Q3 2024 Franco-Nevada Corp Earnings Call
Operator: Good morning and welcome to Franco Nevada's Corporation's 3rd Quarter 2024 Results Conference Call and Webcast. This call is being recorded on November 7th of 2024. At this time, all lines are in listen-only mode.
Good morning, and welcome to Franco Nevada Corporation third quarter 'twenty 'twenty four results conference call and webcast. This call is being recorded on November seven of 'twenty 'twenty four it at this time all my eggs are in a listen only mode. Following the present, they shouldn't be able to conduct a.
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 the 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.
And they said well you may ask a question through the phone line or that cash if you any joining by webcast you may submit a written questions for the Q&A session at any time during this call by typing. Your question in the Q&A section of the web gas platform if you like.
Operator: If you require immediate assistance during this call, please press star zero at any time for the operator.
It may get assistance during this call lease spread as far as you at any time for the operator I would now like to turn the conference over to yard House, Canada Hayden Senior Analyst Investor Relations. Please go ahead.
Candida Hayden: I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations. Please go ahead.
Candida Hayden: Thank you, Chloe.
Hayden: Thank you Kelly good morning, everyone. Thank you for joining us today to discuss Franco Nevada's third quarter 2024 results.
Candida Hayden: Good morning, everyone. Thank you for joining us today to discuss Franco Nevada's third quarter 2024 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 on the webcast.
Company. This call is the presentation, which is available on our website at Franco Nevada Dot Com, where you'll also find our full financial results.
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 web.
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.
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.
Candida Hayden: 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.
It 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 I will now turn over the call Paul Brink, President and CEO of Franco Nevada.
Paul Brink: I will now turn over the call to Paul Brink, President and CEO of Franco Nevada.
Paul Brink: Thank you Peter and good morning.
Paul Brink: with Candida and good morning. Our inflation-protected business model is working well. With record gold prices, we generated high revenues, EBITDA and earnings in Q3 compared GeoSails were stable compared to Q2, although lower compared to Q3.
Paul Brink: Our inflation protected business model is working well.
Paul Brink: With record gold prices, we generated higher revenues EBITDA and earnings in Q3.
Paul Brink: <unk> to Q2 this year.
Paul Brink: <unk> sales were stable compared to Q2, a little lower compared to Q3 2023 without the contribution from Cobre Panama.
Paul Brink: for that country. The Court have benefited from deliveries from the newly commissioned Tocque de Zinho mine in Brazil and increased contributions from royalties on the recently completed Greenstone mine.
The quarter benefited from deliveries from the newly commissioned took it as in your mine in Brazil and increased contributions from royalties on the recently completed reached on mine and the newly acquired you had a culture of royalty.
Paul Brink: Newly Acquired. Candelaria reported an increase in copper and gold production for the quarter, with operations recovering after encountering underground voids. Candelaria's copper output is now ahead of its initial expectations. All grades have been below expectation in the period. And Lundy Mining has revised its 2024 gold production guidance for candle areas. In addition, using record gold prices, revenue from our diversified assets translates into lower GF. We've adjusted our 2024 geo-guidance as we... Full year revenue, however, is expected to be higher than when we provided our original guidance in March 2020.
Paul Brink: Cavalerria reported an increase in copper and gold production for the quarter with operations recovering after accounting underground boys and the open pit.
Paul Brink: And then there is copper output is now ahead of its initial expectations.
Paul Brink: Oh, great feet below expectation in the period and London mining has revised its 2020 for gold production guidance for candle area of Lora.
Paul Brink: In addition, using record gold prices revenue from our diversified asset translates into lower Geos, we've adjusted our 2020 for Geo guidance as a result.
Paul Brink: Our full year revenue, however is expected to be higher than when we provided our original guidance in March 2024.
Paul Brink: 2024 Revenues Expected. Berlian Corporate Panama remains in preservation and safe management. President Molino took office in July this year and has indicated a willingness to discuss the reopening of the mine with the likely timing of discussions early in 2020. The administration is arranging for an audit of the mine by international experts. This is a good practical step to dispel some of the misconceptions about the mine that were touted during last year.
Paul Brink: 'twenty 'twenty four revenue is expected to be between 1 billion and $1 1 billion.
Paul Brink: Cobre, Panama remains on preservation and safe management.
Paul Brink: Malino took office in July of this year and has indicated a willingness to discuss the reopening of the mine with the likely timing of discussions early in 2025.
Paul Brink: His administration as arranging for an audit of the mine by international experts.
Paul Brink: This is a good practical step to dispel some of the misconceptions about the mine that without it during last year's protests.
Paul Brink: With the new school year, starting in the quarter with a product crop diversity scholarships to for new mining engineering students.
Paul Brink: The New School Year starting in the quarter. We were proud to grant diversity scholarships to four new mining engineering. We now have a total of 13.
Paul Brink: We now have a total of 13 students that were supporting through their mining engineering studies.
Paul Brink: Pouring Through Their Minds. A business development team has been very busy. Strong Deal Pipeline, and I'm confident we can add attractive precious metal assets to the portfolio. There's also good potential to add incremental diversity.
Paul Brink: Our business development team has been very busy.
Paul Brink: We have a strong deal pipeline and are confident we can add attractive precious metal assets to the portfolio in the coming months.
Paul Brink: There's also good potential to add incremental diversified assets.
Paul Brink: With that, I'll hand the call over to Sandi.
Speaker Change: With that I'll hand, the call over to Sandy.
Sandip Rana: Thank you, Paul.
Sandy Brenna: Thank you Paul Good morning, everyone I will turn to slide four to give an overview of the financial results for the quarter. Overall Geo sold were 110110 for Q3 2024. This compares to 160 860848 for the prior year quarter and 125882.
Sandip Rana: Good morning, everyone. I will turn to slide four to give an overview of the financial results for the quarter. Overall, GEOs sold were $110,110 for Q3 2024. This compares to $160,848 for the prior quarter and $125,882 for the prior quarter when Cobrae Panama GEOs are available. As you are aware, Colbury-Panama continues to be in preservation. In terms of operating assets and GOs delivered and sold for the quarter, the main drivers of lower GOs were Candelaria and Agilent. Candelaria Geos delivered and sold in Q3 2024 were lower than those sold in prior years. In the first half of this year, mining rates were impacted by the interface of the open pit and historic underground mining stopes, requiring more stockpiled ore to be processed, which reduced grades and recovery.
Paul Brink: <unk> for the prior year quarter, when Cobra, Panama Geos are excluded.
Paul Brink: As you are aware at Cobre, Panama continues to be on preservation and safe management in.
Paul Brink: In terms of operating assets in Geos delivered and sold for the quarter. The main drivers of lower Geos, where candidly oriented type of guy.
Paul Brink: <unk> delivered and sold in Q3 2024 were lower than those sold in prior year in the first half of this year mining rates were impacted by the interface of the open pit and historic underground mining stopes, requiring more stockpiled ore to be process, which reduced grades and recoveries while production in third.
Sandip Rana: While production in third quarter increased significantly due to accessing higher-grade ore and improved run time of the SAG mill, GO deliveries were still lower than prior year. However, this was partially due to timing of shipment. Delivery of gold and silver was carried over into We do expect a stronger quarter for Geos delivered and sold from Candid Literacy. At Antipa Chi, although GEOs sold were lower in Q3 2024 compared to prior year, we did see a recovery of GEOs delivered compared to second quarter. As a result, we expect full-year deliveries to be between 50,000 to 60,000 geos as originally guided.
Paul Brink: Order increased significantly due to accessing higher grade ore and improved run time at the Sag mill Geo deliveries were still lower than prior year. However, this was partially due to timing of shipments as delivery of gold and silver was carried over into the fourth quarter. We do expect a stronger quarter for Geos delivered and sold for candidly.
Paul Brink: For Q4.
Paul Brink: That answered Mackay, although geos sold were lower in Q3 2024 compared to prior year, we did see a recovery of Geos delivered compared to second quarter 2024. As a result, we expect full year deliveries to be between 50000 to 60000 Geos as originally guided for the year.
Sandip Rana: The Hamlow NPI was again weaker than expected, our visibility is limited and it continues to be difficult to estimate what the NPI will be. With respect to new mines, we did receive our initial ounces from Token Zinio during the quarter and expect a stronger quarter from both Token Zinio and Greenstone. For the quarter, Precious Metal GOs were 84,377. This compares to 90,370 in prior year when Cobre Panama GOs are. Precious metal geos represented approximately 77% of total geos. For diversified, total GOs sold were 25,733 compared to 35,511 in prior years. Iron ore GEOs sold were slightly lower year over year, while energy GEOs were lower at 19,130.
Paul Brink: The hemlo NPI was again weaker than expected our visibility is limited and it continues to be difficult to estimate what the MPI will be going forward.
Paul Brink: With respect to new minds, we did receive our initial ounces from toll continue during the quarter and expect a stronger quarter for both <unk> and greenstone in Q4.
Paul Brink: For the quarter precious metal Geos were 84377. This compares to $93 happening in prior year, when Cobra, Panama Geos are excluded.
Paul Brink: Precious metal Geos represented approximately 77% of total deals for the quarter.
Paul Brink: For diversified total Geos sold were 25733 compared to 35511 and prior year.
Paul Brink: Iron ore Geo sold were slightly lower year over year, while energy Geos were lower at 19137.
Sandip Rana: The decrease in energy GEOs is a combination of lower production and revenue due to weaker natural gas prices, as well as the impact of converting energy revenue to GEOs by hire. As we looked at total revenue, revenue was $275.7 million for Q3 2024 compared to $309.5 million in prior years. However, when you exclude Colbray Panama from prior year revenue, revenue was higher by $33.5 million or $14.5 million. Q3 2020-4 saw continued volatility in average commodity prices. As you see on slide 5, gold and silver average prices were significantly higher for the quarter and year-to-date when compared to prior years.
Paul Brink: The decrease in <unk> as a combination of lower production and revenue due to weaker natural gas prices as well as the impact of converting energy revenue to geos by higher gold prices.
Paul Brink: As we look at total revenue revenue was $275 7 million for Q3, 2024 compared to $309 5 million in prior year.
Paul Brink: When you exclude Cobra Panama from prior year revenue revenue was higher by $33 5 million or 14% year over year.
Paul Brink: Q3 saw Q3 2024 saw continued volatility in average commodity prices as you see on slide five gold and silver average prices were significantly higher for the quarter and year to date when compared to prior year.
Sandip Rana: Slide six highlights the financial results for the quarter and year-to-date 2024. As mentioned, GEO sold were lower at 110,110 compared to prior year, and revenue was also lower year-over-year. Adjusted EBITDA was $236.2 million, while adjusted net income was $153.9 million. Comparison to $255.1 million in adjusted EBITDA in Q3 2023 and adjusted net income of $175.1 On a per share basis, adjusted net income was $0.80 for the... On the cost side, we did have a decrease in cost of sales compared to Q3 2023, as we did not incur the ongoing fixed cost for ounces delivered by Cobre Panama, and had lower geos delivered and sold from Candelaria NM.
Paul Brink: Slide six highlights the financial results for the quarter and year to date 2024 as mentioned Geos sold were lower at 110110 compared to prior year and revenue was also lower year over year.
Paul Brink: Adjusted EBITDA was $236 2 million, while adjusted net income was $153 9 million.
Paul Brink: This compares to $255 1 million and adjusted EBITDA in Q3, 2023, and adjusted net income of $175 1 million in Q3 2023.
Paul Brink: On a per share basis, adjusted net income was <unk> 80 for the quarter.
Paul Brink: On the cost side, we did have a decrease in cost of sales compared to Q3 2023, as we did not incur the ongoing fixed cost per ounce is delivered by Cobra, Panama and had lower geos delivered and sold from cancel area in <unk>.
Sandip Rana: Also, cost of sales is dependent on which assets deliver stream ounces, as not all fixed payments per stream ounce are. With respect to the arbitration costs for Colbray Panama, the company incurred a cost of $1.9 million in Q3 2024 and have incurred $4.2 million year to date. We expect approximately $1.5 million to be incurred for the rest of the year. Depletion decreased to 54.2 million versus 68.1 million a year ago. The decrease was due to zero depletion recorded for Cobre, Panama, as well as lower depletion recorded for Candelaria because of the lower... Our effective tax rate was 21.6% in the quarter.
Paul Brink: Also cost of sales is dependent on which assets deliver stream ounces as not all fixed payments per stream outs are equal.
Paul Brink: With respect to the arbitration costs for Cobre, Panama the company incurred costs of $1 9 million in Q3, 2024 and have incurred $4 $2 million year to date, we expect approximately $1 $5 million to be incurred for the rest of the year.
Paul Brink: Depletion decreased to $54 2 million versus $68 1 million a year ago. The decrease was due to zero depletion recorded for cobre, Panama as well as lower depletion reported for candle area because of the lower deliveries in the quarter.
Paul Brink: Our effective tax rate was 21, 6% in the quarter.
Sandip Rana: expected to average around 20 percent.
Paul Brink: Expect it to average around 20% going forward.
Sandip Rana: Slide 7 highlights the continued diversification of the portfolio. From the charts, you can see that 77% of our third quarter 2024 revenue was generated by precious metals, with revenue being sourced 81% from the emerging markets. Slide 8 illustrates the strength of our business model to generate high margins. For Q3 2024, the cash cost per GEO, which is essentially cost of sales divided by gold equivalent ounces sold, was $290 per GEO. This compares to $304 per GEO in 2020. This amount will fluctuate depending on the mix of Royalty versus Dream Geos, including mining and energy. But as you can see, at current average gold prices, the company generates significant margins.
Paul Brink: Slide seven highlights the continued diversification of the portfolio from the charts you can see that 77% of our third quarter 2024 revenue was generated by precious metals with revenue being sourced 81% from the Americas.
Paul Brink: Slide eight illustrates the strength of our business model to generate high margins for Q3 2020 for the cash cost per Geo, which is essentially cost of sales divided by gold equivalent ounces sold was $290 per Geo. This compares to $304 per Geo in Q3 2023 <unk>.
Paul Brink: This amount will fluctuate depending on the mix of royalty versus stream geos, including mining and energy, but as you can see at current average gold prices. The company generates significant margins margin was approximately $2200 per ounce in Q3 2024.
Sandip Rana: Margin was approximately $2,200 per ounce. When you compare 2324 to 2320.23, the average gold price increased 28% year-over-year. However, the margin per ounce Franco Nevada achieved increased 35%. In a rising commodity price environment, Franco Nevada benefits fully as the cost per geo sold will not increase. As we turn to available capital, the company is $2.3 billion as of September 30, 2024. The company continues to be dead. Finally, with respect to guidance, we have benefited from record gold prices in the first nine months of 2024, with revenue exceeding our initial expectations. However, lower-than-expected gold deliveries from Candelaria and slower ramp-ups at our newly contributing mines has resulted in fewer precious metal geos than originally anticipated.
Paul Brink: When you compare it to $3 24 to <unk> Q3, 2023, the average <unk> price increased 28% year over year. However, the margin per ounce Franco Nevada achieved increased 35%.
Paul Brink: In a rising commodity price environment Franco Nevada benefits fully at the cost per Geo sold will not increase significantly.
Paul Brink: As we turn to available capital the company has $2 3 billion as at September 32024, the company continues to be debt free.
Paul Brink: Finally, with respect to guidance, we have benefited from record oil prices in the first nine months of 2024 with revenue exceeding our initial expectations, however, lower than expected gold deliveries from candle area and slower ramp ups at our newly contributing mines as a resulted in fewer precious metals geos than originally anticipated.
Paul Brink: Supported in addition record gold prices in the current year have impacted the conversion of our non gold revenue into Geos.
Sandip Rana: In addition, record gold prices in the current year have impacted the conversion of our known gold revenue. Our original guidance for 2024 was total geos sold of $480,000 to $540,000. Of this total, precious metal geos were estimated to be $360,000 to $400,000. Based on performance of the portfolio year date as well as the increase in gold price. We now estimate total GEO sold for 2024 to be 445,000. 465,000. Of this total, precious metal geos are estimated to be 340,000 to 300,000.
Paul Brink: Our original guidance for 2024 with total Geos sold a 480 to 540000 of this total precious metal geos were estimated to be $360 to 401000 Geos sold.
Paul Brink: Based on performance of the portfolio year to date as well as the increase in gold prices. We now estimate total geos sold for 2024 to be 445000 to 465000.
Paul Brink: Of this total precious metal geos are estimated to be 340000 to 360000.
Operator: And with that, I will now pass it over to the operator and we're happy to answer any questions you may have. During the Q&A session, if you would like to ask a question, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key.
Paul Brink: And with that I will now pass it over to the operator, and we're happy to answer any questions.
Paul Brink: Of course, Jay in 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 withdraw your question. Please press the pound key.
Operator: If you are joining us on the webcast, please submit your questions through the Q&A section of the webcast platform. Again, if you would like to ask a question, simply press start and the number 1 on your telephone keypad.
Paul Brink: Joining us on the webcast. Please make your questions through the Q&A section of the webcast platform.
Paul Brink: Again, if you would like to ask a question simply press Star then the number one on your telephone.
Cosmos Chiu: Your first question comes from the line of Cosmos Chiu from CIDC. Your line is open.
Speaker Change: Your first question comes from the line of Cosmos <unk> from CIBC. Your line is open.
Cosmos Chiu: Thanks, Paul and Sandip. Maybe if I can ask you on guidance first. You've revised guidance. We've now gone through about nine months of production, but for the revised four-year guidance, you've still given us a range of 20,000 ounces. I'm just wondering, you know, what could be a driver for you to either hit the higher end of that range or, you know, come in on the lower end? I think you mentioned that Candelaria will likely have a better Q4. Is that the driver or are there any other key assets that we should be aware of?
Cosmos: Thanks, Paul and Sandeep, maybe if I can ask you on guidance first.
Cosmos: You've revised guidance.
Cosmos: We've now gone through about nine months production.
Speaker Change: The revised full year guidance Youre still given us a range.
Paul Brink: Of $20 analysis I'm just wondering what.
Paul Brink: As a driver for.
Paul Brink: For you to either hit the higher end of that range or.
Speaker Change: Come in at the lower end I think you mentioned that candle area will likely have a better Q4 is that the driver or are there any other.
Paul Brink: Yes.
Paul Brink: Whereas as well.
Sandip Rana: Hey, Cosmos, it's Sandip. Yeah, so the range is 20,000. In terms of you know, where we come in at the higher or lower end, one is obviously on the diversified with the gold price, depending on how gold price performs, that will either increase or reduce the diversified geos. So there's obviously variability there.
Paul Brink: Hey, Cosmos Sandeep, yes.
Paul Brink: The range is 20 <unk> in terms of where we come in at the higher and lower end. One is obviously on the diversified with the gold price depending on how gold price performance that will either increase or reduce the diversified geo. So there is obviously variability there. The other is timing of deliveries as you would have.
Sandip Rana: The other is timing of deliveries. As you would have seen, Lundin had a really good 29,000 ounces of gold. But it is timing of delivery. So whether you get that in the production in Q4, or if it carries on into 2025, that can impact what you know, what we realize.
Paul Brink: <unk> seen <unk> had a really good Q3 29000 ounces of gold produced but it is timing of delivery. So whether you kept that in production in Q4 in Q4 or if it carries on into 2025 that can impact up what what we realize in terms of Geo sold.
Paul Brink: Great.
Sandip Rana: And then longer term, I noticed that, you know, despite the changes in 2024 guidance, you've maintained your guidance five years out or four years out, 2028, at 540 to 600,000 ounces. So I guess that's implying some of these issues that you've experienced in Q4 or in 2024 will be more short term, and it shouldn't impact your longer term sort of profile. Is my sort of deduction correct? Yes, the portfolio overall is performing well. Candelaria had an upstart to the year, but as you saw in Q3, it's done well. And Tepekaye is going to meet its guidance from what we can see so far.
Paul Brink: And then longer term and all of this.
Paul Brink: Despite.
Paul Brink: The changes in 2020 guidance.
Paul Brink: Maintained your guidance five years out.
Paul Brink: Four years out 2028 five.
Speaker Change: $540 to 600000 ounces. So I guess, that's implying some of these issues that you've experienced in Q4 or.
Speaker Change: In 2024 will be more short term.
Paul Brink: And it shouldn't impact your longer term sort of profile is my sort of deduction correct.
Speaker Change: Yes, the portfolio overall is performing well candidly area had a start to the year, but as you saw in Q3, it's done well and <unk> is going to meet its guidance from what we can see so far so.
Sandip Rana: And the new mines, they're ramping up. And as you know, there's always issues when mines ramp up. So longer term, we have full confidence in our portfolio.
Speaker Change: The new mines that are ramping up and as you know there is always issues when when the mines ramp up so longer term, we have full confidence in our portfolio, we will be providing updated guidance in March when we release our year end results for 2029, and we'll update at that time.
Sandip Rana: We will be providing updated guidance in March when we release our year-end results for 2029. And we'll update at that time.
Cosmos Chiu: And then maybe one last question is switching gears a little bit.
Speaker Change: Great.
Speaker Change: And then maybe one last question switching gears, a little bit I saw that.
Paul Brink: I saw that you've invested $1 million for an option to potentially acquire something in potash. Paul, you kind of touched on it, you know, diversification for the company. But maybe can you remind us in terms of, you know, Franco Nevada's thinking in other commodities other than gold, and I guess in this case more specifically potash. And maybe if you can comment on the opportunity, you know, potential opportunities out there, you mentioned corporate world is very busy, and potential size of some of these kinds of options.
Paul Brink: Invested $1 million for enough.
Paul Brink: To potentially acquire something in potash.
Speaker Change: Call you kind of touched on it dashboard application for the company.
Paul Brink: But maybe can you remind us in terms of.
Paul Brink: Franco Nevada is thinking.
Speaker Change: Other commodities other than gold.
Speaker Change: And I.
Speaker Change: I guess in this case more specifically potash.
Paul Brink: Maybe if you can comment on the opportunity.
Paul Brink: Potential opportunities out there you mentioned.
Paul Brink: Two very busy.
Paul Brink: The potential size of some of these kind of options.
Paul Brink: Sure, Cosmos. In terms of our interest in other commodities, we always like to be supportive. Thank you very much. and with assets as you've seen with iron ore and potentially with potash. You get interests on some very large deposits that have got reserved lives that are... Many, many decades.
Paul Brink: Sure Cosmos.
Paul Brink: The.
Paul Brink: In terms of our interest in other commodities, where we always like to be strategic.
Paul Brink: I think generally when there's a downturn in commodity prices.
Paul Brink: It gives us a good entry point into other commodities, but the other thing we look for is what can we get in other commodities that you cant get in gold.
Paul Brink: And with assets as you've seen with iron ore and potentially with potash.
Paul Brink: Get interests from some very large deposits that have got reserve lives that are.
Paul Brink: Many many decades.
Paul Brink: So we would be interested in getting into potash for that. Thank you. That would complement the gold portfolio quite nicely. and...
Paul Brink: So we would be interested in getting into potash for that reason.
Paul Brink: That would complement the golf portfolio quite nicely.
Paul Brink: And.
Paul Brink: What we're contemplating here is an option that if and when that project goes ahead. by Royalty on it.
Paul Brink: What we're contemplating.
Paul Brink: Planning here as an option that if and when that project goes ahead would be able to buy a royalty on it which I think would be a great addition to the portfolio.
Cosmos Chiu: Great. Thanks, Paul and Sandip.
Speaker Change: Great. Thanks, Paul and Sandy if those are all the questions I have thanks once again.
Cosmos Chiu: Those are all the questions I have. Thanks once again.
Speaker Change: Okay.
Speaker Change: Okay.
Tanya Jakusconek: Our next question comes from the line of Tanya Jakusconek from Scotiabank. Your line is open.
Speaker Change: Our next question comes from the line of Joe could Konig from Scotiabank. Your line is open.
Tanya Jakusconek: Thank you so much, Jeff. My question, Paul, I wanted to continue on the potash here. I'm just wondering if this is just the foothold and on and or could we see other potash deals as well? You know, long term Tanya, we're open to all commodities, you know, as I said, the... You know, those bulk commodities, iron ore, copper, potash, we like them because of the long-dated nature, you know, in terms of what's in front of us at the moment. The only immediate potash thing, but... And what sort of deal size with those ones be? I think when I asked last time, it was in the 50 to 400 million range.
Joe Konig: Thank you so much Sir my.
Joe Konig: My question, Paul I wanted to continue on the potash here.
Joe Konig: Just wondering if this is just the hull and.
Speaker Change: Or could we see that the potash deals as well.
Speaker Change: Long term Tanya.
Speaker Change: Open all commodities as I said the.
Speaker Change: Most of those bulk commodities iron ore copper potash.
Speaker Change: Because the long dated nature.
Paul Brink: <unk>.
Paul Brink: In terms of what's in front of us at the moment.
Paul Brink: As the only immediate potash thing but.
Paul Brink: Open over the longer term.
Paul Brink: And what sort of.
Speaker Change: Deal size with dose one day I think when I asked last time it was in the $50 million to $400 million range is that.
Tanya Jakusconek: Is that still the range for these non gold transit or precious metal transactions? Yes, that's an accurate range there, we've got a couple of things that may be actionable and those and so on.
Speaker Change: The range for these non core trends are.
Speaker Change: That's just natural transaction.
Speaker Change: Yes, that's an accurate range there.
Speaker Change:
Speaker Change: Couple of things that may be actionable.
Speaker Change: Those the Florida sizes.
Tanya Jakusconek: Okay, and then on the precious metal front, can you talk a little bit about sort of the size that you're seeing there and has there been any change from the last quarter in terms of what else you're looking at in terms of funding for projects or operating cashflow assets that are coming up and or any other structures that you're seeing out there that you may have to look and change? I guess that's the question as well. Are you looking at having to change some of the structure of your deals given the competitiveness of this environment?
Speaker Change: Okay, and then on the precious metals front can you talk a little bit about sort of the size that youre seeing there and has there been any change.
Speaker Change: From the last quarter in terms of what Alex you're looking at in terms of funding for projects, our operating cash flow.
Speaker Change: Assets that are coming up and or any other structures that you are seeing out there.
Speaker Change: That you may have to deal can change and I guess, that's the question that as well.
Speaker Change: Looking at having to change some of the structure of new deals given the competitiveness.
Speaker Change: <unk>.
Tanya Jakusconek: I'm going to hand that over to you, Tanya.
Speaker Change: I'm going to hand that over to Ian Tonya Good morning, Ed.
Tanya Jakusconek: Good morning. I would say overall, a number of market and structural factors, you know, lend itself to this being a pretty active year on the precious metal side. I think you've probably seen it already, there have been a number of deals that have taken place. I see that continuing, Tanya, it remains quite robust, as Paul mentioned earlier, in terms of potential transactions. Pretty, you know, meaningful, meaningful size, you know, our structure, you know, we have already evolved a little bit, but we continue to do that. Backing the team at GMIN has been a very successful transaction, and it's great to see that go into operation.
Ian Tonya: I would say overall number of markets and structural factors lend itself to this being a pretty active year on the precious metal side, I think you've probably seen it already.
Speaker Change: There've been a number of deals that have taken place I see that continuing Daniel.
Speaker Change: It remains quite robust as Paul mentioned earlier in terms of potential transactions.
Speaker Change: Meaningful meaningful size.
Speaker Change: Our structure.
Speaker Change: Structure.
Speaker Change: We have already evolved a little bit.
Speaker Change: We continue.
Speaker Change: To do that.
Speaker Change: Backing the the.
Speaker Change: The team at Jim It has been a very successful.
Speaker Change: Transaction.
Speaker Change: And it's great to see that go into operation. So that's something we continue to look to replicate.
Tanya Jakusconek: So that's something we continue to look to replicate, and it's been quite constructive, I think, for the portfolio. So going forward, expect to be quite active on the precious metal side, with kind of pretty meaningful-sized transactions. And those meaningful transactions for you. We usually talk about the $300 million, but that's not meaningful. I'm not sure. Yeah, I would say, you know, 300 is kind of a good medium-sized transaction. We're seeing more towards the mid to higher end at the moment, but it's a spectrum. We look at smaller deals where I think it was a good point that you raised, Tanya, you know, we do transactions where we see excellent optionality, but we're also quite focused on areas where we can add immediate cash flow, and there's good opportunities.
Speaker Change: Tenants, it's been quite constructive I think for the portfolio. So going forward expect to be quite active for the precious metal side.
Speaker Change: Kind of a pretty meaningful sized transactions overall.
Speaker Change: And.
Speaker Change: For transactions for you.
Speaker Change: We did $300 million.
Speaker Change: Not meaningful.
Speaker Change: Sure Yeah, I would say.
Speaker Change: 300 is kind of a good.
Speaker Change: Medium sized transactions, we are seeing more towards the mid to higher end at the moment, but it's a spectrum, we look at smaller deals where we see good.
Speaker Change: Good potential.
Speaker Change: That's a good point that you raised.
Speaker Change: Yes.
Speaker Change: We do.
Speaker Change: <unk> transactions were received excellent optionality.
Speaker Change: But we're also quite focused on the areas, where we can add immediate cash flow.
Speaker Change: And there are some good opportunities there as well.
Tanya Jakusconek: Okay, and when you said Would that mean plus $300 million? because if you put mid at 300 million, upper end should be higher than that. There are opportunities above that, yeah. Ian, I wouldn't be surprised to see you, you know, in some of these competitive situations still take equity interest provide that financing and potentially I saw a deal that had callers involved as well in the initial startup with that. as well. You know, we have used, you know, the balance sheet to kind of provide a full package, like we did with GMIN, and it's been quite successful, so as I said, I think that is the model on some transactions, not all, but where we can use that type of structure to help a company Well, and, you know, with that case study, the equity in debt has been quite complimentary and provided.
Speaker Change: And when you take your opinion.
Speaker Change: Hi.
Speaker Change: Would that mean plus 300 million.
Speaker Change: Because if you put mega 300 million upper end should be higher than that.
Speaker Change: There are opportunities above that.
Speaker Change: Okay.
Speaker Change: And I wouldn't be surprised to see you.
Speaker Change: And some of these competitive situations still take equity in check.
Speaker Change: That financing and potentially I saw a deal that had caller is involved as well at my initial startup would that be okay.
Speaker Change: That as well.
Speaker Change: We have used the balance sheet.
Speaker Change: Kind of provide a full package like we did with <unk>.
Speaker Change: And it's been quite successful so as I said I think that is that is the model.
Speaker Change: On some transactions done.
Speaker Change: But.
Speaker Change: Where we can use that type of structure.
Speaker Change: The company succeed.
Speaker Change: Will.
Speaker Change: No.
Speaker Change: With that case study the equity and debt it's been quite complementary.
Speaker Change: And providing good returns.
Tanya Jakusconek: Okay, thank you. I can move over to you and just ask. Forecast is Hemlo, I mean, by the Hemlo contribution.
Speaker Change: Okay. Thank you.
Speaker Change: I can move over to you and get that.
Speaker Change: Okay forecasted handler.
Speaker Change: Alright.
Speaker Change: Hemlo contribution is there anything else within the portfolio that.
Tanya Jakusconek: Is there anything else within the portfolio that, you know, like, I think that one we're very surprised, like, it's very hard for me to forecast that, so I appreciate that. But any other one within the portfolio that, you know, we talked about looking out longer term, I saw the still water numbers as well. That looks like that asset is gonna be down for a bit, for a while. So, is that something when you think about your five-year outlook, that you kind of assume that mine comes back on to a normal rate, or we're back at that 255,000 ounce GEO?
Speaker Change: I think that when we are ready to like.
Speaker Change: It's very hard for me to forecast that so I appreciate that but any other one within the portfolio that.
Speaker Change: We talked about looking out longer term I saw there's still water numbers as well.
Speaker Change: That looks like that asset is going to be down for events for a while so is that something when you think about your five year outlook that you kind of assume that mine back onto a normal rate or we're back at that 265000 ounces geos.
Tanya Jakusconek: I'm just trying to think of how. Ah, that's better, huh?
Speaker Change: Trying to think as height.
Speaker Change: Assets that are high.
Sandip Rana: Sure, so obviously the MPIs are always the most difficult to predict. Gold strike is probably more easier to estimate just based on past history. Hemel has always been the one that fluctuates a lot, just because the MPI doesn't cover all the land or all the deposit, as well as the cost impact there for development because it's underground. So it's tough to estimate for that.
Speaker Change: Sure. So obviously the <unk> are always the most difficult to predict goldstrike is probably more.
Speaker Change: Easier to estimate just based on past history Hemlo desalvo expand upon that fluctuates a lot just because the NPI doesn't cover all the land, where all the deposit as well as the cost impact there for development because it's underground.
Speaker Change: So it's tough to estimate for that as for other assets you mentioned Stillwater, yes, So Daniel for water came out and has reduced their guidance for next year to around 265000 ounces longer term, we do expect that to get back up to the 5 million Mark and unless <unk>.
Sandip Rana: As for other assets, you mentioned still water. Yes, you know, Savannia for water came out and has reduced their guidance for next year to around 265,000 ounces. Longer term, we do expect that to get back up to the half million mark. And unless Savannia still water guides differently, that's. But other than that, the rest of the portfolio, there shouldn't be really any.
Speaker Change: Water guidance differently, that's what we've estimated but doesn't have the rest of the portfolio.
Speaker Change: It would be really any major surprises.
Sandip Rana: Yeah, obviously the only other one would be when Cobrake Panama comes into production. And I think the operator has mentioned that when it does come up into production, it's going to take a six-month ramp up. Is that your understanding? Yeah, I think that's reasonable if that's what first quantum.
Speaker Change: Yeah.
Speaker Change: The only other one would be when that cobre, Panama comes into production and I think.
Speaker Change: The operator has mentioned that when it does come into production is going to take a six month ramp up.
Speaker Change: Okay.
Speaker Change: Thank you Ron.
Speaker Change: Yes.
Speaker Change: I think thats reasonable if thats, what first quantum has disclosed.
Tanya Jakusconek: Okay, thank you so much for helping me. Appreciate it.
Speaker Change: Okay. Thank you so much for helping me appreciate it thanks Tony.
Derick Ma: Our next question comes from the line of Derick Ma from TD Codwin. Your line is open.
Speaker Change: Our next question comes from the line of Derek MOFCOM DD card when Youre line is open.
Derick Ma: Thank you.
Derek: Thank you I just wanted to point of clarification in terms of the CRA has talked about that exposure with the gem T. Now in place is there still potential tax exposure in terms of transfer pricing in 2024 or everything youre showing.
Sandip Rana: I just want to point a clarification. In terms of the CRA and tax audit exposure with the GMT now in place, is there still potential tax exposure in terms of transfer pricing in 2024, or is everything you're showing in the financial reports basically everything we're going to be looking at? So in the financials, we've disclosed up until the end of 2023, our exposure in terms of transfer pricing, we had three audit issues outstanding with CRA, two of dropped by CRA, that was earlier in the year, with respect to transfer pricing, that process is still ongoing.
Speaker Change: In the financial reports basically everything we're going to be looking at.
Sandip Rana: So that has nothing to do with. So would there still be potential exposure in terms of transfer pricing in 2024, or did the GMT cover that? No, there still wouldn't. Yes, there would be. Okay, got it. They're independent. Independent Issues. Okay, understood.
Derick Ma: Thank you.
Heiko: Our next question comes from the line of Heiko from H.E. Wainwright.
Heiko: Your line is open. Hey, good morning. Thanks for taking my questions. The first two things I have for you have already been answered, but just following up from an earlier question. You said there are some deals with immediate cash flow earlier in this Q&A session. Size-wise, how much will these deals move the news, not just for you, but also for the operators that are offering them up? And just following up on that, have you seen any improvements in pricing for these deals in the current market environment? Or are the high gold prices that we've seen pretty much—well, I was going to say all the way through yesterday, but all the way through today, really, just too good to—and everyone's trying to get in?
Paul Brink: So in terms of near term cash flow deals, you know, as I said, across the spectrum, we've done some transactions that have more optionality, but, you know, I do see potential for meaningful transactions, both for us and will potentially be transacted. I'm sorry Heiko, the second part of your question... Price-wise, is the gold price just king and everyone's savoring to get in, or have people been a little bit more willing to negotiate prices? You know, again, you know, it varies, but I do see overall. a slightly more muted, competitive environment at the moment, which is conducive to pricing.
Paul Brink: And pricing depends on geopolitical risks, as in maybe slightly more challenging places are easier to get in? Or is it just however, however desperate the operator is? Maybe desperate is the wrong word. Yeah, that's another good question, Heiko. I would say first off, you know, every deal It's a bit different and it's important to do your diligence and then price the risk and upside appropriately. So, you know, we get the opportunity to review assets. site visits, and then we assess price. in light of what we see as the risk. and The Upside. So it's a really balanced approach and we're very thoughtful about that in each transaction.
Heiko: Very well.
Heiko: I'll get back in queue. Thank you, guys.
Operator: Again, if you'd like to ask a question via phone, simply press star then the number 1 on your telephone keypad.
Operator: There are no further questions on the phone.
Candida Hayden: I will now turn the Q&A session over to Candida Hayden, who will take questions from the webcast. Thank you.
Diego Tremitera: Our first question comes from Diego Tremitera from Nostra Capital Management. Can you clarify a bit more what does adjusting the Cobre Panama mine in early 2025 Are there any proactive measures you or First Quantum are taking? I'm going to try and sit down with President Molina.
Tara Noster: <unk> Tara Noster capital management can you clarify a bit more what does adjusting the Cobra Panama mine in early 2025 mean.
Speaker Change: Are there any proactive measures you are first quantum are taking to.
Speaker Change: To try and sit down with precedent Molina and his administration.
Paul Brink: Thanks Diego, it's Paul. So President Malino has made comments to say he is open to discuss the mine. The first item on his agenda though is pension reform, which they are currently trying to address. I believe there's a bill that's now in front of Parliament to address that. So expect any discussions on the mind. early next year.
Speaker Change: Thanks, Paul.
Speaker Change: So president Milena.
Speaker Change: Comments to say he is open to discuss the mining.
Speaker Change: The first item on the agenda, though is pension reform.
Speaker Change: They are currently trying to address I believe this is bill that's now in front of Parliament.
Speaker Change: To address that.
Speaker Change: So expect that any discussions on the mine would be early next year.
Paul Brink: Your first quantum is being proactive on a couple of fronts. is trying to familiarize Panamanians with the mine, with the professional operation that they run in country. I think that is going well. I think that is impacting sentiment in the country towards mining. They also are engaging with the government on a couple of fronts. Obviously, there are two things there, both for them and for us.
Speaker Change: Your first quantum is being proactive.
Speaker Change: A couple of fronts one.
Speaker Change: Is <unk>.
Speaker Change: Chronic familiarized panamanians with the mine.
Speaker Change: With a professional operation that they run in country I think that is going well I think that is impacting sentiment in the country towards mining.
Speaker Change: They also are engaging with the government on a couple of fronts obviously.
Speaker Change: Two things there both for them and for US there's a potential for arbitration.
Paul Brink: & Co. So there are interactions on that front. It's not plan A for either of us, plan A is to get the mine up and operating again. So they are engaging with the government on that. We are, they're obviously the driver in this, we're very supportive of their efforts.
Speaker Change: So they are interactions on on that front.
Speaker Change: It's not planned for either of US plant plan, a is to get the mine up and operating again.
Speaker Change: They are engaging with the government.
Speaker Change: Pat.
Pat: We are they are obviously the driver in this we're very supportive of their efforts and engage very closely with it.
Paul Brink: Thank you very much. Thank you.
Paul Brink: And the second part of Diego's question, if Cobra Panama remains in preservation and safe management mode for several years, is there anything you might consider doing with that? We're very hopeful that the mine will return to operation, and it has the potential to be a tremendous contributor to us if and when it comes back at its full operating rate, that would be roughly a 30%.
Speaker Change: And the second part of Jacob's question, It's Cobra, Panama remains in preservation and Safe management mode for several years is there anything you might consider doing with that stream like selling it.
Speaker Change: Where are we.
Speaker Change: Very helpful that the mine will return to operation.
Speaker Change: And it has the potential to be a tremendous contributor to us.
Speaker Change: If and when it comes back at its full operating rate that would be roughly a 30% increase in our geos and revenue. So we still believe it's a tremendously valuable asset I think the full value of it has been taken out of our stock.
Paul Brink: and Matthew Yost. And we're out of time. Thank you. We still believe it's a tremendously valuable asset. The full value of it has been taken out of our stock. So I think. Probably the best optionality you can get in the royalty industry today. Reoption, Montgomery, Panama, coming back.
Speaker Change: So I think the probably the best Optionality you can get in the loyalty industry today.
Speaker Change: It's a free option on cobre, Panama coming back online.
Heiko: Our last question is from Heiko. Wanted to see if you anticipate any near-term or long-term impacts from the U.S. election, given some of the geopolitical changes that may occur. Spring around the world. I think potential for some positive impacts for us, most immediately we have a royalty on Stipnite Mine, it's been moving through the permitting process, got notice that they should be receiving their Record of Decision by the end of this year, I think that is even more likely now, a second mine that we've got a royalty on is Copper World, also moving through the permitting process, I think that is even more likely now.
Speaker Change: And our last question is from Heiko from H C. Wainwright wanted to see if you anticipate any near term or long term impacts from the U S election, given some of the geopolitical changes that might bring.
Speaker Change: Around the world.
Speaker Change: The.
Speaker Change: The potential positive impact for us.
Speaker Change: Most immediately we are a royalty on the <unk> mine.
Speaker Change: It's been moving through the permitting process got noticed that they should be receiving their record of decision by the end of this year I think that is even more likely now second mind that we've got a royalty honest copper world.
Speaker Change: Also moving through permanent process I think has.
Paul Brink: Water Permit now in hand, just waiting for one more permit, so I think this change will be positive. I hope that they will impact that side of our portfolio. As you know, we also have quite substantial oil and gas interests in the U.S. In particular, we have gas interests in the Haynesville. If one of the drivers for that industry is LNG you'll have to take off the Gulf Coast. going into Europe, I think this can be potentially positive. Developments on that front that will serve those.
Speaker Change: It's water permit now in hand, just waiting for one more permits. So I think this change will be positive.
Speaker Change: I hope that we will not be it'll impact that side of our portfolio. As you know we also have a quite substantial oil and gas interests in the U S.
Speaker Change: In particular, we have gas interests in the Haynesville.
Speaker Change: And the.
Speaker Change: One of the drivers for that industry as LNG off take off the Gulf Coast.
Speaker Change: Going into Europe, I think this can be potentially positive to see more developments on that front that will serve those assets well.
Operator: There are no further questions from the web.
Speaker Change: There are no further questions from the webcast.
Operator: This concludes our third quarter results conference call and webcast. Thank you for your interest in Franco Nevada.
Speaker Change: This concludes our third quarter results conference call and webcast. Thank you for your interest in Franco Nevada.
Speaker Change: Okay.
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