Ann: Saloro Secures US$7.5m Royalty Funding, page-3

Un- Fu%king believeable....

Oaktree is raping this company right infront of our eyes and what are thre board doing?

Letting them.....

You're absolutely right to raise a red flag. This royalty agreement between EQR/ETP/Saloro and Oaktree is heavy-handed in Oaktree’s favour. Let's break down why it looks "f---ed" and what the real implications are for EQR shareholders and the Barruecopardo project.

Key Concerns with the Royalty Agreement

1. Royalty on Gross Proceeds – Not Net

2.5% of gross revenue from all tungsten concentrate sales.

• Gross revenue royalties are harsh. No consideration of costs, processing, or operating conditions.

• This means even if Saloro operates on razor-thin margins, Oaktree gets paid first, no matter what.

• This can kill profitability or make the mine less attractive to future acquirers or investors.

2. US$7.5M Upfront Payment = "Loan" Disguised as Royalty

• EQR (via Saloro) received $7.5M upfront.

• But in exchange, they've locked in long-term revenue leakage.

• The effective cost of capital is high, especially if tungsten prices surge — the royalty becomes more expensive over time.

3. Limited Buyback Option — Only Partial

• Buyback of minimum 25% can be triggered before year 5, but:

  • Only allows pro-rata repayment of the upfront.

  • Does not allow full extinguishment.

  • May be too late if EQR needs full upside during peak pricing.

4. Security Interests Over Key Assets

• Oaktree gets security over:

  • EQR’s shares in European Tungsten Pty Ltd (ETP),

  • And ETP’s shares in Saloro.

• These are core assets in the Spain project. And that security is expandable if EQR defaults on the royalty payments.

• It creates a de facto path to control if EQR ever struggles financially.

5. Oaktree Can Sell the Royalty to Anyone, Anytime

• Transferability clause allows Oaktree to flip the royalty to another fund or entity, even hostile ones.

• This makes Saloro’s revenue stream vulnerable to opportunistic royalty aggregators (e.g. Triple Flag, Osisko, Orion).

• Future investors or acquirers may discount the value of the asset due to this revenue encumbrance.

⚠️ Summary of What This Means for EQR Shareholders

	Issue	Implication
1	Royalty on Gross	Undermines operating leverage. Oaktree profits even if EQR doesn't.
2	Security Over Key Assets	Oaktree could step in if things go sideways. They're secured.
3	Weak Buyback Terms	No clean exit from this royalty in sight.
4	Transferable Rights	Third-party unknowns could end up with royalty control.
5	Signals Desperation for Capital	Suggests EQR was cash-strapped post-acquisition of Saloro.

Strategic View: Why Would EQR Sign This?

EQR likely needed:

• Immediate capital to finalise the Saloro acquisition.

• Support from a known and credible backer to bolster credibility (Oaktree adds legitimacy in funding circles).

• A structure that wouldn’t require share dilution (hence, royalty instead of capital raising).

But they traded upside for survival.

This structure looks like Oaktree giving with one hand (equity/capital) and taking with the other (cashflow control).

What Can EQR Do Now?

1. Increase margins at Barruecopardo to absorb royalty leakage.

2. Maximise resource conversion and extend mine life — to stretch over royalty period and reduce long-term drag.

3. Explore royalty refinancing with better terms — e.g., private royalty buyback or forward concentrate prepay.

4. Use Mt Carbine and other future assets to generate unencumbered cashflow.