REG - Ecora Resources PLC - Q4 Trading Update

Ecora ResourcesAnnouncement

31/01/2024 07:15

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RNS Number : 4415B  Ecora Resources PLC  31 January 2024

 

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.e (http://www.ecora-resources.com) cora-resources.
                                                                          (http://www.ecora-resources.com) com (http://www.ecora-resources.com)

 Camarco                                                                  +44 (0) 20 3757 4997

 Gordon Poole / Owen Roberts / Elfie Kent

 

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.

 

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