Q1 2020 Earnings Call

Good morning, ladies and gentlemen and welcome to the franco-nevada corporation Q 12020 results conference call at this time. All lines are in listen-only mode off the presentation. We will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on May 7th 2028. I would now like to turn the conference over to candida Hayden, please go ahead Chris. Good morning everyone. Thank you for joining us today to discuss franco-nevada first quarter results with a company. This call is a presentation which is available on our website where you will also find our full Financial results wage Frank our new president and CEO of franco-nevada will provide a company update and Cindy Bruna CFO of franco-nevada will provide a brief review of our results, and yep.

For this development of franco-nevada will comment on Business Development. This will be followed by a Q&A. Representatives from our executive team are present in our board wrong answer any questions. We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our details cautionary note on slide off of this presentation. I will now turn over the call to call bring president and CEO of franco-nevada. Thank you and welcome to all on the line.

Would also please yesterday to welcome Maureen Jansen to the Border Maureen's experience both leading the interior Securities Commission and working as a geoscientist in the industry will be great.

a succession planning

Franco-nevada has been fortunate not to have any covid-19 cases amongst our staff and they've been able to remain fully productive working from home.

We do have temporary closures in two of our core assets Cobra Panama and antonina.

Valerian and I have continued to operate normally those Quantum is placed. Panama care and maintenance until the health Ministry satisfied with the quarantine conditions are appropriate and may also being temporarily suspended to support Peruvian covid-19 efforts and visit and facilitate change in the workforce. They've safely demobilized the workforce and while they're worth. It was a restart the timing still uncertain.

But rather 52 cash flowing assets, 11:00 have announced temporary reduced or curtail production. Although five of those have since resumed activities.

Franco doesn't have any fixed costs related to the

These Investments any temporary closures are effectively only a deferral of Revenue.

The energy side of our business has been impacted by sharp downturn and we'll prices operators reduce capex plans and production curtailments. We have reviewed the carrying value for our energy assets have recorded impairments this quarter primarily related to scoop stack and waiver.

On a positive note and pleased to announce our borders declared a quarterly dividend twenty-six cents per share. It's a four percent increase from the previous 25% fresh air and the 13th annual dividend increase Canadian investors and frankly Novartis 2007 IPO an hour receiving more than a 90% effective yield wage loss me a brief reminder in April. We release that 20 20 amps and handle any issue port and books our annual staple with descriptions that our main asset the offer details. I use G efforts including new commitments to the world gold council is responsible gold mining principles and the global compact both reports are available on our website and also offer expire Christ. I'll hand it to Santa for q1 financials.

Thanks, Paul. Good morning. Everyone. As you will have seen from the press release issued yesterday that company reported strong results for our key financial metrics for the quarter ended March 31st, 2020. Those metrics being gold equivalent ounces Revenue adjusted ebitda and adjusted net income. The company did report on that law of 98.8 million for the quarter. This was a result of recording impairments on some of our energy assets. These are non-cash impairments and reflective of the current uncertainty within the energy market and a pyramid of 275 million after-tax was recorded on our stock scoop and waiver Investments revenue from our energy assets is forecast be less than 10% of revenue for 2020.

4 minutes of our mining assets during the quarter which is best reflected by the number of gold equivalent ounces sold like three highlights the Geo sold for the last five quarters year-over-year the company had a 10.6% increase in jio sold company sold a hundred and thirty-four thousand nine hundred forty-one in first quarter compared to 120 2049 Gio's information or 2019. The main source of the increase was from Cobra Panama. This is that began delivering gold and silver ounces to franco-nevada in third quarter 2019. The company sold the property 25,000 Gio's from the Mind during the quarter first Quantum has done a great job of ramping up the mind but as Paul mentioned do to covid-19. The mine is currently shut down, but we look forward to continued ramp up. Once it restarts Hamlet and in particular the 50% empty. I was also a strong contributor during the quarter. One of the benefits of net profit interests is the large.

looking at the

It provides to Rising commodity prices revenue generated from Hamlet was eleven point six million in few 12020. The company did recognize less go sold from our silver new GM and other mining assets during the quarter compared to first quarter 2018.

This was in line with expectations.

Slide for highlights are gold and gold equivalent wrapping for the last five quarters. The company's Revenue has seen a sharp increase year-over-year as the company has benefited from the increase in gold equivalent wage is deliberating sold, but also the rise in commodity prices.

Your average Precious Precious Metals prices, the Golden Goal equipment Revenue in first quarter was $240 million compared to $159 million life a 35% increase energy Revenue had a significant increase year-over-year increasing from 20.8 million to 26.5 million due to increased production. However, would the decrease in oil prices Revenue was lower than Q for $20 and we expect it to be lower going forward.

As you turn to slide five you will see the key financial results for the company. I won't get into the detailed numbers. But as mentioned previously it was a strong quarter for the company. We recorded wage increases in chios Revenue adjusted ebitda and adjusted net income year-over-year. The first quarter adjusted ebitda was 192.7 Million at 37% increase over q1 2019 as mentioned. We did record impairments on some of the energy assets resulting in a net loss for the quarter when adjusting for this along with other unusual items off. The net income was 67% higher in first quarter compared to q1 2019 at 109.2 million compared to sixty five point two million a year ago.

On slide 6 we illustrate the diversification of our portfolio Revenue generation has shown 89% of our quarterly. Revenue was generated by gold and gold equivalents in the court. It's called being 69% silver 9 9 and other mining 2% from a geographic Revenue profile. Revenue was sourced 87% from the Americas with Lautenberg the largest the third chart highlights. The asset diversification of the company called rate Panama is our largest revenue generator at 17% for the quarter our top form for assets, Cobra Panama.

Candelaria and and antonina generates 40% of the revenue for the company.

One area that our board and management is very proud of is our focus on cost management. We like to stress the strength of our business model and the scalability the chart on flight seven clearly illustrates. Our focus on being is cost efficient as possible in managing this business here. We have highlighted our quarterly revenues and our Fleet G&A expenses since our IPO since 2008 are Thursdays are pulling from approximately $25 million to just over two hundred and forty million this quarter that is approximately a tenfold increase this while r g a g n a has remained fairly stable over this time. General and administrative costs have averaged five to eight million dollars per quarter for the last twelve plus years for first-quarter twenty-twenty G&A was less than 3% of Revenue six point two million dollars management believes. We can continue to add to our portfolio and grow our business without adding significant overhead to the company and now we'll pass it over to Ian who will provide an update on available.

Will capital and business. Thank you said you've been good morning to those on the line looking at slide eight would like to highlight the franco-nevada is debt-free having repays a drawing portion of the RCF combined with marketable Securities and working capital provides one point five billion of liquidity at the moment. This positions us very well in combination with cash flows, which we expect to be continued to be strong over the coming quarters to finance growth in terms of the pipeline. The pipeline is very healthy at the moment. The team is very busy looking at precious life opportunities some small some large, uh, and some modest size in addition to Precious Metals. There are some opportunities in non wage is finding and in terms of size, we expect that perhaps some of the smaller two more modest-sized deals are actionable in the near-term.

With that I would turn it over to the operator for any questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please? Press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request and your questions will be pulled in the order. They are received should you wish to decline from the polling process, please press star to if you are using a speakerphone, please lift the handset before pressing any keys.

Your first question comes from Credit Suisse, please go ahead.

Hi, good morning. Thanks for taking my question. Just on the last thing you mentioned on Deal pipeline. Can you talk a little bit about in this commodity environment, whether you're seeing base metal producers wage more learn to engage and precious metals streams or royalties. And also, can you talk a bit about maybe any constraints you're seeing in terms of just being able to do due diligence and disinvestment. Thanks.

thank you for calling

You're right. One of the themes that we've seen emerge recently is base Metals producers looking to monetize precious metals and the current commodity price environment. You can see why this would be appealing wage so much for a pipeline is comprised of that type of transaction terms of action ability. You're right covid-19 does impose some restrictions and so we're actively looking at various alternatives to be creative and how we do due diligence but keep our team safe. So we're hopeful that we'll still be able to execute on transactions in this environment and as things improve the covid-19 things will become increasingly more actionable.

Thank you. Thank you. Your next question comes from Cosmo Cosmo, please go ahead. Thanks. Thanks. Paul Sandy been dead and and congrats. Once again Paul. Maybe my first question is on on the the impairment charge taking out the energy portfolio. I see that they you know, it is the oil assets being written down, you know, not so much the gassy more gassy assets on that front. I'm just wondering I'm sure you've scrubbed the entire month folio to come out this impairment charge, but you know, what assumptions have you made for gas? And can you talk, you know a bit more about those gas assets and and where they stand today?

Hey given, you know the current commodity prices.

Hi, this is Jason calling here. Oh Jason, you're right. We did in conducting our apartment analysis. We looked across all of our energy assets including. That's the Marcellus Roti that we bought last year is you know, highly dependent on gas and also Natural Gas Liquids. We did conduct an impairment off on that asset, but it didn't result in having to incur an impairment. And the reason there is the production levels at that asset are more stable than some of the oil in this environment where operators are cutting a lot of their Capital costs range who's the opportunity asset came out with their budget and and in their most recent quarter maintain their production guidance office and so volumes will continue to be fairly consistent in the near-term.

And then with regard to gas prices, they are low at the moment and have been lower than at the time that we did that transaction. But we expect those prices will recover over the coming quarters and over the coming years. So we did look at it, but it did not result in us having to take an impairment push and you know, maybe as a follow-up Jason off. Well, there's been cutbacks in capex. But you know, I just want to confirm once again, you know, it's got a bit of a lagging effect to it. So even if they cut the oil and gas producers, even if they cut capex now with the impact doesn't come later on, right? Yeah, that's right. So the nature of our royalties are that there is a deferral between when drilling happens when Wells are completed when production comes online and then we actually receive our check and so we expect that, you know drilling levels were reasonably strong in the latter half of 2019 and even into wage

20/20 so

Will continue to receive the benefit of that drilling into Q2 here even in to potentially early Q3. So the the majority of the impact that we think we will see from the reduction in capital spending will occur in the latter half of this year and then into 2021 and and that may be Switching gears a little bit, you know touching on the island Goldberg royalty interests that you acquired in q1, you know, I just want to make sure like, where is the royalty I you know, my understanding is that you know Island gold is currently undertaking a study for an expansion plan, you know is a royalty going to Encompass that potential expansion.

Thanks for calling Moe's yes and we're quite happy to add that royalty that royalty covers the control planes so you can have a look at our closure by Alamos and you should be able to see from that that that is the core of mind and so the preponderance of of cash flow should be from those claims and the crew to the royalty.

And did as a follow-up here as you mentioned, you know, given all the travel restrictions these days it's hard to do due diligence. But clearly, you know, the silent Goldberg is a bit smaller. So I'm just trying to understand in terms of your due diligence process here. You know, of course is going to be a lot more stringent when you're doing bigger deals, but what you still do due diligence on some of these smaller deals and you know, what's a magnitude of difference here in terms of due diligence when we're talking about billion dollar deal versus eighteen today.

So the level of due diligence obviously varies depending on the transaction when you're buying royalty like that on island from a third-party your access to information is in Harrisburg or limited a larger deals. We do tend to benefit from throw to diligence and one of the things we pride ourselves on is the strength of the technical team. There's a lot you can do these days evaluating Anantara off data remotely, but we do like to put boots on the ground whenever we can and so we're thinking creatively about how we get people to site and the fact that we have resources already in some jurisdictions how we may be able to leverage those. So we're working hard to continue to execute despite the travel restrictions as best we can

of course and I maybe one last question here, you know great to see that Frank Nevada has increased the dividend once again, but that came along with the fact that I'm sure price has been very good year to date so far as you mentioned, you know, if someone that bought during the IP or whatever 9

it's more like a 7% you know dividend yield. I guess my question is in the past when you and I have talked, you know certain points in time franco-nevada had targeted a plus 1% sort of a dividend yield. You're not there right now. Is there still is that still a Target that you look at?

it's

Still is an important factor. The oldest are generalists and and and some of those funds 1% is the dividend deal that they looking to to include you in their funds. So it is a level that we'd like to be at, but we've got we've got also about

That in the boss finds with ensuring the the dividend is sustainable and Progressive so we consider all those things in in setting the dividends.

Of course. Thanks. Once again, those are the questions I have.

Thank you. Your next question comes from Greg Barnes TD Securities Greg, please go ahead. Thank you. Can you give us some sense of what the energy Revenue look like in April wage example just to get some idea the lower oil prices what we can expect from that business.

You know, it was lower as I said on on the call off the top of my head. I don't know what I don't know. If I'm in a position to provide that number at this time off and the Hem low revenue for q1 was impressive. What kind of run rate can we expect obviously to equal gold price going forward.

So obviously, you know, because it is an NPI. There's Capital costs that get deducted against the amount. So it fluctuates quarter-to-quarter. We have seen wage growth in the MPI of the last number of quarters as the the gold price has risen, but again, it's all dependent on, you know, the just in terms of how the capital spending Packers going forward. I think at these commodity prices from low, you know should be able to generate between five to ten million a quarter in MPI Revenue. But again, it could change based upon what they decide to do with their Capital spent. That's great. Thanks.

Thank you. Your next question comes from Josh Wolfson RBC Capital Josh, please go ahead.

I think you just back on the oil and gas assets. Could you mentioned having completed some of the testing on the Marcellus asses was that testing also completed off on I guess some of the other assets Midland Delaware or the Orion Project.

Yeah. Thanks. This is Jason Jason here. Again. We did do impairment testing across all of our energy assets. And so we looked at the Texas assets Marcella's dead Canadian assets the as I talked about for the Marcellus because production volumes are not at risk there. At least at this point. There wasn't an impairment Thursday. We were using when we looked at our Texas outset. They had actually been outperforming up until the end of last year. They had had a significant amount of drilling activity on the land. And so that's why we expect will see reductions in those activity levels. It was starting from a higher base. Um, and then with respect to Orion, we looked at that asset as well and we expect that in the near-term wage reduction in Revenue, but over the long term because it is such a long life asset. Uh, we expect that the value is still there with a longer-term and therefore an impairment wasn't dead.

part

The h d m program that's in place. And and I guess the increase going forward, you know, the current rate of equity issue is is pretty similar to what the dividend is which took my perspective kind of offsets. What current shareholders are are receiving. How do you see it also dividend something which will continue going forward. How do you see the ATM going forward now the company is, you know, internet sort of cash position and and growing growing obviously on a steady-state basis. So so the objective of the ATM when we did put it in a middle of last year was to you know be able to pay off the credit facility as we had that on the balance sheet and we achieved that objective but at the time we both said that we look at the ATM as a as a tool for raising money just as having your credit facility, which is why we are putting in a new one slightly higher three hundred million versus the two hundred dead.

okay, and I'm not sure if it's questions better suited for for Paul or Cindy when you look at the

Before it is there is a tool as we see fit for when we need to to to do to sell under it. But there is no no mandate to you know, I am full $300 million. It's opportunistic for us.

Okay.

Thank you. Thank you. Your next question comes from George topping Industrial Alliance George, please go ahead. Thank you operator. Hello. Everyone say on phone number Panama if if it shut down for a while and if you need if they needed more money, would you be amenable to increasing your exposure? They're all that bumping up against the limits trip at their table and a a single-asset exposure.

George's Paul, it's obviously an asset that we really like and have been so impressed with what first Quantum has done in building the Asus more. The issue is the the streaming that has to be done relates to most of the precious metal that already comes out of the property. So there's there's not much more room, but you could do terms of precious metal screaming there.

. Tom just a follow-up on the on the oil. I see the forecast prices going up to $58 is $58 per month WTI given that would you be listening to expand your royalties into the oil and gas Center?

I think it's Jason here again. The pricing that we used in conducting our apartment analysis was a you know, an average blend of the engineering. So it's not necessarily a call that we're making it's just what we thought the most accurate way of looking at future value given the uncertainty around the commodity price environment current month. We do expect there will be a rebound in prices and so for that purpose if there are Acquisitions that are very attractive in today's environment, we would certainly look at them were not seeing at this point a full sort of capitulation on the seller's side. I think people are sort of waiting to see where prices settle out over the coming months and months. So, you know, there are lucky to be good opportunities towards the back half of the year. But at this point it's a bit early for sellers to kind of come to terms with the new price environment.

No.

Thank you.

Thank you. Ladies and gentlemen, as a reminder. Should you have a question, please? Press star one on your touchtone phone. Your next question comes from Tina unik Scotiabank Tana, please go ahead I think a congratulations fall on the neural. Yeah. You're welcome. I came in a bit late on the call. So I apologize. Maybe you address this month. I know you talked a little bit about the your m&a front on looking at the precious metal side. And I think you said there were some small modest deals and large deals to be done and modest the small more in the near-term. Would you classify modest too small under $500 million. Would that be a fair assumption?

Yes. Yes, that's what I would classify as kind of a moderate to two smaller transaction. As you know, we we like to find optionality and sometimes wage and smaller assets. Um, so we'll continue to look at those and we believe that there are some good action of opportunities there the near-term. Okay, and I think I think you should and most of your opportunities are on on streams on from on base metal companies streams on the precious front. I just wanted to make sure I understood the battery correct off and leave the theme that emerged as you can imagine in the front base levels price environment. So those are the assets that we we like long-duration Precious Metals cash flow. Okay? Okay, and and that just on the non-precious side. I think you said you saw some opportunities there with the non precious metal side be mainly on base metals.

I think there are opportunities emerging in base ten pulse and bulk. Okay, thank you on that. And then on your due diligence I I came on when you were talking about your religion, you're looking at alternative ways of doing due diligence. I understand a bit easier when you have an operating asset, you know it, you know, you've got the numbers behind and development are a bit different. But what are some of the innovative ways you're looking at due diligence or are we going to be looking at deals where you announce it? But you know pending due diligence maybe a little bit of both is the answer. I don't want to get into the details of how we doing it but we are not going to be creative looking at the individual risks related to assets and say, you know, how do we calculate each of those off individually so that we can be sure that we've done a good job before we moved.

Okay, okay. All right. Thank you so much on that.

Thank you. Your next question comes from Brian MacArthur Raymond James Brian, please go ahead good morning. My part question has to do is counterparty risk to the know. You spend a lot of time on this but just in the boiling gas, I'm not quite as familiar with it have the cutbacks on the election. Could you drilling with your partners been more just price related or is there any counterparty in there? That's sort of like that lines pulled and therefore at you know, great risk, and that's why you know, the the production's been been cut back it. Can you give me sort of a percentage? It's just monthly selective as opposed to forced. Is that a fair statement?

I think the question Brian I think at this point.

The vast majority of what we're seeing is cut back in capital spending its elective contacts there have been some instances of uh of bankruptcy but they've been minimal at this point. We'll see if that if that increases down the road but I think keep in mind the you know, one of the reasons we were attracted to the ethnic class in the first place. Is that what we're buying here for the most part mineral title, which is effectively a Perpetual interest in the land base. And so to the extent that there are operators that do go into bankruptcy will keep our faith in the land it will survive that bankruptcy and so it's a very secure form of title that we've invested in.

Great. Thanks very much.

Thank you. Your next question comes from John very independent research John, please go ahead. Thank you. Congratulations again look at the month. So it's an extreme temporary operation and Productions going to shut down and maybe people will drive the Asus free and home prices rebound to fifty or a hundred dollars in a couple of years and this epic buying opportunity or do you want to be conservative out of concern? There's a longer adverse change electric cars people. Stay home and drive less.

John Paul, I guess the first thing is the you know, investing bolts in the goal. Then another resource Industries. The only thing we know for sure if they are highly cyclical Industries, it's not to say that there isn't structural changes going on and they will and gas markets they certainly are but what what we're very aware of is is price isn't set by absolute demand prices set by the amount of the balance of supply and demand and what you're seeing in the oil space is off a lot of capital. It's been pulled out of the space inevitably impact Supply, you know, so we're price settles out like all cyclical markets. We don't know in the future. So Thursday, we obviously looking at what the changes are, but expect that they may still be opportunities down the line.

Thank you.

Thank you. Your next question comes from Ralph / 58 Capital Ralph, please go ahead.

Good morning, everyone. Thanks for taking my question in Paul. Congratulations on the formal appointment with respect to the the decision with Continental resources. Take that contribution down by 50% I was wondering what was what was driving that particular number. What is that sort of on the ordinance of the capex budget that you're seeing in the industry across the board would not be a fair wage kind of relationship on on how how that spending profile was was determined.

Yeah, thanks for the the question. I think what's determining the level of spending for that partnership is what we try to do there is acquire acreage that is essentially dead front of the drill program for Continental the benefit of the teaming up with Continental there is that they have a drill program that goes out twelve months or eighteen months and we're trying to acquire acreage that sits directly in front of it so that we get off of near-term cash flow what's happened in recent months of the old price says kind of collapsed here is that Continental is reducing their Capital spending and pulling back on the drilling activity. And so, at least in the near-term there are less areas to buy acreage just because their drill program have been reduced and so are are pull back in capital spend for the joint ventures vehicle is basically just related to how much hatred sits in front of their job program that we can buy.

I see. Okay. Thanks for the clarity on that. I have a question on Cougar Panama be the precious metals deliveries are based on a a ratio of the copper and I'm wondering if those ratios are fixed and thinking just about the relative performance between gold and copper we seen some other truck in other streams in royalties that that change with the price profile, but just wondering if if that is fixed ratios. The ratios are based. There's a schedule that you could have a look at our disclosure as to how those change over time. But the reference top per million pounds of copper you get X Alice's. Yep so long. I I don't think you have the issue with that stream that perhaps you're worried about.

Okay, and and that should be the last one coming back to Continental. How does the performance thresholds work that were to take you up to 75% Because now we have a choice, you know go over Energy prices. We have an impairment when we have a new spending profile there it has that changed at all.

Can you tell me a little bit how that works? We have volume performance targets that Continental has to hit order for them to achieve their full sort of financial secretary.

At the front end of the that the volume targets grew up sort of a decade in time. So it's it's a long-term Target and what happens is in the early years. They have outperformed at least to date they had outperformed the volume targets. And so there's a period of time here where even though activity levels are reduced and volumes are starting to fall short. There's a bit of a catch up. So, we don't expect that. They will actually fall short of the volume Target until probably sometime in in twenty Twenty-One or so, although even that is uncertain. It will depend heavily on levels of activity in the volumes that they actually achieve so it will be a benefit to us. But again if it's sort of a period of them catching up right now,

Yep, understood. That's good. Thank you so much.

Thank you. Your next question comes from S&P Global, please go ahead. Hi. Thanks for taking my question. I had to just curious given birth to invest in the energy sector on the fossil-fuel side. Was there any interest in you know battery-related medals if you have them any other kinds of streams like that and also was there any update on the law number nine issue over corporate, or has that been resolved? Thank you in terms of wage Commodities outside of gold. We're open to various commodities.

With all the football but baseball or or battery medals or oil and gas really what it's driven by. Our ultimate objective is just to invest in good deposits down the number one criteria and and happy to have a diversified exposure outside of precious metals, you know be in in a multiple of Commodities. So we are open it's just finding deposits that we think will will be great deposits with good upside. And sorry what when you repeat the second of your questions there, I you know, I just wondered if there was any update on um, the law number nine issue related to covet Panama and its contract which came up in 2018. I hadn't seen any new flow about it just creates has that been put to bed or is that an ongoing conversation between first Quantum and and the Panamanian government?

It's still is ongoing and and you got to expect that in the current environment. I don't expect that. It's at the front of the agenda. So it will take a bit more time for this resolved. Thanks.

Thank you. Your next question comes from Carrie McCurry. Canaccord. Genuity. Carrie, please go ahead.

Good morning, guys. Just a question on COBRA and antonina know given their offline. Just wondering if you have a sense. You know what your Revenue would look like in Q2 just given, you know, the timing differences between Dickinson treat shipments and and when you get paid

Carrie it's very difficult to say Obviously cobre on a quarterly basis would provide us about 25,000 and and to midnight anywhere between, you know eight to ten and so we just based upon you know, how long shutdowns will last it's very difficult to to determine at this time.

And do you get paid quarterly or is it monthly or Angelina provides makes payment once a quarter and you know, we will sell that silver during the quarter off and Cobra Panama typically does two to three deliveries a month.

So there's a lag in terms of receiving ounces from when they were shift. Thank you. Thank you. There are no further questions at this time. Please proceed.

Thank you Chris. We expect to release our second quarter 2020 results after market close on August 5th with a conference call held the following morning. Thank you for your interest in franco-nevada. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.