Rule Symposium 2026: Rick Rule interviews Marc Bishop Lafleche, CEO of Ecora Royalties PLC

Added: 2026-05-20

[00:00:01]This is Rick Rule from Rule Investment Media and the Rule Classrooms, sponsors of the 2026 Natural Resources Investment Symposium. Note that this symposium is meant to be used in conjunctions with the free lessons at the Rule Classroom, ruleclassroom.com.

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[00:01:53]Uh I have the good fortune today of interviewing a returning guest to our conference. It's my pleasure to welcome Mark Lefebvre, CEO of Equinox Royalty.

[00:02:05]Um let's Well, first of all, thank you for your efforts on behalf of shareholders, particularly me, of course, uh but thank you, too, for your ongoing support uh of our educational programs both at the Rule Classroom and the Rule Symposium. It's a pleasure to have you with us.

[00:02:21]It's a real pleasure, Rick, on both fronts. I I And in terms of the second what second part, I'm you know, to support anyone who's interested in learning more about mining is as I am so passionate about it personally to the degree I'm able to share that with others, you know, there's no no no higher pleasure for me.

[00:02:38]Well, that's a wonderful segue.

[00:02:40]Tell our audience something about yourself, expertise in mining, expertise in finance.

[00:02:45]Uh how did you come become qualified to run Equinox Royalty? How did you come to be qualified to answer questions from nosy interviewers like me?

[00:02:54]Well, I started my career really in in investment banking uh after studying a master's degree in banking and finance.

[00:03:02]I started work at Citigroup in London and I'm we're speaking today I'm I'm I'm in London, England uh where Equinox is based and I worked in the the industrials team primarily in large mergers, acquisitions, equity issuances for the industrial sector, primarily mining.

[00:03:21]Uh but in that period of time I also worked in leverage finance on a secondment. So, you know, that's a wonderful thing about some of these big big investment banks you have the opportunity to step away from your core area of expertise and grow in other areas.

[00:03:34]Which in hindsight, unbeknownst to me at the time, is almost the perfect background for royalty and streaming because as you know better than almost anyone, Rick, royalty and streaming is very much a mix of M&A, equity, and debt as a as a product class. So, when when I received a call in 2014 to to join Equinox and I contribute towards you know, transforming this company. I joined Equinox and it's been a 12-year journey to take Equinox from what was basically a single asset royalty company generating almost all its material cash flow and value from from a fantastic a Met coal royalty that was, you know, about to run out 12 years later which takes us to today and in that intervening period we've you know, transformed this company to to critical minerals exposure with 2025 coming in as I think in many ways as key inflection point for Equinox of the future and and demonstrating what it will soon be.

[00:04:36]Mark, tell us something about the history of Equinox.

[00:04:39]I mean going all the way back to being a unit investment trust many years ago to owning a coal coal royalty and tell me something about how you fashioned the transition from the Met coal royalty into a much more diversified principally base metals royalty company.

[00:04:56]Yeah, well the the the the the coal royalty I've been um is derived from an interest in land and it just so happened that underneath this land I was acquired in the 1980s there was huge value very valuable deposits of a steel making coal coal Met coal.

[00:05:13]And that started generating income really at the turn of the millennium.

[00:05:16]Which then led to a strategic pivot to you know, a royalty strategy although still mixing equity investments which continued to approximately 2014 and in 2014 the strategy became very centered solely on royalty investments no longer deploying capital well 2013 really 2014 solely to equity invest solely to royalty and stream investments no longer focusing on equity investments. The Kestrel royalty is one of these incredible royalties that's generated a huge amount of cash flow, which is really in largely in part contributed to our ability to completely transform Equinox. Uh but it was also historically uh been a vast amount of that cash flow has also been distributed to to shareholders as dividends. Um so a great like like anything in life, unfortunately, as we know, mining assets deplete. And that in many ways has been the issue around the Kestrel royalty.

[00:06:10]Fantastic royalty, great quality ore body, a very low cost operation, but finite in life. And as that royalty has approached the end of its life, we've seen generally lower valuation multiples attributed to the cash flows given they of course uh are not subject to to subject to increasingly shortening periods. So our challenge at Equinox has been to uh take those cash flows and reinvest them.

[00:06:35]And that's what we've been doing for 12 years, uh at least in the time that I've been there.

[00:06:39]Uh and and I think, you know, when you look at our performance in 2025, I think this really is an inflection point for this business in that it's the first year in the history of the company where more than 50% of the royalty income uh and royalty related income from streams as well is generated from assets that are not the legacy Met Coal royalty, which which is transformational for Equinox for for a number of reasons. I think number one, what you're talking about is a revenue profile that goes from from years to multiple decades, which is completely different. Um and I think the second is a complexion of the cash flows. I think the outlook uh on a fundamental basis is is really compelling when you look at projected supply demand balances in some of the critical minerals we've we've we've positioned this portfolio towards, for example, copper.

[00:07:27]Uh let's look at a little, you know, a little more detail on some of those assets. First of all, Kestrel.

[00:07:34]Uh you say short life. What's left? Uh how many more puffs does this cigar have in it?

[00:07:40]So so I think I mean 2026 will probably be the last year of sort of big chunky volumes for us. We expect year-on-year uh around 50% less volumes from 2026 and 2025 to 2026. And then from 2027 through 2030, somewhere between 25% of what we expect this year in 2025. So, I think you have a two full puffs but expanding over a couple years. And the exciting thing about Kestrel, of course, is because the royalty is ratcheted to price over that period of time, I still think we do retain a great amount of upside, albeit on lower production volumes. Uh but the most exciting thing is is the growth that exists, I think, in the in the produce in in the critical minerals portfolio, which has gone from less than 5 million in 2020 to approximately 36, 37 million in 2025 and the potential to be well above 100 million at the end of the decade.

[00:08:41]Um and so, while while, you know, I I I made the point earlier 2025 is an to us an inflection point in this business, it really does still feel as though we're just at the foothills of um truly demonstrating the cash generation potential that exists within the critical minerals portfolio as we look out to the future.

[00:09:01]Well, let's talk about that. Let's talk about uh what are the principal drivers in terms of current revenue growth uh and any drivers that you see three years, five years out? Uh tell us something about the complexity the complexion, pardon me, uh of the cash flow that you use to grow the company.

[00:09:21]I I I'm I'm glad you asked, Vic, because I love answering this question. Because when we started, Equiora was completely singular dimension just existed in one dimension. It was just what's happening at Kestrel. Right? And now today, when we look at the growth profile that exists, it's very layered. So, number one, over the next few years, we expect further cash flow growth from assets that are already in production. That's just the first layer of our growth profile. An asset like Voysey's Bay, which is owned by Valley Base Metals, or an asset like Mimbula, which is owned by Moxico, assets that are in production already and increasing their rates of production.

[00:09:57]And the second dimension to this layered growth profile are assets that are brownfield growth or restart potentials.

[00:10:04]So, as an example, Capstone Copper's Mantos Blancos is a mine that has potential for production increases utilizing and leveraging existing capacity and equipment.

[00:10:16]So, in other words, type of growth that is generally offers minors or or or relatively high and attractive return on invested capital because they're leveraging a lot of historical investments.

[00:10:29]That third third dimension to Equinox's growth profile relates to assets that are not yet in production, but are very close to coming into production and expected to come into the production in the medium term. So, an asset, for example, in this category is the Santo Domingo mine owned by Capstone Copper, which is one we spoke to a lot of attendees at your conference last year about, and I'm happy to report in the past year there's been a lot of progress on that asset, for example, moving towards first production.

[00:10:56]But, that's an asset that is expected and targeted by by the operator, Capstone Copper, to be to see a final investment decision later this year.

[00:11:05]And then the fourth category, assets that are not really expected to generate income in the next 5 to 10 years, but are still expected to drive value growth as they're de-risked. And an example for this category is NextGen's Patterson Quarter East, you know, which is an early stage uranium deposit in the Saudi Arabia of of uranium mining in the Athabasca Basin in in Canada. But, to date has just been incredibly exciting, over which Equinox has a royalty, and in time really has the potential to evolve into one of the best uranium royalties, you know, that in existence, albeit with the with the benefit of time.

[00:11:40]For generalist listeners, uh it's important to note that the deposits that Mark discussed uh are large multi-decade deposits.

[00:11:50]And what's important to know about that, and Mark will have experience of with this as a credit guy, I made the same sin, uh is that one typically underestimates the value of a very large deposit.

[00:12:02]You do it, you underestimate the value for two reasons.

[00:12:05]The first is that on a net present value basis, uh all of the value that matters occurs in the first 10 years. But after that 10 years is over, you reset the net present value clock at zero, which is to say it didn't deplete. The second is that these projects get put into production not when they've been drilled off, but rather when there's enough reserve and resource to amortize the capital, which is to say that very often uh these things at year 20 will have the same reserve profile that they had at year one. Uh I think Mantos Blancos, Voicey's Bay, uh all of those uh you know, uh meet that sort of description.

[00:12:46]Yeah. Um so I you know, I wanted to add that footnote because it's very very very easy to underestimate the value of very large deposits. What would you suggest uh will be defensible uh revenue levels in, say, 2027?

[00:13:07]And what do you see as potential near-term and then long-term value drivers? And if you could be fairly specific in terms of projects in your answer, that would be useful.

[00:13:18]Yeah. So, in terms of the the analyst forecasts, you know, and that's probably the best place to be because as a royalty company, uh our revenue profile is a function of two things, very simplistically, volumes pulled out of the ground and pricing. And we don't run the mines, right? So, I think the the the the best place to get provide indication is analyst consensus and the production guidance as put forward by our operator partners. And assuming those things, the revenue profile from the critical minerals portfolio is somewhere between 60 to 70 million dollars a year.

[00:13:49]Um and that compares to, you know, 36 million from the critical minerals portfolio last year. And then as we get to the end of the decade, including some of the new growth uh the new revenue income that's expected to be generated from assets not already in production, that has the potential to push the portfolio well above 100 million. And the key assets specifically are a mix.

[00:14:10]Um it includes uh an asset like Santo Domingo, which is which is a large one for us, owned by Capstone Copper. Um the the the a rare earth project, which is at very advanced stages of development, uh called Phalaborwa. And then a few other smaller assets, but those are the two biggest contributors to the the growth profile towards the end of the decade.

[00:14:31]It's important, too, for uh people new to mining to understand that in the royal royalty business, unlike the operating business, in effect, your gross is your net before G&A. Uh Mark is not responsible for the capital cost, for the sustaining capital cost, or for the operating costs.

[00:14:51]Uh tell me if we're talking about stabilized near-term revenues in the 70 million dollar range, what am I paying for this? What's the market cap and what's the enterprise value uh of Altius Yeah, so the enter Yeah. Yeah. Well, in the past month, it's moved around quite a bit every single day. Uh as of today, it's roughly 550 million US dollars. And the stock is trading on approximately a 10 times EBITDA multiple uh or or you know, a cash flow yield that is in the low teens. Um and trading at only 0.6 times uh price to net asset value. All these by the way, all these metrics are in our presentation on the Equora website. So, if someone wanted to have a look, we it's it's it's there, so you can see for yourself if you if I've gone too quickly. And I think, you know, I think the overall you know, this is something you and I have to spend a lot of time discussing Rick in the past, but I still personally am of the view that there's a really compelling entry point for Equora, which is partially a function of this major transition that we've been to as we've transitioned from short-dated cash flows in Metcoal, which are not that exciting and don't attract, you know, great valuation multiples in the market. And as our royalty income profile transitioned to multi-decade cash flows with expansion potential thereafter in critical minerals, which are much more exciting and have really attractive um uh long-term supply-demand balances and fundamentals outlooks. And therefore, I think there's there's real potential to see, you know, from absolute percentage in absolute terms revenue growth, but also valuation multiples expansion at Equora. And part of where we've come from and where we're going towards.

[00:16:25]In terms of growth, uh how much balance sheet and income statement flexibility do you have? How much debt do you have?

[00:16:32]How much debt capacity do you think you have?

[00:16:35]And uh what percentage of that 70 million growing uh is truly free cash flow, truly deployable?

[00:16:42]Yeah, well, I I mean, okay, so on let's take the second part first. So, as you said, we have generally low operating costs at Equora, right? So, we've been around 10 million US cash.

[00:16:52]Um, that comes off, we have tax.

[00:16:55]And that that the effective rate is expected to decrease as we move forward in time, given the cast the historical Metcoal royalty cash flows attracted historically amongst the higher tax rates. So, with the newer royalties that are coming into production and increasingly are that are increasingly generating income for Equora attract to lower tax rates, so you have a more cash flow conversion in that regard.

[00:17:17]Um, and in the other part of your question on deleveraging, I'm glad you asked Rick because this is something I said to you would happen and it's a real pleasure now to be able to talk about how it did happen.

[00:17:26]Uh, deleveraging. So, last year, just over a year ago, we we acquired a uh, producing copper royalty. That took our leverage up to our our drawn debt on our facility to just under $130 million.

[00:17:39]The facility allows us to go to 180. We have the ability to uh, subject to lender consent to upsize that facility.

[00:17:46]Uh, we we uh, delevered very quickly last year.

[00:17:50]Uh, we ended the year uh, roughly equivalent to where we started. And that's after having acquired a $50 million royalty.

[00:17:56]Uh, the portfolio largely driven off of um, the portfolio's performance, uh, but also the sale of a non-core uh, a gold royalty as well. So, we we're very happy to have uh, delivered as we said we would. That's something we spoke to a lot of people about last year, actually, when we were at your event. And it's and and it's nice to be able to to have delivered on that. But of course, that also means we have more flexibility to continue diversifying this business. And in my opinion, that's the key for Equinox. You know, I think we've we've created a great layered portfolio. Um, it's unique in that [snorts] it doesn't necessarily uh, there are few royalty companies that offer uh, the pure play exposure as we do uh, in a constant in a in a fairly diversified way to the critical minerals thematic centered in copper. But I feel we have much more work to do to really continue you to diversify that layered growth profile.

[00:18:47]And I feel like the the opportunity that's available in the market today is one where we're we're seeing a lot of opportunity to to just keep doing so in a very disciplined and patient way.

[00:18:58]I could continue this conversation all day, but Albert will give me the hook if I do. Uh, Mark, uh, I would like you to identify for our listeners the person within Agora uh, put pardon me, within Equinox.

[00:19:13]I got you confused with the publisher.

[00:19:15]Um uh that uh will help uh our listeners understand the story better. Who in particular should people reach out to and how exactly do they reach that person?

[00:19:28]Yeah, there are two people.

[00:19:30]And and and one of them is me and I assure you, Rick, I can and I would continue this conversation all day with great pleasure. So, you can reach me at [email protected].

[00:19:41]And if you're just looking for a quick question and you're not looking to uh you know, bite off more than you can chew, my colleague Jeff as well, uh Callow, c a l l o w, uh uh c a l l o w at equoroyalties.com. Both Jeff and I will have be uh we're at your conference last year. We'll be there again this year. So, you know, just feel free to reach out and and and I would love to hear from people that you know, we spoke to last year um in advance of of the event uh or at the event and likewise to to new people who have new questions. I mean, we've spent 12 years uh uh at Equora and there's there's frankly two things we like speaking more about than this company.

[00:20:20]Well, thank you for your efforts on behalf of shareholders, particularly of course this one.

[00:20:25]Uh and thank you too for your ongoing support uh of our educational programs both at the classroom and also at the symposium. I look forward to hosting you in Boca Raton, July 6th through 10th.

[00:20:38]Uh likewise, thanks, Rick.