Ecora Royalties PLC (ECOR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Anglo Pacific Group PLC investor presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Marc Bishop Lafleche, CEO; and Kevin Flynn, CFO. Good afternoon.

Good afternoon all, and thank you so much for joining us today on this call. As Paul just mentioned, my name is Marc Bishop Lafleche, CEO at Anglo Pacific Group, joined as well by Kevin Flynn, Anglo Pacific CFO. We are absolutely delighted today to be speaking to you in relation to our most recent transaction. Earlier last week, we announced the acquisition of a high-quality advanced development stage of royalties from South32 for fixed consideration of $185 million and $15 million of contingent payments. First and foremost, this really positions Anglo Pacific Group as the leading future-facing commodity royalty business, which in itself is an incredible milestone when one thinks of the journey that this business has been on over the last approximately a decade. The transaction has been structured in such a way that it permits the recycling of our very strong recent metallurgical coal cash flows into copper and nickel, which is absolutely straight down the fairway in terms of our stated strategy. And furthermore, ensures that we have a strong balance sheet and a very well-covered 7p dividend based on the current outlook for our portfolio. The acquisition at completion positions Anglo Pacific Group to have a core portfolio in base metals, really well understood copper and nickel in terms of the market outlook. And furthermore, enhances our portfolio and continues our increased exposure to strong counterparties with very world-class assets, all without compromising on what has been an attractive selling point we say for Anglo Pacific Group and our very strong exposure to OECD jurisdictions. This royalty portfolio, as I mentioned, our development stage royalties, which when overlaid on our very strong current baseline producing royalties, really pivots the business and adds a complexion of growth beyond the runoff of our metallurgical coal assets. In terms of Anglo Pacific Group, in the last 18 months, we've deployed almost $400 million of capital. And we think this really complements what's been a proven track record of accretive and value-enhancing transactions. But last, we think this transaction continues to position Anglo Pacific Group as a business that takes sustainability very seriously. And you can see the journey we've been on, on the bottom right slide, 2014, 0% exposure to future-facing commodities, almost 90% in 2026. So the portfolio itself. Now the portfolio really has 2 key assets at its core. Those are the royalties in relation to the West Musgrave's copper nickel project in Australia as well as Capstone copper, the Santo Domingo project located in Chile. Both -- these assets are very high quality, long mine life and near production assets, significantly increases our exposure to copper, nickel and cobalt. The operators are really well capitalized. They have a lot of experience bringing projects into production. Capstone recently has completed or is in the progress of completing 2 pretty significant expansions at Mantoverde and as well as Mantos Blancos. And furthermore, OZ Minerals has a strong track record in Australia and elsewhere, bringing projects into production, which we think significantly enhances the likelihood that these projects will be built, with reduced risk of delays during construction or overruns, which are fairly common in the mining sector. And last, both through the assets offer significant exploration and the production upside potential, which is something that we always look for in our royalty acquisitions. We price these transactions assuming long-term copper prices and nickel prices that we feel are really attractive entry points for these commodities. And very similar to the Voisey's Bay acquisition, these assumed transaction prices, we think, on the base case, absolutely meet our minimum return criteria. But beyond that, as we look ahead, based on the really attractive fundamentals for these 2 commodities, offers significant price upside. So in many ways, very similar to the thesis of the Voisey's Bay stream acquisition. So what does our portfolio look like today? And it's really quite amazing how different this business looks today even to 12 months ago, 18 months ago to a few years ago. And if you look at our producing asset exposure here, you'll see very quickly some very strong counterparties, assets that are very well positioned on the cost curves. For the most part, our producing asset portfolio has a very long mine life in the core commodities that we really targeted at Anglo Pacific Group. And furthermore, on the development side, this transaction adds some key assets into our near-term growth pipeline. So obviously, Incoa is the closest. Piaui remains absolutely central and core to our growth strategy. We're tracking developments at Piaui very carefully. But West Musgrave and Santo Domingo as well now, as I mentioned earlier, really changed complexion of our business. West Musgrave based on OZ Minerals guidance could be in production as early as 2024, although as always, that could slip a few years. And similarly, Santo Domingo, targeted production in 2024 to 2026. There is potential for things to slip slightly. But ultimately, in our view and our investment case, our assumed transaction returns are very robust in the context of a year or 2 slippage, to the degree that would occur. So in terms of transaction structure, I'll hand it over to Kevin very briefly. But before we do that, Kevin, if I may, just a bit about South32. So South32 is a global diversified mining company. And South32 exists today as a spinout of BHP. And at the time of the BHP spin-off, South32 inherited effectively a portfolio of royalties that are noncore to a mining company, and that based on look through to market valuation, were not assigned any value. And so therefore, from South32's perspective, this is a great way to unlock value from assets that previously were getting 0 recognition of value in the market. And secondly, by doing this transaction with Anglo Pacific and by retaining a stake in our business, allows South32 to retain pretty substantial upside to these assets, which they believe to be there, and in some ways, is partially why South32 was really keen to transact with Anglo Pacific Group. We think South32 is an excellent partner into the future. Could we potentially do more with South32? Yes, although at -- that was -- there are no guarantees in life. But in any event, it does create a very strong basis for a partnership and a strong commercial rationale to see what's possible together, and so similar win-win outcomes. So with that, I'll hand it to Kevin to talk through the key transaction terms.

Yes. Thanks, Marc. Hi, everyone. The way we thought about this transaction in terms of the structure from a financing perspective was to try to preserve as much liquidity, firepower and flexibility in our balance sheet post this transaction. In the last 18 months, we've deployed now $400 million in growth opportunities and acquisitions. But what we've tried to do here is to structure this in a way that the record windfall levels of cash flow we've received from Kestrel over the last 6 to 9 months can be recycled in a way which provides a platform for medium- and longer-term earnings growth going forward. So looking at this in some more detail. Day 1 cash was limited to $48 million or there or thereabouts. We ended the second quarter with net debt of approximately $20 million to $25 million of net debt. So peak debt drawn on day 1 of this transaction should be comfortably below $70 million to $75 million. And depending on your view on commodity prices, if we take spot, for instance, that should broadly represent peak net debt. We obviously placed $82 million to South32 as part of the transaction, again, preserving balance sheet strength and firepower for future deals. And what we really like about the structure of this transaction is that we've deferred $55 million. And this will be paid in equally quarterly installments over the next 6 quarters. And based on current spot prices and our current dividend level of 7p, this should be self-financed through free cash flow generated from the rest of the portfolio from Kestrel going forward. Furthermore, depending on certain milestones and events of West, there would be $15 million of further consideration to go to South32. But in this scenario, similar to Voisey's Bay, this would basically be self-financed that of additional free cash flow to the group. What we've also done as part of this transaction is to make some modifications to our borrowing facility. There was a $25 million stepdown in the facility due to occur next month. We've agreed with our lenders based on what we've experienced from Kestrel over the last 6 to 9 months plus this acquisition to remove their stepdown, but also at the same time, insert $50 million accordion feature to pave the way for future acquisitions that we're hoping to undertake. So not only have we removed the $25 million stepdown, we've also added $50 million of upside, such that our facility now is effectively $200 million available for acquisitions going forward. And if, based on spot prices, peak net debt is $70 million, that gives you a flavor for what we've got left to be able to meaningfully deploy going forward. And those numbers include the $20 million in co-investment, which we expect to make in the coming months. The transaction itself, whilst not generating income, it's a key pillar of our capital allocation policy to preserve good balance sheet strength. And we think based on spot prices going forward, on a projected basis, our leverage ratio should be very comfortably under 1.5x., and our facility allows us to go to 3.5x. So we think we have plenty of headroom to weather any short-term commodity price downturns to come if they materialize, but plenty of upside on the other side, not least under the new Queensland government royalty regime in Australia. So if we just turn to this slide. And this really kind of paints a picture for the strategic imperative and rationale for this transaction. When we look at where this business was a number of years ago, we were basically a 1-asset business in Kestrel. And whilst we have enjoyed record levels of cash flow from this asset over the last 6 to 9 months, this has been based on abnormally high levels of coking coal pricing. So if you look at a through-cycle measure of what Kestrel has generated for the business over the last number of years, it's about $42 million on average. However, this is a short-term asset which is rolling off mid-decade. So these are unsustainable levels of short-term cash flows. And in terms of thinking about capital allocation and preserving and safeguarding the 7p dividend, obviously, we had to backfill and insert some growth into the portfolio beyond Kestrel. Now we think we've achieved the first stage of that by the acquisitions we've made over the last 8 years. So based on kind of broker analyst consensus numbers over the next 8 years, what we already have put into the portfolio should generate about $55 million of sustainable ongoing revenue, which clearly kind of replicates and replaces Kestrel. We also have within the portfolio $90 million of investment optionality. And this is through the Incoa and Piaui opportunities that we have in the pipeline. And these could add $15 million to $20 million of sustainable revenue going forward as well. And then when we look to the middle to latter part of this decade, this is when the real benefit of the South32 royalties really come to the fore in terms of adding $30 million to $50 million of revenue. So what we have is a platform that could and is on a journey towards generating a portfolio revenue contribution of $100 million going forward. And this should over the medium term allow for meaningful earnings growth, which then potentially has the ability to add to dividend growth in the portfolio. But in the meantime, while we wait for that growth to come through, the $55 million we're currently generating is sufficient to keep and preserve the 7p dividend, whilst covering our cost base and allowing for the recycling of free cash flow in the short term to self-finance the deferred consideration structure associated with the latest acquisitions. Marc, maybe back to you for the slide, please.

Thank you, Kevin. Well, every time we do a investor meets presentation, it does feel as though the business is sort of different and different pretty materially from when we last spoke. This slide, again, is very, very different to when we last connected. Today, as I mentioned, the core of our portfolio is now in base metals, consisting of nickel, cobalt and copper, I mean, all very well understood commodities. This really simplifies the Anglo Pacific equity story. It's a lot easier to understand the key drivers of the business and aligns us at our core with commodities that are absolutely vital and crucial to the energy transition. Beyond that, in terms of future-facing commodities, we also have vanadium and uranium exposure, which have a big role to play in the low-carbon future, such that approximately 80% of our portfolio today now forward-facing commodities, which is something that we're absolutely delighted with. In terms of the direction of travel, it's -- we're on a journey, and soon, we'll be at 100% or close, maybe not 100% exactly, but close by. It's really, really great to see. And we hope that as shareholders, you equally share our enthusiasm on that front in terms of how we've been able to reposition this company. And as I mentioned earlier, we've done it all without compromising on our high-quality jurisdictional footprint. And on the left-hand side of this, I will go into the detail today on this call, but should folks be curious to better understand. So the end markets for these commodities is additional detail here on a left-hand side of the slide. So our portfolio in terms of commodity exposure and commodity strategy is unchanged. By virtue of this transaction, we really upside our exposure to copper, nickel and cobalt. But that being said, we continue to target all the commodities listed here on the left-hand side of the slide, along with projects that while might not directly flow into, say, battery or into some sort of energy transmission grid projects or commodities, that themselves provide relative environmental benefits. And that certainly includes iron. Our investment in Labrador Iron royalty company, where that iron ore produced on a Scope 3 basis is amongst the lowest carbon units per unit of steel produced relative to other types of iron ores. The reason for this, I mean, it's all pretty clear. I don't think we need to belabor this slide because it's fairly well understood that the energy transition is expected to be highly metal intensive. And we think that this is a really attractive entry point at the moment for this portfolio of royalties that we just acquired, but other opportunities we see in the market today to continue to acquire royalties at good value. There will come a time where it's more prudent to stop investing capital -- more prudent to slow down on capital invested and focus more on capital returns based on where we are in the cycle. We just don't think we're there yet, especially not now that commodity prices have pulled back pretty materially over the last, say, weeks or month, that to us signals the possibility and opportunities to more really attractive entry points. And so at this time, our capital allocation policy continues to be primarily weighted towards growth, that being said, with a really strong commitment to the current 7p dividend level. So about the projects themselves. At the end of the day, these projects really tick all the boxes for us. Both of them are in really well-established mining jurisdictions. Both of them are expected to be exceptionally well positioned on global cost curves, and therefore, able to produce profitably through cycle. Both projects have strong counterparties. Both projects are, in our view, very likely to come into production. We don't see these as 10- or 15-year options or -- with a huge amount of development risk. These projects do appear to be very close to first production, which is something that for us is very important, because ultimately, our strategy continues to be to focus on assets that are in production or near production, particularly at the size of deal ticket. So what does this all mean? In terms of our track record, this slide is one that we have discussed with you in the past. But in terms of deal value now, we've deployed almost $700 million of capital. Of that, a pretty significant amount has been returned to shareholders as dividends, both as a combination of cash flow generated from our portfolio pre these transactions, but also cash flow generated from the transaction themselves along the way. And we continue to believe that our -- it's for investors to decide for yourselves. But on the right-hand side of the slide, you can see our -- basically a mark-to-market metric where one can evaluate for themselves whether or not you believe we're continuing to be prudent or are -- continuing or are prudent allocators of your capital. In terms of capital allocation, Kevin, do you want to take this one? You sort of touched on it already, but please go ahead.

Yes. Sure. Thanks, Marc. Pillar #1 has to be balance sheet strength. We don't want to run this business based on high levels of leverage. Ultimately, Anglo Pacific should be a derisked way to gain exposure to the mining sector. So we don't want to jeopardize that virtue by overleveraging our balance sheet. However, it's very important for us to be able to borrow in order to transact quickly and opportunistically when that arises. And I think with this transaction, based on spot prices, we should comfortably be under 1.5x levered. And I think as a business, we don't want to go too much over that. But it is important to use free cash flow when we can to delever. Marc has touched on this as well. We continue to see good opportunities to deploy capital. One of the good things about what we do is we don't focus solely on precious metals. So we don't have to just invest in 1 or 2 commodities through cycle, which means that there should usually be a much wider universe for us to kind of appraise and consider when looking to deploy capital. The quarterly dividend, the 1.75p, this currently remains unchanged. As I pointed out on the previous slide, the portfolio, excluding Kestrel, covers that dividend. And the Kestrel revenues that we've received recently, we consider to preserve a 7p dividend on a go-forward basis. It's much more sensible to reinvest that into growth, which allows for medium-term earnings growth, whereby without those investments, we would most likely be looking at dividend cuts once Kestrel moved outside of our private royalty area. So we think we've really stabilized the dividend at 7p level going into the medium term before these assets contribute and allow for a revision upwards to any future policies. Anything beyond that, obviously, we'll look to provide other shareholder returns. Marc's alluded to this. But if we feel that the -- we're near the top of the cycle than the bottom or the middle, then it makes more sense not to deploy capital. But we don't feel we're at that point yet.

Thanks, Kevin. So in terms of this company, I mean, 8 years ago, this company was effectively a coal business. Today, 2022, totally different. The majority of the quantity profile in the near term following the Kestrel runoff will be directly generated from future-facing commodities. We think that Anglo Pacific has -- is certainly a leader in terms of its sustainability profile, and very few companies have been able to achieve in the short time frame what we have. And we're delighted as a management team to have done this for shareholders and provided a creative platform for a business that has a big role to play in the next century. So to wrap up before we move into Q&A, to summarize in 4 -- in 5 very quick bullets. First of all, what are we doing here? Well, we're taking what are really strong metallurgical coal cash flows, recycling that into long-term sources of cash flow derived from copper and nickel royalties. We are now positioned as Anglo Pacific Group, your shareholders and what is positioned as the leading future-facing metals royalty company. And we certainly, as I mentioned earlier, I think that there's more to do here to further improve the portfolio, particularly in terms of near-term income. The business has been stabilized, with a very strong outlook in terms of our commodity basket, including copper and nickel, cobalt, uranium. And those commodities are trading -- continue to trade very strongly, albeit down from what were very strong levels a month or 2 ago. The business now has a very strong source of growth beyond Kestrel as we exit metallurgical coal and that asset runs down in 2026. And last, this transaction was structured in such a way that we have very, very strong balance sheet, which in itself is not -- something to keep in mind, having now financed almost $400 million of transactions, our balance sheet continues to be very strong. And we have the capability should we find the opportunities that meet our investment criteria to continue to grow, and ideally, to the degree we can, minimize any further equity issuance to ensure and to try to drive as much EPS growth and NAV accretion as possible, which is very much a signal something we did in this transaction as well by virtue of how the transaction was structured. So with that, why don't we pause here and switch to Q&A?

[Operator Instructions] Marc, Kevin, we did receive a number of presubmitted questions from investors. Perhaps I can start with those. The first one reads as follows, could the company's balance sheet withstand a significant drop in commodity prices due to the global economic downturn, especially after considering the cash commitment to the acquisition?

Well, the short answer to that, we think, is yes. But Kevin, why don't you provide a bit more color? .

Yes. I think that's right, Marc. It depends what you mean by the word significance. Look, I think coking coal today has traded down from just over $600 to where it is now at $250. I think iron ore has leveled off as well. So what are we looking at in the short term? We are looking at recessionary threats. We are looking at a slowdown in China in terms of its policy towards COVID. But I don't think you can consider the Chinese self-inflicted slowdown as something that can run into the medium term. So that's why we've looked at certain downside scenarios and spot levels when appraising the merits of this transaction and its potential impact on our financial covenants and our total net debt drawn. And we still think that there's sufficient headroom to weather a longer-than-expected downturn in commodity prices. But clearly, if coking coal goes back to $100, then we're in a different position. But I still think we've got plenty of headroom to weather that scenario.

And next one we've got here is, why don't you make the dividend a flat 8p per year? It will help the stability of the share price and not cost that much in the general scheme of things. Doesn't impact the funding more, just be a reward for long-term investors.

So on that front, in our view, the dividend level at 7p is an appropriate level in the context of this business, with the assets that we have today, excluding Kestrel. And the Kestrel income that was generated over the last 12 months is simply not sustainable. And therefore, what we think is far more prudent than increasing a dividend level, to reinvest that cash flow into assets are going to ensure that the business has a very solid platform to generate income, to pay dividends for a much longer period of time rather than increasing short-term dividends and then being unable to fund royalty acquisitions in the future. And even at 1p over a 5-year or a 6-year period, that can pay for approximately 75% of the Incoa transaction. And so 1p in itself might not appear significant, but dividends are cumulative. And they can absolutely, in our view, at this time anyways, even that move from 7p to 8p can do some great things in terms of building a business for the future and ensuring really strong dividend covering earnings growth.

And as you basically see, we have received a number of questions throughout today's presentation, thanks to the investors for submitting those. Can I please just ask you both just to click on the Q&A tab and start at the top of the list. And just where appropriate to do so, read out the question and give your response, please.

Sure. Marc, maybe I can read the first 2 for you, and you can take the answers, if that's okay.

Sure.

Paul asks a question, what's the probability at West Musgrave and Santa Domingo generating royalty revenue, i.e., coming into production? I think we both know the answer to this obviously, but -- and you've touched on it earlier, but maybe take that for Paul.

Sure. Well, thanks for the question, Paul. In our view, there's a very high likelihood of these assets coming into production. The assets are owned, as we said, by really well established and well capitalized mining companies, which is the first point. The projects themselves appear to have really attractive economics and really attractive cost profiles relative to the wider industry. The outlook for these commodities is it's actually robust, with both supply deficits forecasted in copper and nickel in the medium to long-term period. And furthermore, the projects from a technical basis appear really, really sound and robust. So we have -- we wouldn't have done this investment if we didn't take those, our likelihood that these projects will come into production.

And Marc, maybe as well, specifically to Santa Domingo, the Capstone kind of tie in and why we think that's valuable.

Yes, of course. So we're going into a bit more detail here. But yes, that is something that we love to do because we're pretty excited about this acquisition. One of the things that's really interesting about Santo Domingo is that, following the Capstone Mining and Mantos Copper merger, the Santo Domingo project is only 35 kilometers away from an existing mine owned by Capstone Copper. And that creates a potential for pretty sizable synergies that would not have been available had this project been developed really as a stand-alone piece. But #2, means that there's now a team at Capstone that has experience in the last 5 years doing 2 pretty sizable and significant projects in Chile. So not only do you have a project that is likely to be significantly more attractive on an economic basis given the proximity to an existing operation, but there are a bunch of people who have proven the ability to bring these assets in Chile into production. And that track record applies also to the team at OZ Minerals who have themselves are currently executing or have executed development stage projects into production.

Stephen asks the question, Marc, what is South32's pedigree in royalties? And what exposure do they have post this deal?

Well, South32, as I mentioned earlier, is a mining company. They're not focused on royalty and stream acquisitions. And these royalties really are legs the assets and exists in South32 because BHP included them in the South32 assets that were there spun off. So they -- in terms of royalties, they've said publicly, they have other royalties in that business, maybe 30 or so. And Anglo Pacific theoretically certainly positioned to be the most logical commercial partner should they look to monetize royalties in the future. But of course, we always evaluate any acquisitions on their merits. And likewise, we have no doubt that South32 would equally ensure that any transaction they do would be on an arm's length basis.

Okay. Marc, I've just seen a kind of a follow-up question further down the list. What were the base prices for copper and nickel that we use to appraise the value of these assets? Peter.

So thanks for the question. Those present -- those prices are actually in this presentation. Copper, in the range of $3.40. And nickel, in the range of $8 per pound. And you can see those prices on this slide here, on the second last bullet.

And we've got a question from Stephen again. Were we in competition on the deal?

Yes. We've been working really hard to position ourselves on this process for a number of years. South32 did explore a competitive process. We ended up in exclusivity at the end of the transaction, and we're transacting bilaterally. So in other words, us and South32. That's pretty common for most of our royalty transactions in the past 8 years. The majority of all of our transactions have been between us and the seller as opposed to a very competitive seller -- competitive auction.

Thanks, Marc. And from what I can see, the last question we have specifically on the deal before we get on to company questions. What revenue is forecast from South32 for 2023 and 2024 to give an idea against the yield on the acquisition cost?

Well, these royalties are not in production. So it's not really possible to go that path. But actually, on the slide that I have up here, you can see forecasted revenue from each royalty, assuming current broker consensus and steady-state operational production levels as disclosed by OZ Minerals, Capstone and the others. If you were to try to do that more simply, you can also do that math based on this slide, where the illustrative run rate of the portfolio is $30 million to $50 million, the acquisition cost of $185 million, excluding retention payments, you can do that math. But that won't -- it's not -- with the perfect illustration given these are development stage royalties, and you can -- you'll annualize that on year 1 or 2.

Marc, Gary asks, can we give any color around the profile of potential future transactions?

So as we look into the future, I think this transaction is pretty indicative of what we're looking for. First of all, it's commodities that are either directly being sold into end markets for the energy transition or that support the energy transition, whether that be power generation, distribution, storage infrastructure or commodities that have themselves a strong sustainability profile, and while not directly contributing to the energy transition, can effectively help make the world a better place, right? And that's pretty -- for example, that could include potash, where with potash, it's absolutely true that potash itself isn't going to the energy transition. But a potash unit produced with a low-carbon footprint had a good -- and with a good cost curve profile can certainly help achieve our climate change objectives in other ways, but get us to the exact same place. We'll continue to look for strong operators. We'll continue to look for assets that are well positioned on the cost curve. And as always, [ build ] an attractive returns profile. We have been successful because we're disciplined. We are certainly not in any hurry to deploy capital. If we don't see attractive opportunities, we won't transact. It's as simple as that. I think the bottom line is what we don't -- what we want to do is make sure that we continue to build our portfolio in a very safe, defensive way and not sacrifice or compromise on a very rigid discipline. That has been, as I said before just now, the key to our success to date.

I might just link these 2 questions together from Stephen and Ulrik. Stephen is asking, how much debate was there about issuing shares given that they look undervalued? And Ulrik is asking -- is wondering why our valuation is so much lower compared to gold or silver companies. Do we need more iron ore press coverage?

So the first question, we've intentionally structured this transaction in such a way to recycle as much as possible as we could from our existing operations and to reduce the need for equity issuance as much as possible. And when you think, slightly more than half of the consideration here is cash, and we remain with the balance sheet in as good shape as it currently is. And we think that's a pretty impressive accomplishment. In terms of the share price being where it is, that -- we're scratching our heads as well a little bit here. But I think the reality is, we're facing some pretty challenging market conditions, where we've seen across the board, almost indiscriminately a pullback in equity valuations. At the end of the day, we certainly spent quite a lot of time ensuring that the business is well marketed. We have a really strong strategy to really expand our presence and coverage in North America. And as some of you may have seen, we've recently been -- Scotiabank out of Toronto has initiated equity research coverage of Anglo Pacific Group, which is fantastic to see, and it's something that we're keen to see, as well as further coverage out of North America. And -- but ultimately, we can do what we can. But we can't control the share price. So ultimately, investors in the market will put the stock where they think it should be. We continue to believe that there's excellent upside to where we are today, but that's for investors design ultimately. And we can -- the last thing that's totally in our control is to keep doing what we think are really good transactions for the shareholders that are in the stock today. Kevin, do you want to take one from David H. The question, why is the new revised revolving credit facility rated solely by [ banks ]?

Yes. Absolutely, Marc. These Canadian banks, the royalty model is much more well understood and appreciated in Toronto, certainly than any other jurisdiction globally. And what we have now is a syndicate of the leading lenders to the royalty and streaming sector in our facility. We really truly understand the difference between being a mining operating company and being a royalty and streaming business. And that difference is very, very obvious in times of inflation like what we're seeing right now. So basically, we've just tried to capture our true debt capacity through lenders that really appreciates and fully understand the nuance between being a mining operating business and being a royalty and streaming business. And I think what we've done here is put together a leading syndicate of lenders who can not only provide balance sheet to us but also M&A advice and deal origination as well. So we've got a fully integrated relationship across the institutions. And I think that's just something which is incredibly strong and a real valuable asset for us.

Okay. Great. There's a question here. I think also from David H, in relation to asking sales from the CFO or CEO. I personally am the CEO of Anglo Pacific Group, and just to be clear, haven't done any sales in the Anglo Pacific -- in my Anglo Pacific holdings. In terms of the next question, about remuneration. As a management team, Kevin and I are both remunerated based on the package that's entirely very much aligned with shareholder value creation. And that goes down to per share metrics. And therefore, our personal remuneration package does not incentivize, to put it, growth for the sake of growth, and it really incentivizes value creation at the individual shareholder level, i.e., on a per share basis. I don't know if you want to add anything to that or?

Yes. I was just looking further down the question. I think David was asking about using our own cash to purchase shares. We've certainly been doing that over the last number of years. We've accumulated a shareholding ourselves. Marc and I are still, despite my appearance, certainly relatively young. We haven't captured a huge amount of personal wealth. We've got mortgages and young kids. But what we do have is a bonus structure in place such that if there's a good year and we earn more than 50% bonus, that portion, over 50%, is required to be invested in shares in the business. That's certainly what happened earlier on this year with my package. So look, it's a benchmarked compensation package, designed to increase our shareholding over time. And there are certain limits as to what percentage of our salary we are required to own in shares. So I think this is a well-trodden path in London-listed remuneration structures. And I think over time, you will see us increase our shareholder accordingly. And that's a good thing for Marc and me because we are very passionate about the business. I've been with the business 10 years. Marc is almost 9. We fundamentally believe in the potential for this business and to unlock that ratings difference. We see the opportunities to do it. We've deployed $400 million in the last 18 months, which is by far the greatest amount outside of the precious metal space. And we continue to see a very good path towards a much larger business. Marc, there's a question down here which maybe you can take, from Jose about Piaui and decisions about the second investment stage.

Yes. So currently, the Piaui project, as you may have seen, recently announced first production, which is a fantastic milestone. The next step really in the development of Piaui would be for the completion of the bankable feasibility study, which, from there, will permit discussions with, as we understand it, with potential financiers. Upon securing financing, construction starts. And that would also trigger our investment of $70 million should we proceed with that commitment. Ultimately, the Piaui royalty is not an obligation. It's subject to final APG board approval. But we would say, at this time, we're really excited by that project. We think the outlook, which should be no surprise given the transaction we just completed with South32, to acquire a nickel royalty. We think the outlook for nickel in Piaui is excellent. And as I'm sure we've mentioned to many of you on the call in the past, so forgive us if there's someone who hasn't heard us say it. It's type of nickel, and nickel product and coproducts or form, which can be used directly and flow directly into a North American battery precursor supply chain. So we think that there is a really strong strategic rationale for this project to come online and very strong ability to place the product as countries and firms look to increase their security of supply of these strategic minerals. There's a question from JG being, did you agree on pricing? Was the recent price decline a reason to get the current conditions? So we price this royalty portfolio based on long-term pricing. And in our view, long-term pricing at the levels have not really changed. We think the outlook for copper and nickel remains very, very strong, actually, with a lot of potential beyond where we priced this transaction. And what has come down is near-term spot pricing. And in many ways, that is why we specifically were looking at portfolio development-stage royalties. So in other words, to avoid the risk of acquiring a producing royalty in the current market, with copper prices being in excess of $4.50 per pounds, now very quickly, they've come back down to the $3 per pound range. So the pullback in spot pricing, we don't think thematically changes the basis and the strong rationale for this transaction in any way. What it does mean though, as we look ahead into the future, we think there's a good chance we'll be able to find good value and good entry points for copper and nickel royalties based on lower near-term price levels that offer more asymmetric price upside than downside.

And Marc, there's a couple of questions we could group here. Stephen, Gary. Would we consider Africa as a jurisdiction? And Gary notes that the portfolio doesn't have lithium currently. And what are your views on that?

So I'll take the second one first. On lithium, we do think lithium is a really interesting commodity. But with lithium prices where they've been in the past year, I mean, currently, lithium prices are almost 7x or 8x where they were 18 months to 2 years ago. So we think it's an expensive time to acquire lithium exposure. We would like to get some lithium exposure, but it really comes down to valuation and making sure that we don't buy a royalty at really high cyclical prices. What was the second part of the question, Kevin? Forgive me.

It was the Africa jurisdiction market.

Yes. Africa is a big place. Africa is certainly not one country or one jurisdiction. And we would absolutely look at certain areas of Africa. For example, South Africa has changed incredibly over the last couple of years. Not -- particularly in the power -- in terms of power generation and power certainty, which has previously been a big issue in that country. That dynamic is no longer the same, especially with the introduction of significant renewable energy capacity. And so for the right project, ultimately, we would consider certain African jurisdictions. But ultimately, we think the core of our portfolio and the vast majority of our NAV, as it currently stands with exposure to OECD jurisdictions, is how we want to see this portfolio into the future. As we do think -- especially in today's world, having 90% plus of our portfolio in OECD jurisdictions is really valuable and something that -- from discussions with our shareholders, something that people are really keen to see us maintain.

David asks the question, maybe I'll take it. It appears in the short-term South32 deal will be dilutive. Is that a fair assessment? Yes. It's just inevitable, isn't it? That David, that when you issue equity to acquire something that isn't immediately producing, there will be some short-term dilution. I think that will by a long way gets compensated in the middle to latter part of this decade when you really see the effect that this acquisition has on longer-term sustainable levels of earnings per share. But not only that, these assets will become very NAV accretive as they get closer to production. And that's also something that you don't get when you acquire income-producing assets. So in the medium term, these assets -- these acquisitions will allow for accretion to NAV and also earnings.

Take the last.

There's one last question, which is an important one, I think, for you. Stephen asks, it doesn't have a Bloomberg machine. What's the best source for cobalt price?

Yes. That's a good question because we source our cobalt price deck on our Boise's pricing, our reference is not Bloomberg actually, but metabolism in fast markets, which unhelpfully is also behind a subscription. So let us take that one away, Stephen. If you could perhaps drop a line to the Anglo Pacific Group sort of a question. So we have your contact details, and we can look to see what we can find in the public domain to try to find something for you that's available publicly, that's not behind sort of subscription. .

That's fantastic. And thank you indeed. I think you've told every question you've had. And Stephen, if you some feedback and pop your e-mail address in the feedback, the team will be able to pick that up from there as well. Look, thank you very much indeed. As always, you've been super kind in answering every single question that we've had through. And if there are any further questions that do come through, the team will have the ability to review those. And we publish questions where appropriate to do so. Marc, perhaps before redirecting the investors to provide you with some feedback, which I know is particularly important, just a few closing comments, please.

Look, in a nutshell, we think this company is in great shape. I mean, the last quarter, our core commodity basket has been exceptionally strong. H2 maybe looks a bit choppier. But we're basically looking at a dynamic or H1 basically being really, really strong should sell Mina relatively strong full year 2022. Inflationary pressures have in no way receded. In fact, in many jurisdictions, they're getting stronger. As a royalty and streaming company, we continue to be a very defensive way for investors to retain exposure to commodity prices. Have some sort of protection against inflation, eroding the currency and the underlying by part of that currency. And furthermore, without any of the same sort of direct margin exposure, I think what we'll see in the mining sector, as commodity prices come down and as inflationary pressures remain is margin compression. And that's just not something that we face as a royalty and streaming company. So hopefully, that virtue will be come to light and even more apparent detail in the coming months. And last, we remain very committed. And we are incredibly excited about the business as it stands today. We have a really strong balance sheet. We're seeing some interesting opportunities. We're under no pressure. And we will not transact for the sake of it. But should we see opportunities that we think are going to deliver attractive shareholder returns, we have the capacity to fund it. So thank you very much for joining us here today, and we look forward to our next discussion with you in the future.

That's fantastic, Marc, Kevin. Thank you indeed for updating investors today. [Operator Instructions] On behalf of the management team of Anglo Pacific Group plc, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good afternoon to you all.