Triple Flag Precious Metals Corp. (NYSE:TFPM) Q4 2024 Earnings Call Transcript

Triple Flag Precious Metals Corp. (NYSE:TFPM) Q4 2024 Earnings Call Transcript February 20, 2025

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 Corp. 2024 Q4 results conference call. All lines have been placed on mute to prevent any background noise. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star followed by the number one on your telephone keypad. To withdraw your question, press star followed by the number one again. I will now turn the call over to Sheldon Vanderkooy, CEO. Please go ahead.

Sheldon Vanderkooy: Good morning, everyone, and thank you for joining us to discuss Triple Flag Precious Metals Corp.’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 Precious Metals Corp. 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, which 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 a GEO guidance range of 105,000 to 115,000 ounces. Notably, the high-grade E31 open pit deposits at North Parks, 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 North Parks 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. 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. 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 Precious Metals Corp.

is well-positioned, 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. 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: Thank you, Sheldon. As you can see, 2024 was a record year 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, reflecting 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 Agdal and Bonaco 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 E31N deposits continuing to contribute to deliveries from North Park, as well as solid performance from Cerro Lindo.

Depletion is expected to be between $70 million and $80 million, the 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 relaunched in 2024. Triple Flag Precious Metals Corp. 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 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 Tuskiblahas.

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: Thank you, Eban. We are 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 with multi-decade reserve life, an 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 Precious Metals Corp. expects to receive royalty revenue from phase one Tres Quebradas equivalent to approximately 1,000 GEOs per year, representing production capacity of 20,000 tons per year of battery-grade lithium carbonate.

Zijin is aiming to be a global producer, having entered the listed 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 Arcadia, this asset is located in the right area for low-cost, long-term lithium brine production. In terms of expansion optionality, Zijin is contemplating a potential expansion of nameplate production from a range of 40,000 to 60,000 tons of lithium carbonate, referred to as phase two. If advanced, this would meaningfully increase the steady-state GEO profile I mentioned earlier. Overall, the acquisition of Tres Quebradas Royalty represents a counter-cyclical opportunity to deploy capital into a crucial asset, expanding 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 following part of the presentation.

Sheldon Vanderkooy: 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 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 the 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. Ultimately, our strategy that has made us successful and 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, focus on acquiring good assets in good regions with good operating partners, and stay focused on generating cash returns for shareholders. Terrence, please open the floor to questions.

Q&A Session

Operator: At this time, I would like to remind everyone in order to ask a question. Your first question comes from Lawson Winder from Bank of America Securities. Your line is open.

Lawson Winder: Thank you, operator, and hello, gentlemen. Good morning. Thank you for the update. I wanted to ask about a few things. So first off, on the Bonaco and Agdal Stream, there was a proportion of revenue in 2024 that was a true-up. And so just trying to think about what was a run rate number in 2024 for those two assets excluding the true-up? And are there any additional true-ups still coming in 2025 for those?

James Dendle: Hi, Lawson. Thanks for the question. Yeah, the true-ups are a relatively small contribution, and obviously, we do not provide asset-specific guidance. So I think you can think about it from the point of view of the overall guidance. There will be a sort of assuming the minimums, which their guidance would indicate that they are marginally, there would be a sort of a lagging true-up every year. So when you smooth that out over the period of the minimum deliveries, it would kind of blend through to being not dissimilar to the production rate they achieve. And as a reminder, those true-ups are settled by the end of January the following calendar year. So you basically have them in Q1. Obviously, there’s a bit of timing with deliveries from the prior year, in any case.

Lawson Winder: Okay. Yeah. Perfect. Thanks for the reminder. Also, I’d ask you 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 Mochito. So you haven’t received deliveries from that asset for a couple of quarters, maybe three or two and a half. Is that asset expected to restart at some point?

Sheldon Vanderkooy: Hi, Lawson. I’ll take that. Yeah. That’s a smaller asset that we acquired as part of the Mavericks 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. 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: And, Lawson, to be clear, we have received deliveries on that in Q3 and Q4 2024.

Lawson Winder: Oh, great. Thank you for confirming that. And then just getting back to one of your bigger assets, just thinking about Buritica. 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 that we can kind of forget about that going forward, or are there still some potential risks that we should think about with that asset in terms of forecasting revenues for the coming years?

Sheldon Vanderkooy: Hey, Lawson. It’s Sheldon here. I’ll answer this one as well. You know, I think the Zijin team has done a really good job on the ground dealing with a difficult situation there. And, you know, this is actually 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 the 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 in 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: Okay. Fantastic. And I could add just one more on the project pipeline or 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?

Sheldon Vanderkooy: Yeah. 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, you know, I love that lithium deal we just did. Part of it is like, Zijin is an operator, large well-capitalized mine coming on in Argentina. And I think the timing and the price cycle 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 will announce will be a gold and silver deal in the Americas, so that’ll 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 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 non-precious, the weighting is definitely towards the precious. There are some non-precious opportunities out there. We’ve always been open that we’d be open to looking at some non-precious 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, you know, when people look at Triple Flag Precious Metals Corp., it’s right in our name, and we’re not changing that.

Lawson Winder: Fantastic. Thank you very much, guys.

Operator: Your next question comes from the participant from Scotiabank. Your line is open.

Cosmos Chiu: Oh, good. That’s me. Thank you. Good morning, everyone. I just wanted to follow up on Lawson’s question. You mentioned, you know, the size, the sweet spot of you’re seeing $100 to $300 million. Are we looking at producing assets in that sort of range, or is this still like development coming in in like five 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: So the things we’re looking at in that pipeline that I’m referencing, there’s actually a mix of development assets and producing assets. It’s really a matter of what fish we get into the boat.

Cosmos Chiu: Okay. And you mentioned a couple of bigger ones greater than $300 million. You know, 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 a Nasdaq could you do a $700 million transaction. Just wondering how big you would go. And would you syndicate?

Sheldon Vanderkooy: So open as a 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 over-concentrated. You know, whether that be a commodity or a jurisdiction or a development or something like that. You know, so we are open in concept to syndication, but we’re not necessarily wanting to go there. Upper end of the range, 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 say 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.

Cosmos Chiu: Okay. And what about corporate transactions? I mean, I say that from just, you know, speaking to generalists. You know, 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: I mean, I guess we’re a little bit unique in that we’ve had the kind of the more recent successful corporate transaction. You know, I think 2024 has been a fantastic year for some of the assets we picked up through the Mavericks transaction, including Kone, Eskay Creek, and others. So we are open to it, but you just really 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 Mavericks, we’re open to it in other cases, but, you know, corporate M&A is not easy, necessarily. We’re open to it, but you just kind of need to find something where all the gates line up.

Cosmos Chiu: Okay. And then maybe finally, just on your $700 million available and also your pay down your debt. So congrats on that, so zero debt. How do we think about the dividend? I think that comes up for a review, I think with Q2 or thereabouts. How are we thinking about the dividend?

Sheldon Vanderkooy: Yeah. 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’s discretion. But no changes anticipated on that. So I would say you should probably expect us to continue our policy or practice of increasing the dividend annually.

Cosmos Chiu: And as I think about, you know, 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, you know, increased dividend.

Sheldon Vanderkooy: Oh, yeah. I mean, the actual amount of cash you need to run this business is very, very low. We tend to keep, like, you know, $10 million on, but, you know, 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, you know, if you’re modeling, I would use somewhere in the $5 to $10 million range there.

Cosmos Chiu: Yeah. I’m just trying to see, Sheldon, what you could do from a dividend perspective plus transactions and kind of still, you know, keep that minimum balance of $10 million and up. Okay. No. I really appreciate those insights. Well, I’ll pass it on to someone else. Thank you so much for taking my question.

Sheldon Vanderkooy: Thanks, Cosmos.

Operator: Your last question comes from Derick Ma from TD. Your line is open.

Derick Ma: Thank you very much. At North Park, early days, there has been a major Tom situation where exploration success for evolution might actually displace what is otherwise higher grade gold tonnage, and that would be subject to your stream.

Sheldon Vanderkooy: Derick, I don’t see any risk of Major Tom displacing anything that, you know, to our disadvantage. Actually, Major Tom’s a really positive development for Triple Flag Precious Metals Corp. 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 Precious Metals Corp.

Derick Ma: Okay. And then on the $35 million precious metal stream you mentioned in your MD&A, just what about Brantford 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: Yeah. That is a bilateral situation, and, you know, I’m hoping that that will close very shortly, and we can talk a little more freely about that. But so it’s kind of 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 opportunity perspective. We are 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, you know, kind of right in the middle of our Venn diagram.

Derick Ma: Okay. Great. Thanks.

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

Sheldon Vanderkooy: Thank you, everyone, for your questions and for joining us today. We are very proud of 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 are right now. The cash flows are very robust. There’s a great deal pipeline, and we are 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.