Deterra Royalties Limited

Good day and thank you for standing by. Welcome to the Terra Royalties full year 2026 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Mr. Jason Neal, Interim Chief Executive Officer and Managing Director. Please go ahead.

Thank you. Good morning and welcome to the Terra Royalties full year 2026 results call. I'm Jason Neal, Interim MD and CEO. and I'm joined today by Jason Clifton, our Chief Financial Officer. As you are aware, I've been a long-standing non-executive director of Duterra and have stepped into the MD and CEO role on an interim basis as a bridge to the next leader of our company. I will add further comments on the CEO's search after the financials, but the summary is that we have an active search process underway and fiscal year 2026 is the business as usual and our team continues to advance various opportunities. Without further delay, I'm going to hand the call to Jason Clifton to take you through the highlights and important details. I will conclude the call before the Q&A session with some of my own reflections on the year and the strategic direction of the company.

Thanks, Jason, and good morning, everyone. If you move to page three, you'll see we have delivered a strong full-year impact of $164 million. This has been largely driven, firstly, by record production and sales volume from Matt, partially offset by softer AUD pricing. And secondly, by the first half profit from the sale of non-core precious metals assets that came as part of the Trident acquisition. We announced those sales in August and September last year and have used the Aussie $108 million proceeds received to date to pay down debt. Thacker Pass continues to de-risk. Construction is well underway and Jason Neill will add more on Thacker later. We have a very strong balance sheet with net debt at $132 million and are well within all of our banking covenants and target leverage range, and this positions us well to execute on investment opportunities as they arise over time. Moving to page four, you'll see revenue from continuing operations is up 6% driven by the MAP royalty. After costs, underlying EBITDA is also up 6%. We have a number of non-recurring items that I've called out here. Firstly the MAP capacity payment. In FY25 you'll recall we received a $20 million payment as Southlink had a significant production increase in that year as it ramped up to name plate capacity. That meant that FY26 is always going to be lower and going forward we don't expect material capacity payments to be received. The second non-recurring items are the revenue or profit from the sale of disposed assets. These were disclosed in the first half, so no change there. And finally, in FY25, we had the costs associated with the Trident acquisition. Importantly, our financing costs have reduced following net debt reduction from proceeds of asset sales and also from operating cash flows not being paid out as dividends. On the tax row we called out in the first half that we have a lower effective tax rate this year as we utilise offshore tax losses to offset the tax that would have been payable on the profit on total assets. And the dividend for the half is 10.8 cents per share which together with the first half dividend of 12.4 cents delivers a 23.2 cents per share fully franked full year dividend and that's consistent with our payout ratio target of 75%. Moving to page five, you can see the MAC Royalty is up 7% on FY25. Sales for the year were a record 140 million dry metric tonnes, which were up 9%. The US dollar realised price of $92 US was also up on FY25, but was offset by the FX rate. So the Aussie dollar realised price is down 2% on FY25. Moving to page six, our operating costs were 14.1 mil for the year. within that number includes one-off costs of $1 million associated with a CEO transition that I called out at the first half. Offsetting that has been a lower headcount in FY26 which reflects a restructuring of our teams both here in the Perth office and our London offices as well. There were some other small increases in other costs from our Denver office and a small increase in external business development activity costs. is the sale of non-core precious metals assets as presented at the first half. These generated 108 mil in cash proceeds, which was used to reduce debt. There is a further Aussie $13 million cash payment due coming to the Terra in August 2026, and that is the deferred component of the La Presqu'Oscar sale. That won't hit the P&L as we've booked the profit from that sale in this period. Page 8 shows the strength of our balance sheet. debt to $132 million at 32 and 26 and we have $357 million undrawn capacity. Across our facilities our average margin is 1.3% and all in post-tax cost of debt is 3.8%. That's a real distinct competitive advantage when you look across the royalty industry. Page 9 outlines our capital management framework. We have a very strong balance sheet, and this is providing us a range of options to finance any potential new value-adding investment. We maintain a 75% payout ratio, which is striking the right balance between shareholder returns, balance sheet strength and investment optionality. And finally, page 10 provides a reconciliation of non-cash items and underlying impact. I won't cover that here, but happy to take questions later. With that, Jason Neill, I'll pass back to you.

I mentioned at the half-year results that I expected we would have appointed our next managing director and chief executive officer before today. The extended timing of this process is a reflection of the dedication of our board to get the right leader in this seat. We have several live candidates that we continue to work through, but I will not promise the timing for such appointment. Those of you who have heard me speak about the global royalty industry will know that I view the Australian acceptance of new loyalties and strains financing tool has lagged in the experience in North America by a decade or so. So it is great to see in the last six months several key royalty and streaming transactions within the Australian market by leaders in our industry, frankly, by precious. While these are precious little transactions, they have certainly helped build awareness of royalties and streaming financing tools to support growth here in Australia, as well as Australian companies operating internationally. We have certainly seen an increase in dialogue with domestic companies on future opportunities. FY26 has been another great period for our mining area seed royalty. The MAC royalty supports are given into shareholders, which is fully franked and targeted to be 75% of the net profits after tax. We are a growth-focused company, but how MAC supports that growth has not thus far been by redeploying significant cash flows into acquisitions. has banked that capital and effectively has created rates, which is a huge advantage for a small company. Our output tax borrowing rate is 3.8% in FY26. We continue to be very happy with our acquisition of Trident, which we bought in the track of multiple, in part because the shares were given with the training on UK market. The Trident acquisition continues to deliver for deterra. During FY26, this This has been demonstrated by the U.S. $82 million sale of gold off-takes and other non-core assets that came with Trident PLC. Off-takes aren't really royalties, and they did not fit our portfolio, so we were always tagging these for disposal. We generated $8.4 million Australian in profits on that sale. Importantly, this means that the cost of acquiring Thacker Pass, Lithium Royalty of Nevada, which is the primary target of the Trident acquisition, was U.S. $106 million after factoring the disposals, but retaining some important smaller development and exploration royalties. Factor Pass has been a perfect example of how royalty can mature and add value. Trading at quite 26 lithium Americas, the operator of Factor Pass has drawn U.S. $1.2 billion of the $2.2 billion U.S. Department of Energy loan. The DOE has taken 5% equity rights in Lithium Americas and 5% in the Lithium Americas General Motors Joint Venture that owns the project. Detail engineering design surpassed 95% and over 70% of procurement is complete. On General Motors, they are not only a partner in the joint venture, having contributed US $945 million, but also having off-take arrangements in place for lithium production. All this is a significant inflection. That progress has been made during a period where the lithium price has doubled and follows on from the 2025 technical report that updated the mine life to 85 years and outlined expansions to 150,000 tons per annum production rate, both of which are double the assumptions we had at the acquisition. So we're very much looking forward to first production with which Lithium America's continues to project to be at the end of calendar 2027. This is a good point to reflect on our capital allocation, which can be summarized as continuing to pay a peer-leading dividend in the royalty and streaming sector, and having completed a well-timed acquisition and subsequent asset rationalization to add new core assets, and now having available capital to deploy in future growth. The U.S. dollar 82 million proceeds from our asset sales were largely applied to debt repayment, As of June 30, 2026, our growing debt is now 143 million Australian. So today we have 357 million Australian of undrawn debt in position to make further acquisitions opportunistically. We have also amended our dividend reinvestment plan to include a discount. The rationale behind this is to allow our shareholders to efficiently subscribe for additional shares with the cash dividend they receive. The discount, which is in line with other Australian companies which provide this opportunity, should increase the uptake on the DRP, and this capital is in turn invested in the growth of our business. Initially, cash received pays down our drawn debt facilities and increases the liquidity available for acquisition. As I open my remarks, it is business as usual. I will continue to search for of our foundational MAC asset and build significant shareholder value through growth. We are conscious that so far we have delivered shareholders with a very good return through dividends, but have not provided a return through capital gains as our share price is not that different than it was at the 2020 IPO. The royalty and streaming sector, which is dominated by North American companies, typically trades at stronger multiples than ourselves, and has provided an outstanding shareholder experience overall and generated significant returns greater than the underlying commodity prices. That multiple is earned through growing and diversifying the royalty stream portfolio through deploying capital to new attractive assets, both in consolidating additional royalties and streams and then forming part of the funding base for new line development. That is the potential and the objective of this company, and I look forward to returning to a non-executive role in due course

Thank you. We will now begin the question and answer session. To ask a question, please press star 1-1 on your telephone and write your name to be announced. To withdraw your question, please press star 1-1 again. There may be a short pause as we compile the Q&A roster. Once again, that's star 1-1 for questions. We will now go ahead to take our first question. And the first question comes from the line of Glyn Lovecock from Baron Joey. Please ask your question. Glyn, your line is open.

Oh, good morning. I just wanted to ask a little bit about, like, it's been six months and there's been no real activity. You obviously had lots come through the door, but nothing that you've actioned. If the net debt continues to come down at the rate it is, Do you think you'd return to the 100% payout as well once you get to a net cash position? Thanks.

I don't think so, no. We have a lot of opportunities that we're looking at of various sizes and the expectation is that we'll be able to deploy capital. If we got close to net debt zero, I think that we'd be looking at the pipeliner payout ratio.

Okay, thanks. And then maybe just to follow up, just if you could maybe sort of give us an idea. I think six months ago, you know, you said the environment was more active than it had been in the preceding 12 months. I mean, how would you sort of describe the last six? Is more and more deals coming through in the last six months or has the backdrop of the Middle East conflict, et cetera, maybe slowed things down? Thanks.

I think volatility always works against deals. And so we've had a fair bit of volatility in commodity markets as well as stock markets. We have a number of things that we're working on right now. I would tell you that some of the things that are the most interesting they can take longer than we would like to as as well and some of it based on the volatility that you that you reference so I would summarize by saying still a pretty healthy pipeline Lots of active dialogue. We have our own kind of hit list of proactive targets that we have. And I actually, when I had the half year discussion, I thought that there's a reasonable chance we might have something done by now. But what I can say is we have a number of things that are still advanced.

Okay, and then just in closing, is that operating or development assets? Is there a preference still one way or the other?

We've seen a bit of both, and I would say we have both in the pipeline. I would say that I think in particular near-term development assets are a great sweet spot for us, especially on assets that are held by single asset companies. Because we we compete with lots of different forms of capital but we kind of sit more on the on the debt side than the equity side. It's kind of in between, obviously. And our capital is very competitive against bank capital, especially for early-stage assets that are at a point where they they're not exploring the point where they're constructing. And because our structure, we can absorb some volatility as assets are ramping up, et cetera, that banks typically don't take. That's a real sweet spot for us. So I would say that there's a number of those types of opportunities that are in our pipeline. When we get operating assets, already operating assets, they tend to be an existing royalty that's changing hands. Maybe it's a prospector that had originally, you know, maybe it's someone who's accumulated royalties and is selling them on. There's a couple of private equity groups that do that. Or they come as part of some sort of deleveraging by the operator. But when quantity prices are really strong, um there's not a lot of deleveraging deep number operators because they're quite flush with uh uh they're quite flush with cash and so those those operating royalties are just are just based on you know processes that are being run to liquidate um existing royalties and by definition they're probably cash they're probably cash flowing and and um and uh often the owners of them are enjoying that cash flow so anyway so I know a long, wandering answer there, but, I mean, you see a bit of everything, but I would say that, you know, late-stage development and construction assets are probably the biggest target.

All right. Thanks very much. Appreciate the call.

Thank you.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone keyboard. Once again, if you wish to ask a question now, please press star 11 on your telephone keypad. I'm showing no further questions. I'll now turn the conference back to Mr. Jason Clifton for closing comments.

Thanks for your participation today, everybody. I appreciate that. I know it's a busy day in the market here. And so if you do have any additional questions, please contact me. Thank you very much and see you in due course.

Thank you for your participation in today's conference. This has concluded the program. You may now disconnect your lines.