for the next 6 to 9 to 12 months. During that period of time, we expect a lot to be able to much more precisely pin down the year when some of these projects are expected to come into production, but generally speaking, this is the view on the producing portfolio, which, as I mentioned, is probably more linear in its shape, particularly from the critical minerals royalties. And then, as I said, the base metals and development, in particular, are somewhat lumpy and tied to the development of 3 or 4 projects.

Turning to our final question. Which of your royalty assets are expected to contribute most growth in the next 3 to 5 years?

I think we've touched on that actually in some ways during the presentation. Voisey's Bay, Mimbula, Mantos Blancos from the producing portfolio. And then, beyond that in the development stage assets, you could say it's a function of Capstone Santo Domingo is actually quite a big one in the pipeline. This is a royalty that once in production could generate at spot copper prices around $30 million a year for Ecora. The Phalaborwa Rare Earths project at spot prices today. And if you overlay the offtake agreement between MP Materials and the U.S. government, that implies roughly $3 million a year and the Nifty project. While the Nifty royalty is subject to a production threshold of 800,000 tonnes per year that's expected to be hit in about 5 years, that would be around $4 million per year. And then, beyond that, of course, there are a number of other assets. I've just picked out a few that immediately come to mind, but by no means is that the limited list.

There are no more questions online. So do you have any additional closing remarks?

Well, thank you very much for joining Kevin and I today. I think the entire Ecora team is really excited, as I mentioned, to be showing -- to be printing and to be demonstrating what we've always sort of spoken to but never really been able to print is the cash generation potential that exists within Ecora. This is a really exciting time for the business as it transitions from a very short-dated royalty -- from a royalty company's primary source of revenue was from a very short-dated asset in met coal to a royalty company that's much more diversified from a basket of critical minerals that has a sector-leading growth profile. And we look -- we're very excited to -- and we look forward to our next update following the full year when hopefully, we'll have seen some of the key developments that we've alluded to in the portfolio come through, and we can further update you on that at that time.

Thank you, Marc and Kevin. That concludes the Ecora Resources investor presentation today. Please take a moment to complete a short survey following this event. The recording of this presentation will be made available on Engage Investor. Hope you enjoyed today's webinar.