LunR Royalties Corp.

Thanks, Eric. Good morning, everyone. Good to see everybody. Thanks for attending the LunR presentation. I’ll give an overview of the business and then take some questions from the audience and Eric. But getting started with LunR, we’re very excited. We got this company up and listed December 19th last year, and really been getting it organized for growth and setting the stage to continue to build out the first royalty and streaming business within the Lundin Group.

We want to obviously deliver value to shareholders, but thinking about why we wanted to start a royalty and streaming business is really situations in the past and also when we had Filo. We thought about spinning a royalty to shareholders, but we got too far down the line and ended up being acquired. And then we were able to talk with NGEx, and then spin out a 1% NSR on Lunahuasi and a 1.4% NSR on Los Alotos. But there was a lot of situations in the past within the Lundin Group where we were able to form some great partnerships.

I think back to Zinkgruvan, which was in Lundin Mining and couldn’t afford to make that acquisition at the time, so we streamed the silver with Wheaton Precious Metals. Again, Lundin Mining, we wanted to go and buy Candelaria, couldn’t fully afford at the time, so we streamed the gold to Franco-Nevada. With Lundin Gold wanting to build Fruta del Norte, we were able to partner with Orion. More recently, with Montage, when we wanted to secure that project financing, we did another partnership with Wheaton Precious Metals.

And so as we were going through these certain scenarios, it was always at the back of our mind, is it our ability for a Lundin Group royalty and streaming business to get started and maybe be that partner for future, not just only Lundin Group companies, but other mining companies looking to grow their business, either through development or through acquisition. And so that’s where we want to get to with LunR. We really want to continue to grow this business, and I think we’re well on our way to do that.

Again, touching on our underlying portfolio, we closed the Fruta del Norte transaction in April, May this year. That was able to give us revenue and cash flow, and with that, Fruta del Norte has the ability to do 500,000 to 600,000 ounces of silver per annum. And so at that steady run rate, we should be doing anywhere from 25 million to 30 million in revenue.

And then when you look at our underlying royalties, again with Lunahuasi, a very high-grade copper, gold, silver deposit in the Vicuña District, we see NGEx having the ability to get that started at a similar size and scale as Fruta del Norte. Fruta del Norte started at that 3,500 tons per day and getting closer to 6,000 tons per day and probably going to be able to continue that. So Lunahuasi on a standalone basis, it’s something the group feels comfortable developing on its own. And I think when that comes online, that will double our revenue.

And then when we get to Los Alotos, again, on the Chilean side of the Vicuña District, about 15 kilometers away from Caserones, we feel, again, when that starts getting up and running, it’ll be a similar revenue generator as FDN or Lunahuasi. So we see we have the ability, on a do nothing scenario, which is not going to be the case, good assets with growth that are very doable projects and come online and that can really juice the revenue of the company.

So it’s been a bit of a quick start. Here’s the market caps and a few of our peers. I guess we’re sixth right now, but we want to continue to grow the business and continue to climb. I guess a couple of the milestones, with NGEx announcing the spin out and forming a royalty company, starting trading in December, moving quickly, announcing again the FDN silver stream deal, getting that closed in May, so being able to add two very strong underlying royalties and adding a silver stream to the portfolio, able to get uplisted on the TSX, able then to swiftly move into getting a credit facility. I think this undrawn credit facility will give us the ability to grow the portfolio, but also if we needed to scale up that credit facility, if we wanted to reach higher than that.

We will look at deals anywhere from $50 million to $2 billion. We put in a shelf perspectives for $1.5 billion US, so we’re not going to shy away from the bigger deals. I think when BHP sold its silver stream, it was kind of a firing gun where I think a lot of bigger players, similar to what Lundin Gold did. Antamina went for $4.2 billion. I think analyst consensus for BHP value of that on their books was $4.2 billion, so it was something that was a bit overlooked and that’s what we felt like this silver at Lundin Gold was. And so can you give that to shareholders in another vehicle and capture that value? And so I think those are deals we’ll look to do.

Definitely want to focus on the precious metal side of the business. That’s where we see the best multiples. We’ll continue to look at gold and silver, and I think as we scale the business, then maybe look to do other commodities. Obviously, with Lunahuasi and Los Alotos, we have copper and gold in there as well. And we won’t shy away from that, but predominantly the focus right now will be precious metals and hopefully cash flow or near-term cash flow.

And then again, I think success of any company is all about the team and who you surround yourself with. Obviously, it’s a bit unique having a board bigger than your management team, but we designed that board to be able to lean on. I think we can build out a technical department. We have technical people within the management team, but also being able to lean on a Vojtech when we’re looking at geology. Newmont, again, is a big shareholders of ours since Lundin Gold distributed their shares to their shareholders. So we’re very happy to have Scott join us on the board, who’s on the board of Lundin Gold. And then also Jamie and Martino. It’s nice to have other CEOs on the board who are very active in the space, looking to grow their businesses. Maybe they see something for LunR, but also helping us with the technical due diligence side of things.

A fully diluted basis, about 125 million shares outstanding. The family being the largest shareholder of about 28%. We’re happy with that position. And if we need to raise equity to do deals, we’ll definitely more than stand our corner. And so I think that gives us a bit of an advantage. I think also the ability to make quick decisions, having big shareholders on the board and within management. We know what the board’s looking for. And again, the business and what we do on a day-to-day basis is evaluate deals and potential deals. And so be able to say, okay, there’s no point in bringing that to the board and wasting time. It’s not going to fly. It just allows us to turn and burn a lot quicker.

And here’s really the platform where we sit today. Again, continue to look at more deal flow, wanting to grow this business, wanting to get it up there with the big guys. Happy to have the credit facility in place. Happy to have the underlying portfolio of very strong assets. And don’t want to put ourselves too much in a box where it’s going to be harder to do different transactions. We want to look at similar quality assets. We want to focus on precious metals. We’re happy to grow. And also, if there’s a project finance deal that is a bit of a stretch for LunR and you need additional equity or things to come in, family can cut a check alongside that. And again, I think that helps differentiate LunR and allows it to continue to grow the business quickly. And I think with that, still early days, but very excited with where we have LunR positioned and very excited about our future and happy to take any questions.

Excellent. Thank you very much. Maybe before I begin, any questions from the audience? Maybe just a question, Adam, on jurisdiction. So obviously, South America focus right now, Chile, Argentina, Ecuador. Lundin’s been operating very successfully in South America for many years. Do you think investors fully understand what these jurisdictions have to offer? And should we expect to see a very South America-centric focus going forward?

Yeah, I think jurisdiction-wise, Lundin Group historically and currently active in a lot of countries. Also happy to go to countries that maybe people think are a bit challenging. I think, again, very happy in South America, obviously actively in Brazil, Argentina, Chile, Ecuador. South America, we feel comfortable in. Same with North America, obviously active in the US and Canada currently. So we’ll continue to look there. And before Lundin Mining sold its European assets in Sweden and Portugal, we were happy there. So not going to shy away from Europe either. But I think you’ll see us go into jurisdictions where either the Lundin Group currently operates or where we’ve been historically. But that being said, if it’s another jurisdiction where we feel comfortable with and there’s strong underlying agreements with host nations and corporates, we’ll look at that as well. But we’ll stay focused where the group’s been.

Excellent. Thank you very much. So just in terms of maybe the sweet spot for deals, I know you’ve got good liquidity now. You mentioned the ability maybe to access additional financing as needed. What should investors expect in terms of your maybe target deal size or wish list here going forward?

Yeah, thanks, Eric. Again, I think happy to go anywhere on the smaller side of things. If there’s good royalties or deals around $50 million, we’re happy to look at that. And I think those kind of deals are obviously going to be potential development situations that aren’t going to deliver instant cash flow, but maybe near-term cash flow. And then we’re also happy to punch pretty high; we’ll look at deals up to $2 billion. And do we need to increase our credit facility? Obviously, we need to raise some equity. And again, don’t want to overstretch LunR. And if that requires family coming in additionally alongside that, but outside of LunR, we’ll do that as well. So I think that helps give us the ability to look up to $2 billion size.

Thank you. Maybe just in terms of the royalty market itself, obviously you’ve got access to great projects around the world. Any comments in terms of deal pipeline and what you’re seeing and maybe state of the market out there?

Yeah, I think it’s, again, very competitive space. Everyone’s very active in it. We’ve probably looked through 50 plus deals just this year alone. And you got to be quick on your decision-making if you really want to get into the depths of it or just pass. So I think there’s more deals that come up, more processes that are going to happen with the banks. And then also with the relationship in the sector that we have with our peers. Been fortunate to partner with a lot of great mining companies along the way with the Lundin Group. So again, I think we’ll be ready for new processes that get kicked off and then currently looking at a few things and, again, want to grow the business, but want to be disciplined doing that. Don’t want to just grow the market cap and not the share price.

Excellent. Thank you very much. Maybe in terms of commodity mix going forward, you’ve obviously got a very strong shareholder base with Newmont on the register. Does that maybe lend itself more towards a gold focus in the future, or are you somewhat agnostic on commodities?

I think continue to focus on the gold and silver aspect of the business and then as we continue to grow, if we want to look at copper or other metals on a pure play basis, we’ll do that. But definitely want 80% or north of that of the business being generated revenues from precious metals.

Great. Thank you. And maybe moving over to M&A, obviously very topical. I’ve heard some of your peers talk about it in the royalty space. Do you see that as a key part of the strategy, or you think organic growth is more the plan for now?

I think it’ll be competitive. I think there’s a lot of royalty companies being formed, especially with mining company has their own mining royalty portfolio. Selling it versus floating it, you’re probably going to get more value floating it, and so that’s why you see, I think, a lot more vehicles being started. But that being said, I think M&A’s healthy and I think we’ll continue to see further consolidation within the space. And happy if that makes sense for LunR, we’ll look at it. Haven’t found a scenario yet where we think M&A makes sense, but not shy to engage.

Great. Thank you. Maybe on a similar vein, so Tether’s obviously very topical these days, has come up quite a bit. I’m curious if you have any views as it relates to LunR.

Yeah, no, it’s good to see new players in the space in mining, and Tether being one of them coming into the royalty and stream base. We both became shareholders of Versa, the family and Tether, we became shareholders of Versa together. We’re happy with that. They’re going to continue to be very active. I think it was a smart decision, streamline their portfolio they announced a couple weeks with Elemental. But I think they’ll look to grow. Don’t think they’ll shy away from M&A and they won’t shy away from doing further deals. So I think that makes it competitive, that makes it exciting, and definitely a sector to watch.

Great. Thank you. Just ask the audience, any additional questions, feel free to raise your hand. In terms of dividends and buybacks, again, I know you’ve got lots of use of proceeds here, but is that part of the roadmap for the future, or what do you think is an appropriate level where you’d look to put something in in terms of buybacks and dividends?

Yeah, I think early days right now. We started the business with the two royalties from NGEx and 2 million CAD. So obviously we had moments where the lights were flickering, but didn’t want to go and raise equity, wanted to close the deal with Lundin Gold and FDN and get that cash flow. So I think as cash flow continues, we’ll continue to use that to see if we can grow the business. But then I think as you look to create shareholder value, you kind of need all those tools in your toolbox. And so if that’s buybacks or dividends, I think as we continue to mature the business, we’ll analyze and see what’s best. Is it a combination like Lundin Mining does of cash dividends and buybacks? Perhaps. I think it’s early, but it’s definitely the name of the game, returning value to shareholders and we’ll look to adopt a policy when the time is right.

Great. Thank you. Maybe just a question on Vicuña if I could while you’re here. Do you see any additional opportunities for royalties there perhaps? Obviously extremely exciting with everything going on there and nice to see the development. But just curious, any updates on Vicuña or royalties there?

Yeah, I think the Vicuña JV also has a 1% NSR in Lunahuasi. Obviously, we’d be happy to get bigger at Lunahuasi. I think when it comes to project finance for the Vicuña, both Lundin Mining and BHP are well equipped to go ahead and do that on their own without having to do a stream. Obviously, if they wanted to, we’d be very happy to take a look. And then, having the 1.4 NSR in Los Alotes on the Chilean side, I don’t think there’s further deals to be done in the Vicuña District currently, but obviously know it well and if something pops up, we’ll be keen to take a look.

Yeah, for sure. We’ll be watching the district very closely. Well, I think we’re running near the end of time here, but any additional thoughts you’d like to leave everyone with or in terms of catalysts to look for in the months ahead?

Yeah, no, just again, LunR, early days, we’re very happy with where we’ve got started. We’re going to want to continue to grow the business. We’ll look at things, probably one of the only royalty and streaming companies not listed in the US, so I think that makes sense to look and see if we pursue that. And then continue to look at deals, continue to watch our underlying portfolio assets with Fruta del Norte, Lunahuasi, and Los Alotes. We think that throughput expansion will continue at FDN, and we think Lunahuasi and Los Alotes are both projects that can come online and deliver significant value for our shareholders.

Great. Fantastic. Well, a terrific update. I want to say congratulations on the success to date and look forward to what I’m sure is going to be a very busy couple of months and quarters to come.

Thanks, Eric. Appreciate it.

[audience applauding]