Ecora Resources PLC (LSE:ECOR, TSX:ECOR, OTCQX:ECRAF) this week unveiled a significant new deal that promises to elevate its commodity diversification efforts to a new level.
It is acquiring an interest in a copper revenue stream in the Moxico Resources’ Mimbula copper mine in Zambia, which is set to undergo an expansion and ramp up in production
CEO Marc Bishop Lafleche joined the Proactive studio, and told us that the $50 million transaction aligns with Ecora's strategy of focusing on royalties and streams over producing mines, contributing to immediate earnings and cash flow growth.
Lafleche says the deal "cements copper at the core of the portfolio."
Here we take a closer look at what was discussed.
Proactive: Marc, very good to speak with you. You've announced some acquisitions today in the copper space. Can you talk us through some of the highlights?
Marc Bishop Lafleche: Great to be here and great to be speaking about the transaction.
Well first, it's a fantastic start to 2025 and really builds on the momentum of a strong fourth quarter that we saw last year.
So the transaction itself, we've acquired a producing copper stream, Moxico Resources’ Mimbula copper mine.
The mine is located in the Zambian copper belt province.
We acquired the stream for a total consideration of $50 million. The acquisition cements copper at the core of our portfolio, and the stream has been structured to really front load the entitlements to the first 7 years, first 7 to 8 years of the reserve based mine life.
The consequence is that the stream is expected to deliver maximum contributions to our earnings profile in that period, and contribute to being number one materially, immediately accretive to our earnings and free cash flow per share from year one onwards.
Proactive: Ecora has the ability to hand-pick projects. What made this one so attractive?
Marc Bishop Lafleche: Yeah, there's a lot to like here. Well, first of all, it's a producing mine.
So there's a track record of production, it’s in a prime location, it's located, as I mentioned, in the mineral-rich Zambian copper belt province. It's a very high margin mine.
So, in other words, very low cost. And that means the ability to generate very strong cash flows throughout the commodity price cycle.
The mine has an 11-year reserve-based mine life with extension potential. And currently, the Moxico team is undertaking a brownfield expansion, which is expected to result in a fourfold increase in production from 14,000 tonnes of copper last year to 56,000 tonnes of copper once the expansion is completed in 2026.
Proactive: Marc, it looks like an interesting stream structure. Can you tell us more about the stream entitlements and why the transaction has been structured in this way?
Marc Bishop Lafleche: The stream has been structured to funnel net income to the first 7 to 8 years of the reserve-based mine life. The stream rate is 4.7% on the first 15,000 tonnes of production.
The stream rate on the next 15,000 tonnes of production reduces to 2.5%, and then incrementally, the stream rate on any production above 30,000 tonnes per annum is 1%.
The impact on a blended basis works out to being approximately a 2.3% stream entitlement.
The volumes are much more weighted towards the first band of production such that we expect the impact will be a stream that has relatively lower volatility as a result of the natural fluctuations in a mine, but also an expected ramp-up profile as the mine completes phase two expansion.
Proactive: How have you funded this transaction?
Marc Bishop Lafleche: We've funded this transaction with a mix of cash on hand and an upsized debt facility.
We've upsized the revolving credit facility to $180 million. At the same time, we extended the maturity of the facility out to 2028.
Following the transaction, proforma on that date is expected to be $126 million. By the end of next year, that would imply net debt in the range of $75 million.
Proactive: How does this play into Ecora’s growth strategy?
Marc Bishop Lafleche: Well first, I think this represents delivery on our strategy which we stated to focus on acquiring royalties and streams over producing mines, or that were very close to generating income, such that they would contribute in the short term to our revenue profile and also diversify our revenue profile in the short term. This deal really delivers against that strategy.
Ecora already has one of the royalty sector's leading copper growth pipelines.
But we think this deal really enhances that pipeline by adding growth. Copper now represents just under 50% of our portfolio's estimated net asset value.
This transaction really just cements that base metals exposure with a primary focus on copper.
Proactive: Well congratulations again on that deal. I hope you'll keep us posted on any progress with it. Thanks for speaking with us today.