Triple Flag Precious Metals Corp. Q3 FY2024 Earnings Call

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 session. As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Sheldon Vanderkooy, CEO. Please go ahead.

Thank you, Jeremy. Good morning everyone, and thank you for joining us to discuss Triple Flag's 2024 Third Quarter Results. Today, I'm joined by our Chief Financial Officer, Eban Bari; 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. We now expect to achieve the top half of our guidance range. The high-grade open pit material from Northparkes continues to be a key part of the 2024 story as Northparkes 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. The streaming model is working as it should for the benefit of our shareholders. Our portfolio has also achieved several milestones over the past three months. These include the following: first, Cerro Lindo delivered robust 2024 production year-over-year. Second, Orla Mining increased its production guidance for Camino Rojo for the second time this year. Third, Montage Gold fully permitted and financed the Koné 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. Triple Flag acquired its royalties on Camino Rojo, Koné and Beta Hunt through the Maverix transaction in 2023, which continues to pay dividends for Triple Flag shareholders. Towards the end of the third quarter, Triple Flag was added to the S&P/TSX Composite Index, which brings exposure to a broader investor base as well as greater liquidity and 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 Eban to discuss our financial results for the third quarter of 2024.

Thank you, Sheldon. As noted we have 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. We exited the quarter with a small net debt position of only $11 million, following third quarter drawdowns on the credit facility of over $60 million for the acquisition of the new streams with Allied Gold and an additional royalty on the Tamarack project. This clearly demonstrates the robust cash flows generated by the Triple Flag business. Our cash flow outlook combined with nearly $690 million 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 three key aspects of our investment thesis, namely asset diversification, precious metals focused and a portfolio which derives roughly 80% of its revenues from Australia and the America. Cerro Lindo and Northparkes continue to be the two 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. 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 profile 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 2028 growth outlook and are committed to remain disciplined on capital allocation as we diligence in yields for accretive per share growth and deliver sustainable returns for our shareholders. Over to you, James.

Thank you, Eban. 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's royalty. Beta Hunt is an underground mine in Australia with four ore bodies across the 7-kilometer footprint, posting approximately 1.6 million ounces of measured and indicated resources and 1.1 million ounces of inferred. The main ore source is the Western Flanks deposits. The mine is currently undergoing an expansion to consistently deliver 2 million tonnes per annum of ore, which is expected to be completed in the first half of 2025 and support production growth at Beta Hunt over the medium term. Beta Hunt's new operator Westgold 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 dual code, the Fletcher Zone ranging from 23 million to 27 million tonnes at a grade of 2.1 grams to 2.5 grams per tonne gold and containing 1.6 million to 2.1 million ounces of gold. Clearly, this is a substantial discovery, which could nearly double the current resource base at Beta Hunt, at a very similar grade. 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 Fletcher Zone, which is a prime example of the strength of the streaming and royalty business model to deliver substantial additional gold and no additional cost to our shareholders. Over to you, Sheldon.

Thank you, James. With record production, record revenue, and most importantly, record operating cash flow per share, we are very pleased to present these third quarter results to our shareholders. We will continue Triple Flag's track record of accretive growth. We have available capital of nearly $690 million, a broad base of 235 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. 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.

We have our first question. I apologize, I couldn't catch your name in the recording. Your line is now open.

It's Tanya Jakusconek from Scotiabank. Good morning everyone, and thank you for taking my question. I wanted to revisit the deal type line. I know I ask this every quarter, but with the gold price being quite volatile and fluctuating, I'm curious about the opportunities available to you. Previously, we discussed a range of $100 million to $300 million, primarily focused on funding new projects. Can someone provide an update on what you're seeing today and if there have been any changes? Thank you.

Yes. Thanks, Tanya. This is Sheldon speaking. I'll respond to that. It remains a strong pipeline. And that $100 million to $300 million, I think remains in play. 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 million. So I could see there being a transaction that's in that range as well. The pipeline's deep. In terms of development, it remains that there's a pretty good proportion of the pipeline remains on the development side. There is also operating cash flow possibilities out there as well, primarily in the gold and silver space. I don't know if that helps or not.

Yes. It does, Sheldon. 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?

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

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?

Yes, for sure. We don't actually start with the – we are 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, the determination of the risk of the jurisdiction that you're investing in. We are quite happy with that Allied transaction and quite comfortable with the jurisdiction. 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 is always an assessment of what the risks are as a whole. I'll come back to, though is when I look at the portfolio as a whole, we really are centered in Australia. Australia is our single biggest concentration and primarily like mining-friendly jurisdictions in the Americas as well. And so I don't see that changing.

Okay. Would you say that you are currently seeing many opportunities in Latin America, or did I misunderstand that?

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

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

Thanks, Tanya.

Our next question comes from Derick Ma from TD Cowen. Please go ahead.

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 at the deal market right now in terms of potential stream opportunities?

Yes, Derick, I don't think there's anything significantly different from before. We're consistently working to manage our exposure to the entire project to prolong the life of the mine. Counterparties are certainly aware of the need to make deals that benefit them and their shareholders as well. However, I wouldn't say there's any major change from when we started in 2016 to now. In some respects, the streaming and royalty model has become more accepted over the years. I believe that anyone looking to finance a project is considering a stream, and I'm quite pleased with how frequently the stream is included in those financing packages.

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 do gold prepay compete with streams? And does that potentially erode the opportunity set for streaming companies?

I don't believe that's the case. I think it actually forms part of the overall capital landscape that companies are evaluating. If someone has a prepay that accompanies a stream we provide, it could be advantageous for us too. There are some fundamental distinctions between a prepay and a stream. One aspect is that we finance throughout the entire life of the mine, which can be very appealing to counterparties. Additionally, we share production risk, which doesn't happen with a prepay. There are significant benefits to stream financing for operators. However, many are looking to create a comprehensive package. As mentioned earlier, there may be equity, debt, or prepay contributions from various sources, and that can also be effective.

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

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 it's never going to be the focus of our business or, quite frankly, the focus of any one financing.

Great. Thank you.

Thank you.

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

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

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