OceanFirst Financial Q4 2024 Earnings Call Transcript

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February 20, 2025

There are 7 speakers on the call.

Operator

My name is Karen and I will be your conference operator today. At this time, I would like to welcome everyone to the Triple Flag Precious Metals Q4 twenty twenty four Results Conference Call. All lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask questions.

Operator

I will now turn the call over to Sheldon Van der Kooi, CEO. Please go ahead.

Speaker 1

Thank you, Karen. Good morning, everyone, and thank you for joining us to discuss TripleFlag's fourth quarter and full year twenty twenty four results. Today, I'm joined by our CFO, Ivan Bari and our Chief Operating Officer, James Dendle. Triple flag had a fantastic year in 2024. The business delivered another strong performance during the fourth quarter resulting in record performance for the full year of 2024.

Speaker 1

This includes record GEOs of 113,000 ounces. That's a result that is in the upper half of the guidance range we issued at the beginning of the year and represents our eighth consecutive year of GEO growth. And while record GEOs are great, what really matters for shareholders is our annual operating cash flow of $214,000,000 demonstrating our ability to directly realize higher cash flows due to the rising metal price environment. We are on track to deliver another great year in 2025 with GEO guidance range of 105,000 to 115,000 ounces. Notably, the high grade E31 open pit deposits at North Parks, which were a core contributor to our performance in 2024, will continue to be processed during the upcoming year.

Speaker 1

Looking further ahead, the next stage of high grade gold ore from North Parks is also advancing to production. Access to the first sub level at E48 is substantially complete and commissioning is expected in the third quarter of twenty twenty five. In the fourth quarter, we were also pleased to announce the $28,000,000 acquisition of the Trey Corbatis royalty, reinvesting the cash flows we generated into further streams and royalties, which will benefit our shareholders for decades to come. This gives our shareholders exposure to near term cash flow from a large well capitalized mining project operated by Zae Jin with a long life and significant exploration potential. Our portfolio provides top tier precious metals exposure.

Speaker 1

We are proud of what our operators have achieved in 2024. These achievements include GEOs at Cerro Lindo increasing 24% year over year due to higher grades and enhanced plant efficiency. In addition, Camino Rojo achieved record production of 137,000 ounces representing a 19% beat on initial guidance. And on the development side, the new team at Montage Gold delivered a fully permitted and financed project at KONE in less than a year with construction now well underway. Overall, Triple Flag is well positioned to deliver long term value for our shareholders from a diversified mix of producing and development assets and we are poised for further growth with an organic growth profile of 135,000 to 145,000 GEOs in 2029.

Speaker 1

As I noted earlier, record GEOs are great, but what really matters is cash flow for shareholders on a per share basis. The single most important metric I focus on is cash flow per share, which we have increased through the course of 2024 both consistently and rapidly as we have benefited from record production and a rising gold and silver price environment. This is the way it's supposed to work. This is exactly what we have done. There is still more to come.

Speaker 1

The average gold price in 2024 was less than $2,400 an ounce, which is $500 an ounce lower than spot prices. At spot prices, our year over year cash flows will continue to increase. I will now turn it over to Eban to discuss our financials for Q4 and the full year 2024.

Speaker 2

Thank you, Sheldon. As you can see, 2024 was a record across all financial metrics due to strong volumes and precious metals prices, as well as continuing strong margins. These margins drive a high conversion of top line revenue into cash flow available to shareholders, a key benefit of the royalty and straining model. Strong cash flow generation will continue to support all of our capital allocation decisions, including shareholder returns and external growth opportunities. On shareholder returns, we paid out over $43,000,000 in dividends to shareholders in 2024, which reflects a 5% increase in the middle of the year, our third consecutive increase since our IPO.

Speaker 2

In addition to our progressively growing dividend, we also returned nearly $9,000,000 to shareholders via share buybacks in 2024 and expect to remain active on our NCIB opportunistically. On external growth, we reinvested the cash flow generated in 2024 into streams and royalties, including the Agbaou and Banco streams, as well as the Tres Quebras royalty. These assets either generate cash flow today or in the near term, offer significant exploration potential and are operated by strong management teams and represent accretive additions to our portfolio. Moving forward to 2025 guidance, as Sheldon noted, we expect GEOs of between 220,000 ounces for the year, which we expect to be essentially 100% derived from precious metals, namely gold and silver. This is driven by our expectation of higher gold grade open pit material at E31 and deposits continuing to contribute to deliveries from North Parks as well as solid performance from Saralindo.

Speaker 2

Depletion is expected to be between $70,000,000 and $80,000,000 same as in the prior year, while G and A will be relatively consistent between $24,000,000 and $25,000,000 Finally, our Australian cash tax rate for Australian royalties will be approximately 25%, consistent with the 24% that was realized in 2024. CruiseFlag has delivered a consistent track record of GEOs growth since inception, achieving a compound annual growth rate of approximately 20% since 2017. Beyond the guidance we set for 2025, we see further growth to 135,000 to 145,000 GEOs in 2029. Midpoint to midpoint, this represents ounce growth of over 25% from 2025, driven by our operating partners pursuing their own organic growth through both brownfield development and advanced projects such as KONE, SK Creek and Feis Guebras. We also continue to have substantial firepower for deals that would be additive to this growth profile with more than $700,000,000 available to deploy for new transactions that are accretive, fit with our strategy and deliver value throughout the cycle.

Speaker 2

I'll now pass it on to James to discuss that Tez Kebradas acquisition.

Speaker 3

Thank you, Ivan. We are pleased to announce the acquisition of a 0.5% gross overriding royalty on Tres Pilaras, the $28,000,000 this past December, which is expected to close in the first quarter. This asset adds near to revenue from a high grade lithium brine asset with multi decade reserve life and attractive cost profile as brine operations tend to be in the lowest cost quartile of the lithium cost curve, expansion optionality and significant resource upside. Notably, our royalty has full coverage of all the mineral properties that comprise the project. At steady state, TripleFlag expects to receive royalty revenue from Phase one, Prescovradas, to equate to approximately 1,000 GEOs per year, representing production capacity of 20,000 tonnes per year of battery grade lithium carbonates.

Speaker 3

Lejuez is aiming to be a global lithium producer having entered the lithium market in 2021 and acquiring its 100% interest in Trezcovadas in early twenty twenty two to $770,000,000 As highlighted by Rio Tinto's six point seven billion dollars acquisition of Arcadia, this asset is located in the right area for low cost, long term lithium prime production. In terms of expansion optionality, CEGENE is contemplating a potential expansion of nameplate production from a range of 40,000 to 60,000 tonnes of lithium carbonate per year referred to as Phase two. If advanced, this would meaningfully increase the steady state one thousand year profile I mentioned earlier. Overall, the acquisition of Transcribadas Royalty represents a countercyclical opportunity to deploy capital into a crucial commodity and gain exposure to a large well capitalized mining project, a long life and significant upside potential. I'll now pass back to Sheldon for the future of the formal part of the presentation.

Speaker 1

Thank you, James. We have a strong and positive outlook in front of us in 2025. We have a growing cash flow per share profile that will allow us to increase our dividend, buyback shares opportunistically and reinvest in the deals to drive compounding cash flow growth. We have a diversified portfolio that provides us with top tier precious metals exposure. We have forecast organic production growth of over 25% by the end of this decade.

Speaker 1

We have a debt free balance sheet with over $700,000,000 of debt capacity available to finance further deals. We have full alignment with shareholders as we are significant shareholders ourselves and ultimately our strategy that has made us successful provided us with a strong track record is not going to change as we look ahead. Here's what we're going to do. We're going to focus on reinvesting cash flows to deliver compounding growth per share. We're going to focus on acquiring good assets in good regions with good operating partners.

Speaker 1

And we're going to stay focused on generating cash returns for shareholders. Karen, please open the floor to questions.

Operator

Your first question comes from Lawson Winder from Bank of America Securities. Your line is open.

Speaker 4

Thank you, operator and hello gentlemen. Good morning. Thank you for the update. I wanted to, ask about a few things. So, first off, on the Benicro and Agbaal streams, there was a proportion of revenue in 2024 that was a true up.

Speaker 4

And so just trying to think about what was like a run rate number in 2024 for those two assets, ex the true up? And are there any additional true ups still coming in 2025 for those?

Speaker 3

This is James. Thanks for the question. Yeah, the true ups are relatively small contribution and obviously we don't provide asset specific guidance. So I think you can think about it from the point of view of Allied's guidance. And there'll be a sort of assuming that short of the minimums, which their guidance would indicate that they are marginally there'd be sort of a lagging true up every year.

Speaker 3

So when you sort of smooth that out over the period of minimum deliveries, it will kind of blend through to being not dissimilar to the production rate that mine is achieving. And as a reminder, those true ups are settled by the January the following calendar year. So it basically happens in Q1. Obviously, there's a bit of timing with deliveries from from the prior year in any case.

Speaker 4

Okay. Yeah. Thanks for the reminder. I also wanted to ask about a privately held asset that you guys have. Just trying to get some clarity on whether or not we should be thinking about including it in our long term projections, particularly thinking about your long term guidance up to 2029.

Speaker 4

And that's El Machito. You haven't received deliveries from that asset for a couple of quarters, maybe three or two point five. Is that asset expected to restart at some point?

Speaker 1

Yeah. Hi, Lawson. I'll take that. Yeah. That's a smaller asset that we acquired as part of the Mavericks portfolio.

Speaker 1

It's a privately held zinc mine. It's been in operation for decades and, they got hit with a few, you know, higher costs and the zinc price ticked down last year. And, but they've actually restarted, deliveries. They're we have really good dialogue with the operator. It's not a large asset in our portfolio and, it's not something that we need or count on to hit either our 2025 guidance or our 2028 or 2029 numbers.

Speaker 1

So I would say it's kind of like upside from here. But, but you know, the mine is operating. It's a really good team there. And, we're working closely with the operator. So I don't see that as an issue.

Speaker 5

And Lawson, to be clear, we have received deliveries on that in Q3 and Q4 of twenty twenty

Speaker 4

four. Great. Thank you for confirming that. And then just getting back to one of your bigger assets, just thinking about Bruticas, so there was the disruption from the artisanal miners at that asset. Do you have any sort of update or insight as to what's happening on the ground today?

Speaker 4

Like is that an issue that's now resolved and we can kind of forget about that going forward or there's still some potential risk that we should think about with that asset in terms of forecasting revenues for the coming years?

Speaker 1

Hey, Lawson. It's Sheldon here. I'll answer this one as well. You know, I think the ZayJin team has done a really good job on the ground dealing with a difficult situation there. And, you know, this is actually this is very important.

Speaker 1

It's not artisanal miners we're dealing with. These are illegal, miners. It's more criminal, syndicates and gangs and, and that's a situation that the Zae Jin team is managing. The mine is producing right now. Last year was a record and if you look at what Zae Jin is projecting for the future, they're continuing to invest money and expanding that asset.

Speaker 1

We feel really good about the asset, but this situation is probably not going to be one that's going to resolve quickly. It's probably going to be something that this asset lives with for a while. But Zaijin has done a very good job of operating through the, through the issues with the, the illegal miners.

Speaker 4

Okay. Fantastic. And I could ask just one more on the project pipeline or the sort of the deal pipeline. What, what sort of transaction sizes are you seeing? Is it more focused on precious metals?

Speaker 4

Are you seeing opportunities in non precious metals like the lithium opportunity you guys took advantage of last quarter?

Speaker 1

Yes. No real change from prior quarters we would have said. I mean I think our sweet spot is still the $100,000,000 to $300,000,000 range. It's a really robust pipeline right now. There's a lot of good opportunities that we're looking at.

Speaker 1

The lithium, you know, I love that lithium deal we just did. Part of it is like Zayden is an operator, a large well capitalized mine coming on in Argentina. And I think the timing and the price cycle is, looks good for lithium. It's also a very small size and it doesn't change our focus from a precious metals focused portfolio. I think the next deal we'll have, have announced will be a gold and silver deal in in The Americas.

Speaker 1

So that'll be kind of squarely in the in the strike zone. We are seeing some smaller deals as well out there. So it's probably a pretty healthy pipeline of under $100,000,000 to kind of the $100,000,000 to $300,000,000 and actually a few, you know, larger ones that are probably lower probability, but you know, we'll see what we can do. In terms of precious versus non precious the weighting is definitely towards the precious. There are some non precious opportunities out there.

Speaker 1

We've always been open that we'd be open to looking at some non precious exposure. Right now we have 100% of our revenues from precious metals. So I think there's definitely some room in there for the portfolio. But I never want to take the portfolio away from being seen as really a precious metals vehicle like that. You know, when people look at Triple Flag, it's right in our name and we're not changing that.

Speaker 4

Fantastic. Thank you very much guys.

Speaker 1

Thanks Lawson.

Operator

The next question comes from the participant from Scotiabank. Your line is open.

Speaker 6

Good morning, everyone. Morning. I just wanted to follow-up on Lawson's questions on the M and A pipeline. You mentioned the size, the sweet spot while you're seeing $100,000,000 to 300,000,000 are we looking at producing, assets in that sort of range? Or is this still like development coming in in, like, five years' time?

Speaker 6

Just wondering your mix of what you're seeing, is it going to be adding immediately to the pipeline or beyond 2,030?

Speaker 1

So the things we're looking at in that pipeline that I'm referencing, there's actually a mix of development assets and producing assets. It's a it's really a matter of what fish we get into the boats.

Speaker 6

Okay. And you mentioned a couple of bigger ones greater than 300,000,000. You know, I'm hearing one big one down in South America as well. Just wondering if, you're open to syndication on that one or how big of an asset could you do a $700,000,000, transaction? Just wondering how big you would go And would you syndicate?

Speaker 1

So, openness to syndication, yes. But it would probably come down to a concentration. I'm talking completely in the abstract here and, and not with respect to any particular asset. But certainly open to syndication if there would be some kind of concentration in our portfolio that we wouldn't want to have over concentrated. You know, whether that be a commodity or a jurisdiction or development or something like that.

Speaker 1

You know, so we are open in concept of syndication, but, we're not necessarily wanting to go there. Upper end of the range, I I don't know if I wanna give you an upper end of the range, but we could finance, quite quite a bit, right right now. And and I would we've always had a view that we would be competing for even the largest deals in the sector and that's been the case since even before we were public and that has not changed.

Speaker 6

Okay. And what about corporate transactions? I mean, I say that from just, you know, speaking to generalists, you know, everyone wants to talk about Wheaton and Franco and then getting down to the smaller ones, it gets a little bit hard for some of these generalists to invest. How do you think about corporate transactions?

Speaker 1

Yeah. I mean, I guess we're a little bit unique in that we've had the kind of the more recent successful corporate transaction. You know, I think 2024 has been a fantastic year for some of the assets we picked up through the Mavericks transaction, including like KONE, SKA Creek, Beyond and others. So we are open to it but you just really have to find, you have to find the value there and you have to find a partner that's willing to transact at a price where you both agree you're seeing good value. So we found that on Mavericks.

Speaker 1

We're open to it in other cases but you know, it's, corporate M and A, is not easy necessarily. We're open to it, but you just kind of need to find something where the all the gates line up.

Speaker 6

Okay. And then maybe, finally, just on your 700,000,000, available and also your your pay down your debt, so can you grab on that with zero debt? How do we think about the dividend? I think that comes up for a review, I think with Q2 or thereabouts. How are we thinking about the dividend?

Speaker 1

Yeah. I think we've I've been quite public that I see us with a progressive dividend policy. We've increased our dividend every year since we've been public. We, I would look to be seen to increase that. Of course, I suffer for the board discretion, but no, no, no changes anticipated on that.

Speaker 1

So I would say you should probably expect us to continue our policy of, or practice of increasing the dividend annually.

Speaker 6

And as I think about, you know, your investment in the business and I think about your dividend payout, how should I be thinking about what's the minimum cash balance you would keep on your balance sheet to operate your business? I know it's going to be very low. I just wanna try and see how much leverage I have for deals plus, you know, increased dividend.

Speaker 1

Oh, yeah. I mean, the actual amount of cash you need to run this business is very, very low. We tend to keep like you know 10,000,000 on but you know we could we could run this business with $5,000,000 of cash in the system. It's just these are just very efficient business models and the cash flow tends to come in pretty consistently throughout the year. So, you know, if you're modeling, I would use somewhere in the $5,000,000 to $10,000,000 range there.

Speaker 6

Yeah. Just trying to see Sheldon what you could do from a dividend perspective plus transactions and kind of still, you know, keep that minimum balance of 10 and up. Okay. No, I really appreciate those insights. I'll pass it on to someone else.

Speaker 6

Thank you so much for taking my questions.

Speaker 1

Thanks, Tanya.

Operator

Your last question comes from Derek Ma from TD Cowen. Your line is open.

Speaker 5

Thank you very much. At North Park, early days are hot, but is Major Tom a situation where exploration success for evolution might actually displace what is otherwise higher grade gold tonnage and that would subject to your stream?

Speaker 1

Derek, I don't see any risk of Major Tom, displacing anything that, you know, to our disadvantage. Actually, Major Tom is a really positive development for Triple Flag. That's a new discovery on the property right in the middle of the mine site. So, no, I don't see any downside exposure to Major Tom. I see it as all outside for Triple Flag.

Speaker 3

Okay. And then on

Speaker 5

the $35,000,000 precious metals stream you mentioned in your MD and A to support a brownfield restart in Peru. Was this a bilateral situation? And are there other opportunities like this supporting restarts, given the elevated precious metal prices?

Speaker 1

Yes. That is a bilateral situation. And you know I'm hoping that that will close very shortly and we can talk a little more freely about that but so it's kind of right now it's on a no names basis but as you pointed out we disclosed it in our MD and A. It is bilateral it's exactly what we're supposed to be doing from a corporate development opportunity perspective is we're out there talking to people using our networks. It's a really nice opportunity.

Speaker 1

I'm really looking forward to talking to the market more fully on it. A really good team, it's a nice property, it's brownfields, it's a restart and it's precious metals in Latin America. So, you know, kind of right in the middle of our Venn diagram.

Speaker 3

Okay, great. Thanks.

Operator

That concludes the Q and A session. I will turn the call over to Sheldon Van der Kooij, CEO for closing remarks.

Speaker 1

Yes, I just want to thank everyone for participating. Thank our shareholders. We're very excited about what we've accomplished in 2024 and we're even more excited about 2025. I don't think we've ever been as well positioned as we have been right now. The cash flows are very robust.

Speaker 1

There's a great deal pipeline. Very much looking forward to the upcoming year. Thanks everyone for participating.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

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