Ecora Royalties PLC (ECOR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Anglo Pacific Group plc Q1 Trading Update Investor presentation. [Operator Instructions] The company may not be in a position to answer every question received in the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to do the following poll. And I'd now like to hand over to Marc Bishop Lafleche, CEO; and Kevin Flynn, CFO. Good afternoon to both.

Hi, good afternoon. Thanks for joining us here today. So to kick off, I think today, what we're looking to do is update our shareholders, who are existing shareholders on how the business has performed in the first quarter, but also covers some of the more fundamental cornerstone aspects of our business for new potential investors or interested parties who are keen to learn more about Anglo Pacific Group. What a quarter it's been for quarter 1. We always anticipate it based on the performance of our commodity basket that Q1 had the potential to be exceptional. And we're delighted that for a third straight consecutive quarter, we reported portfolio contribution of approximately $44 million, which taken into perspective is almost 50% of the entirety of last year. So we're tracking very well along for an exceptional 2022 depending on how commodity prices perform for the rest of the year, particularly that's cobalt and that's coking coal with prices that either record levels or near record levels. We are expecting some continued strength in both for the rest of the year, although we'll circle back to that later in the presentation. On the debt side, we've continued to delever exceptionally quickly, which is, for us, a key strategic imperative, given our hope to be a derisked way to get exposure to the mining sector. And furthermore, in a very inflationary environment, the virtues of the royalty model are really shining. And that as a royalty and streaming business, we offer exposure to commodity prices without the operating expenses and without the capital costs that are often incurred by mining companies. We were equally pleased to have a favorable ruling in Australia in relation to our long running Four Mile disputes. And last, we continue to have fantastic balance sheet firepower to fund new acquisitions. So we're very much where we sit today, coming off a quarter, which leaves us in a position of exceptional strength to continue to grow and improve this business. From here, I'll hand it over to Kevin to take you through the first quarter results in more detail. Kevin?

Great. Thanks, Marc. Hello, everyone. Now looking to the slide which summarizes the Q1 numbers. We compare this back against the full year results for 2017 to 2021. Total portfolio contribution of $43.6 million in the first quarter alone. And to put that into context, as Marc said, that's over 50% of what we generated in our record ever royalty year in 2021, $5.6 million. Obviously, a lot of this is coming through in windfall format for Kestrel given coking coal prices are currently north of $500 a ton. To put that into context in 2021, that number was $289 a ton. So we are seeing some very meaningful cash flow coming through from Kestrel. But equally as important, excluding the Kestrel revenue from the Q1 numbers, produced $10 million of quarterly revenue from the rest of our portfolio. And on an annual basis, that's getting towards the portfolio in its entirety generated in 2020, which really does show that through cycle, we have achieved a significant reinvestment of the Kestrel portfolio once Kestrel starts to move that side of the private royalty next year. As Marc mentioned, this level of cash flow that we generate has really enabled us to accelerate our deleveraging. We ended the month of April at 0.6x and the short-term cash flow, as I expect to generate, will continue to delever our partnership. Looking at the individual royalties. I'm just thinking forward for what 2021 is likely to look like. We expect a very similar level of volume for Kestrel this year as we did last year. In fact, that's quite a similar theme tracking royalties for 2022. We expect similar volumes, generally. But clearly, we're in a higher pricing environment. So we do expect to see some significant growth to come in terms of portfolio contribution. From next year onwards, we would expect the Kestrel volumes to reduce, and I'll cover that off in a couple of slides down. Turning to the next slide. So question, has this record level of commodity pricing shown an equal upturn in terms of our share price? And the chart on the left-hand side would suggest not. Our basket of commodities that we derive our revenue from has increased by 234 points versus 43 on our share price. So whilst our share price has benefited significantly over the past couple of months, this chart would suggest that there should be more to come as we continue to execute on our strategy and add further growth to the portfolio. And I suppose if you look to the right-hand side, this is really where you start to see how this has come through into cash flow. The record revenue that we generated in 2021 is really back dated to the second half of that year. And we can see that from the 1st of July 2021 through to present, our basket has increased by 92% with coking coal increasing by 138% in that time. And obviously, current prices are still in excess of what was earned in the first quarter as a whole. So I'm going to pick out 2 assets specifically. We can go into further detail on the rest of the portfolio in Q&A perhaps. But if we look at Kestrel and not all of the news here has been just commodity price driven. We're also very pleased to report a new long wall panel has been added to the beginning of the 500 series. And as always, with Kestrel, a picture paints a thousand words. So if we look on the right-hand side of the page, we can see the area that's currently in line, which shows that this panel is going to drive most of the volumes from the current year, which will leave us similar to last year. But then the next 2 columns and thereafter will show how the royalty begins its transition outside of our private royalty area. So to try and put a couple of numbers around that, we broadly expect that 5.2 million to 5.3 million tonnes within our private area this year, that's very similar to what we had last year. And we would expect over the next 3 years on average about 2 million tonnes from the royalty. Turning on to the next slide, which is Maracás. This is a very good example of how the royalty model works very well in terms of providing considerable upside potential with no associated investment requirements. We were very pleased to see the updated 43-101 in December last year, which basically increased the mine life by about 10 years out to 2041, up from 2031 previously. In addition to this, Largo have been very successful in terms of updating their plant efficiency, and they're now producing 13,200 tonnes per annum. This was up from an initial 9,500 tonnes per annum. And in addition to that as well, they are now making considerable progress with their aluminum plant, which is looking to produce a TiO2 byproducts later on in the year. The royalty covers every product from this operation, which also includes some iron work by-product as well. So we're very pleased with progress that's been made here. But if we look on the right very quickly, we can also see that this royalty a good example of what we are trying to do at Anglo Pacific in terms of positioning portfolio, which is very well positioned on the cost curve, which in times of significant operational inflationary pressures is a very valuable asset to have in your portfolio whereby you are obtaining top line exposure to commodity price through an income-producing portfolio, but also very well sheltered against inflationary pressures. And with that, I think I'm handing back to you, Marc, slide.

All right. Thank you, Kevin. Okay, it will be well known to most. And for those who are dialing in or joining us here today who are less familiar with the business. Anglo Pacific's strategy has been and will continue to be to diversify its commodity exposure, both in terms of commodity focus, where historically, this business was very much in core to where we are today, where we've repositioned the business such that almost 75% of our exposure today is to commodities that we see as future facing our 21st century. And by that, we mean commodities, which are either absolutely required into the supply chain for a renewable energy production or storage or mining projects that relative to other miners or miner operations with the same commodity are produced in a more sustainable way. We're absolutely delighted with this progress. This is very much the direction of travel. So in other words, Anglo Pacific is very much positioned to be in very derisked way to gain exposure to the commodities that ultimately are going to be a key engine of economic growth for the next century. To that end, we've been very deliberate and methodical in terms of which assets we've added to our portfolio. We've moved slowly, and we've been patiently been disciplined, but we're very proud of these assets. If you look at those which are highlighted in darker shading, you can really see that from our counterparty exposures, these are really Tier 1 operators, either for example, some of the biggest mining diversified mining companies in the world or in the example of Cigar Lake that the Cigar Lake mine and the McClean Lake mill operated by some of the largest and best well-known Western uranium producers in that space. Furthermore, Capstone Copper, one of the largest diversified copper producers and Largo as Kevin just mentioned, Largo Resources owns and operates the world's lowest-cost Canadian mine. So we think that the portfolio that we've assembled is exceptional quality, both in terms of counterparties, but in terms of asset base. And there's a huge premium in value to the scarcity of these royalties and that it's not -- oftentimes, there's only 1 of these royalties available on these assets. And if you have it, you have it; if you don't, you don't. So really proud of this portfolio. We think it's very good quality. And taking a step back, when we think about the royalty model in itself and why we think it's interesting, very simplistically, as we've already mentioned on the right-hand side of the page, you can see that our business model is derived from commodity price exposure and to production. We don't have exposure to operating costs or capital costs. And that's crucial in terms of both number one, providing a very safe way relative to mining equities on the inflation side in that as commodity prices go up, oftentimes that revenue gain is offset to the mining company by labor cost inflation, material raw materials, consumables, diesel, other such that even though commodity prices could be up 30%, 40%, that might not translate directly into a 30%, 40% increase in profitability. The virtue of the royalty model, of course, is that inflationary pressure flows through to the bottom line. And in a world where inflation is tracking almost 10%, but this virtue of the royalty model has been far less recognized and appreciated in the last 20 years in a period of relative low inflation, we expect more inflation. And in fact, we've seen some mining operators report increases in labor costs in the ranges of 30% in 1 year. And so therefore, as we move forward in the next 12, 24 months, we think those inflationary pressures will be even more. We'll have an even stronger margin erosion in some instances on the mining side. In terms of where we want to be and how we look to position this portfolio. If we put it simplistically, we have an opportunity here and our strategy and our vision is to build a business where investors can get a diversified exposure to a basket of commodities that would otherwise be very difficult or very risky to put together by going directly into mining companies. So for example, it's very difficult to get diversified exposure to Canadian cobalt, if not impossible. And to have that with diversified exposure to Tier 1 low cost Canadian and similarly diversified exposure to uranium, creates a vehicle on the platform where investors are and our hope is in time as we continue to grow is to have a vehicle that is -- the go-to name for people looking for that exposure to future-facing commodities in a way that doesn't require trolling through mining company, AZ, by commodity and taking the very nuanced risk on project development, cost escalation, but also jurisdiction risk in terms of single assets. So therefore, the Anglo Pacific opportunity and the Anglo Pacific investment thesis is really unique, and there's a lot of white space for us to come into, particularly as ultimately it'll be impossible for the world to achieve a net 0 future, unless there's just a lot more of these commodities that we list on the left-hand side of the page, produced. And similarly, on the right-hand side of the page, the commodities that don't directly flow into a battery supply chain. Well, even if, for example, we've -- and then we have as Anglo Pacific, even if we're allocating capital towards mining operations that produce greener products, that's also a fantastic outcome from the world and the world's ability to achieve decarbonization. And it's really quite incredible when one thinks about the actual amount of commodities that are going to be required to achieve a net 0 future. Now when you think, okay, the lithium sector will need to produce at least -- and part of it will come from recycling. But to think that the world will require 42x the number of lithium mines in the world today is just incredible, by volume anyways. And similarly, in terms of the copper market, I mean, to think that the copper market will need to triple in terms of supply. Again, some of that will come from recycling. The bottom line is the mining sector will require a huge amount of investment. And furthermore, not only that, the mining sector will require investment to projects that themselves are not part of the problem, but are part of the solution. You can really see that when we look at nickel. I think this slide is an interesting slide that people are keen to understand which commodities broadly are key raw materials by end market as part of the energy transition. But when you look at nickel, I'm jumping around a bit here -- when you look at the nickel piece, you can see that actually, most of the world's nickel supply is largely expected to come from nickel projects that are very carbon intensive, which is kind of a bit of a conundrum in that most people are buying electric vehicles in order to lower their carbon footprint, but that can't necessarily be achieved if the nickel supplies coming at the cost of huge carbon volumes. And so nickel is one that we're particularly interested and focused on simply because if you can get exposure to nickel assets and to a commodity that's expected to grow by 3x over the next 20 years, which is incredible. And actually, for nickel here, it's 3x over the next decade, which is just absolutely remarkable. And we position the portfolio as we have to have exposure to projects like Piauí which are very low in carbon, then we are benefiting on both sides of the demand piece. But also from a product that is likely to be very marketable and theoretically, could even obtain premiums as a result of supply chain audits when an EV brand manufacturer audits the supply chain on carbon, all else being equal, this is a great product. The cobalt market is developing very, very nicely. And at the time of doing our transaction last year when we acquired the Voisey's Bay stream, we took a view that based on supply and based on expected demand, we really saw an opportunity for outperformance. We've been thrilled to see cobalt prices effectively doubling from around the time we priced this transaction. And what's even more interesting, I encourage you when you think about a lot of the noise that's being made by automakers turning to cobalt-free battery chemistries, I just think, and we have it here on the slide, this blue line in the top right corner, the dark blue line represents the cost of the cobalt-free battery, which actually, as of today, costs more than a battery that contains cobalt. And so the economic rationale, in other words, the benefit to using a cobalt-free battery is that it was cheaper. Today, it's more expensive. And second, the performance of that battery, both in terms of range and output is significantly lower. And so we absolutely see a future which will have different chemistries. Some of them cobalt-free. We don't see a future, at least in the next decade, where cobalt-free technologies are going to completely disappear. And in fact, we think the demand for those chemistries will remain very strong, at least until the end of this decade. We look at Piauí very briefly. This is an asset that, for the reasons that we mentioned earlier, we think is an integral part to our growth story, and we're tracking very carefully. We have -- for those who aren't familiar with that investment, we initially invested $2 million for a 1.25% gross revenue royalty on the project. And we have the right to increase that for $70 million, but not the obligation at the time of construction. We think that could be exercised as early as 2023. And the project now is really -- it's going to be a big year for Piauí and that there are 2 key milestones occurring this year. Number 1 is the completion of the PFS, and number 2 will be the completion of a small-scale production plant. Now if you look forward, we earlier made the comment that we expect fairly large nickel shortages. And what the chart on the right hand shows is the carbon emissions per unit of nickel produced. And so what you can see is that today, the operations on the right are almost 20% to 30% of the total carbon emitted by -- the operations on the left, excuse me, or 20% to 30% on average roughly of, say, the right-hand side of that curve. And what's really unfortunate is that most of the supply of nickel is going to be -- is expected to come in much higher carbon intensity on the right. So from Piauí, what we have here is an asset, which is potentially one of the lowest-cost carbon emitters; and number two, an asset that has exceptional economics at today's spot prices. So when we think about capital allocation, and Kevin will speak about this shortly, but we think about capital allocation at the back of our mind is always the $70 million funding obligation as well as the $20 million funding that we have commit -- that we have to Incoa, Kevin, why don't -- that's a nice segue for you to perhaps go through our capital allocation.

Yes. Thanks, Marc. This slide is a replica of the slides that we've discussed before, and our capital allocation plans haven't changed since then. I suppose in terms of the first box, our balance sheet strength has improved significantly with the record levels of cash flow that we've generated over the past 6 months. But even and despite the increase in commodity prices, we are still seeing some pretty attractive investment propositions right now, not least the fact that we have $90 million of optionality within our existing portfolio from finance. So whilst we continue to see growth opportunities, our capital allocation will still be in favor of growth and continuing on the journey to significantly infill even from these record levels of Kestrel cash flow. In addition, we maintained our quarterly dividend at 1.75p per share, and that policy will continue. We may shift that amount to the U.S. dollar denominated but it will effectively be the equivalent to 1.75p per quarter, which obviously gives shareholders a very good return on their investment as we continue to grow our business with a view to adding earnings growth further down the track which in turn should facilitate a more progressive dividend at that point. Beyond that, we would look to additional shareholder returns. But our priorities at the moment very much still aligned to repaying our borrowing facility and building a war chest for restocking cash flows into future growth opportunities. And if we look at the next slide, which is our track record. This is why we feel it's beholden upon us to reinvest and recycle cash flows into growth. Our track record and this is very transparent and largely can be found in the public domain shows our history of making acquisitions and also the returns that are currently anticipated to accrue on those investments. We've focused on right-hand side of the page on Maracás which we discussed earlier, our position Mantos Blancos, which was a copper acquisition that we made in 2019. And given the outlook for copper currently, we think that this is going to prove to be a very significant royalty within our portfolio going forward. And the obvious one, which is Voisey's Bay acquisition that we took around about this time last year. When we expected the cobalt price to currently be around $21 and prices currently are closer and have exceeded $40 a pound. So I think we've got a good track record. We've got Marc and I, we have 20 years of experience of investing in nonprecious royalties. And importantly, despite some commodities being at very, very high historical levels, we still continue to see value elsewhere as a precious metal, which is our focus. Back to you, Marc.

Thank you, Kevin. So if you're going on -- leaving us today with 6 key points. We'd say, number one, Anglo Pacific is arguably one of the only, if not the only royalty business that can provide investors with exposure of 75% to forward-facing metals. Number two, we've really repositioned this portfolio by virtue of the investments that we've made in terms of recycling Kestrel and recycling those met coal cash flows into growth. And through cycle, as we look ahead post-Kestrel, we think there's a great platform of income in the business, which can support a 7p dividend. And as Kestrel runs off, we see the -- it's crucial to reinvest to get growth into the business such that there's a view and visibility on earnings growth. It's because the reality is, and this is well known to all folks who have been tracking Anglo Pacific Group, Kestrel royalty is now approaching the end of its life. We've proven our ability to deploy capital wisely and remain disciplined. And while we are, of course, looking to grow business, at the same time, we will remain very disciplined. We are very patient, and we're happy to wait until we have the same opportunity might be available in the future at a lower price. And ultimately, we've been very patient in the past, and we've been really pleased with the opportunities we've been able to acquire as a consequence. The royalty portfolio, ultimately, 90% exposure to very attractive and well-established mining jurisdictions, was 90% OECD. And the very unfortunate conflict in the Ukraine is a very good reminder of why jurisdictions and jurisdiction risk can change very rapidly and quickly. We've spoken about the growth piece. And in terms of the ESG credentials, ultimately, our -- the cornerstone asset of our portfolio are directly or indirectly going to lead to achieving global net 0 goals, which we think is a fantastic way for investors to get exposure to the commodities, as I mentioned earlier, required to fuel that achievement. But furthermore, as we look ahead, while we continue to have a lot of exposure to met coal as Kestrel winds down and even more so when met coal prices are $400 or $500 per tonne by 2025 and thereafter, the vast majority of our portfolio will be copper, nickel, cobalt, uranium and very clean vanadium that flows both into the steel indus but also into the battery sector. So thank you very much for listening to our presentation today. We will now be delighted to turn to Q&A.

So starting from the first question. The question is, can you give a medium-term 1- to 5-year cash flow production. We generally aren't in the business of forecasting commodity prices as it can be, as you can imagine, quite volatile. In terms of commodities, however, our materials include projections on all the key assets as generally published and as available from the underlying mine operators. From Kestrel, we expect volumes this year to be fairly constant relative to where they were last year. And the latest information available to us suggest that Kestrel volumes will be roughly 50% of what they are this year and last year in 2023, 2024 and 2025 and thereafter step down. The shape of that step down could change. But broadly speaking, we think it will be fairly smooth decline from where we are today to 50% of those levels, plus or minus, for the next few years and then put all production fading outside of our royalty zone thereafter. In that context, that again speaks to the point that, number one, we feel in terms of these record and windfall Kestrel cash flows, it feels very prudent and wise to first allocate those cash flows to deleveraging because they aren't going to last forever. And then number two, to think about how can we fund acquisitions in the most accretive way possible such that as we look ahead post-Kestrel, there's a very clear and visible cloud path on earnings growth, which can then support sustainable dividends growth. Kevin, there's a question here from Stephen P. Do you want to take that on net debt and leverage?

Sure. I'm just getting it, Marc. Where do we expect that to be at the end of the year? And how do we expect to make use of this in cash? To echo Marc's point, I think the answer to that will largely depend on what commodity crisis between now and the end of the year. The consensus prices and expectations for coking coal has increased for the second half of the year, pretty much across the portfolio. So we would expect to exceed the level of income that we earned in 2021. That has the potential to return us to a net cash position towards the end of 2022 with a $150 million facility and $30 million stake and $10 million of treasury shares that obviously is a considerable war chest available to us to fund future growth. And I think what we would like to do is to obviously maintain our quarterly dividend at current rate and then use our war chest sensibly and in a disciplined fashion to continue adding growth to the portfolio. We would not consider, at this stage, the commodity environment has become too hot to deploy capital. We consider -- we continue to see opportunities to put capital to work in a way, which should extract value over the medium term. And that's what our continued focus is going to be.

Thank you, Kevin. We have a question from Mark S. What plans are in place to replace expected revenue from Kestrel? If you look at Kestrel income through cycle, Kestrel historically generated $30 million to $50 million. And so the question is, are we trying to replace Kestrel through the cycle prices, which has been our goal. The answer to that is we think that's largely been achieved by virtue of the acquisitions and the growth that's already in our portfolio. And so what we think we have beyond Kestrel, based on our portfolio today, is a platform of assets and income that keeps us in the same place. What we haven't been able to do, which would be exceptionally difficult is to infill the portfolio from an income perspective when met coal prices are at $500 plus, where we are today. I don't think anyone was expecting that. So while we'll happily take those cash flows given we can recycle them into green investments and debt repayment. If you assume sort of through the cycle and historical income performance level, we largely believe that Kestrel has been replaced actually. And therefore, the future transactions that we do will be growth beyond those levels.

Yes. And Marc, just to add to that. Just to reemphasize the point I made earlier, the rest of the portfolio in Q1 generated $10 million, which on an annualized basis would be $40 million. And I think that's a very stable and solid platform from which we can grow the business and add further income by recycling the Kestrel's cash flows.

And so on top of that Kestrel, when we -- on top of that Kestrel number, when we think about the growth in our portfolio already from Incoa, the growth from Piauí and future acquisitions, the portfolio really is well positioned to grow. At its current level, however, the run rate of the business is not one that is demonstrative of these current windfall record -- royalty record met coal prices. What news flow should we look out for, for the remainder of '22? That question is from Mark A. So we've partially answered that question, Mark. Number one, the news on Piauí we think, will be particularly -- we're really excited to see how the BFS shakes out, how the demo plant is going, is actually inform the timing to our potential $70 million investment. You should also keep an eye out for generally the nickel market is like we do think that the nickel market is going to be quite choppy and volatile over the next 3 to 4 years, particularly as people reassess supply chains. The Ukrainian conflict has somewhat disrupted traditional nickel supply chains in that large portion of total nickel supply comes from Russia. And secondly, the next best alternative to that nickel produced in the Russian region is very carbon-intensive nickel supply in Indonesia. So the West in its ability and desire to position itself strategically in supply chains, we'll have to look at securing nickel supply into its -- vertically into its industries. And we may even see later this year, OEMs going upstream to partially invest at the project level in the mining sector to ensure security supply downstream to the car manufacturers. Taking it back to Anglo Pacific, one more thing to watch out for this year is cobalt because supply chains in the Democratic Republic of Congo have been very stretched and therefore, a lot of cobalt that's being produced in the world today is finding a very hard way to making it to the market. And so while we wouldn't necessarily say that cobalt prices will stay at $40 forever, we do think that there is some more upside from where we are today at the $40 level potentially before things normalize again. But beyond that, looking ahead at EV chemistries and EV growth rates, we think the outlook for cobalt remains exceptionally strong. And the last thing to keep an eye for, of course, will be H1 results because I think H1 should give us a very clear line of sight on whether or not we think that the exceptionally strong met coal and cobalt prices are likely to run into H2. I think at this time, we have a fairly good line of sight on the second quarter, potentially not being as strong as Q1, but being a good quarter in the scheme of things. And then for H2, how long can record prices last, but we'll have to see -- but we'll have more of a feel on that at the time of H1 results.

Great question here for you, Marc, from David H, to completely put you on the spot. Why do you think that our positive performance year-to-date is not fully reflected in the share price?

Well. There's 2 reasons. And as investors, this is up to you to decide. It's not us to tell you whether we think our share price is cheap. But since the question was asked, we have to answer it. So thank you, David. I think number one, on a relative basis, Anglo Pacific continues to trade at a fairly large discount to royalty sector peers. And so dollar for dollar, it's possible to buy, for example, $1 of cash flow from Anglo Pacific on a relative basis for cheaper than it is to buy other royalty companies. And secondly, the portfolio has performed so strongly that we think while the share price has caught up, we've also paid that down much more quickly. And so when you look -- when folks look at firm value and relevant firm value multiples to EBITDA, firm value to cash flows because the debt numbers come down so quickly, those multiples haven't gone up nearly as much as one might think if they were just basing the calculation on market capitalization.

Yes. And I think just to add to that, Marc. I think as inflation starts to come through the bottom line of many sectors, P&Ls in the first half of the year. I think the true benefit of an inflation hedge should start to be seeing a bit more in the market in the coming quarters. And I think when we are able to report our half year numbers show that benefit, hopefully, we'll see a little bit of momentum as well. But in the meantime, we remain focused on delivering our strategy. Our track record is very good. And we're generating windfall cash flows. And I think the more we can demonstrate our ability to recycle those in an accretive way. I think that will just stand to benefit the stock further as we go through the year.

The question here from J.G. The question is what comparatively high commodity price levels today -- or with comparatively high commodity price levels today, what is your view on future return potential? And so there's a few questions. I'll just unpack that and take that one first. I think it very much depends which commodities we go into. And that's really one of the benefits of a royalty model, which is not singularly focused on, say, precious metals or only copper. We really have the ability to move between commodities. And while in our view, one should be careful in certain commodities, as Kevin mentioned earlier, we continue to see fantastic opportunities in other commodities. Nickel, for example, is one where we see a situation where the forecasts are to believe a world that requires 3x as much nickel in 10 years is what was produced in 2020. And so purely from a supply-demand imbalance, we think that it's likely that there'll be strong incentive pricing to support the new supply that's going to be required, particularly in those commodities that flow into energy storage or renewable energy production. You've also asked here what our exposure is on copper. I think copper is a commodity that we're keen to get more exposure to, but it's also one which historically has been very hard to transact in. Within the world of royalty and streaming companies, copper exposure is actually quite rare. Anglo Pacific has a fairly large royalty and amongst a few other peers. But the copper royalties are rare. And so when we see opportunities for very good quality copper projects and with strong counterparties, it's vital that we complete because they might not come again for some time. Merwin's question, what are you proposing the dividend. Regarding the dividend, the current rate is not an attractive level. APF, has always paid more attractive payout, you have sufficient cash flow. So I guess the question here fundamentally is to what level should the Anglo Pacific dividend be compared. Relative to royalty companies, Anglo Pacific is one of the highest yielding royalty company stocks on the market. It's true that Anglo Pacific is not paying the same level of yield relative to a mining company. But arguably, the risk level in a royalty company is a lot lower than that of a mining company and Anglo Pacific should have a lower dividend yield compared to a mining company. In terms of the current rate, I think as much as we would love it if the business could support a much higher dividend last year or this year, the reality is that Kestrel will be stepping out of our lands. And so the most prudent thing to do, we think, as a management team to ensure long-term shareholder value is, number one, to pay down debt while we have the cash flows available to us and to not put ourselves in a situation where if commodity prices were to turn, the balance sheet would be stretched. So that's the first strategic imperative. And then second is to ensure that we have the financial resources to acquire new royalties and new assets that will be adding growth into the business that will therefore support sustainable dividend growth. The reality is in the mining sector, all our assets are depleting. They don't run forever. They deplete and therefore, we need to reinvest to, at a minimum, even just stay in the same place. And we see that example with Kestrel in that the Kestrel income unless we reinvest further, just will not be generated into the future.

Marc, I'll follow up to that, Marc, when we declare dividends for the current year, I think that's largely been done. I think our plan is to pay the 1.75p dividend on a quarterly basis. And then we usually announce our final dividend either with our year-end trading update or the year-end results. So for the rest of the year, you can expect to see the 1.75p on a quarterly basis.

And a question here from Mark B. How competitive is the market for acquiring royalties? So there is a distinction to be made between how competitive the market is for precious metals royalties versus nonprecious metals royalties. The precious metals royalty market is highly competitive. The non-precious metals royalty space where we operate is far less competitive. And most of our transactions that we've completed in the past have been on a bilateral basis. In other words, we negotiated those directly with the sellers. Whereas in the precious metal space, the vast majority of transactions are completed through very competitive auction processes. And so therefore, we really feel -- just by virtue of those dynamics, we're able to acquire royalties at a rate that generate higher returns and they're not necessarily races to the bottom. In terms of how attractive the space is generally, a picture paints a thousand words, and I would just take folks back to this slide here, in that over the next 20 years, the world will require a huge amount of investment into the mining sector in order to produce and supply these commodities to achieve decarbonization. And so even though we are seeing increased inflows from equity and arguably in some commodities from debt, the reality is the pie, our investable universe and the projects that require our projects, the capital need is growing and will continue to be exceptionally strong if we ever have any hope of achieving a net 0 future. So in other words, Mark B, we feel very good. We feel strong. We feel confident about our pipeline, to put it simply.

Owen C. asked a question, Marc, how concerned are we by Chile and talk of nationalization. Generally, we've seen what's happened in Mexico recently, of course, as well.

Yes, it's something that we have to track very carefully. At this time, market commentary and commentators alike seem to be able to view that on balance nationalization is less likely than more. It's something that we all need to monitor very carefully in terms of our exposure to Chile. That being said, in the worst case outcome, while we're certainly not forecasting this to be the case and the absolute worst case, Chile continues to be a relatively small part of our entire portfolio. And again, really emphasizes the benefits and need to have a diversified portfolio, both in terms of commodities, both in terms of counterparties and both in terms of -- and third, in terms of jurisdictions, which obviously shows that the business can support and withstand volatility. Nationalization is an extreme event, at this time, again, appears unlikely. But there are other risks in the mining sector. That diversification ultimately is the cure. I think that's -- is that it, Kevin?

Marc, Kevin, thank very much that. I think you actually managed to address the questions from investors. And of course, the company will review any further questions submitted today and we'll publish those responses on the investment company platform. But just before redirecting investors to provide you with their feedback, which are particularly important to you both. Marc, could I just ask you for a few closing comments?

Yes. In a nutshell, we continue to feel that this year, we're on track for a very, very strong year and cash flow generation, which we could number one, pay down debt exceptionally quickly and then look to recycle met coal into things like nickel, copper, tin, amongst other commodities. And as we look ahead beyond Kestrel, the business is very much positioned to be almost 100% for future-facing commodities. So we thank you for your interest today and those who are supporting us as we continue on this journey, we're very keen to continue to enhance and grow this business. And ultimately, we're doing it for you. So thank you for your support.

Marc, Kevin, thanks once again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete but I'm sure will be greatly valued by the company. On behalf of the management team of Anglo Pacific Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.