Triple Flag

This is an automatically generated transcript. Denver Gold Group cannot accept responsibility for mistakes, errors, omissions, or any action taken in reliance thereon. Use of this transcript is governed by Denver Gold Group’s Terms of Use.

, thanks everyone. Thank you for attending that, and I'd like to introduce our, our next, presenter and speaker for another fireside, chat Q&A. It's, Sheldon Vander Corey is CEO and director of Triple Flag, Precious Metals. welcome, Sheldon. Thank you, Ralph. All right, my pleasure, great to see you, yeah, you know, given this is, Part of the streaming model, you know, maybe I'm gonna start more focus on, you know, contract structures, deal flow is always topical in the, in the streaming space and the royalty space, and so that's kind of where I'm gonna take the line of questioning as again as the last presentation maybe leave about 3 to 4 minutes at at the end. I do wanna give you the opportunity, Sheldon, to maybe just at a high level introduce, the audience to your company, just a few points on, you know, where you are in sort of market capitalization. And some of the strategic priorities thanks Ralph. So we're a streaming and royalty company. We started the company in 2016. We went public in 2021, so we're relatively young. We're actually the fourth largest precious metals streaming and royalty company right now. We have a portfolio of about 240 assets. About 35 of those produce the cash flow, Tier One assets like North Parks, Fosterville, Beta Hunt, the Arthur Project, and really what we've looked to do is generate shareholder value by deploying our capital into streams and royalties into good assets run by good operators. And with a real focus on good jurisdictions, and I think we've had a pretty successful track record over over the years. I mean we have $1.8 billion of shareholder capital in the company and the market cap right now is about $7.5 billion and we paid out a few $100 million in dividends as well in the short history of the company. So we're kind of like a 4x return on capital invested. Great, great, thank you for that. Sheldon, the team has talked about the strike zone of of particular deals in the space being in that sort of $200 to $500 million dollar range, you know, typical on what we see sort of on some of the players that are smaller than yourselves and some of the players, that are bigger. can you talk a little bit about some of the transactions that we've seen in the sector? Where do you fit into that, and are you seeing, more of a blue ocean in terms of opportunities? Yeah, I like the blue ocean analogy. I mean, we're always looking to find good places to put our capital, and that's really how we built all the value in the company. We didn't start with an endowment or a portfolio, and when we give that guidance, like a $200 million to $500 million transaction, that actually really moves the needle for a company like Triple Flag, and it actually represents really the bulk of the yields you see in the sector. There's some that are much, much larger. Of course, but those tend to be the minority. So we actually feel we're actually really well poised, we did $350 million of, deployment last year into really great investments that are going to benefit our shareholders for, for, for decades. That's meaningful growth for us. Some of the larger peers, of course, the same, the same sort of, deployment figure wouldn't have the same sort of impact. So we actually see a really nice opportunity for us to grow substantially. Excellent. jurisdictional concentration typical with all mining companies, about 75% of your asset allocation right now is towards what we call Americas and Australia. Just, you know, is there a hard cap on jurisdictional exposure and how do you think about that when you approach new deals? Yeah, so there's no hard cap. We kind of look at each deal as it comes in, but, you really have to, you really have to pay a lot of attention to jurisdiction risk and remember we started our deployment in 2016. I think the focus on jurisdiction risk has only increased over that period, and I feel really well situated right now. Our single largest asset is North Parks. You know, royalty and streaming companies get fantastic diversification. That's actually the only asset we have that's over 20% or even actually over 10% of the NAB. If you want to have your biggest asset somewhere, it's probably in Australia, a long established operation. And then beyond that, again, biggest country concentration is Australia, real focus on the. America is, and specifically Canada, United States, yeah, you know, coming back to, to North Park's, you know, this E44 agreement I thought was fascinating because what it did it sort of redid the agreement to include the exploration upside really unlocking a lot of value in what was sort of, you know, a supplemental type of of agreement and, and my question is, you know, are you seeing some of those other types of structures applicable to other, deals in your portfolio? Yeah, so North Parks is a little unique and you know. What's really nice about North Parks is it's our biggest asset and it's actually now gonna be our biggest growth engine over the next like 5-10 years of of the company and the E44 that actually came about because our product is our our stream is a byproduct stream. It's a copper mine at North Parks, and we get actually 60% of the the gold revenue and that works because the bulk of the revenue is copper and so it all works for the for the operator. What they found is we have a 1000 square kilometer area of interest. The stream area is 1000 square kilometers, so 20 kilometers away from that mine. there's actually a gold deposit. Now gold deposits, no one's gonna develop a gold deposit if someone's getting, 60% of the revenue. so we came to a deal there and they're gonna unlock that now. Evolution is gonna make a lot of money on E44 because that's really nice. We have minimum payments, minimum deliveries contracted for there, so it's really risk-free from our standpoint, but I, I expect to get more than the minimums, of course, because they wouldn't agree to minimums that they thought that was, that's they're kind of cutting it close to that line. Agreed, agreed. the, the path to 2030 includes significant growth from 9000 to 105,000 gold equivalent ounces up to that, 145-ish range which is, you know, call it 45% growth, just wondering when, when you look at that growth, can you sort of segment to us, study cases versus brownfield versus green field, and how do you approach those buckets in terms of the sources of that growth. Yeah, and so we feel really confident about that, you know, that 140 to 150 sort of range, and what's nice about it is it doesn't really depend on any one project coming in. It's actually a pretty long list, couple sources and a couple buckets. I think it's really you're asking for like what, what are the, you know, where does that come from? a lot of it actually is embedded, growth at a number of the M plans within the existing operations that are producing, so it's not just all development projects coming online. Places like Beta Hunt, North Parks, you know, RB Platt, those are gonna go, those are gonna increase their, their, their production. That's just the profile and the mine sequencing. then we have a number of assets that have been like in construction right now that are tracking really well like the Con project that, Montage is building in, in Cote d'Ivoire, the, the Arcata project which is being done right now in, in Peru, and then there's a few others which are kind of in, you know, going through the milestone steps, but if you add up the total production of like what all of our, operators put in for 2030, you're actually gonna get a high, a figure higher than the, the 150, so we've. Already done some hair cutting on on that because you know it's mining and things tend to, it's a lot easier to come in a little while later than it is to come in a little earlier. OK, so we have some front end loading of that growth but also conservatism baked into that, assumption. Yeah, it's not really front end loading, it's just that a lot of it comes from existing operations and it's gonna come sequencing, sequencing in, but we're gonna, we're gonna start seeing that in, 26 and 27, and then, and going on through to 2030. Great, great, let's switch to, you know, silver, a hot topic over the first few months of this year. we do have a Sarah Lindo step down, in terms of that royalty and just with that, how do we incorporate silver exposure, into the business model. Yeah, so, and the Cerros Lindo step down is actually a really, it's a, it's a good news story. It was our very first investment, it was in 2016, and we modeled the 17.5 million ounces of silver that we've received, and the step down actually is gonna take place when we get our 19.5 million ounce. So it's like 2 million extra ounces of silver, and I. I had no idea that the silver price we'd be getting for those ounces were gonna be in the 70s when when we did that deal in 2016 of course silver exposure is gonna come down. We are we do have other silver exposure and that's first of all, Cerro Lindo is gonna be our second biggest asset even after the the step down. It's quite a wonderful stream we have silver coming out of Baritica. A new silver coming online will be, from, from the Arcata stream that we did, last year. and then a little bit further out, so this isn't gonna impact, it's gonna impact in the 2030 plus period, the CAS project has shown some real, momentum, and, that's been one of our, our recent catalysts that, you know, quite frankly went a lot faster than we expected, OK. you know, we've, we talked about North Parks as part of the early part of our conversation, maybe get a little bit more on sort of the technical side because you've guarded, you've guided to 2026 GOs being, about 5 to 10% growth there coming from a certain part of the bulk. Mining and the and the the the mind sequencing there and maybe if you could talk a little bit about from a technical aspect the sublevel caving, how that plays into the production profile in the short term. Yeah, so one of the nice things about North Parks is they have multiple ore sources so there's these surface pits. there's a, you know, the, the E48, blockade. There was an E26 blockade which is winding down now. And then there's the, you know, the E22 ore body coming up. It's a copper mine, and we get the gold byproduct, and each of these zones has different gold grades. And so the amount of gold we receive is gonna, is gonna vary as they sequence and, and as the ore blends, you know, has different, constitute it gets drawn from the different areas. so the step down that we're seeing, like the sort of the down the dip is in 26, is actually completely with the M plan, and then we're going to start seeing it come up. E48 was something that we're watching really carefully last year because they had to get their development work done, and they're starting to draw on ore from E48, and E48 actually has very nice gold grades in it. I was really watching that development all last year, wanting to see them hit their markers. So of course if you're behind on your development, it's going to flow through in the back half of, of, of this year. they actually were tracking on exactly the evolution team. really impressed with how they execute, and actually have been hitting all their marks. And if we go a little bit further, then we have the E22 blockade, right, that, that's what gives you that real production. And so when does it sort of reach that full capacity where you think of it more as steady state? I can't get ahead of evolution here, but what they approved was they approved the capital to start the deve the blockade development of E22, and E22 actually has a very. Good gold grades relative to the rest of the deposits, so that's going to drive some real growth, but block caves have about a 4 year period or this one does. And so we're going to start seeing production from that block cave in 2030. This is why it's really poised as a very good growth asset from us. We're going to see an increase from 26 levels as E48 comes in. And then 2030 beyond we're going to start seeing the the E22 effect coming in and it'll be a blockade and it'll take them a little while to get up the full, full ramp rate there. I don't want to get ahead of evolution, but what's really exciting there is we're also looking at increasing the capacity of North Parks. So right now it's 7.6 million tons per annum. they're doing a coarse particle flotation and some other deep bottlenecking sort of activities that'll take them to 8. They've actually approved that now, and they're doing a study that they said is going to look at 10 plus. If you look at the earnings call transcript of evolution, they were talking about that being, you know, up to 15 million tons per annum, so roughly a double from what they have today. So of course as a streamer that's exactly what you want to have, and that really affects the, the gold byproduct we get from the copper operation. And then there's that E44 on top of that. Which we're going to get, you know, as they develop the E44, and that's just the same flow sheet, so they're going to put that material into the mill. It'll just make the, the gold content of the concentrate that much higher, and it's going to be over and above. So we did not have anything from E44 in our investment case when we, when we bought the stream. we didn't have it in our mind plan or our model even like a year, a year ago, and it's really we had these discussions with, with evolution to unlock that. we heard from Agnico yesterday talking about the pending commissioning of Hope Bay, sometime later this year, perhaps in the next, month or so. how are you looking on the timeline of that asset into production and what could it mean in terms of the NSR exposure on, on GEO contribution to Triple Flag? So that's another asset that's not currently producing cash flow for us, but that just gotten better and better over the last couple of years. Anika was, kind enough to host me on site, last month up at Hope Bay. I got to spend some time with the team. It was fantastic. I can't get ahead of Agnico, but what they've, guided for publicly is 400,000 to 425,000 ounces a year for, 10 years plus. we have a 1% NSR, so you know, you do the math there, it's 4000, maybe a little bit more than 4000, a year. every geologist that goes to Hope Bay comes back raving about it. It's very perspective. There's a lot more there, you know, I think they're, the, the, the date they've had, they have circled in the calendar, they put out publicly is May 19th, so I'm kind of looking forward to that May 19, announcement. I, I see the, the first decade is really the starter. And then they're gonna, they're gonna expand that out as, as they go along, but there's a lot more material. OK, Sheldon, let, let's keep on the line of, you know, questioning concerning around upcoming growth and let's talk about SK Creek, and permitting there and how you're feeling about what is the guidance now for a Q2 of 27 start date and how that plays into the growth profile. Yes, we have, we have a 0.5% royalty on SK Creek and again just, a team that's really hit all its milestones and. You know, I gotta give credit to the province of British Columbia too. Like the story used to be that permitting would, you know, be indefinite or take a lot longer, and they've actually moved through that permitting process, I think, much faster than anyone saw before. again, I'm gonna defer to the company as to what they believe the, the timelines are for that coming in, but, you know, I've been impressed with how that team's, executing, and that's one of the fairly long list of, assets that we have coming in, to production in the next couple of years, yeah, And, and how closely are you monitoring monitoring Kon Construction Montage Gold big cap X number with first gold poor plan there could, could we see some delays there or has management been executing according to your plan and, and, and sort of to a satisfactory level? Like, again, it's a consistent story, right? the Montage team has done an incredible job. It's been reflected in the market. I think it's very well recognized, overall. I think initially they were talking about next year and. And then, early this year or maybe it was late last year they started saying actually they might get some production early this year so actually moving up timelines, which is, is not the way you normally hear. So anyway, I've, no reason to doubt what they're gonna do, Sheldon, I'd like to maybe pivot a little bit towards capital allocation, shareholder returns. we've had 4 consecutive annual dividend increases. Where do dividends play into the portfolio allocation as it pertains to, capital. Yes, we've been really clear in our messaging on, on dividend policy since we've gone public and capital allocation policy overall. we've gone, we went public with a dividend. it was 19 cents US a share per year. we've increased it every year. we've increased it by 1 penny, We, we see continuing that I would say indefinitely into the future. When we went public, it was consuming a little over 20% of our cash flows and, you know, with our production profile going up and the gold price movement that's going to be under 10% very, very, very shortly. haven't had any groundswell from, shareholders asking for it to increase over and above actually shareholder feedback from shareholders has been overwhelmingly positive on, on that approach and then it's really, being opportunistic on the NCIB. always feel the shares are undervalued and I think that's been, shown by the performance over, over time, but also trying to balance that with keeping capital available to make new investments and add value that way so it's really a balance between those two and, and. You know, just coming back to the NCIB strategy, you know, do you weigh internal rate of returns, between the stock and opportunities as, as whether the trigger point on the two, and how do you, how do you sort of approach that from a match because share buybacks on streaming and royalty companies not conventional, right, because we tend to think of their evaluation arbitration. Charge on the market. So how do you approach that and how do you balance those risks and opportunities? The one, the one thing is I think like the, the nav that you see in the public market, just really understates the value of streaming royalty companies and any, any CEO of a precious metal streaming royalty company that said, oh, I, you know, as long as I trade over one time Nav I'm fairly valued. I mean, you, you lack ambition, right? So and no one's gonna say that. internal rate of return, not necessarily like I think, the shares tend to be unvalued because the value tends to be revealed over time like E44 wasn't in anyone's model a year ago and, and that's the nature of streaming royalty companies. I've been at operating companies too, and there's a lot of things that, you know, come up. There's, there's more negative surprises than positive surprises I would say, whereas in a streaming and royalty company there's a lot more positive. Surprises and negative surprises. People extend the M life. They find more deposits, they put more capital to work on your properties. so I think buying back shares is almost always a good thing to do. But on the other hand, when you're buying these streams and royalties, these have proven to be very lucrative investments over time, right? And so if the next North Parks comes, I want to jump on that because I created like literally billions of dollars of value for our shareholders. I'd like to turn it to the audience. We have time for one question. In the front here, sir. Yeah, I'm speaking loud here, Can you tell us, you've mentioned that the company Can you tell us why you think it's undervalued compared to the many other royalty and streaming companies who say pretty much exactly what you said about what you do? Yeah, a very fair question, and you're right, it's not unusual for a CEO to say a company is, under, undervalued. a couple of things. First, when you look at how the, the valuations on things like PNA and stuff like that, a company like ours does skew a lot lower, and there's a lot the, the bigger ones trade at, you know, call it 2.5, 2.25%, the public numbers we have is 1.5. So there's kind of a value differential there. second is I think streaming royalty companies tend to be undervalued, so not just my company. And it's because a lot of the value gets revealed over time, and part of that is you have a royalty in your portfolio. Someone raises money, and this environment is fantastic for surfacing value. So there's a whole bunch of out of the money options, options that were out of the money 2 or 3 years ago that are now coming into the into the money. When we bought that Kone royalty, we put a very modest value on it, and now it's actually very valuable, that Hope Bay asset too. There's going to be more of those. The idea that that's just going to stop now, I actually don't believe at all. I supplementary. When you bought the, I call it the Silicon Merlin royalty which you now call Arthur, I believe, you paid $420 million for it, which seemed at the time to be a very high price. Is that how you've achieved growth? You, you've paid a high price recognizing that that long-term value is going to be there irrespective of the premium that you pay. Yeah, and you, you may be a little confused on the, the public company evaluation or origin. What it actually cost us to buy that royalty was $250 million US, and, you're right, there are people that said it was a pretty high price. Franco, Nevada paid for $275 million for essentially the same royalty, shortly thereafter. So there's at least one other person out there that that felt the same. So I felt, I didn't need them to vindicate me, but I felt there was someone else that saw the same value. And then when you see the news flow that's come out on that since. I think that that property is a clear winner for for us. I mean this is gonna be the cornerstone mine for AngloGold Ashanti, going forward. we, we don't just base our our our investment decisions based on what's in the analyst report. We sent people to site. We looked at where the drill rigs were going, we talked to people at the company and we had a pretty good idea that there was a lot more there than was in the public domain. it actually was in the public domain but it wasn't widely known at the time we did that deal. I actually feel my my technical team deserves like, you know, gold stars all around for that one because they've been completely completely vindicated on what they, the work they did before we bought that. please join me in, in thanking Sheldon and and the Triple Flag team for their presentation.