Triple Flag Precious Metals Corp

TSX:TFPM

Earnings Call Transcript

[Operator]

Thank you for standing by. 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 2024 Results Conference Call. [Operator Instructions]

I will now turn the call over to Sheldon Vanderkooy, CEO. Please go ahead.

[Sheldon Vanderkooy, executive]

Thank you, Karen. Good morning, everyone, and thank you for joining us to discuss Triple Flag's fourth quarter and full year 2024 results. Today, I'm joined by our CFO, Eban 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.

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. While record GEOs are great, what really matters for shareholders is our annual operating cash flow of $214 million, 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 Northparkes, which were a core contributor to our performance in 2024 will continue to be processed during the upcoming year. Looking further ahead, the next stage of high-grade gold ore from Northparkes is also advancing to production. Access to the first sublevel at E48 is substantially complete and commissioning is expected in the third quarter of 2025.

In the fourth quarter, we were also pleased to announce the $28 million acquisition of the Tres Quebradas 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 Zijin with a long life and significant exploration potential. Our portfolio provides top-tier precious metals exposure, and 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.

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, and this is exactly what we have done. There is still more to come. 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.

[Eban Bari, executive]

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 the high conversion of top line revenue into cash flow available to shareholders, a key benefit of the royalty and streaming 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 million in dividends to shareholders in 2024, which reflects a 5% increase in the middle of the year, our third consecutive increase since our IPO. In addition to our progressively growing dividend, we also returned nearly $9 million 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 Bonikro streams as well as the Tres Quebradas 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 105,000 and 115,000 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 E31 end deposits continuing to contribute to deliveries from Northparkes as well as solid performance from Cerro Lindo. Depletion is expected to be between $70 million and $80 million, same as in the prior year, while G&A will be relatively consistent between $24 million and $25 million. Finally, our Australian cash tax rate for Australian royalties will be approximately 25%, consistent with the 24% that was realized in 2024. Triple Flag 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've 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, Eskay Creek and Tres Quebradas. We also continue to have substantial firepower for deals that would be additive to this growth profile with more than $700 million available to deploy for new transactions that are accretive, fit with our strategy and deliver value throughout the cycle.

I'll now pass it on to James to discuss the Tres Quebradas acquisition.

[James Dendle, executive]

Thank you, Eban. We were pleased to announce the acquisition of a 0.5% gross overriding royalty on Tres Quebradas for $28 million this past December, which is expected to close in the first quarter.

This asset adds near-term 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, Triple Flag expects to receive royalty revenue from Phase 1 Tres Quebradas to equate to approximately 1,000 GEOs per year, representing production capacity of 20,000 tonnes per year of battery-grade lithium carbonate.

Zijin is aiming to be a global lithium producer, having entered the lithium market in 2021 and acquiring its 100% interest in Tres Quebradas in early 2022 for $770 million. As highlighted by Rio Tinto's $6.7 billion acquisition of Arcadium, this asset is located in the right area for low-cost, long-term lithium prime production. In terms of expansion optionality, Zijin 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 2.

If advanced, this would meaningfully increase the steady-state 1,000 GEO profile I mentioned earlier. Overall, the acquisition of Tres Quebradas royalty represents a countercyclical opportunity to deploy capital into crucial commodity and gain exposure to a large, well-capitalized mining project with a long life and significant upside potential.

I'll now pass back to Sheldon for the conclusion of the formal part of the presentation.

[Sheldon Vanderkooy, executive]

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, buy back 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. We have a debt-free balance sheet with over $700 million 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 are 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 and with good operating partners. And we're going to stay focused on generating cash returns for shareholders.

Karen, please open the floor to questions.

[Operator]

[Operator Instructions] Our first question comes from Lawson Winder from Bank of America Securities.

[Lawson Winder, analyst]

I wanted to ask about a few things. So first off, on the Bonikro and Agbaou stream, there was a proportion of revenue in 2024 that was a true-up. And so just trying to think about what was like a run rate number in 2024 for those 2 assets ex the true-up? And are there any additional true-ups still coming in 2025 for those?

[James Dendle, executive]

Lawson, this is James. Thanks for the question. Yes, 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 they're short of the minimums, which the guidance would indicate that they are marginally, there'll be sort of a lagging true-up every year.

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

[Lawson Winder, analyst]

Okay. 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 out to 2029, and that's [ El Machito, ] so you haven't received deliveries from that asset for a couple of quarters, maybe 3 or 2.5. Is that asset expected to restart at some point?

[Sheldon Vanderkooy, executive]

Lawson, I'll take that. Yes, that's a smaller asset that we acquired as part of the Maverix portfolio. It's a privately held zinc mine. It's been in operation for decades, and they got hit with a few higher costs and the zinc price ticked down last year. But they've actually restarted deliveries. There 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. So I would say it's kind of like upside from here. But 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.

[Eban Bari, executive]

And Lawson, to be clear, we have received deliveries on that in Q3 and Q4 of 2024.

[Lawson Winder, analyst]

Great. And then just getting back to one of your bigger assets, just thinking about Buriticá, 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? Like is that an issue that's now resolved and we can kind of forget about that going forward? Or is there still some potential risks that we should think about with that asset in terms of forecasting revenues for the coming years?

[Sheldon Vanderkooy, executive]

Lawson, it's Sheldon here. I'll answer this one as well. I think the Zijin team has done a really good job on the ground dealing with a difficult situation there. And this is actually -- this is very important. It's not artisanal miners we're dealing with. These are illegal miners. It's more criminal syndicates and gangs. And that's a situation that the Zijin team is managing. The mine is producing right now.

Last year was a record. And if you look at what Zijin is projecting for the future, they're continuing to invest money and expanding that asset. 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 Zijin has done a very good job of operating through the issues with the illegal miners.

[Lawson Winder, analyst]

Okay. Fantastic. If I could ask just one more on the project pipeline -- sorry, the deal pipeline. What sort of transaction sizes are you seeing? Is it more focused on precious metals? Are you seeing opportunities in non-precious metals like the lithium opportunity you guys took advantage of last quarter?

[Michael Fries, executive]

Yes. No real change from prior quarters we would have said. I mean, I think our sweet spot is still the $100 million to $300 million range. It's a really robust pipeline right now. There's a lot of good opportunities that we're looking at. The lithium, I love that lithium deal we just did. Part of it is like Zijin 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 announced will be a gold and silver deal in the Americas. So that will be kind of squarely 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 million to kind of the $100 million to $300 million and actually a few larger ones that are probably lower probability, but we'll see what we can do.

In terms of precious versus nonprecious, the weighting is definitely towards the precious. There are some nonprecious opportunities out there. We've always been open that we'd be open to looking at some nonprecious 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 -- when people look at Triple Flag, it's right in our name, and we're not changing that.

[Operator]

The next question comes from the participant from Scotiabank.

[Tanya Jakusconek, analyst]

I just wanted to follow up on Lawson's questions on the M&A pipeline. You mentioned the size, the sweet spot -- well, you're seeing $100 million to $300 million. Are we looking at producing assets in that sort of range? Or is this still like development coming in, in like 5 years' time? Just wondering your mix of what you're seeing? Is it going to be adding immediately to the pipeline or beyond 2030?

[Sheldon Vanderkooy, executive]

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

[Tanya Jakusconek, analyst]

Okay. And you mentioned a couple of bigger ones greater than $300 million. 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 million transaction? Just wondering how big you would go? And would you syndicate?

[Sheldon Vanderkooy, executive]

So openness to syndication, yes, but it would probably come down to a concentration. I'm talking completely in the abstract here 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 overconcentrated, whether that be a commodity or a jurisdiction or development or something like that.

So we are open in concept of syndication, but we're not necessarily wanting to go there. Upper end of the range, I don't know if I want to give you an upper end of the range, but we could finance quite a bit right now. 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.

[Tanya Jakusconek, analyst]

Okay. And what about corporate transactions? I mean I say that from just speaking to generalists, 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?

[Sheldon Vanderkooy, executive]

Yes. I mean, I guess we're a little bit unique in that we've had the kind of the more recent successful corporate transaction. I think 2024 has been a fantastic year for some of the assets we picked up through the Maverix transaction, including like Kone, Eskay Creek, [ Buriticá ] and others. So we are open to it, but you just really have to -- 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 Maverix. We're open to it in other cases. But it's -- corporate M&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.

[Tanya Jakusconek, analyst]

Okay. And then maybe finally, just on your $700 million available and also you've paid down your debt. So congrats on that, so 0 debt. How do we think about the dividend? I think that comes up for review, I think with Q2 or thereabouts. How are you thinking about the dividend?

[Sheldon Vanderkooy, executive]

Yes. I think 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. I would look to be seen to increase that. Of course, that's subject to the Board discretion, but no changes anticipated on that. So I would say you should probably expect us to continue our policy of -- or practice of increasing the dividend annually.

[Tanya Jakusconek, analyst]

And as I think about 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 want to try and see how much leverage I have for deals plus increased dividend.

[Sheldon Vanderkooy, executive]

Yes. I mean the actual amount of cash you need to run this business is very, very low. We tend to keep like $10 million on, but we could run this business with $5 million 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 if you're modeling, I would use somewhere in the $5 million to $10 million range there.

[Tanya Jakusconek, analyst]

Yes. And just trying to see, Sheldon, what you could do from a dividend perspective plus transactions and kind of keep that minimum balance of $10 million and up.

[Operator]

Your last question comes from Derick Ma from TD Cowen.

[Derick Ma, analyst]

At Northparkes, early days for us, but is Major Tom a situation where exploration success for Evolution might actually displace what is otherwise higher grade gold tonnage and that would be [ struck at your ] stream?

[Sheldon Vanderkooy, executive]

Derick, I don't see any risk of Major Tom displacing anything that -- 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 upside for Triple Flag.

[Derick Ma, analyst]

Okay. And then on the $35 million precious metal stream you mentioned in your MD&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?

[Sheldon Vanderkooy, executive]

Yes. That is a bilateral situation. And I'm hoping that, that will close very shortly, and we can talk a little more freely about that. But -- so it's -- right now, it's on a no-names basis. But as you pointed out, we disclosed it in our MD&A. It is bilateral. It's exactly what we're supposed to be doing from a corporate development perspective is we're out there talking to people using our networks. It's a really nice opportunity. 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 brownfield. It's a restart, and it's precious metals in Latin America. So kind of right in the middle of our Venn diagram.

[Operator]

That concludes the Q&A session. I will turn the call over to Sheldon Vanderkooy, CEO, for closing remarks.

[Sheldon Vanderkooy, executive]

Yes. I just want to thank everyone for participating. Thanks to 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. 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.