Q4 2023 Triple Flag Precious Metals Corp Earnings Call
<unk> fourth quarter and full year 2023 results conference call.
Today's conference is being recorded in all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press. The star key followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one a second time.
Speaker Change: Thank you and I will now turn the conference over to Shaun <unk>, Chief Executive Officer, Mr. Messmer, you may begin.
Shaun <unk>: Okay. Thank you and good morning, everyone and thank you for joining us to discuss triple flag fourth quarter and full year 2023 result.
Shaun <unk>: Today I'm joined by our CFO Shouldnt, then decoy and our senior Vice President of corporate development, Jim Stendal.
Shaun <unk>: Turning to slide four our business continued its strong performance during the fourth quarter with sales of roughly 26000 gold equivalent ounces, resulting in $38 million of operating cash flow during the quarter on.
Shaun <unk>: On a full year basis, our portfolio generated sales of just over 105000 gold equivalent ounces.
Shaun <unk>: Delivering within our guidance range, and creating a new record for triples back.
Shaun <unk>: This strong performance resulted in a $154 million in operating cash flow and $159 million.
Shaun <unk>: Adjusted EBITDA for 2023, both new records for the company.
Shaun <unk>: In December evolution mining acquired an 80% interest in the North <unk> copper gold mine in Australia in which triple flag retains at 54% gold stream and 80% silver stream.
Speaker Change: Evolution has a long history of upgrading in Australia and is poised to continue developing and operating our clocks and the exceptional manner that CE Mark had previously.
Speaker Change: Those products is a world class asset, having a multi decade mine life and great exploration potential and we expect the high grade <unk> deposit to drive a significant increase in 2020 for estimated stream deliveries for the asset.
Speaker Change: Additionally.
Speaker Change: Several of our over 200 development and exploration stage assets continue to advance.
Speaker Change: Highlighted by exploration success at <unk> Bay, and updated economic studies at Kona and SK Creek.
Speaker Change: Finally, looking forward to 2024, we are establishing a guidance range of between 105 and 115000 gold equivalent ounces were reaffirming our five year outlook, averaging over 140000 gold equivalent ounces.
Speaker Change: This both on Triple flag track record of a sector leading growth in gold equivalent ounces over the past seven years, we've delivered a cumulative annual growth rate of more than 20% since 2017, and continuing continuing with short and medium term growth well in excess of our intermediate peers for comparable capital deployment, which we reaffirm.
Speaker Change: <unk>.
Speaker Change: The annual average of 140000 Geos.
Speaker Change: I'll now turn it over to Sheldon to discuss our financials for Q4 and the full year 2023.
Sheldon: Thank you Sean.
Sheldon: We had a strong fourth quarter with a portfolio of producing over 26000 global equivalent ounces, which resulted in us achieving our full year 2023 guidance with a final total of over 105000 gold equivalent ounces.
Sheldon: This resulted in records for both revenues and operating cash flow during 2023 supporting our investment thesis for the Mavericks transaction more than a year ago.
Sheldon: Operating cash flow per share is a very key metric for me and I'm pleased to say that we increased slightly for the year from <unk> 76 per share and <unk> 77 per share. This reflects accretive growth for the year with a solid quarter and a solid year.
Sheldon: Our dividend has been maintained at 21, <unk> on an annualized basis, which resulted and triple flag paying out over $40 million in dividends to shareholders in 2023.
Sheldon: <unk> increased our dividend every year since our IPO and as the year progresses, we will consider the potential to continue that track record.
Sheldon: <unk> to our dividend. We also returned over $28 million to shareholders via share buybacks as of December 31, 2023, we have $9 9 million shares of remaining capacity under the current and CIB.
Sheldon: I'd also like to comment on our strong balance sheet.
Sheldon: We exited 2023 with just over $40 million and net debt.
Sheldon: In Q4, we had operating cash flow of $37 million. So our net debt represents just over one quarter's cash flow this positions us very well, allowing us to make capital allocation decisions to benefit shareholders through new acquisitions share buybacks or dividends.
Sheldon: I'll turn now to slide six.
Sheldon: Our portfolio has shown consistent growth since our inception two.
Sheldon: 2023 was a record for operating cash flow free cash flow and adjusted EBITDA, each increasing significantly from 2022 gives the acquisition of Maverix metals as well as other royalties acquired during the year, such as store and AG balance.
Sheldon: Consistent margins result in efficient translation of revenue into cash flow available to shareholders. Our portfolio has significant embedded production growth as production grows and further aided by a beneficial gold price environment, we expect our free cash flow to grow due to both the price and the volume impact.
Sheldon: Moving to slide seven.
Sheldon: We have highlighted here three very important aspects of our portfolio, namely asset diversification precious metals focus in our portfolio, which is predominantly centered in the Americas and Australia.
Sheldon: Our revenue is well diversified across our portfolio Cerro Lindo in North Park, our biggest contributors during the year, representing 22% and 14% of annual revenue respectively.
Sheldon: Cerro Lindo was our first investment in 2016, we invested $250 million and a silver stream I am very pleased that in Q4, we achieved a significant milestone and having recovered all of our initial investment in Cerro Lindo.
Sheldon: Demonstrating the strength of the streaming model Cerro Lindo has the current remaining mine life of over eight years, we're going to benefit from the stream for a great deal of time to come and my expectation is that overtime mine life will continue to be extended as it has in the past.
Sheldon: Moving on the investment thesis for Triple flag is for a strong pure play royalty and streaming company focused on precious metals. This has not changed since our inception in 2016 Goldman silver account for roughly 95% of our revenues amongst the highest in the sector.
Sheldon: Our portfolio is centered in mining friendly jurisdictions jurisdiction matters. Our single greatest country concentration is in Australia are Australia and producing assets include North parks, Fosterville and beta hunt as well as a number of smaller contributors including stall.
Sheldon: I'd like to now turn to slide eight.
Sheldon: Okay.
Slide eight sets out our production growth since we were founded in 2016 and 2017, we produced 33000 gold equivalent ounces by 2023 that had increased to 105000 ounces a three times increase in a compound annual growth rate of over 20%.
Sheldon: Looking forward, we expect this growth to continue in 2024, with our 2024 guidance being between 105000 and 115000 gold equivalent ounces.
Sheldon: We also expect this growth to continue for the next five years as we're expecting our gold equivalent ounces to average over 140000 ounces from 2025 to 2029.
Sheldon: Importantly, this is by organic growth from assets already within our portfolio and does not include any additional acquisitions that may occur.
Sheldon: This production growth will efficiently translate into increased cash flow for shareholders.
Sheldon: Okay.
Sheldon: Turning now to slide nine.
Sheldon: I'd like to provide some additional guidance on financial metrics.
Sheldon: We've already stated our CEO guidance of 105000 to 115000 gold equivalent ounces.
Sheldon: This was driven by our expectation of significant growth from north parks due to the processing of higher gold grade open pit material at <unk> 31 in the EU 31, North, which Sean will discuss further.
Sheldon: Depletion is expected to be between 70 million and $80 million higher than the prior year given the growth in gold equivalent ounce production, while our G&A will be between 23% and $24 million finally, our Australian cash tax rate for Australian royalties will be approximately 25% consistent with the 24% rate.
Sheldon: That was realized in 2023.
Speaker Change: Over to you Shaun.
Speaker Change: Thanks, So I just want to spend a moment.
Speaker Change: Looking a bit about North park is a cornerstone asset.
Speaker Change: As mentioned North Park was acquired by evolution mining in December of last year.
Speaker Change: <unk> is positioned in evolutions backyard and in one of Australia's most prospective gold copper belt, and new South Wales, which I will highlight in the latest slide.
Speaker Change: Evolution brings significant expertise in large scale underground caving operations from Henry mind, having a skill set and experience that is well suited for large scale poultry operations, such as North Park.
Speaker Change: And as you can see on the next slide mining of <unk> 31 open pits at North Park is well underway and we expect these higher gold grade pits to contribute materially to our gold equivalent ounce profile starting this year.
Speaker Change: Okay.
Speaker Change: On Slide 12, you can see that evolution has had great success with developing and optimizing prior acquisitions like the <unk> mine, which is proximate to North Park.
Speaker Change: Since acquiring the mine in 2015 from Barrick evolution has successfully delivered sustainable production reserve and resource growth and major capital projects.
Speaker Change: <unk> approach to investing and adding mine life and capacity to create shareholder value in a mine recently proximate to North Park bodes well for our interest in this mine with a new partner and we're excited to help investors appreciate the quality of our Golden Silver stream on this cornerstone asset as evolution shows the market what value. They can unlock in the years ahead.
James: Hand over to James to discuss Hebei.
James: Thanks, Joe.
James: One of our exploration assets that has generated significant news flow over the last year.
James: <unk> multi deposit gold project operated by Agnico Eagle.
Of which triple slide holds at 1% NFL royalty.
James: Agnico is undertaking an extensive exploration program.
James: With 2023 drilling totaling more than 125000 meters and 2024 exploration budgets.
$22 million.
James: Focusing on high potential areas of Madrid indoors.
James: The results from an internal technical evaluation are expected to be reported in 2025 targeting a larger production restart scenario.
James: On page 14.
James: You can see the size of the land package in Hebei and the multiple deposits and exploration targets that agnico Eagle has identified.
James: Of particular interest is the target area in the vicinity of patch seven in the center of the long section.
James: Which has delivered strong results, including $16 three grams, a ton gold of $28 six meters and of that 385 meters.
James: At $12 seven grams per ton gold over $4 six meters at a depth of 677 meters.
James: As well as the exploration and development stage assets that were excited about when acquiring maverix metals, we're happy to see our thesis play out and look forward to seeing agnico Eagle continue to develop this project.
James: Sure.
Speaker Change: Thank you.
Speaker Change: So this is a snapshot demonstrates triple flags outlook is overwhelmingly positive with our amplifier power of roughly $660 million in available liquidity and our broad base of 235 assets.
Speaker Change: Alright consecutive sales record projected for the year ahead with guidance of 105 to 115000 gold equivalent ounces and a five year average annual production outlook of 140000 gold equivalent ounces. We're excited to continue growing triple flag into a leader in the sector with a top sustainability ratings and a prudent capital allocation decision.
Speaker Change: Yeah.
Speaker Change: But the board and management team being large shareholders ourselves, we are completely aligned and ensuring the best outcomes for all stakeholders and are looking forward to what 2024 has to offer.
Speaker Change: So with that please open the floor to any questions.
Speaker Change: Thank you.
Speaker Change: And at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: And we will pause for just a moment to compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: We will take our first question from Cosmos <unk> with CIBC. Your line is open.
Speaker Change: Thank you, Sean Sheldon and James and congrats on a very strong 2020.
Speaker Change: Maybe my first question is on North parks, good to see evolution, taking over north parks.
Speaker Change: And Sean you talked about some of the benefits, but I'm just wondering.
Speaker Change: Still early days, but.
Speaker Change: Have there been any positive changes at.
Speaker Change: Forex that you can share with us.
Speaker Change:
Speaker Change: Kosmos firstly.
Speaker Change: I think it's a point we had made firstly thank you for that.
Speaker Change: The praise that.
Speaker Change: <unk> got a great team and we're really very proud of them and what this team has achieved.
Speaker Change: Your point on North Park I, just wanted to take a moment because you've traveled this journey with us.
Speaker Change: <unk>.
Speaker Change: We've had perhaps some of the I would say best access and disclosure on north pods, but really in China moly with great partners.
Speaker Change: They really didn't have the same sort of reporting disclosures that I think we will see in the evolution. So I guess.
Speaker Change: In the short term, it's only months since evolution has acquired the business the Bunny just put us.
Speaker Change: Joel compliant reserve statements, we expect in the coming months, they're going to be highly motivated to.
Speaker Change: <unk> studies and the vision for that so it's premature for us to Sydney front run them, but the business as it has.
Speaker Change: Multiple ore bodies, it's well set up 31% 31, north is con beautifully.
Speaker Change: For this year and next year to deliver very very material gold ounce growth for our portfolio.
Speaker Change: We're actually having dinner with the team on.
Speaker Change: On Sunday night, and so we will give further updates and we're going to keep the market informed I think just conceptually.
Speaker Change: One of the great royalties in this sector is melodic that's no secret you think of this acid with a longer life for similar NAV for our company as it is to two of Cisco, but really with a growing ounce profile over the next year longer life and Thats before evolution have engaged and it's not to say one is bad ones. Because these are both great assets our job.
Speaker Change: It's really too.
Speaker Change: Work on the hotels of evolution and what they see hopefully similar to what they have done a cow and to really showcase that invested in the very same way that people come to associates melodic with Cisco that truly is that.
Speaker Change: Well costs and I think that's that's what we would like investors to appreciate I think with evolution their track record and also the disclosure obligations that will unveil itself in the weeks and months ahead.
Speaker Change: James.
James: Have any other comments that wish to add.
James: Charles I'll, just reinforce Sean's point Cmos.
James: Operator.
James: And really around North park spread very well and many of the operating team are consistent from Rio Tinto days seem update in Netherlands evolution with.
James: Few changes here and there but really.
James: There is some similarity in the operator.
James: If you look at evolutions in our comments publicly.
James: That focus on the plan as expected.
James: They point to the size of the mineral inventory and as a reminder, we're talking about a half a billion tonne resource. That's currently being chipped away at $7 6 million tons per year.
James: Scope to maybe grow that.
James: That throughput given the size of the Midland Diamonds. They've also stated a focus on immediate relates to target near mine mineralization at surface analysis in the deeper portions of <unk> 48, So we think with looking at it exactly the right way, we have always been convinced that exploration of those tax rate limited.
James: And really was focused on Pittsburgh material, and we think there's tremendous possibility of that.
James: That reflects quite well.
James: With regards to how evolution is looking at the asset but.
We will see how they go with disclosing their plans of course to yet.
Speaker Change: Great. Thanks, a lot.
Speaker Change: That gives you a flavor.
Speaker Change: What's the space there should be more to come.
Speaker Change: Of course, yes, and maybe as a follow up.
Speaker Change: And the MD&A yesterday, you mentioned short term at North Park. The growth is coming from <unk> 31, and 31, North Sea open pits longer term, it's potentially coming from the <unk> 22.
Speaker Change: Underground could you maybe help us understand or describe once again the evolution of the asset.
Speaker Change: Uh huh.
Speaker Change: Sort of a life of mine of the open pits and what needs to be done in terms of the underground and then just kind of wrap it all together for us quickly.
Speaker Change: Possible.
Speaker Change: Sure James do you want to yes.
Speaker Change: And this is a good refresher if you think about North Park historically it was a series of relatively small open pits.
Speaker Change: <unk> cut government organization more or less at surface.
Speaker Change: Mid nineties.
Speaker Change: Time, those pits are being developed and of course time is north than Rio Tinto discovered deepa.
Speaker Change: Porphyry system believes the pits and the mine's transition progressively from shallow pit two very sophisticated block caves and their minds series locations predominantly in a number of supplementary open pits. So thats been the history of the mine there are numerous.
Speaker Change: It's across the property. So we would expect some contribution of open pit to continue into the future, but as you de Cosby.
Speaker Change: The real sustained growth is from the development of a 22 and when you look at 'twenty. Two we're talking about a grade is quite in excess from goals without point of view.
Chris: Chris is the current run of mine grades at <unk> 37 grams, a tonne to that provides for a longer period of increased gold output yet steady citywide are by design right.
Chris: Typically small relatively short lift said I'll provide our production this year and into the next part of from 2025.
Chris: But really set a sustained gold output from <unk> 22, which is an important development.
I know evolutions also focused.
Speaker Change: I would just add to Jim's comment I think part of the.
Speaker Change: Thesis, we had which is sort of alluded to when we did the transaction because we made sure that we had full exposure to the over thousand square kilometer land package and if you recall.
Speaker Change: The surface manifestation of those reserves are only on 2006 square kilometers that half a billion tons or so.
Speaker Change: With really the opportunity to fund more sort of undiscovered material at.
Speaker Change: At depths and even since we've owned this which has not been a long time, they've been very successful with limited drilling today and uncovering that so.
Speaker Change: Im very excited to see what.
Speaker Change: Evolution can do and.
Speaker Change: When you have acquired.
Speaker Change: I'm sure you have lots of time in reporting season, but go back and look over CFO, Eric when they acquired <unk>.
Speaker Change: As a case study, it's just down the road, it's a very impressive track record of.
Speaker Change: Adding substantial value and unlocking value, which I think they are well positioned to do with this mineral endowment yet.
Speaker Change: Alright, Thanks, again, Sean James and show them. Those are all my questions. Thanks, a lot. Okay. That's great. Thanks, Chris.
Speaker Change: And as a reminder, it is star one if you would like to ask a question.
Speaker Change: Okay.
Speaker Change: And we will take our next question from Andy.
Speaker Change: <unk> <unk> with Scotiabank Your line is open.
Speaker Change: Good morning, everyone I think that May Tanya not any guidance there would be any day.
Okay.
Speaker Change: For Sheldon first and then over to you Sean just for transaction environment Sheldon.
Speaker Change: About G&A.
Speaker Change: Level this year and I thought we were going to start to see some synergies from the Maverick transaction on some of the G&A.
Speaker Change: Would you be able to just talk to us a little bit about how you see your G&A going out.
Steve: Alright, I thought Steve.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: Yes, Hi, Hi, Tanya thanks.
Speaker Change: And when you're talking with a gene are you talking about the 2023 or the guidance going forward in the guidance.
Speaker Change: Okay, and I didn't really expect to Jeff Garro Sheldon in 2023.
Speaker Change: <unk> start seeing it in 'twenty four and beyond.
Tom: Yes, so so first Tom.
Speaker Change: We actually have completely delivered the $7 million in synergies.
Speaker Change: You can kind of get there just by looking at the executive team spend at Mavericks, the board costs coming down.
Speaker Change: Audit insurance office space.
Speaker Change: So that $7 million has been fully fully realized there's a couple of impacts youre going to see as we go forward. So you remember historically, we were a private company. We went to the public on the PSX and we also started to experience.
Speaker Change: New York listing costs. So there is additional cost in that regards and that has DNO costs as well as just other compliance costs and we also became subject to Sox this year. So.
Speaker Change: Youll see us our audit report looks a little different we're actually fully compliant with stocks.
Speaker Change: 2023.
Speaker Change: That's a that's an accomplishment for the team, but it also involves additional additional costs and expenses. The other thing is the <unk>.
Speaker Change: Some of the noncash equity compensation from accounting point of view.
Speaker Change: Get treated it gets smoothed out over a number of years and so you end up with a catch up effect there, but I think we're really coming off to a really what our run rate is on the G&A front and even if we grow the portfolio, we wouldn't expect the G&A to hatter.
Speaker Change: ROE Accordingly, we will get that gearing effect and just be able to leverage the platform.
Okay. So we should be thinking of this level going forward.
Speaker Change: Yes, that's right.
Sheldon: Okay. Thank you for that does Sheldon.
Speaker Change: Yes.
Speaker Change: I wanted to just talk a little bit about the transaction environment, if I could.
Speaker Change: And yet.
Speaker Change: What are you seeing out there.
Speaker Change: Size wise this morning, Lee at Newmont eight assets on the block.
Speaker Change: So just wanted to talk about Tom could.
Could you see yourself participating obviously in those asset sales somewhere in Ghana, and Australia, and the U S Canada.
Speaker Change: Just your thoughts on the environment and your opportunity.
Speaker Change: Yes its tenure.
Speaker Change: It's kind of interesting if you zoom back well I guess the first answer.
Speaker Change: The direct question is yes.
Speaker Change: The fire power and indeed the appetite.
Speaker Change: So if there is a sensible partnership we would obviously look to do that.
Speaker Change: The deal environment, when I step back and look at some of the issue is reporting to this period.
Speaker Change: I'm not saying, it's necessarily 2014, which was a very interesting period for for the sector to deploy meaningful amounts of capital, but it's starting to feel a little like that I think we are seeing.
Speaker Change: A number of sectors coming under pressure from a liquidity point of view, some very big issues to have seen substantial declines in pricing I'm not talking precious of course, but probably metallics and others and it does feel to me with the equity capital markets being the most supportive for the sector and valuations.
Speaker Change: Under pressure.
Speaker Change: I think the opportunity set arguably is actually growing.
Speaker Change: In a way that.
Speaker Change: Absent some medical rebound in the traditional markets I think is setting up well for the sector as a whole we have had multiple flexes its already this year we're seeing.
Speaker Change: In some cases bilateral opportunities, which we may or may not convert on in the sort of tens of millions to hundreds of millions of dollars.
Speaker Change: And so that's I would say what's on the menu directly but even in the last 24 hours had direct inbounds on situations that I think are being made possible by the environment I just described.
Speaker Change: So the only caveat you would have heard me say, even a year ago, where we were bilateral on some very large transactions.
Speaker Change: I think there is.
Speaker Change: With opportunity comes responsibility and I think it's a great environment for us to be receiving.
Speaker Change: Interesting deal flow opportunity, but we also are very cognizant of.
Speaker Change: From a liquidity risk in this rate environment, and we are spending a disproportionate amount of time on what happens when things inevitably doesn't go to script. So.
Speaker Change: That analysis beyond just the simple IRR.
Speaker Change: This table Stakes that you would normally expect from US I think we've amped that up.
Speaker Change: If that answer this but we're seeing we're seeing a lot right now.
Speaker Change: And what the size range and what would be sort of the upper end of what you would be comfortable with.
With your balance sheet.
Speaker Change: I mean, there are some I would say.
Speaker Change: Hudson sort of predict probabilities, but some that are in excess of our financing capability would perhaps be looking at partnerships.
Speaker Change: But we are seeing several is the same.
Speaker Change: Good return sort of.
Speaker Change: Multiple 100 tens of millions to sort of.
Speaker Change: $102 million to $300 million type snack bracket, which for us is pretty easily financeable.
Speaker Change: Yeah, so something over $500 million, we can see you do that.
Speaker Change: That would be yes.
Go ahead.
As you'd appreciate it's Tonya.
Speaker Change: On this call have a lot of shares in this company and I think.
Speaker Change: The very idea of like incurring dilution for the heck of it isn't a great idea you'd have to have something super interesting of scale.
Speaker Change: And if there was sort of a almost a generational opportunity, obviously think long and hard about that but.
Speaker Change: You're thinking about history, the histogram of of opportunities the largest actual just pure precious streaming opportunity was with North Park and.
We could do north parks today again with our capability with the additional cash generation that comes in so.
Could we could we see things bigger.
Speaker Change: I'm sure we could.
We just havent seen one in the last eight years.
Speaker Change: No one gets bought the book.
Speaker Change: Okay, great. Thank you so much.
Yes. Thank you.
Speaker Change: As a reminder, the star one if you would like to ask a question.
Speaker Change: And we have no further questions at this time I will now turn the call back to Mr. Sean <unk> for closing remarks.
Sean: Thank you Ed I think the questions we were quality over quantity, which is wonderful and I think there is.
Speaker Change: That's probably a reflection of I think what should be.
Speaker Change: Straightforward and a good set of results I'll end by just saying, thanks again to our team aboard our partners and our investors for their trust and it's been a great year I think when you step back and consider the outlook. We've just provided and you've considered in the context of the sector I think it should show quite well.
And.
Speaker Change: Im truly appreciative of the platform that we have it's simple we've got.
Speaker Change: The growth that we've delivered I think should be playing for everyone to see eight years now and.
Speaker Change: We've got a lot of firepower like $50 million of debt basically on the balance sheet at this stage and cash run rates of trailing in about $160 million, we're extremely well positioned and I'm excited for what lies ahead. So thank you very much wish you well for the rest of the day.
Debbie: Thanks Debbie.
Speaker Change: Thank you and ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.