Ecora Royalties PLC (ECOR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Ecora Resources PLC Half Year Results Investor Presentation. [indiscernible] recorded meeting. [Operator Instructions]. Before we begin, we'd like to submit the following poll. I'd now like to hand it over to Marc Lafleche, CEO. Good afternoon, sir.

Good afternoon, all. Thanks very much for joining us here today to discuss our results. In the period, we saw a really strong portfolio contribution, $52 million translating to adjusted earnings per share of $0.106. This was driven primarily by a really strong level of Kestrel operations within our royalty area. During the period, we acquired a royalty over an advanced stage Phalaborwa rare earth project for $8.5 million. It's a very high-quality rare earth development project that we're delighted to get into our portfolio, given it has consistently screened amongst one of the best, if not the best, undeveloped rare earth project globally, ex China. We also saw in H1, very, very positive news, a big milestone in terms of the development of the Voisey’s Bay project. In H2, we anticipate a second key milestone will be met such that on that basis, and we'll talk a lot about that in the presentation, we have a very good line of sight on volume ramp-up there. In the period in light of weak nickel price environment, BHP announced an attention to temporarily put their entire Western Australian nickel division on care and maintenance or on hold with a decision to restart that operation to be considered by February 2027. And that's enormously disappointing for us, of course, because of our royalty on the West Musgrave project, which was in the process of being constructed. It's even more disappointing for us because this is an asset that's very low cost, well located on the cost curve with BHP even saying that the asset even at today's really weak nickel prices could have generated reasonable returns in that a very challenging environment. So for that reason, it's disappointing and one of the reasons we always look for assets that are very low in the cost curve, particularly to be able to create strong cash flows through commodity price cycles. But for those same reasons, we also remain quite confident in this asset's potential. Again, it's one of the lowest cost [ carbonate ] products globally. It's fully permitted, very long mine life, and the asset is very heavily weighted to copper actually with the potential to be even more weighted to copper from what it is currently at spot prices, maybe 55%, 60% nickel, 40% to 45% copper. On the copper side in the period, Santo Domingo released an updated feasibility study on the Santo Domingo project. That's something that we've been watching very carefully and waiting for over the past month. And we were very pleased with the results of that study. The study confirmed the project as having really robust economics but also as one of the lowest cost undeveloped fully permitted copper projects in the world. We ended the period with net debt of $86 million, and a leverage ratio of 1.4x, which is well below our financial covenants. So with that, I'll hand it over to Kevin to take you through the financial performance.

Thanks, Marc. Good afternoon, everyone. This slide is the slide we usually present showing our key performance indicators for the period. I think to summarize the first half of the year, very strong solid performance from the portfolio, driven mainly by Kestrel. I think 2024 as a whole is likely to be a year of 2 halves. The first half predominantly dominated by volumes from Kestrel. We've effectively received all the volumes from that asset for the full year and the first half. And in the second half of the year, we expect to see at least a doubling of deliveries come through from Voisey's Bay, which Marc will touch on later. Other than Kestrel, we expect to see good volume growth from most of our other assets in the second half of the year as well. The strong performance from Kestrel really resulted in a [indiscernible] at 30th of June. The operational leverage was very low at only 1.43x. And if taken against the balance sheet value of our assets, this imply a loan-to-value ratio of only 16%. So our balance sheet remains very, very healthy going into the second half of the year. And these metrics as well represents -- are derived based on what's now expected to be [ picked ] out at some further investment acquisitions. We've got a very strong pathway in the next 12 to 18 months to delever from our peak net debt number. We have no firm capital commitments within the group following the final payments to South32 as part of the acquisition of their portfolio of royalties in 2022. So plenty of financial flexibility on the balance sheet, not least following the refinancing of our borrowing facility in January this year, which provides much greater flexibility for use at a lower cost and the accordion option of $75 million means that there's a potential to bring that facility up to $225 million should we choose to do so. The dividend per share recommended at the half year was $0.017 under the new capital allocation framework. This is very much at the top end of the payout range on the new policy as well. Turning to the next slide, if we can. This breaks down our portfolio contribution. So we can see from the core portfolio, we generated $10.5 million in the first half of the year. This was down a little bit on the $12.7 million in the first half of the year. A large part of this is due to the fact that we disposed of our LIORC stake in the first half of the year, recycling that into our share buyback that we announced with the capital allocation framework. The buyback itself represented a good capital recycling opportunity by retiring a publicly traded equity at 1x at P/NAV into our own stock, which was at that point trading at 0.5 P/NAV. So good value opportunity we felt. But nonetheless, it reduced our income from that asset in the first half of the year. As I touched on earlier, we received 4 deliveries from Voisey's Bay in the first half of the year that was down on what we received in the first half last year. But very importantly for us, we now have a very good line of sight on the impact of the ramp-up of this asset going into the second half of the year and in fact, to date in the second half of the year. So 2 months into the second half, there's already been 4 deliveries either produced or shipped to us. So we've -- the guidance for at least a doubling in the second half of the year seems to be well on track. Volumes of Mantos were pretty much in line following the continued progress of the debottle necking plant, and we would expect to see in the second half of the year, the benefit of that come through with higher volumes as we go through the second half of the year. At Maracás, softening of the vanadium price really drove revenue down here. The vanadium price currently is about $5 a pound. But importantly, that's still above our long-term price input at the time we acquired the asset in 2014. Four Mile was a standout performer in the period, higher year earning prices contributed to increased revenue from the project. So all in all, we're very pleased with the performance in the first half from the core portfolio, notwithstanding the fact that we expect volumes to increase significantly in the second half. Looking at Kestrel. Here, we received about 2 million tonnes in the first half of the year. And again, that was at the top end of our guidance at the beginning of the year. So we were very pleased to see the volumes coming through from Kestrel. The average price remained very resilient also in the period, well over $200 a tonne, which is currently traded down to about $175 a tonne when mining is expected to be outside of our private royalty area for the next 6 months. So good timing on pricing coming through from Kestrel here. And those cash flows were very significant for the group in terms of managing net debt and leverage ratios to very low levels well within our financial covenants in the period. If we turn to the next slide. This slide here allows you to see how we calculate the dividend under the new capital allocation framework. What we do here is basically take an average of the 2 preceding 6-month period and then apply a payout ratio in the range of 25% to 35%. So for the half year, you can see the impact resulting in $0.017 per share dividend. The reason why we look at the 2 immediately proceeding half year periods is to try and manage some of the volatility associated with when Kestrel moves in and outside of our private royalty area. So whilst we expect minimal volumes in the second half of this year, the dividend for the full year will be based on an average of that plus the first half of the year as well. So we're trying to avoid a situation where there's a significant weighting in one 6-month period to the dividend over the second and try to provide as even a payout ratio for shareholders as possible. And Marc, I think back to you for the business update.

Okay. Great. Thanks, Kevin. We like to include this slide given it gives a great snapshot of where the company is. I think this is a slide that also has really evolved over the years. If you go back 2 years, 3 years, and actually back to 2014, what you would have seen back then is a slide which showed a portfolio that was materially Kestrel and that's kind of it. So it's definitely changed and in our view, it's definitely changed for the better, and it's something that we feel we can continue improving upon, certainly not a finished product. That being said, we are very comfortable that we have not had to sacrifice on jurisdiction with 96% of our portfolio being OECD or Brazil. We've taken the commodity exposure as of the last period to almost 3/4 -- around 3/4 to base metals of that 35% copper. And of that 35% copper exposure we built into this business, what is the sector-leading or amongst the sector-leading copper growth pipelines of any royalty company, both in the short, medium and long term into the next decade. And from a cost curve positioning, one of the key things we've always looked for when we made investments into royalties is it's assets that are expected to be low on the cost curve or are already producing all on the cost curve. I think it's one of the most defensive things we can do when we buy royalties, especially when we see cyclicality in prices. When we think about West Musgrave actually, our confidence in West Musgrave is really a function of the fact that it's such a low-cost asset that can generate robust cash flows even in times of weak prices. So if that asset were much higher on the cost curve when we think about the nickel market today, the prospect of that asset ever coming into production will be substantially lower. And then in terms of stage of development, most of our portfolio continues to be a way to producing assets, and that's something that's kind of unusual for a company of our size. And furthermore, the assets that are coming down the pipe, so to speak, on the development side are materially derisked in the sense of being closed, if not fully permitted owned by a really well-capitalized mining companies. We don't have a perfect land of sight into when so those assets will come into production, although we do have a lot of confidence that there really high-quality development projects that in time will be brought into production such that will benefit from the royalty income at the time. So now just taking a quick overview of our portfolio. We've already discussed the really strong performance in Kestrel and for the rest of the year, we anticipate that production within our Kestrel royalty area will be fairly minimal, if not negligible. So when we think about what H1 achieved in terms of Kestrel production, the 2 million tonnes are very much at the top end of our expectations for the year and at the top end of our guidance, which is fantastic to achieve that level of performance on Kestrel halfway through the year. And furthermore, the timing is somewhat fortuitous in the sense that the met coal price environment during H1 was relatively strong compared to what we've seen thus far into the second half of the year. So if ever we're going to see a period of met coal price weakness, it's always great to see that when the [indiscernible] units are not being mined in our royalty area. That being said, we -- so while we don't expect anything from Kestrel in the second half of the year, there's still a lot more to come from that asset. And that's something we'll come back to you later in the presentation. Turning to Voisey's, Kevin touched on this already. Voisey's is an asset that can do so much more for Ecora. It's an asset that unfortunately has been delayed, but we're now at a key point in this development, and we'll come back to that and take you through the [ PB ] update shortly. We've spoken a bit about the Santo Domingo project already. But just to give you a few more details. All this is available, of course, in the press release as released by Capstone Copper. But in terms of a quick flavor, this project is now estimated to have a mine life of around 17 years, a cost profile of just over $0.30 per pound which, as we mentioned earlier, confirmed Santo Domingo as one of the -- as being amongst the lowest-cost copper projects globally. And last but certainly not least, the Capstone team has proven ability to execute on this sort of project. Most recently, they developed the Mantoverde project or the brownfield expansion, which is very nearby, very similar size of CapEx, and that project was completed materially on time and on budget, which is quite the feat in this -- in what has been a very inflationary environment. So that's really positive for [ Ecora ] and our copper growth because with Santo Domingo at full production during the initial 6 to 7 years, that asset could generate -- I mean depending on your copper price assumption, of course, picking a copper price at level is not too far away from where we are now or in line with where we are now, that asset could generate $30 million to $35 million of royalty income per year for the first 6 to 7 years. So a lot to like here. It's an asset that, hopefully, will continue to be derisked in the coming months with further news from Capstone Copper as we approach the targeted final investment date that most recently by Capstone [indiscernible] Copper was targeted for next year. So taking a moment here to talk about Kestrel. I think the key point that we'd encourage folks to just on this slide that we really like to draw out is the type of confidence that we have, number one, in the Kestrel volumes returning to our royalty area next year. And you can see the mine plan overlaid with our royalty area as well as an annotation, which indicates an expectation of when the mining of those longwall panels will occur. As we mentioned earlier, for 2024, we saw roughly 2 million tonnes of production this year and 2025 looks even better. As of today, we anticipate that being either in line or potentially ahead with being ahead meeting potentially up to 10% more. And then in 2026, there's an expectation of volumes in our land of over 1 million tonnes. And then between 2027 and 2030, as you can see, there's some areas of royalty coverage. And on an annual basis, that works out to somewhere between 0.2 million to 0.6 million tonnes. So I think the key point here is that Kestrel is certainly approaching the end of its life, and this has been a phenomenal asset for this company. That being said, there's still more to give from this royalty and it's certainly not -- we certainly don't see it as one that is a sort of cliff edge [ from ] a year and then nothing. It's really much more of a taper. And then turning to Voisey's. So this is one we are actually really excited to take you through. First of all, on the left-hand side of the slide, you can see we expect a ramp-up profile. And as I mentioned earlier in the call, one of the key milestones to achieving that ramp-up profile was delivered earlier this year. The second is on track to be achieved in the second half of the year. Vale -- when we bought this royalty, Vale expected the mine to be much closer to full production already. So in other words, I think it's no secret, we've been all collectively previous appointed in that this asset has been delayed. The Vale team remains very high quality. They have a great set of folks on site, they're great operators. And unfortunately, mining delays can happen in these sorts of projects. Ultimately, the good news, though, is that we really do feel as though we're at the inflection point for this asset. Kevin touched on the fact that 2 months into H2, we've seen the equivalent deliveries that we saw during the entire H1. And then looking ahead compared to '23, we anticipate levels that are almost 400% or 4x what we saw last year at full production, and that's expected by the end of 2026. So if we extrapolate -- well, what does that mean for Ecora? If we extrapolate full production on average deliveries approximately 40 deliveries per year. And we think that -- and we -- in H1 of this year, 4 deliveries yielded around $2 million of very low cobalt prices on a cyclical level at full production by the end of 2026. This asset is one that should be generating something in the range of $20 million a year. And that's the potential for more, of course, on a cyclical basis because a few years ago, cobalt prices -- we were realizing cobalt prices are close to $40 per pound. But in any event, about $20 million a year by the end of 2026, we think goes a very long way towards underpinning this portfolio's revenue profile from an asset that is already in production. And then from here, as a matter of ramping up. Most recently, we -- our most recent acquisition was fairly small, but it's one that we're really happy to have gotten across the line for a few reasons. First and foremost, when we look at the world of opportunities in the rare earth, this project really screams out as being amongst the best, if not the best. This is not actually a mining project. I think that's the first thing to note. This is retreating existing stacks of material that were created when that material was processed to create phosphate fertilizer. So that means effectively, it's the operational risk associated with bringing this into production is very different. There's no mining per se. It's recovery of material that's already been crushed. The resource is very well understood. It's very low cost because it's out of mine, and you don't have mining costs or crushing costs. And of course, there's a lot less capital costs associated with this type of operation relative to building a mine. So there's really a lot to like and for other reasons, among -- including the ones I just mentioned, this asset consistently screams really, really well. The first production for this royalty is targeted in 2027. So in that context, we anticipate income from this asset. It won't -- not to match perfectly with the customer runoff, but we are very focused amongst the cash flow time line I mentioned earlier on income between '25 and 2030. And so this one is sufficiently close to production that we think will help offset cash flow and add more growth to the business. And furthermore, we've included some levels of defensive protections. We just spoke a few minutes ago about how Voisey's Bay was delayed. And therefore, what we've done with this deal is we have an increase to our royalty rate if production has not occurred by a certain date and then a subsequent increase in the royalty rate that hasn't occurred by a second later date. So a whole lot to like about this one, we think and notwithstanding that it comes at a very attractive cyclical entry point with rare earth prices closer near to 3-year lows. We first [ delayed ] this royalty and some of you who are on our call actually around the time of the full year will remember we disclosed to the market that we had a royalty over a new uranium discovery by NextGen. And at the time, we indicated that NextGen was planning to do further drilling to better define what may be there. This is, of course, very early stage, but news has been very positive. And in fact, when NextGen has said publicly, they've indicated that what they're calling the Patterson East Corridor, the size of that potential deposit compares really favorably to what they now have a feasibility study stage, the Arrow Deposit, which is basically adjacent. So of course, early days, but certainly a reason to really like the royalty model and a good indication as to why buying high-quality royalties over good quality or prospective deposits has provided -- the capital outlay is not enormous, is a good strategy. So a quick update on our capital allocation framework. We communicated an update earlier this year with 4 key priorities, the first being growth and the desire to really allocate capital with a focus on buying royalties that primarily contribute to our income profile between 2025 and 2030. We acquired Phalaborwa in the period to that. And second is deleveraging from where we sit today. We don't anticipate any fixed financing commitments such that absent further transactions, all the cash flow that's being generated from the business unless we see something we really like, we'll use that to pay down debt, otherwise. Our cash dividend was just under the high end of the range of 25% to 45%, $0.017 per share, and we anticipate that some of the really strong benefit of Kestrel in the second quarter will actually translate to our free cash flow in the second half of the year, which will then lead to that benefit coming through on the dividend and also a buyback in the period, as Kevin mentioned, we completed a buyback and in that context, as part of our capital allocation framework, we recently discussed potentially doing more of a buyback exercise given the rationale was that -- for the first was that our shares were trading at a substantial discount to estimated net asset value, which actually remains to be the case. Our Board concluded that having just deployed the $10 million for the immediate future anyways, our capital allocation focus would be to buying royalties, specifically royalties that have the potential, ideally producing royalties are those very close to production that will contribute to our income profile of '25 -- in the period of '25 to '30. And absent that, deleveraging. And that really takes us to our strategy update. It's a nice segue because what are we looking to do in terms of our next deals, really, the plan is to infill around some of our core royalties that we have in our business. If you think back, the strategic priority for this company was always to buy a portfolio of assets that through cycle replace Kestrel. And now we've done that. If you assume the full ramp-up at Voisey's Bay, which is now -- which we now have a lot of confidence in, what we have is a producing base that replaces Kestrel, and we have a development portfolio, which is some big, really high-quality assets but ultimately, decisions to bring those assets into production and the exact timing is not within our control. So what we're looking to do is infill around the growth portfolio, reduce the volatility of that ramp-up curve within our development portfolio and just be more diversified. We will continue to look at smaller investments in really high-quality, early-stage projects. We think it's just a mistake to ignore that aspect. And actually, in many ways, Ecora is partially where it is today because in 2014 -- since 2014, we really haven't seen any of the prior investments materially contributing to our cash flow profile. So in other words, the future was somewhat neglected and that none of the assets that were bought had come into production. So while our focus, of course, is around -- our key focus is, and I personally think it absolutely should be and has to be, around assets that are close to production or in production. I think we ignore some really high-quality opportunities [ are at parallel ] in the long term. And from a commodity perspective, base metals is really the core of our focus. We will, of course -- we've outlined on this page, the sort of investable universe that we look at. It's really very, very broad and for the most part, almost includes everything other than hydrocarbons and diamonds and precious metals. But within that, we feel that now continues to be a really good time to grow our base metals exposure, especially where base metals prices are. And most recently, we've seen a pullback in the expectations on the copper price towards the end of this year, which for us creates a great entry point for further capital deployment. As I mentioned earlier, though, in the absence of seeing really high-quality opportunities that meet our investment criteria, if the alternative is to reduce debt and keep our powder dry until such time that we do see something that fits really well, we think that's absolutely the right thing to do at this stage. So I think we've touched on most of the key points here. We've spoken about Voisey's Bay. We've spoken about Santo Domingo. We've spoken about West Musgrave. Kevin touched on Mantos Blancos. A quick one at Piauí. I think the company is doing really impressive work to continue to progress the financing discussions. And they have brought solicited interest from some real blue-chip high-quality names. It's very impressive. If you're inclined to see a bit more detail on the activities and the financing plan, Brazilian Nickel recently put out an update on their website. They have a strong team. The current -- they have a strong team pushing towards a revised final investment date, which is now targeted for 2025, previously, that was 2024. But we'd encourage you to have a look at the Brazilian Nickel website just for that update, if you'd like more detail. And then at Nifty, this is one that really doesn't get much attention in our business because it's still relatively small compared to some of the bigger development assets in our portfolio. But there have been some great steps forward towards bringing that one into production and a step towards -- closer towards generating royalty income for Ecora. They've most recently entered into an AUD 40 million financing agreement with Glencore. They're looking to raise another AUD 20 million to restart cathode production. But the real prize here is to continue the work to study and then ultimately bring the copper concentrator back online that could deliver currently targeted 36,000 tonnes of copper containing copper concentrate per year. That compares to [ 40 to 60 ] at Mantos Blancos. So a really sizable copper production in that context. And I think it's also worth highlighting, we've been really pleased by how things have developed because when we bought the royalty at the time, the company was targeting annual production in copper concentrate around 25,000 tonnes per year. That's increased by just under 50% in the latest studies over a 17-year mine life. So that effectively accelerates cash flow and income to us as a core of faster in our royalty. So certainly one to watch on as well. We touched on Phalaborwa, so I suggest just carrying on. And that really takes us to the conclusion. I think there are some really key takeaways that you hope you'll have picked up on our call today. I think first and foremost, we're in a position where we anticipate to see production volume growth in this business from our portfolio, both from 2024 compared to '23 and then carried forward into 2025, which bodes very well for the short term, subject to commodity prices, of course. We didn't haven't really touched on it in the context of this discussion. But we have a very strong copper growth portfolio, really strong counter parties, blue chip names with underlying projects that are really well located on the cost curve would suggest a much higher likelihood that these will come into production. We have really strong counterparties across our portfolio, folks who are well capitalized and able to weather any choppiness that we may see in the upcoming years from a more macro level in commodity markets. Both Kevin and I have mentioned it but ultimately, we have a very strong balance sheet today, 1.4 leverage ratio, well below our financial covenants from the shares as a perspective of an investor, it continues to be a highly attractive entry point for Ecora. Our shares are trading at a discount to NAV. And actually very encouragingly on the business development side, what we've seen thus far this year is a big uptick in opportunities. So we as a royalty investor, there are a number of factors beyond our control because often times, it's not just us. Oftentimes, our royalty is part of an equity financing or a debt financing or an M&A transaction or a decision to proceed with an expansion of a project. That being said, the fact that we're just seeing these opportunities and actually a good amount of them in copper is really encouraging, and we have been much busier on the producing side in terms of the opportunities at year-to-date or assets that are closer to production in 2024. We just see more of it compared to 2023, which is great. So a number of reasons to be really positive on Ecora and a number of reasons why Kevin and I have personally continued to put our hands in our pocket, so to speak, and buy Ecora stock at what are really attractive entry points. From here, happy to stop and shift to Q&A.

Fantastic. Marc, Kevin, thank you very much indeed for the presentation. [Operator Instructions] I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. I'd now like to hand over to Geoff Callow, Head of Investor Relations. Geoff, as you can see, we've had a number of questions submitted, both during today's presentation and pre submitted. If I may just hand over to you to read out the questions where appropriate to do so and direct them to the team, and I'll pick up from you at the end.

Thank you Paul. First question, how much advantage could the combination of Nickel West and West Musgrave bring? Meaning what do you think West Musgrave would bring to Nickel West to restart? And consequently, how likely is BHP considering the sale of West Musgrave in our opinion?

Yes, that's an excellent question. Look, part of the rationale for OZ Minerals -- the purchase of OZ Minerals, as stated by BHP, was to secure a feed of really high-quality nickel concentrate for Nickel West. And furthermore, the specification of the material, more specifically on the ratio of the [indiscernible] ratio is very favorable for the operation of their smelter at Nickel West. So that was certainly part of the reason as we understand it that BHP -- those synergies and operational benefits were certainly part of the reason we understood at the time that BHP was able to put forward a price for the purchase of OZ Minerals, which was potentially so much higher than any of the other miners who just didn't have the potential to benefit from those synergies. I think we've also seen BHP allocate substantial capital to their nickel division in Australia in excess of $300 million a year, I believe. So this business is still seeing a substantial financial commitment from BHP. And as of yet, anyways, in our opinion, we see no indication that BHP has an intention to fully walk away from the nickel division. That could, of course, change. Ultimately, with an asset like West Musgrave, we'd expect the marketability of that asset to be very high. As we mentioned earlier, it's fully permitted. It's way towards nickel, but it has a lot of copper and has the potential to actually contribute more copper than nickel. Furthermore, it also has a lot of prospectivity on the copper side. All that has been disclosed by OZ Minerals. So it's difficult to speculate as to what BHP may or may not do in the future. But ultimately, just the quality of the West Musgrave project as a starting point bodes well, we think, for Ecora and our shareholders.

Thanks, Marc. Could you update on the status of the relationship with South32. Are they fully involved in Ecora's day-to-day operations? Does Ecora have a right of first refusal for any few assets we signed to offer the sale? And do they have an option to acquire more stock in Ecora?

We continue to have a very active dialogue with South32 as you would expect, they are our largest shareholder. South32, in terms of governance on that aspect of the question, have the right to appoint a director or to nominate a director rather, they have not done so to date. South32 at the time of Ecora buying the royalty portfolio indicated they had royalties assets in excess of 30 royalty assets, I want to say. And it was a sizable number, if not, if it wasn't 30, slightly less. And we'd expect -- we don't expect that South32 by any means would give the value to Ecora shareholders. That being said, given the relationship, the strategic relationship, we think and to date, we have a very active dialogue as to what may or may not be possible should they look to dispose any of those royalties in the future.

A number of questions on similar themes. So I'll kind of group them into one here, which is around sort of dividends versus buybacks. People are saying at the current share price, would we consider eliminating dividends? And would it be more accretive just to go ahead and maybe a better use of capital just to use buybacks instead of paying dividends?

That's a difficult question, frankly, because it's something we've thought a lot about as a Board. And it's one where certain constituencies of our shareholder register have very polarized views. On the one hand, certain share -- Ecora shareholders have communicated us very strongly that they have a preference for dividends and others have for share buybacks. And so in that context, I think what we're looking to do is to have a capital allocation framework that continues to distribute a really healthy level of dividends to shareholders at today's price actually just some 5% yield. Well, that is expected to grow in the coming years on broker forecast number anyways. And in addition to that, potentially considering share buybacks if and when shares trade at a discount to NAV. I think I touched on earlier as to our decision and thinking process as to why in the short term we're not -- we have not announced a buyback, but just to replay the message in short at this time when we consider the relative merits of our buyback, we feel in the short term anyways, that from a capital allocation perspective, acquired royalties of our assets that are in production or very close to yields a better outcome across in terms of share price potential movement upwards from these levels. And number two, we feel like maintaining a strong balance sheet is crucial for the royalty sector. And thus, we feel it's important to keep poweder dry.

Yes. And I think, Marc, just to add to that, the [ 2 times ] we've undertaken buyback has very much been a capital recycling exercise where we captured value arbitrage by trading at one stock and purchasing our own stock at a much more attractive multiple. I think, to undertake buybacks in the current market would just start to increase leverage in the short term without achieving the diversification of revenue line, which ultimately is where we see or hope to see the equity rating kind of compressed in the next few years as we increase our number of assets and the diversification of our commodity offering through our earnings line.

And following on, are there any estimates as to what the annual dividend could be for 2025 through 2030?

Yes, I'll take that one, maybe. I think without the obvious answer being it depends on commodity prices. But I think if I look to where our brokers currently are, I think it's anywhere between $0.035 to $0.04 per share in the next couple of years. And I think to go further out on to that means you have to imply or drive longer-term commodity prices, which could be very volatile. So I think the next couple of years is likely to be $0.035 to $0.04.

And looking, Marc, at the point you made about allocating capital to growth as opposed to return buybacks. A couple of questions along the lines of we've been sort of talking about potentially acquiring royalties for a couple of years now and the limited successful -- limited actual delivery, how can investors have a degree of confidence that we'll be able to sort of deliver more acquisitions when we talk quite bullishly about that over the next couple of years?

Yes. I guess the question really is one. The question is, if I understand it correctly, why are you more confident that you can acquire assets that are closer in production or in construction. And I think part of that is just a function of where we are cyclically. If we go back to 2023, even 2022, commodity prices were very strong. And therefore, when we look for royalties over really high-quality operations, in the context of strong commodity price markets, the folks who are running these assets as they're Tier 1 and are really low on the cost curve are just generating really strong cash flows. And in those circumstances, don't really need external financing or less likely to require external financing. So very much a function of how markets have moved. We've seen equity valuations not just alone Ecora, of course, but in the wider sector come under pressure across the entire mining sector. And that seems also to be just a function, frankly, of general macro concerns around global economy, the pace at which interest rates will come down where commodities have come under pressure and so have the equities. So that means, for us, that creates a good environment where the type of opportunities we like and the quality that we really target come on to the opportunity list, so to speak. So what we're talking about here is not really a change in buying royalties because we've acquired high-quality royalties in the last couple of years. But a lot of the royalties we bought the past couple of years are not yet in production, right? So we're not yet seeing the benefits of those really high-quality, long-lived royalties come through with P&L. So in that sense, I think it's just -- it's not so much a question of what we'll do differently, but it's also a question of the opportunity set that's a little bit different now compared to a few years ago.

Moving on, can we get an update or on any color when this seems to come to fruition?

Yes. So when we structured that transaction, if you recall, for some of you who aren't familiar with Ecora, it's a $20 million investment subject to certain conditions being met. And that's actually a pretty defensive way of doing a deal. In other words, they went ahead with Phase 1 and at a certain time on Phase 1 achieved operational milestones and metrics. Part of our financing was to keep expanding the project. Unfortunately, it seems to have just taken the company a bit longer than they initially expected to get the operations fully ramped up. So from where we sit now, we haven't deployed any capital into Ecora. We'd love for the operation to ramp up and to really hit its stride because we think it has a lot of potential. But if it doesn't, we haven't deployed any capital to that opportunity and it's capital that's available to just deploy elsewhere.

There is a question here on cobalt. Are we immediately selling the cobalt or other deliveries during times of cyclically low prices? Maybe it's a good idea to keep some of those that have written storage until prices improve.

Yes, that's absolutely something we have considered in the past. I think what we've trained there is a little bit of -- it's a trade-off of cash conversion and receiving that cash, that cash can then contribute to repaying debt, and there's a carry cost. In other words, it's at least equivalent to our interest rates. Now with cobalt prices being where they are, however, I mean, they're so low compared to through cycle averages. There is absolutely the potential for substantial capital gains. I think when you think about H1, specifically delivery of 4 units, the calculus and the potential benefit is much smaller. It's something that we will consider increasingly in time as a number of deliveries steps up. That being said, we do feel that the ability to pay down debt is valuable. And from the perspective of the market, especially in the context of relative uncertainty, having a stronger balance sheet can [indiscernible] benefits that may not be directly measurable against capital appreciation on cobalt. And furthermore, there's also a question of timing. Ultimately, when will cobalt prices turn? It's a harder one to predict. I think from what we've seen in terms of trading in the last 6 to 12 months, it appears that we're at or near bottom of the cyclical pulse levels. So -- but we're loath to call the bottom. We are, of course, cognizant however that commodities, by definition, are cyclical, and cobalt is one that's ranged from where we are today up to $40 per pound with an entry point, just over $20 per pound. I think on a long-term assumption, this asset still, despite like the current market weakness, having realized a $16 per pound in the first half of this year, still compares very favorably to our entry point of the low 20s, and that still positions us for a substantial amount of outperforming on the life of the stream. So in time, it's something that we -- the first step really is to get the ramp up and get the units and then beyond that, we think there's a lot more potential on the price side. This asset can and will do so much more for Ecora in time.

Back to West Musgrave, [indiscernible] touched on this. Do we know where it sits on the cost curve?

Yes. According to -- I mean, according to S&P, it's in the first cost curve -- first quartile, the lowest cost quartile. And that in part is a function of it being so heavily weighted to copper and having so many copper byproducts.

Do we have any more equity stakes or investments to sell that could be used to fund buybacks?

I'll take that. No, nothing really material. We -- most of the legacy portfolio is being dealt with and has been monetized and recycled. So nothing that would provide any amounts of capital for any form of significant buyback.

Okay. Have we looked at M&A as an opportunity to grow the business and improve the company's prospects?

When we think about M&A, there are kind of 3 key things. The first is relative valuation. Today's share price, we think carefully about how we trade versus other trades, other companies trade. And then that, of course, compares to the relative merits of just buying royalties because ultimately, M&A is just buying more royalties, but in one go. I think the second is around commodity. I think from where we sit today, there are a lot of folks who are very heavily wait weighted to precious. So that's potentially less obvious given our commodity basket and given some of the competition we see in the precious space. That being said, cash flows are cash flows. So whether they're precious, met coal or copper, a lot you can do with those cash flows. And then the third consideration, I think, when one considers M&A is just balance sheet, like how long is one's balance sheet coming out of that M&A to get bigger, but not really have the low income profile of volatility that seems really to be weighing on investors' minds at this moment, in particular, around Kestrel. That's something to keep in mind. So if M&A could yield an entity that has, it's very well capitalized [ that is ] in a position to really keep growing and to keep diversifying the top line, that's also something to be considered. We regularly look at the landscape. In the past, it's always we've always seen better growth opportunities just by buying royalties, but opting [indiscernible] don't actually come with M&A premium either. And ultimately, these are financial assets. So if you buy a royalty, is it worth the financial premium that comes with buying a company. The royalty usually is not worth 30% more, 20% more, 40% more or whatever the financial premium is. I think that partially explains why in the royalty sector, even amongst the large North American names in the precious space, we just see a lot less M&A.

And I think the final question [indiscernible] all the others. How are you going to improve share price and shareholder return with high debt, no accretive deal completed and depressed income for the next 3 years?

That's an interesting one. There is a few things going on here. I think the first point to note is if you look at the free cash flow generation of Ecora going back the past 3 years, it's been very strong. This company has generated a lot of free cash flow from its royalty portfolio. If you go back to '22, Kestrel had a spectacular year when met coal prices reached absolute record levels. So I think it's less, I think, just around the free cash flow generation of the business. But we think it also a key factor of this is that Kestrel, which has been such an important asset to this company and has been an amazing royalty for this business is now 5 to 6 years away from depletion. And one of the challenges about that royalty just by its nature is that it's very difficult for the market to get a line of sight on just how many units are expected before that royalty is depleted. And I'll give you an example. Some folks that we speak with are of the understanding that Kestrel is just going to be a cliff and it's just going to disappear after next year, for example. And that's really not the case. I think we spoke about the expectation of volumes from Kestrel this year, next year and thereafter. And you don't really expect a Kestrel cliff, you expect to taper. So I think that's really just weighed on the share price, having a core asset that's approaching the end of its life but also uncertainty in terms of the ramp-up of the rest of the portfolio. And that's where Voisey's Bay has been disappointing. When we bought that asset, Vale was guiding towards being operating at levels that around this time, we're much closer to full nameplate capacity. If we had the $20 million in Vale this year from the Voisey's Bay stream, we think that would go a really long way to offset concerns around the income profile. That is what it is, it's unfortunate. I think the good news here, frankly, as I mentioned, is that we're finally at a great inflection point. And that we're only a couple of years away from $20 million at full production, and that's if you assume the very weak levels that we saw in H1. So I think the ramp-up that we're seeing -- that Kevin already mentioned that we'll see in Q3 this year, Q4, 2025 at Voisey's, we think that will just go away to make the market much more comfortable with this company's revenue profile, excluding Kestrel. And then the last factor amongst others, of course, is like almost every U.K. small cap, which has come under a huge amount of pressure as a result of redemption from the U.K. small cap space, it's a period of almost 40 consecutive period of equity outflows. So it does seem like we've been fairly consistently hit just by forced selling to a degree over the last 12 to 24 months, which has been challenging to offset. A lot of that buying has been from non-U.K. sources. We've seen our shareholder register evolve from being almost primarily U.K. only to now for the first time ever, actually, less than 60%, and that's been a function of all the really hard yards and kind of the payment we've been doing in other markets, amongst non-U.K. investors. But unfortunately, it just hasn't quite been enough to absorb some of the fored selling that we've seen as well.

Fantastic, Marc.

There's no more question.

Thank you Geoff. Marc, Kevin and Geoff, thank you indeed for updating investors today. Could I please ask the investors not to close the sessions, you'll now be automatically directed to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and I know it's been greatly valued by the company. On behalf of the management team of the Ecora Resources PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.