Earnings Call Transcript - TFPM Q3 2025

Operator, Operator

Good morning, and thank you for joining us. My name is John, and I will be your conference operator today. I would like to welcome everyone to the Triple Flag Precious Metals Third Quarter 2025 Conference Call. I will now turn the conference over to Sheldon Vanderkooy, CEO. Please proceed.

Sheldon Vanderkooy, CEO

Thanks, John. Good morning, everyone, and thank you for joining us to discuss Triple Flag's third quarter results. Today, I am joined by our CFO, Eban Bari; and our Chief Operating Officer, James Dendle. 2025 has been an exceptional year so far, and Triple Flag has achieved another record quarter in Q3. We recorded 27,000 GEOs in the quarter, which drove record adjusted EBITDA of $79 million and record operating cash flow per share of USD 0.39. Shareholders are directly benefiting from the higher gold prices through higher cash flow per share. We should continue to benefit in Q4 and beyond as well as current gold prices are well in excess of the average gold price realized in Q3. We expect to achieve 2025 GEOs between the midpoint and the high end of our 2025 guidance range. I am very pleased with the additions we have made to the portfolio year-to-date. Year-to-date, Triple Flag has now deployed over $350 million of capital over 5 investments. In H1, we announced our investments in the Tres Quebradas lithium mine in Argentina, the Arcata silver mine in Peru and an additional interest in the Johnson Camp copper mine in Arizona, all of which have now started production either in line or ahead of our investment case. Early in the third quarter, we completed our acquisition of a 1% NSR royalty on the Arthur project in Nevada operated by AngloGold Ashanti. And most recently, we have acquired a royalty package on Pan American's producing Minera Florida gold mine in Chile for $23 million. James will provide further details on Minera Florida later in the presentation. This is exactly the sort of royalty that drives shareholder value over time in the royalty sector as we have open-ended exposure to top line revenues and resource expansion over time. Together, our investments year-to-date are providing near-term increasing cash flows as well as longer-dated optionality. They are also located in the right jurisdictions. The bulk of the value is in the Western United States and the remainder is in Chile, Peru and Argentina. I will now hand over to Eban to discuss our financials for the third quarter of 2025.

Eban Bari, CFO

Thank you, Sheldon. As mentioned, we had an excellent third quarter with just over 27,000 GEOs. This positions Triple Flag to achieve between the midpoint and high end of our 2025 GEOs guidance. The strong volumes in Q3 occurred alongside high precious metals prices, which reached a record quarterly average of nearly $3,500 per ounce for gold and nearly $40 per ounce for silver. We are pleased to report that our operating cash flow per share, the most crucial metric for us, has increased by over 25% year-over-year. Additionally, we exited the quarter with essentially zero net debt, despite significant capital deployment during Q3 for the acquisition of the Arthur Gold royalty and the Minera Florida royalty. Currently, we are in a net cash position. Our solid balance sheet, record operating cash flow, and total liquidity of nearly $1 billion give us the capital to invest in accretive opportunities for future growth for our shareholders. It also enables us to continue providing superior returns to shareholders, and we're happy to declare a quarterly cash dividend of USD 0.0575 per share. Triple Flag is focused on top-tier precious metals assets, with nearly 90% of our revenue coming from mining-friendly jurisdictions in Australia and the Americas. Northparkes and Cerro Lindo remain our two largest revenue contributors in the third quarter, with Northparkes achieving another record quarter due to the processing of higher open pit grades from stockpiled ore. Our sales mix remains 100% from precious metals, with nearly three-quarters derived from gold. We do not expect this to change significantly, and it will continue to provide investors with exposure to the strong gold and silver price environment. I will now turn it over to James to discuss the producing Minera Florida gold mine in Chile.

James Dendle, COO

Thank you, Eban. Minera Florida is located approximately 75 kilometers southwest of Santiago in Chile and is owned and operated by Pan American Silver. It's an underground mine that produces gold and silver ore with a zinc concentrate byproduct. During the third quarter, we were pleased to acquire a package of 3 net smelter return royalties on Minera Florida, ranging from 0.8% to 1.5% for a total cash consideration of $23 million from a third party. Minera Florida has a long history of consistent performance, continuous operation and reserve replacement and has produced over 2.5 million ounces of gold and 14 million ounces of silver since commissioning in 1986. The mine has always operated with a relatively short reserve life. Over the last 20 years, the mine has had approximately 0.5 million ounces of gold in reserves at any one time, which equates to about 4 to 5 years of visible reserve life. Historic annual production at Minera Florida has ranged between 75,000 and 100,000 ounces of gold per annum. Driven by mill expansion potential to increase the nameplate capacity, Triple Flag expects GEOs for Minera Florida to increase to approximately 1,000 ounces by 2028. The exploration potential of this mine is significant. And given Minera Florida's impressive track record of reserve replacement since 1986, we see this asset continuing to perform for decades to come. I'll pass it back to Sheldon for closing remarks.

Sheldon Vanderkooy, CEO

Thank you, James. In closing, Triple Flag is performing very well and is positioned to continue this performance going forward. Our shareholders are benefiting from our strong current production and the increase in gold prices, which are translating into record cash flows per share. I am very pleased at our success in reinvesting those cash flows in further streams and royalties, which will benefit our shareholders for decades to come. There are a number of near-term catalysts across our portfolio. First, Johnson Camp mine, Tres Quebradas and Arcata have all recently started production and will continue to ramp up into 2026. Second, on the project front, economic studies for Arthur and Hope Bay are on track for completion in the first half of 2026, and we look forward to ongoing exploration updates on the Fletcher zone from Beta Hunt. And finally, the Koné project continues to make good progress, targeting production in 2027. That concludes our presentation. Operator, please open the floor to questions.

Operator, Operator

Our first question comes from Fahad Tariq with Jefferies.

Fahad Tariq, Analyst

Regarding the deal pipeline, could you elaborate on how the Minera Florida transaction was sourced? I understand it involved a third-party royalty from a family. Was there a specific process involved, or was it based on a preexisting relationship? Any additional details would be appreciated.

James Dendle, COO

Yes, I can take this. Yes, it was, I think, a fairly concentrated process. We developed a bit of a report with family over the course of negotiating the deal. And that was good because we actually were able to undertake a site visit. And very often, as you know, with these third-party royalty sales, you can't do that, whereas we actually have a team down in Chile earlier on in the year, spending a couple of days at site. So we had access to Pan American Silver in this instance and the whole mine sales team.

Fahad Tariq, Analyst

Okay. Great. Yes, that's helpful. And then maybe just switching gears to the ATO stream. It looks like there was an international arbitration that was started in early October. Can you maybe just give us an update on how the discussions are going with Step Gold? And what's Triple Flag's expectation for a potential resolution?

Sheldon Vanderkooy, CEO

Fahad, it's Sheldon. I'll take this one. We tried to be really transparent in the press release and give everyone direction on the legal proceedings we've started. I'm a little limited in what I can say, but I can provide some background and direction to you in the market. First of all, I'm going to start by saying we're just extremely confident in our legal position. We're owed about USD 10 million. STEP's market cap is a little over CAD 500 million. They have production, they have cash flow. They clearly have the ability to pay. We are in dialogue with Steppe's controlling shareholder. There is no doubt in my mind that they are building Phase 2. And the last thing I'd note is we're going to land in the top half of our guidance range even if we don't receive a single ounce from Steppe Gold here to the end of the year. I really can't go any further into how this is going to get resolved, but we are in discussions, and we are very confident in our legal position.

Fahad Tariq, Analyst

Okay, I have a follow-up question. Are you in discussions directly with Steppe Gold?

Sheldon Vanderkooy, CEO

I would take the largest shareholder as being in discussions with Steppe Gold.

Operator, Operator

Your next question comes from the line of Sam Overwater with Scotiabank.

Sam Overwater, Analyst

I have a question regarding the transaction opportunities. Last time we spoke, you mentioned you were considering opportunities between $100 million and $300 million. Can you provide more details on that? Specifically, in which geographies and jurisdictions are these opportunities located? What are the structures of these deals, including debt and equity streams? Are there any royalty opportunities? Additionally, could you elaborate on the purposes of the transactions, such as asset sales or construction funding?

Sheldon Vanderkooy, CEO

Yes, thank you, Sam. I appreciate that. I believe the opportunities remain primarily in the $100 million to $300 million range. We’ve engaged in smaller deals and will continue to consider those, and there are also larger opportunities available. Looking at our year-to-date activity, we've completed $350 million in deals, which encompasses a good mix of smaller royalties and the larger Arthur transaction, which was a corporate deal that helps us acquire quality assets at reasonable prices for our portfolio. The opportunity set includes a variety of streams and royalties and is focused on jurisdictions that would please investors, particularly traditional mining regions in the Americas. The reasons behind the use of proceeds are diverse. As you noted, there is a demand for capital across various needs, which presents us with opportunities to provide financing.

Sam Overwater, Analyst

Great. And then just on top of that as well, corporate transactions. How are you guys assessing corporate transactions relative to sort of other opportunities in the current landscape? Is there anything you're currently considering?

Sheldon Vanderkooy, CEO

Yes. I mean I don't view a big distinction between corporate transactions and other transactions. I mean we acquired that Arthur royalty. It was via an acquisition of Origin and then a spinout. The Maverix acquisition was a way to acquire a great portfolio at a reasonable price. So we're always looking for ways to add good assets to our portfolio at returns that are attractive and accretive to shareholder value.

Sam Overwater, Analyst

Great. And then lastly, does Triple Flag currently have like an equity portfolio to sell? Are you considering any sales in an equity portfolio or anything like that?

Sheldon Vanderkooy, CEO

No.

Operator, Operator

Your next question comes from the line of Brian MacArthur from Raymond James.

Brian MacArthur, Analyst

I was curious if you could provide some insight on Prieska and the current developments there. It appears that Orion has signed a term sheet with Glencore, but what steps need to be taken for you to advance this, aside from obtaining the necessary South African regulatory approvals?

James Dendle, COO

Brian, it's James. I'll pick that up. So as you'll recall, Prieska was always contemplated as a single integrated project comprising 2 zones, what they refer to as the Uppers, which is the upper remnant areas of the historical mine and the Deeps, which is the sort of untouched sulfide ore body. The Deeps is of great interest to us because it hosts the precious metals. It also has the exploration upside and it's the part of the ore body we're most focused on. The company through looking to stage their capital expenditures has disaggregated the project to the Uppers, which they'll develop first and the Deeps that they'll develop progressively thereafter. There is a dewatering component to that. And as you noted, they've received, I think, a very supportive nonbinding letter of intent from Glencore, which they're working through at the moment. So that is all very positive. Given our primary economic interest is in the Deeps, we will be evaluating the right but not obligation to fund the stream into the Deeps when they actually are at the stage to make a final investment decision on that project. So we expect the company to make an investment decision on the upper this year and an investment decision on the Deeps next year. So as a reminder, we have no obligation to fund the stream, but we like the asset. So it's a funding decision for Triple Flag in 2026.

Brian MacArthur, Analyst

But just to clarify, can you elaborate on whether they develop the upper section with the funds they have, allowing you to choose to wait before entering the lower section? Or is there a requirement to proceed once they decide on the upper section? I'm trying to understand if there is a definitive point in the contract that forces a decision, or if you have the flexibility to wait and see how the second part unfolds.

James Dendle, COO

Yes, we can wait until the second part is ready to go. The nice thing is that the company will be progressing with the dewatering of the Deeps while mining the Uppers, so that they continue to derisk and develop the project whilst we get the opportunity to wait to make the investment decision on the Deeps. So there's no drop dead in that sense. We just have the opportunity to wait a little longer. You'll recall we have a small royalty on the project as a whole. So when the upper start producing, obviously, the royalty will pay because that applies to both zones.

Operator, Operator

Our next question comes from Derick Ma with TD Cowen.

Derick Ma, Analyst

On the El Mochito stream disposal, you got a fair amount of consideration to perhaps a win-win situation for both parties. But could you discuss how the situation arose and how you evaluate these types of situations versus retaining optionality in the portfolio?

Sheldon Vanderkooy, CEO

Yes. Sure, Derick. It's Sheldon. I'll speak to that. El Mochito, it's a fairly small mine. It's based in Honduras. We acquired as part of the Maverix portfolio. It was undercapitalized and they were having difficulty servicing the stream as part of their operations. Eventually, what we did, and we're close to the operator. They're a private company, and we were looking for ways to get additional capital that was not our capital into that project so they could be in a position to start paying out on the stream. Basically, I think this is a win-win-win situation where we found the outside capital, they're bringing that in, and then we're structuring ourselves to come out on these terms. It's good value for us, and I think it allows them to move forward without the stream in place.

Derick Ma, Analyst

Okay. And how do you kind of evaluate these type of situations versus retaining optionality when you look across your portfolio when other opportunities come up like this?

Sheldon Vanderkooy, CEO

Every situation is different. I am very happy with the structure of this and the way it is being resolved. It is providing us with good value. It allows them to move forward. Generally, we do not look at selling streams, but this is essentially a structured sale of a stream based on an asset-by-asset basis.

Operator, Operator

Our next question comes from Cosmos Chiu with CIBC.

Cosmos Chiu, Analyst

Maybe my first question is on Minera Florida. James, you mentioned that you were on site. My understanding is that this past quarter or this past year, there's been some issues in terms of negative grade reconciliation, unplanned mine sequencing into lower-grade ore zones. I think you mentioned that as much as well in your guidance. You said, I think Minera Florida long term was capable of doing 75,000 to 100,000 ounces. This past year, 78,000 to 90,000. So the top end is lower. So I guess my question is, James, how much of that have you factored in into your valuation? And is it just really a one-off and it's really going to bounce back? Or how do you look at it?

James Dendle, COO

Yes, Carl, good question. The valuation and the production assumptions over a short period of time, of course, you consider what's actually happening on the short term as a guide for the long term. But the interesting thing is, as you know, about Minera Florida is there's a very long history of operations here. So we actually had access to the full history of production records that gave us great confidence in the forecast. And at the end of the day, quarterly variance in a gold mine is not a new thing. So for sure, there's quarterly variance on-month scale that exists, and I'm sure it will occur in the future. But in the long term, we think the mine will operate in accordance to how it's operated historically, which is in the range we stated.

Cosmos Chiu, Analyst

Maybe switching gears a little bit, bigger picture. Sheldon, as you mentioned, you reiterated in your release as well, 2029 guidance outlook. Outlook is you're still looking for 135,000 to 145,000 ounces GEOs. That's a very good increase from what level you're at today. Could you maybe summarize for us what goes into that thinking? What needs to come on for you to hit that growth into 2029?

James Dendle, COO

Sure, I can address that. We have several assets ramping up, including new ones. As Sheldon mentioned, the Arcata silver mine shipped concentrate for the first time this week and is expected to ramp up through 2026. Additionally, we are adding Minera Florida and seeing progress at Johnson Camp. Montage is developing the Koné project, which will also contribute to our outlook. We anticipate production increases from operating mines as well. Although Northparkes will have a lower year next year, we expect it to recover. We foresee incremental volume increases from other sites as well. Westgold has publicly committed to expanding Beta Hunt to 2 million tonnes per annum, which is on schedule. All of these contributions enhance our outlook, so it’s not just one asset driving the increase; rather, it’s a well-diversified portfolio of strong assets.

Cosmos Chiu, Analyst

Great. And then maybe one last question, the 2025 GEOs. The gold/silver ratio you've used is 85:1 in terms of the calculation of GEOs converting silver into gold. I just want to confirm, silver has actually outperformed a little bit compared to gold into 2025. That benefits Triple Flag. Am I correct in the sense that I think there's a good percentage of your revenue actually coming from silver. That's number one. Number two, it also benefits your GEO calculation, if I'm not mistaken, if you can confirm that as well. And then third, when do you consider, I guess, changing that ratio? Or I guess, it's not too late in 2025, it's not needed in 2025, but how do you consider that into 2026?

Sheldon Vanderkooy, CEO

It's Sheldon here. The current ratio is around 85:1, which is quite similar to where we are now. It tends to fluctuate and has varied throughout the year. Year-to-date, you're correct that a stronger silver price compared to gold benefits GEOs, and the reverse is true when the situation changes. Overall, we've faced some challenges with the average silver price due to the timing of its increase, which has affected us and our competitors. We typically account for these fluctuations and maintain a conservative approach when setting our guidance, which we have integrated into our production. Currently, everything is aligning well. Whenever we issue new guidance, we assess the current gold/silver ratio to ensure our projections are reasonable and conservative. When we prepare our guidance for 2026, we'll evaluate the circumstances at that time and adjust as necessary.

Cosmos Chiu, Analyst

Yes. Sounds like a good plan. And I guess the important part, Sheldon, as you mentioned, is that you're now aiming for the top end of guidance for 2024.

Sheldon Vanderkooy, CEO

That's right. Silver prices all the way through.

Cosmos Chiu, Analyst

Congrats on the solid Q3.

Operator, Operator

At this time, we have no further questions. I will now turn the call over to Sheldon Vanderkooy for closing remarks.

Sheldon Vanderkooy, CEO

Yes. Thanks, everyone. Q3 was another good quarter, and we're actually having just a great year in 2025. Really appreciate the support from all of our investors. Thank you all. Bye.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. We thank you for your participation. Have a pleasant day.