Joanne Jobin: Thank you, David. In regards to Borborema advancing. Is February 2025 production realistic, feasible?
Peter Behncke: Definitely based on Aura’s track record as a Latin American operator, we’re quite confident that we’ll see that asset enter production early next year. But given how we’ve structured that investment as well, we’re significantly de-risked on if there was a delay. We’re still receiving 250 gold equivalent ounces per quarter until they enter production. So we do see an increase once into production, but we’ve got very reliable cash flows up to a maximum of 10 years, if that asset was never built, which is not the case, but we’ve really protected ourselves on the downside with the structuring.
David Garofalo: And the other component of that, about 1/3 of the financing we provided was in the form of our convertible debenture, which actually generates interest during the preproduction phase. And that debenture is convertible into an additional royalty on the property. So as they ramp it up and we gain confidence in the underlying operation as they start to convert that significant resource over 2 million ounces in the reserve and extend the mine life, then it will make a lot of sense for us to convert that that debenture into an additional royalty over and above the initial royalty that we have.
Joanne Jobin: Excellent. Next question, cost savings. Where did the majority of cost savings come from in 2023 versus 2022?
Andrew Gubbels: Yes. I’ll take that one. So the majority of savings, it came from a few different areas. First and foremost, I mentioned in the presentation we came off a couple years of a fairly high pace growth, corporate consolidation and 2023 was a year whereby we removed some duplication which came into the company, and that was in the form of administrative functions and associated office costs related to primarily the Ely, Golden Valley and Abitibi acquisitions. Further to that, over the course of the year since I became CFO we’ve established more of a streamlined FP&A function to re-evaluate and monitor our G&A costs, and that allowed us to focus on the highest value add services as well as review service contracts and make improvements where we could.
We started down that track through 2023. And then lastly, the third area was really, we have seen a reduction in some of the professional fees and in 2023 we did take on a little more in house from a technical review standpoint, something the team that reviews projects, as well as in the finance team in particular, so really centralization of our operating footprint within our Vancouver office system.
Joanne Jobin: Excellent. Question on evaluating future growth opportunities; how is the company doing that?
David Garofalo: We’ve never been busier. We’re in a perpetual state of due diligence, that’s our business. There is such a dearth of capital for development stage assets, even expansions of existing operations that we’re seeing more and more companies whether they’re at the operating stage, development stage or exploration stage, meaning the corporate streams and royalties into their capital structure more consistently. That means we’re getting an influx of opportunities thrown our way but we have a very, very heavy screen. Since our IPO, we’ve looked at over 300 opportunities. We’ve only executed on eight, including the M&A deals we’ve done. So we’re very, very choosy about the things that we invest in and write royalties on because we have very stringent rate of return criteria.
Unidentified Analyst: Excellent. David, do you expect speaking on the sector, do you expect more consolidation within the mid-tier royalty space in the near future? What are your thoughts on that?
David Garofalo: Well, I think there’s definitely going to be a continued consolidation on the producer side, and there has been significant consolidation, big, small and medium. Big being Newcrest being the biggest ever since the Newmont Goldcorp merger back in 2019. That was – this one was over $50 billion. And then we’ve seen smaller ones like recently Argonaut being taken over by Alamos and Calibre taking over a project Marathon’s project in Northland. That will continue to happen because, as I said, with the lack of exploration occurring in the sector, the seniors have to take out other companies in order to maintain unsustainable production profiles. They’re kind of caught in this vicious cycle and have been for decades, and I don’t think that’s going to reverse.
So given the lack of exploration, continued deterioration in the reserve profile of the industry, they have to basically play Pac-Man with each other. On the royalty side, I see lots of scope workers on acceleration. There’s probably too many players in the small cap universe, and there’s a complete absence of a mid tier competitor in the royalty space, which is big enough to be relevant to institutional investors, generalists that come into the space, but still small enough to grow. And so there is no $5 billion market cap royalty player out there. The absence of that, to me, is a void that needs to be filled. I think you’re going to see consolidation among the smaller cap players to enhance their multiple and drive down their cost of capital.
The order of that, the sequencing of that is hard to predict, but I think it’s inevitable because it’s such an economic imperative for the smaller cap universe.
Joanne Jobin: Excellent. Regarding your Granite Creek project, was that a net profit royalty rather than an NSR? Can you provide clarity on that?
