Triple Flag Precious Metals Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2024

There are 6 speakers on the call.

Operator

Hello, greetings and welcome to the Triple Flag Precious Metals Q3 2024 Results Conference Call. All participants are in a listen only mode. Later, we will conduct a question and answer As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Sheldon Vanderkoye, CEO. Please go ahead.

Speaker 1

Thank you, Jeremy. Good morning, everyone, and thank you for joining us to discuss Triple Flag's 2024 Q3 results. Today, I'm joined by our Chief Financial Officer, Yves Anvari and our Chief Operating Officer, James Dendle. Triple Flag delivered another strong performance in Q3 with record sales of nearly 30,000 gold equivalent ounces. This has resulted in another record quarter for Triple Flag and places us firmly on track to achieve our 2024 production guidance of 105,000 to 115,000 ounces.

Speaker 1

We now expect to achieve the top half of our guidance range. The high grade open pit material from North Parks continues to be a key part of the 2024 story as North Parks continues to be a strong contributor. I'd like to highlight our growing cash flow per share. Operating cash flow per share increased over 70% as compared to the prior period. This is due to record production, record gold prices and stable margins insulated from inflationary cost pressures.

Speaker 1

The streaming model is working as it should for the benefit of our shareholders. Our portfolio has also achieved several milestones over the past 3 months. These include the following. 1st, Cerro Lindo delivered robust 2024 production year over year. 2nd, Orla Mining increased its production guidance for Camino Rojo for the 2nd time this year.

Speaker 1

3rd, Gold fully permitted and financed the Kone project to production. And finally, Westgold announced exceptional exploration results from drilling at the Fletcher zone of Beta Hunt, demonstrating meaningful expansion potential for that mine. Tripleflag acquired its royalties on Camino Rojo, Kone and Beta Hunt through the Mavericks transaction in 2023, which continues to pay dividends for Triple Flag's

Speaker 2

shareholders. Towards the

Speaker 1

end of the Q3, Triple Flag was added to the S and PTSX Composite Index, which brings exposure to a broader investor base as well as greater liquidity in trading. Looking ahead, Triple Flag's growth profile remains strong and well positioned to deliver long term value for our shareholders. Our production is expected to be between 135,000 to 145,000 gold equivalent ounces in 2028. With that, I'll turn it over to Ivan to discuss our financial results for the Q3 of 2024.

Speaker 3

Thank you, Sheldon. As noted, we had the strongest quarter yet, with the portfolio producing nearly 30,000 GEOs, a new record for the company. This puts Triple Flag right on track to achieve our 2024 sales guidance as Sheldon just confirmed. As a high margin royalty and streaming business, these record volumes have translated to record levels of adjusted EBITDA and operating cash flow per share. Lastly, I'd like to comment on the balance sheet.

Speaker 3

We exited the quarter with a small net debt position of only $11,000,000 following 3rd quarter drawdowns on the credit facility of over $60,000,000 for the acquisition of the new streams with Allied Gold and an additional royalty on the Tamarac project. This clearly demonstrates the robust cash flows generated by the Triple Flag business. Our cash flow outlook combined with nearly CAD690 1,000,000 of current available liquidity gives us the financial capacity to deploy future capital for future per share growth as well as deliver high shareholder returns. Moving ahead, we continue to highlight 3 key aspects of our investment thesis, namely asset diversification, precious metals focus and a portfolio which derives roughly 80% of its revenues from Australia and the Americas. Saralindo and North Parks continue to be the 2 largest contributors to Q3 GEOs with both assets receiving a benefit from higher year over year volumes and of course, higher gold and silver prices.

Speaker 3

Our asset diversification and geographical focus is well understood. So given the strong precious metals environment, I highlight Triple Flag's continuing 100% portfolio exposure on top line revenue to precious metals in Q3 2024 with a meaningful portion weighted to silver at approximately 30%. I feel fortunate to have this level of exposure given the many favorable tailwinds for both gold and silver in the near to medium term as a pure play royalty and streaming company. As highlighted earlier, the realization of strong precious metal prices and an asset portfolio that continues to deliver has resulted in record performance across revenue, cash flow, adjusted EBITDA and GEOs over the last 12 months. We expect this performance to continue as we deliver on our 20 28 growth outlook and are committed to remain disciplined on capital allocation as we diligence new yields for accretive per share growth and deliver sustainable returns for our shareholders.

Speaker 3

Over to you,

Speaker 2

James. Thank you, Ebrahim. The open ended optionality embedded in the royalty streaming assets is crucial to the value proposition of our business and well exemplified by the exploration success announced by Westgold for Beta Hunt, where we hold both a 3.5% GR royalty and a 1.5% net smelter return royalty. Beta Hunt is an underground mine in Australia with 4 ore bodies across a 7 kilometer footprint, posting approximately 1,600,000 ounces of measured and indicated resources and 1,100,000 ounces of inferred. The main ore source is the Western Flanks deposits.

Speaker 2

Mine is currently undergoing an expansion to consistently deliver 2,000,000 tonnes per annum of ore, which is expected to be completed in the first half of twenty twenty five and support production growth of Bieder Hunt over the medium term. Beta Hunt's new operator West Gold has recently announced a significant new discovery known as the Fletcher Zone. The Fletcher Zone is located 300 meters to the west of Western Flanks and is interpreted as a parallel structure to this primary ore source. Successful drilling has resulted in Westgold declaring an inaugural exploration target under the Jolt code for the Fletcher zone ranging from 23000000 to 27000000 tonnes at a grade of 2.1000000 to 2.5000000 tons gold and containing 1,600,000 to 2,100,000 ounces of gold. Clearly, this is a substantial discovery, which could nearly double the current resource base of Beta Hunt at a very similar grade.

Speaker 2

Exploration drilling is ongoing and Westgold is also advancing decline development from the Western Flanks to the Fletcher zone to support a potential new mining front. We look forward to the continued development of the Fletcher zone, which is a prime example of the strength of the streaming and royalty business model to deliver substantial additional gold at no additional cost to our shareholders. Over to you, Sheldon.

Speaker 1

Thank you, James. With record production, record revenue and most importantly, record operating cash flow per share, we are very pleased to present these 3rd quarter results to our shareholders. We will continue Triple Flag's track record of accretive growth. We have available capital of nearly $690,000,000 a broad base of 2.35 assets, a strong organic growth profile and our corporate development team remains busy and focused on adding additional assets to the portfolio. I want to stress our alignment with shareholders.

Speaker 1

The Board and the management team are large shareholders and we are completely focused on shareholder value. We are looking forward to what 2025 brings for Triple Flag and all its shareholders. Jeremy, please open the line for questions.

Operator

We do have our first question. We do have our first question, sorry. And I apologize, I was not able to pick up your name in the recording, but your line is now open.

Speaker 4

Hello, is that me?

Operator

Yes.

Speaker 4

Okay. Well, it's Tanya Jakusconek from Scotiabank. Good morning, guys, and thank you so much for taking my question. Just wanted to come back and circle in the deal pipeline. I know I asked this every quarter, but we have a gold price that is quite volatile and moving in both directions.

Speaker 4

And just wanted to look and ask what the opportunities look like for you. And right now, like we had last talked last quarter about $100,000,000 to $300,000,000 range. And we had talked about mostly focused on the funding for new projects. But maybe someone can give me some color on what you're seeing today and if anything's changed? Thank you.

Speaker 1

Yes. Thanks, Tanya. This is Sheldon speaking. I'll respond to that. It remains a strong pipeline and that $100,000,000 to $300,000,000 I think remains in play.

Speaker 1

There's also some smaller transactions I think that we're looking at. We announced the Allied Gold transaction on the last quarter and that was just a little bit over $50,000,000 So I could see there being a transaction that's in that range as well. But the pipeline is deep. In terms of development, it remains that there's a pretty good proportion of the pipeline remains in the development side. There's also operating cash flow possibilities out there as well, primarily in the gold and silver space.

Speaker 1

I don't know if that helps or not.

Speaker 4

It does, Sheldon, and thanks for that. And maybe are these simple royalties and or streams or do we still have the complexity of having to look at maybe also providing debt or equity exposure as well. Are those still how we should be thinking about some of these transactions?

Speaker 1

Yes, you should be thinking about traditional royalties and streams, Tania. We really don't want to go down the debt and equity route. It's just not our business model and I don't think it's what our shareholders are looking to us to provide our counterparties.

Speaker 4

And then maybe from a geopolitical standpoint, your recent ones have been in Africa. So I'm just kind of wondering if you have a focus to come back to more stable jurisdictions or how are you thinking about your portfolio there in terms of geopolitical risk on future transactions?

Speaker 1

Yes, for sure. We don't actually start with the we're targeting a certain jurisdiction. It's more like you're looking for good assets, a good way to deploy capital. And then part of that determination involves, of course, a determination of the risk of the jurisdiction that you're investing in. We're quite happy with that Allied transaction and quite comfortable with the jurisdiction.

Speaker 1

That said, it's not like we're targeting Africa per se for our new deployment possibilities. I'm thinking through the pipeline, it's pretty varied where it is. Probably the biggest focus there is Latin America. And again, it's always an assessment of what the risks are as a whole. What I'll come back to though is when I look at the portfolio as a whole, we really are centered in Australia is our single biggest concentration and primarily like mining friendly jurisdictions in the Americas as well.

Speaker 1

And so I don't see that changing.

Speaker 4

Okay. So would you say a lot of your and maybe I misunderstood this, but you're seeing a lot of opportunities in Latin America at this point? Or did I misunderstand that?

Speaker 1

If I had to say a single jurisdiction that most of our pipeline is in, it's in Latin America, but there are opportunities that are outside of Latin America as well.

Speaker 4

Okay. All right. I don't want to take up all the time, but thank you so much for helping me on this understanding this. Thank you.

Speaker 2

Thanks, Dania.

Operator

Thanks, Dania. All right. Our next question comes from Derek Ma from TD Cowen. Please go ahead.

Speaker 5

Thank you for taking my question. In terms of the evolution of deal mechanics and emerging themes, are there certain things that counterparties are looking for when you're looking in the deal market right now in terms of potential stream opportunities?

Speaker 1

Yes. Hi, Derek. I don't think there's anything that's really a sea change of difference from before. I mean, we're always trying to keep our exposure to the whole project, to extend the life of mine. Counterparties are, of course, cognizant of doing a deal that works for them and their shareholders as well.

Speaker 1

But I wouldn't say that there's any real sea change difference from when we started in 2016 through today. In some ways, the streaming and royalty model has just gotten more accepted over the years. I think everyone that goes and looks to finance a project, probably well, certainly, they're considering a stream and I think I'm actually quite pleased with how many times the stream is part of that financing package.

Speaker 5

Okay. That makes sense. And in terms of alternative financing, we've seen a number of gold prepay arrangements being completed in the last 12 months or so. How did gold prepay compete with streams and does that essentially erode the opportunity set for streaming companies?

Speaker 1

I don't think so. I think it's actually part of the total capital picture that companies are looking at. And if someone has a prepay and it sits alongside a stream that would be provided by ourselves, that could actually be for our benefit as well. In terms of there's some really fundamental differences between a prepay and a stream, right? It's but part of that is we actually finance over the entire life of mine.

Speaker 1

And I think that can be really attracted to counterparties. We often we also share the production risk, which a prepaid just doesn't do. And I think there's some real advantages to the stream financing for operators. But again, I think that a lot of them are looking to put together a total mix. And kind of as alluded to on the prior question, there can be equity provided by other sources, there can be debt provided from other sources.

Speaker 1

And if there's some prepay provided from other sources, I think that could also work.

Speaker 5

You said debt and equity are not really what you guys look at as part of the core part of the business. Are prepays something that you would look at more going forward?

Speaker 1

We've gone there in the past. I mean, it's not that we've ruled it out. But again, what I really want to offer our shareholders is life of mine exposure. A prepay isn't life of mine exposure. So that's never going to be the focus of our business or quite frankly the focus of any one financing.

Speaker 5

Great. Thank you.

Speaker 2

Thank you.

Operator

All right. I'll give it just a few more seconds to see if anybody else queues up. It does look like that is all the questions we have today. So I'll turn it back over to Sheldon Van Der Quoi and the team for closing remarks.

Speaker 1

Yes. Thank you, Jeremy, and thanks, everyone. I don't have any more closing remarks, but it's been a great quarter. Looking forward to what the end of the year brings and then 2025. I hope everyone has a great day.

Speaker 1

Thank you.

Operator

Thank you. That does conclude today's presentation. Have a pleasant day.

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Earnings Conference Call
Triple Flag Precious Metals Q3 2024
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