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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, everyone. Welcome to Nova Royalty Corporation Fourth Quarter and Full Year 2022 Corporate Update Call.
Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked, could constitute forward-looking statements and are subject to risks and uncertainties relating to Nova Royalty's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. Risk factors that may affect results are detailed in Nova Royalty's fourth quarter and full year 2022 management's discussion and analysis and other periodic filings and registration statements. You can access these documents under the company's profile at sedar.com.
I'd like to remind everyone that this conference call is being recorded today Friday, March 24, 2023.
On this call, management of Nova Royalty Corporation will be quoting dollar figures. All figures are in Canadian dollars unless otherwise noted. Participants on this call will be Alex Tsukernik, President and CEO of Nova Royalty; and Hashim Ahmed, CFO of Nova Royalty.
At this time, I would like to introduce Mr. Alex Tsukernik to provide an update on the quarter. Please go ahead, sir.
Thank you, operator, and thank you everyone for joining us today. With me on the call is Hashim Ahmed, our new CFO, whom we're very excited to welcome to the Nova team.
Nova released its fourth quarter and full year 2022 financial results and corporate update after market closed yesterday. You can find our consolidated financial statements and MD&A on the Nova Royalty website or under our profile on sedar.com.
2022 was a great year for Nova's portfolio growth and advancement. Nova now owns royalties on five of the top 10 open pit copper development projects in the Americas. To put this into perspective, when we started 2022, we only had two projects on this list. We acquired the royalties on Copper World and Josemaria, two long life development projects that are being prioritized and actively advanced to our construction decisions by Hudbay Minerals and Lundin Mining respectively. Hudbay has guided to a construction decision at Copper World in 2024 to 2025, and we expect a construction decision from Lundin Mining in 2024 at Josemaria. Those assets, in addition to Taca Taca where First Quantum has guided to a construction decision in 2024, give Nova arguably three of the most advanced greenfield copper projects in the Americans. Furthermore, in February of this year, Los Andes Copper, the owner of the Vizcachitas Project, released a positive PFS and an initial reserve report with metrics that clearly place it among the top tier of copper development projects in the Americas.
Seeing our portfolio reach expand, we're very excited about a full pipeline of acquisition opportunities that will propel Nova into its next stage of growth.
In March, 2023, we increased our position in Copper World, our second transaction with the original owners of the royalty. Just as we've done with our prior royalty acquisitions, where we have built a relationship with the sellers and bought the royalty in multiple increments, we're very happy to solidify the relationship with this family. Nova currently owns a 0.165% NSR on Copper World with a right of first refusal for an additional 0.51%.
As we look at our acquisition pipeline, we're excited to see opportunities to expand on existing relationships, and build new ones that will significantly improve the company. Nova's hallmark since the beginning has been close relationships with royalty owners who have become meaningful shareholders because they believe in the company. As our portfolio has reached critical mass and the world gets even more challenging, we believe that we will continue to see interest from high quality counter-parties to engage with Nova and become a part of what we're doing for the long term.
Given the rise in interest rates and the corresponding increase in the cost of debt and equity capital, we're now also seeing new interest from quality issuers in the originating royalties and streams. Given what we see among the geopolitical and macro trends, we believe that we're only in the beginning stages of this development.
As we enter our next stage of growth, we've also added several key team members, Doug Silver as a Director; and Hashim Ahmed, the CFO. Both of them bring unique skill sets to the company and will help Nova achieve our vision of becoming a generational investment for our shareholders.
Financially, the Aranzazu mine achieved multiple quarters of record production with the royalty covering the majority of our cash G&A. We're grateful to help the continual support of our largest shareholders, who have supported our acquisition and growth efforts during a challenging time in the capital markets.
Moving now to Slide 4, I'd like to provide an update on some of our key assets in Q4 2022. Q4 relative portfolio performance was characterized once again by solid operational performance at the Aranzazu mine, and steady advancement of our key development assets. Aranzazu continued to perform well in Q4 2022, selling 13.8 million pounds of copper equivalent, up 14% from Q4 2021 and 9% higher than in Q3 2022. For the full year 2022, Aranzazu were sold 52.3 million pounds of copper equivalent, a 16% increase compared to full year 2021, which was the result of a full year of operations at an expanded throughput capacity. Looking ahead, Aranzazu's operator Aura Minerals reported that it expects to produce approximately 101,000 to 116,000 gold equivalent ounces for 2023, which is largely in line with 2022 production levels. Additionally, Aura reported this month that it's looking to increase mine life at Aranzazu by advancing drilling at several promising targets near existing mine workings. Aura expects to continue infill drilling and additional geological work at these target areas in 2023. I would like to again commend Aura for the excellent, excellent job data. It's very difficult to operate a midsized copper mines as well as they have, and our kudos to them for doing so. We remain confident that Aranzazu's strong performance and revenue generation will continue.
Similarly, our large development royalty assets also progressed during Q4 2022. At Taca Taca, First Quantum continued to conduct pre-development, permitting and feasibility activities. First Quantum submitted two environmental permits regarding key infrastructure at Taca Taca. The primary environmental and social impact assessment for Taca Taca was submitted to the Secretariat of Mining of Salta Province in 2019, and First Quantum anticipates the approval of the ESIA in 2023. Water supply studies and pump tests to support the application for a water permit advanced steadily in 2022 and the results are expected to be completed in early 2023. Additionally, in November 2022, the Salta Production Minister signed a resolution, approving the environmental pre-feasibility for the Taca Taca 345 kilovolt power line development. The power line development still requires detailed construction permits, but the main environmental aspects of this development have already been approved. First Quantum expects to continue primary work in 2023, as well as government engagement regarding key aspects of an administrative and fiscal regime for investment into Argentina.
At Josemaria, Lundin Mining continued to advance commercial agreements and permitting with national and provincial authorities in Argentina and is advancing work for the baseline capital cost estimate and project execution schedule. Plant engineering, including procurement of long-lead equipment is ongoing and was 38% complete as of the end of Q4 2022. Early work is continuing on-site, including the preparation of platforms for the camp and batch plant, additional fuel storage and increasing camp capacity. Pre-construction works, including internal access roads were also advanced during 2022. Lundin Mining reported that it submitted the environmental impact assessment for a new power line, while permitting works and agreements regarding power supply, concentrate logistics, infrastructure funding and a project construction union agreement continue to progress. Lundin Mining reported that it spent US$237 million at Josemaria during 2022 and intends to spend approximately US$400 million at Josemaria during 2023. Lundin Mining also reported that approximately 31,000 meters of drilling has been completed at Josemaria since the 2020 Mineral Resource and Mineral Reserve Estimate was published by Josemaria Resources. These results are expected to be included in an updated technical report, which is expected to be published in the second half of 2023.
At Copper World, Hudbay continued with permitting efforts in Q4 2022. Hudbay reported that they applied for an Aquifer Protection Permit from the Arizona Department of Environmental Quality. In October 2022, they submitted an application for an Air Quality Permit to the ADEQ. Hudbay reported that it expects to receive these two remaining state permits in 2023. Hudbay also reported in 2022 that it received approval from the Arizona State Mine Inspector for its amended Mined Land Reclamation Plan for the Copper World Complex, which is a key state permit. In January 2023, Hudbay received an approved right-of-way from the State Land Department that will allow for infrastructure such as roads, pipelines, and power lines to connect between properties and Hudbay's private land package at Copper World. Hudbay also reported that it's continuing to advance prefeasibility activities for Phase I of the Copper World Complex. These activities are expected to include the following: conversion of inferred mineral resources to measured and indicated; optimization of the layout and sequencing of the processing facilities; and the evaluation of other upside opportunities.
Pre-feasibility level engineering for the main processing facility as well as geotechnical and hydrogeological site investigation activities were completed by the end of 2022. Metallurgical test work continued into 2023, the results of which are being analyzed as part of Hudbay's concentrate leaching trade-off evaluations. Hudbay expects to release a prefeasibility study in the second quarter of 2023. Hudbay also reported that upon receipt of state permits they expect to conduct a bulk sampling program at Copper World to further de-risk the project. The objectives of this program would include the following: testing grade continuity; variable cut-off effectiveness; and metallurgical strategies. Lastly, Hudbay reported that following receipt of the state permits, they intend to initiate a minority joint venture partner process, which will allow the potential joint venture partner to participate in definitive feasibility study activities in 2024.
At Vizcachitas, Los Andes Copper continued to advance work and its prefeasibility study during Q4 2022. Los Andes Copper also continued to conduct initial resource modeling for mine plan optimization work on general engineering, infrastructure planning, plant design, and environmental considerations. Los Andes announced that it expects to resume drilling in Q4 2022 to expand the resources at Vizcachitas beyond those being currently considered in the PFS. Subsequent to year end Los Andes announced positive results to the PFS in February 2023. The PFS contemplates a conventional open pit mining, crushing, grinding and flotation to produce a copper-silver concentrate and molybdenum concentrate product. Over an initial 26-year mine life average annual production is expected to be approximately 153,000 tonnes of copper with average annual production of 183,000 tonnes of copper over the first eight years. The PFS contemplates an after-tax NPV of US$2.8 billion for the project. Los Andes also reported an initial proven and probable mineral reserve for Vizcachitas of 1.2 billion tonnes at 0.36% copper, 136 parts per million molybdenum and 1.1 grams per tonne silver. Los Andes also reported measured and indicative resources of 1.5 billion tonnes at 0.38% copper, 155 parts per million molybdenum and 1.1 grams per tonne silver.
Before I hand the call over to Hashim Ahmed to provide an overview of our financial results, I would like to personally take the opportunity to welcome Hashim, who was appointed to the role of CFO midway through the first quarter of this year and has already hit the ground running. Hashim’s skillset and experience is invaluable for Nova, as we realize the next chapter of our growth story. I’d also like to personally thank our outgoing CFO, Bill Tsang, for all of his hard work and dedication to the company.
And with that, I'd like to turn the call over to Hashim.
Thank you, Alex. And hello, everyone. I'm excited to join Nova Royalty and look forward to working with such an accomplished Board and management team. The current team has accumulated a portfolio of strong and attractive copper royalty assets and is positioned to be a unique player in the growth of the global copper sector. With the advent of electrical vehicles, the demand for copper is expected to rise exponentially. I plan to support the Board and management in scaling our royalty and delivering superior returns to our shareholders.
Picking things up at Slide 6, in Q4 2022, Nova's revenue was $0.5 million compared to $0.5 million in Q4 2021. For the year ended December 31, 2022, Nova recognized $2 million in revenue compared to $0.7 million in the prior year. There’s increase mainly in revenue from the full year of production from Aranzazu NSR. Nova recorded a net loss for Q4 2022 of $1.9 million or $0.02 per share compared to a loss of $5.2 million or $0.06 per share in Q4 2021. Of the $1.9 million net loss, $1.5 million of the loss was due to non-cash items, primarily share-based equity compensation, interest accrual, and depletion expenses. The reduced net loss compared to the comparable quarter last year was attributable to a lower G&A expense, low share-based payments, and a $2.7 million impairment on the Twin Metals royalty, which was incurred in Q4 2021.
Net cash used in operating activities for the year end December 31, 2022 was $2.1 million compared to $4.5 million in the year ended December 31, 2021.
Turning to the balance sheet on Slide 7. At the end of Q4 2022, the company had a cash balance of $1.1 million compared to $1 million at the end of Q4 2021. In Q4 2021 -- 2022, the company issued 968,700 common shares in the ATM equity program for gross proceeds of approximately $1.5 million. Subsequent to quarter end Nova drew $1.5 million under its existing amended restated -- and restated convertible loan facility with Beedie Capital. The proceeds of the drawdown will be used to fund royalty acquisitions for general corporate purposes. This drawdown increases the amount drawn on the Beedie facility to $9.5 million with $15.5 million available to the company. At the same time as the drawdown, Nova also issued approximately 1 million Nova shares through its ATM program for gross proceeds of additional $1.5 million. Currently, at the time of this call, Nova has a cash balance of approximately $3.3 million. Along with the revenue expected from Aranzazu and $15.5 million available through the Beedie facility, we have sufficient capital resources to cover our near term liquidity requirements.
That concludes my comments. Back to you, Alex.
Thank you very much, Hashim. We are now in a truly unprecedented time, geopolitically. At a time of constant change, we're building a company with diversified royalty exposure to some of the world's truly essential mineral assets. We always set up to be a generational investment that our shareholders can pass on to their children. We've preached patience since we started with one royalty on a Newmont project as a private company in 2019. Since then, we've patiently but aggressively grown the company toward our vision without compromising topnotch asset quality. We expect to continue doing so going forward. We are excited to see the progress of our operators in bringing the assets toward production, and we believe that the true value of Nova's assets will fully be known only years into the future, as they become keystone producing assets in the portfolio of the major companies.
As always, we would like to thank all of our shareholders for their support throughout the years. We look forward to updating the market on our progress.
And now, operator, I'd like to open the line up for questions.
[Operator Instructions]. First question comes from Mike Kozak of Cantor Fitzgerald. Please go ahead.
Good afternoon everybody. Just two questions for me. First one, can you just clarify because it's not entirely clear in the MD&A, and if you mentioned it on the comments, I apologize. The size of that convertible debt facility with Beedie, is that CAD 20 million or CAD 20.5 million? It's not entirely clear.
Mike, the gross size of the facility is CAD 25 million. We have drawn down CAD 9.5 million. And so that gives us availability of CAD 15.5 million.
Perfect. Thank you. And then the second question. On your Taca Taca and Josemaria royalties, if and when those mines start producing. Are you going to get paid in Argentinian pesos or in USD?
In the case of Taca Taca, it's in USD. It's an excellent royalty agreement when you look at it. Actually one of the legacy owners of Taca Taca is the ex-President of Argentina. And so the investor group when they initially put the property together was very professional from the start. So royalty agreement from the time that it was actually written, of this professionalism is very unusual and great. In terms of Josemaria, it's more nebulous right now. So it could be in dollars, it could be in pesos. I think it's something we probably want to clarify with the operator before the company goes to production.
Thank you. The next question comes from Adrian Day of Adrian Day Asset Management. Please go ahead.
Yes. Thank you. Good morning. I had a couple of questions, if I may. The current mine life on Aranzazu, what is the current mine life? And then when do you expect your first revenue from one of the new -- your next new revenue?
So in terms of Aranzazu, what we really like about this property Adrian is that it seems to be growing consistently. When they opened the mine back in 2018, I believe the expected mine life was about 5.5 years. When you look at it right now, the reserves plus the M&I, give it 10 years, plus there is additional inferred that would take it out a little beyond that. And now they are looking at an increase in the mine life even further through the resource delineation drilling, which Aura has discussed. So the way we see it right now, this could be one of those camps sort of in Taca Taca that goes for decades and decades into the future. When you look at the area, mining has been going on there, I believe, for about 500 years. So we will see what the details are like, but it's something that we think indeed a very long life asset for Nova.
In terms of future revenue, when you look at how we have built the company, priority one was to get royalties on really these Tier 1 development projects, which are really in the next batch going into production in the sector. So, we're expecting construction decisions at Taca Taca, Josemaria, Copper World in the next couple years as we disclosed. If you budget just say four to five years to build a major mine of that nature, you're talking about end of the decade, which is really -- as soon as possible for a major copper mine in today's environment.
In the current environment in the market, we are seeing some excellent acquisition opportunities for more near term cash flow. And so, as a part of just our strategy from beginning, most the balance of the duration of the portfolio, so we're bringing in some more near term assets. So we're excited about some of the things we're seeing and hopefully we can execute on that.
[Operator Instructions] The next question comes from Justin Stevens of PI Financial.
Just a couple for me here. Obviously, the back and forth with First Quantum and El Cobre was -- been a bit of a mess, it seems like it's at least on the right path here. Do you see that having any impact in terms of potential timelines for Taca Taca? I know, obviously First Quantum was looking to ease its balance sheet before tackling a project of that scale.
Justin, I think, what happened in Panama is probably something that's going to be very much part of the future of the sector. Unfortunately, everything that happened there, they're back in operations. But I think that resource nationalism I think is going to be a core part of the world we live in. What we've done, if you look at the portfolio, we've invested in places that we think are the friendliest to develop in the major projects and actually seen them produce and succeed over the years. So if you look at say, Salta and San Juan, I think these are probably the most supportive jurisdictions you'll find anywhere in the Americas right now.
Chile is clearly heading in a better direction, and I think Arizona, particularly for private land is very hospitable in terms of developing projects. But I also think, look, prices will go up. I think, they have to go up given everything we're seeing in the sector, and governments will see that and I think you can expect that they will go back and ask for more. I think that has to be the base assumption for anybody who looks at the sector.
That said, I think, the way to differentiate between those places is see who is committed to the success of the sector and some deal will be worked out and in some places I think, it's a much more fragile environment and you can potentially have real damage done. But again, when you look at the sector and you have multiple problems from an operating perspective, obviously resource nationalism and governments asking for more is one factor. But the parts that keep us up at night much more and that we worry about before we invest in anything is the social disruptions. When you look at what's happening in Peru in multiple projects, that's something that cannot be negotiated away so easily.
And so, if it's a question of say a higher royalty rate that you give to the federal government, we think that's actually a much better problem to have than say a community disruption, which is not straightforward. But then I think that's where the real issues happen. So when we look at underwriting projects. We look very carefully at the social environment. I think that probably preoccupies us much more than anything else because you want to make sure that you're locally in a place where you actually wanted. The governments will ask for more. I think the good operators understand that, they budget for that upfront. They're only going to go build projects that are really good. And so we feel very comfortable that what we've picked are strong enough projects sitting at the forefront of these people's pipelines is that we think they will get built. And even if people ask for more in the future, we think the projects still -- are still very viable and sustainable from that perspective.
No, that makes sense. I think that is a sort of a key point that sort of gets missed. And one of the reasons that having a base metal royalty company does actually make a lot of sense, because it does take some of the edge off of the risk profile by spreading it out amongst different projects. And especially projects like you say that are well situated, obviously a little ways out like any of the large projects are, but it gives exposure across the board, which is kind of nice. And I guess it'll be interesting to see what Josemaria sort of can negotiate in terms of its Argentinian deal to be the first sort of a large project in a while here.
I think, it's a very fortunate situation that Josemaria is probably going to be the first in Argentina. The Lundin family has done very well in the country. And I think they've clearly demonstrated the know how to operate and that will be I think the bellwether for the whole sector. Everybody else who's going to go afterward, it is going to be Taca Taca and whoever else. I think that will be probably the blueprint by which everyone is going to operate. But one thing I think you clearly see in Argentina is that there's a widespread commitment really across all levels to see the mining sector really grow as a part of the economy. And I think they see the opportunity. The geology has always been there. The projects have always been there. But I think what you haven't had before has been the will overall to see things happen. And now that when you look at the bluechip investment that's come into Salta, San Juan, just the last two or three years, it's really incredible. I mean [Cementos] has just put in $150 million worth. But even beforehand, you had BHP, Rio Tinto, First Quantum, Lundin, Pasco. I mean these are the strongest companies around really committing themselves to a future in these provinces.
So we're very happy in terms of where we are. I think these things always -- these agreements are always complex to execute no matter how supportive people are. But we feel very good about the future of these projects in Argentina and Salta San Juan for sure.
I think -- yes, that I've always -- I mean I have always hoped that Argentina can sort of maybe steal some of the spotlight here from -- away from Chile as sort of a key copper producer going forward because there's -- the rocks are fantastic and it'd be nice to see that sort of get added into the mix.
Switching gears a little bit, I mean, I know you've indicated that you're looking towards adding cash flowing or near term cash flowing projects into the mix. Obviously, the base metal space doesn't have quite the same breadth of call it junior to intermediate producers. What do you sort of see the landscape being right now in terms of that sort of potentially third-party royalty on an existing smaller operation versus origination of a new stream of royalty?
I think you've got to be very careful with smaller operations. There are, I mean, Aranzazu I think is a great example of how it goes when it works well. But I think, to be honest with you, there's a lot more cases where it doesn't work well, because I mean, this is a very difficult business, especially copper mining. I mean the capital needs of the mine will often overwhelm whatever profit exists above the line. And I think you just have to understand that. And again -- and also in an environment like this where you have more and more requirements on companies to continue operating successfully, and that's from governments, that's from regulations, that's just from general difficulties, sometimes sourcing material, that's from inflation, I don't think inflation here will slow that much personally, just given what we see. So, I think you have to be that much better as an operator to succeed. So we are -- we think this environment actually benefits us in many ways because whereas debt and equity we're previously preferred by the stronger operators -- stronger mid-size operators in terms of financing themselves when debt costs are often 15% and equity is even higher, I think a royalty that's yielding something reasonable say in a nominal range of 7%, 8%, but obviously gives us exposure to commodity price upside, and project expansion is a very attractive instrument from both sides. So I think that the capacity to do win-win deals right now is much greater for us I think than it's ever been in terms of origination.
In terms of buying existing royalties, of course, look, that has been our main business to-date and we see some great opportunities. I would break it up into two discrete parts. One is, people who have very strong development assets. When you look at what Nova has, where we have legitimate critical mass in this sector in terms of Tier 1 development projects. We are a really natural vending vehicle for people for people with those things. And there is people also have very strong cash flowing -- near-term cash flowing royalties. And that's also a very natural sort of counterparty for us, because obviously putting those assets in has a huge benefit for Nova right now, because we are very strong on the development side in terms of when assets are coming in. We would like to add more cash flowing -- near term cash flowing royalties. So we think there is a natural complement there.
But irrespective of which group you are looking at, we have critical mass of really the key projects in the sector. So it's a great time for us to grow, whether it’s origination, whether it’s third-party. We see opportunities that we didn't see before six, 12 months ago for sure.
Got it. I think that's a good overview there. Lastly, I mean, slightly broader strokes. But I mean, on the copper side, we are seeing inventories, like finished inventories here just tracking lower and lower and lower. Given the inelasticity of sort of the supply end, do you sort of see a demand shock coming here? And my read is that, only can go one direction and that's higher price, because there really isn't a tap you can turn on. But just curious of your thoughts on where you just see the balance in supply and demand for the copper side of things?
Well, the thing is that the -- let's put away the demand side for a second. Even if you didn’t have the energy transition, which obviously is pretty material, it's a good question, where the supply is going to come from. I mean, we own the royalties on arguably the three most advanced major projects in the Americas, and so that the construction decisions there are coming in '24, '25 based on operator disclosure. And each one of those projects has multiple billions. In each project, you're going to have to get a joint venture, a partner who has the capital to help you build it, at least one. And even with every, all the stars aligned, then motivated operators and capital partners, you still have to work extremely hard and invest probably at least five years in order to make that work. So -- and permitting is not getting any easier anywhere. Nothing is getting easier. So I think the supply story in copper, I don't think people will really understand how difficult it is to bring just one into production.
If you now move on to demand side, so when Anglo put Quellaveco into production recently, they had a very good comment. They said, you're going to need about 60 of them, and then by 2040, to meet the needs of the energy transition. So that means about three to four a year, roughly. And this is a sector globally right now that builds less than one. So you are talking about a fundamentally different investment approach that you are asking the industry to take, relative to what it's done historically. And the only way I think you can do that is by, is price.
Now the good question -- but one thing to remember also on projects with this type of CapEx and scale, this isn't something where you put in a small amount of money that you can lose, which is where IRRs and NPV calculations probably become relevant. This is an absolute at the company moment for even a large company. So you look at, say, First Quantum or Antofagasta, they have two or three large mines. That is basically the entirety of their production portfolios by and large, absence of smaller operations. So when they build -- these are the types of projects we have royalties on. So whenever you build one of them, it's a massive commitment by the company from every perspective. It's management team, time and reputation. It's capital, it's everything. So I think that in order for people to feel comfortable investing the types of capital that the industry and the world is going to need, you're going to need much higher incentive prices, I think, before you can really have this conversation seriously. I mean when you look at what's happening right now at $4, I don't think that's even nearly enough.
So, I think it'll be very interesting to see the supply response -- the price response in the coming years. I think it's very possible that at some point you'll just see a shock, and it's just a matter of you need the material, the price is not nearly enough. Getting people to move is difficult. And so, I think you're going to see a lot of consistent upward pressure on the price, simply because there's just no other way to live.
No, I think, that's becoming more and more clear. Obviously, the prices tend to move in the short term based on headlines and the like in terms of growth expectations. But I think that fundamentally if we're going to maintain or improve our standard of living and keep our population anything close to what it is, we're going to need a lot more copper. And so that's -- we'll see how that shakes out here, but I think you guys are pretty well positioned going forward. But that's it for me. Thanks.
Hey, Justin. Yes, just to add to that, I mean, I remember I think last year and after the second quarter, I mean, there were a lot of people who thought copper would go to about $2.75, because they thought the recession would happen. And then Freeport came out, I think with a very good release and said, look, even the current price, which I think was somewhere in the 3s, is not nearly enough to incentivize new builds. And so, I think, you really haven't seen, I think, a strong macro economy here. And the same time I think the price is sitting around $4, and again, even at $4, I just don't see how this is in any way indicative of the future of the copper sector. So, I think we're in for a lot of surprises for people in the coming years, because I do think the reality of very constrained supply and demand that's clearly heading up is going to come home.
We're obviously very happy to have the projects we do. We intentionally targeted the portfolio to be the most -- so to have the most advanced Tier 1 assets, because those will go into production we think before the price has to go up a tonne, because you have the motivated operators. You're very well-advanced people who understand building. They like building. But again, to see a mass investment, where you do see anything like the builds that Anglo is talking about, 60 mines by 2040, the price will have to fundamentally change for sure.
The next question is a follow up from Adrian Day of Adrian Day Asset Management.
Yes. Hello again. I had a two-part question on financing. So first, absent any new acquisition, would you intend continuing with the ATM? And maybe if you need to another draw down from Beedie? And I ask that question in light of the fact that the ATM volume is a significant part of the volume -- market volume over the last two quarters. That's an observation, not a criticism.
And then the second part of the question obviously is with an acquisition, would we be looking at new equity, and would you potentially be looking at diversifying the debt? Thank you.
Thanks, Adrian. Yes, I think, just kind of take it one by one. On the ATM, it's a useful tool to top for us on occasion. When you look at the liquidity of the shares, it has been fairly liquid. At the same time when we had inbound investor interest, it's something that we can use. Again, when you have sort of a company of this nature, which our cash, plus the royalty revenue allows us to run our operations, obviously, we're entering a time where we do see some material acquisition opportunities. For anything that's material acquisition, I think we would want to go to the market and go to our existing shareholders and also bring in new people, that's shown strong interest in funding the company and really see it go forward into what it should become.
So I think know maybe just to re-summarize. For our ongoing operations cash plus the royalty plus occasional ATM is more than sufficient for us for anything material. And given where we are, I think in terms of acquisitions, we are excited about what we see. We would go and kind of use the equity markets, but only I think with the right investors. I think that's probably a critical element here because again, this is when you look at the company and what we're trying to do, this is not a one or two or even five year build, you're talking about 10 plus years, I think realistically, to fully flesh out the value of the assets. Let them develop, come to production, further build out their portfolio. And really, I think, these are assets that hopefully will run past the century.
So, you're really creating something that's a truly incredible, long-term company. And I think you want to be very methodical in terms of how you do it. And obviously, we want to bring in people, whether that's new shareholders we bring in via placement or royalty holders so you bring in via deals. I think the emphasis on making sure that you have the right core people doesn't change. I mean, I'll just give an example. What we just did with Copper World, we did our second transactions and the family has been sort of a very happy shareholder since we did the deal. That was actually one of the reasons why they did the deal with us in the first place. We just did a second deal and actually they wanted additional shares, and actually that’s the amount that I think probably went up the most from the first deal.
So I think when we have people that really believe in the company and see what we're trying to do and understand sort of the timeframes that we're targeting, I think it's always great to bring them in and become long term shareholders of Nova.
In terms of Beedie, they've been a great supporter of the company from the very beginning. They've backed us really at the go public with that financing facility of $15 million. They obviously are a greater shareholder, they own about 11% of the company. They also invested in the convert structure in addition to that, and the objective behind that is for it to become equity over time. So that's a great tool for us to have with our most supported -- with our supporting shareholder ready to fund additional growth. But you also are cognizant that you don't want to have too much leverage in the company at this stage. So I think that our preference would be that whatever we do will be equity weighted, if there's anything material.
There are no further questions on the phone lines. Please continue.
Okay, excellent. So let me -- there's some questions that came in via the webcast. The first question is an interesting one. It talks about our audit fees, and they're approximately $200,000 a year. That is simply nature of the fact that we're using a Big 4 accounting from Deloitte who has been great for us. Nova is meant to grow up. When you look at the assets that we have, these are major assets that will become keystone assets and has the major companies. We have a great acquisition pipeline as well. So we see really a phenomenal opportunity for us, especially at the time right now where capital is tighter. So it's just natural for us to go to a Big 4 accounting firm and we had a great experience with them so far. So that's really just the cost of doing business to be perfectly honest.
Next question. Why would I invest now instead of waiting for news and construction decisions on big projects in '24, '25?
Excellent question. I think, the way I would phrase it is, this is something that once you invest, hopefully this is something you'll hold for a long time and you can pass on to your children. This is really the kind of company that we are trying to build. And so obviously when you look at our portfolio, it's never state static. When we went public, we had the royalties really on two principal projects, which were the Nueva Union project in Dumont. I would argue those are not in our top 5 assets right now, about 2.5 years of it going public. And we see a great opportunity for us in this environment. So it's always a growing, evolving company and we have a great foundation of royalties, which allow us to both source new existing third-party royalties, plus also an origination in terms of we are a very relationship driven company. If you look at what we have done, we have had the vivid business multiple times. We bought Taca Taca into separate deals. The first deal was 80% cash, the second deal was 80% stock. And as people got to know us, they realized they want to do more business with us.
On Copper World, we just did the same thing. We did a first deal, now we did a second deal. We have great support from our core shareholders from the very beginning. So this is meant to be something that's a long-term hone. I can't speculate on the timing of when you should invest. That's really a very individual decision. But I will say, sort of, as myself, this is a business that's meant to always grow. So we think the best time is always now.
Next question. Could you give your thoughts on how if current share price hurts Nova's visibility to acquire royalties?
It's an excellent, excellent question. I think the way that we look at deals is always, do you want to have the asset in your company for a long time? Because, again, when you look at what we have done, we have been very careful in terms of underwriting really the best quality assets at very reasonable prices. When you look at sort of Nova since going public, when we went public, we had approximately 57 million fully diluted shares. Since then, we have grown the net asset value of the company anywhere between 8x and 10x and the share count -- the full diluted share count has gone up by about 65%. So we have been very efficient in terms of diluting our shareholders to make sure that we really brought in very valuable assets into the company. And we will continue doing that irrespective of the share prices. Sometimes the share prices is high and it overruns. Sometimes it's low and it undershoots. And that's just the nature of markets. I think good companies, they find a way to grow their business in a way that makes sense with people that want to deals with them, irrespective of the where the markets are. And I think right now, obviously, there is a lot of dislocation. I think there is a lot of people who don't know what's going to happen. It's a phenomenal opportunity for us. Obviously, you have to be mindful of dilution. Before you do something really material, you have to, of course, take full stock whether that's something you want to do, given that it's going to cost some dilution. But I think if you get comfortable with that, you go ahead and do it because, again, truly sort of unique assets that have a long span ahead of them that will be taken care of by great operators, they don't come around every day. I think when you actually look at the world, things are getting riskier. They are not getting any easier.
So I think what's going to happen is, when it's going to be the best operators and best assets that capture all of those benefits and implied inflation that you are going to see here from supply chain shocks, central bank spending and alike. So if you can find something that's excellent and priced reasonably, I think odds are you want to pull the trigger because you're going to hold it for many years and you will pay it back very nicely.
So next question. How are rising input costs impacting development timelines and production targets across the portfolio? Is there a change on CU price hurdle rates?
I think -- absolutely, I think everyone understands that, capital costs and operating costs are going up. Nothing here is getting any easier for anyone. So I think our base assumption to be perfectly honest is, costs are going to continue going up. Our job as a royalty company is find projects that are robust enough, and you have capital partners that are strong enough to continue funding those projects because they are worth it. Because again, even though the capital cost goes up, if you are talking about a multi-generational mine and you have capital partners and operating partners who know how to build it, they are going to go ahead. As going to be those mines, they'll probably be the biggest beneficiaries of the market going forward.
So, I think the key here is making sure you pick the right operator and project. If you've done that, you're in an excellent spot, and because cost will continue going up, but the mines will get built anyway. Because once the big companies commit, it's going to get done. I think, where the risks levels are going up way higher, that's not really appreciated, it’s really the next tier down, because if you don't have those people who will make sure it can get done, then I think the world can really waiver in terms of getting things across the finish line and supporting them as well. Because again, I mean, everything is getting harder. So the biggest companies and the strongest companies will do even better. The question is what happens to the middle tier? And I mean, there are excellent -- obviously excellent operators like Aura and others, and we try to get that exposure as much as possible. But the truth is, I think, there's going to be a small and small number of those people.
Another question. Could you speak in general terms to the compensation mix for the exact team changes over time?
I think, when you look at the -- so my compensation is obviously out there for everyone to see. It's very heavily equity weighted, that's really the objective. When you look at the actual cash G&A, it's quite low for a company sort of that has this asset mix and kind of -- and so I think the objective is obviously have people fully incentivized with the success of the company and the shares. And that was the philosophy from the beginning, and I don't think that's going to continue. That's going to change over time.
Then next question. As an investor, I would appreciate it Nova could provide a cash flow estimate for say, the next 10 to 15 years with different assumptions on copper price.
What I would suggest here is, kind of there is research on Nova, and I think that gives you some idea in terms of what the potential cash flow and timing is. And obviously, the information -- because our assets are so prominent, all that information is generally available in public filings. We're very hesitant to provide that kind of guidance in our disclosure. Because again, there's variability, we don't know exactly when things are going to happen. So, we don't want to overstep sort of our role as the company, but you should be able to get a pretty good idea -- and obviously, we've done the work internally in terms of determining our acquisitions. You should be able to get a pretty good idea from the public research and the public filings to get you very close in terms of what the portfolio looks like in full pro forma.
And then there's actually another question here. So -- and it talks about -- essentially I think a similar question was, when you have a share price lower than before, how do you finance your acquisitions?
When you look at the company, we're very well supported by Beedie. We have another $15.5 million in the available credit fund, in available funds. We have other existing shareholders who are interested in supporting the company, and we have new shareholders who potentially, who want to support the company. So, I think it really comes down to, do you want the deal? We have a richer deposit bases that's heading into a construction eventual production. So we are very confident about the long-term value of the portfolio. The question is if you want to -- when you want to add something else, and obviously dilute the existing shareholders to do so. As I said before, we've been very economical with dilution to date. When you look at sort of increasing enough, 8x to 10x at 65% dilution, that's I think something you'll do as much as you can. And so, it's something we think about on a regular basis in terms of whether we want to have additional assets. And then the decision is either yes or no, depending on what makes sense.
I believe that's it for questions. And so I want to thank everyone for participating today and taking the time and learning about where we are, and we look forward to continuing to stay in touch with all of you in the future. And now it's back to the operator.
Thank you. Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines.