Foraco International SA (FAR) Earnings Call Transcript & Summary

Hello, and welcome to the Foraco International Investor Presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Glen Akselrod with Bristol IR. Please go ahead, Glen.

All right. Thank you, Kevin, and thank you, everybody, for joining our webcast today with Foraco. The purpose of today's presentation is to give our audience a better understanding of the business through a PowerPoint presentation and then Q&A with management. The presentation is going to be led by Daniel Simoncini, CEO, who is also joined on the call by Jean-Pierre Charmensat, Vice Chief Executive Officer and Chief Financial Officer. This -- see the presentation through the webcast that would have e-mailed it earlier in PDF. If you don't have a copy and want one, simply e-mail me. We will break for Q&A at the end of the formal presentation. When we do break, we encourage questions. And as a reminder, we're only taking questions through the web portal. If you're listening over the telephone, please access the web link sent earlier to ask the question. You can submit a question using the Q&A text box within the portal at any time. I'll ask the questions on the air for everyone to hear and Daniel or Jean-Pierre will then answer. I'll not reference any names, but simply read the questions asked. As we have a very large audience today, if I can't get to your question online, and it has not yet been addressed during the call and can't be, I'll come back to you through e-mail. If for some reason you're experiencing any issues once we do start and if you want a PDF copy of the presentation, please remember, you can email me at [email protected], I'll be happy to assist. I'm not going to read the forward-looking statements, but I do state that they apply and I reference them on Page 2 of this PowerPoint. With that said, once again, thank you for joining us. Remember, this is fairly informal, we do encourage Q&A to help you better understand the business and its growth path. And now I'll turn the call over to Daniel to start his part of the discussion and presentation.

Thank you, Glen. Hi, everybody. We will go through this PowerPoint, and I hope you're not going to fall asleep before the end of it. Foraco is #3 mineral and water drilling services, meaning we are not involved in the oil and gas or thermal coal, okay? That's good to know. Our capital market profile, we are listed on the TSX. Our ticker is FAR. There are 90 million share outstanding. And Jean-Pierre, myself, we are controlling 42% of the company. And after the announced transaction, we will have 38%. 56% of the stock of the company is on float. At a glance, so as I said, we are the -- in the mineral and tooling business, we are exposed to water as well. We have 300 rigs. And our 2020 revenue was $207 million. Foraco is usually outperforming the market, thanks to our 2,100 employees. And we operate in the main mining regions in the world, starting with Canada, the U.S., Australia, Chile, Brazil, West Africa and Russia to tell the main. We had a very solid growth since 2017, thanks to the very recent EV battery metals cycle. We have a very strong customer base, focus exclusively quasi exclusively on Tier 1 mining companies. We work for all kind of commodities, we'll go later on that. And we are the clear leader in groundwater drilling and monitoring. This is quite important for the future. The business we're in is based on the mine life cycle. And the density of drilling demand, the intensity of drilling demand is subject to the different phase of the mine life. You will see on the graph, on the left part, that's what we call the greenfield and the brownfield. This is the project phase of the mine before the mine is being constructed. And there is a lot of drilling to be made to make sure that the asset is worthwhile and the investment is good to go. Typically, there are 4 destination of drilling. The first one is the reserve assessment, what we put in dark red. Basically, the drilling means to assess what kind of reserves the geologists and the manager can count on to give the volume of the deposits. Then once they have a deposit, it's important to know whether or not they can access to. And this is where the geotechnical work is going to start. Basically, the main question is that the rock can withstand the digging of an open pit or an underground mine or is it too weak? And this can be a very big problem for the development and for the construction. The third drilling destination is to assess the metallurgical properties of the ore. There are many, many bad stories in the mining industries when people had a very good deposit, they had a very good rock on top of it. But then when they started to process it, they found out that there are a lot of toxic components nearby embedded in the deposit, and that killed the investment. So people now, they request before the mine construction financing phase that all the process can be proven through pilot studies, and this is where we come to play as this metallurgical assembling is usually related to a massive amount of ore, well upstream the mine construction, to give you an idea, I think we provided to a customer a 3,000 ton of diamond ore before the mine construction to make sure that the grade of the diamond and the carats per ton was good enough. So metallurgical sampling is a big specialty of Foraco. And the last but not the least, drilling purpose is for water. Each and every mine of the world has a water issue. Would it be too much water in the ground or not enough? And you know that miners are using water as an industrial diluting facility, and it's becoming more and more controversial, more and more sensitive vis-a-vis the local community and the regulation. And therefore, each and every mine in the world now is very carefully assessing the groundwater quantity and quality. And this is where we have developed our business recently. After the mine is constructed, there is a recurring appetite for drilling services. As you can see, this is on the right side of the graph. And 1 mine is under production. The game is to expand the reserves by drilling around and find satellite deposit, et cetera, to replenish the loss of reserves indeed and keep the mine life as long as possible. Today, we at Foraco, we are exposed mostly in the downstream part of this graph, meaning we are 80% -- close to 80% exposed to the life of mine extension, which is closer to production, and we have left, a few years ago, the upstream side of the services because that can be, let's say, very, very quickly reduced in terms of demand when the cycle is turning down. So our exposure to the downstream is 80% compared to 20% in the upstream. That's basically what we do for our customers. ESG policy, this is something relatively new for us in terms of environment standards. We are service companies. So we are not poised to pollute or to downgrade our environment, but we have decided to follow the SASB Sustainability Accounting Standards. And we are going to start to publish our quantitative environment data early 2022. As far the SMG, we are already pretty much in place. We have strong metrics and excellent cores, would it be an engine use rights, local community relations, labor relations, health and safety or business ethics and transparencies, that's something that we publish regularly on that. What is our market made of? The market is -- the main driver of our market is indeed the metal prices. The graph I'm showing here on Slide 11 is showing you the direct correlation between the commodity prices, which is the yellow curve versus the number of billion dollars that the mining industry is putting in the ground for drilling. This is drilling for exploration. So it's upstream side of it. Nobody is reporting the actual drilling for the downstream because it's embedded and melted into the production. But this is a good proxy for the activity. And you can see that there is a direct correlation between the prices of the commodities and the amount of money that the people spend. With some exception, which is the -- which are the last 2 years, where you can see a growing gap, commodity prices went up and exploration budget went down. We do believe that this is going to be reversed and normalized as soon as 2021. What are the main, let's say, commodities who are driving the exploration? Gold, as always, has the lion share of that. So it's above 50%. So in 2020, we're at 52% globally in the world. And copper was about the #2 with 21%. And then all the other commodities were much, much lower, like zinc was 5%, nickel was 4%, et cetera, et cetera. So that's the way our business demand is supported by. Recently, we -- as you all know, we have seen some tension on different commodities and some metals. Number one, the EV metals are under attention, would it be copper, nickel, cobalt or rare earth. Number two, iron ore is having a very good run despite all the short investment on that. China is still swallowing a ton of iron ore. And the problem that Vale had in Brazil has not helped the supply side, and that has resulted in a very good run for iron ore so far. And the last one is the gold. Gold is very active in terms of sector because mainly the reserves have shrank for -- by 35% since 2012 for the main players. And they have a lot of drilling to catch up to replenish the reserves. So we are experiencing the beginning of an upcycle for the moment, which is quite good for the business and the sector. How are we organized in terms of customer base? As I said, we have, with Jean-Pierre decided, many years ago to go mostly for the Tier 1 customers, meaning the majors. And you can see on this slide that we work for quasi all the top tier in the world. And juniors represent only 10% of our business. In terms of human resources, which is our main asset because we are a people business rather than an asset business or process business. We are working very, very hard to keep our people safe, like we show in this slide. We have a very complex and comprehensive HR policy in order to keep our people, to train them, to give them some -- good future and to make sure that Foraco is a good place to work. And that has allowed us to, let's say, to go from low 40% to high 50% utilization rate in our assets without losing too much people because the sector is now experiencing some kind of tension in terms of availability of human resources and qualified people, especially the field crews. In terms of assets, our -- as I said, we have 300 rigs, 2/3 of them are diamond drilling rigs and the rest are RC rigs or combination of underground rigs. Half of the fleet is less than 10 years old and half of the fleet is above 10 years old. In our business, a rig can cost from $300,000. I'm talking in U.S. to $2.5 million, and the technical life of such an asset is about 10 years. What we do? We usually overhaul them every 10 years, and then we gain another 10 to 15 years for 1/3 of the price of the brand new units. We spend approximately 8% of our revenue in CapEx on a yearly basis. This is just to give you an idea of the capital intensity of our business. What is Foraco known for? Number one, we have a -- we think we have a very good reputation in -- amongst the Tier 1. Number two, we have -- we are a force of proposition, and we have innovated constantly even during the bad years between 2013 and 2017, I would say, when the business were really down. We are the first company in the world having rolled out a remote control rig like a kind of big drone where the crew is not on the rig, and it's just sitting safely outside in a special cabin. And this is where the business is going to grow in the coming years. Nobody will be on the rigs to make sure that we don't hurt any and they have very good, and much better working conditions. Another specialty of the company is that we are the clear leader, especially in North America of the deep directional drilling. What is the deep directional drilling? It's basically we navigate the hole, and we can do a 3-dimensional trajectory in order to hit a deposit in a particular angle or at a particular place where the geologists want to know better what's going on. So you can see on the graph that we do very sophisticated deep drilling plans. And as we speak, we have approximately 10 rigs doing deep drilling -- deep directional drilling in Canada. And the last strong differentiation factor that we have compared to competition is that we pride ourselves to be the leader in water well drilling. What does that mean? Typically, we drill large diameter holes on mining sites either for trumping out the water to make sure that the owner can dewater his deposit and access to it and produce the ore or we do the other way, we do injection wells, where we pump in the water when there is a strong need of water for the process, for instance. We do also water drilling for people. And this is a kind of humanitarian kind of business we do in West Africa. This is a historical business we do. And we have extended this business into now the groundwater protection plan. And to give you an idea, we have worked for, let's say, 3 years now for tech resources in the Rockies in -- between Alberta and BC to help them to solve the selenium issue they had in the high altitude water table due to the concentration of selenium in these dams, I would say, or in the deposit in the mountains. They were kind of impacting the salmon life downstream in the rivers and they have now solved the issue by injecting a very specific bacteria deep down in the ground water table in the mountains to make sure that the selenium is neutralized. And we have a multiyear contract with that to treat all of their mines throughout the region. Our geographical mix is as follows: North America is about 1/3 of our business; Asia Pacific, 18%; South America and Brazil, 17%; Africa, 13%; and EMEA, I would say, is a balance of that. We have -- we are not a gold driller. We are not a copper driller. We have a very balanced portfolio of commodities. You can see on the left that battery metals and EV, what we call EVs, represent now 30% of our revenue. Gold is about 30%, same thing. Water is just short of 20% and steel, coal and iron ore, meaning the steelmaking business is 15%. So for us, it's a good balance exposure vis-a-vis the different commodities, which are getting their own life now. Our top customers, the top 5 customers represent 45% of our business. The top 10 represent 60%. So here again, we don't depend on one customer too much. Although, we have some significant exposure here and there depending on the regional mix. Compared to the competition, we compare ourselves with, let's say, the international and global drilling companies. So Foraco is #3 behind bottom and major drilling in terms of rig count. But you can see that we have outperformed these guys constantly on our profitability margin since 2016, which was the, let's say, the bottom-up moments of the market a few years ago. So basically, what is our strategy going forward? Number one, we have now announced that we have restructured our current debt, and this will give us a much stronger balance sheet. We are going now to develop the business much more on organic growth than an acquisition growth as we did before the down cycle when we were doing our first phase of the strategy, which was implementing few acquisitions to acquire a sufficient footprint international. So that has been done since 2012. And now we are well positioned in the countries where we are. And we are going to grow from there by increasing our market share and expanding our kind of services. So we're going to grow in battery metals, we're going to grow in water, and we're going to grow in specialized services. Basically, this allows us to deleverage even more our balance sheet. Make sure that -- we will make sure that we keep an eye on our cash flow And we will grow our cash position and why not resume our dividend policy as we had a few years ago. Financial data, I will skip that. I think it will come to -- through the Q&A. So you have all the recent data from revenues, margin, EBITDA, P&L and balance sheet. So we would be happy to answer your questions. And basically, you can -- the take away of this short talk is that we are a world-class good company. We -- 50% of our business is linked to green energy and water. We have a very strong reputation of agility innovation and delivery. Our management is very solid because of the HR policy and the good place to work, that is Foraco. We didn't lose anyone during the downtime. And we will make sure that our profitability will remain the top -- on the top tier. So thank you for that. I will pass the mic to Glen for the Q&A. Glen?

Thank you very much, Daniel. [Operator Instructions] I'll start with some questions already in the queue. Daniel, what did you say your utilization rate is currently? And what do you estimate the average for the industry?

The last time we published, we were in the high 40s or low 50s. And as we speak, we are much higher than that. So we are approaching the -- I'm speaking under Jean-Pierre control, but we are approaching the 60% in Q2. This will be confirmed in end of July. As far as the industry is concerned, we don't know exactly because we don't use the same convention. But basically, all of our main competitors are reporting 50%-plus utilization anyway. So it seems that across the board, the utilization of the fleet has broken the 50% sailing.

And as a follow-up question to that, what will be the implications of the increased utilization across the industry on pricing?

Typically, we will have more pricing power when we're going to reach globally -- when the utilization is going to reach 60% that we saw in the upcycle 10 years ago. But I can tell you that even today, most of our customers are very conscious of the scarcity, the building scarcity of crews and not rigs. And they are very open to renegotiate and secure for mid- to longer term the service with improved conditions. So the is more on the HR now rather than on the rigs, if I may say this way, okay?

Okay. There's actually a question related to that. So I'll ask on the question and you could expand on that a little bit. Are you having any difficulty in adding crews or seen tightness in the labor market?

Yes, we have. Like everybody, we have that on 2 specific regions. One is Canada, and the second one is Australia. All the rest are more or less going okay. I think there is a -- the explanation is that it's a multi explanation. Number one, these 2 countries have led clearly the upturn. So Canada and Australia have started to recover much earlier than the other places. Number two, the -- it seems that the strategy of the top miners in the world is to come back to more stable jurisdiction, and which explain the success of Canada and Australia and in a lesser extent, U.S. And therefore, the tension of the HR of the crews are the biggest in this region. Bearing in mind that this is where the workforce is the most fluid, which means that during the bad time, many, many people, hundreds of them have left the industry to go to work somewhere else, like agriculture, construction, whatnot. And we are left with some kind of void that we are stumbling . When we say we, I mean the industry is stumbling to fear , okay?

Okay. I've got almost the exact same question from 2 different individuals, so I'll ask one of them and hopefully that covers both. Have you experienced higher ramp-up and mobilization costs to respond to the surge in metals drilling demand?

I'm not 100% sure I understand the question. You talk about the costs?

Yes. So the ramp up in the industry.

Well, there is clearly a kind of inflation in terms of products in certain area like drilling rods, chemicals, stuff like that. But we think that this is more a result of lack of inventory and disruption of supply chains and transits rather than an intrinsic inflation. Many, many circuits have been disrupted. As an example, the cost of a container, 40-foot container from China to Europe has gone through $10,000 very recently, where it was about $2,000, pre-COVID. So we think that the global industry is trying to find a new balance and to solve the problems. But that is -- this transition is nevertheless, giving us a kind of tension on prices. So yes, we have -- we are experiencing some higher cost for mobilizing jobs because we have to either pay a little bit more to get the stuff on time or we miss our mobilization date. So basically, that is pressurizing the prices.

Okay. Great. And as a follow-up to that, does this differ by geography?

Yes, yes, yes. This is much less visible in West Africa because West Africa, for instance, is a place where the logistic is already a nightmare. So people are working with, let's say, high inventories. So it doesn't show so much. And it shows a ton in Australia, for instance, because Australia has decided to deploy a no virus strategy, and they have closed the country and for the last, what, 16 months, and they are talking to keep it closed until mid-2022. So it's a headache to move people. Well, basically, we don't move people. And it's a headache to get stuff from Europe or from America. So you have kind of a scale, Australia is high up, followed by, I would say, Canada and at the bottom of the scale you have South America, Africa and in a lesser extent, Russia.

Okay. And I guess on the same theme, do you expense all costs related to mobilization for new jobs upfront?

Jean-Pierre?

I didn't hear the question. Can you repeat?

Yes. Do you expense all costs related to mobilization for new jobs upfront?

Yes. We expense the cost, but there is in general mobilization item in the contract. So we match the expense and the whole growth revenue. Now we -- in general, the margin at the beginning of the contract is a bit lower, but for a different reason, which is the learning curve.

Okay.

But we booked that in real time. We don't wait for the end of the contract to show that we have a higher cost, okay?

Yes, of course.

Okay. Next question. What percentage of capacity would you classify as full utilization? And how many of the 302 drills have not seen any usage in the last year or 2?

Okay. Full utilization is around 70%. You have to understand or I was not clear enough probably, most of our fleet is regionalized. We -- to give you an idea, we move approximately 5% of the rigs from one big region to another region, maximum. So most of the rigs are located in a region. And the utilization rate we calculate by the region, okay, according to the region conditions. So in Australia, for instance, we are at 75% as we speak because we have been quite successful and actually were maxed out. In Canada, I would say that, we, as we speak, we are near 67%, 70%, and we are not far from being maxed out. Other regions like South America has been trailing. We are at 50%, 55%. But as a rule of thumb, I would say, full utilization is 70%, 75% because you need to have some backup reserve rigs on the way, rigs in maintenance to make sure that you can run at 70%, okay? So we still have 10%, 15% to go. And as far as how many rigs have not worked for the last 2 years, I would say that quasi 100, 120 are still in the parking.

Okay. Super. Next question. How much of the market recovery that you've seen is specifically tied to the EV metals, I guess, growth versus how much would you characterize by traditional growth in demand for commodities such as water and gold?

It's a complex question. I'm not sure I have an answer to that. I would say -- I will come back to one slide where we show the 3 drivers. EV -- battery metals and EV, I mean, energy transition, is relatively very fresh singularity. But it has focused on 2 metals, basically, copper and nickel, which were already, let's say, well utilized. And suddenly, everybody wants to have a stake in these 2 metals. So now people are scrambling to buy reserves, to control reserves, et cetera, et cetera. And of course, depending on the growth model of that, people say, okay, well, we're going to miss -- we're going to lack of nickel in 2 years because the market is going to turn negative in terms of supply and demand. Same for copper. But that varies every quarter depending on announcement, on strategy shifts, et cetera, et cetera. What we have seen on the ground is that despite the copper going through $10,000 a ton, it has not rocketed yet in terms of drilling demand. There is a solid demand for copper. There is a solid demand for nickel. But the billing is not through the roof yet. It's warming up rather than -- and same thing for iron ore. We were very surprised that the big guys like the BHP, the Rio Tinto and the Vale kept going. And these guys have increased their drilling budget by 20% for the next few years. And this is quite surprising for us. But giving you a kind of correlation between the price expansion increase -- sorry, the price increase of certain commodity vis-a-vis the growth in this commodity in terms of drilling service demand is too much for us. We don't do that. So I hope I have more or less understood the question and answered.

No. And I guess it's a thematic point in a number of questions. So I'm just sort of combining a bunch of different points and putting them together into 1 question. Have you seen or experienced the rotation from the majors from I guess, the traditional metal to some of these green metals across the board? Or is it just a few of the majors that are doing this?

It's a very few number of majors who are shifting. Basically, most of these guys are heavily invested They are specialists of their own commodities. So you have diversified the big diversified guys like Glencore, like BHP, okay, fine. But for instance, you will not see a major shift of -- the major going to iron ore or going to gold. If they rotate, they're going to rotate on the base metals, meaning doing more nickel or doing more copper. So I would say that what we have seen in the last 2 years, it's a hunt for copper deposits. That's for sure.

Okay. Next question. How does current pricing compared to that during the last peak? Example, how much more upside is there in pricing? should margins ultimately be comparable to the last peak?

We hope so. I give you our -- the last peak, the margins were about 15 percentage points higher that we have today on an average. Jean-Pierre, what was our highest gross margin reported on a quarter on a consolidated basis?

We have to check that. We were at 25.

25? Okay. I remember we had what, 27%, 28% EBITDA, right?

24% was [indiscernible] EBIDTA.

Okay. So we're still about what, 6, 7 points below?

Yes.

Okay. So that gives you, Glen, what we can expect from the market in terms of pricing. But indeed a major effect on our bottom line is our increase in utilization rate, right, at constant gross margin because everything goes down to the bottom line, except the direct costs, which are about 30%, 35%. So we have a kind of double booster effect, one to the price. I mean we think that the price can -- I'm talking about not the price, the gross margin increase because price can increase and not the gross margin if we have inflation. I'm talking about net, okay, net of inflation. We still have about 5% to 10% to go in terms of margin restoration. And in terms of bottom line impact, I think that if we get another 10% of utilization rate, of course, this will be a massive addition to our bottom line as well and cash.

Because we will have also a better coverage of our fixed cost, which do not increase that much compared to the increase in revenue.

Okay. Next question. And again, I'm combining a couple of questions here to one. You mentioned during the presentation that you're going to focus more on organic growth versus M&A. Can you just expand on that as to why the shift in strategy given your previous, I guess, M&A experience?

Okay. Maybe I was not clear. We spend a lot of money and a lot of time and a lot of energy between 2007 since we floated Foraco on the TSX and 2012 to establish Foraco as the #3 in the world. Nobody is perfect. We started with a French company. France is a mining nothing. Europe is a mining dwarf. And without domestic market, we had to go on the international game. To be in the international game, take an example in Canada, if you are not Canadian, you cannot access the junior market. And therefore, the only market which is open to you, as a foreigner, is a major, the Tier 1. And therefore, we said, okay, fine. Let's establish our footprint as our first phase of our strategy plan. We're going to buy into the market we believe in. And so we bought in Canada. We bought in Australia. We bought in Russia. We bought in Chile. We bought in Brazil, and we -- and I must have forget one. And that was Phase 1 of the plan. And we achieved that by being relatively aggressive in terms of M&A and debt up to 2012. So we finished our job in 2012, more or less. Then the recession came. We stopped everything. We switched into damage control phase between 2013 and 2016. And since 2017, we are fortunate to be able to deploy our second phase, which is to establish our -- consolidate our local positions, increase our market share using different ways. And so we don't see any important need to acquire competition or competitors, et cetera, for the time being because we have a vast organic growth opportunity for the years to come. Do I have expressed myself well?

You have for me, hopefully, for our audience. If not, then we'll get some follow-up questions on that. Next question. Do you use any technology or equipment from a company called Index? And if so, how would you characterize that technology?

Yes, of course. We know Index very well because Peter Jacobs, our Senior VP, Australian was the GM of Index a few years ago. So we use Index equipment, which is basically instruments and sensors we put in the holes to navigate the holes, meaning doing the trajectory and to do some measurements down the hole. Index is one of the 2 or 3 best suppliers in the world. And we regard them very high, and we have an excellent relationship with them. So nothing to say more than that. They're reliable guys. They are going to the data world now because they try to increase added value chain. I'm not a strong believer of that for the moment because the data is still the client thing. But okay, we'll see. So we use Index. For instance, we use Index field reporting system in Australia, and we use a ton of instruments. We rent from them, many instruments. Good company.

[Operator Instructions] What would you say are your biggest competitive advantages versus other drillers?

Biggest in terms of fleet like Burkina and Major?

Yes.

Okay. 2 different beast. Burkina is clearly a very, very good name in the industry because they are the oldest, very good company, and they go -- they went bust during the downturn, ending up with several hundred million dollars of debt, negative cash flow. So it's -- and guess what, they've gone now through a restructuring, which give 98% or 99% of the company to the creditors. It's a sad story. Nobody is -- I mean, in terms of management, top management, they are more or less employees. They have no skin in the game. And if you look at that, you will see that it's a typical corporation kind of story with the game of the funds and secondary and third and et cetera, et cetera. It's still a very formidable competitor. They have 600 rigs or 700. It's still a very good name. They retained some very good operational people. So we keep an eye on them. And we respect them very much because their business ethics and their business attitude is very similar to us on the ground. As far as major is concerned, Major is our main competitor. We respect them very much as well. It's not a corporation. The CEO, the current CEO and the last CEO were people having a ton of experience from inside. They know what they're doing. We are not that fighting too much because they are okay, Canada is a kind of region where we really compete with them. But where they are strong, we are not there and vice versa, so we -- it's okay. The balance sheet of MDI is good. They are very savvy. So it's a competitor that will remain in our radar scope, and we will have to do with it. But they are good and solid guys.

Next question is, do you envision your revenue mix growing for the juniors in the future beyond the current 10%?

Well, we will do our best to be better than that for sure, market permitting, okay?

Fair enough. Next question is around the debt. You recently restructured a significant debt piece. Can you just, again, discuss your overall debt strategy for the company in terms of potential future debt reduction. And how you sort of think about the current debt level?

I will let Jean-Pierre comment on that, Jean-Pierre?

Yes. We -- first of all, we announced the binding agreements in May, and we intend to close definitely on the agreements in end of June, okay, before the June 30. So all the details on the transaction are not fully discussed, but we have already disclosed a certain number of the main components of this discussion, this negotiation. So basically, we have paid the current debt we have with the 2 funds, the 2 bonds with 2 funds. One of them was the new money we raised in 2017 after the -- at the end of the recession. And the second one was renegotiation of the debt that we had with the French banks and related recognitions. So these 2 bonds are being repaid to the raising of the new debt or new loans at much better conditions in our opinion, okay? So what we are raising is $100 million. I mean we are repaying $150 million for the value of the debt, and we are generating almost $50 million of debt reduction, okay? This is one of the main components, of course, of this negotiation. The second one, [Indiscernible] funds. We'll have good increase of share capital, a 9.3% or 9.3 million new shares. So there will be fair -- of Foraco. These are the 2 main components. So we repay all the debt. We give them 9.3 million new shares and the rest is big on -- the rest of the debt is done.

I have -- go ahead.

To keep on that, one thing is that the new debt of the $100 million has a part, which is -- which will be amortized. How much is it over 3 years, Jean-Pierre?

So we intend to amortize $5 million in 2022. And then $10 million each year until 2025. So in total of $55 million during the life of the new loan. And at the end of December 2025, okay? So the $65 million. We have a certain flexibility if we generate more cash to decide on, let's say, 5-year repayment of this debt. It's flexible for us and very interesting.

And basically, what we want to do is to deleverage as quick as we want even further the balance sheet of the company, okay? Having gained 5 years maturity.

Sounds great. Thank you, Daniel, for that and JP. We have no further questions at this time. So given the hour, I'll ask you to give you some further comments just to summary statements, and then we'll end the call.

Thank you. Well, thank you, everybody, for those who are still there. If you have some questions, follow-up with Glen. We're going to be happy to answer that. We're always ready to set up some one-on-one discussion with you guys since we cannot have the pleasure to meet in person in Toronto, Canada or wherever for the moment. So be safe and talk to you next time. Bye-bye.

Thank you, Daniel, thank you, JP. And this concludes our webinar.

Thank you. You may now disconnect.