Full Year 2023 Franco-Nevada Corp Earnings Call
Operator: Good morning and welcome to Franco Nevada Corporation's 2023 Year-End Results Conference Call and Webcast. This call is being recorded on March 6, 2024. At this time, all lines are in a listen-only mode.
Good morning, and welcome to Franco Nevada Corporation, 2020 fee yearend results conference call and webcast. This call is being recorded on my sixth 24 at this time all lines are in a listen only mode.
Operator: Following the presentation, we will conduct a Q&A session, where you may ask a question through the phone line or webcast. If you are joining by webcast, you may submit a written question for the Q&A session at any time during this call by typing your question in the Q&A section of the webcast platform. If you require immediate assistance during this call, please press star zero at any time for the operator.
During the presentation, we will conduct a Q&A session. You may ask a question through the phone line all that cash. If you are joining by webcast. You may submit written questions for the Q&A session at any time during this call by typing. Your question in the Q&A section of the webcast platform. If you were quiet immediate assistance during this call. Please.
Zero at any time for the operator.
Operator: I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst in Vestal Relations. Please go ahead. Thank you, Lara. Good morning, everyone.
I would now like to turn the conference over to your house can be the hired Hayden senior analyst Investor Relations. Please go ahead.
Hayden: Thank you Laura good morning, everyone. Thank you for joining us today to discuss Franco Nevada's year end 2023 results.
Candida Hayden: Thank you for joining us today to discuss Franco Nevada's year-end 2023 results. Accompanying this call is a presentation which is available on our website at franco-nevada.com, where you will also find our full financial results. The presentation is also available to view during the webcast.
Hayden: Accompanying this call is a presentation, which is available on our website at Franco Nevada Dot com.
Hayden: Where you will also find our full financial results.
Hayden: The presentation is also available to view on the webcast.
Candida Hayden: During our call this morning, Paul Brink, President and CEO of Franco Nevada, will provide introductory remarks, followed by Sandip Rana, Chief Financial Officer, who will provide a brief review of our results. This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by telephone or via the webcast.
Hayden: During our call. This morning, Paul Brink, President and CEO of Franco Nevada will provide introductory remarks, followed by Sandy Brenna, Chief Financial Officer, who will provide a brief review of our results.
Sandy Brenna: This will be followed by Q&A period.
Sandy Brenna: Our full executive team is available to answer any questions.
Sandy Brenna: Participants may submit questions by telephone or via the webcast.
Paul Brink: We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our detailed cautionary note on slide 2 of this presentation. I will now turn the call over to Paul Brink, President and CEO of Franco Nevada. Thank you, Candida. Good morning.
Sandy Brenna: We would like to remind participants that some of today's commentary may contain forward looking information and we refer you to our detailed cautionary note on slide two of this presentation.
Sandy Brenna: I will now turn over the call to Paul break President and CEO of Franco Nevada.
Paul Brink: Thank you can data and good morning.
Paul Brink: Our diversified top line business has a history of generating leading returns. But in late 2023, we were challenged by the unprecedented production halt at Cobra Pan. We're hopeful that the issues can be resolved, although we've taken a prudent approach to the carrying value. Despite the issues at Cogre Panama, our business remains robust, with no debt, and 1.4. The balance of a long-duration business still generates industry-leading cash, and top-line business model is fortunately not impacted by industry cost inflation.
Paul Brink: Our diversified top line business has a history of generating leading returns but.
Paul Brink: But in late 2023, we were challenged by the unprecedented production at Cobre Panama.
Paul Brink: We're hopeful that the issues can be resolved, although we've taken a prudent approach to the carrying value of the asset.
Paul Brink: Despite the issues that Cobra, Panama business remains robust we finished the year with no debt $1 4 billion of cash.
The balance of our long duration business still generates industry, leading cash flow.
Paul Brink: Top line business model is fortunately not impacted by industry cost inflation in 2023, we generated an 83% adjusted EBITDA margin.
Paul Brink: During the year, we added a number of attractive royalties, Serial Productions LLC, Canada, Chile, Australia, and the U.S. The drop in U.S. natural gas prices also allowed us to add to our natural gas supply. Shareholders depend on us to allocate capital to operations that treat the environment, and they host..., for work has resulted in top level ratings for years, notably. Unknown Speaker.
Paul Brink: During the year, we added a number of attractive royalty interests, principally on gold mines and projects, Canada, Chile, Australia and the U S.
Paul Brink: The drop in U S. Natural gas prices also allowed us to add to our natural gas royalty interests.
Paul Brink: Shareholders depend on us to allocate capital to operations, the trade environment and the host communities responsibly.
Paul Brink: Our work has resulted in top level ratings from ESG agencies, notably where top ranked in.
Paul Brink: Gold Sector, and in the broader precious metal sector, by Sustainability. Our objective is to have a sustainable and progressive dividend that's dependable even in volatile times. 2024, our board, we're proud to increase our dividend for the 17th consecutive year. Investors from our IPO are now achieving a 9.4% yield in U.S. dollars. 12.9, The growth outlook for the balance of our business is strong over the next five years. Great assets keep getting better. Amina has just sanctioned a capital program that will increase production. 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28, New Eagle is planning to head underground. Expand Output, up to a million. With an exciting period of new builds, I'm looking forward to new contributions from Toca do Zinho.
Paul Brink: In the gold sector and in the broader precious metal sector by sustained analytics for 2024.
Paul Brink: Our objective is to have a sustainable and progressive dividend, that's dependable even involved at all times.
Paul Brink: 2024, our board, we're proud to increase our dividends for the 17th consecutive year investors from our IPO and are achieving a nine 4% yield in U S dollars.
Paul Brink: Or a 12, 9% yield in Canadian dollars.
Paul Brink: The growth outlook for the balance of our business is strong over the next five years.
Paul Brink: Great assets keeps getting better.
Paul Brink: Mena is just sanctioned a capital program that will increase production candle area is considering an underground expansion agnico Eagle is planning to add underground production at detour.
Paul Brink: <unk> output up to a million ounces per year.
Paul Brink: It's an exciting period of new mine builds and looking forward to new contributions from <unk> Green.
Paul Brink: Greenstone, and Solaris Norte, amongst others. This outlook is good certainty. Two-thirds of the production is already. 2.4 billion in capital; we have available positions as well today. Corporate Panama represented roughly 20% of our revenue. Production Halt is seen more than that proportional reduction in our market. The prospect of Cobre restarting, or an Arbitration Settlement are all upside optionality for these tribes. Summary.
Paul Brink: Greenstone and Soliris not lost Nortel, you amongst others.
Paul Brink: We're driving organic growth through 2028.
Paul Brink: This outlook is good certainty two thirds of the production is already under construction.
Paul Brink: $2 4 billion of capital, we have available positions us well to add further assets.
Paul Brink: Cobre, Panama represented roughly 20% of our revenue and the production halt seen more than that proportional reduction in our market cap.
Paul Brink: Prospect of co grade restarting.
Paul Brink: One arbitration settlement are all upside optionality from these trading levels.
Paul Brink: In summary.
Sandip Rana: The outlook for our business is bright. The strategy of Maintaining a Strong Balance Sheet has never been more relevant, and Thank you, Paul. Good morning, everyone.
Paul Brink: The outlook for our business as Brian.
<unk> and maintaining a strong balance sheet has never been more relevant.
Paul Brink: Giving us a large treasury to grow the business at a time when capital for the industry as otherwise scarce.
Paul Brink: I'll now hand, the call over to Sandy.
Sandy Brenna: Thank you Paul and good morning, everyone I will begin with slide four which shows how the company performed against the guidance that was issued for 2023.
Sandip Rana: I will begin with slide four, which shows how the company performed against the guidance that was issued for 2020. The updated guidance provided by the company for last year was $620,000 to $640,000 total GOC. Of this total, we guided to 480,000 to 500,000 precious metal geodes, with the balance being from Diversified Aspects. The company ended the year with 627,045 geos sold, well within the guidance.
Sandy Brenna: The updated guidance provided by the company for last year was 620000 to 640000 total Geos sold.
Sandy Brenna: This total re guided to 480000 to 500000 precious metal deals with.
Sandy Brenna: With the balance being from diversified assets.
Sandy Brenna: The company ended the year with 627045 year sold well within the guidance range we.
Sandip Rana: We were also within the guidance range for precious metals with 488,100. The diversified assets, which include our non-precious metal mining assets and energy assets, resulted in just under 140,000 geos sold. Before I get further into the financial results, I wanted to speak about Colbray Pass. Turning to slide 5.
Sandy Brenna: We're also within the guidance range for precious metals with 488189 Geo sold.
Sandy Brenna: The diversified assets, which include our non precious metal mining assets and energy assets resulted in just under a 140000 geos sold for the year.
Speaker Change: Before I get further into the financial results I wanted to speak about Cobra, Panama turning to slide five.
Sandip Rana: Cobre Panama is Franco Nevada's largest investment and has generated approximately 20% of its revenue. Before the halt in production, the mine was operating very well, having successfully completed its expansion to 100 million tons per year. We were delivered 28,318 geos during the fourth quarter and just shy of 129,000 geos for the fourth quarter. However, as previously disclosed, Cobre Panama has been in preservation and safe management with production hall pits since November. On November 28, 2023, following protests, President Corteso's call for a mining moratorium. The Supreme Court of Justice of Panama released its ruling declaring Law 406 unconstitutional.
Speaker Change: Cobre, Panama is Franco Nevada, as largest investment and has generated approximately 20% of revenue.
Speaker Change: For the Halton production. The mine was operating very well, having successfully completed its expansion to a 100 million tons per year.
Speaker Change: We were delivered 28318 geos during fourth quarter, and just shy of 129000 geos for the full year.
Speaker Change: However, as previously disclosed Cobra, Panama Hudson in preservation and safe management with production halted since November 2023.
Speaker Change: On November 28, 2023, following protests the president of car T cells called for mining moratorium.
Speaker Change: The Supreme Court of Justice of Panama released its ruling to clearing law 406 unconstitutional.
Sandip Rana: In light of these events, we carried out an impairment assessment of our Colbrae Panama streams on December 31. The recording of impairments is a judgment made by management based on available information at a point in time, which is used to determine the accounting treatment. We took a prudent approach in our judgment of the facts and circumstances, and based on the halting of production and the political environment surrounding the ruling by the Supreme Court, as well as the significant share price impact, we determined the recoverable amount under applicable county standards to be, as of December 31, 2020. As a result, we recognized a full non-cash impairment loss of approximately 1%.
Speaker Change: In light of these events, we carried out an impairment assessment of our Cobra, Panama screams at December 31 2023.
Speaker Change: The recording of impairments as a judgment made by management based on available information at a point in time, which are used to determine the accounting treatment.
Speaker Change: We took a prudent approach in our judgment of the facts and circumstances and based on the halting of production and the political environment surrounding the ruling by the Supreme Court.
Speaker Change: As well as the significant share price impact we determined there were a couple recoverable amount under applicable accounting standards to be now as at December 31, 2023.
Speaker Change: As a result, we recognized a full noncash impairment loss of approximately $1 2 billion.
Sandip Rana: As previously disclosed, we have provided a Notice of Intent to commence arbitration against this data panel. While we believe in the strength of our claims, the potential proceeds from the arbitration were not reflected in our impairment valuation. Our streams on Cobra Panama remain valid, and we are hopeful of a resolution between the first quarter... State of Panama and a restart of the mine, at which time our deliveries would restart. In this situation, we would assess the recoverable amount of Cobra Panama streams at that point in time, which may lead to a reversal of part or all of the impairment loss. Moving on to the financial performance for the quarter, on slide six, we highlight the gold equivalent ounces sold for the last five quarters as well as the last five. Total Geos sold were lower when compared to the prior year, with Q4 2023 Geos sold being 152,351. Compared to 183,886 in Horford.
Speaker Change: As previously disclosed we have provided a notice of intent to commence arbitration against the state of Panama.
Speaker Change: While we believe in the strength of our claims the potential proceeds from the arbitration were not reflected in our impairment valuation.
Speaker Change: Our streams on Cobra, Panama remain valid and we are hopeful of a resolution between first quantum and the state of Panama and a restart of the mine at which time our deliveries would restart.
Speaker Change: In this situation, we would assess the recoverable amount of cobre, Panama streams at that point in time, which may lead to a reversal of part or all of the impairment loss we recognized.
Speaker Change: Moving on to the financial performance for the quarter on slide six we highlight the gold equivalent ounces sold for the last five quarters as well as the last five years.
Speaker Change: Total geos sold were lower when compared to prior year with Q4, 2023, Geo sold being 152351 compared to 183886% and fourth quarter of 2022.
Sandip Rana: All of these precious metal geos were 119,581, down approximately 8% from prior years. For the quarter, the largest contributors to the lower precious metal geos were Cobre Panama, due to the halt in production as mentioned. Stillwater, which was due to the impact of converting weaker platinum palladium to Geos and Candelaria, which had lower production drain. However, the lower GOs from these assets was partially offset by stronger production from both Antipakai and MWS, both of which had very strong foreclosures. Precious metal geos represented 79% of total geos for the quarter and 78% for the year.
Speaker Change: All of this precious metals Geos were 119, <unk> hundred 81 down approximately 8% from prior year.
Speaker Change: For the quarter, the largest contributors to the lower precious metal Geos, where Cobra, Panama due to the halt in production as mentioned Stillwater, which was due to the impact of converting weaker platinum palladium revenue to check to Geos and candle area, which had lower production during the quarter.
Speaker Change: The lower Geos from these assets was partially offset by a stronger production from both <unk> and.
Speaker Change: <unk>, both of which had very strong fourth quarter.
Speaker Change: <unk> represented 79% of total geos for the quarter and 78% for the full year.
Speaker Change: For diversified geos or valet royalty resulted in an increase in geos for the quarter compared to prior year due to higher iron ore prices.
Sandip Rana: For diversified GOs, our valet Roll-T resulted in an increase in GOs for the quarter compared to the previous due to higher iron ore prices. As you know, each quarter we make an estimate of what the royalty will be, with the actual amount being announced by Ballet in late March and September. As a result, you will see adjustments to our pools twice: First and Third Quarters.
As you know each quarter, we make an estimate of what the royalty will be with the actual amount being announced by by late in late March and September each year. As a result, you will see adjustments to accruals twice a year in our first and third quarter each year.
Sandip Rana: Energy GEOs were significantly lower at 25,640 GEOs for Q4 compared to 47,713 a year ago. This was the result of lower energy prices, particularly natural gas. 2023 saw continued volatility in commodity prices. As you can see on slide seven, gold and silver prices were higher for the quarter and year, with gold higher by over 14% for the quarter and almost 8%. Palladium prices were significantly lower year over year, which did negatively impact the conversion of PGM.
Speaker Change: Energy Geos were significantly lower at 25640 deals for Q4.
Speaker Change: <unk> to <unk> 47713, a year ago. This was the result of lower energy prices natural gas in particular.
Speaker Change: 2023 saw continued volatility in commodity prices as you can see on slide seven gold and silver prices were higher for the quarter and year with gold higher by over 14% for the quarter and almost 8% for the year.
Speaker Change: <unk> prices were significantly lower year over year, which did negatively impact conversion of PGM revenues to geos.
Sandip Rana: Energy prices were weaker in 2023 coming off multi-year highs. Slide 8 highlights our total revenue and adjusted EBITDA amounts for the last five. As you can see from the bar charts, revs and adjusted EBITDA have decreased slightly to $420.23 compared to the prior year. The company recorded $303.3 million in revenue during the quarter and $254.6 million in revenue during the year, a margin of 83.9%.
Speaker Change: Energy prices were weak during 2023 coming up multiyear highs from 2022.
Slide eight highlights our total revenue and adjusted EBITDA amounts for the last five quarters as you can see from the bar charts revenue and adjusted EBITDA has decreased slightly Q4 2023 compared to prior year the.
Speaker Change: The company recorded $303 $3 million in revenue during the quarter and $254 6 million in adjusted EBITDA.
Speaker Change: Our margin of 83, 9% was achieved for the quarter.
Sandip Rana: As you turn to slide 9, you will see the key financial results for the company. As mentioned, total GOs were 627,045 and generated $1.2 billion. On the cost side, we did have a slight decrease in cost of sales compared to Q4 2022 due to lower energy. Also, cost of sales is dependent on which assets deliver stream ounces; that's not all fixed payments per stream ounce. Depletion decreased to 68.9 million versus 73.5 million a year.
Speaker Change: As you turn to slide nine you will see the key financial results for the company.
Speaker Change: As mentioned total Geos were 627045% generating $1 2 billion in revenue.
Speaker Change: On the cost side, we did have a slight decrease in cost of sales compared to Q4 2022 due to lower energy costs.
Speaker Change: Also cost of sales is dependent on which assets deliver stream ounces not all fixed payments per stream ounce are equal.
Speaker Change: Depletion decreased to $68 9 million versus $73 5 million a year ago depletion is based on actual mining geos sold and barrels of oil equivalent received on the energy side of the business as we received last Geos with Cobra, Panama and to meet our intangible area. This impacted depletion as those assets are higher per ounce dipped.
Sandip Rana: Depletion is based on actual mining geos sold and barrels of oil equipment received on the energy side of the mine. As we received less GEOs from Cobre, Panama, Antimena, and Candelaria, this impacted depletion as those assets are higher per ounce depleted. We did record a net loss for the quarter of $982.5 million, or $5.11 per share, due to the impairment recorded on Colbray Panama
Speaker Change: <unk> assets.
Speaker Change: We did record a net loss for the quarter of $982 5 million or $5 11 per share due to the impairment recorded on cobre Panama.
Speaker Change: This compares to net income of $165 million or <unk> 86 per share in the prior year. However.
Speaker Change: However, adjusted net income was $172 9 million or <unk> 90 per share for the quarter up 5% and five 8% respectively versus prior year.
Sandip Rana: This compares to a net income of $165 million, or $0.86 per share, in the prior year. However, adjusted net income was $172.9 million, or $0.90 per share for the quarter, up 5% and 5.8%, respectively versus the prior year. Slide 10 highlights the continued diversification of the portfolio. From the charts, you can see that 78% of our full-year 2023 revenue was generated by precious metals, with revenue being sourced 88% from the Americas, with Canada and the United States. Slide 11 illustrates the strength of our business model to generate high margins. For 2023, the cash cost per geo, which is essentially the cost of sales divided by gold equivalent ounces sold, is $286 per year. This compares to $242 per geo in 2020.
Speaker Change: Slide 10 highlights the continued diversification of the portfolio from the charts you can see that 78% of our full year 2022, <unk> revenue was generated by precious metals with revenue being sourced 88% from the Americas, with Canada, and the United States being the largest.
Speaker Change: Slide 11 illustrates the strength of our business model to generate high margins for 2023, the cash cost per Geo, which is essentially cost of sales divided by gold equivalent ounces sold.
Speaker Change: Is $286 per Geo this.
Speaker Change: This compares to 242 per Geo in 2022.
Speaker Change: This amount will fluctuate depending on the mix of royalty versus stream geos, including mining and energy.
Speaker Change: But as you can see at current average gold prices the company generates significant margins margin was over $600 per ounce in 2023.
Speaker Change: In a rising commodity price environment, we expect to benefit benefit fully as the cost per geo sold should not increase significantly.
Speaker Change: We consider our cost structure to essentially be fixed.
Speaker Change: The other cost component for the company. Besides besides the cost of sales as our corporate administration costs.
Sandip Rana: This amount will fluctuate depending on the mix of rural T versus stream geos, including mining and energy. But as you can see, at current average gold prices, the company generates significant margins. In fact, margin was over $1,600 per ounce.
Speaker Change: The royalty streaming business model is a scalable model our corporate administration costs have increased at a much slower rate than our revenue.
Speaker Change: Revenue has increased eight fold from 2008, while corporate <unk> cost is less than doubled over the same period.
Speaker Change: Management believes we can continue to add to our portfolio and grow our business without adding significant overhead to the company.
Sandip Rana: In a rising commodity price environment, we expect to benefit fully as the cost per geo sold should not increase. We consider our cost structure to essentially be fixed. The other cost component for the company, besides the cost of sales, is our corporate administration. The Royalty Streaming Business Model is scalable, so our corporate administration costs have increased at a much lower rate than our revenue.
Speaker Change: With respect to guidance going forward. Please refer to slide 13 for 2024, we are guiding to total geos sold of between 480000 to 540000 Geos sold.
Of this total Geos, we are guiding to 360000 to 400000 precious metals geos for the year.
Speaker Change: The balance would be geos from our diversified assets of which we expect energy to account for about 75% for 2024.
Sandip Rana: Revenue has increased 8-fold from 2008, while corporate admin costs have less than doubled over the same period. Management believes we can continue to add to our portfolio and grow our business without adding significant overhead. With respect to guidance going forward, please refer to slide 13. For 2024, we are guiding to a total geo sold of between 480,000 and 540,000 Chios sold. Of this total geos, we are guiding to 360,000 to 400,000 precious metals geos. The ballots would be GOs from our diversified assets, of which we expect energy to account for about 75%. Please note that for all guidance ranges, we have excluded Colbray, Panama, and Argeo, Sultan.
Speaker Change: Please note that for all guidance ranges, we have excluded Cobra, Panama and our Geo sold numbers at Cobre, Panama remained in production, we would've expected deliveries and sales of between 130000 to 150000 Geos annually.
Speaker Change: The overall main drivers for Geos year over year are for precious metals, we will benefit from initial ounces from new mines being completed in 2024 tokens in young greenstone Meera Rosa and <unk>.
Speaker Change: We will have full year deliveries for <unk> and Sig whaler and we expect an increase in geos from tangible area based on the guidance from the operator.
However, we are anticipating lower production at <unk> based on the mine plan for lower rates.
Speaker Change: Our guidance has been calculated using $19 50 per ounce gold $22 50 for silver $850 per platinum 900, Palladium and had 115 per ton to 62% iron ore.
Sandip Rana: At Colbray Panama remained in production, we would have expected deliveries and sales of between $130,000 and $250,000 GEOS. The overall main drivers for GOs year-over-year are, priced in 2024 Topanzino, Greenstone, Mararosa, and Solaris Norte. We will have full-year deliveries for Maginot and Seguela, and we expect an increase in geos from Candelaria based on the guidance. However, we are anticipating lower production at Antipakai based on the mine plan for... Our guidance has been calculated using $1,500 per ounce gold, $22.50 for silver, $850 for platinum, 900 palladium, and 115 per tonne. Unknown Speaker.
Speaker Change: Obviously prices are volatile and as they change it will impact of conversion of non gold's commodities to geos.
Speaker Change: Also please note that we expect to reach our geo capped at <unk> by the end of 2024.
Speaker Change: On the energy side, we are using a price of $75 per barrel <unk> and $2 50, Mcf natural gas.
This provides a range of 85000 to 105000 geos from our energy assets.
Speaker Change: As we look forward over the next few years, we do forecast 2026 at the current high for Geo sold based upon what we know today.
Speaker Change: Thereafter, we will have to step down for <unk> in 2027, and then <unk> in 2028.
Speaker Change: Our outlook for 2028 $540 to 600000 Geos sold.
Speaker Change: This range precious metals will be 385000 to 425000 geos.
Sandip Rana: Obviously, prices are volatile, and as they change, it will impact the conversion of non-gold commodities. Also, please note that we expect to reach our Geo Kappa MWS by the end of the year. On the energy side, we are using a price of $75 per barrel WTI and $2.50 MCF natural gas. This provides a range of 85,000 to 105,000 GEOs from our energy... As we look forward over the next few years, we do forecast 2026 as the current high for geos sold based upon what we know today. Thereafter, we will have the step down for Candelaria in 2027 and then Antipakai. Our outlook for 2028 is 540,000 to 600,000 geosols. Of this range, precious metals would be 385,000 to 425,000. The main contributors will be higher production from Antimina and Guadalupe based on the latest mine plans. New mine starts are from Valentine Gold, Stibnite Gold, Eskay Creek, and Castle Mountain Face.
Speaker Change: Main contributors will be higher production from <unk> and Guadalupe based on latest mine plants.
Speaker Change: The new mine starts from Valentine Gold step night Gold SK Creek and Castle Mountain Phase II.
Speaker Change: For diversified yields we do expect an increase in geos from our valet royalty as attributable production should increase with the royalty on the southeastern system, becoming payable.
Speaker Change: But the energy assets, we do assume an increase in production over the next five years, resulting in increase in Geos.
Speaker Change: Also we upheld energy prices flat at $75, a barrel <unk> and $2 50, Mcf natural gas for the period.
Speaker Change: Overall, when you look at the outlook for Geos sold the company has approximately 15% built in organic growth from 2023 to 2028 at budgeted commodity prices, excluding cobre Panama.
Speaker Change: This also assumes that no additional assets are added to the portfolio.
Speaker Change: Two additional items to note.
Speaker Change: With the legal proceedings that we will move forward related to Colgate, Panama, we are expecting to incur annual costs of between $10 million to $15 million per year. These.
Speaker Change: These costs will be disclosed separately in our financials going forward.
Speaker Change: And with the proposed implementation of the global minimum tax sometime in 2024, we are projecting that our effective tax rate will increase to approximately 18% to 19% going forward.
Sandip Rana: For diversified geos, we do expect an increase in geos from our valet royalty, as attributable production should increase with the royalty on the southeast. For the energy assets, we do assume an increase in production over the next five years, resulting in an increase in GDP. Also, we have held energy prices flat at $75 a barrel WTI and $2.50 MCF natural gas for the period. Overall, when you look at the outlook for GeoSol, the company has approximately 15% built-in organic growth.
Speaker Change: The global minimum tax will be retroactive to January one 2024.
Speaker Change: The effective tax rate will fluctuate based on the jurisdictions that generate taxable income.
And lastly, slightly slide 14 summarizes the financial resources available to the company.
Speaker Change: When including our credit facility of $1 billion.
Speaker Change: Total available capital at December 31, 2023 is $2 4 billion.
Speaker Change: And now I'll pass it over to Laura and we were happy to answer any questions.
Sandip Rana: 2023 to 2028 at budgeted commodity prices, excluding Colbray Panama. This also assumes that no additional assets are added to the portfolio. Two additional items to note. With the legal proceedings that we will move forward with related to Cobre Panama, we are expecting to incur annual costs of between $10 to $15 million per year. These costs will be disclosed separately in our financials going forward. And with the proposed implementation of the global minimum tax sometime in 2024, we are projecting that our effective tax rate will increase to approximately 19% going forward. The Global Minimum Tax will be retroactive to January 1st, 2020. The effective tax rate will fluctuate based on the jurisdictions that generate taxes.
Speaker Change: Yes.
Laura: Of course, thank you during the Q&A session. If you would like to ask a question simply press Star then the number one on your telephone keypad. If you would like to invite a question. Please press star followed by the number.
Laura: If you are joining us on the webcast. Please submit your questions through the Q&A section at the webcast.
Laura: Yeah.
Laura: Our first question comes from the line of Josh Wolfson from RBC capital markets. Please go ahead.
Joshua Wolfson: Okay. Thanks, very much first question just on the long term guidance.
Laura: Yes.
Joshua Wolfson: The structure of the deals the company has signed for a lot of its cornerstone assets.
Joshua Wolfson: <unk> stepped down to which to which I guess are coming into play here for the five year guidance.
Joshua Wolfson: When you look at the outlook for growth and and the replacement of some of this production how do you sort of factor that turns into the timing of deals or is there any motivation to structure. These deals. So this consistent growth.
Sandip Rana: And lastly, slide 14 summarizes the financial resources available to the company when including our credit facility of $1 billion, total available capital at December 31st, 2020. Now I'll pass it over to Laura, and we are happy to answer any questions you may have. During this Q&A session, if you would like to ask a question, simply press the star then the number 1 on your telephone keypad.
Joshua Wolfson: On a year over year basis longer term.
Paul Brink: Josh It's Paul.
At the time with do we do the deals.
Joshua Wolfson: It's more looking at what the reserves are and what Youre confident will be mined over time, and making sure that we get that minimum return.
Operator: If you would like to review your question, please press the star followed by the number 2. If you are joining us on the webcast, please submit your questions through the Q&A section of the webcast platform. Our first question comes from Josh Wolfson from RBC Capital Markets. Please go ahead. Thanks very much.
Paul Brink: Or a minimum estimated return based on that.
Paul Brink: And then also sizing of the long term of the deal so that you've got an acceptable burden on the assets that you are going to maximize the optionality.
So it's really it's deal by deal.
Paul Brink: To strike that balance.
Paul Brink: <unk>.
Paul Brink: The obviously, it's a negotiation we would love to push that out further in time.
Paul Brink: But you see what you can achieve on each transaction.
Joshua Wolfson: The first question is just on the long-term guidance. The structure of the deals the company has signed for a lot of its cornerstone assets incorporates these step-downs, which, you know, two of which I guess are coming into play here for the five-year guidance. When you look at the outlook for growth and in the replacement of some of this production, you know, how do you sort of factor these step downs into the timing of deals? Or is there any motivation to sort of structure these deals so there's consistent growth on a year to year basis in the longer term? Josh, it's Paul.
Paul Brink: Okay.
Paul Brink: And then on cooperate.
Paul Brink: My understanding is there is some volume of concentrate on site that could potentially be sold down.
Paul Brink: Has this already been recorded at all in terms of value I guess.
Paul Brink: Franco and if there was any concentrate sales would that registers as production to Franco share.
Franco: So Josh.
Paul Brink: You know, at the time when we do the deals, it's more looking at what the reserves are and what you're confident will be mined over time, and making sure that we get a member of TURN or a minimum estimated return based on that. And then also sizing the long term of the deal so that you've got an acceptable burden on the assets that you're going to maximize the optionality. So it really is deal by deal that you're trying to strike that balance. Then, you know, obviously, it's a negotiation. We would love to push that out further in time, but you see what? Okay. And then on Colbray, my understanding is there is some volume of concentrate on site that could potentially be sold down. Has this already been recorded at all in terms of value, I guess, for Franco, and if there were any concentrate sales, would that register as production for Franco this year?
Speaker Change: Since the concentrate has not yet been shipped no deliveries have been made to Franco for our share of the gold and silver there.
Speaker Change: Under our agreement, we are entitled to deliveries of gold and silver based on that concentrate.
Joshua Wolfson: Okay, and then last question again on cooperate the five $5 billion damages value.
Joshua Wolfson: Just so I understand physicians a separate case that would be in addition to the first quantum arbitration for $20 billion.
Joshua Wolfson: It is in addition guests so we're both we're pursuing independent arbitrations.
Joshua Wolfson: So the two numbers are accurate.
Joshua Wolfson: Okay, and then under the under the stream agreement.
Joshua Wolfson: Franco would be entitled as well to the proportional share for that $20 billion I hope it doesn't come to that.
Speaker Change: That situation, but is that is that means if I understand you still correct there.
Speaker Change: So I mean that was the one approach that we could've taken was just first quantum pursuit and then we get a share of proceeds.
Paul Brink: So Josh, since the concentrate has not yet been shipped, no deliveries have been made to Franco for our share of the gold and silver there. You know, under our agreement, we are entitled to. Okay, and then last question, again, on Cobre, the $5 billion damages value, just so I understand, this is a separate case that would be in addition to the first quantum arbitration for $20 billion? It is in addition, yes, so we're both pursuing independent arbitration. Thank you for watching.
The approach that we've agreed to take between US is that we would each independently pursue it.
Speaker Change: Assuming we're both successful wouldn't share on their side as well.
Speaker Change: Okay. Thank you very much.
Speaker Change: Our next question comes from the line of Lawson Winder from Bank of America Securities. Please go ahead Sir.
Lawson Winder: Thank you very much operator.
Lawson Winder: Hello, everybody and thank you for the call today.
Lawson Winder: I wanted to ask about cobre, Panama as well how much of the upfront between the two streams.
Paul Brink: Okay, and then under the stream agreement, Franco would be entitled as well to a proportional share of that $20 billion, and I hope it doesn't come to that situation, but is that my understanding still correct there? No, so I mean, that was the one approach that we could have taken if we just pursued the first quantum, and then we get a shared approach.
Lawson Winder: The core is in the in the first quarter upstream has been paid back up to today and.
Lawson Winder: Before any potential concentrate sales.
Lawson Winder: It's roughly half Lawson.
Speaker Change: Off the top of my head, it's close to about $700 million.
Speaker Change: Okay, perfect and then sometimes with these agreements these partner guarantees where any sort of like outstanding upfront that hasn't been paid back that the mine closure.
Paul Brink: The approach that we've agreed to take between us, which will be independently pursued. You're assuming we're both successful. For the, Okay, thank you very much. Our next question comes from the line of Lawson Winder from Bank of America Securities. Please go ahead. Thank you very much, operator. And hello, everybody.
The operator, then would be on the hook for that is that a feature of this agreement.
Speaker Change: Yesterday, there isn't an credited balance so as I said after 135 that we invested we've received.
Lawson Winder: And thank you for the call today. I wanted to ask about Cobra Quantum as well, how much of the upfront between the two streams, the cores and the first quantum stream, has been paid back up to today and before any potential concentrate sales? It's roughly half Lawson, you know; off the top of my head, it's close to about seven.
Speaker Change: Around half of that back the remainder is an uncredited balance that we would be entitled to at the end of the contract.
Speaker Change: Yes.
Speaker Change: Will you be seeking that.
Speaker Change: Now that you've written.
Speaker Change: The asset down to nil will you be seeking that now going forward from first quantum.
Speaker Change: Not at this time.
Speaker Change: We want the contract to remain solid and we're.
Lawson Winder: Okay, perfect. And then sometimes with these agreements, these partner guarantees where any sort of like outstanding upfront that hasn't been paid back in the event of a mind closure, the operator then would be on the hook for that. Is that a feature of this agreement? Yes, it is.
Speaker Change: We are hopeful of a restart at which time the mine resumed production and we receive our deliveries.
Okay, Perfect and then I also wanted to ask about Palmer al.
Speaker Change: Our U which mine plan are you assuming are you assuming a reserve only mine plan or is there some resources in the mine plan that you've assumed with Ges.
Lawson Winder: There is an uncredited balance. So as I said, you know, of the 1.35 that we invested, we've got around half of that back; the remainder is an uncredited balance that we would be entitled to. Um, will you be seeking that now that you've written the asset down to nil?
Speaker Change: Reserves and resources based on mine plan that the operators provided to us.
Speaker Change: So with that.
Speaker Change: To reflect our most recent technical report.
Speaker Change: I'd have to double check.
Speaker Change: Okay formation, we've received.
Speaker Change: Okay fair enough.
Speaker Change: Thanks, very much for that I appreciate it good luck guys.
Speaker Change: Our next question comes from the line of Cosmos <unk> from CIBC. Please go ahead.
Cosmos: Thanks, Paul and Sandeep.
Lawson Winder: Will you be seeking that now going forward from First Quantum? Not at this time, you know; we want the contract to remain valid and, you know, we're hopeful of a restart at which time, you know, the mine resumes production and we, Okay, perfect. And then I also wanted to ask about Palmareo.
Cosmos: If I can if I can ask you about the write down of course.
Cosmos: With animals.
Cosmos: I just wanted to interesting that when first quantum reported about two weeks ago now they didn't take the write down on the other hand yesterday night, you did take a write down on coal Kobe Panama.
Cosmos: And I checked same auditors Pwc Toronto, So I'm just wondering about the different approach and should we be at all concerned about the security that you have.
Lawson Winder: Are you, which mine plan are you assuming? Are you assuming a reserve-only mine plan? Or are there some resources in the mine plan that you've assumed with those GEOs? Reserves and resources based on a mine plan that the operators provide.
Cosmos: Economic interests on the assets.
Hi, Cosmos as I said.
Lawson Winder: So would that reflect their most recent technical report? I'd have to double check for myself. Okay, fair enough. Thanks very much for that. I appreciate it. Good luck guys. Our next question comes from the line of Cosmos Chiu from CIBC. Please go ahead.
The recording impairments is a management judgment, it's based on the information at that point in time and based on the facts we would.
Cosmos: Opted to be prudent and recorded an impairment.
Cosmos: It does not question the validity of our stream agreement our stream agreement is in place and if the mine does resume production, which we're hopeful that it adds.
Cosmos Chiu: Thanks, Paul and Sandip. If I can, could I ask about the write-down at COVID Panama? I just find it interesting that when First Quantum reported about two weeks ago now, they didn't take a write-down. And on the other hand, yesterday night, you did take a write-down on Kobe, Panama.
Cosmos: We would look to reverse that impairment.
Speaker Change: Of course.
Speaker Change: And then Sandeep as you mentioned earlier, there is a $10 million to $15 million of ongoing costs annually.
Sandip Rana: And I checked, you know, same auditors, PWC Toronto. So I'm just wondering about the different approach. And should we be at all concerned about the security that you have of your economic interests in the asset? Cosmos, as I said, recording impairments is a management judgment, it's based on the information at that point in time and based on the facts. Optic chose to be prudent and recorded an impairment.
Sandeep: Could you maybe what are those just legal costs, what kind of costs are there.
Sandeep: Could you maybe give us a bit more color.
Sandeep: Sure. So as you know we have filed notice of arbitration with the state of Panama under the Canada, Panama Free trade agreement.
Sandeep: Going forward if this arbitration.
Sandeep: <unk> pursued and the mine is not restarted.
Sandeep: You are basically having lawyer legal fees and other.
Consulting fees associated with that arbitration. So we're under a scenario where at this arbitration does actually proceed.
Sandip Rana: It does not question the validity of our stream agreement. Our stream agreement is in place, and if the mine does resume production, which we're hopeful that it does, we would look to reverse that. Court. And then, Sandip, as you mentioned earlier, there's $10 to $15 million of ongoing costs annually. Could you maybe, are those just legal costs? What kind of costs are they?
Sandeep: That's our estimate right now on an annual basis.
Speaker Change: Of course, and then maybe one last question on 2024 guidance.
Speaker Change: You mentioned.
Speaker Change: There is a number of assets coming on.
Speaker Change: That's why it is growing.
Speaker Change: Year over year without Cobra Panama.
Sandip Rana: And could you maybe give us a bit more color? Sure, so as you know, we have filed a notice of arbitration with the State of Panama under the Canada-Panama Free Trade Agreement. You know, going forward, if this arbitration is pursued and the mine is not restarted, you're basically having Lloyd's legal fees and other consulting fees associated with that arbitration. So we're in another scenario where this arbitration does actually persist. That's our estimate right now, of course. And then maybe one last question on 2024 guidance. As you mentioned, there are a number of assets coming on. In part, that's why it is growing year over year without COBE Panama.
Speaker Change: Could you maybe talk about.
Speaker Change: Is there any kind of.
Speaker Change: Leg between production and when Franco Nevada received starts Rajiv receiving a stream or royalty payments on those assets and how much.
Speaker Change: Conservatism how much.
Speaker Change: Kind of leg have you factored in just in case, there is any kind of delay in the startup of some of these assets.
Speaker Change: Obviously, we're basing our projections of what the operators with the developers.
Speaker Change: <unk> released publicly.
Speaker Change: Arms of delays of receiving ounces there shouldnt be.
Speaker Change: Greenstone and.
Speaker Change: As a royalty as a soliris <unk> and.
Speaker Change: <unk> adds a stream, where we should get deliveries.
Sandip Rana: Could you maybe talk about, is there any kind of lag between production and when Franco Nevada starts receiving a stream or a royalty payment on those assets? And how much, you know, conservatism, how much lag have you factored in just in case there's any kind of delay in the startup of some of these assets? You know, obviously, we're basing our projections on what the operators or the developers have, you know, released publicly. But in terms of delays in receiving ounces, there shouldn't be, you know, Greenstone and it's a royalty as a Solaris Norte, and then Pease adds a stream where we should get ounces on a regular basis. So I don't anticipate any time constraints. Great. Those are all the questions I have.
Speaker Change: On a regular basis, so I don't anticipate any timing delays.
Speaker Change: Great.
Speaker Change: Those are all the questions I have thanks again for answering my questions. Thank you.
Speaker Change: Our next question comes from the line of Kenny Advocate connect from Scotiabank. Please go ahead.
Kenny Advocate: Thanks, Good morning, everybody. Thank you for taking my question just wanted to follow up on that right now so it does appear sandy.
Kenny Advocate: How you answered the question for Cosmo says that you guys decided that you wanted to take the write down full amount.
Kenny Advocate: Even before having any visibility on the new government is that a fair assumption.
Sandy Brenna: Yes, as I said, it's a management judgment based on information that's.
Sandy Brenna: Available to us and that was the decision we made.
Sandy Brenna: Wanted to go that route rather than take a little bit every quarter would that be a fair statement. That's the first thing.
Cosmos Chiu: Thanks again for answering my questions. Thank you. Our next question comes from the line of Tanya Jakusconek from Scotiabank. Please go ahead. Okay, good morning, everybody.
Sandy Brenna: Okay.
Speaker Change: Thank you for that and then $10 million to $15 million would be expense in the income statement that we would put in for this year, assuming the mine comes back up next year.
Tanya Jakusconek: Thank you for taking my question. Just wanted to follow up on the write down. So it appears, Sandy, from how you answered the question for Cosmos that you guys decided that you wanted to take the write down full amount, even before having any visibility on the new government. Is that a fair assumption?
Speaker Change: Correct, yes, yes, so obviously those costs or if it doesn't we start yes, and then just on the global minimum tax we can see that bar.
<unk> has implemented at when you've given us attach rate for the year is it safe to assume that so far like Q1 should have a lower tax rate and then we would have a top up back up to that 18, 19% sometime in 2024.
Sandip Rana: Yes, as I said, it's a management judgment based on information that's available to us. So you wanted to go that route rather than take a little bit every quarter. Would that be a fair statement? Yes, that's a fair statement.
Speaker Change: So Barbados has not.
Speaker Change: Our beta says it's not substantially enacted so for us in Q1, we would have a lower tax rate until it actually is implemented in Canada. The key here is for Canada to implement the global minimum tax, which then puts Barbados in effect and then our tax rate would change.
Sandip Rana: Okay, thank you for that. And the 10 to 15 million would be expensed in the income statement that we would put in for this year, assuming the mine comes back up next year. Correct. Yes. Yes.
Speaker Change: Okay. So lets assume this isn't done till midyear you go into two quarter is that the lower tax rate and then we go back up to the higher tax rate and potentially then have to go back to restate for Q1 and Q2.
Tanya Jakusconek: So I'll see those costs or if it does. Yeah, and then just on the global minimum tax, we did see that Barbados has implemented it, and you've given us a tax rate for the year. Is it safe to assume that so far, like Q1 should have a lower tax rate, and then we would have a top up, like back up to that 18-19%, you know, sometime in 2024? So Barbados has not, you know, Barbados has not substantively enacted it, so for us in Q1, we would have a lower tax rate until it actually is implemented in Canada. The key here is for Canada to implement the Global Minimum Tax, which then puts Barbados in effect, and then our tax rate. Okay, so let's assume this isn't done till mid-year. You'd go through two quarters at the lower tax rate, and then we go back up to the higher tax rate and potentially then have to go back to restate for Q1 and Q2. It wouldn't be re-stayed; it would be attached.
Speaker Change: Wouldn't be restated with the attach of adjustment.
Speaker Change: Yes, okay.
Speaker Change: Thank you for that as well and just on the guidance if I could ask I mean, we were a bit higher on 8% higher from your midpoint. So I. Appreciate all the assets that are doing well and we have all of those you mentioned and to Mackay that is coming off are there any other assets likely as a whole I mean, we are always off.
Speaker Change: Paul is there any other assets within the portfolio that you can help us understand what would be weaker this year versus last.
Speaker Change: And our guidance, we've highlighted the material ones, obviously other assets theyre small movements positive and negative, but I think we've highlighted the large large movers.
Speaker Change: Okay.
Speaker Change: And it's fair to assume that.
Speaker Change: As you look at your second half weighted with the better.
Paul Brink: Coming on with some of the P&L till kenzie nodes than Soliris arcades et cetera that is correct. Okay and then if I could ask on just that.
Tanya Jakusconek: Yeah, okay. Thank you for that as well. And just on the guidance, if I could ask, I mean, we were a bit higher, to an extent higher from your midpoint. So I appreciate all the assets that are doing well, and we have all of those. You mentioned Antipakai that is coming off. Are there any other assets, like Holt? I mean, we're always off on Holt.
Paul Brink: The natural gas acquisition that you did is there any guidance that can be provided on these royalties contribution and our other like is there anything you can help us with on that.
Paul Brink: Yes, Hi, Tanya it's Jason here.
Jason: You'll have noted that acquisition at the end of last year was $125 million that we spent.
Jason: On assets in the Haynesville, there a complementary set of assets to what we already own.
Jason: In the Haynesville.
Tanya Jakusconek: Is there any other asset within the portfolio that you can help us understand what would be weaker this year versus last? Um, you know, in our guidance, we've highlighted the material ones; obviously, other assets, they're small movements, positive and negative. But I think we've highlighted the large, large Okay, we'll take it and it's fair to assume that it's, you know, as you look at your second half weighted with the better, you know, you know, coming on with some of these Tocantinos and Solaris, Nortes, etc. That is correct. Okay, and then if I could ask about just the natural gas acquisition that you did, is there any guidance that can be provided on these royalties or contribution and or other, like, is there anything you can help us with on that? Yeah, hi Tanya. It's Jason here.
Jason: In terms of contribution.
Jason: What I would tell you is last year on an annualized basis. The royalties that we acquired generated about $6 5 million Mcf.
Jason: And so depending on your gas price. So if you had a $2 50 gas price that would be a little over $16 million in revenue.
There are some reductions in costs associated with that so you'd have to deduct those but that's a rough guide as to how the assets performed last year.
Jason: We would expect volumes to be sort of in a similar range. This year, although they do depend on drilling activity and and operators have been a little bit more conservative in their drilling activity or drilling pace. So far this year, but thats sort of a rough rough estimate.
Jason: So somewhere in that if we want to be conservative $10 million to $15 million for 2024 and into the 2028, we would be somewhere in there on the revenue line.
Jason OConnell: So yeah, you'll have noted that acquisition at the end of last year was $125 million that we spent on assets in the Haynesville. They're a complementary set of assets to what we already own in the Haynesville. In terms of contribution, I guess what we can tell you is last year on an annualized basis, the royalties that we acquired generated about six and a half million MCF. So depending on your gas price, so if you had a $2.50 gas price, that would be a little over $16 million in revenue. There are some deductions and costs associated with that, so you'd have to deduct those, but that's a rough guide as to how the assets performed last year.
Jason: Yes, I think thats, a reasonable estimate and our best guess in terms of five year guidance would be similar to the coming year.
Speaker Change: Okay. Okay, and then just lastly, maybe if I can just address some of the M&A opportunities.
Speaker Change: Out there I would assume and maybe you can correct me if I'm wrong that the focus will shift back to precious metals or maybe someone can just tell me. How you are looking at transactions right now from either.
Speaker Change: Commodity base.
Speaker Change: Producers versus developer is helping on the funding of these assets potentially for sale from Newmont and arent, maybe corporate transaction. So the sidelines that would be very helpful. Thank you.
Jason OConnell: We would expect volumes to be sort of in a similar range this year, although they do depend on drilling activity, and operators have been a little bit more conservative in their drilling activity or drilling pace. So far this year, but that's sort of a rough estimate. Okay, so somewhere in that if we were to be conservative 10 to 15 million for 2024 and into 2028, we would be somewhere in there on the revenue line. Yeah, I think that's a reasonable estimate. And yeah, our best guess in terms of five-year guidance would be similar. Okay, perfect. And, just lastly, maybe someone could just address some of the M&A opportunities out there. I would assume, and maybe you can correct me if I'm wrong, that the focus will shift back to precious metals, or maybe someone can just tell me how you're looking at transactions right now from either commodity-based producers versus developers helping on the funding of these assets potentially for sale from Newmont, or maybe corporate transactions. Size-wise, that would be very helpful.
Speaker Change: Thank you for the question <unk> speaking I think those are very astute observations.
Speaker Change: We are spending the majority of our time on precious metals for soft, but we do look at other commodities and increasingly I think we see a lot of opportunity there. So.
Speaker Change: Coming out of the last couple of weeks of conferences.
Speaker Change: We see good opportunities kind of across commodities, but we are spending the majority of our time on precious metals.
Speaker Change: In terms of the types of transactions I would say this is certainly a fed towards for project finance.
Speaker Change: Getting things constructed.
Speaker Change: But M&A finance of course is also.
Speaker Change: Premier in the front of the package versus potential transactions. So.
Speaker Change: Looking at that carefully as well.
Speaker Change: But would it be fair to assume from what you said that youre looking at project financing.
Speaker Change: Fund that that also corporate transaction from an M&A standpoint.
Speaker Change: Yes, yes, certainly folks.
Ian: Thank you. Thank you for the question, Tanya; it's Ian speaking. I think those are very astute observations. I'd say we're spending the majority of our time on fresh metals, first off, but we do look at other commodities, and increasingly, I think we see a lot of opportunity there.
Speaker Change: I'd say in terms of volume, though there is some more project financings and acquisition financings.
Speaker Change: In terms of the pipeline.
Speaker Change: And size wise that Ian if I could what youre seeing out there.
Ian: I don't think it's changed much since we last spoke probably more towards the kind of medium.
Ian: Size.
Ian: $300 million.
Ian: The typical kind of size of those transactions there are some smaller.
Ian: You know, coming out of the last couple of weeks of conferences, you know, we see good opportunities kind of across commodities, but we are spending the majority of our time on precious metals. In terms of the types of transactions, I would say this is certainly bent towards project finance, getting things constructed, but M&A finance, of course, is also pretty near the front of the pack in terms of potential transactions. University of Colorado Boulder.
Ian: We don't mind doing some of the smaller transactions that they give us good torque on resource.
Ian: Yes.
Ian: The general.
Ian: Kind of medium size.
Speaker Change: Okay. Thank you so much and thank you for taking all my questions that could go on but I surely with.
Speaker Change: With someone else. Thank you.
Speaker Change: Yes.
Speaker Change: Our next question comes from the line of Martin <unk> here from Daycare. Please go ahead.
Martin: Yes. Thank you.
Martin: My first question is in terms of the arbitration.
Ian: Would it be fair to assume from what you said that you're looking at project financing, you know, to help fund that, but also corporate transactions from an M&A standpoint? Yes, yes, certainly both. I'd say in terms of volume, though, there's more project financing than acquisition financing.
Martin: Is there any legally established time for the arbitration to take time I mean.
Martin: Is it like two years, one year or there is no limit on how long this can go.
Speaker Change: Hi, Martin deployed Hall.
Ian: And size-wise, Ian, if I could, what are you seeing out there? I don't think it's changed much since we last spoke. Probably more towards the kind of medium size, to 300 million. We don't mind doing some of the smaller transactions if they give us good torque on resources. General, uh, kind of median.
Martin: There is no sort of prescribed timeline for these things.
Martin: As a general rule I think you should probably expect it does go to conclusion it will take several years.
Martin: Okay.
Speaker Change: And the second question would be.
Speaker Change: How enforceable woolen arbitration.
Speaker Change: Because.
Ian: Thank you so much. And thank you for taking all my questions. I could go on, but I should, Ch mindfulness and like-minded people.
Speaker Change: These things like other countries had.
Speaker Change: Legal rulings against them.
Speaker Change: People will never be able to influence it.
Speaker Change: Yeah.
Speaker Change: Yes, so in terms of the recognition of the award.
Martin Pradier: Our next question comes from Martin Pradier from Veritas. Please go ahead. Yes, thank you. My first question is, in terms of the arbitration, is there any legally established time for the arbitration to take place? I mean, is it like two years, one year, or there's no limit on how long this can go on?
Speaker Change: We went to international conventions that would be treated as if it were a final judgment to the highest court.
Speaker Change: Given country, that's a party to that convention.
Speaker Change: Collection following that as something that would have to be pursued.
Speaker Change: Okay.
Speaker Change: In terms of.
Speaker Change: Uh huh.
Lloyd Hyunsoo Hong: I'm Martin. This is Lloyd Hong. There is no sort of prescribed timeline for these things. As a general rule, I think you should probably expect that if it does go to conclusion... And the second question will be, how enforceable will arbitration be?
Speaker Change: Can this tablet.
Speaker Change: Can you provide some guidance what do you expect on that Mike.
Speaker Change: Yes.
Mike: So Congress to operate there is that there is a minimum delivery in place.
Mike: It's roughly 11000 Geos a year.
Mike: But I can call you afterwards to give you the specifics.
Speaker Change: Perfect. Thank.
Lloyd Hyunsoo Hong: These things, like other countries had, you know, legal rulings against them, and... People will never be able to enforce them. Um, yeah, so in terms of the recognition of the award, uh, pursuant to international conventions, I mean, it would be treated as if it were a final judgment of the highest court of any given country that's a party to that convention. Collection following that is something that would happen. Okay. And in terms of... Condostabler.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Jackie.
Jackie: <unk> <unk> from BMO. Please go ahead.
Thanks, very much for taking my question.
Jackie: So I wanted to ask you about your arbitration claim.
Jackie: The amount that you disclosed a $5 billion.
Jackie: Like it was higher than.
Jackie: I guess, what we would have expected in terms of.
Martin Pradier: Can you provide some guidance? What do you expect from that, mate? So Condostoplaid, there's a minimum delivery in place, it's roughly 11,000 GOs a year, but I can call you afterwards. Thank you. Our next question comes from the line of Jackie Ribelowski from BMO. Please go ahead.
Jackie: In terms of the amount, but okay.
Jackie: Okay.
Jackie: Oh to you in arbitration for Cobra, Panama and I was wondering if you might just be able to walk us through.
Jackie: How you arrived at that number and sort of what that represents two Chris to Franco Nevada.
Jackie Ribelowski: Thanks very much for taking my question. I just wanted to ask you about your arbitration claim. The amount that you just went to $5 billion seemed like it was higher than, I guess, than what we would have expected in terms of the amount that, you know, would be owed to you in arbitration for Cobre Panama. And I was wondering if you might just be able to walk us through how you arrived at that number and sort of what that represents to Franco Nevada. Jack is Paul.
Paul Brink: Hey, Jackie it's Paul.
Paul Brink: So under the under the Canada, Panama trade agreement the.
Paul Brink: In terms of our claim and what we've got a right to recoveries.
Paul Brink: The loading is full reparations format full amount of the damages website.
Paul Brink: So there are a number of ways if you get to that in terms of calculating the value of the asset.
Paul Brink: Within our company.
Paul Brink: One of those measures.
Paul Brink: Any loss of market valuation.
Paul Brink: That for US is a minimum of $5 billion.
But we expect as we work through the details.
Paul Brink: We will finalize what that number is but.
Paul Brink: But I expect it will be well supported by the valuation for the asset.
Paul Brink: Be a minimum of $5 billion.
Paul Brink: The, you know, under the Canada-Panama Trade Agreement, in terms of our claim and what we've got a right to recover, the wording is full reparations, full amount of the damage. So there are a number of ways that you get to that in terms of calculating the value of the asset.
Speaker Change: That's super helpful I hadn't hadn't factored that in so thank you for clarifying that.
Speaker Change: And then maybe just one other question.
Speaker Change: This is probably.
Unlikely going to ask anyway.
Speaker Change: Is there any recourse to to you.
Paul Brink: One of those measures is, you know, any loss of market valuation. That, for us, is a minimum of $5 billion. But we expect the, as we work through the details, we'll finalize what that number is, but I expect it'll be well supported by the valuation for the asset. That's super helpful. I hadn't factored that in.
Speaker Change: If you don't collect on arbitration Archer arbitration doesn't doesn't conclude favorably is there any other recourse to you could you or would you.
Speaker Change: Put a direct lawsuit against first quantum is that something thats available or would you consider that.
Jackie Ribelowski: Um, maybe maybe just one other question. This is probably unlikely, but I'm going to ask anyways, is, is there any recourse for you if you don't collect on arbitration, or if your arbitration doesn't, doesn't conclude favorably? Is there any other recourse for you?
Speaker Change: We haven't considered that Jackie the terms of.
Speaker Change: The plants, yet <unk> is a negotiated solution to get the mine restarted.
Speaker Change: Plan B would be the arbitration.
Speaker Change: Got it thank you very much.
Speaker Change: All my other questions have been answered. So thanks. Thanks, that's all for me. Thank you.
Speaker Change: Our next question comes from the line of Greg Barnes from TD. Please go ahead.
Jackie Ribelowski: Could you, or would you, you know, bring a direct lawsuit against First Quantum? Is that something that's available? Or would you consider that?
Greg Barnes: Thank you Sandy if I can I apologize I'm going to ask about the impairments as well.
Greg Barnes: Are there any tax issues that went into you deciding to take the impairment now just seems rather early.
Paul Brink: We haven't considered that, Jackie, in terms of the plans here, Plan A is... is a negotiated solution to get the mine. Plan B would be... Got it.
Greg Barnes: And what are the factors maybe went into your thinking given that the managements decision.
Speaker Change: Hey, Greg.
Greg Barnes: No tax had nothing to do with it.
Sandy Brenna: As I've said, it's a management judgment based on the impact on our share price based on the Supreme Court decision based on the mine being halted all triggers.
Jackie Ribelowski: Thank you very much. All my other questions have been answered. So thanks. That's all for me. Our next question comes from the line of Greg Barnes from TD. Please go ahead. Thank you. Sandi, if I'm going to apologize, I'm going to ask about the impairment as well. Are there any tax issues that went into you deciding to take the impairment now?
And our analysis of recording an impairment.
Greg Barnes: Got it we tried to be prudent.
Speaker Change: And that's the decision that management team.
Speaker Change: Okay, Okay fair enough.
Speaker Change: I would think the share price reaction may have been one of the biggest factors in that decision.
Speaker Change: It was part of it.
Speaker Change: Okay.
Greg Barnes: It just seems rather early. And what other factors maybe went into your thinking, given that it's a management decision? Hey Greg, no tax had nothing to do with it, you know, as I've said, it's a management judgment based on the impact on our share price, based on the Supreme Court decision, based on the mine being halted, all triggers in our analysis of recording and impairment, that is, you know, we try to be prudent. And that's, that's, Okay, okay. I would think the share price reaction may have been one of the biggest factors in that decision. It certainly was part of it.
Speaker Change: That's it from me.
Speaker Change: Yes.
Speaker Change: We have a follow up question coming from the line of Martin <unk> from Baird. Please go ahead, yes.
Martin: Yes, just one question about the <unk> balance that you could have some recourse against first quantum if I understood understood correctly.
Martin: Good.
Martin: Probably go for like 650 million. If my math is correct, but that you didn't you didn't count any of that when you do this you did your impairment.
Speaker Change: Correct, we did not factor that into our analysis.
Sandip Rana: Okay, that's it for me. We have a follow-up question coming from the line of Martin Pradier from Veritas. Please go ahead.
Speaker Change: But as a potential cause of action.
Speaker Change: It is yes.
Speaker Change: Alright. Thanks.
Speaker Change: I've said, it's not fee.
Speaker Change: Soft our plan, we're very we're hopeful that there is the potential for restart so we.
Martin Pradier: Yes, just one question about the uncredited balance that you could have some recourse against FirstQuantum, if I understand correctly, that you could... probably go for like $650 million if my math is correct, but that you didn't account for any of that when you did your impairment. Correct, we did not factor that in, but it's a potential course of action. As Sandip said, it's not the... It's not the current plan. We're hopeful that there's the potential for a restart. We wouldn't want to terminate the contract to make that claim; we'd rather keep it open. Perfect. Thank you very much. We have a follow-up question coming from the line of Lawson Winder from Bank of America Securities. Please go ahead.
Speaker Change: Wouldn't want to terminate the contract to make that claim.
Speaker Change: To keep it open.
Speaker Change: Hope for success.
Speaker Change: Perfect. Thank you very much.
Speaker Change: We have a follow up question coming from the line of Lawson Winder from Bank of America Securities. Please go ahead.
Lawson Winder: Alright, Thanks, operator, and thank you guys for taking the question again I just wanted to follow up on the discussion around.
Lawson Winder: Deal flow and ask whether or not youre seeing any.
Lawson Winder: Deal flow in terms of transactions, where there is a balance sheet repair elements I mean, obviously.
Lawson Winder: Those are some of the biggest transactions you guys have done and are you seeing any signs of closing.
Lawson Winder: Hi, thanks, operator. And thank you guys for taking the question. Again, I just wanted to follow up on the discussion around deal flow and ask whether or not you're seeing any deal flow in terms of transactions where there's a balance sheet repair element. I mean, obviously, you know, those are some of the biggest transactions you guys have done. And are you seeing any signs of those in your discussions? Thanks very much. Hi Lawson, it's Ian again.
Speaker Change: Your discussions thanks very much.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: The short answer we do have some of those we're currently looking at.
Speaker Change: You make up part of our typical deal flow with higher interest rates I think continuing.
Speaker Change: Matt.
Likely to remain part of what we do over the next little while.
Speaker Change: And so when you discussed the various sizes of those transactions would that fall into that sort of.
Ian: Yes, as a short answer, we do have some of those that we're currently looking at. They do make up part of our, you know, typical deal flow, with higher interest rates, I think, you know, continuing, that is likely to remain part of what we do. And so when you discuss the various sizes of those transactions, would that fall into that sort of, you know, like lower hundreds of millions of dollars ranges are some of those, you know, getting bigger, like like they had been in sort of the 2015 to 2017 period? It varies,
Speaker Change: Lower hundreds of millions of dollars ranges are some of those.
Speaker Change: Getting bigger leg.
Speaker Change: <unk> had been in sort of the two.
Speaker Change: 2015 to 2016 period.
Speaker Change: It varies there are some out there that would be meaningfully larger as I said that was kind of immediate.
Speaker Change: Size of what we're looking at.
Speaker Change: And there are some that are smaller.
Speaker Change: That's still fall into that category.
Speaker Change: Okay. Thank you very much.
Speaker Change: There are a couple of things driving it there.
Speaker Change: It is the cost of that people have got that and rates are high and struggling to repay that.
Speaker Change: The other area is the availability of equity.
Speaker Change: So there are folks where they were hoping to raise the next set of funds to advance their projects to feasibility of due to the next stage of economic study.
Ian: There are some out there that would be meaningfully larger. As I said, that was kind of the median of what we're looking at, and there are some that are... Okay. Oh, that's intriguing. Thank you very much. There are a couple of things driving it there.
Speaker Change: And then just not able to get that money in the equity market. So the industry is feeling a squeeze and so.
Paul Brink: And the one is the cost of debt. You know, people who've got debt and rates are high and struggling to repay that. The other area is the availability of equity. And so there are folks where they were hoping to raise the next set of funds to advance their projects. Unknown Speaker, Page 9 of 9. And they're just not able to get that money in the equity market.
Speaker Change: As I characterize the portfolio, it's very active right now.
Speaker Change: Because of the need for capital.
Speaker Change: Okay. Thanks, Paul Thank you.
Speaker Change: There are no further questions in the phone line I will now turn to Q&A session open to Candido Haden, who will take questions from the webcast.
Candida Hayden: Thank you Laura our first question comes from Michael sign up investing for retirees.
Paul Brink: The industry is feeling a squeeze, and so... As I characterize the portfolio, it's very active right now. Thanks, Paul. Thank you. There are no further questions on the phone line.
Candida Hayden: What have you learned from the Cobra, Panama experienced and how are you applying that to your business strategy.
Paul Brink: So Michael it's Paul.
Candida Hayden: I will now turn the Q&A session over to Candida Hayden, who will take questions from the webcast. Thank you, Laura. Our first question comes from Michael Fine of Investing for Retirees. What have you learned from the Cobre Panama experience, and how are you applying that to your business strategy? So Michael, it's Paul the, No, we didn't at the time anticipate the political risk in Panama. Part of that is that the world has changed. In terms of what went on, we see how, despite having a government that was supportive of the mine and negotiated contracts with the company, there was a populist uprising that caused these issues, and so... As we look at countries going forward, that is the new world we're in, and we've got to take that into account.
We didn't at the time anticipated.
Paul Brink: The political risk.
Paul Brink: In Panama.
Paul Brink: Part of that as the World has changed.
Paul Brink: In terms of what when what went on we see how despite having a government.
Paul Brink: We're supportive of the mine.
Paul Brink: Negotiating contracts with the company.
Paul Brink: There was a populist uprising latest course these issues and so.
Paul Brink: As we look at countries going forward that is the new world, We're in and we got to take that into account.
Paul Brink: Our next question is from BR Wicklander from Sweden.
BR Wicklander: How does the current market environment, and finding new high quality streams in royalties and.
BR Wicklander: And how is the competition for the opportunity.
Thank you for the question I think we've covered a lot of that with <unk> and losses question.
BR Wicklander: I would say competition remains relatively.
BR Wicklander: Vigorous.
Paul Brink: Our next question is from Björn Wicklander. How is the current market environment in finding new high-quality streams and roads? How is the competition for the opportunity? Thank you for the question. I think we covered a lot of that with Tanya's and Lawson's question. I think we're benefiting significantly from our strong liquidity and cash flow position, and some of our peers. Transaction, and also we've demonstrated, cases that were a part of our choice. Project Financing, very welcome to you. There are no further questions from the webcast. This concludes our 2023 results. Your end results conference call and webcast. We expect to release our first quarter 2024 results after market closed on May, The conference call held the following morning. Thank you for your interest in Franco Nevada. Transcribed by https://otter.ai, ?? ?? ?? ?? ?? ??
BR Wicklander: Said.
Speaker Change: I think we are.
Speaker Change: <unk> significantly from our strong liquidity and cash flow position vis vis some of our peers.
Speaker Change: A larger balance sheet helps us compete on a number of transactions and also we've demonstrated I think in a number of cases.
Speaker Change: Our choice.
Speaker Change: As people look towards project financing that we can offer a unique and very helpful solution as you saw with the Chinese continue transaction.
Speaker Change: That was.
Speaker Change: Very well conceived and I think received by the market.
Speaker Change: Thank you Ian.
Speaker Change: There are no further questions from the webcast. This concludes our 2023 results year end results conference call and webcast. We expect to release, our first quarter 2024 results. After market close on May 1st with a conference call held the following morning. Thank you for your interest in Franco Nevada Goodbye.
Speaker Change: Okay.
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Speaker Change: Thank you.