Q3 2023 Gold Royalty Corp Earnings Call
Speaker 1: more effectively with you in the future.
With you in the future.
Speaker 1: And before I turn it over to the team, please note the forward-looking statement at the beginning of this presentation. Gentlemen, the stage is yours.
And before I turn it over to the team. Please note the forward looking statement at the beginning of this presentation gentlemen, the stage is yours.
Speaker 2: Well, good morning and good afternoon, as the case may be to everybody. Thank you for attending our third quarter town hall. I'm delighted to walk through our quarterly results and then hand it over to Peter to walk through the advancement on our prolific and diverse portfolio of royalties.
Well good morning, and good afternoon as the case may be to everybody. Thank you for attending our third quarter Town Hall I'm delighted to walk through our quarterly results and then hand, it over to Peter to walk through the advancements on our prolific and diverse portfolio of royalties our operators have been very busy.
Speaker 2: Our operators have been very busy, both on the exploration development front. So there's lots to talk about today. And what's clear from our Q3 financial results is that we're very much at a tipping point right now. For the first time, we were free cash flow neutral as we drove down our cash operating costs by 50%.
On the exploration and development fronts of the slots to talk about today and what's clear from our Q3 financial results is that we're very much at a tipping point right now for the first time, we were free cash flow neutral as we drove down our cash operating cost by 50% crystallizing synergies from the mergers we completed in the first year of our exist.
Speaker 2: Crystallizing synergies from the mergers we completed in the first year of our existence. There were three companies that we took over
Since there are three companies that we took over and we went through an extensive post merger integration period, and we've driven a lot of the redundant costs out of the business and that's why you've seen such an appreciable improvement in our operating cost profile. We also saw a 48% increase in our total revenue land agreement proceeds and we're poised.
Speaker 2: And we went through an extensive post merger integration period. We've driven out a lot of the redundant costs out of the business and that's why you've seen such an appreciable improvement in our operating cost profile. We also saw a forty eight percent increase in our total revenue land agreement proceeds.
Speaker 2: And we're poised to be significantly free cash flow positive in 2024 with the startup of Cote next year, which when fully producing will be Canada's second biggest producing gold mine.
To be significantly free cash flow positive in 2024 with the startup of <unk> next year, which when fully producing will be canvas second biggest producing gold mine and as we saw during the past quarter.
Speaker 2: And as we saw during the past quarter, they reported I am gold, the operator reported over 90% physical completion of the property, they expect to have about 5 million tons or about 6 months, 6 months of production of broken or at the mouth of the mill. So they're in an excellent position.
<unk> reported I am goal, the operator reported over 90% physical completion of the property. They expect to have about 5 million tons or about six months six months of production of Brooklyn or act as the mouth of the mills. So they are in an excellent position to hopefully execute on a smooth ramp up and significant free cash flow generation.
Speaker 2: to hopefully execute on a smooth ramp up and significant free cash flow generation or revenue generation or royalty over the course of 2024, which represents a significant step change for us in our total revenue profile. And again, drives us into free cash flow positive territory.
Revenue generation on a royalty over the course of 2024, which represents a significant step change for us and our total revenue profile and again drives us into free cash flow positive territory.
As we stated in our presentation, our company's operators Agnico Eagle Ied goal, Blackrock overall announced material positive developments on their respective projects over the course.
The quarter, as well, which Peter will get into in a bit more detail in his presentation. We're very busy on the acquisition side as well we continue to supplement what's one of the most prolific and diverse portfolios not just in the junior royalty space, but in the royalty space generally.
Approaching over 240 royalties in the portfolio with the acquisition of 'twenty royalties in this past quarter over 20 royalties in fact and.
And we did it in a very creative way recognizing the capital is scarce in the sector right now and so we've had to be creative in terms of where we've acquired it we.
We acquired a producing copper silver royalty on the Cozman mine in Mexico operated by Capstone of large cap copper producer based in Canada.
And we also acquired over 20 royalties from <unk>, which is the main investment arm of the Quebec government and return <unk> and by extension the Quebec government took a strategic stake in gold royalty again expressing our confidence in the intrinsic value of our portfolio, our management team and our ability to continue to grow value not only in an app.
With basis, but on a per share basis, and thats going to be a very important relationship for us with <unk> and that they will continue as is their investment model to continue to invest in exploration properties in tobacco and now we have a relationship a conduit. If you will for any future royalty opportunities that generate from the properties that are investing in the normal course.
Are there business. So that's been an very important relationship is an exclusive deal.
We ended up purchasing all of their royalties.
From their existing portfolio and return for shares in gold royalty Corp.
And also we continue to add royalties through our royalty generator model, adding to in the current quarter with significant well capitalized operators again, we generate those royalties effectively for free through the sweat equity of our team, particularly in Reno, Nevada.
And in fact, we not only get those for free we cut off and get paid for them not only we do we get royalties in return for those properties, we quite often get option payments and option payments have been a significant component of our revenue through the first couple of years of our existence. So it's a strategy not only pays for itself.
But actually pays profits for us while we're generating royalties on those properties that we stake through our exploration efforts.
So we've been able to demonstrate we continue to grow through all of the four major legs Theres only four ways of growing the royalty business you can do it through M&A, which we've done quite capably. When we had a much stronger currency over the course of 2021, we've done it through third party royalty acquisitions. That's the way how we acquired co day, which represents a significant leg of growth for us going forward, we've done <unk>.
Financings as well and we do organic royalty generation. So we do all four things, we think quite Capably, which is unique and a unique value proposition for the small cap royalty universe among our competitors.
What clearly was not a highlight in the quarter and the first admit it is share price performance and it has to be very very frustrating for investors in the gold universe to see this type of goal chart and not getting the kind of performance and Leverages. The gold price I should expect in a rising gold price environment and our goals has been range bound over the long.
Last couple of years between 19 hundreds of $2000 an ounce, but it is held in like a champ in the face of massive exodus of capital added virtually every other jurisdiction in the world into the U S dollar.
So that exited as a capital that flow of capital into the US Dollar has also gone into Gulf Coast Gold has held its value against the U S. Dollar in spite of that flight to safety to the U S dollar and U S. Treasuries in particular and in fact goals at all time highs in every other major currency in the world. So that's a recognition of the intrinsic value of <unk>.
<unk>, what we haven't seen is the kind of performance you would expect.
In the share prices in a rising gold price environment, and we've seen a significant underperformance, particularly in the last year relative to the gold price in the <unk> index and that's a smaller cap universe, where we've seen a 20% underperformance relative to the gold price but.
But we've also seen that in the large cap universe of many of the bellwether stocks in the industry, whether youre looking at agnico, newmont, Barrick or half the value that they were a year or two ago and thats a reflection I think in the producer universe of declining reserves.
And also increasing operating costs and capital costs and thats eaten into their margins, even as oil prices maintain value at about $2000 an ounce.
So that doesn't really make sense in the royalty universe of royalty companies should be doing significantly better because they provide that optimum leverage that investment model provides you that leverage while protecting you from inflation.
But what I think will continue to do is drive consolidation among the producers and we've seen a significant amount of consolidation among the producers over the course of last couple of years back going back to 2018, given the shrinking pie of reserves shrinking production profiles youre going to start to see and continue to see the larger cap players in the produce universe continue that.
Consolidate I think inevitably youre going to see that kind of consolidation in the royalty universe as well because where our cost of capital driven business and what clearly has been demonstrated in the market is scale matters. The biggest companies enrolling royalty sector get the bus multiples, but the biggest companies are also challenged wants to grow and we think the absence of a mid tier company.
Represents a significant opportunity for many of the smaller cap royalty companies in the space, including gold royalty to fill that void, where we can create something that's big enough to be institutionally relevant and attract capital, but small enough to grow because the multiples at the seniors and the royalty space are enjoying currently implied that they have significant growth ahead of them, but they could.
Really do not have high quality portfolios.
Are significantly challenged to grow given their absolute scale and thats the opportunity the smaller cap universe can start to create in the royalty space as they continue to consolidate and create critical mass over the course of the next little while so I'd say watch that space over the next little while so with that I'd like to pass it on to Peter to walk through.
Our portfolio our growth plans in a bit more detail and then we'll have some Q&A Andrew doubles, our CFO and Peter and I can answer at the end of the presentation. Thank you for your attention.
Thanks, David.
Speaking to the growth that we've had across the portfolio.
With the pro forma closing of our recently announced <unk>.
Acquisition brings our portfolio to over 240 royalties that's up 13, five fold increase in less than three years since our IPO in March of 2021, the fastest rate of growth of any royalty and streaming company in this sector.
So you don't think it's just been a focus on quantity of gold royalty, we really have been focused on a key metric and that's growing the underlying net asset value per share.
As David noted when we had a stronger currency in 2021, we were very aggressive on the growth front and to that end. We did issue stock in the context of several acquisitions and that has been the only context that we have issued any material quantity of <unk>.
Shares is in growing the portfolio too.
To that end, we've grown our overall gross net asset value by five times in less than three years, while only increasing our underlying share count by three five times over the same period. This translates into a 40% increase in the underlying net asset value per share of the business.
A significant increase in a significant creation of value for a gold royalty shareholders, albeit it has not been translated across the share price.
When we look at the consensus average figures, that's where that 0.4 times price to net asset value metric comes from I'd also highlight the average price target of our seven analysts is 225% above where our current share prices. So we've created significant value in this business.
Albeit it's not being translated into market performance, but in time that cash flow will start to crystallize and we will start to see a re rating in the stock.
As cash flow starts to come in.
So to that end the overall revenue profile of the company.
Is materially unchanged for the quarter, we saw several positive advancements on our key assets, but the big picture is really the same leading revenue growth within the sector key assets well on track to enter production over the near and mid term as David mentioned expect to have 5 million tonnes of stockpile at <unk>.
<unk> to see.
Smooth ramp up in 2024, which will be a meaningful step change in our revenue profile next year 2025, and 2026, we start to see some upside potential the Odyssey project, especially with the internal zones and the potential incorporation there.
And then assets like Granite Creek Ren.
Standalone supplementing our revenue profile towards the end of the decade.
One thing that we found very encouraging this quarter was the continued efforts on our cost savings, 50% year over year decrease in cash operating costs in Q3 2023.
And that really translates well to this revenue profile chart every dollar that you see in revenue growth.
Driving towards the bottom line as we maintain that disciplined approach to our expenses.
So getting into the portfolio in a bit more granularity as I mentioned.
Largely the main assets the core assets that are driving the value of our business are on track and unchanged.
Did supplement are cash flowing and to the portfolio with the addition of <unk> in this quarter, but kotte Odyssey rent or the true value drivers of the business over the next several years.
The silicone portfolio, primarily fits into the green exploration bucket.
Be it with very strong operating partners and then one of the best mining jurisdictions in the world.
A bit more detail on that recent acquisition the silicone portfolio.
Just north of 20 royalties all located in Quebec with.
With quality operating partners have some gold nuclear Eagle Cisco mining probe and several others interestingly with this portfolio there was $18 2 million Canadian and associated milestone payments and buyback proceeds.
So relative to our very attractive bargain purchase price of Canadian and $1 million in Gulf royalty stock, we have the potential to benefit with.
With multiples of that in terms of proceeds from these buybacks on milestone payments before we even consider the exploration of the optionality associated with the remaining royalty after those buybacks have been exercised.
It's primarily a gold focused portfolio.
And a few of these assets do have underlying resources, but for the most part they are earlier exploration stage.
But I'll reiterate with great operating partners well funded operating partners to explore these assets and then prolific mining jurisdictions.
Our long trend with significant assets, such as the Detour Lake mine or near Val d'or, the likes of <unk>.
Canadian <unk> Acton and.
Prolific district as well.
As part of the consideration.
<unk> is entitled for 50% of any potential buybacks or milestone payments that still leaves gold royalty with net.
Canadian $9 1 million and potential proceeds again relative to a $1 million purchase price are very attractive tuck.
Tuck in in creative ways to continue to grow our portfolio.
Now moving on to the organic growth associated with the portfolio wanted to dive into some of the key assets in some of the investments we saw in Q3.
At Odyssey Agnico.
<unk> continued to aggressively explore the Odyssey south deposits, specifically infill drilling up the internal zones, which a majority of those are.
Towards the north of Odyssey, South between the Odyssey, North and Odyssey, South deposit, which lies underneath our royalty coverage area. So we're very bullish on agnico delineating a larger resource at the internal zones and they are continually emphasized that the internal zones represent upside to increase production from the <unk>.
Ground during the transition period, the transition period being 2024 to 2028, when the Canadian Mill Arctic complex shifts from open pit to underground. It's currently operating is.
Both an open pit and underground operation.
The key high grade deposit at the Canadian <unk> complex is still east Goldie, which does lie to the south.
<unk> gold royalties royalty coverage area. However, I note that their exploration is focused along strike to the east and west to extend that east Goldie mineralization to the west they've seen significant drill hole results near the noise zone, which is actually underneath the gold royalty coverage area. So so we're quite excited to see that.
Colby style mineralization starting to appear under the gold royalty coverage area to.
To the east, albeit it is.
Quite a bit further their drilling towards our midway royalty and they have been drilling across the midway property as well.
And this is a massive massive mineral system and we're very excited to see the potential for that east Goldie style mineralization trend to the east towards our one 5% MSR at midway.
At Cotai.
David mentioned construction as of September 30th was approximately 92% complete targeting 5 million tonnes stockpile by the end of the year and on track for initial production in early 2024 or zero point, 75% MSR as a reminder to everyone covers that.
Southern edge of the coach a pit importantly, the southern portion of the <unk> pit as well.
The high grade mineralization is occurring near surface. This means that we expect to have increased attributable coverage at cotai over the early years of the mine life.
<unk> focused on the high grade portion of mineralization and we do expect to see our coverage taper off towards the end of the mine life. However, this increased coverage in the early years increases our expected revenue and cash flows from Coty, starting immediately next year.
Based on estimates of the technical production technology Technical report production schedule at Coty consensus commodity prices and our estimate of coverage. There we could expect between three and $4 million in revenue from <unk> immediately next year, which will roughly translate to bottom line cash flow growth.
The <unk> project.
Is continuing to be highlighted by Barrick as the future of the Carlin complex.
They had a.
Updated press release in September of this year.
Mining all of the growth opportunities across barrick's vast portfolio and ran was highlighted as.
A potential opportunity to supplement the 10 year mine plans at Carlin.
They outlined a potential doubling the current resource of $1 6 million ounces, bringing it over 3 million ounces.
And total potentially next year and they're targeting an advanced mine study a pre feasibility study.
Over the next two years.
Salon in June of this year, we saw a.
Inaugural PPA on the project with a $12 three year mine life and annual production of 212000 ounces are 2% MSR covers all the mineralization that's incorporated in the mine plan.
The Companys continued their drilling and exploration efforts across the project and recently appointed Brian Penny as their interim CEO.
So we're encouraged by the continued advancement of the project they are not immune to the difficulties that most small cap advanced exploration companies have faced.
But that really does not discredit the technical merits of phenol on and in the jurisdiction that it's located in just 70 kilometers to the east of the Detour Lake mine.
The last two projects here Cozman, our most recent acquisition.
We had our initial revenue recognized from from the Cozman mined in the quarter.
<unk> and our total revenue and option proceeds.
Adjusted figure.
And.
They're looking to continue their exploration efforts, specifically at the zone, which is directly underneath our royalty coverage area. So we're quite encouraged by the continued strong performance at Cozman, which is currently planned out till 2030 based on reserves alone, but also for the potential for this asset to grow and they're expected to.
An updated resource estimate.
In early 2024.
Finally, the granite Creek mine project IHT provided a operational update on the assets earlier this fall on October 11th.
Focus here has been ramping up the underground production from.
The granite Creek mine underground.
It achieved 592 tonnes per day of mineralized material production.
But theyre targeting closer to 1000 tonnes per day in 2024.
A key area of upside and continued exploration success is to show specific zone, which is currently pre resorts and we're excited to see the sort of specific zone have a resource delineated on it and be included as the mine's main horizon in 2024 for development and potential future production.
Beyond those six core assets, we now have or expect to have over 240 royalties across the portfolio.
Theres various other advancements and exciting catalysts.
But those were some of the key material.
Pieces of progress that we saw and the golds royalty portfolio in Q3 as a reminder, we had 700000 meters of drilling in 2022 and expect to see over 600000 metres of drilling across the portfolio in 2023, all at no cost to both royalty Corp.
We don't see the immediate benefit of a lot of that drilling translates into growing resources derisking of these assets.
So that type of investment that will continue to grow our portfolio throughout the remainder of the decade.
Finally, a comment on our commitment to sustainability.
As represented in our most recent acquisitions, we place a strong emphasis on our ESG related due diligence and our sustainability focus due diligence.
As a man and established operation with good social license and capstone.
Reputable operator that has a track record of the same commitments of sustainability that Gold's royalty has and the silicone portfolio really does fit our core strategy aligning with partners or vendors that have those same juices us in <unk>.
Perfect example of that.
So with that I'll pass it back to David to wrap things up we've had.
Great quarter.
And we can open things up for Q&A as well to address your questions.
Thanks, very much Peter so just to wrap up.
Peter said significant intrinsic value in the portfolio the target price on the stock across the seven analysts that cover us and Thats remarkable sell side research coverage for a relatively young company is both for in our quarter $4 25 per share our consensus net asset value is about <unk> 30 per share.
So more than.
Double where our current share prices is currently so significant intrinsic value in our sector is facing cost pressures and I'm talking among the producers significant capital expenditure pressures significant operating cost pressures declining reserves in production, which has driven M&A, which I think has demonstrated over time, that's a zero sum game it doesn't.
<unk> value in this sector just maintains current production and reserve profiles, but doesn't create per share value. We're very much focused on growing through multiple means as I said through M&A through.
Financing through third party royalty acquisition of royalty.
Generation organically as well, which delivers value on a per share basis, providing leverages the gold price, while protecting you from inflation leveraged to the exploration success of our underlying operating partners, who are investing north of $200 million per year on their portfolio to which we're contributing nothing so optimum leverage to the gold price significant.
<unk> value significant value because frankly, the royalty companies had been tarred with the same brush as the operating companies and there's been an acceleration of capital out of the gold sector. This resulted in significant underperformance of equities to the gold price, but I think it's well overdone in the royalty sector, where we I think there's significant value in particular and the gold royalty stock.
So with that we'd be happy to take any Q&A Joanne.
Excellent. Thank you very much for that update gentlemen, notwithstanding caustic.
We've got a lot of people online and theres lots of questions to be asked.
So let's go to our first one and it's regarding expenses.
Can you hold expenses in 2024.
A big part of the stock price underperformance, maybe the small cap nature of the stock and the lack of profitability.
What kind of profitability can you drive next year, if you meet your revenue target.
Sure I can take take that one.
So look with respect to.
Holding cash our operating expenses from this year.
We are tracking towards our guidance of recurring cash operating expenses for 2023, we've seen subsequent decreases quarter over quarter.
And thats really eliminating.
Redundancies connected with prior corporate transactions has been disciplined use of consultants professional services et cetera.
There may be some additional refining of contracts as we go into 2024.
That being said.
I look too.
To sustain roughly consistent.
Operating costs will have to assess how 2024 is looking.
And and.
See where the cost profile will fall out, but we've reduced our costs really to be consistent with a number of the companies in the sector.
Which is an achievement.
With respect to profitability going forward in the future as Steve mentioned at the outset.
We have reached a point where.
Cash flow free cash flow neutrality is is being reached.
On a monthly basis in the quarter, we were very close.
Past quarter.
And I suspect in future quarters, certainly through 2024, we will be free cash flow positive, which I think is great for profitability now we don't put out guidance.
Core revenue beyond this year.
Assess what we do next year all I can comment on is what is the public domain that the street puts out therefore revenue forecast.
And based on what I've seen for 2024 and 2025.
Based on revenue and if we do keep a consistent operating cost base, we will generate.
Profitability next year.
Pending on what analysts do you pick depending on what cash.
Gold price they have assumption they have it will be a variation on what that profitability is but certainly we've turned the corner and will join the ranks of profitable free cash flow generating royalty companies from 2024.
Excellent.
That's a great milestone.
And going back to the cash costs are there any further cost reductions expected like is there any way you can squeeze some more margin out of there we have a lot of questions on that supply them coming back to us.
Yes.
There is.
We've taken a.
Fairly conservative approach to our budgeting through 2023, and we will do it again in 2024.
<unk>.
I mean, there are some fundamental cost in our company that are difficult to.
To avoid for instance.
We have certain insurance costs that are associated with characters and management as well as.
Just general.
<unk> that.
Is somewhat contingent on the fact that we IPO Ed in 2021, and then it takes a track record before some of those costs start to decrease we are having a track record over the last couple of years also the fact that we're only listed in New York has an impact on that.
Our regulatory and listing fees being listed only in New York is a relatively fixed cost as well.
So when you look at our company compared to other.
Canadian listed companies had promised the companies we do have some fundamental costs are difficult to decrease.
And that's really the benefit also to scale is that you can spread those costs across a larger base as companies get bigger it's a good rationale for consolidation going forward can we bring more costs out of the system.
That's going to be a function of where we get to on some of those fixed costs like insurance for one thing in 2020 for which we don't renew until next year as well as just generally looking at our vendor selection is there ways. We can we could trim down costs a little more.
Not materially.
Different areas, but I suspect.
We'll have to look at at.
At the budget next year, and where we can start.
So picking away, but I think we've got to a stage, where we're much more similar to where our peers are now.
Okay. So let's move on to the portfolio before we go back to our financing questions.
Do you see.
Okay entering production next year and will it impact your bottom line.
Yes, absolutely.
92% complete construction as of September 30.
<unk> 5 million tonnes of stockpile ready to go in early 2024, we expect initial production in Q1.
And a smooth ramp up through next year impact.
Impact on the bottom line is close to 500000 ounces of annual production next year.
Porting in translating close to 2000 Geos gold royalty Corp.
Next year alone a meaningful increase in our overall attributable production our revenue on a direct impact on the bottom line cash flow.
Great. Thanks, Peter and can you comment on the news.
Regarding fenelon and tone of PA West project, what other catalysts should.
Should we should we be looking forward to such as Granite Creek Odyssey.
All of these completions, which I know you went through in the in the presentation, but maybe you can yes no.
I spoke to granite Creek Odyssey and Cotai at some length, but fenelon Antonio call West are great. Examples of some of the advanced exploration assets within our portfolio ton up our west had over 100% increase in its underlying mineral resource really attractive high grade silver deposit down in Nevada, Similarly, phenol on an asset that's.
Now published its initial economics and they continue to look for ways to grow and expand their production profile. These are catalysts across our portfolio that we really don't get much value attributed to us as potential cash flow thats.
A 10 plus years away, albeit does create meaningful value.
Across the portfolio and are just a couple of examples of the 20, some odd advanced exploration assets in the 170, plus early stage exploration assets all of which are having.
Some kind of work or are many of which are having some kind of work.
Across the portfolio.
Okay.
As you can imagine there's lots of questions on the <unk> deal.
So how did it come about.
And.
What's their bidding process can you give a little more granular with that deal.
And I'm happy to.
Time, and again since our IPO in 2021, we've been able to demonstrate that leveraging the relationships that our board and management have with collectively 400 years of industry experience has led to significant growth virtually every deal that we've done since our origination has been on an exclusive basis and so it was leveraging our.
Chip that a couple of our management and board members had with the executive at <unk> you.
You will remember I was in northwestern Quebec for many many years with agnico Eagle. So I have relationships within the Quebec institutions as well that was meaningful in terms of getting this exclusively negotiated with <unk>, but I think more meaningfully it opens us up for future deals with so Quinn, we now that we've established relationship we have a formal commercial.
Arrangement as they continue to invest in the normal course and exploration at the back which is fundamental to their mandate theyre going to generate more royalties and theyre going to look for a way to monetize those royalties within a vehicle a public vehicle weikel royalty. So hopefully can't guarantee it will be exclusive going forward, but hopefully now that we've established.
<unk>. This the structure, it's something that we can leverage time and again through that strong fundamental relationship with silicone.
Okay, and I guess the question that I keep getting asked here is like why wouldn't they just keep the million dollars in and take the proceeds from the royalties.
Why did they why did they partial off our spin out.
So claims mandate is not to hold on to these assets forever. Their mandate is to incentivize exploration in the ground into back make those investments to catalyze growth in reserves and resources across a broad spectrum of metals, not just precious metals and ultimately exit those positions over time.
And recycle that capital into new exploration opportunities, so holding onto those royalties forever doesn't really hit their mandate theyre looking to put new capital back to work in the ground and this will provide them. Some some capital they can use over time to reinvest back into exploration at the back which is again fundamental to their mandate.
Okay and the last question on <unk> is clearly it's hard to model at this early stage, but.
Do you have any metrics of how this deal actually looks it shakes out in the end well for gold.
There's a couple of ways to look at it you know Peter talked about the $18 million of buy downs.
Within the contracts of the royalty conscious of which we would get 50% so.
In a very aggressive scenario, assuming all those got bought down we would get nine times our money back.
And just cash so.
That's excluding any option value fundamental to those royalties the other way of looking at it is we got 20 royalties for the equivalent of U S. $600000. So that's about $30000 of royalty, it's comparable to what our royalty generate a model cost in terms of staking claims the salaries of our people down in Reno, so very comparable to generating royalties.
In terms of the entry costs, so very very.
Cost effective way to add additional royalty optionality into the portfolio.
Okay, and lets talk about focused on precious metals that in North America, and I'm going to combine this with another question.
From someone regarding platinum pricing and gold is nearing the cheap valuation Debra.
Or are we entering the platinum streams and royalty contracts.
Yes.
We're going to stay focused on <unk> traded metals are ones that are quite liquid if.
If you look at our board and management, including myself.
Spent equal amounts of time in my career and base and precious adult copper zinc silver and gold mines over the course of my career nickel those metals are ones that we understand where we think we add value some of the more exotic less liquid metals or something that you weren't really wouldn't CSA. If it's in context of a poly metallic deposit there has those.
Core minerals in them, that's certainly something that we would look at but.
We're going to be precious metal focused with some diversification into some of those led emails.
David I would just expand on that looking at the <unk>.
Bottom on Palladium commodities, we do see the argument there as including them within the precious metals bucket, but with that said the quantity of opportunities we see in that space relative to the much larger gold silver copper commodity space is much smaller we've looked at over 300 opportunities since.
We went public.
And only executed on on a handful of those I'd note of those 300 plus opportunities. The vast majority were gold silver and then some copper opportunities as well we will look at.
High quality opportunities across the commodity spectrum.
But consistently we're seeing.
What we've been able to close on.
Okay.
Let's go back to your portfolio how much of your revenue is expected to be generated or come from Odyssey next year and what does the ramp look like over the next several years in terms of expected rapidly.
Peter you want to yes. So.
So from Canadian <unk> in 2023, our attributable production was primarily expected to come from Barnett pit now that has been.
We have seen less attributable production from the Barnett pit just due to the sequencing at Canadian <unk>.
We expect most of that to be caught up in 2024 and targeting closer to.
30000 ounces at a total production reporting into our 3% MSR from the pit.
We are awaiting on any specific guidance across the Odyssey, south and internal zones. As I noted they are still delineating that internal zones resource.
Our focus on incorporating that into the mine plan as soon as next year, but it's really a key metric and something we can't speak to certainly about.
Where we see the most clarity so towards the end of the decade with assets such as Odyssey, North and East Mill Arctic on a combined basis reporting closer to 200000 ounces, a total production reporting into our 3% to MSR.
By the end of the decade.
Really starts to ramp up through 27% and 28.
Okay, and how many assets do you.
You.
Do you think will be producing by 2024 25, yes.
So by the end of next year. We currently have our four producing assets, we're excited to see cotai enter production.
And the potential for the Odyssey underground to also supplement that so we're looking at six royalties producing by the end of 2024 and then by the end of 2025, we have a handful of smaller royalties in Nevada that could supplement that number of producing royalties upwards of eight by the end of 2025.
Okay, and I have a couple of questions. Here, then I'm going to try to put it into one and it has to do really with royalty companies and maybe David you can answer this.
What are your thoughts do you think theres going to be more mergers among royalty companies next year.
And why are they I know you touched on this a little bit about why are they performing so badly in the market.
Our underperforming at this point, yes.
There actually has been quite a bit of M&A activity since our IPO. So <unk> March 2021, there was no consolidation occurring.
We instigated the consolidation by emerging with three of our peer companies Ely Golden Valley in activity over the course of 2021 and then we saw a lot of other M&A activity in fact, six other royalty companies have disappeared.
Some of the Mavericks and Nomad ultra strategies et cetera, there's a number of them have disappeared over the course of last couple of years. So there has been meaningful consolidation with the objective of trying to achieve scale quickly drive down cost of capital.
That hasnt been borne out honestly, we've seen some consolidation, but what we haven't seen is the re rate you would have expected from that consolidation because there's been a massive exodus of capital out of gold equities generally not just in the royalty streaming universe.
Again, what's driving that exited the capital has been cost inflation.
So among the producers.
<unk> operating and capital costs and that's shrunk.
That has shrunk our margins and a stable cost stable oil price environment <unk> been range bound between <unk> hundred $2000, an ounce over the last couple of years. So the gold price hasnt grown meaningfully, but the costs have and I think thats resulted along with shrinking reserves and production profiles.
Significant cycle of M&A activity among the producers has seen capital just kind of disappeared from this space and unfortunately, the royalty and streaming companies have been tarred with the same brush in spite of the fact that we do provide cost installation. So it's been a baby with a backwater type of reaction in the gold sector and that's obviously disappointing to both investors.
But we're looking for leverage to what's an increasing gold price globally again goal has hit all time highs in every other major currency has held its own against the U S dollar, but we haven't seen.
The royalty and streaming companies perform but they will inevitably because they do provide that optimum leverage to the gold price in exploration, while protecting from inflation and I think as we start to see generalist money come back into the space inevitably will as we see a rotation out of other general equity markets into natural resources in precious metals in particular.
Youre going to see those $1st go into the royalty and streaming companies because they provide a much less risky proposition risky exposure and better leverage the gold price then the producers and developers.
And David do you actually have a plan in place if someone were to approach you either on a hostile bid or.
And prepare a proposed merger I guess.
<unk> is where do you see yourselves in three to five years from now.
I think consolidation among the other half a dozen to 10 other royalty streaming companies is inevitable because there is a significant void in the sector that there isn't a meaningful mid tier royalty and streaming company to compete for capital and opportunities with the big guys.
And as I said earlier on the big guys are getting multiples that implied that they have significant growth ahead of them and they don't they can't there is no conceivable way for them to grow given how big they are they are quality plays are very liquid and so it's a good place for many specialist funds in the precious metal sector kind of park their capital while they wait for the generalists.
Come out and play as well.
But invariably when we start to see the generals come back into the space. The specialists will be looking for the growth vehicles that provide better leverage and I think if we create that mid tier company amongst the rest of US I think we're going to be something that's going to be covered in this space because we can provide that growth, while providing trading liquidity and.
<unk> relevance, that's what's absent in the space right now and I think invariably youre going to see these these remaining smaller cap players start to consolidate what I can't predict for you Joanne or for any of our shareholders on the phone is the sequencing of that who takes over whom it's too difficult to predict at this stage, but it's been quite a quiet over the last year or so because.
Virtually everybody in the royalty and streaming space and the smaller cap universe and plumbing 52 week low it's tough to have those kind of conversations when everybody is discounted severely to their net asset values.
Excellent and just a few more questions. We are at the top of the hour.
What cash rate does it make sense to spin off the contracts that are not to be producing four years I guess like what value do you hold.
Yes.
I've heard that argument before but the reality is we're not getting paid for that option value and a small cap company like ourselves $200 million market cap.
Ghibli larger larger.
The larger end of the spectrum in terms of smaller caps why would it get a better valuation than even a smaller vehicle with no cash flow in fact that get less valuation. There is no economic rationale for spinning it out into a separate vehicle that doesn't cash flow.
And I think in fact, what small value we get for those long dated options will get effectively zero and that kind of vehicle and would just create additional G&A costs because public companies as we see have a fixed not associated with any you can avoid listing fees and insurance and whatnot why duplicate that we've been going the other direction and realizing synergies through consolidation.
So deconsolidation just introduces those costs back into the system.
I think I'll also add that term.
That's to sometimes forget that there are.
Core assets within the portfolios of companies like Royal Gold and Franco Nevada.
At one point in time exploration assets with no production so.
Holding onto some of these.
More long dated options if they don't have a whole lot of value to spinoff now could have a lot of value in the future. It's an excellent point, Andrew because guess, what they bought and paid for they don't eat they don't decay that you sit there and wait and eventually there's going to be reevaluate realization not all of them clearly, but that's the beauty of our model is theirs.
No limit to the diversification we can achieve we can have 2000 royalty same G&A footprint that we have right now and they don't waste they don't occupy our time.
They just wait they provide infinite optionality there shareholders it effectively zero cost.
Okay. So the final question of the day.
Is do we I love it when shareholders.
Do we have a certain valuation or multiple that we monitor to determine if and when it would make financial sense.
To introduce buyback of our own shares.
And multiple multiple barrel question here and what about other publicly traded stream company.
If the price hits those levels do we have a plan on buying back at those levels.
Yes. It was clear to me is that when we start to get into sustainable free cash flow next year, we're going to have to reintroduce the concept of returning capital to shareholders in whatever form.
And that's something that I'm looking forward to having a discussion with my board on next year. Once we do reach that tipping point that we've advertise.
With Colgate coming on with the Kingdom of ramp up of Odyssey.
With rain coming on in the several years as well we have a nice profile almost hockey stick profile in our revenue growth over the course of next little while while our cost structure is now been quite well stabilized under Andrew's stewardship over the last year since he took over as CFO. So I'm very happy about the position we're in where we can sit down with our board.
Next year in say house, what's the most effective way to start to share some of that return free cash flow return with our shareholders is it dividends as it buybacks or there are other forms of returning capital to shareholders that helps our share price go up.
Excellent.
So I was going to ask you if you'd like to say a few more words to your shareholders before we sign off but.
What you just answered is.
Quite valuable and I think shareholders appreciate your stance on everything.
Great management team great presentation as usual we are now at the top of the hour. So we will end our town Hall Forum.
Thanks, everyone for tuning in and it's been a pleasure to host queue and we will see you on the next bid Cowen Hog farm. Thank you very much everyone.
Okay.