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Producing royalties

Mantos Blancos / Copper

The copper concentrate produced at Mantos Blancos is very high-quality, with low levels of impurities and should remain in high demand by consumers.

Stage
Producing

Commodity
Copper

Operator
Mantos Copper

Location
Chile

Royalty rate and type
1.525% NSR

Balance sheet classification
Royalty intangible

What we own
The Group acquired a 1.525% net smelter return (‘NSR’) royalty over the Mantos Blancos copper mine in Chile for $50.3m in 2019. The Mantos Blancos mine is an open pit operation located in Chile, producing copper with silver by-products. The NSR entitlement applies exclusively to copper production at the mine.

The operation is owned by Capstone Copper, following the completed merger between Mantos Copper and Capstone Mining Corp in 2022

Performance
Income from the Group’s royalty increased 75% from $3.7m in 2020 to $5.7m in 2021. While the Group benefitted from the 9% increase in total payable copper volumes from 41.3Kt in 2020 to 45.0Kt in 2021, the primary driver of the growth in royalty revenue was the 38% increase in the underlying copper price to $8,318/t for the year (2020: $6,044/t). Copper prices have performed well since the beginning of the pandemic as industrial output, particularly in China, remains resilient. Most commentators are predicting a supply deficit in the copper market over the course of the next decade as new supply has been slow to come online at a time when demand, both from traditional sources and the electric vehicle market, has
increased. It would appear that over the medium-term there could be more upside than downside risk to the copper price. While volume growth was welcomed during the year, the progress of the debottlenecking project, which our royalty part financed, has faced ongoing delays primarily due to the impact of COVID-19 on workforce arrangements. This is anticipated to be completed in H1 2022 and the throughput improvements from the project are designed to increase the mill feed capacity from 4.3Mtpa to 7.3Mtpa

Outlook
We welcomed the announcement of the merger between Capstone Mining Corp, a C$2.5bn mining conglomerate, and Mantos Copper which completed in early 2022 and see this as a long-term positive for our royalty. A revised technical report was issued as part of the combination, which identified further production growth potential via the further increase of the sulphide ore processing plant capacity, a potential extension in the life of oxide ore leaching beyond 2023, and exploration drilling in the bottom of the pit.
While there has been some uncertainty around political events in Chile over the past year following the election of a new government with ambitions to radically alter the mining tax regime, this does not impact upon our royalty which is only exposed to NSR deductions – highlighting one of the main benefits of the royalty model. Importantly, we would not expect any tax changes to impact on the fundamental commercial viability of the underlying operation or the financing required to complete
the debottlenecking project.

The benefits of Copper

RECYCLABLE

Copper is recyclable without any loss of quality, both from raw state and from manufactured products

80%

An estimated 80% of all copper ever mined is still in use today

EFFICIENT

Copper is an efficient conductor of energy therefore is used in electrical equipment as well as uses in construction and industrial machinery

ENERGY

It would be difficult to imagine a successful transition to green energy production and consumption, smart electricity grids and electric vehicles without copper

Mantos Blancos : Key facts…

+54%

We entered copper at an opportune time for our shareholders, with copper prices increasing ~54% since acquiring the Mantos Blancos royalty

52Kt

Mantos Blancos has a current capacity to produce around 40-45Kt of copper per annum. Following the debottlenecking programme through 2021, Mantos is expecting a production rate of ~52Kt per annum over the next 10 years

59Kt

Mantos Copper could also potentially build a Phase 2 debottlenecking plant. This could see average mine output as high as 59Kt per annum through 2030, and a life of mine extension beyond 2035

Mantos Blancos : Zoom view

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