Latest / The Business Case - with Mark Wharrier and Phil Clark / S2 - Episode 8: The Business Case: Interview with Marc Bishop Lafleche, CEO of Ecora Royalties PLC

Transcript

S2 - Episode 8: The Business Case: Interview with Marc Bishop Lafleche, CEO of Ecora Royalties PLC · The Business Case - with Mark Wharrier and Phil Clark

• 0:16
  SPEAKER_02: Welcome to the business case in partnership with the leading investor presentation help engage investor.
• 0:22
  SPEAKER_02: This is the podcast where we dive deep into the stories behind the UK's leading companies.
• 0:27
  SPEAKER_02: I'm Mark Warrior.
• 0:29
  SPEAKER_03: And I'm Phil Clark.
• 0:30
  SPEAKER_03: And in each episode, we'll be sitting down with top business leaders to uncover their career journeys, the challenges they faced, and the insights that have shaped their success.
• 0:43
  SPEAKER_02: We will spend our careers analyzing and investing in UK companies, meeting management to understand the business case.
• 0:50
  SPEAKER_02: And now we want to share those insights with you.
• 0:53
  SPEAKER_02: We will hear about the companies our guests lead and how they are positioned for the future.
• 0:58
  SPEAKER_03: But we also want to find out what makes these business leaders tick, the highs and the lows that they have experienced, and the lessons of management that might apply to your life.
• 1:10
  SPEAKER_02: Please remember that this podcast is not investment advice and is for informational and educational purposes only.
• 1:24
  SPEAKER_02: Well, today we're delighted to welcome Mark Bishop LeFech, Chief Executive of ECORA Royalties, a listed mining royalties company with a market cap of about£350 million.
• 1:36
  SPEAKER_02: Mark joined the company in 2014 and became CEO in 2022.
• 1:41
  SPEAKER_02: Mark, welcome to the business case.
• 1:43
  SPEAKER_02: Thank you for having me.
• 1:44
  SPEAKER_02: Great to be here.
• 1:46
  SPEAKER_02: Good.
• 1:46
  SPEAKER_02: Well, um, before we go into the business and the drivers of the company, um, let's just talk a little bit about your background.
• 1:53
  SPEAKER_02: You worked in investment banking before ECORA, and now you're in a leadership position.
• 1:58
  SPEAKER_02: Um, you know, what were the the events that sort of shaped your career journey to this point becoming chief executive of the business?
• 2:05
  SPEAKER_01: Well, I started my career, as you rightly mentioned, in uh investment banking at Citigroup uh in London.
• 2:11
  SPEAKER_01: Uh I had the good fortune to work with some very talented people, um, and in particular some folks who were uh very passionate about mining, which drove me uh to gravitate towards the the mining team, uh working in mining sector coverage, and worked on a number of transactions, uh mergers and acquisitions, um, equity transactions, uh not all were successful, uh uh nevertheless all fantastic learning experiences.
• 2:38
  SPEAKER_01: And and I had a second uh stroke of good fortune where at Citigroup I was able to spend um just under a year on a rotation program in the leverage finance team, which in hindsight, combining MA experience, equity market experience, and leverage finance experience is um I think in I think in many ways the perfect background for royalty and streaming investing, given as a listed royalty company, you're you're you're you're obviously um interacting with listed equity markets and participants.
• 3:10
  SPEAKER_01: Uh your royalty acquisitions are not too dissimilar to uh MA process, but on an asset level.
• 3:16
  SPEAKER_01: And of course, the structuring of the instrument itself.
• 3:19
  SPEAKER_01: I mean, a royalty is somewhere between an equity investment and a debt investment, and we often structure these instruments with many features that are debt-like, security structures, intercreditor agreements with other lenders, and so forth.
• 3:30
  SPEAKER_01: So all struck of good fortune and luck.
• 3:35
  SPEAKER_01: Uh, it just so happened that um I then received a call from a recruiter in relation to a position at a at a company called Anglo Pacific, the the precursor to ECORA royalties.
• 3:46
  SPEAKER_01: Um and I um took the took the brave move to leave a big investment bank to join a very small royalty streaming company um with uh a big strategic challenge ahead.
• 3:57
  SPEAKER_02: Well, you've certainly repositioned the company quite materially uh during your time so far as chief executive.
• 4:03
  SPEAKER_02: You know, how would you describe the company today versus the one you joined in 2022?
• 4:08
  SPEAKER_01: Well, that that in many ways is the strategic challenge I I articulated just now.
• 4:13
  SPEAKER_01: Uh this business was entirely concentrated uh by commodity uh and by revenue um and by asset value in a single royalty, a phenomenal royalty over the Kestrel Steel Making Coal mine in Australia, which has generated sizable cash flows.
• 4:31
  SPEAKER_01: Um however, that royalty um has been producing cash flows to this business for many years, and mining operations uh were expected to move out of the cora royalty areas right around 2026, where we are today.
• 4:47
  SPEAKER_01: So the core, the core strategic imperative has always been to rebuild a diversified portfolio across many layers, uh the producing asset, uh near-term development, longer-term development, and so forth, um, which, you know, is not always easy to do when you're when you have an investment criteria prioritizing very high quality assets.
• 5:06
  SPEAKER_01: But I think in that regard, we've been quite successful.
• 5:09
  SPEAKER_01: And in particular, I've been very excited to see the business perform the way it has in 2025, where we've seen the company hit this inflection point where I think the company now is no longer perceived as a runoff steelmaking coal rob company, a royalty company, but rather a fast-growing critical minerals royalty company, which is very exciting for me, but not just me, everyone involved in the core story for the past uh 12 years, um, since I've been there, anyways, um, to transform this company.
• 5:37
  SPEAKER_02: Uh there's a big difference between a traditional mining company and a mining royalty company.
• 5:43
  SPEAKER_02: Um, but for the generalist investor who's listening, what's the simplest way to understand the difference between royalty company and conventional uh miner?
• 5:52
  SPEAKER_01: Look, this is gonna sound very nuanced, but it's very important.
• 5:55
  SPEAKER_01: ECORA has a market cap, as you mentioned, call it 350 million pounds.
• 6:00
  SPEAKER_01: So at face value, we are small cap, yes.
• 6:03
  SPEAKER_01: Small cap trading, yes.
• 6:05
  SPEAKER_01: But the folks operating and developing these projects, an aggregate or not.
• 6:11
  SPEAKER_01: So the Ecora portfolio spans over$300 billion of market cap uh of listed entities.
• 6:18
  SPEAKER_01: Um you have folks like Valley Base Metals, Capstone Copper, BHP, Rio, you know, some of the most blue chip names in the sector.
• 6:24
  SPEAKER_01: So Ecora as a royalty company is very, very different uh to a small cap junior developer in the mining sector with a single project, for example.
• 6:35
  SPEAKER_01: Um it's not to say it's better, it's not to say it's worse.
• 6:38
  SPEAKER_01: It really depends what the investor is looking for.
• 6:40
  SPEAKER_01: Uh, but if an investor is looking for diversified exposure across jurisdictions, uh commodities, counterparties, um, with low-cost assets, um, and the royalty model, I think equora really shines.
• 6:53
  SPEAKER_01: And in that maybe it's worth just taking a quick second to actually talk about what the royalty model is.
• 6:57
  SPEAKER_02: Yeah, no, go through it.
• 6:59
  SPEAKER_01: Yeah, and that's the second point of differentiation that I think makes Ecora very interesting.
• 7:03
  SPEAKER_01: I mean, eCora is the only uh uh royalty company focused on our commodity strategy listed in London.
• 7:09
  SPEAKER_01: Um and the royalty model is direct exposure to the revenue uh of of of resulting from the extraction of minerals from a from a from a mineral property.
• 7:20
  SPEAKER_01: So why does that matter?
• 7:21
  SPEAKER_01: Well, number one, you know, eCora derives its revenue from multiple projects or operations, and our revenue is a function of how many units are produced and what the price is at the time of extraction.
• 7:35
  SPEAKER_01: And therefore, as eCora, we don't have direct exposure to the operating costs of extracting the minerals from the ground, unless we have far less volatility that typically exists in a highly volatile sector.
• 7:47
  SPEAKER_01: And furthermore, a sector that uh has cash flow um that can be volatile as a result of very high capital intensity and uh operating leverage relative to other industrial sectors or even other sectors across the world.
• 7:59
  SPEAKER_01: So that's that's the first really impeling aspect of our business model is relatively lower volatility of cash flows.
• 8:04
  SPEAKER_01: Um and then I think the second, of course, is we aren't directly responsible for the capital costs or the ongoing maintenance costs of developing the project.
• 8:12
  SPEAKER_01: So um I in many ways the royalty model is much lower volatility or much lower beta than traditionally investing into a mining company.
• 8:23
  SPEAKER_01: And how that relative comparison will be very different.
• 8:27
  SPEAKER_01: You know, how diversified is the royalty company and to what mining company are you comparing the royalty model to specifically?
• 8:33
  SPEAKER_01: So you know there's a spectrum here, but overall I think it's really important to understand that ECORA in and of itself is not a mining company.
• 8:40
  SPEAKER_01: We are not seeking to be miners, uh, we are allocators of capital and we seek to allocate capital to very high quality operators um in um in established mining jurisdictions with long mine lives.
• 8:54
  SPEAKER_03: Just then uh Mark, just to pick up on that and just to again help our audience understand what is the logic or the rationale for your mining partners?
• 9:02
  SPEAKER_03: So you talked about all of those blue chip miners that you work with.
• 9:05
  SPEAKER_03: What what is it that they get from you?
• 9:08
  SPEAKER_03: Why do they why why do they need a cora as part of how the mine works and operates?
• 9:15
  SPEAKER_01: There are a lot of different reasons as to why a mining company may seek to uh pursue a royalty financing transaction.
• 9:22
  SPEAKER_01: Um but stepping back from it all, I'd say there are two ways that e-Cora uh grows its royalty portfolio.
• 9:28
  SPEAKER_01: So the first is to create a new royalty with a mining company, which is the crux of the question you've just asked.
• 9:33
  SPEAKER_01: Uh the second is to buy royalties that already exist from folks who own royalties over mineral projects.
• 9:40
  SPEAKER_01: And we've grown this portfolio per roughly by pursuing, it's not quite 50-50, but it's close enough to say that we've been uh we've grown this portfolio in sort of a primary and in a secondary way.
• 9:52
  SPEAKER_01: In other words, primary being the creation of new royalties and secondary being a transaction in relation to existing royalties.
• 9:58
  SPEAKER_01: Uh your question specifically, though, is with respect to why would a mining company be interested in royalty financing.
• 10:04
  SPEAKER_01: And I think uh it's obviously very situational specific.
• 10:08
  SPEAKER_01: Uh there is I think difficult to say with one size fits all approach, is the one size fits all answer.
• 10:16
  SPEAKER_01: Um but usually the royalty in stream financing is much more accretive than issuing equity and is much more flexible than issuing debt.
• 10:27
  SPEAKER_01: Um so let me unpack those.
• 10:28
  SPEAKER_01: Um you know the royalty and streaming instrument is taking exposure directly to production and price, but not necessarily to the volatility and capital cost, inflation, operating cost volatility.
• 10:40
  SPEAKER_01: And so by definition, the royalty should price and is less risky than investing in equity in a mining project.
• 10:47
  SPEAKER_01: Uh and secondly, it's more risky than debt, though, because the royalty is only payable in the event 38 production.
• 10:55
  SPEAKER_01: And we also take um production uh price risk.
• 10:58
  SPEAKER_01: So if you're a mining company, relative to equity, it's less dilutive, and then relative to debt, you have far less financial leverage on top of the already high operating leverage that exists, such that you know you're able to take drive return on equity, a high return on equity, a high return on invested capital by utilizing a royalty instrument without necessarily the same risk profile of a debt instrument with fixed servicing uh and and fixed servicing in the form of debt amortization and interest payments.
• 11:25
  SPEAKER_03: So fundamentally you you are a um financing structure uh amongst a series of financing structure options that the miners would have, including debt, including equity, including their own cash flow generation.
• 11:39
  SPEAKER_01: Yes, exactly.
• 11:40
  SPEAKER_01: And it's important to think it's very rarely one or the other.
• 11:44
  SPEAKER_01: I mean, it can be in certain instances, but if you were looking you know to look at a capital structure of a minor project developer, the royalty and streaming very rarely will entirely substitute equity, very entirely, very rarely would it substitute in its entirety debt.
• 12:00
  SPEAKER_01: I think it's part of a wider, uh, wider package of financing.
• 12:04
  SPEAKER_01: Uh and in many ways, because of its flexibility, you've seen the rise of royalty and stream financing as a very mainstream source of financing to the mineral sector.
• 12:12
  SPEAKER_01: Also, in part, of course, uh also a function of the fact that royalty and streaming companies do seek to deploy capital throughout commodity price cycles, right?
• 12:20
  SPEAKER_01: And uh in at times when equity capital and investor interest is is more challenging or equity market conditions are more choppy.
• 12:28
  SPEAKER_01: Uh the royalty streaming sector has certainly been a consistent source of financing to the mining sector.
• 12:34
  SPEAKER_03: And as a financial instrument, has the royalty um streaming business existed for a significant period of time or is this a relatively new construction?
• 12:44
  SPEAKER_01: Yeah, it's an interesting question.
• 12:46
  SPEAKER_01: You know, I think I would say Ecora sits outside of the most established form of royalty and streaming financing.
• 12:52
  SPEAKER_01: And most royalty and streaming finance companies, my market capitalization, are focused on precious metals.
• 12:58
  SPEAKER_01: So ECORA, in many ways, is quite unique by virtue of our focus on critical minerals, actually copper being the core of our commodity exposure.
• 13:05
  SPEAKER_01: But I mean that's that's probably a whole point in itself.
• 13:07
  SPEAKER_01: So we can come back to that.
• 13:09
  SPEAKER_01: Yeah, yeah.
• 13:10
  SPEAKER_01: We'll come back to that.
• 13:11
  SPEAKER_01: Um in terms of the royalty and stream financing, we're the mainstream, yes, today, absolutely.
• 13:16
  SPEAKER_01: I think 10 years ago it was really on the cusp of of moving from alternative financing to the mainstream.
• 13:22
  SPEAKER_01: But today, it's you know the merits and the virtues of the royalty and streaming model are pretty well understood.
• 13:28
  SPEAKER_01: So I th I very rarely do we uh uh have folks asking us what a royalty and stream is.
• 13:33
  SPEAKER_01: Uh so very few CFOs, anyways.
• 13:36
  SPEAKER_01: Got it.
• 13:36
  SPEAKER_03: Perfect, thank you.
• 13:37
  SPEAKER_03: Um, and then just picking up on a couple of the points you were talking about there earlier.
• 13:40
  SPEAKER_03: I mean, m mining is you know famously quite cyclical.
• 13:43
  SPEAKER_03: There's a lot of operational complexity in mining, depending on where you are in the you know in the development cycle.
• 13:50
  SPEAKER_03: As as somebody who's looking at driving and signing new royalty deals, what are some of the key decisions that you need to be thinking about and making in order to know whether that's a royalty stream that you want to get involved with or not?
• 14:06
  SPEAKER_01: We've been very focused at Icora and strictly adhering in a very disciplined way to a defined set of investment criteria.
• 14:15
  SPEAKER_01: I think it's served us very well.
• 14:17
  SPEAKER_01: Um it means being patient.
• 14:20
  SPEAKER_01: And at times it means doing nothing is is potentially better than doing something for the sake of it.
• 14:27
  SPEAKER_01: But if you take a long-term view in this sector, you know, it's hard to argue with with the with the consequent success of this strategy we've adopted.
• 14:35
  SPEAKER_01: And and and also more widely in the royalty sector, and not to mention investing in a sector as volatile as the resource base.
• 14:43
  SPEAKER_01: So those criteria themselves are first and foremost the quality of the ore body.
• 14:47
  SPEAKER_01: Um there's there's scarcity in in a high quality ore body across the world.
• 14:52
  SPEAKER_01: I mean, of course, there are mineral deposits spread across this planet, but in their concentration of the minerals of interest um in terms of the concentration of um um deleterious elements and and and size, not to mention ease and cost of extraction, creates uh scarcity amongst the highest quality ore bodies.
• 15:12
  SPEAKER_01: So if you position yourself to high quality ore bodies, by definition, you have an element of defensiveness.
• 15:18
  SPEAKER_01: And similarly, by positioning yourself to operations that are either in production but low cost producers relative to other producers of the same commodity or expected to be low-cost producers if these are development projects, uh, these operations then have um the ability to generate strong free cash flow margins throughout commodity price cycles.
• 15:41
  SPEAKER_01: And therefore, if you're a royalty investor, you have relative greater insulation against your greatest risk as a royalty investor, which is your uh the the project or the mine over which you have a royalty stops producing because it's no longer economic.
• 15:55
  SPEAKER_01: So um, not to mention, we've sought to uh partner with the best quality operators, you know, folks who have experience operating mines, building mines.
• 16:04
  SPEAKER_01: Um and I think it's served us really well.
• 16:07
  SPEAKER_01: It has meant being patient and it has meant you know at times measuring success in terms of the quality of the transactions as opposed to the number of transactions.
• 16:15
  SPEAKER_01: Uh, but when we when I look back uh on the last 11 years at Ecora, I think that's absolutely been the right decision and right move and remains the plan for the foreseeable future.
• 16:24
  SPEAKER_03: There's an old adage in fund management that sometimes the best decision is to do nothing.
• 16:28
  SPEAKER_03: So I mean it may there's maybe some elements of what you've just described there.
• 16:31
  SPEAKER_03: Um and then thinking just just thinking about um origination, how imp how how much of this is kind of relationship led that you you sort of do follow-on deals with a with a a subset of operators, or are you you know how how do you go about building the pipeline of new business opportunities?
• 16:50
  SPEAKER_01: A lot of what we've done historically has been primarily relationship-driven.
• 16:53
  SPEAKER_01: Um, I think that's probably one of our competitive advantages at Ecora.
• 16:57
  SPEAKER_01: We have a lot of experience transacting, um, and therefore we have ability to offer our our counterparties and operator partners really smooth um financing processes.
• 17:08
  SPEAKER_01: Um, we can move quickly.
• 17:10
  SPEAKER_01: We know how to structure these deals efficiently.
• 17:12
  SPEAKER_01: We can work with lenders and capital structures to to achieve inter-credit agreements uh relatively smoothly, or at least we believe we can.
• 17:20
  SPEAKER_01: Uh, and that and that, I think in and of itself is um helpful towards winning the next deal, right?
• 17:24
  SPEAKER_01: If your counterparties are happy, then they'll they'll tell others and that that's helpful to us.
• 17:29
  SPEAKER_01: Um I also think you know, one of the things we've done is is is just position ourselves with a lot of patience in front of the opportunities and partners we like and uh be ready for when the stars align.
• 17:41
  SPEAKER_01: Um so, in other words, uh we've been, I think, quite successful in identifying potential opportunities and positioning ourselves such that while they might not immediately be available, if it, if it's at times it's been years, but when they do open unlock as a result of the stars aligning, uh we've been ready to transact very quickly.
• 17:58
  SPEAKER_01: And um, and that's something that's that's really important as part of our sort of discipline and patient approach to identifying the right opportunities.
• 18:05
  SPEAKER_03: I mean, it sounds like you you you you do a lot of due diligence, but w where are some of the I mean, and you talked about some of the criteria there in terms of what the all all base is, the partners that you're operating with, what where they are in their development journey.
• 18:17
  SPEAKER_03: But where where do where do where do royalty investors still get caught out?
• 18:21
  SPEAKER_01: Well, on the first three that we mentioned, and and the fourth um that we have not spoken about, but of course is cyclical entry points, right?
• 18:28
  SPEAKER_01: And so we've spoken about quality and the counterparty, the asset base, the development team.
• 18:33
  SPEAKER_01: Uh, but you know, as a royalty and streaming investor, you're predicating your investment decision on number one a production plan, and that's and your underlying assumption is how much and when, and on commodity pricing.
• 18:46
  SPEAKER_01: In other words, what will be the value of those commodities when they're extracted extracted, upon which Equoro would receive a percentage of of the of the value.
• 18:55
  SPEAKER_01: Um and so you know, this is a 20-year investment decision, and therefore, if one is assuming a commodity price that's cyclically elevated, then 20 years is a long time to reflect upon how you've mispriced your deal.
• 19:08
  SPEAKER_01: You know, act in haste and repent at leisure, as they say.
• 19:13
  SPEAKER_01: Um and therefore, look, I think I think Cora has not really sought, and I think it would be impossible to say that you know we we achieve highly opportunistic and every transaction is priced at the lowest point in the cycle.
• 19:25
  SPEAKER_01: That would be that would be a stretch.
• 19:26
  SPEAKER_01: I think if anyone were to claim that, I'd I'd I'd be very suspicious if I were you.
• 19:31
  SPEAKER_01: Um but I think what we have done is able to identify commodities and points in the cycle that are are attractive entry points and um and and add commodities from our relative entry points that have attractive longer-term uh supply-demand balances such that we are we along with our partners uh benefit as these dynamics play out.
• 19:51
  SPEAKER_03: We'll we'll come back to the commodity cycle in a little bit, but but a couple more questions, just thinking about the the model and how it works.
• 19:57
  SPEAKER_03: In in terms of your portfolio, you you've clearly pivoted away from a sort of single asset or or single royalty stream to to being much more sort of pivoted towards more future-facing commodities, if you like.
• 20:12
  SPEAKER_03: Um what was it that was really behind that strategic pivot?
• 20:17
  SPEAKER_01: Well, the biggest one was the castrel royalty, the biggest factor is castrel royalty approaching the end of its life.
• 20:22
  SPEAKER_01: Um you know, when you have your primary source of revenue um depleting effectively.
• 20:31
  SPEAKER_01: Uh our core focus initially was to build out with with primarily the cash kestrel cash flows, uh buy royalties over assets already in production or close to production, such that as Kestrel approached the end of its life and eventually ran out, the revenue profile wouldn't collapse.
• 20:48
  SPEAKER_01: And that's been achieved actually now.
• 20:50
  SPEAKER_01: Um if you were to look at like the the the expected revenue profile on a through-cycle basis average from the portfolio of producing royalties we have today, and compare that historically to the cash generated from Kestrel on average, um, that's been achieved.
• 21:04
  SPEAKER_01: Um and next, the strategic objective was to build a growth profile that uh was more interesting beyond just the producing asset base.
• 21:12
  SPEAKER_01: Um, and then we've done that.
• 21:14
  SPEAKER_01: So today when we sit here and look at our growth profile at ECORA, I'm really delighted by how layered it is, although in a in a in a way that could definitely be improved.
• 21:23
  SPEAKER_01: And by layered, I mean ECOR's growth profile is a function of, first of all, assets that are already in production ramping up to full production capacity.
• 21:32
  SPEAKER_01: So, in other words, just demonstrating their free cash flow potential.
• 21:35
  SPEAKER_01: And so the ECOR share price has reacted very strongly in the last 18 months when we've seen the next wave of uh the producing uh asset baits uh demonstrate their free cash flow potential.
• 21:46
  SPEAKER_01: I think in part because you're transitioning from assets that are you're transitioning to assets that have multi decade cash generation lives as opposed to assets that have uh castrel, very short dated singular in capital mine life in single.
• 22:00
  SPEAKER_01: Years.
• 22:00
  SPEAKER_01: So of course, you will see very reasonable to see and expect multiple expansion.
• 22:06
  SPEAKER_01: But beyond that, the portfolio offers growth in brownfield expansions, greenfield expansions, in other words, assets that are not yet in production expected to come into production in the medium-term and longer term assets that will not probably unlikely to produce cash flow to ECOR in the next five or 10 years, but have the potential to drive significant per share capital growth as these assets are de-risked.
• 22:28
  SPEAKER_01: So that's a complexion of the portfolio that we're really happy with that this company has lacked historically, but it can always be improved.
• 22:36
  SPEAKER_01: And our from here, we think the key strategic uh imperative is to further diversify each of these layers I've just outlined.
• 22:42
  SPEAKER_03: Yeah, and I get I so I guess you're just diversifying from uh underlying commodity duration and then what where where you are in the sort of delivery of cash flows for that though those projects.
• 22:53
  SPEAKER_01: Precisely.
• 22:53
  SPEAKER_01: I mean, look, if you have 10 producing royalties, it's better than one, but it's not as good as 20.
• 22:58
  SPEAKER_01: Yeah.
• 22:58
  SPEAKER_01: It's not as good as 30.
• 22:59
  SPEAKER_01: And therefore, I think as we can diversify our portfolio of sources of revenue, but our sources of growth as well, ultimately, which is what you achieve is a lower volatility instrument.
• 23:09
  SPEAKER_01: Um, and I think there's a big prize for the first group who's able to offer that to uh the world, the global equity investors, because there are not that many ways today in the world.
• 23:19
  SPEAKER_01: If someone is looking for upstream thematic exposure to the critical mineral story, to do so in a royalty model um is quite unique.
• 23:28
  SPEAKER_01: So we're really excited about this opportunity that exists at eCora.
• 23:32
  SPEAKER_01: Uh, we're happy to have laid the foundations for that next phase.
• 23:36
  SPEAKER_01: Uh, from here, we think we just need to execute and really deliver on being much more diversified.
• 23:40
  SPEAKER_01: So we're not nearly as concentrated in any singular asset going well or going wrong.
• 23:45
  SPEAKER_02: Well, let's just dig a little bit further on in terms of the portfolio.
• 23:49
  SPEAKER_02: As you said, 2025 was a key year in terms of coal dropping below 50%, is now quite a modest part of the composite value.
• 23:57
  SPEAKER_02: Um, but you've got a couple of notable assets just looking through the report on accounts, um Canada, Voisey Bay, which is a producing cobalt asset, and Santo Domingo, which is a uh at an earlier stage, um, a Chilean copper asset.
• 24:11
  SPEAKER_02: Are are these sort of a couple of the the key drivers of value from here, or is there more on the development portfolio that you would uh you would highlight?
• 24:20
  SPEAKER_01: I mean those are certainly two of the key key royalties, but there are many, many more.
• 24:24
  SPEAKER_01: And and I'm not sure I think we'll I'm not sure it'll be a great move for your podcast to start going through every single one and start listing them.
• 24:32
  SPEAKER_02: But it it's sometimes quite diversified in terms of the value drivers from the Yes, absolutely.
• 24:36
  SPEAKER_01: It's much more diversified than those two.
• 24:38
  SPEAKER_01: Um, but those two are key, absolutely.
• 24:40
  SPEAKER_01: And and and I think Foysi's Bay as an example is an asset that um is is still ramping up to full production capacity.
• 24:48
  SPEAKER_01: We've seen really strong commodity price tailwinds on the copper on the cobalt.
• 24:53
  SPEAKER_01: Uh Santo Domingo is an asset uh owned by Capstone Copper.
• 24:57
  SPEAKER_01: Uh that Capstone is is targeting a final investment decision to construct to proceed with the development of this project uh later this year in Q4.
• 25:06
  SPEAKER_01: So that's certainly one to watch.
• 25:08
  SPEAKER_01: Uh but but this but the ECORA story is much more diversified than solely those two.
• 25:13
  SPEAKER_01: Um and I suppose that's really the key when I said earlier, what we'd like to do is achieve a much more diversified portfolio so that when we think about at any point of time on a time series basis, an investor is you know in eCora on a rolling time series, you would benefit from producing assets already in production, ramping up, new assets that are brownfield expansions, uh increasing production capacity or restarting.
• 25:38
  SPEAKER_01: Uh, and then as we move forward in time, assets moving up that development curve being de-risked and ultimately coming into production.
• 25:44
  SPEAKER_01: And you see, I mean, this is nothing new in the royalty sector.
• 25:48
  SPEAKER_01: What I'm describing here has been proven to work exceptionally well by royalty companies focusing on precious metals.
• 25:53
  SPEAKER_01: So effectively, really, what we're trying to do at Ecora and what we've we've achieved, although with a lot more work to do, is to mirror a strategy that's been rolled out to incredible success in gold and silver, uh, but take it to the critical middle story.
• 26:06
  SPEAKER_01: And that's where I think it's really unique in terms of having a scarcity of what we're offering.
• 26:09
  SPEAKER_01: I mean, there probably isn't in the world today a royalty company as concentrated in base metals, for example, uh as as we are at ECOR.
• 26:17
  SPEAKER_02: So portfolio, we have a balance sheet value that we we can look at and analyze, but presumably that's quite conservative because you know, over time there is upside from mine life extensions, technology, um, increasing yields.
• 26:31
  SPEAKER_02: Um, is that something you can quantify over time?
• 26:35
  SPEAKER_02: You know, how much upside there tends to be from these assets due to the natural improvement that takes place in these mines?
• 26:44
  SPEAKER_01: Yeah, that's that's that's a bit of a challenge, I think, under IFRS for some of our investors to do mark-to-market on our balance sheet.
• 26:50
  SPEAKER_01: Most of our royalties are carried at historical amortized costs and they're not written up.
• 26:54
  SPEAKER_01: So you're correct.
• 26:55
  SPEAKER_01: In the event that we're to be a sizable life of mine expansion potential, that probably wouldn't be reflected in, say, a royalty intangible asset under IFRS9.
• 27:02
  SPEAKER_01: Um, some of our royalties are adjusted for fair value, but uh most of the most of the royalties are not.
• 27:08
  SPEAKER_01: So um the best way to think about eCora's valuation would be to to run a discounted cash flow valuation of each of our royalties, um, and then derive some of the parts to to to sort of mark to market what what the present value of of the future expected cash flows is.
• 27:28
  SPEAKER_01: And thankfully, uh eCora, there are some excellent research analysts coming in eCora who who do a lot of this work.
• 27:34
  SPEAKER_01: Uh uh, but you know, a royalty company uh is assuredly much simpler to model than than a mining company, far more complex uh in a mining company with operations, costs, and so forth.
• 27:45
  SPEAKER_01: As I mentioned, modeling a royalty company and valuing it from a from an investor perspective is much simpler.
• 27:50
  SPEAKER_01: You're considering number one, how much production and when, as I mentioned, and number two, at what price.
• 27:56
  SPEAKER_02: And presumably over time, as the portfolio de-risks and becomes more diversified, your cost of capital gently comes down over time.
• 28:04
  SPEAKER_01: In theory, yeah.
• 28:05
  SPEAKER_01: And you I mean, I think we've seen the eCor share price and our cost of capital uh by extension reduce quite significantly as the royalty cash flows generated a transition from short-dated to multi-decade, and second to commodities that you observe in the market trading at higher valuation multiples relative to um to steel making coal.
• 28:28
  SPEAKER_01: So, for example, copper equities generally trade at discernible valuation uh multiples um relative to um discernibly higher valuation multiples relative to med coal.
• 28:42
  SPEAKER_02: And does that mean as that cost of capital falls, your appetite for debt increases?
• 28:46
  SPEAKER_02: Because you're a very cash-generative business in the speed with which you pay down the debt that you take on.
• 28:51
  SPEAKER_01: Yeah, UCORA for its size generates um relative to other value, other royalty companies of our size has a large proportion of our net uh net asset value uh in producing royalties.
• 29:02
  SPEAKER_01: Um, research analysts estimate approximately 50%.
• 29:06
  SPEAKER_01: So, as a consequence, we've been able to utilize those free cash flows to fund growth and drive um and bootstrap our debt capacity uh for to accreditably fund our next deal and so forth.
• 29:19
  SPEAKER_01: So the revolving credit facility in 2014 was around zero or 10 to 15 million, which has been grown to 180 million today with the further uh accordion subject to agreement with our lenders.
• 29:32
  SPEAKER_01: And largely that's been exactly as you mentioned by focusing on uh allocating our cash flows into generating more cash flows from other royalties and bootstrapping up that debt capacity.
• 29:41
  SPEAKER_01: And the business, I mean, we have utilized the revolving credit facility really as an acquisition facility, and we've done so very prudently and very cautiously.
• 29:51
  SPEAKER_01: Uh, but we've done so generally when we've we've expected to achieve really rapid deleveraging following the acquisition, and we have a track record of doing so.
• 29:58
  SPEAKER_01: And you see that as recently as the acquisition uh completed in 2025, uh, we bought it producing Copper Stream and we for$50 million, and we ended the year after using our facility primarily to fund that acquisition with a debt roughly the same as where we started the year before the before that acquisition.
• 30:16
  SPEAKER_01: So yeah, as we look to the future, I'm it's pretty exciting to to to to be able to drive uh a creative growth as a mix of of um the the debt capacity that exists in the business, and then potentially as you you know in in time you could consider utilizing um you have you have more options to grow the business as as the equity cost of capital uh uh reduces.
• 30:38
  SPEAKER_03: I mean, as I I guess the logic is that as a long duration asset, anything you can do to bring down whack on in any DCF, all things being equal, sort of drive drives more value.
• 30:49
  SPEAKER_03: Um but I uh just to expand on that a little bit, because we we really just talked about the organic growth opportunity, but just in terms of consolidation, you talked about you've made a number of acquisitions.
• 30:59
  SPEAKER_03: How how much more is there to go for?
• 31:01
  SPEAKER_03: Is this is this becoming more important part of the strategy for you in terms of suppl supplementing organic new uh royalty deals on top with the MA, or is that is the are you happy with sort of where you sit today?
• 31:17
  SPEAKER_01: I think the key strategic imperative for ECORA is just to continue to be far more diversified.
• 31:22
  SPEAKER_01: Um and therefore the way to achieve that is to continue to um continue to acquire royalties.
• 31:29
  SPEAKER_01: Um at the moment we're generally focused by time, the majority on time on royalties and streams that are at the advanced end of the development curve.
• 31:38
  SPEAKER_01: So in other words, assets that are royalties over mines that are already in production, or if not in production, very close to being in production.
• 31:47
  SPEAKER_01: From we also, of course, um consider our earlier stage opportunities, although um as a smaller minority of our time, and number two, as uh in the context of smaller absolute deal values, such that you know, following that strategy, the the balance of the portfolio will remain weighted towards assets in production or at the front end of the development curve.
• 32:10
  SPEAKER_01: Uh and I do think that as we continue just to diversify this profile, um there's um I think there's there's an ability and time to further drive down the cost of capital in eCor as your beta and your volatility reduces.
• 32:23
  SPEAKER_01: Uh, but number two, I also believe it's a really attractive time to be acquiring royalty exposures given the commodity outlook for the critical minerals we target.
• 32:33
  SPEAKER_03: Well, maybe that's the perfect way to segue into talking about the commodities, commodity market more broadly.
• 32:39
  SPEAKER_03: Just uh maybe, maybe a starter for 10, sort of talk us through the logic of the commodity bets that you've made within the portfolio.
• 32:48
  SPEAKER_01: I mean, if you take a step back, right, we've positioned this portfolio as some fairly large mega trends that are um we believe very attractive.
• 32:57
  SPEAKER_01: Um and the first, I think, is the intersection between technology and the mineral space.
• 33:04
  SPEAKER_01: And if you were to reflect on the last decades of primary drivers of economic growth in many areas, you would observe very asset-like business models.
• 33:12
  SPEAKER_01: Uh and if you look to the future, I think you could argue, and it's hard to disagree, that something like AI, uh, energy transition, um, digitization, um these things are are incredibly materials intensive, relatively speaking.
• 33:29
  SPEAKER_01: And so I think what you see is a strong intersection of of the critical minerals, uh, materials sector, and the next next at least the next few decades of of economic growth.
• 33:41
  SPEAKER_01: Um that's also in the context of you know the estimates vary, but let's let's just say a decade and a half um or of historical relatively low investment to to further develop and and brand bring new projects uh into production.
• 34:02
  SPEAKER_01: And I think it's easy to forget that minerals and mines are by definition depleting assets and thus require new assets over time to come online to replace that production capacity.
• 34:12
  SPEAKER_01: And so if you combine if you combine a historical period of underinvestment relative to prior periods, and then key areas of economic growth driven by higher materials intensity, you have the um in a very obvious way the parameters for a really attractive fundamental commodity outlook.
• 34:35
  SPEAKER_01: And that that is that is part of it.
• 34:38
  SPEAKER_01: I think the second dimension is geopolitical because government agents have have observed this.
• 34:43
  SPEAKER_01: And I, you know, this is not news to anyone who reads any newspaper.
• 34:47
  SPEAKER_01: Uh, we have seen governments recognizing the importance of access to critical minerals to secure um economic growth uh and and and geopolitical objectives.
• 34:57
  SPEAKER_01: So now you have governments sort of entering the arena seeking to ensure access for for along along you know geopolitical lines to these critical minerals for for the economies of today and the future.
• 35:10
  SPEAKER_01: Um and then of course, through it all, you have other factors.
• 35:14
  SPEAKER_01: You know, there was a time when um when when when not so long ago where it was hard to imagine that one out of four cars would be EVs, and that's the reality today.
• 35:28
  SPEAKER_01: Right?
• 35:28
  SPEAKER_01: And and people today do seem to sort of speak about EV sales growth in a disappointing way.
• 35:34
  SPEAKER_01: I mean, I think it's quite incredible that in in the in slightly more than a decade the world is not one out of four cars as an EV, but that that's just me.
• 35:42
  SPEAKER_01: And that's expected to continue into the future with all the implications of energy demand uh upstream, all the way up to energy production, distribution, grids, storage, and so forth.
• 35:53
  SPEAKER_01: Um we haven't even spoken about robotics, but we're really at an age when you combine with AI when you start to imagine some pretty incredible things, whether they be manufacturing lines, whether it be humanoids.
• 36:06
  SPEAKER_01: Um I'm sure that you've I can't imagine that the two of you have not spent time considering what what Tesla is up to in the human humanoid arena and the direction of where Tesla is going.
• 36:16
  SPEAKER_01: Uh, drones and and other areas.
• 36:18
  SPEAKER_01: So, so and all that, all that is on top of just plain old traditional demand as we run our lives as we normally do and live in cities and you know, have a washing machine and turn on the lights and do all these things.
• 36:31
  SPEAKER_01: So, so look, I think thematically the trends are are I won't belabor it because if anyone's really interested in this or able to access this information, it's all over the it's it's very easy to to to to research.
• 36:43
  SPEAKER_01: But you know, to us it's a really attractive, attractive outlook upon which to predicate uh a portfolio strategy of critical minerals.
• 36:50
  SPEAKER_01: Um and at a time where historically, as I mentioned to you, um the price today in commodities reflects demand today in commodities, not necessarily what expected demand will be and supply-demand balances will be in five, 10, 15, 20 years and so forth, which is necessary when one is investing in a royalty in the stream by definition.
• 37:09
  SPEAKER_01: Because when one is investing in a royalty or stream, you are taking a 15 to 20 year view on that commodity.
• 37:14
  SPEAKER_01: Uh it's a very liquid instrument.
• 37:16
  SPEAKER_01: It's not the same as investing in in an equity when someone can sort of ride the next wave and exit.
• 37:22
  SPEAKER_03: Yeah.
• 37:22
  SPEAKER_03: You've you've laid out my words, not your, but a but a pretty pretty strong argument there for a sort of commodity super or critical mineral mineral super cycle.
• 37:30
  SPEAKER_03: Uh how sensitive is Ecora to you know significant upside or downside on on achieved price if that doesn't necessarily if uh if that your base case doesn't play out as you expect.
• 37:43
  SPEAKER_01: Well, I think I think the story as it stands today, if you just run spot prices, um I think you'd be we'd be very happy to run spot prices that exist today.
• 37:53
  SPEAKER_01: And and and and I think one of the key things to observe in eCor is that typically we would just receive nominal prices.
• 38:00
  SPEAKER_01: So, you know, if you if you believe in underlying inflationary forces persisting, and we've seen those for five years now, a decade, and we know in various forms.
• 38:14
  SPEAKER_01: More more recently, and as a result of uh energy shock, uh then as a royalty company, we effectively are positioned to be very defensive exposure where as time continues and you know the these inflationary pressures manifest in higher production costs and thus higher um commodity prices necessary to incentivize future production, ECOR as a royalty company is exposure to that top line, but not directly to the uh operating costs.
• 38:44
  SPEAKER_01: So I think I think even within the mining subset to your question, which is what sort of sensitivity do you have to commodity prices up or down, you generally have less sensitivity on the downside um simply because um you don't have direct operating cost exposure to erode your margins.
• 39:01
  SPEAKER_01: And so you provided you have the right underlying exposures in your portfolio and the mineral, the mines themselves have are sufficiently low costs that they can stay in production and keep generating cash flows.
• 39:12
  SPEAKER_01: Or number two, um, and the development projects are sufficiently attractive that they receive capital and are brought into production, I think the role you you do you're fairly well defensively positioned as as a royalty, uh, as a royalty company and royalty exposure.
• 39:27
  SPEAKER_03: You've you've you've sort of skewed your portfolio mix more towards copper and cobalt.
• 39:33
  SPEAKER_03: Um how are you seeing the copper market in terms of sort of potential shortage of demand uh of supply?
• 39:40
  SPEAKER_03: Because as you said, it's critical for the energy transition.
• 39:44
  SPEAKER_03: Uh there's there seems to be an increasingly sort of demand requirement on copper.
• 39:48
  SPEAKER_03: Is the supply side keeping up?
• 39:51
  SPEAKER_03: Does that is that something that's a a new opportunity or a further opportunity for you?
• 39:56
  SPEAKER_01: Well, if the basic arithmetic in the copper market is really compelling.
• 40:01
  SPEAKER_01: Um estimates vary in terms of when.
• 40:05
  SPEAKER_01: I've seen very few that disagree on the idea that the outlook for copper is an undersupplied market that will require further investment.
• 40:13
  SPEAKER_01: Even it and the further you go into the future, even it and the more speculative you become in terms of possible and incremental sources of supply, uh, you still expected to see very sizable supply deficits.
• 40:27
  SPEAKER_01: And so what does that mean?
• 40:29
  SPEAKER_01: Well, number two, I think the most obvious conclusion is we're likely to require higher commodity prices to incentivize the supply of new production.
• 40:38
  SPEAKER_01: Um and so we've centered our portfolio around copper for that reason, as and also because of the fact that copper is uh amongst most diversified in terms of its end uses.
• 40:47
  SPEAKER_01: I mean, copper by definitely copper is is a conductive element.
• 40:50
  SPEAKER_01: Uh, and it really transcends, I think, the many underlying trends we spoke about earlier uh as a as a conductive element of electricity.
• 41:01
  SPEAKER_01: Um it's it's it's why copper has been described by many as the oil of the future.
• 41:08
  SPEAKER_02: Good.
• 41:09
  SPEAKER_02: Well listen, um, we're sort of coming to the end of the uh the conversation now, but I just wanted to touch on um being a listed company, which is uh a common theme in the the um the podcast that we have because the the London Stock Exchange has not been without its challenges over the last few years.
• 41:26
  SPEAKER_02: And Icora's actually been listed since 1986, right?
• 41:29
  SPEAKER_02: So it's it's it's been listed a long time.
• 41:31
  SPEAKER_02: Yeah, as a chief executive, what have you found the positives and negatives um of the LSE and what what do you think could be improved?
• 41:39
  SPEAKER_01: Well, 1986.
• 41:41
  SPEAKER_01: I mean, I guess I I speak to 2014.
• 41:44
  SPEAKER_01: How about that?
• 41:48
  SPEAKER_01: Um I look, I think the royalty model uh as a permanent source of capital um can be really successful as a listed vehicle.
• 41:58
  SPEAKER_01: Um I think that as a royalty company, we are isolated in the UK.
• 42:04
  SPEAKER_01: I mean, you have other groups here with secondary listing, a very large precious metals royalty company.
• 42:09
  SPEAKER_01: Um but but most of our peers are are listed in North America.
• 42:15
  SPEAKER_01: Uh, but that really hasn't stopped, I think, global investors from um ac you know buying into eCorra over the last two years.
• 42:25
  SPEAKER_01: There has been a trend amongst our register that um we've seen sort of net outflows from the UK and overall uh our exposure to to North America and Europe for that matter have have have been net uh have increased.
• 42:41
  SPEAKER_01: Um I would never bet against the British, although I think in some ways um you know the the the sort of US exceptionalism has been incredible.
• 42:52
  SPEAKER_01: Um and it's not a surprise that that's attracted a lot of capital uh from global markets.
• 42:57
  SPEAKER_01: On the flip side, I think there are some fantastic companies and in on the LSE, uh eCor being one of them, um, that on a relative basis appear highly undervalued.
• 43:07
  SPEAKER_03: Mark, if we think about what what what your what ECORA is offering investors, I mean obviously one way of getting exposure to commodities is is through an ETF.
• 43:16
  SPEAKER_03: Um, but it sounds like you know you're you're much more of a compounder.
• 43:18
  SPEAKER_03: How do you think about that kind of opportunity?
• 43:23
  SPEAKER_01: It's a really interesting question.
• 43:25
  SPEAKER_01: Um I mean look, an ETF can exist as a physical commodity strategy, so let's and also as a as a strategy in listed equities.
• 43:34
  SPEAKER_01: So let's do those separately.
• 43:36
  SPEAKER_01: Um so starting with a uh a physical commodity strategy.
• 43:40
  SPEAKER_01: I mean a royalty generates cash, a physical commodity only appreciates up and down with with price, so um, and has storage costs, so very different there.
• 43:50
  SPEAKER_01: And and it's therefore you're sort of a compounding asset as a as a royalty strategy relative to a physical metal ETF.
• 43:57
  SPEAKER_01: And by virtue of if you were to compare.
• 44:00
  SPEAKER_01: Cora to a listed equity strategy, I think you achieve in both an element of exposure to a number of underlying operators and commodities and jurisdictions.
• 44:12
  SPEAKER_01: But I think the nature of the exposure is different as a royalty investor, as we've discussed, relative to an equity investor.
• 44:19
  SPEAKER_01: And of course, um the royalty strategy, I think over time has the ability to compound uh as we reinvest and grow our royalty portfolio accretively from the cash generated from a royalty basket, which may or may not be the case depending on the ETO strategy.
• 44:34
  SPEAKER_01: So look, I don't think one is necessarily better or worse than the other.
• 44:38
  SPEAKER_01: It depends what an investor is looking for.
• 44:41
  SPEAKER_01: And the royalty strategy, like ECORA amongst other royalty companies, really sits somewhere between a direct exposure in a in a mining company and not having any exposure at all to the sector.
• 44:53
  SPEAKER_01: So in other words, it can be a great uh intermediary exposure.
• 44:56
  SPEAKER_01: Someone is looking for a diversified exposure to the to a to either a critical mineral or to a precious metal strategy, or as an alternative to you know, like potentially going out and building a 20 equity exposure portfolio and managing that oneself as a as an equity investor.
• 45:14
  SPEAKER_02: Perfect.
• 45:15
  SPEAKER_02: Now we've touched on this on in various uh uh answers you've given to our questions, but you know, how would you kind of sum up what um perhaps the stock market still misunderstands about the value within the business and the future potential?
• 45:28
  SPEAKER_01: Yeah, if you it's funny, if you had asked me that 12 months ago, I would have been sitting here saying to you that the market perceived eCora as a declining revenue core royalty vehicle, and we perceived eCora as a really exciting, fast-growing critical minerals royalty company.
• 45:47
  SPEAKER_01: And it's amazing how in 12 months things can change.
• 45:50
  SPEAKER_01: Um and it's very exciting, actually, that you know, by virtue of the performance of the portfolio in the last 12 months, um, by demonstrating the cash generational that exists, starting only in the producing asset space, um, there's a great buzz around eCora and the company as it stands today.
• 46:06
  SPEAKER_01: Um, and obviously the the backdrop for the critical mineral suite has been uh very topical.
• 46:12
  SPEAKER_01: Um and in that sense, I do appear, I do believe that we appear still to only really be at the foothills of the organic growth profile that exists within eCora.
• 46:21
  SPEAKER_01: Um I'm very excited for for the short, medium, long term.
• 46:26
  SPEAKER_01: Um, and I think the team is really energized to just keep at it and keep diversifying this business.
• 46:31
  SPEAKER_01: So we look to the future with an enormous amount of energy and enthusiasm to take this company from where it was 12 years ago from a single asset running off to uh to where we are today.
• 46:43
  SPEAKER_01: Um, it's been wonderful.
• 46:44
  SPEAKER_01: It's been a great journey, and we can't wait to keep going.
• 46:47
  SPEAKER_01: Look forward to seeing where it'll be in 10 years.
• 46:49
  SPEAKER_02: And if we were to sort of peer forward uh 10 years, you know, what would you like the business to look like and to have achieved?
• 46:56
  SPEAKER_01: I think 10 years from now, what we'll really be benefiting from is these long mine lives over which ECOR has royalties.
• 47:05
  SPEAKER_01: Um, because many of the royalties that are in production today, Boises Bay, Mantos Blancos, amongst others, have the potential for sizable life of mine expansion uh beyond the reserve lice uh and beyond the extensions we've already seen.
• 47:19
  SPEAKER_01: So if you combine that with the potential for new mineral projects being brought into production, um I think that's when you really start to see the portfolio that we've assembled shine in terms of the multi-decade uh exposures that exists uh within this company.
• 47:35
  SPEAKER_01: And that's just such a contrast to how this company has always been perceived as a sort of taking talk, clean-clock, short runway met coal royalty company.
• 47:44
  SPEAKER_01: So so yeah, that's that's a piece I'm most excited about.
• 47:47
  SPEAKER_01: And and and more generally, if you were to, that's the micro, and if you were to look more generally at the macro, I think the commodity backdrop is incredibly exciting uh for all the reasons we've already mentioned and for all the more structural longer-term trends that it that exist that are, as I mentioned, you know, ad nauseum, but but are still quite exciting.
• 48:04
  SPEAKER_01: The um really attractive long-term fundamental outlook for the critical rental suite.
• 48:09
  SPEAKER_02: Great.
• 48:10
  SPEAKER_02: Well, that's a great note to finish on.
• 48:11
  SPEAKER_02: Mark, thanks for appearing on the business case.
• 48:13
  SPEAKER_01: Thank you for having me.
• 48:14
  SPEAKER_02: Thanks very much.
• 48:16
  SPEAKER_03: Well, Mark, we had uh Mark there from uh Acoya Royalties, uh certainly a business I wasn't familiar with before we um had Mark come on the podcast.
• 48:27
  SPEAKER_03: What did you think?
• 48:28
  SPEAKER_02: Yeah, uh frankly, a lot more interesting than I thought it was going to be.
• 48:31
  SPEAKER_02: Because I'm you know, we both invested in mining companies uh over the years, and there's that old fund management um quote, you know, definition of a mine as a hole in the ground owned by a liar.
• 48:41
  SPEAKER_02: Um and that for a lot of speculative mining companies that is the case.
• 48:46
  SPEAKER_02: Um, but this is much more of a DCF of very high margin cash-generative annuities.
• 48:52
  SPEAKER_02: Um, so it has to be looked uh very differently.
• 48:55
  SPEAKER_02: What were your impressions, Phil?
• 48:57
  SPEAKER_03: Yeah, look, really interesting.
• 48:58
  SPEAKER_03: I mean, the big takeaways from me was that clearly the underlying asset that that um Ikora were exposed to, I can really sort of paint a quite strong ballmark ball case for that, you know, supercycle.
• 49:12
  SPEAKER_03: You know, Mark clearly did a much more eloquent job than I'm going to in in the discussion we had around what are the fundamental drivers for copper, cobalt, and some of the other metals that they're exp and minerals that they're exposed to.
• 49:27
  SPEAKER_03: I hadn't appreciated that ultimately this is a this is a funding vehicle for for the mining companies, and actually, you know, they're they're just clipping checks um what once those mines are um producing assets.
• 49:42
  SPEAKER_03: And I think what how Mark has transformed this business from being a single asset that's in in runoff to a you know a multiple sort of streams of diversified income streams makes it super exciting.
• 49:56
  SPEAKER_03: I mean, I was a bit of a DCF junkie when I was uh on the investing side for all of its faults, but I can really see how diversification of the income streams really can drive down cost of capital.
• 50:10
  SPEAKER_03: And I know that was a question that we talked about with Mark.
• 50:13
  SPEAKER_03: And that that just has a has a sort of virtuous circle or cycle effect because you you get bigger, more diverse, you've got a more visibility on your income stream, your risk-free rate or sorry, your your risk-adjusted return probably improves, and then you've got cost of capital coming down like that.
• 50:29
  SPEAKER_03: That's a that's that's a really interesting setup, I think.
• 50:31
  SPEAKER_02: Yeah, and I think as as Mark said, uh, you've got this lovely dynamic of long-term contracts.
• 50:37
  SPEAKER_02: You know, these are 10, 15, 20, 25 year contracts that you've signed, you get all of the leverage uh upside from the price cycle as commodities um you know go go you know rise in in price, but the uh the cost space is secured, you know, it's the cost base of the vehicle rather than the cost base of the mine.
• 50:56
  SPEAKER_02: And as I'm sure we've both uh seen over the years, when you do have these mining booms, you get a lot of inflation in the cost base, and then governments decide that they want a bigger take.
• 51:06
  SPEAKER_02: So this is a lovely way to kind of compound without having the um the inflation in the cost space.
• 51:12
  SPEAKER_03: Yeah, the other thing I thought was quite interesting, it's always worth reminding, is that they haven't reinvented the wheel here, that there are well-established royalty businesses in precious metals, and you know, Mark and the team have clearly identified an opportunity to replicate uh a financing model against another set of commodities.
• 51:35
  SPEAKER_03: And um, yeah, really interesting conversation.
• 51:37
  SPEAKER_03: It's uh as I said, uh not a business I'd really come across before, and it I really enjoyed the conversation.
• 51:44
  SPEAKER_02: Good.
• 51:44
  SPEAKER_02: Well, hope you all enjoyed the conversation too.
• 51:46
  SPEAKER_02: Uh, lots more interesting guests, UK company CEOs coming up in the next few weeks.
• 51:51
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