Triple Flag Precious Metals Corp. (TFPM) on Q1 2023 Results - Earnings Call Transcript
Operator: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everybody to the Triple Flag Q1 2023 Results Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator instruction] And I would now like to turn the call over to CEO, Shaun Usmar. You may begin.
Shaun Usmar: Thanks, Bailey, and good morning, everyone, and thank you for joining us to discuss Triple Flag's First Quarter 2023 Results. Today, I am joined by my CFO, Sheldon Vanderkooy; my Senior Vice President of Corporate Development, James Dendle. And I'll also be joined by our Vice President of Talent and ESG, Katy Board; and our Vice President of Finance, Eban Bari, in the Q&A section. Turning to Slide 4. The first quarter of 2023 was the first since completing the acquisition of Maverix Metals, which contributed to another record quarter for Triple Flag. This include sales of 26,599 gold equivalent ounces, resulting in revenue of $50.3 million and operating cash flow of $38.9 million, which are new quarterly records. We have also seen a more than 10-fold increase in trading liquidity with the addition of many new quality investors to our register as well as inclusion to the GDXJ, S&P and TSX Global Gold and Solactive Global Silver Miners indices. Our portfolio continues to perform well, and the assets that we acquired from Maverix have shown great progress and continue to reinforce our investment thesis. Operational performance at Camino Rojo and exploration success at Beta Hunts are two highlights. I'm also grateful to my team and the former Maverix management team, who worked well together to deliver the integration of the two businesses to a high standard and enabling us to achieve the anticipated run-rate of $7 million in annual synergies. Finally, I'm very pleased to report that as we celebrate our seventh anniversary as a company and second anniversary of our initial public offering. Our share price is up 31% in U.S. dollars and 45% in Canadian dollars with a lot of room to continue to close the gap with our senior peer valuations as we continue to focus on delivering value to our shareholders. I'll now turn it over to Sheldon to discuss our financials for Q1 2023.
Sheldon Vanderkooy: Thank you, Shaun. Turning to Slide 5. We have a record first quarter, realizing over 26,500 gold equivalent ounces, reflecting the addition of the Maverix assets to the portfolio. Operating cash flow in the quarter was also a record at nearly $39 million. Adjusted net earnings in the quarter was $0.07 per share. Adjusted earnings was impacted by the step-up in value of the Maverix assets on acquisition as well as additional costs in Q1 due to the Maverix acquisition in the quarter. We remain on track to realize identified synergies of at least $7 million annually from the transaction. I also want to highlight that we recorded non-cash cost of sales of $5.6 million relating to gold sales from prepaid gold contracts. This equates to $0.03 per share. This is purely accounting as this is a non-cash expense moving to the income statement. Our cash flow in the quarter was $0.20 per share, a 15% increase over the corresponding period in 2022 at $0.17 per share. Our asset margins in the quarter were 88%, slightly lower than the 90% levels we have traditionally experienced. This figure was impacted by acquisition accounting as metal inventory on Maverix's balance sheet on the acquisition date was recorded at fair value and then sold during the quarter. Going forward, we forecast asset margins to return to the 90% levels. We also declared our $0.05 per share dividend. On payment of that dividend, we will have paid over $65 million in dividends to shareholders since our 2021 IPO. I'd also like to comment on our strong balance sheet. Our total cash outlay on the Maverix acquisition was $146 million, consisting of cash consideration paid to Maverix shareholders, cash paid to retire the Maverix's credit facility and transaction cost incurred. At quarter-end, we owe $80 million on our revolving credit facility. Subject to new investments we may make, at current metals prices, we forecast the internal cash generation will allow us to be debt-free by year-end. I'll now turn to Slide 6. Slide 6 highlights three very important aspects of our portfolio, being asset diversification, precious metals focus, a portfolio which is predominantly centered in the Americas and Australia. Our revenue diversification meaningfully increased with the addition of the Maverix portfolio. Cerro Lindo was our biggest contributor in the quarter with approximately 28% of quarterly revenues, and no other asset accounted for more than 15% of revenues. In the past quarter, gold and silver accounted for 95% of our revenues amongst the highest precious metals percentages in the sector. And by geography, the country with the greatest contribution to our revenues was Australia. And after Australia, our portfolio was predominantly located in mining-friendly jurisdictions in the Americas. I'll now turn to Slide 7. Triple Flag went public in May of 2021, so we are approaching our two-year anniversary as a public company. Looking back, I'm proud of the progress the team has made in these two years and I'm excited about the future possibilities. First, I'd like to look back on our share price performance since the IPO. I think it is a fair comment that many IPOs disappoint on share price performance. Our IPO investors have been well-rewarded for their trust in us as our share prices increased over 30% from IPO, well in excess of our peer group and the GDX [Indiscernible 0:06:13] performance. In addition, we have declared dividends of over $65 million since our IPO. We have increased the scale of the portfolio meaningfully. We are guiding for 100,000 to 115,000 gold equivalent ounces in 2023 as compared to 63,000 in 2020. We see this increasing to over 140,000 in the next five years. Our portfolio now totals 229 assets, increased from 75 at our IPO. We now have 29 paying assets as compared to 15 at IPO. Our ESG practices have been recognized by Sustainalytics as we are ranked fourth out of 114 companies. We expect this to continue in the future. In 2022, we increased our dividend and our cash flow continues to grow. In 2022, we also listed our shares on the New York Stock Exchange, increasing access to U.S. investors. And in 2023, our shares were added to three indices. Triple Flag has made much progress since our IPO, and we are well-positioned to continue our track record of creating shareholder value. I'll now ask James to speak to some of our portfolio highlights.
James Dendle: Thanks, Sheldon. Overall, portfolio assets are performing well. We expect deliveries from Northparkes to be back-end weighted with open pit mining of E31, which holds a higher gold grade than the current run-of-mine. In Peru, unusually heavy rainfall caused by Cyclone Yaku affected the region in which Cerro Lindo is located, resulting in the suspension of production for approximately two weeks during March. Next -- it expects to increase production in the coming months and have maintained its 2023 guidance. Also drilling in the Southeast area of the mine is continuing to extend mineralization, which benefits upstream. Camino Rojo, a gold mine operated by Orla Mining and acquired as part of the Maverix asset -- transaction is performing to plan and is on track to meet its 2023 guidance of 100,000 to 110,000 ounces. Fosterville reported its 4 million quarter since beginning the sulfide project in 2005, which is particularly impressive when one considers that the mine had a reserve of around 1 million ounces at the time. Agnico Eagle has reported the abatement trials of the new low frequency noise were completed in the first quarter of 2023. I believe that the results are promising, and they are now being considered by the EPA with respect to the current prohibition notice. Agnico has reaffirmed its guidance for the year between 295,000 and 315,000 ounces. Karora announced record quarterly results and strong exploration results for Beta Hunt, an Australian gold mine we acquired as part of the Maverix transaction. From our perspective, the expansion to 2 million tons per annum delivers near-term growth and the strong exploration results positioned Beta Hunt for a long future. I'll turn it back to Shaun.
Shaun Usmar: Thanks, James. So turning to Slide 9. Triple Flag transitioned from a private to public company two years ago with a concentrated shareholder register with limited liquidity. Our portfolio characteristics compared favorably with our targeted peer set in terms of duration, cost position, precious metals concentration, our focus on royalties and streams and our jurisdictional concentration in good mining regions. The impediment to our valuation potential was dominated by a limited liquidity profile. Our focus remained as substantial owners of this business and continuing to build value for our investors in a disciplined manner as we have done the prior five years since founding the business. We're now very happy to see our shareholder base expand since the Maverix acquisition as we welcome many new investors into our stock. As shown on this chart, our three -month average daily traded volume in the first quarter of 2023 increased by over 10 times compared to Q4 of 2022, all while continuing to exemplify our belief that strong management and insider ownership is critical for a successful business. This dramatically improved liquidity profile has been a primary driver of this enhanced investor interest and bodes well for the future as we seek to broaden our investor appeal and ownership, removing an obvious obstacle to closing the valuation gap with our senior peers. We view our alignment with our shareholders as a differentiating part of our business strategy, acting as owners and being prudent shepherds of our capital. So moving to Slide 10. We embarked on a journey seven years ago to build the next senior precious metal streamer and provided competitive structured finance to an underserved mining sector, while seeking to add value to our mining partners beyond the competitive cost of funding via our approach to ESG, our commercial and technical capabilities and our global networks. I believe our track record is revealing the quality of this team and the ability to execute against our strategic objectives. As major shareholders ourselves, our focus remains on disciplined deal execution and value creation, pursuing sensible and accretive deals in a patient manner rather than pursuing growth at any cost. We appreciate the support and trust to our stakeholders, and we look forward to providing further updates soon. Thank you. With that, Bailey, happy to answer any questions.
Operator: Thank you. [Operator instructions] And your first question will come from the line of Cosmos Chiu. Your line is open.
Operator: And your next question comes from the line of John Burke. Your line is open. John, if you're speaking, we can't hear you right now. You may need to unmute locally. All right. The next question comes from Shane Nagle. Your line is open.
Operator: [Operator instructions] And our next question comes from John Tumazos. Your line is open.
Operator: There are no further questions. At this time, I will turn the call back over to Shaun Usmar, CEO, for closing remarks.
Shaun Usmar: Yeah. Bailey, thank you, and thanks, everyone, for the questions. I know that there's a number of participants as well who are having to try and do this on the flight and site visits. And I really appreciate the demands in this earnings period of people. Yeah, just by way of closing, look, it's been a great start. Most acquisitions, the MBA books will tell you often don't achieve their sort of anticipated benefits often due to poor integration. The team has done a great job on that. These are not complex businesses to integrate. I think you're really seeing the window outside of some of the accounting noise of why we went about this, and you're definitely seeing the benefits in terms of liquidity. And we've got some great new investors and names on the register as a consequence of this transaction. As I sit here today pretty much our seventh anniversary though, and I look at the opportunities that lie ahead, I still don't see a fire horse of new capital available from generalist sources for this sector. Everyone seems to have found religion more or less on the energy transition and other things. I just think there's a better opportunity going forward than we've seen to date, and I think there is a very exciting prospect for us to continue to deploy capital and really grow this business. So with that, just thank you all. Thanks to our shareholders, our stakeholders and our mining partners and a special thanks to my team. Thank you.
Operator: This concludes today's conference call. You may now disconnect.
