REG - Ecora Resources PLC - Acquisition of producing copper stream

Ecora ResourcesAnnouncement

27/02/2025 07:15

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RNS Number : 6862Y  Ecora Resources PLC  27 February 2025

 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

27 February 2025

 

 

Ecora Resources PLC

("Ecora" or the "Group")

 

Acquisition of producing copper stream on Moxico's Mimbula Mine

 

 

Ecora (LSE/TSX: ECOR, OTCQX: ECRAF), a critical minerals focused royalty
company, announces that it has entered into a copper stream (the "Stream")
with reference to production at the Mimbula copper mine ("Mimbula"), owned by
Moxico Resources plc ("Moxico"), for a total cash consideration of US$50m (the
"Transaction"). The Stream will cover Mimbula's existing reserve-based Life Of
Mine  ("LOM") of 11 years  with potential for additional extension.

Mimbula, located in the Zambian Copperbelt Province, achieved first copper
production from Phase 1 of the project in late 2022 and in 2024 produced
14,000 tonnes of copper at operating costs in the lowest half of global copper
mines. A brownfield Phase II expansion is currently in construction, which
will increase total copper cathode production capacity to achieve 56,000
tonnes per annum in mid-2026.

Marc Bishop Lafleche, Chief Executive Officer of Ecora, commented:

 

"Following strong momentum in Q4, we are excited to start 2025 with the
announcement of a new partnership with Moxico in relation to the Mimbula
copper mine, which will cement copper at the core of our commodity exposure
and be immediately accretive to earnings and free cash flow.

 

"Mimbula has everything we look for in an investment; it is a high-quality ore
body, with low operating costs, and with an exceptional management team who
have developed the project from concept to a high-margin operation currently
undergoing a brownfield expansion to increase production capacity.

 

"To fund the acquisition, we have triggered US$30m of our Revolving Credit
Facility's US$75m accordion feature, bringing our total committed borrowing
facility to US$180m with approximately US$55m undrawn. The transaction has
been structured with the objective of frontloading streamed copper
entitlements to the initial 7-8 years of the stream, driving earnings growth
during the period as well as contributing to the Group's expected debt
reduction during the next 12-24 months.

 

"The acquisition of a producing copper stream enhances Ecora's strong organic
copper growth profile across the short, medium and long-term. Following the
transaction, Ecora's copper and base metal exposure as a percentage of NAV
will be approximately 45% and 75% respectively, with approximately 80% of the
royalties and streams in Ecora's wider portfolio over mines and projects
within the lower half of their respective cost curves."

 

Highlights

 

·      Immediately accretive to earnings per share and free cash flow per
share

·      Increased exposure to strong fundamental copper outlook
(approximately 45% of NAV)

·      High margin producing copper mine with low operating costs

·      Brownfield expansion underway to increase copper production from
~14 kt in 2024 to steady state capacity of ~56 ktpa

·      Stream structure reduces ramp-up risk and has an expected payback
period of approximately 6-7 years

·      Reserve based LOM of 11 years (2035) with extension potential

·      Proceeds to bolster liquidity for Mimbula's brownfield expansion as
well as for other general corporate purposes

·      Mimbula produces Grade A LME cathodes

·      High-quality management team with a proven operational track record
and prior experience at large diversified miners

·      Transaction completion expected within the coming days

Analyst and Investor Presentation

 

·      There will be an analyst and investor webcast at 2pm (GMT) on 27
February 2025. The presentation will be hosted by Marc Bishop Lafleche (CEO),
Kevin Flynn (CFO) and Geoff Callow (Head of IR)

·      Please join the event 5-10 minutes prior to the scheduled start
time.

·      Slides will be available shortly on the Company's website
(www.ecora-resources.com (http://www.ecora-resources.com) )

 

 Event Conference Title  Ecora Resources - Acquisition announcement
 Time Zone               Dublin, Edinburgh, Lisbon, London
 Start Time/Date         2pm, Thursday 27 February 2025
 Duration                60 minutes

Webcast Link

                         https://stream.brrmedia.co.uk/broadcast/67bf2e37118fdd713472228a
                         (https://www.google.com/url?q=https://stream.brrmedia.co.uk/broadcast/67bf2e37118fdd713472228a&sa=D&source=calendar&ust=1741015475025282&usg=AOvVaw03C3knM4Do4TdhMqEi7-xo)

 

Stream details

The stream entitlement is structured as follows:

 Ecora stream entitlement((1))  Calendar year copper production  Illustrative stream EBITDA per annum at full production((2))

 4.7%                           Nil to 15kt                      ~$5 million
 2.5%                           >15kt to 30kt                    ~$2.5 million
 1.0%                           >30kt                            ~$2 million

 

1. Quarterly stream entitlements calculated with reference to pro-rated
quarterly production levels (i.e. 4.7% of copper produced between nil to
3,750t; 2.5% of copper produced between 3,750t - 7,500t; 1.0% of copper
produced in excess of 7,500t per quarter). Annual true up to occur following
Q4 of any given calendar year.

2. Fully ramped up production of 56ktpa, assuming copper price of $4.22/lb,
the average LME Copper 3-month price over last 6 months (assessed 24-Feb
2025).

 

Once Ecora has received a cumulative total of 9.15 kt of copper (expected to
be in ~7-8 years), Ecora's stream entitlement will reduce to 1.0% of copper
cathode produced for the remaining life of mine.

Copper will be delivered to Ecora quarterly, with ongoing payments to Moxico
at 30% of the LME quarterly average copper price for all copper received under
the Stream.

Transaction financing and impact on Group earnings

Ecora will fund the US$50m consideration through a combination of cash-on-hand
and the Group's debt facilities. Proforma net debt at 31 December 2024
adjusted for the Transaction is approximately US$126m(3). In conjunction with
the Transaction, pursuant to an amendment dated 26 February 2025 the Group has
made certain amendments to its revolving credit facility dated 24 February
2021, between Ecora and the syndicate of Scotiabank, CIBC and RBC (the "RCF"),
the key terms of the amendment as follows:

·      Upsizing the facility from US$150m to US$180m

·      Extending the Group's RCF maturity to February 2028

·      Net debt to EBITDA ratio calculation uses an adjusted LTM EBITDA,
calculated as trailing 6 quarters of Kestrel income annualised, rest of the
portfolio is on a LTM basis

·      Interest cover covenant reduced from 4.0x to 3.0x for the term of
the facility

·      Pricing of SOFR plus 2.25 - 4.50% depending on leverage levels
(previously 2.25 - 4.00%)

·      No step-downs or amortisations associated with the facility

·      Accordion reduces to US$45m following the US$30m increase in
commitments

The above amendments ensure that the Group remains well capitalised with
sizable headroom following the Transaction. The Group's income producing
royalties, including the Stream, are expected to drive meaningful deleveraging
throughout the next 12-24 months, as illustrated in the table below(4):

                                    2025     2026
 Analyst consensus price forecasts  US$109m  US$88m

 -10% adj.
 Analyst consensus price forecasts  US$101m  US$72m
 Analyst consensus price forecasts  US$95m   US$58m

 +10% adj.

 

3. The proforma net debt figure includes US$6.2m that the Group expects to
receive in Q1 2025 as a result of an agreement with Whitehaven Coal Ltd. to
bring forward payment of the contingent consideration due as part of the sale
of the Narrabri thermal coal royalty.  Whitehaven has agreed to make a single
payment of US$6.2m for the period 2025-2026 for the deferred consideration, as
well as contingent consideration linked to future coal prices levels, Narrabri
sales volumes and the successful permitting of the Narrabri South project.

4.Operator partner production guidance and research analyst consensus
commodity price forecasts: Met coal: 2025 = $209/t, 2026 = $215/t; Copper:
2025 = $4.28/lb, 2026 = $4.49/lb; Cobalt: 2025 = $12.4/lb, 2026 = $13.9/lb;
Uranium: 2025 = $92/lb, 2026 = $101/lb; Vanadium: 2025 = $6.0/lb, 2026 =
$6.0/lb.

 

The Mimbula Copper Project(5)

 

Mimbula is 93% owned by Moxico and is located in Zambia, approximately 10
kilometres south-east of the town of Chingola.

The Phase 1 operations commenced in December 2022 and produced 14 kt of copper
cathode in 2024 using a heap leach and solvent extraction/electrowinning
(SX/EW) process, with copper cathodes consistently at 99.999% and within LME
Copper Grade A specifications.

A bankable feasibility study ("BFS") for Phase 2 of Mimbula was completed in
August 2022. This evaluated the opportunity to expand Phase 1 operations to 56
ktpa through a 46 ktpa agitated leach and SX/EW circuit and demonstrated an
economically valuable, low cost and technically feasible project.

The final stages of Mimbula Phase 2, consisting of the expansion of the SX
capacity, the construction of an elevated temperature leach circuit and the
construction of an additional 80 EW cells to complete the overall EW circuit,
is expected to be completed in mid-2026. Stockpiles of fines ore material and
weathered ore material are ready to be processed through the ETL circuit once
it has been commissioned.

An updated mineral resource statement for Mimbula was completed in March 2024,
and contains 76.4 million tonnes at 1.07% TCu, with 89% of the Resource
estimate classified as Measured or Indicated(6). The stockpile Resources are
estimated to contain 7.6 million tonnes at 1.19% TCu.

Based on the current JORC Reserve and production at the rate of 56 ktpa,
Mimbula has a life of mine to 2035. Moxico anticipates that the life of mine
can be extended further with additional exploration drilling, both infill and
near mine.

The initial part of Mimbula Phase 2, consisting of the construction of the
first half of the EW (80 cells), has been completed and commissioned, and
produced its first copper cathode in January 2024. This expansion has doubled
cathode capacity to 20,000 ktpa, with Mimbula achieving a run rate of over
16,000 ktpa in the final months of 2024.

Transaction Completion

Payment of the US$50m cash consideration is conditional upon the execution and
delivery of certain security-related documents, expected within the coming
days.

( )

(5)Source: www.moxicoresources.com

(6) JORC compliant MRE as of March 2024

 

For further information

 

 Ecora Resources PLC                                      +44 (0) 20 3435 7400
 Geoff Callow - Head of Investor Relations

 Website:                                                 www.ecora-resources.com

 FTI Consulting                                           +44(0) 20 3727 1000

 Sara Powell / Ben Brewerton / Nick Hennis /Lucy Wigney             ecoraresources@fticonsulting.com

                                                        (mailto:ecoraresources@fticonsulting.com)

About Ecora

 

Ecora is a leading critical minerals focused royalty company.

 

Our vision is to be globally recognised as the royalty company of choice
synonymous with commodities that support trends of electrification 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).

 

About Moxico

 

Moxico's principal objective is to be an effective creator of value for its
shareholders, other stakeholders and partners by establishing itself as one of
the main copper producers in Zambia through the expansion of the Mimbula
Copper Project and developing its portfolio of near term development and
exploration assets, including the highly prospective Kalengwa copper project
in the Republic of Zambia the Khnaiguiyah zinc-copper project in the Kingdom
of Saudi Arabia, and the Esperanza copper project in Argentina.

 

Further Information

 

UK Listing Rules

The Transaction, because of its size in relation to Ecora, constitutes a
Significant Transaction for the purposes of the UK Listing Rules made by the
Financial Conduct Authority (the "FCA") for the purposes of Part VI of the
Financial Services and Markets Act 2000 (as amended), which came into effect
on 29 July 2024 (the "UKLRs"), and is therefore notifiable in accordance with
UKLR 7.3.1R and 7.3.2R. In accordance with the UKLRs, the Transaction is not
subject to shareholder approval.

Board's views on the Transaction

Considering all the information that is outlined above, the board of directors
of Ecora believes that the Transaction is in the best interests of Ecora
shareholders as a whole, offering income growth, increased exposure to copper
and is expected to be immediately accretive to earnings per share and free
cash flow per share.

Risks to Ecora as a result of the Transaction

 

The Transaction will increase the Group's financial leverage

 

The Transaction is being funded through a combination of cash-on-hand and the
Group's RCF, which has been upsized from US$150m to US$180m and had its
maturity extended by 12 months to February 2028. The utilisation of the
Group's RCF to part fund this Transaction will increase the Group's overall
indebtedness and financial leverage, based on current forecasts. The Group's
cashflow is expected to support meaningful deleveraging in the next 12-24
months.  Should the production profiles and commodity price forecasts assumed
at the time of investment not prevail, the rate at which the Group can reduce
debt levels may differ materially from that expected at the time of
investment.

The future production profiles and commodity prices are uncertain

 

As with all of the Group's royalties and streams, Ecora is not directly
involved in the ownership or operation of the Mimbula mine. The Group is
therefore reliant on the owners and operators achieving their stated
development and production milestones. In the event these production levels
and development milestones are not achieved, the timing and quantum of cash
flows and the EBITDA generated by the Stream may differ materially to those
expected at the time of investment.

In addition to the impact that changes in the development and production
profile may have on the Stream's cash flows and EBITDA, fluctuations in the
underlying commodity prices may also result in the timing and quantum of cash
flows and the EBITDA generated by the Stream differing materially to those
expected at the time of investment.

 

Appendix I

SIGNIFICANT CHANGE, LEGAL AND ARBITRATION PROCEEDINGS AND RELATED PARTY
TRANSACTIONS

 

1.   Significant change

Ecora

Aside from the amendments to the Group's RCF as detailed above, there has been
no significant change in the financial performance or financial position of
Ecora since 30 June 2024, the last period for which financial information for
Ecora was published.

2.   Legal and arbitration proceedings

Ecora

There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which Ecora is aware)
during the period covering the 12 months preceding the date of this
announcement which may have, or have had in the recent past, significant
effects on the financial position or profitability of Ecora or the Group.

Mimbula

There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which Ecora is aware)
during the period covering the 12 months preceding the date of this
announcement which may have, or have had in the recent past, significant
effects on the financial position or profitability of the Mimbula mine.

3.   Related Party Transactions

Ecora's annual reports and accounts for each of the 12-month periods ended 31
December 2022 and 31 December 2023 and unaudited interim report and accounts
for the six months ended 30 June 2024 contain details of related party
transactions entered into by Ecora and/or the Group during such periods.

There were no related party transactions entered into by Ecora or the Group
during the period since 30 June 2024.

 

Appendix II

MATERIAL CONTRACTS

 

Part A

Material Contracts of the Group

No contracts have been entered into by the Group (not being contracts entered
into in the ordinary course of business): (i) within the period of two years
immediately preceding the date of this announcement that are, or may be,
material to the Group; or (ii) that contain any provisions under which any
member of the Group has any obligation or entitlement that is, or may be,
material to the Group, save as disclosed below.

Section 1

The Transaction

A summary of the principal terms of the Transaction is set out in the main
body of this announcement.

Section 2

Material financing arrangements entered into within the period of two years
immediately preceding the date of this announcement.

Revolving Credit Facility

(i)   In connection with the Transaction, the Group made certain amendments
to the RCF on 26 February 2025 as set out above under "Transaction Financing"
in the main body of this announcement.

 

 

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.

 

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