31 January 2024
Ecora Resources
PLC
("Ecora"
or the "Group")
Q4 Trading
Update
Ecora Resources PLC (LSE/TSX: ECOR)
issues the following trading update for the period 1 October 2023
to 31 December 2023. This update is released ahead of the Group's
audited full year results on 27 March 2024.
Fourth Quarter and Full Year 2023 Portfolio
Contribution
FY23 portfolio contribution of
$63.6m (2022: $143.2m), with the YoY decline primarily a result of
expected lower production within the Group's private royalty area
at Kestrel as well as a normalisation of commodity prices in 2023
from near record levels the previous year. Q4 portfolio
contribution was $14.4m (including $5.4m of accrued income). Net
debt as at 31 December 2023 was $75m (2022: $36m).
Marc Bishop Lafleche, Chief Executive Officer of Ecora,
commented:
"In-line with our expectations, portfolio contribution
rebounded from third quarter levels as operations at Kestrel moved
back within the Group's private royalty area and a higher weighting
of quarterly cobalt deliveries from Voisey's Bay.
"This momentum has continued into 2024. Kestrel production
within the Group's private royalty area is expected to increase
15-25% compared to 2023. The Voisey's Bay underground ramp-up is
expected to accelerate in H2, and other volumes across the
portfolio expected to be ahead or in-line with last year. Current
commodity price levels would imply year-on-year portfolio
contribution growth in the year
ahead.
"In the fourth quarter, we acquired an incremental royalty
interest over the Piauí project for $7.5m. Brazilian Nickel will
primarily use these funds to de-risk the project by undertaking
detailed engineering studies prior to project construction. This
was financed by recycling a portion of our LIORC holding in
the quarter, which realised a c. 110% total pre-tax return on the
investment.
"The mining sector continues to see underinvestment and a
challenging market backdrop. We anticipate these conditions will
persist over next 2-3 years, during which royalty financing should
be a highly attractive source of capital. The extension of our
revolving credit facility puts us in a strong position to continue
to grow and diversify our portfolio, which currently offers the
leading copper growth profile in the royalty
sector."
Highlights:
· FY23
portfolio contribution of $63.6m (2022: $143.2m), with the YoY
decline primarily a result of lower production within the Group's
private royalty area at Kestrel as well as a normalisation of
commodity prices in 2023 from near record levels the previous
year.
· Q4
portfolio contribution was $14.4m (including $5.4m of accrued
income released to the income statement following the favourable
Four Mile judgment announced on 4 December 2023). On a recurring
basis, Q4 portfolio contribution was $9.1m, up 57% on Q3 2023
($5.8m).
· The
Voisey's Bay stream produced four deliveries in Q4 (Q3 2023: one
delivery) taking the number of deliveries for 2023 to 11 (2022: 19
deliveries), in line with guidance and reflecting the ramp up
profile of the underground transition.
· During
Q4 2023, the Group invested $7.5m into Brazilian Nickel's Piauí
nickel-cobalt project, increasing its royalty by 0.35% to
1.60%.
o The
proceeds will primarily be used to finance detailed engineering
studies and flow sheet optimisation that will further de-risk the
project prior to the start of construction.
o The
Group has the right to acquire a further 2.65% royalty over the
Piauí project for a consideration of $62.5m. These funds would form
part of the construction financing package.
· During
Q4, the Group sold ~60% of its residual stake in Labrador Iron Ore
Royalty Corporation (LIORC) realising C$18.9m, a total pre-tax
return on investment of c. 110% and a gain on disposal of C$4.1m.
The proceeds were used to pay down debt and remain available to
fund growth opportunities, including the recent investment into
Piauí.
· Net
debt at the end of the period, following these investment
activities, was $75m (2022: $36m).
Portfolio Outlook
· Production at Kestrel moved back into the Group's private
royalty area at the end of 2023. Saleable volumes produced within
the Group's private royalty area are forecast to be 15-25% higher
in 2024 than those achieved in 2023 (c 1.6 Mt) and are expected to
be weighted towards Q1, with approximately 75% of the full year
volumes in Q1, and approximately 15% in Q4. Steelmaking coal
prices have started the year at elevated levels compared to the
previous year.
· Voisey's Bay stream is expected to produce between 12-16
deliveries of cobalt in 2024. Between 5-6 deliveries are scheduled
for H1 2024, as deliveries will be heavily weighted towards the
second half of the year when production from the underground mining
operations is expected to ramp up. More detailed guidance for H2
will be provided in the Q2 2024 trading update.
· Mantos
Blancos production volumes are forecast to increase in 2024 due to
higher mill throughput with the increase being second half
weighted.
· Capstone Copper is expecting to release a Feasibility Study
for the Santo Domino project by mid-2024, with a potential project
sanctioning decision not anticipated prior to mid-2025.
· BHP
continues construction of the West Musgrave nickel-copper project
in Australia with first production targeted as early as
end-2025.
· Production volumes at the Group's other royalty assets for
2024 are expected to be broadly in line with 2023
levels.
Post Period Events
· In
January 2024, the Group made the final $9.2m deferred consideration
payment to South32 in relation to the royalty portfolio acquired in
2022.
· Completion of a refinancing of the Group's corporate debt
facilities has increased the borrowing potential to $225m on
broadly similar terms to the previous facility.
Portfolio contribution -
Unaudited(1)
|
Q4 2023
|
|
Q3 2023
|
FY 2023
|
|
FY 2022
|
|
$m
|
QoQ
|
$m
|
$m
|
YoY
|
$m
|
Core
Portfolio
|
|
|
|
|
|
|
Voisey's Bay (cobalt)
|
2.0
|
300%
|
0.5
|
5.6
|
(70%)
|
18.8
|
Mantos Blancos (copper)
|
1.4
|
-
|
1.4
|
6.1
|
1%
|
6.0
|
Maracás Menchen (vanadium)
|
0.7
|
-
|
0.7
|
3.2
|
(12%)
|
3.6
|
Four Mile (uranium)
(3)
|
5.9
|
2,850%
|
0.2
|
6.8
|
584%
|
1.0
|
Other (copper)
|
0.2
|
-
|
0.2
|
0.6
|
200%
|
0.2
|
|
|
|
|
|
|
|
Royalty and stream income
|
10.2
|
240%
|
3.0
|
22.3
|
(25%)
|
29.6
|
|
|
|
|
|
|
|
Dividends - LIORC &
Flowstream
|
0.2
|
(75%)
|
0.8
|
2.0
|
(31%)
|
2.9
|
Interest - McClean Lake
|
0.4
|
-
|
0.4
|
1.8
|
(13%)
|
2.1
|
|
|
|
|
|
|
|
Royalty and stream related revenue
|
10.8
|
157%
|
4.2
|
26.1
|
(25%)
|
34.6
|
|
|
|
|
|
|
|
EVBC(2)
|
0.1
|
(50%)
|
0.2
|
0.7
|
(74%)
|
2.8
|
Principal repayment - McClean
Lake
|
0.5
|
-
|
0.5
|
2.3
|
(20%)
|
2.9
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Metal streams cost of
sales
|
(0.5)
|
400%
|
(0.1)
|
(1.4)
|
(67%)
|
(4.3)
|
Total portfolio contribution from core
assets
|
10.9
|
127%
|
4.8
|
27.7
|
(23%)
|
35.9
|
|
|
|
|
|
|
|
Near
term run-off portfolio
|
|
|
|
|
|
|
Kestrel (steel making
coal)
|
3.5
|
250%
|
1.0
|
35.9
|
(67%)
|
107.2
|
Total near term run-off portfolio
|
3.5
|
250%
|
1.0
|
35.9
|
(67%)
|
107.2
|
|
|
|
|
|
|
|
Total portfolio contribution
|
14.4
|
148%
|
5.8
|
63.6
|
(56%)
|
143.2
|
(1)The portfolio contribution above is unaudited and based on
narrow midpoint range, therefore, the actual number reported in the
forthcoming annual report may be slightly higher or
lower.
(2) Under IFRS 9, the royalties received from EVBC are reflected
in the fair value movement of the underlying royalty rather than
recorded as royalty income.
(3) Four Mile Q4 revenue includes A$8.1m (US$5.4m) of previously
underpaid royalties recognised as a result of the Appeal
being upheld in December 2023
For further information
Ecora Resources PLC
|
+44 (0) 20 3435
7400
|
Geoff
Callow
Head of Investor Relations
|
|
|
|
Website:
|
www.ecora-resources.com
|
|
|
Camarco
Gordon Poole / Owen Roberts / Elfie
Kent
|
+44 (0) 20 3757
4997
|
About Ecora Resources
Ecora Resources is a leading royalty
company focused on supporting the supply of commodities essential
to creating a sustainable future.
Our vision is to be globally
recognised as the royalty company of choice synonymous with
commodities that support a sustainable future by continuing to grow
and diversify our royalty portfolio in line with our
strategy. We will achieve this through building a
diversified portfolio of scale over high quality assets that drives
low volatility earnings growth and shareholder
returns.
The mining sector has an essential
role to play in the energy transition, with commodities such as
copper, nickel and cobalt - key materials for manufacturing
batteries and electric vehicles. Copper also plays a critical role
in our electricity grids. All these commodities are mined and there
are not enough mines in operation today to supply the volume
required to achieve the energy transition.
Our strategy is to acquire royalties
and streams over low-cost operations and projects with strong
management teams, in well-established mining jurisdictions. Our
portfolio has been reweighted to provide material exposure to this
commodity basket and we have successfully transitioned from a coal
orientated royalty business in 2014 to one that by 2026 will be
materially coal free and comprised of over 90% exposure to
commodities that support a sustainable future. The fundamental
demand outlook for these commodities over the next decade is very
strong, which should significantly increase the value of our
royalty portfolio.
Ecora's shares are listed on the
London and Toronto Stock Exchanges (ECOR) and trade on the OTCQX
Best Market (OTCQX: ECRAF).
Cautionary statement on
forward-looking statements and related information
Certain statements in this
announcement, other than statements of historical fact, are
forward-looking statements based on certain assumptions and reflect
the Group's expectations and views of future events.
Forward-looking statements (which include the phrase
'forward-looking information' within the meaning of Canadian
securities legislation) are provided for the purposes of assisting
readers in understanding the Group's financial position and results
of operations as at and for the periods ended on certain dates, and
of presenting information about management's current expectations
and plans relating to the future. Readers are cautioned that such
forward-looking statements may not be appropriate other than for
purposes outlined in this announcement. These statements may
include, without limitation, statements regarding the operations,
business, financial condition, expected financial results, cash
flow, requirement for and terms of additional financing,
performance, prospects, opportunities, priorities, targets, goals,
objectives, strategies, growth and outlook of the Group including
the outlook for the markets and economies in which the Group
operates, costs and timing of acquiring new royalties and making
new investments, mineral reserve and resources estimates, estimates
of future production, production costs and revenue, future demand
for and prices of precious and base metals and other commodities,
for the current fiscal year and subsequent periods.
Forward-looking statements include
statements that are predictive in nature, depend upon or refer to
future events or conditions, or include words such as 'expects',
'anticipates', 'plans', 'believes', 'estimates', 'seeks',
'intends', 'targets', 'projects', 'forecasts', or negative versions
thereof and other similar expressions, or future or conditional
verbs such as 'may', 'will', 'should', 'would' and 'could'.
Forward-looking statements are based upon certain material factors
that were applied in drawing a conclusion or making a forecast or
projection, including assumptions and analyses made by the Group in
light of its experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors that are believed to be appropriate in the
circumstances. The material factors and assumptions upon which such
forward-looking statements are based include: the stability of the
global economy; the stability of local governments and legislative
background; the relative stability of interest rates; the equity
and debt markets continuing to provide access to capital; the
continuing of ongoing operations of the properties underlying the
Group's portfolio of royalties, streams and investments by the
owners or operators of such properties in a manner consistent with
past practice; no material adverse impact on the underlying
operations of the Group's portfolio of royalties, streams and
investments from a global pandemic; the accuracy of public
statements and disclosures (including feasibility studies,
estimates of reserve, resource, production, grades, mine life and
cash cost) made by the owners or operators of such underlying
properties; the accuracy of the information provided to the Group
by the owners and operators of such underlying properties; no
material adverse change in the price of the commodities produced
from the properties underlying the Group's portfolio of royalties,
streams and investments; no material adverse change in foreign
exchange exposure; no adverse development in respect of any
significant property in which the Group holds a royalty or other
interest, including but not limited to unusual or unexpected
geological formations and natural disasters; successful completion
of new development projects; planned expansions or additional
projects being within the timelines anticipated and at anticipated
production levels; and maintenance of mining title.
Forward-looking statements are not
guarantees of future performance and involve risks, uncertainties
and assumptions, which could cause actual results to differ
materially from those anticipated, estimated or intended in the
forward-looking statements. Past performance is no guide to future
performance and persons needing advice should consult an
independent financial adviser. No statement in this communication
is intended to be, nor should it be construed as, a profit forecast
or a profit estimate.
By its nature, this information is
subject to inherent risks and uncertainties that may be general or
specific and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate; that assumptions may not be correct and that
objectives, strategic goals and priorities will not be
achieved.
A variety of material factors, many
of which are beyond the Group's control, affect the operations,
performance and results of the Group, its businesses and
investments, and could cause actual results to differ materially
from those suggested by any forward-looking information. Such risks
and uncertainties include, but are not limited to current global
financial conditions, royalty, stream and investment portfolio and
associated risk, adverse development risk, financial viability and
operational effectiveness of owners and operators of the relevant
properties underlying the Group's portfolio of royalties, streams
and investments; royalties, streams and investments subject to
other rights, and contractual terms not being honoured, together
with those risks identified in the 'Principal Risks and
Uncertainties' section of our most recent Annual Report, which is
available on our website. If any such risks actually occur, they
could materially adversely affect the Group's business, financial
condition or results of operations. Readers are cautioned that the
list of factors noted in the section herein entitled 'Risk' is not
exhaustive of the factors that may affect the Group's
forward-looking statements. Readers are also cautioned to consider
these and other factors, uncertainties and potential events
carefully and not to put undue reliance on forward-looking
statements.
The Group's management relies upon
this forward-looking information in its estimates, projections,
plans and analysis. Although the forward-looking statements
contained in this announcement are based upon what the Group
believes are reasonable assumptions, there can be no assurance that
actual results will be consistent with these forward-looking
statements. The forward-looking statements made in this
announcement relate only to events or information as of the date on
which the statements are made and, except as specifically required
by applicable laws, listing rules and other regulations, the Group
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated
events.
This announcement also contains
forward-looking information contained and derived from publicly
available information regarding properties and mining operations
owned by third parties. This announcement contains information and
statements relating to the Kestrel mine that are based on certain
estimates and forecasts that have been provided to the Group
by Kestrel Coal Pty Ltd ("KCPL"), the accuracy of which
KCPL does not warrant and on which readers may not rely.