RBCWas surprised that they cover this company. Their upside scenario target is GBp 400. With a current exchange rate of C$1.69 to the GBp, their current and upside targets work out to C$3.38 and C$6.76. Toss in the 7% dividend and this has the potential to be a very lucrative long term investment. Added more yesterday. GLTA
July 24, 2023
Ecora Resources PLC
Adds Chilean copper royalty to bolster long-term growth
LSE: ECOR | GBp 118.00 | Outperform | Price Target GBp 230
Sentiment: Positive
Ecora will acquire a royalty over Los Andes Copper's (TSXV : LA) Vizcachitas copper project found in Chile, for $20m in cash. The royalty will consist of 0.25% net smelter return from the (currently) 26 year reserve life.
The Vizcachitas copper project is a $2.4bn pre-feasibility study project with 1.2 bt of copper reserves at 0.4% copper and 1.5 bt of resources at 0.44%. The project is found 120km north of Santiago and is located near multiple large copper mines including ANTO's Los Pelambres, AAL's Los Bronces and Codelco's Andina mine. According to the pre-feasibility study, the project is expected to produce 183ktpa of copper over the first 8 years and then 153ktpa over the life of mine. The cash costs for the first 8 years are expected by Los Andes Copper to be at $0.93/lb Cu and $1.25/lb Cu for the life of mine. Los Andes is guiding to first production in 2029.
The terms of the royalty provide a series of step up clauses of 0.1% should the mine not be operational by June 2030 (or cash payments of $15-20m at Los Andes election) through June 2032. There is also a 0.125% royalty over any underground operations.
Our view: Ecora continues to execute on its strategy to shift from coal into longer dated battery metals royalties. We think this transaction fits the strategy perfectly. Adding copper increases future metals exposure and the longer dated tonnes come in a project that should have substantial extension optionality.
We expect Ecora to have a series of choppy quarters in 2023 as the Kestrel mine provides uneven contributions, and as Vale reported last week, Voisey's Bay's continues to struggle with the transition to underground. Adding Vizcachitas to the mix helps to reinforce both parts of the strategic pivot. The transaction is easily funded via Ecora's cash and financing reserves (~$50m). We continue to believe that Ecora's royalty structure is substantially undervalued by the market. The shares are trading on 0.59x NAV and 8.2x 2023e EV/EBITDA. We maintain our Outperform recommendation.