Q4 2023 Osisko Gold Royalties Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the <unk> Cisco Gold royalties Q4, and year 2023 results conference call.
After the presentation, we will conduct a question and answer session.
If you would like to ask a question. Please press star followed by one on your telephone keypad. Please.
Please note that this call is being recorded today February 21, 2024 at 10, a M eastern time.
Today on the call we have Mr. Jason <unk>.
President and Chief Executive Officer, Mr. Fidel, Eric because we've added Chief Financial Officer, and Vice President of Finance and Mr. Ian Farmer, Vice President corporate development.
I'd now like to turn the meeting over to your host for today's call Mr. Jason It to Porsche.
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Thank you operator, good morning, everybody and thanks for being on today's call.
I'm, Jason asking president and CEO of Cisco gold royalties.
Having been around to witness the formation almost 10 years ago and subsequently subsequent growth over Cisco gold royalties.
I'm very humbled to be taking the leadership teams of the leading royalty company in the sector and look forward to interacting with all our stakeholders and a positive constructive manner in the near future.
Procedurally I'll run through the presentation and then we will open up the line for questions.
Those participating online you can submit your questions in advance through our webpage.
The presentation is available on the website as well as through the webcast.
Please note there are forward looking statements in this presentation for which actual results may differ.
Also the basis of presentation is in Canadian dollars unless otherwise noted.
I'm joined on the call this morning.
Well, the company's Vice President Finance, and Chief Financial Officer, Ian Farmer, Vice President corporate development amongst others as highlighted on this slide.
When looking at our overall performance for the full year. It is important to note that our fiscal booked a record year in terms of deals earned and was very busy from a transactional point of view.
<unk> $94 3000, Geos earned in 2023, representing a respectable 6% growth over the 89 4000 Geos earned in the full year of 2022.
This number we reported in January 8th came just below the company's 95 to 105000 Geo guidance.
Released in early 2023.
By this time, the challenge and space across our portfolio have been well documented.
Sure.
A quick recap.
A sharp fall in our rough diamond prices.
Resulting in a shutdown of the were not Diamond mine.
Canadian wildfires, which primarily affected deliveries from eleonore.
And ongoing ramp up issues at the Memphis Blancos.
Are they now appears to be some light at the end of the tunnel.
Despite these headwinds 2023, Mark record annual revenues of $247 3 million and an annual cash margin of 93%.
With a record 94% being achieved in the company's fourth quarter.
And Cisco ended the year with $67 7 million in cash and net debt of just $130 million. After the company use the gross proceeds of $132 million from the sale of the Cisco mining shares to pay down our revolving credit facility.
Subsequent to this and in 2024 year to date the company has repaid an additional $32 million on the facility, reducing our overall debt and thereby.
Increasing our financial flexibility to carry out accretive transactions.
With respect to our ongoing commitment to return capital to our shareholders. The company declared and paid its quarterly dividend of <unk> <unk> per share in Q4.
It's 37th consecutive dividend with over $268 million returned to shareholders from these distributions.
The company has had a stellar year as it relates to its disciplined deployment of capital into new transactions.
With some meaningful additions to its already strong portfolio.
In summary.
Cisco Bermuda close both the CSA silver and copper streams in June 2023.
Followed by execution on the Gibraltar stream amendments silver stream amendments by Cisco and then also the acquisition of gold and copper MSR royalties on cost cost of Wangle. Finally in the fourth quarter. The company closed the acquisition of the 1% MSR on Nvme for U S 35.
Million.
With other smaller transactions rounding out the whole list 2023, providing yet another demonstration of our team's ability to uncover and source accretive precious metals transactions.
Yeah.
Turning now to the financial performance from 2023.
Increases in record annual revenues largely track both the commensurate increase of annual Geos earned as well as higher year over year commodity prices.
On a quarterly basis strong commodity prices resulted in a new quarterly high watermark achieved in the fourth quarter of $65 2 million.
Which contributed to our revenue achievement of $274 3 million.
For the full year 2023.
One of the disciplines I brought to the team as to think and per share metrics and it is encouraging to see that from a cash flow per share growth perspective, our annual cash flows from continuing operations in 2023 compared to 2022 increased by <unk> <unk> per share despite being impacted by <unk>.
Interest charges and higher G&A as a result of severance charges associated with the recent management changes.
Without these severance charges.
The increase in cash flow per share would've been <unk>.
Our net loss of 26 cents per basic common share for 2023 year represented a marked decline versus the previous year. However.
However, this delta largely reflects noncash impairment charges on royalties and streams and investments.
Major contributors of this impairment were charges to the carrying value of the Renard stream and loans fair value accounting treatment of our investment in our Cisco development and an impairment of the Trixie stream at 10 Tech.
On the ladder. Please refer to the Cisco development press release put out this morning related to their impairment review at Trixie.
More importantly, 2023 annual adjusted earnings of 54 cents per basic common share represented an improvement over 2022.
During the fourth quarter, the company had 23 producing assets, including ongoing contributions from our Cisco's newest cornerstone asset the silver stream on the CSA mine located in New South Wales.
Recall deliveries from the associated copper screen for CSA are not set to kick in for Cisco until June 15th of this year.
Our deals earned come predominantly from Canada, and we derive over 90% of our geos from precious metals.
Gold at 67% and silver at 25% with the remainder coming from diamonds and other mills.
With the recent shutdown of Bernard.
Diamonds will no longer be a contributor to cisco's deals, earning earn cove going forward, putting the company in a position to effectively 100% precious metals until some of the Companys base metal exposure begins to expand.
With the aforementioned CSA copper stream being the first such major contributor later this year.
Some comments on specific mine performances before speaking about a couple of our assets in greater detail.
Like a reliable workhorse the Canadian Mark melodic had yet another impressive year at <unk>.
The company's most significant contributor to Geos earned.
In terms of the underground project progress at Odyssey during the period.
Eagle's planned mining rate of 3500 tonnes per day was reached in October 2023, and sustained through the fourth quarter.
In addition underground development was ahead of plan in the fourth quarter.
Finally, the main ramp towards East Goldie is ahead of schedule with agnico Eagle expecting to reach the first level of the top of the east Goldie deposit at a depth of 750 meters this quarter.
Consequently, we're excited here that our partner is now evaluating the potential to accelerate initial production from east will lead to 2026.
Year earlier than previously expected.
Performance from the Victorian Eagle.
Gold Eagle mine in 2023 was an obvious improvement over 2022.
Despite a two week wildfire evacuation during the third quarter.
Victoria managed to achieve total production within its provided guidance range.
With the mine, becoming more predictable going forward and based on the new flying plan released earlier last year and Cisco It looks forward to modest year over year growth as the company works towards achieving our near term target of 200000 gold ounces per year.
The strong performance from allergic Eagle and others helped offset the lower than budgeted silver stream deliveries from capstone mantles Blancos operation.
We're milling rates continue to lag phase one expansion design levels.
Worth noting is deliveries from the mines are in a two month lag, meaning that Cisco is 2023 results represent operations from the mine from November 2000, 2022 to the end of October 23.
Cisco will continue to monitor Mentos is performance going into 2024 and for now is expecting relatively flat year over year performance from the asset for 2024.
Capstone is pointing to a mid 2020 for a resolution of the plant issues following the delivery and installation of new pumping infrastructure related to fine tailings and water management and after which it is expected that mentos blancos will consistent consistently delivered nameplate phase one through.
<unk> rates of 20000 tonnes per day.
Newmont Eleonore mine was impacted as operations were temporarily suspended for approximately six weeks during the third quarter due to the proximity of forest fires, which impacted the mine's 2023 production.
And Ah Cisco's annual Geo deliveries were also impacted.
Newmont will be providing updated public disclosure on the asset as part of this annual outlook Tomorrow morning.
Rounding things out with our newest material contributor metals acquisition limited they had a solid quarter.
With gold and silver production basically flat versus the previous three months period.
In 2020 for Cisco will benefit from a full year of silver deliveries from CSA under the silver screen and just over six months of deliveries deliveries under the copper stream from June 15 onward.
The next major catalyst from our partner will come in the form of an updated mineral resource estimate.
On CSA.
The first under metal acquisition Corp's ownership.
A very successful Australian IPO.
After a very successful Australian IPO the company Cdi's began trading yesterday on the ASX.
As was highlighted last night in our MD&A. The number of currently producing assets in our portfolio has come down to 19.
The previous aforementioned 23.
The most high profile of these assets no longer contributing Geos earned is renard.
While the three other names that have come off well, it's worth significantly less material used for quality Matilda intrinsic, which collectively only contribute 415 geos.
A more positive note however, I'll draw your attention to the top half of the list where five of our top 10 contributors continue along that path of improvement in the form of ongoing expansions mine life extensions or throughput and production ramp ups.
By the end of 2024, we can also expect both men gloomy and token convener gold projects to be added to this list.
Along with Cisco's high precious metal exposure, especially diamonds, the longer serving as a major geo contributor our company continues to distinguish itself from pure leading jurisdictional exposure.
As it relates to both production and NAV.
To what Cisco defines as tier one mining jurisdictions, which include Canada, and the United States and Australia.
Recent global events have only served to underpin our belief that maintaining a high exposure to both tier one and very well established mining jurisdictions, where mining has been a key industry or part of the overall culture is extremely important.
As stated in our press release last night after joining the team and subsequent subsequently going through a full portfolio review. In addition to factoring events that have transpired over the past years. Since this company last published its 2023 guidance and previous five year outlook the.
The company has updated these numbers to reflect what we believe to be achievable ranges.
With respect to our 2024 guidance.
Of 82000 to 92000 Geos It goes without saying that there is a significant void in terms of Geo as that has been left by the shutdown of or not.
Production improvements and new mine startups, plus the CSA copper stream coming online for us on June 15th are expected to partially offset this reduction.
However, our cornerstone asset Canadian malarkey is guided to be flat to be modestly down year over year in large part because of the glucose decision to defer the reintroduction of pre crushing lower grade ore to increase mill throughput, which is now not expected to happen until 2025.
In 2024 mill throughput is expected to be sourced primarily from the Barnett pit as well as the Odyssey underground to a lesser extent.
With total throughput estimated to be 52000 tons per day in 2024 versus the nameplate capacity of 60000 tons per day.
Further to this at Mentos blancos when combining our two months stream delivery lag with recent progress timelines provided by our partner Capstone.
We are basically expecting flat year over year Geo deliveries compared to 2023.
With a material positive step change expecting expected from 2025 onwards.
As noted in our press release, we are also expecting a 97% cash margin in 2024.
This I believe is the highest amongst our peer group.
And finally, it should be worth noting that due to recent and previously disclosed closed write downs associated with Renard.
Cisco is not expecting to be cash taxable in Canada for 2024.
Looking further out with respect to our five year outlook and as it relates to our growth trajectory. We believe 120000 to 135000 Geos is a very realistic range for us over that time period.
What this means is that Cisco is peer leading growth profile very much remains intact.
This growth will not occur in a straight line.
Notable assets that are no longer included in our five year outlook.
Previously been factored include back 40, San Antonio and pain point.
For reference, we also haven't been including either <unk> or Horne five in any of our published numbers for some time.
In summary on slide nine the company is now looking at its near term guidance and longer term outlook through a more conservative lens.
After barely missing the low end of its guidance range for the past two years at Cisco has now set targets that the company is confident that can deliver on helping us further reestablished credibility by meeting expectations set in order to complement our asset base, which we believe remain remains second to none.
Underpinning this updated growth profile is a long list of near term catalysts that we provided on slides 10 and 11.
We've already touched on some of these earlier in the presentation. So I'm not going to go through this list line by line. However, there are a few names in opportunities that will benefit our shareholders that I would like to highlight.
As everyone May have seen last week, our partner, So 32 announced the final investment approval of the Taylor deposit her at her Rosa.
Along with project economics as part of its final feasibility study.
Based on timelines provided the project remains on track for first production in the first half of calendar year 2027.
Congratulations to <unk> 32 for achieving these important milestones and as a reminder, Cisco has a 1% MSR at Taylor.
Our partners at Cisco mining and Goldfields together, the windfall mining group are expected to achieve some important milestones themselves at windfall over the next 10 to 12 months, not the least of which being the finalization of an impact benefit agreements with local first nations.
Moving to slide slide 11.
I would also like to highlight that on Friday last week, our partner sold announced the successful completion of an updated pre feasibility study at cascabel.
Effectively outlining a lower cap capex longer life lower risk development option.
<unk> now expects to commence the technical work to further advance and Derisked cascabel.
If you'd like to discuss further and any more detail any of the remaining items highlighted in these two pages I encourage you to reach out to any of my colleagues here at Cisco and we'd be happy to assist.
Finally, we will end the formal part of the presentation.
On slide 12, which outlines the current state of the Cisco is balance sheet.
At year end, we had total debt of just over $190 million and net debt of only $130 million.
As we stated previously the covenant performance is exceptionally strong with cash margins expected in 2024 of 97%.
This is important.
And sorry as noted previously on this call and noted as a subsequent event in our MD&A. We've now also repaid an additional $32 million against our revolving credit facility further strengthening our financial position.
This is important as a Cisco doesn't expect to sit sit on its hands in 2024 and a much improved balance sheet provides the company with the financial capacity and flexibility to continue with strategic strategy of disciplined allocation in that pursuit of high quality accretive precious metals streams in royalties that will bolster the company.
Current and near term Geo deliveries and cash flow that should accrue to our shareholders' benefit.
And if for whatever reason and clarity of that isn't the company's base case, but the company were unsuccessful in cementing new transactions. In 2024, then we will end the year in a net cash position based on current projections, which is not the worst outcome.
And with that I'd like to thank everyone for listening today, we know it's a very very busy day for earnings.
With respect to our peers and other mining companies, but we will open the lineup for questions.
As well as questions posted on the webcast and.
And if we don't get to all the questions on the line, we will make sure to respond offline to.
To those that we don't cover on this webcast. Thank you very much operator over to you for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Do you have a question. Please press star followed by the one on you touched on phone.
Youll hear three Tom.
Alleging a request.
Questions will be pulled in the order they are received.
Wish to decline from the polling process. Please press star followed by the Q.
If you are using a speakerphone please lift the handset before pressing any Keith one moment. Please for your first question.
Your first question.
It's from <unk>.
Cosmos <unk> with CIBC. Please go ahead.
Hi, Thanks, Jason and team.
Maybe my first question is on your equity holding true.
As you mentioned you've divested all your Cisco mining shares could you comment on your other equity positions and to the extent that you can share with us where intentions.
Those equity positions.
Thank you good morning Cosmos. Thank you for the question Michelle.
And so yes, we do obviously have some other equity holdings in the portfolio the majority of which being the Cisco development, we do hold a 40% interest in a Cisco development as well as with metals acquisitions limited.
And so those are the majority of the rest of the positions we have to make up less than.
Very small amount anyway.
So with respect to I'll, just talk about our philosophy around our equity holdings.
As I've stated we have the conversation before because we're not in the business to be portfolio managers.
And so we obviously make investments in equity that really.
Pivots or as a part of a transaction that involves obviously, a royalty or stream or an economic interest and so what you witnessed doors or saw when we divested the Cisco mining law is first of all we had a really good use of proceeds to pay down our debt, but secondly, we're not providing a lot of value to our partners.
Essentially being a passive equity holder.
Our philosophy is again, we're not long term holders of these equity positions, we will provide equity to our partners. If is around a catalyzing event such as an acquisition.
And our other milestone that advances.
And arguably preserves our interest as it relates to a royalty stream our economic interest within the company.
We will look at the appropriate time to monetize these equity interests, but obviously working with our partners to ensure that we're doing it in a responsible way.
Perfect. Thanks, Jason and my other question is just trying to understand your thought process here as you talk about your five year projections.
In terms of growth.
Pacifically you pointed out that are compared to the last sort of target under the old management.
Slide 40, San Antonio High end points are no longer included in your the number I'm just trying to figure out how you went through that process, what well, what's a commonality between some of these three.
For example projects that made you decide to ticket.
Your numbers and to the extent that you can comment on it what have you included.
Or.
What have you what remains in that number.
Thank you Cosmos, so with respect to our process is not different I don't think to any other royalty companies when they put out their guidance, we get together as a group we've got technical evaluations and technical folks that obviously applying on the disclosure of our partner companies.
We very much rely on again the disclosure that we see from per quarter is it remind everybody. We are not the operators here. They are our partners are very much closer than we are but mining is a tough business as you and I, both know and so when we get together to look at again, what our guidance should be we take the appropriate.
Contingencies that we see.
And so collectively what you'll see is they talked about the assets that we pulled out of the five year guidance for the most part the slippage and timelines.
Which we don't expect to come in within that five five with your window, but we do essentially probability weight.
All of the assets.
The five year timeline, and therefore, we have a lot of assets in that portfolio Cosmos. So happy to walk you through our thoughts offline with respect to what with aggregate into that five year.
Contribution from it from a geo perspective, but.
We do take the appropriate contingencies as we see them as a partner and obviously the royalty or stream holder with with respect to these assets.
Great. Thanks, Jason that perfectly answered my question. So thanks again.
Thanks Scott.
Your next question comes from Kenya, Jack <unk> with Scotiabank. Please go ahead.
Great and good morning, everyone. Thank you so much for taking my question Jay.
Jason and Kim.
New CEO at the helm and we'd like to get a bit.
Thoughts on your strategy for transaction. So the first question I had you've improved the balance sheet.
Size of the deal would you be comfortable to attacking academic point.
Great question.
Thank you Tim and good morning, Thanks for joining.
Okay.
From a strategic perspective, 2023 was a very good year for Cisco in terms of transactions five transactions were done and Theyre, all very accretive and will benefit shareholders go forward I would see us going forward you have the ink that frequency and cadence.
Around.
Transactions, but there was obviously a big big chunky one.
And I'm thinking of the CSA transaction, which aggregated to over $190 million U S by the timing, including the private placement into it and so that's obviously very meaningful.
For for Us to us. So you can think again, we will as an organization strategically we obviously want to stay a precious metals focused we will support very good management teams, which we believe making his crew is a very good management team in jurisdictions that we considered tier one and the reason why he did as well.
Talked about January we did pay down our debt facility with the Cisco mining sale is now we have over $550 million within our facility.
<unk> include the accordion as well to go out and do accretive transactions. So look obviously it depends on the flow and the receptivity of our partners here, but you can think of.
Transactions 200 million U S launch is not out of reach for the Cisco group.
But we will also continue to do transactions like in 2023 with $35 million U S. In Vimy, which gives us some very good yield profile. So.
If you ever did basically bracket.
I think from the corporate development engine and corporate development perspective, and he's here and he can comment on it as well $50 million to $250 million I think would be our sweet spot for us for the next couple of years.
Okay and then thank you for that Jason and then just on the jurisdiction.
You mentioned tier one Sallie you flagged, Australia, Canada U S.
Great areas to operate would you be willing to move out of those jurisdictions and for example did Laura in Africa I saw that you did something in Ghana, but how do you see that in terms of that diversification of your portfolio.
And excellent questions and thank you very much. So we do have the ability to take on more jurisdictional risk geopolitical risk as they talked about in the presentation.
However, again, we'd obviously prefer to stay in what we call our tier one jurisdictions, we recognize if we did that our deal flow would probably be more limited. So you do have to look outside of those jurisdictions. The way I'd answer that question is yes, we'd be irresponsible.
Constable not to assess opportunities for example in out and there's a lot of different places in Africa, we have our own risk ratings associated with it but at the end of the day, what we do as management.
Sitting in the room here with me and Ian and Michael and Fred and others is we're effectively just risk managers on behalf of our shareholders' capital and so for us to go into a jurisdiction that is not what we consider tier one we need a commensurate return.
Two two to two.
Do you have that risk the other aspect too as you're very well aware. It really also depends on the contractual nature of the royalty or the streaming interests, we absolutely need survivability and any sort of transaction that is a must for us.
There's a lot of factors that obviously go into our calculus as we think about putting.
Putting bids in term sheets in front of companies that are not necessarily in the tier one we talk about but to be clear we have to make a spread.
More so than a spread in some of these other jurisdictions more so than the spread that we make in our investment in Canada for example.
Find in Africa.
Thank you Rex profiled yesterday would be smaller in size than let's say $200 million deal.
So Tony I think we missed the first part of your question.
I said that.
Would you be looking then for the risk.
Being size wise and I can tell you.
So it's a smaller portion of that transaction.
Yeah, Yeah look I think again, we wouldn't we certainly wouldn't bet the farm and use their whole facility to do for example, a $500 million transaction in a jurisdiction in Africa.
I don't think what our shareholders would want us to do so you're absolutely right has got to be balanced in terms of the size of the trends in the size of the transaction that we would be looking at.
Outside of the jurisdictions that we considered tier one.
Okay and then just my final question turn to capital allocation that Jason maybe you can that will true for us your priority for capital allocation with respect to.
That's alright, Debra again, Brian said share buybacks.
Thank you Tanya.
So again it follows our typical capital allocation decision tree.
Obviously, we had a forecast now.
Speak to 2024, that's going to generate some significant operating cash flow dividend is very important to us and we will continue to obviously pay our dividend a lot of that is obviously dependent on the commodity prices underpinning our business. So as I said from a capital allocation.
This in perspective, we still do have that.
Our facility if for whatever reason, we can't find accretive deals to do our first priority would repay debt down our debt and just really really have an increase in our financial flexibility to go out and do transactions. If it's not in 'twenty four 'twenty five and beyond.
And so beyond that then we're really just looking at how rich and how much cash we are having on our balance sheet and so if we do get to a point, where our balance sheet is very very healthy and we've got a lot of cash on the balance sheet. We would look to do things like special dividends per share.
In terms of buying back shares thats really dependent on more so our trading price and the capital markets.
We do know what our fundamental value in the businesses and so we've got cash on our balance sheet. We do see that we think theres a disconnect with respect to what we think fundamental value is and what the market is quoting US. Yes. We will also use it as a tool to go back and buy back shares that again should accrue.
Over the medium to long term to our shareholders. So you can think of the decision tree is quite quite straightforward and simple, we obviously want to grow the business, we want to grow it responsibly, we're focusing more on per share metrics as they talked about.
And in my presentation.
We will be disciplined with our shareholders' capital.
Okay and my last question is just what's the minimum cash balance.
On the balance sheet to run your business.
Thank you that's a great question I'll actually pass it off to Fred.
Our CFO can answer the question much better than I can.
Well thank you.
In terms of cash balance, we like to keep that $16 million approximately in the cash balance.
And use the remaining balance to pay down the debt.
Or do acquisitions.
That's helpful. Thank you so much I'll leave it to someone else.
You're welcome Thanks Danielle.
Your next question comes from John Tumazos, with John Tumazos, very independent research. Please go ahead.
Congratulations Jason.
Great to have you on board.
Thank you Jim.
Hi can I ask a very detailed question concerning <unk>.
As your charge related to the tariffs.
Put it in.
For the future screen.
And excludes your equity.
And the impairment process, that's the wiring their earnings reports.
Through the end of March.
Yes, good question, Dan I'm going to pass it over to Fred <unk>, our CFO as well to answer yes, I think these impairments.
They must be looked at.
First the investment so.
<unk> requires that we look at investments and if it.
It does it potentially paramount or indicators of impairment.
Which we believe was the case this time so the value of the investment was reduced to the fair value at the end of the year.
And then for the stream, it's always based on financial models and terminal financial models and in this case, we booked 23 million can you in any impairment on the stream itself $2023 5 million to be exact.
So this doesn't count the equity income abstract for whatever OTC calculates.
It's not going to be directly related to the impairment in mind.
Book and they are in their books.
You likely saw John Leonard Cisco development put out press release, as well, putting a range of the impairment at Trixie between 80 and $120 million.
On their books.
Of course.
That's a big question Jason.
How.
Big picture would you like to change the structure orientation of the Cisco gold royalties.
There is.
'twenty wonderful near term catalysts you posted.
It seems as though the stock market has a hard time.
Understanding or digesting everything.
Theres so much progress in there.
The market is confused.
Because most of the years, we report a loss because of non cash charges.
We never Royal global or Cisco or.
Triple Flyer, usually reported profit every quarter.
For example would it be a good reorientation.
The dividend, you're a Cisco development, 40% to your shareholders directly.
Sort of it we get a positive value for it.
Rather than having a panel because they take a run at all so most quarters.
John do do appreciate the comments.
And firstly.
We will like to stress the fact that our earnings and what you see.
With respect to these and these are all noncash charges. So that's why we direct our investors to our adjusted earnings number.
I do take your comments that confusion does have costs here associated and we have made a number of changes both on the governance side and as well with respect to our strategy go forward.
We will never be my buying a mining asset go forward I can promise you that we are going to be a pure play royalty company that does effectively invest in royalties streams economic interests in good jurisdictions with good management.
With respect to the question on the 40% are on our 40% interest in a Cisco development.
If we didn't do a dividend the challenges as we see it with that is that will actually create them.
Capital gain for our shareholders or.
<unk>.
The cost for our shareholders to do that.
And so we don't think although it's something we are certainly considering and we'll talk to our shareholders about that but we don't think by doing in distribution or dividend of the Cisco developments would be well received given they'll all receive a tax bill.
Associated with a distribution.
But open to have conversation with yourself, John and others on options as it relates to again, ensuring that we create value on that investment.
Thank you.
Your next question comes from Adrian Day, with Adrian Day Management. Please go ahead.
Yes. Good morning. Thank you I had two questions if I may.
First one can you just talk a little bit about <unk>.
You mentioned that Youre pretty pure precious metals now, but you also mentioned <unk> got lots of base metals coming on.
What is your general thinking general strategy on diversifying into other commodities.
And how broadly would you diversify.
Really good question Hadrian enterprise myself or my team and our board do you actually have lots of conversations around diversification around the first statement that I'll make is we absolutely want to state precious focused.
For the near medium and long term that said as you just pointed out our concentration around precious is one of the highest in the group. So we do have the ability to take other commodities and we have taken other commodities I mean, mostly as we talked about copper coming from promos and the copper stream.
In CSA will adjust.
So to some degree again our concentration of crashes.
I really think it does depend on the opportunity set that we're looking at clearly.
If we can invest in large either expansion or a new development of a poly metallic asset for instance that gives us both precious and copper all disease copper as an example.
We certainly would entertain that but the fact is that again our team is very much focused on per share metrics, we will be very much focused on value over volumes or whatever it is going to create value for our shareholders. We endeavor to look at so we would look at base metals.
We would look like copper, we have a very positive constructive view on the copper environment go forward around the energy transition and the de carbonization themes that youre very very well up we're a relevant one.
Could we go into more esoteric commodities.
You don't necessarily you can't necessarily COVID-19 them.
Metals exchange I'm thinking.
Commodities like lithium ion there's no. We don't think that makes sense for our portfolio right now given the opportunity that we're except that we're seeing but certainly in the base metal side. We do have exposure within 180 assets that we do have in the portfolio, but we also do think that there's opportunities to.
Really get some of that.
Royalties and streams with some of the base metal assets as well specifically around expansions or new developments that we see being very important to the energy transition sector.
Okay, but you don't have those particular sort of hard line in the sand, where you Wouldnt go over.
Thanks.
We do not Adrian but it's something certainly we evaluate as our portfolio shifts so over time, but we do not have a specific target, saying if were going to drop below.
Pick the number 80%, we wouldn't go out and do with the investment we always look at value first and then look at the other factors such as you're suggesting are around commodity mix.
Okay Super and then my second question, if I may in answer to Kosmos choose very first question.
I got the sense that there's no particular urgency or it's not a high priority to sell down more of your equity.
Is that correct.
But that's that's correct Adrian we've got as I said, the two major ones in the portfolio or a Cisco development in metals acquisition limited and both of those companies metals acquisitions Limited for example, they just did a big raise in Australia as you're certainly aware of and with respect to co development, they've got a bunch of cat.
<unk> not the least of which a construction permit this year, not the least of which theyre going to need to raise capital for their larger builds so it doesn't make sense and are arguably it's it's it's not.
It would be counter productive for us to suggest that we be monetize you can think of.
The Cisco mining situation as a good analog when we're not providing really any value to our partner companies. After the goldfields joint venture. We essentially just became a passive shareholder that's when we'd be looking to monetize or divest or interests and we obviously dealt directly with the Cisco mining when we did do that and thought it was.
The right thing to do at the time.
Okay, great. Thank you. Thank you that helps.
Thanks Adrian Your next question comes from Ralph property with eight capital. Please go ahead.
Okay.
Thanks, operator, Jason.
So most of my questions have been answered.
You know how much time are you spending sort of planning or on origination.
And is there a market appetite for origination for new deals and has it really been anything kind of new and unique that you've seen on the playing field since you've started in sort of going around.
Fostering these relationships.
Good morning, Ralph Thank you for your question.
Yes is certainly the answer that I wouldn't say.
And again for people online I don't know my history background I spent 16 years in investment banking. So do you have.
Some deep relationships the team has some deep relationships and our boardman certainly some deeper relationships across the sector.
And so what I would say is.
There are certainly opportunities for us and so the first phase of meat, becoming coming on as a CEO is thought it was very critically important that meet all our owners and shareholders.
In the last little while.
Grants and myself have been on the road meeting with all our owners getting feedback talking about our strategy go forward. The second phase obviously is around our deal flow and deal origination.
Which again our team continues to do and I will pick that up as well.
Would say that just.
From what we're seeing semantically is really around what I talked about before Ralph around there are a lot of management teams and companies.
And we're looking to grow their business.
And growing their business.
Around the energy transition theme that I talked about is something that we think will continue to be a theme for for some time.
So looking at companies that obviously want more copper or have.
Project, that's just a few kilometers away from their head frame or the processing facilities that they'll accelerate their studies for where you'd have very entrepreneurial management teams out there that are looking to acquire assets.
From the big seniors. So yes, there's that whole origination piece. This group has been doing it for the last 10 years very very well and then again as evidenced by the five transactions in 2023 record allocation in terms of capital deployment I think the deployment with some very very smart and they are going to benefit all.
All of our owners go forward.
So certainly well will continue it's not something that the.
The company hasn't done in the past, but we obviously you need to stay contents to trends.
Cost of capital for all of it called these parties and their aspirations around growing their portfolios.
To become.
I said leaders in this energy transition piece that we're going to see unfold over the next five years to 20 years.
I appreciate the answer thanks, Jason.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the one.
Your next question comes from Brian Macarthur with Raymond James. Please go ahead.
Good morning Adrian.
My main question, but maybe you could just follow up on the non precious metal transactions.
You mentioned lithium with somebody one interested in but you've got a pretty interesting lesbian loyalty.
Does it ever make sense with sallow royalty going forward.
I mean, the whole philosophy here is you tend to get higher multiples for precious metal versus base metals.
With those two comments have you not focusing on lithium what's your view on corvette.
Thank you Brian I. Appreciate the question. Good morning Corvette is a very good asset in our portfolio and so we're very very fortunate to be a benefactor of upholding the 2%.
<unk>.
The MSR there.
We also have MSR than any other metals that are found in that region as well whether it was conveyed.
Convenient to Adrian as I think we have to be very focused as a corporate development team and origination team on what we're good at what we know and so we know when we launched and are focused on.
Precious metals opportunities.
As I talked about before.
We really need to stay in that focus so looking at new lithium projects or new projects in that commodity would.
It would depend if it's a really good management team that we've got a history for of course, we potentially look at it but I don't think it sir.
We would consider first of all our core competency or something that we would consider.
Doing outside of one off exceptions with respect to potentially trading.
Lithium or any of the assets that we have there are not very specific either base or precious.
Of course, we would consider that well certainly do and as I said in my presentation is done a ton of portfolio review.
If if we can actually create value for shareholders.
For example.
The other commodities that we have in our portfolio.
If we see something in.
Other assets, maybe preface focused in other portfolios that we can come to a deal with been swapping, yes that would absolutely make sense for us.
I would say, it's a lot easier to to suggest around the medically and conceptually then around the real execution around these transactions because there was a lot of things obviously involved.
You've got tax got considerations around divestments investments.
But the broad answer to your question.
We absolutely will consider looking at our portfolio and it doesn't make sense and another party's portfolio and kept and then the second question is can we actually realized good value for it either by trading it or monetizing.
Great. Thank you very much very clear Jason.
Thanks Ralph.
For Brian I will now turn the conference back over to Jason for questions on the webcast.
Thank you operator.
The first question, we have is expand and the rationale behind the recent balance sheet actions and comment on your capital allocation going forward.
Leave that we've answered that question for Q&A periods that thank you.
Next question from Kerry Smith at Haywood, Jason do you plan to retire any more debt in 2024.
I think we've also addressed that we as you saw in <unk>.
Q1, or sorry, Q1 to date or year to date, we have retired and paid down another $30 million on our revolver facility. We will continue to do that unless and until we see transactions.
That.
We want to do that to essentially move are again, it's a revolving credit facility. So we always want to have some capacity and flexibility around that so but so if we don't do transactions. Yes, we will continue to retire or paid down or facility Kerry. Thank you for that question.
Question from Eric Lemieux, Congrats on the nomination to the whole team what has been the total ounces produced at Eleonore since startup production.
And around 2 million ounces is what I'm getting from the team is to point to.
Gold ballpark or.
And is there expectation to reach a three 5% MSR royalty eventually.
I'll turn that question to Ian is the three 5% also I believe commodity linked <unk> commodity price based.
But to answer the question, yes about 2 million ounces had been produced at Eleonore and I'll ask him to comment on the three 5% MSR.
Yes look familiar announcement and produce water.
And.
In terms of getting the next bump up on the total production rate with probably a little bit too far in the future to say that that's going to happen at this time.
Thank you for your question here.
That's all the questions operator, we have from the webcast.
So thank you very much everybody for attending the <unk> for the year and Cisco gold royalties results presentation.
I know as I said very very busy day, especially for the analysts that cover so very much appreciate your attention and the thoughtful questions. This morning.
So have a very good weekend, we're always available our team and myself is always available if you'd like to have a conversation on any of our business and our strategy go forward. So thank you very much for attending this morning.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in ethane. Please disconnect your lines.
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