Ecora Resources PLC (LSE:ECOR, TSX:ECOR, OTCQX:ECRAF) reported a US$10.2 million loss for the first half of 2023 as it begins a multi-year transition in the constituent commodities of its portfolio.
There was no change in the royalty company’s dividend payment plans though, with a quarterly payment of 2.125c to be paid next month, bringing the first-half dividend to 4.25c.
For the six months to June, the group's portfolio contribution reduced by 52% to US$44.5 million, down from the outsized returns the previous year when the Ukraine war drove up commodity prices and led to a £130 million profit.
This year, as well as the reduction in portfolio contribution, a US$43.8 million fair value loss on the revaluation of the Kestrel steelmaking coal royalty due to depletion and slightly lower forward-looking pricing inputs resulted in the loss.
Since the end of the period, Ecora acquired a royalty over Chile’s Vizcachitas copper project, which has an estimated 26-year life.
Chief executive Marc Bishop Lafleche said: “Our performance in the first half of the year has been in line with expectations for a lower portfolio contribution following a record outcome in 2022.
“Ecora has now entered the first of a multiyear transition in the commodities underlying the composition of our revenue mix, which will see a run-off in the Kestrel steel making coal royalty, and income growth from our portfolio of royalties exposed to future facing commodities which has the potential to generate over US$100 million of annual portfolio contribution in the medium term.”
While commodity prices have remained subdued in the first half of the year, he said the longer-term outlook “continues to remain very positive for decarbonising commodities which, combined with an environment of limited sources of growth capital for mining companies, has created a favourable dynamic for royalty acquisitions”.
As part of the initial transition in the next two to three years, the company said Kestrel revenue will become more volatile on a quarterly basis as operations move in and out of the group's private royalty area.
Production is expected to remain outside of the private royalty area for the majority of the second half of this year, with volumes that had been anticipated in the fourth quarter likely to be deferred into the first half of 2024.
Of the growth assets designed to replace the Kestrel income, work at Voisey's Bay to develop the underground mine has seen slower progress than anticipated, the company said, but there were six deliveries of cobalt in the first half of the year, five more are expected in the second, and there is expected to be a step-up in the number of deliveries in 2024.
Further ahead, in Australia, BHP is developing the West Musgrave nickel-copper project in line with a target of first production in the second half of 2025; in Brazil, Piauí has been producing nickel for 12 months from a starter plant and financing discussions are said to be ongoing for the construction of a full capacity production facility; and Capstone Copper is expected to publish a feasibility study later this year on the fully permitted Santo Domingo copper-iron project in Chile, which Ecora hopes will confirm the current 2027 guidance for first production.