Ecora Royalties PLC (ECOR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Ecora Resources plc Investor presentation. [Operator Instructions] Before we begin, I would just like to submit the following poll. And if you'd give that your kind attention. I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from coral Resources plc. Marc, good afternoon, sir.

Good afternoon, and thanks, everyone, for joining us for our full year 2023 Ecora investor call -- investor meet call, I should say. So jumping right into it. 2023 delivered what most expected down on 2022, of course, in line with expectations. And in the context of just how spectacular 2022 was as a year, very hard to follow it up. But if we strip out '22 as a bit of an outlier, lot to be happy about in line generally with what we've done as a business the past 4 years. We'll come back to the financials when -- in Kevin's section of the presentation. But the first half of the presentation will focus on a couple of key points that we had announced as part of these results. The first is the portfolio itself and the positioned -- being positioned for year-on-year organic volume growth from 2023 to '24 to '25 from our producing asset base with positions as well for potential for portfolio contribution growth subject to commodity prices in the next -- this year and next year. We'll talk a bit about how our development royalty portfolio underpin the medium term beyond the next 2 years of sort of organic growth in the business. More generally, the market opportunity and what we see today in the market for royalties and streams and sort of a window of opportunity that comes along. It does come along regularly, but does not come along very often, if that makes sense by virtue of the cyclical factors that exist in the mining sector. And we'll talk through our updated capital allocation framework, which we announced earlier this week and the logic behind the $10 million buyback program, which was also announced at that time. And of course, we'll also talk to you about our balance sheets, including our newly refinanced credit facility. So this is just a quick snapshot on where Ecora is today. And for the folks who have been tracking Ecora for a long time. There's a lot to like here in terms of how the portfolio has evolved and what we've sort of said pretty consistently for the past years. Is that the business today where we see it as it's kind of the end of the beginning, and that the business today is in good shape compared to where it was certainly 10 years ago, and we only had 1 royalty materially in [indiscernible]. But there's a whole lot more work that's required to really take this company to the next level in terms of diversification. That being said, we're really happy with our operating footprint in terms of geographic exposure, good jurisdictions. And if we look at what's happening around us in the world today, I have a good reminder that jurisdictions are really important in terms of royalties, especially upon us taking a 20- to 30-year view on a project. Our commodity base is the right one, we believe. At the core of our portfolio today by asset value is copper. And the outlook for copper, in particular, is we believe to be very compelling. In time that copper exposure will also grow as and when we get closer to production from these assets. So that's a great place to be. In other words, our we have sort of a NAV-accretive copper exposure in our business today as we get closer to first production. And then last is the nature of the portfolio. And what we've looked to do when we buy royalties and we'll continue looking to do is to buy assets that are defensively positioned on the cost curve. As most of you will know, if you've been tracking Ecora, the key risk really with the producing royalty is that the operation is not economic. And we all know that mining is cyclical. And therefore, as a royalty company, having 84% of our assets and the lower cost of the cost curve either today or expected to be once in production, really positions this business as a very defensive play and well positioned to sustain what can be pretty sizable peaks and troughs in certain underlying commodities. This is a quick snapshot of the Bloomberg World Mining Index. And what you can see here is that equities have come under pressure. Ecora is no exception. The Ecora share price is also come under a lot of pressure in part. We've seen some pretty challenging macroeconomic circumstances out there that for many folks have cause a risk off sentiment in terms of our near-term commodity demand expectations. We've seen, first of all, sort of underwhelming response last year following the China reopening following a period of really relatively lengthy mandatory lockdown restrictions and an expectation that would result in substantial demand growth immediately following those the relaxation of those COVID rules in China, which didn't materialize. And we also saw a rising rate environment, which caused a lot of folks to worry that we're in for hard economic lending and commodity prices not uniformly, but softened over the course of last year. And if we extrapolate that to the environment today -- excuse me, if we overlay that with just generally limited capital available to the mining sector, it's creating what we see today is a very attractive and cyclical opportunity to buy royalties of really high-quality projects. that the last time we feel we saw circumstances that were similar was in 2016. So while in a cyclical sector, we anticipate, yes, we will get back to these this type of environment at some point in the future, if it's an 8-year weight, the opportunity to take capital and to really build our business to diversify it to buy more producing royalties to really diversify our producing revenue, reduce the volatility. If we can add more sources of short-term growth, so we're more diversified. We're more diversified in short-term growth today than we've ever been as Ecora, but more is always better in that area because as we know, in mining. Some things, as we know at mining, if you have 4 near-term development royalties, what's better than that, 8 or 10, for example. So to summarize, today, the market conditions are really creating an environment where the value of the royalty model is shining through. And for a mining company, if they have to choose between a highly dilutive equity financing, if they can even get an equity deal across the line or royalty partnership, it's on a relative basis, it's really attractive. So that in a nutshell is a quick overview of where we are cyclically and what is a compelling entry point for growing our portfolio. We announced earlier -- well, yesterday, rather, an updated capital allocation framework. And that capital allocation for [indiscernible] in many respects reflects where we are in terms of our opportunity to grow the business. And we feel now is the right time to strategically pivot the business from a time in the cycle where it makes sense to deploy return capital to 1 where it makes sense to grow the business by acquiring royalties. So in terms of our capital allocation framework, we have 4 key pillars. The first is growth, deleveraging cash dividends and share buybacks. I will come back to the cash dividend and the cash dividend formula later in the presentation, where there's a slide detailing exactly how that works. But the other thing that we announced yesterday was a share buyback. And that share buyback really is in the context of where we're trading, where we believe the true intrinsic net asset value of this business to be. Today, the stock is trading for less -- slightly less arguably than the value of our producing royalty portfolio. And so what we kind of see is an opportunity to acquire shares in a really high-quality portfolio of royalties for 50% to 60% of the net asset value. Our intent in the future is not to regularly distribute capital shareholder returns via buybacks. The buyback today is really a function of this very sizable parent discrepancy between the share price and what we believe to be the true intrinsic value of Ecora. So in terms of funding the buyback, what we're doing here is something that we've done before actually is Ecora and we're funding the buyback primarily by recycling capital from an equity position that we hold in Labrador Iron Ore Royalty Corp. into [indiscernible], which you can see Labrador Iron Ore Royalty Corp. on an illustrative basis is trading at sort of double the market price to net asset value and a much more attractive free cash flow yield or relatively speaking. So it's a lower free cash flow yield, excuse me, which in Ecora terms is much more attractive. If you -- for those who have been following the Ecora story, you'll remember a few years ago, we proceeded with the buyback that was funded similarly by recycling the proceeds of the sale of an equity position trading at 52-week highs into an Ecora stock which is trading at around 52 week close. And while Labrador Iron Ore Royalty Corp. is not currently out of 52-week high, upon exit to that position, we realized an over 100% pretax return. And therefore, it's -- from our perspective, we believe it to be a compelling capital recycling exercise. This will give you a snapshot of the company and how it's evolved. And we like to include this slide because it allows folks to if you like what we've done or just like what we've done, you could -- it's a very transparent way to show how the business has evolved and how we've deployed capital. So what the first chart shows you on the top left is the revenue mix and what you can see if we went back to 2015 is that the revenue mix then was obviously much smaller, but very little contribution from anything other than Kestrel. And the bluish color reflects the portfolio and the assets that we bought that have either -- that were in production when they were acquired or are in production today. The next is a feel for how our net asset value has evolved. And obviously, Kestrel in 2015 was a big portion of this business and a sizable portion of the net asset value. And what you can see here is that we've -- a lot of the capital that we've deployed has not only gone into producing assets. A lot of capital has gone into high-quality royalties that are not in production yet. But in time, as they come in, we'll, of course, generate revenue. And that's what this chart on the right-hand side really demonstrates is that today, 53% our portfolio is producing. There's a pipeline of assets that are in construction thereafter. There's a pipeline of assets that are in development earlier stage. And therefore, as we move forward in time, what we really are looking to achieve is a treadmill effect, where the producing assets generate income, of course, but as they deplete, we have other assets that are moving up the curve into production, if that makes sense. This gives you a feel for the portfolio today and what it could look like in the future. I mean we like to include the slide because you can easily see what the portfolio, if you just look at the producing assets can do? So the dark blue line in this chart represents the producing assets other than Kestrel. And that we kind of see the meat and potatoes of the portfolio that's in production that has already some attractive sources of volume growth. but isn't necessarily subject to development risk in the same way that a construction stage or a greenfield asset is. And that's what that medium-term column shows you where in addition to the producing assets in our business today, one can overlay and evaluate and judge the expectation, but contributions from assets that are expected to come online in the medium term. So in the context of Ecora, Ecora today, where it trades as an enterprise value multiple has a potential, of course, in time, just by virtue of the growth we have in the business to significantly change. But what's really interesting when you think about Ecora is the nature of the cash flows. Because if we look at the wider mining sector as a proxy, you can clearly see that businesses that derive the majority of their cash flows from steelmaking coal or thermal call trading at substantially lower valuation multiples than those that drive the revenues from, for example, base metals. And you could actually see that with Ecora, where on the right, it shows our current trading multiple to a range, which is based on our closest peer, which is not a precious metals business, but it's a business that has a commodity basket that in many ways is fairly similar to ours ex metallurgical coal. So we think in time, as our cash flow transitions in terms of its source from being steel coal or steelmaking coal related to base metals that there's really potential for this business to attract a higher valuation multiple in the market. And with that, I'll hand it over to Kevin.

Thanks, Marc. Hello, everyone. Geoff, if you wouldn't mind moving to the financial performance slide for me, please. These are our KPIs. The portfolio contribution in the year was $64 million. which, as Marc pointed out earlier, it was always unlikely we were going to hit the highs of 2022 given the volumes in that year from Kestrel and also that Kestrel, particularly in the first half of that year benefited from record high coking coal prices. However, if you kind of exclude 2022, the $64 million in 2023 kind of was in line with the 3 previous years to 2022. So a very solid performance from the portfolio in 2023. And importantly, for us, we expect this kind of level to remain flat or slightly upward trending over the next 2 years. 12 months ago, many analysts were expecting a reduction in our revenue in '24 and '25 as well. It now looks like we're going to have a smoother profile going forward. I'll come on to portfolio contribution on the next slide. Adjusted earnings decreased in line with contribution and more so than the previous years because 2023 had a full year impact of [ said ] 32 shares that were issued in July 2022. This produced dividend cover of 1.4x. The final dividend remains unchanged, in line with our previous dividend policy of $0.0125 per share. And as Marc mentioned, we've got an updated capital allocation policy. I'll touch on the dividend component of this in a later slide. If we move on to the portfolio contribution slide, our total -- our core portfolio of future-facing commodities generated about $28 million in the period. This stand from $36 million in the previous period, and this was mainly due to the expected ramp-up at Voisey's Bay, slightly offset by the successful appeal that we had in relation to our legal dispute around the Four Mile royalty. Touching on 1 or 2 of these in a little more detail. Voisey's Bay, as we said, it is in its ramp-up period. So 2023 was always likely to be the low point in terms of volumes. So we received 11 deliveries in 2023, that compared to '19 and 2022. and pricing as well, which is very well documented in the context of the nickel and cobalt markets was quite a lot lower in the year as well, averaging about $16.50 a pound versus 32% in the previous year. all of that kind of combined to produce a 70% reduction. However, the underground transition, we're guiding 12 to 16 deliveries in 2024. So we do expect good volume growth to come from this asset on a longer-term basis, that's likely to be -- this asset can generate 40 deliveries annually plus. So a very good path to increase volumes to come from this asset. Mantos was in line with previous years, but actually benefited in the second half of the year from the de-bottlenecking projects that Ecora's royalty was designed to Park Finance. So we're quite optimistic for volume growth from this asset in the year ahead as well. And that kind of coincides with higher copper prices. Ecora are very bullish on copper as a commodity and we expect to see some growth in this asset next year as well. Looking down the portfolio, I've mentioned formal to touch on that a little bit further. The $6.8 million that we received in -- that we booked in 2023, $5.4 million of this was effectively backdated royalty revenue. in relation to the amounts under dispute, which we released to the income statement in the fourth quarter of 2023 with a successful appeal. The successful outcome here is quite important to us because the current uranium price is at quite elevated levels, coinciding with the period where we're seeing uranium really coming back into favor, the supply the demand dynamic for it looks reasonably good. So very timely to have a successful outcome here and a higher run rate of revenue to come in the years ahead. The other portfolio that includes things like EVBC and flow stream. These were lower in the period because we facilitated a lower ratchet rate at EVBC to allow the operator to continue to mine through some cash flow difficulties. That's an asset that we've had very healthy financial returns on over the last 12 years. So we're very pleased to support the operator to continue production. And last but not least, Kestrel, the reduction here very well sign posted was due to mining being more outside of the group's private royalty area in 2023 than in and also a more normalization of the coking coal price, which whilst lower than 2022, should be noted that it's still considerably higher than the long-term average here. So a very good tailwind behind Kestrel as it will run down out of our portfolio in the next 2 to 3 years. Looking on to the next slide. This kind of brings our portfolio contribution through to show what that did for our net debt position as we went through 2023. We invested $27.5 million in the period into growth assets, $20 million of this through the [indiscernible] royalty and $7.5 million was by way of an advance against our option into the PRE project. Along with that, we continue to make our deferred consideration payments associated with the [ S32 ] portfolio. And these -- the final payment of that was made in January of 2024. The PIE investment was part financed through a report recycling and part disposal of our layer position. We generated around $14 million from that disposal. We sold 60% of our remaining stake. And that money was put into the PR advance. So again, a very good capital recycling opportunity we felt to further advance and derisk the PLE project. So the remaining $6.5 million from that stake disposal is now being recycled into Ecora shares through the buyback program that we recently announced. So again, a good capital arbitrage play, we feel, in terms of retiring an equity in our portfolio at a much higher multiple into our own, which we consider to be fundamentally undervalued. We still hold the option to put the remaining $62.5 million into the PLE project. That could come as early as the second half of this year. And we -- as I will discuss on the next slide, I feel like we have the balance sheet capacity to do so. So turning to the next slide. We've started to put this one in. We refinanced our facility at the beginning of the year. And this really is a very significant transaction for us. because not only is the new facility on better commercial terms, but it's also a little bit more flexible in terms of how we can use the facility to grow our business as well. And we're obviously working with 3 of the largest lenders to the royalty and streaming space globally in Scotiabank [ or BC ] and CIBC. So very pleased to have their continued support in terms of our business in terms of the strategy and in terms of the quality of the assets we feel underpin that credit. Some of the key terms of the refi include an upsized accordion feature. Previously, it was $50 million. It's now $75 million, and that's available for future growth. our leverage can increase to 3.5x in normal business conditions, and this can increase to just over 4% for certain acquisitions for a period of time post transaction. pricing, I've mentioned, slightly better than where we were previously. The ratchet begins at 225 basis points of sofa. Previously, that was 2.75%, slightly better pricing and we would expect to see the Fed start to trim interest rates in the second half of the year. So our average interest costs should reasonably -- a reasonable expectation should be to see that come down in the second half of the year. Looking at what we then have available to us to deploy growth. First of all, we've got $60 million undrawn in our facility at the moment. There is no refinancing or capital commitments in our business currently until January 2027 at the earliest with the refi of this facility. The $75 million accordion, I've mentioned is available for growth as is the potential to recycle the residual [indiscernible] treasury shares. So when taken all together, that provides about $150 million of liquidity to us, which puts us in a very strong position given the favorable investment background just now. So we're well capitalized to continue our growth journey in the context of favorable market conditions. And my final slide looks at our new dividend payouts calculation, just to give you all a feel for how this is going to work. We've looked at this in a way to try and avoid situations where the interim dividend could be significantly higher than the final dividend. So we've crafted a calculation, which should see smoother dividends per share level at both half and final year. And that -- and it's simplest form looks to take the average of the 2 preceding 6-month period outlined in the diagram. The dividend payout ratio range on free cash flow will be between 25% and 35%. And I think a payout ratio for a royalty company is much simpler to calculate than a payout ratio for an operating business because basically, it takes our portfolio contribution less our cost base, which remains pretty static and our finance costs, which depend on levels of leverage. So really, there's only 3 inputs into calculating the free cash flow range. So it should be less volatile than operating businesses who have to worry about margins. So we felt quite appropriate for our business model. Looking at what that may mean for 2024 based on the operator guidance that's recently been announced, which kind of flag post volume growth to come across the portfolio in 2024 and taking a view on commodity prices where they are now. that could produce a dividend per share of around about $0.04 per share in 2024, maybe a bit higher depending on pricing where things are right now. and the payment profile of that, we think, will result in payments pay twice a year, once in early January and the second payment in early July of each year. I'll pass it back to Marc.

Thank you, Kevin. So turning back to look at our portfolio. And Kevin and I, we both mentioned that 2024 is expected to deliver volume growth. And this slide gives you a feel for which assets and how much Kestrel sort of the range here is in line with what we communicated earlier this year as we get through and afterwards the first quarter, it looks like the [ Vecastro ] volumes are going to be or could be smooth more so across Q1 and Q2. We'll just have to wait and see until we get further information from the mine operator. That being said, thereafter, in H2, we don't anticipate at this time anyways, material contributions from Kestrel until once again in H1 of next year. And I guess, strategically, -- this is why we think it's really important to add more assets that are in production to this business just to create a bit more stability in the revenue line. We've always known that the Kestrel royalty was going to run out -- well, run out. We've always known that the Kestrel royalty would no longer generate cash flows with Ecora when mining operations materially moved out of the Ecora royalty area. And so the strategic imperative to get new sources of income and to build out the portfolio with subsequent areas of growth remains. But -- so that's nothing new. -- but that's certainly something that we're focused on as part of our new capital allocation framework. Voiseys is an asset that -- we really or frankly are disappointed with the volumes at Voisey and the pace of the underground ramp up. It's taken more time certainly than we thought, certainly more time the mining operator initially thought as well. Although we now seem to be much closer to a ramp-up than we were last year anyways, where this year, we anticipate 12 to 16 deliveries of cobalt throughout the year and then scaling up in the next couple of years to a steady state of around 40 deliveries per year. that's around 4x as many as we got last year. So that's a pretty material source of near-term income growth into '24, '25 and '26. The other thing to note about Voisey's Bay is that this product is alloy grade material for the most part, not all of it, but it's alloy grade material and what isn't a standard grade. The alloy grade material today is about 30% to 35% higher in price than what's on the LME. So I would just encourage folks, it's not a stable relationship to say that the alloy grade price is always higher at 35% than the LME at a fixed percentage point, but the alloy grade price is always much higher than the sort of standard grade products and the LME generally. So that's an important point to note and one is evaluating the potential revenue contributions from Voisey's Bay today and into the future. Mantos is an asset that we've been overall pretty happy with. From a cash flow perspective, that's delivered broadly in line with our expectations when we bought the asset and it potentially has a whole lot more to give the asset this year is expected to ramp up. And thereafter, the steady-state annual production rate is really a Phase I steady-state annual production rate there's further production upside with following a potential Phase II expansion of that mine. The Maracas asset last year, not too far away from the levels the year before, for this year, it kind of sounds like it will be roughly in the same place. Vanadium prices currently appear to be closer to the bottom cyclically then will definitely not at the top, vanadium price is somewhere in the range of $6 to $7 currently and historically, vanadium has ranged from $3 to, call it, above $30. So let's see on pricing, that 1 could tick up for us in the next couple of years. Kevin already discussed Four Mile, so I won't go into detail here. And last on the page is we've clearly described the volume potential from our near-term growth development royalties. The Piauí is, of course, one that we haven't materially funded. I think that's an important thing to keep in mind. The Piauí royalty would materially only be funded at the time of construction financing. So from a returns perspective, return on invested capital perspective, that one is far less sensitive to the start date. We would, of course, love to see that one come into production as soon as possible. That's more of a function, however, of wider economic conditions and the financing time line for this -- for the project. You can see here on the next page, our copper growth pipeline that goes into the next 2 decades. And this is something we're really at the core of our business, really happy to have. This is within the wider royalty sector, the best copper growth pipeline that exists in the wider royalty sector that includes sources of growth, both in terms of production near term and longer dated. Copper, as a commodity, we mentioned is -- has really compelling long-term demand fundamentals. And as an end of market is in any electrical application, so it's very diversified as an end market and is expected to see substantial demand growth in particular from things like grids, even AI, I mean, if AI should arise and contribute to society in a way that's forecast, there's a huge amount of copper required to make all those electronics run. We've included this slide here on our nickel exposure to give investors a feel for how our exposure looks today in the context of really challenging nickel markets. And this really highlights the importance of and why when we deploy capital, we target assets that are well situated in the cost curve. The West Musgrave asset which is currently 21% complete and construction sits or is expected to set amongst the lowest cost producers in the world. And even at today's spot nickel price, the orange line it were it to be in production could still generate positive cash flow and withstand economic cycles. Similarly, Voisey's Bay, while we don't have nickel exposure at Voisey's Bay, it's cobalt, we indirectly have vertical exposure as the cobalt units come with nickel, a full ramp-up expected to be in the second cost quartile resilient mine that can withstand volatility and similarly Piauí. So in the royalties, as many of you already know, it's not just the right commodity exposure, but it's crucial to have exposure to assets that are well situated in the cost curve. BHP has indicated currently, as I mentioned that the project at West Musgrave is 21% complete. They're considering the they stated publicly that they will announce further guidance on the first production date sometime in the first half of this year. One thing that we really like about the West Musgrave project is that, that asset is at today's prices around 40% copper, 60% nickel, which, of course, is just contribute towards that asset's resilience, and that is not dependent on the performance of a single battle. This is a new royalty for most. We've had it in our portfolio for a long time, but until recently, there wasn't much work very limited work had been completed on this property, where we have a royalty this royalty area is on some grounds owned to by a Canadian uranium company called NexGen, listed on the TSX $1 billion-plus market cap and they've built a business really around a project called Aero, which you can see on the map. Recently, they've explored within the Acura royalty area, which is highlighted in sort of a radish color on the slide. And they intersected what is a highly prospective uranium discovery. Next Gen themselves highlighted that this discovery is significantly in all metrics than the aerodeposit when that deposit was first discovered. So while it's a drill hole and it's very, very, very early days. So a lot more work to be done to prove that this is royalty is substantial value. It's just a really exciting development for us. And we also think it just goes to show how important it is that royalty businesses are diversified. On this slide, we've included the key things to watch out for over the course of this year. You can see we've -- the first thing at Boise is the ramp up, right, and that's expected to occur over the next 12 to 18 months at Musgrave's, further information from BHP in relation to the timing of first production to Santo Domingo is an asset that's going very, very well. We can't stress enough how much -- how delighted we are with the performance of this asset to date. It's an asset that's about 20 to 30 kilometers away from the Manto Verde mine, also owned by Capstone Copper recently built on time, materially on budget, and they plan on using the safe team to build Santo Domingo should they proceed within a final investment decision. So the first thing to watch out for in relation to Santo Domingo is an updated feasibility study expected in the first half of this year. And thereafter, Capstone Copper have targeted the final investment decision for the second half of next year. And in advance of that, Capstone has already they have started working on the detailed engineering for the project. So this slide here in the context of a revised capital allocation framework. We've included it to help inform what people should expect in terms of what transactions we might look for and what we might look to add or how we might look to add to our portfolio. For those who have been tracking Ecora, it actually isn't really anything that's new for producing and construction stage royalties we'd be looking to do investments larger than $25 million. In the past, the largest thing we've done has been well in excess of $100 million. So there's no immediate cap at '25, by a means. But that's the sort of tickets we'll be looking at there and above. The next thing we'll look to do for assets that are very close to production stage, but not at production stage yet. Investments in the range of $10 million to $25 million and for earlier stage opportunities that are at study stage, but certainly far more advanced than exploration investments of $10 million or less. In terms of the commodity selection, what we're looking to do at Ecora is build exposure to suite of metals and commodities, industrial minerals, others that are required for an energy transition thematic. And that is very, very broad. It's much broader, for example, than commodities that go into a battery. I mean this ranges from commodities required to build renewable power or low carbon power to the distribution of that includes things even, frankly, liquid LNG carriers. The third leg is commodities, which are somehow connected to the consumption of electricity, right? So when you think about what commodities we actually target. Well, we don't target precious metals, in large part because there are a lot of people targeting precious metals royalties and the investment returns are very relatively speaking, compressed by virtue of how competitive the precious metal space is. And we don't target fossil fuels other than those baskets, most commodities if not all fall into our -- if their mind, fall into our remit. So it's a very broad basket of commodities. So in summary, we have tried to communicate today is that market conditions remain very favorable to royalty partnerships. We've updated and communicated capital allocation framework which to date has been, for the most part, very well received by the majority of our institutional shareholders. We've also announced a $10 million buyback opportunistically, given the equity is trading at a substantial discount to net asset value. We anticipate year-on-year volume growth from our producing portfolio in the years ahead. And beyond that, growth from our near-term development portfolio. We intend on accelerating the deleveraging of our balance sheet, absent further acquisitions and should we proceed with acquisitions thereafter remain retain discipline to deleverage and more generally, when you look at the basket of our commodities of our portfolio, in particular, copper, which is the core of our net asset value, but amongst others, there's a very strong alignment with structural demand trends that are expected to run decades. So with that, we'll turn to some Q&A.

[Operator Instructions]. I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. And Geoff, as you can see there in the Q&A tab, we have received a number of questions that were both pre submitted ahead of today's event and the number that have made their way through during the presentation this afternoon as well. And Geoff, at this point, sir, if I may now hand over to you to chair the Q&A with the team, and then I'll pick up from you at the end.

Thank you for that. We've had a number of questions today on the buyback and the dividend and our commodity selection process, which I won't go into because they're hopefully being covered off by the presentation. So if you could ask that question, it's not bidding Nordics has hopefully been covered off. We'll crack on with that as we've got a lot of questions, and we probably need to be quite, I guess, brief to try and get through all of these when we're doing the answers. First, maybe, Hello, could you please give us some details on the status of Ecora? You talked us through the next-gen discovery this Ecora, are there other royalties in the Athabasca Basin.

So on Ecora first. I [indiscernible], just to remind everyone what we have here is the opportunity to fund the construction of that project. should certain operational conditions be achieved, we have not funded any capital into Ecora -- excuse me, at this stage. And that project, we don't anticipate those conditions to be achieved in 2024, although were they to be achieved, it would be great news because those operational thresholds.

It seems that the only investments being made are into green metals. We kind of touched on this, but why are we against investing in precious metals and industrial commodities. Okay, maybe you want to jump in, Marc seems to have frozen.

Geoff, please just bear with me while I reconnect Marc to the room.

Well, we saw Kevin on the line, so maybe I'll jump a couple of the financial questions. Here's one here, Kevin, are we kind of seeing the shares bought back or placed any treasury?

We're placing the shares in treasury, Geoff, similar to the ones that we did previously. Those shares will not qualify or participate in dividends. So they won't form part of our adjusted earnings or basic earnings per share calcs. So those remaining treasury and available for issue.

Someone else has asked would there be right in understanding, we will not be making any further dividend payments in calendar year 2024.

The final dividend of $0.0215 per share will be paid. I believe that's going to be paid in June 2024. The interim dividend for 2024 will be announced with our half year results, which is early September, and that will be paid early in January. So there will be the final 2023 dividend to be paid in 2024.

Thanks Kevin. We appear to have Marc back and hopefully -- oh, no. He has disappeared again. We'll give you another one, Kevin, in the meantime. Is the lithium decline in price is a good opportunity in the short term?

In the short term, it is, yes, I mean, lithium, cobalt and others have had very volatile pricing recently. And one of the advantages or opportunities for royalty companies is really to grow and scale businesses based on entry points into certain commodities, it beholds royalty companies to get the pricing entry point correct. And of course, what that really means when prices are low, is to look at projects which are very well placed on the cost curve. And that really is one of Ecora's USPs. We've got an amazing portfolio of royalties, which are very well positioned on cost curves, which can weather truly cyclical commodity price movements. And lithium is a gap in our portfolio. We'd love to get some. We're looking at opportunities as always.

Thanks, Kevin. Marc is back. So, Marc for you maybe. What's the plan for us to reverse the disaster strategy according to one shareholder, which is [indiscernible] shareholders lever 50% of their investment value in the last year?

Yes. I mean, that's a tough question, but it's fair. And I think fundamentally, from a strategic perspective, we think our strategy has been spot on. And I can take you to the slide. The challenge today is not so much that the assets are bad assets. It's not so much that the investments have been bad. The challenge is that the market is giving us no value for anything that's not immediately in production. So these market conditions are difficult. They're challenging. And frankly, Kevin and I as individuals have a lot of skill in the game. We've put a lot of our own private -- of our own capital into buying shares. I personally bought more shares last year than I took post-tax income. So we share the pain of where the share price is at the moment, but we don't think it's a strategic issue. And we think that further diversifying the portfolio for adding quality assets is a solution.

Okay. Maybe one on just why have we not supplemented income by investing in near-term accretive assets.

Yes. Here, it's really a question of what's available to us. Producing assets and few are far between and for the returns on some of the producing assets with just not that compelling. So what we look for is the best available opportunity that's available to us. I mean, in some instances, for certain commodities, things like copper, the best producing assets are owned by folks like BHP. And BHP don't really need an Ecora royalty. So to get access to the BHP royalty or other really high-quality royalties. Sometimes it means buying royalties on earlier-stage projects but a really, really high-quality with a view that a larger mining company will 1 day develop those projects. Viscatitas is a good example of being 1 of the largest undeveloped copper ore bodies in the world. Now we were able to buy a royalty last year, and that's why we went on a bit earlier.

Another question is saying, why do we limit the buyback to USD 10 million? Are they seeing more attractive opportunities in the market than Ecora shares at 50% discount to NAV?

It's hard to say, it's hard to imagine any opportunity being more compelling than frankly, the core share price at the moment when we look at the transactions in the royalty and streaming sector, the opportunity to buy our portfolio for 50% to 60% discount is incredibly attractive. That being said, buying these shares, while it does deliver earnings per share growth, DAP per share growth and actually DPS growth, dividend per share growth on our latest dividend formula. It doesn't achieve diversification. So our buyback program is one that's tactical but not contemplated to be repeated. In the ordinary course, we would certainly hope that the share price is not going to be trading at these levels. We're at such a big discount to NAV for the first -- which has not been the case historically, either, although cyclically can occur in the context of very difficult market conditions.

Question on -- a couple of questions on West Musgrave, which I think are probably being picked up hope in some of the asset progress in BHP's current stance as far as we can tell. But a couple of specific questions in terms of if the asset was to be canceled, I think what were the financial indications for us being? Would there be any impairments expected in the short term?

Sorry, Geoff. My line is a bit cracky. Could you mind just [indiscernible].

Would we expect any impairments on West Musgrave if the project is delayed at all?

No, not at this time. I mean if the project were to be canceled or permanently deferred, yes that could be the case. But the by virtue of -- the entry point by virtue of long-term commodity prices delaying the project by a few years. At this time, we don't anticipate that to cause a material change to the valuation. Something we would have to see, though, at the time, BHP hasn't indicated an intention to stop development of that project at this time. So we don't anticipate that being the case. We'll have to see what BHP says in the next few weeks.

Okay. Switching to Voisey's Bay. It's a question which summits quite a long question, but I think it's fairly saying that with the nickel price under pressure and obviously, the cobalt price is under pressure as well, would we consider looking to market our cobalt to take physical delivery of it potentially to direct people like German car manufacturers or other people who might be an interesting end user for the cobalt [indiscernible] premium price?

Yes, we received today actually, as I mentioned, a premium price to standard grade and even to the LME price, not necessarily because of the quality of the product to the LME, but the LME is not a great indication of where the actual cobalt trades. And our cobalt is very strategic. There's been a lot of interest in our cobalt by virtue of its providence from Canada; and second, it has a really low carbon footprint. So in the future, that's something we'll consider but not contemplated in the next year or 2.

Thanks, Marc. Would we invest in hydrogen? How would we invest in hydrogen?

Hydrogen is an interesting commodity, and it's not -- it's the one that we're not ignoring. I think the one thing about hydrogen that has kept us on the sidelines is that it's a really new industry, and it's been theory very scalable. And the risk of going into hydrogen today is that what might be a low-cost operation today is potentially a high-cost operation of tomorrow if new entrants come in with a substantially larger scale and thus lower unit costs. So it's something that we'll monitor. And it cannot be ignored just by virtue of how important it could be to a low-carbon energy feature. But at this time, it's not something that we're actively evaluating.

Another question here regarding the potential air pocket Kestrel rolls off, what scenario analysis has been done regarding potential minimum cash flow we may experience or timing of the trough?

Yes. So as it sits here today, the base case is that should be very minimal. Kestrel rolls off towards the end of '26. The base case, as I said, is that there's not a sizable air pocket for [indiscernible] to use those words. The solution really is to buy more royalties is to further diversify the portfolio. It's to buy more producing royalties and if you buy more royalties that are expected to come online in the short to medium term. And that import really has informed our capital allocation revision or our updated capital allocation framework.

Another cash flow question. I'm saying there's 1.6 million tonnes of coal mined in the private royalty area in 2023. How much coal is left in mine in that area until depletion in 2026. So maybe it's worth stating that the mine itself will carry on beyond 2026. It just moves outside of our private growth area at that point. So I take on how much you're lifting area for 2026.

Yes. I think we're restricted on what we can say publicly here. But to answer that question, we can reference production last year, and we indicated we anticipate higher production volumes this year. We indicated a step-up in 2025 from Kestrel and then in 2016, lower volumes, I think we're going to be in a position to provide more detail on what those volumes are likely to look like in '26 as we get closer to it. But for the next 2 years, hopefully, that gives you a good feel for what we can expect.

Okay. Why do we pump out news about copper prices when the main current producing cobalt asset has seen a spectacular falling price?

Yes. I think the -- it really comes down to what is our net asset value and copper is by far the most important commodity by long-term exposure in Ecora. The cobalt price is down. That's correct. Currently this year, it's averaged around $17 per pound on the [indiscernible] price, which I mentioned is very different to the LME. Our long-term investment in Cobalt contemplated a long-term price in the range of $22 to $23. And since we bought that stream, we've seen pricing range from where we are now to $40 per pound. So actually, while we're not thrilled with cobalt at $17. Cobalt is a commodity that will go through cycles. The issue really at Voisey's has been the slower ramp-up in volumes. But that -- back to the question, why are we excited about copper. We're excited about copper because it's -- it's already entered this year into a commodity supply deficit, and the outlook for copper is -- and supply growth is enormously constrained. And so while our copper exposure is not a huge focus of the business today necessarily is a revenue contributor. The future of this business is intrinsically linked to copper.

Last couple of questions, we have come to the time. Where did the next-gen royalty come from? Was it stated so when we owned a royalty over that area successful for the public? Are there any other royalties that people don't know of and where can we get access over all of the royalties that we hold. Some of our royalty competitors have long list published their areas, they hold royalties or rights over?

Yes. So the Athovascular royalty came as a suite of royalties, and that actually was acquired long before either Kevin or I joined the business in the sort of pre-2010, I want to say, it's early stage land at this stage, the majority of it is sort of unexplored. In terms of the other royalties we hold, we can certainly consider providing a full list in somewhere on our website, for example, if folks are interested to better understand that. In the past, it just hasn't been an area of focus simply because many of these royalties are so long-dated folks have not attributed much value to them. I mean if you look at where the market is today, we don't -- the market isn't attributing value even to assets that are a couple of years out let alone potentially a decade or more.

Maybe one final question. Why do we not take a more measured approach to investing in green projects and what will we do to ensure such gambles are not taken again?

Yes. So a green project, I mean, as I mentioned earlier, every green project other than precious metals on hydrocarbons and that's like basically every commodity. So we wouldn't characterize that investment strategy as a gamble by any means.

I'm conscious we're up on 3:00. So with that, is there any questions anybody particularly wants that haven't been covered off or answer, then please send them into the IR email address, and we'll try and get back to you with those. With that, I'll hand back over to the operator.

Perfect, Geoff, Marc, Kevin thank you very much indeed for addressing all of those questions that came in from investors. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation is ended just for you to review and then add any additional responses, of course, where it's appropriate to do so, and we'll publish the responses out on the platform. But Marc, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

First of all, thank you for joining us for our full year results presentation. A lot of material to get through. And so along with some technical issues, if you feel your questions haven't been addressed really echoing the comments that were made earlier, please send them through. I appreciate them and we'll endeavor to come back to you with a fulsome response.

Perfect. Marc, that's great. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session. You will now be automatically redirected for the opportunity to provide your feedback in order of the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of the Ecora Resources plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.