Earnings Call: Q4 2020

Mar 11, 2021

Good morning, ladies and gentlemen, and welcome to the Franco Nevada Corporation Year End 2020 Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on March 11, 2021. I would now like to turn the conference over to Candida Hayden. Please go ahead. Thank you, Joanna. Good morning, everyone. Thank you for joining us today to discuss Franco Nevada's 2020 year end results. Accompanying this call is a presentation, which is available on our website atfrancovevada.com, where you will also find our full financial results. Paul Brink, President and CEO of Franco Nevada, will provide introductory remarks Sandeep Barana, our CFO, will provide an overview of our 2020 results Ian Gray, our Senior Vice President of Business Development, will provide an overview of the Condesa Blade transaction and Jason O'Connell, our Senior Vice President of Energy, will provide an overview of the Haynesville transaction. This will be followed by a Q and A period. Our executive team is available to answer any questions. We would like to remind participants That some of today's commentary may contain forward looking information, and we refer you to our detailed cautionary note on Slide 2 of this presentation. I will now turn over the call to Paul Brink, President and CEO of Franco Nevada. Thank you, Candida, and good morning. Our tagline is Franco Nevada is the gold investment that works, and we're committed to ensuring it does work For our shareholders, our operating partners and our communities. We're proud of the results achieved in 2020, But we'd like to start by thanking our staff and supporters and the employees and communities at our operating assets for all your efforts And particularly your resolve through the pandemic this year to make the results possible. 2020 was a strong year for Franco Nevada. We received top ESG ratings during the year from Sustainalytics, MSCI and ISS. We were active through the year We're committed to the World Gold Council's responsible gold mining principles And during the year became a signatory of the UN Global Compact and the BlackNorth Pledge. We've also strengthened our The Board and senior management levels by 2025. Our diverse portfolio weathered the impacts of the pandemic better than expected. Despite COVID interruptions at a number of our operations and a strike at Candelaria, we were able to match and even slightly beat 2019 GEO sales. Our energy assets recovered well through the back half of the year, also exceeding our revised guidance. Cobre Panama produced first ore in 2019, but it was early 2020 that it joined Candelaria, Antamina and Antepacay As one of our core long term cash flow generators. On the back of higher gold prices, the portfolio generated record financial results. Our revenue exceeded $1,000,000,000 for the first time. Our EBITDA margin increased to over 80%, and our 4th quarter was our most profitable quarter on record. On the strength of these results, we're increasing the quarterly dividend to $0.30 a share, starting with our 2nd quarter dividend payment in June. This will mark our 14th successive annual dividend increase. The greater than 15% increase is larger than typical. But now that we're receiving full contribution from Cobre Panama, we feel it's well warranted. Our business development team saw good success through the year. Over the last 12 months, we acquired a royalty on the Alpala copper gold development property in Ecuador, a portfolio of natural gas royalties in the Haynesville Shale And a precious metal stream on the Condestable copper operations in Peru. The team was selective about the assets they chose, Patient waiting for the right window in the energy markets and added both to immediate cash flow and long term growth potential. Along with our results, we provided new guidance. We expect strong growth in 2021 leading to another record year. We're guiding to 10% to 15% growth in our business year over year. In particular, we expect increased contributions from Cobre Panama, Candelaria and Antamina And that the recovery in energy prices is sustained. Our 5 year outlook anticipates 20% to 25% growth in our business. We're expecting Cobre Panama ramping to 100,000,000 ton Branham, Musselwhite operating again, expansions at D2S Stillwater and Tasiast And new mines in production, Solaris Norte, Hard Rock, Stibnite Gold and Valentine Lake. Slides 9 and 10 of the deck provide an indication of the contribution of core assets and the timing of the expansions and new mines. There's exciting organic growth in the portfolio coming from the drill bit. The year saw exploration success at many of our assets Detour, Yup'Denton, Guadalupe, Macassa, Malartic, Ballantyne Lake And many others. Much of our long term growth potential is in the form of new copper mines, including Rosemont, Apala, Taka Taka and Nueva Union. The recent Noron investment by Wailu Metals and Andrew Forrest investment vehicle Both wildfire royalties covering much of Ontario's ring of fire. To wrap up, our core assets are outperforming. We have built in growth and tremendous long term optionality. We have no debt, dollars 1,900,000,000 in available capital And are generating upwards of $800,000,000 per year in cash from operations. We have a good pipeline of opportunities and are looking forward to putting the capital to work As the industry returns to building new mines. Last, some advanced advertising. We're planning to host an Analyst Day this year With a more in-depth review of our assets, likely the 2nd week of April, and we'll publish our annual asset handbook and our ESG report at the same I'll now hand it over to Sandeep for his review of the results. Thank you, Paul. Good morning, everyone. As we know, 2020 was not a typical year. As Paul mentioned, a number of our assets were impacted in the first half of the year because of the pandemic. With the steps that our operators and partners took and as the year progressed, we saw our royalty and stream interest return to normal As a result, Franco Nevada ended 2020 with a strong 4th quarter, resulting in record financial results for the quarter and full year. As you turn to Slide 13, you can see how the company performed against the guidance levels that were issued in 2020. The initial guidance provided by the It was 550,000 to 580,000 GEOs sold. Due to the impact on operations of the pandemic, the initial GEO sold guidance was retracted in the spring. Once operations stabilized, the revised guidance was 475,000 to 505,000 GEOs. As the year progressed, our royalties in stream portfolio has performed better than planned with the GEO sold for 2020 being 521,564, easily exceeding the high end of the revised guidance range. With respect to our energy assets, the company had guided to revenue of $80,000,000 to $95,000,000 for the year using a $45 WTI oil price. Again, due to the unforeseen circumstances, the guidance was retracted in the spring. The revised revenue range provided was $60,000,000 to $75,000,000 in revenue. Based on the recovery in energy prices, revenue for our energy assets for 2020 was $91,700,000 which also exceeded the top end of our revised range. I will note that revenue for 4th quarter does include $4,200,000 in revenue related to the Mesa transaction, which Jason will talk to shortly. Turning to Slide 14 and looking at the gold equivalent ounces sold for the last 5 quarters as well as the previous 5 years, You can see that the portfolio continues to perform well. The company sold 147,476 GEOs in the Q4 2020 compared 153,396 in Q4 2019. Although it was lower GEOs than prior year, it was the best quarter of 2020. This strong Q4 closed out the year with just over 521,000 GEOs sold for 2020, a new record for Franco Nevada. Gold ounces represented 75 percent of GEO sold for the quarter and 78% for the year. For the quarter, we had strong performance from a number of key 3 key contributors being Cobre Panama, Antipakay and Guadalupe, who all delivered higher GEOs than expected. Candelaria was impacted by the work stoppage during the quarter, which did reduce the amount of gold and silver delivered. We expect a stronger year from Candelaria in 2021. Our NSR and NPI royalties at Hamlo had another strong quarter, generating $21,600,000 in revenue. We did have a carryover of 3rd quarter revenue into 4th quarter of approximately $8,000,000 For the year, Hemlo generated $70,000,000 in revenue for With the increase in the gold price in 2020, it highlighted the leverage that our net profit interest royalties do have to higher commodity prices. Also on Gold Quarry, the company received 6,123 GEOs compared to the expected 11,250 ounce minimum. For 2021, we expect to receive approximately 6,000 GEOs a gain. 2020 saw continued positive momentum in precious metal prices. Gold, silver, platinum and palladium prices were higher for the quarter and full year compared to prior year. 4th quarter especially saw a rebound in silver prices. Energy prices were not as fortunate as both the WTI oil price and natural gas Slide 16 highlights total revenue for the last 5 years along with the average gold price over the same period. The company's total revenue has Significantly over the period shown. When combining the slightly higher GEO sold in 2020 with the higher average precious metal prices, Total revenue surpassed $1,000,000,000 for the first time. Total revenue increased 21% year over year. As you turn to Slide 17, you will see the key financial results for the company. There are a lot of financial records for the company For the quarter full year, which are highlighted in gold. As mentioned, with the increase in commodity prices, the company had strong revenue growth for the quarter year. And with the margin generation of our business model, there was a significant increase in adjusted EBITDA and adjusted net income. For the full year 2020, adjusted EBITDA was $839,600,000 a 24.6% increase over 2019. Adjusted net income was $516,300,000 a 51.2% increase over 2019, While adjusted net income per share was $2.71 a 49% increase over full year 2019. As 2 of our key contributors for the year were Guadalupe and Hamlo, both of which have minimal book value, this did result in lower overall depletion for the company. Slide 18 highlights the diversification of the portfolio, which we consider one of the strengths and differentiators of Franco Nevada. As shown, 91% of our 2020 revenue was generated by gold and gold equivalents. The geographic revenue profile has revenue being sourced 86 from the Americas with Latin America being the largest. With respect to asset diversification, Cobre Panama was at 13% of total revenue for the year, followed by Ad Tipakay at 12% and Candelaria at 10%. No one asset in our portfolio generates more than 13% of our revenue. The last chart highlights our operator diversity. Our largest exposure to revenue being generated by any one operator is 13%, which is First Quantum who operates Cobre Panama. We are fortunate to have royalties and streams on many properties mined by some of the most reputable mining companies in the world. Slide 19 illustrates the strength of our business model to generate high margins. For 2020, the cash cost per GEO, Which is basically cost of sales less cost associated with the Energy business divided by gold equivalent ounces sold is $2.92 per GEO. This compares to $2.66 per GEO in 2019. This amount will fluctuate each quarter depending on the mix of royalty versus stream ounces. But as you can see at current average gold prices, the company generates significant margins. For 2020, Franco earned a GEO margin of approximately $14.80 per GEO. With our business model, the company sees an immediate financial benefit The other cost component for the company besides cost of sales is our corporate administration costs. Our Board and management are very proud of our focus on cost management. We like to stress the strength of our business model and the scalability. The chart on Slide 20 clearly illustrates our focus on being cost efficient as possible in managing this business. Here we have highlighted our quarterly revenues and our Quarterly corporate administration expenses since our IPO. Since 2008, our revenues have grown from approximately $25,000,000 to an excess of $300,000,000 this quarter. That is a twelvefold increase. This while our G and A has remained fairly stable over this time period. General and administrative costs have averaged $5,000,000 to $8,000,000 per quarter for the last 13 years. For Q4 2020, G and A was less than 2% of revenue. Management believes we can continue to add to our portfolio and grow our business without adding significant overhead to the company. 2020 was a strong year for Franco Nevada as it built on the momentum from 2019. We look to 2021 to continue to build on this momentum. For 2021, we are guiding to 555,000 to 585,000 GEOs sold. This is a 10% increase over the level reached in 2020. The main drivers of the growth are Colbre Panama, We have the mine ramping up and producing at 85,000,000 tonnes per year increased geos from Candelaria as it is running back at normal operations And for Mantamina, where we expect an increase in silver deliveries. We will be receiving our first gold and silver deliveries from the recent Stop late stream to which Ian will speak to shortly. These increases will be slightly offset by lower expected ounces from Hamlo With a lower gold price and lower production on the Intralate plane, we'll reduce profitability. Sudbury will be in production for the full year, but at a reduced rate. We expect to receive approximately half the GEOs we were delivered in 2020. Also, our stream on Karma steps away from the fixed ounces and becomes variable. Guidance has been calculated using $17.50 gold, dollars 25 silver, dollars 1100 platinum and $2,200 palladium per ounce. On the energy side, we expect revenue of $115,000,000 to $135,000,000 using a $55 per barrel WTI price And $2.50 Mcf natural gas price, both of which are higher than what was realized in 2020. This revenue guidance does include a full year revenue from the Haynesville acquisition. As we look forward to 2025, we are proud of the built in growth that the company already has in place. Our outlook for 2025 is 600,000 to 630,000 GEOs sold. Major contributors will be Cobre Panama as it ramps up to 100,000,000 Ballantyne Lake and Stibnite Gold. We do expect Macready West and Sudbury to remain in production at 2021 levels until 20 26. Also, it should be noted that our cap on mine waste solutions is reached in 2024. On the energy side, the revenue outlook is $150,000,000 to $175,000,000 for 2025. This assumes the full capital commitment for Continental has been funded, and it also assumes there is a rebound in U. S. Drilling levels, but not to what they were in 2019. Again, similar commodity prices are used as for 2021. Overall, when you look at the outlook for GEO sold and energy revenue growth to 2025, At current commodity prices, the company has greater than 20% revenue growth over the next 5 years. Obviously, this assumes no additional acquisitions added to the portfolio. With respect to the CRA audit that is ongoing, I'd like to highlight a few items. As normal course, CRA has begun auditing years 2016 2017 for Franco, no proposals or reassessments have been received. We did receive reassessments in 4th quarter related to Penalties and interest for the 2013 to 2015 previously issued reassessments, these were approximately $10,000,000 In our view, these are all normal course. Also, the recent court decisions involving Canadian transfer pricing disputes, including that of Cameco's are encouraging. We believe CRA's reassessments are not supported by Canadian tax law, And we are vigorously defending our tax filing positions and will continue to do so. Slide 23 summarizes the financial resources available to the company when including our working capital of $610,500,000 marketable securities of $191,800,000 Our credit facility is at $1,100,000,000 Total available capital at December 31, 2020 is $1,900,000,000 The company did fund the $165,000,000 Condestable transaction subsequent to year end. Before I turn it over to Ian, I'd like to mention that we have added an interactive analyst center to our website, making it easier to download financial data. Historic financial information has been added and the website is live. And now I will pass it over to Ian. Thank you. Thank you, Sandy, and good morning. We're very happy to announce the closing of Gold and Silver Street for $165,000,000 Over the Conda Sablin mine located in Peru, mine is owned by Southern Peaks Mining, which is a GNRI portfolio company. We're very excited about this opportunity as we see excellent geological potential in the asset, which I'll speak to further in a moment. Conestable has a very long history and has recently grown its in situ global resources to over 90,000,000 tons of M and I On the back of significant drilling and very good geological work. We believe the potential for near mine and depth extensions of these ore bodies is excellent And quite and are quite excited to partner with Southern Peaks on the asset, where we see very good potential for output growth and mine life extension. The mine is currently in the process of expanding to 8,400 tons per day this year and is advancing studies to move to 10,000 tons per day. This further expansion does require some permitting, but we see 10,000 tons per day or more as very likely with time. It's worth noting also that the stream benefits from 5 years of fixed deliveries, which helps de risk any ramp up. While the mine is privately owned and does not have publicly reported reserves, our team is confident that current resources should support a 15 year plus mine plan. Moving to Slide 26. We've shown Conestoga's location in the Andes Copper Belt and the overall concession. As you'll see, the mine benefits from a location 90 kilometers south of Lima. This provides easy access to labor and infrastructure, Which underpins very low operating costs and puts the line in the bottom half of the cost curve. It's worth highlighting that our team sees great parallels here between the deposits geology and the underground at Candelaria, where we saw reserves grow tenfold since the acquisition. The underground Manto and vein mineralization is similar between them and both benefit from excellent geotechnical conditions, which really helps in terms of cost and safety. As part of the deal, we're also partnering with the operator on community development initiatives around the mine. We're very excited to have a positive impact here. Mine has enjoyed good relationships with communities for many years. The stream also cut first 45,000 hectares, Which is a very large land package. Location of the concession is shown on the right hand side of the page. Our team sees this is highly prospective land and I believe there's good potential for more discoveries over time. Moving to Slide 27, We've shown a cross section of the deposits that make up Conestaple. The stream applies to the Conestaple Roll and Vincos mines, which are highlighted on this slide. The key takeaway here is the potential to add more both as depth and along strength. We see good drill indicated upside confirming the large size of the system. This makes us believe the asset should be a good contributor across multiple cycles. Moving on to the next slide, we've highlighted the deal terms. The stream is effective for January 1 and will start contributing immediately. The deliveries are fixed for the 1st 5 years, as I mentioned, and they provide roughly 13,000 GEOs annually through that period. We like the fixed feature given the certainty in the medium term, but we believe that the variable deliveries give us great exposure to the geological upside We expect to see here. The delivery switched to 63% of gold and silver contained in concentrate after year 5, Which we expect to last for roughly another 5 years before it steps down to 25% of the gold and silver for the entire length of mine. We have offered the operator the ability to buy the Stream Down with an advanced delivery for the 1st 4 years. If this were to occur, it would, however, boost our returns and still give us immediate exposure with the 25% Variable stream, which would commence thereupon. It's worth noting that buy down in year 1 is only possible under certain circumstances. Overall, we see this as a very good fit with our model as it maximizes geological optionality on exciting deposit And a large land package, we're mitigating our risk with the initial fixed deliveries. We expect this asset will be a long term contributor. Thank you very much. And with that, I'll hand it over to Jason. Thanks, Ian, and good morning, everyone. In December, we closed a transaction with a private company, Mesa Minerals partners to acquire their portfolio of royalties in East Texas for $135,000,000 The assets consist of about 2,600 and net mineral acreage, which provides for perpetual ownership interest in the land and which is shown on the map on the right hand side of Slide 29. The acreage is situated in the western portion of the Haynesville shale play in Harrison and Panola Counties where the producing formation is at its thickest. The Haynesville along with Marcellus Shale in the Northeastern U. S. Are the 2 most significant natural gas plays in the United States. The Haynesville benefits from its close proximity to the U. S. Gulf Coast, where low transportation costs provide strong underlying economics for operators. Throughout the commodity price downturn in 2020, the Haynesville remained one of the most robust basins in North America The portfolio of royalties we are acquiring was originally assembled by Mesa In partnership with RockCliff Energy. Both companies are sponsored by the private equity group Quantum Energy Partners and that relationship allowed for Mesa to leverage RockCliff's geologic knowledge of the basin and to prioritize acreage buying ahead of RockCliffs drilling program. RockClip is the operator on approximately 75% of the acreage position and they are the leading operator in the East Texas part of the Haynesville. Turning to Slide 30. One of the key attributes of the royalties is that they are generating strong current cash flow. The transaction had an effective date of October 1, 2020. And in Q4, the assets generated $4,200,000 of revenue From the production of 2 Bcf of natural gas. We expect the assets will contribute at a similar level of $4,000,000 to $5,000,000 per quarter in the coming year. Looking longer term, the acreage hosts approximately 700 undeveloped well locations. And for context, last year, there were About 60 wells drilled on our lands. That level of activity will provide for more than a decade of drilling activity followed by a long tail as the wells decline. Along with excellent mineral tenure and strong current cash flow, the transaction is attractive in that it adds to our natural gas weighting, Bringing the balance of the gas in our portfolio to about 35% in the current environment. In addition, it adds increased portfolio diversity from acreage position within a core Of a new high quality basin. That concludes our prepared remarks for this morning. So with that, we'll turn it back to Joanna for any questions from those on the call. Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a 3 tone prompt acknowledging your request. First question comes from Tyler Langton at JPMorgan. Please go ahead. Good morning, everybody. Thanks for taking my questions. I guess just to start on the energy side, I know that the guidance for this year is the $115,000,000 to $135,000,000 growing to the $150,000,000 to $170,000,000 in 2025, should that be somewhat, I guess, of a linear increase over the next 5 years? And then can you just remind us how dependent that revenue guidance is on sort of oil Gas prices? Yes, Tyler, the ramp up in revenue over the course of the next 5 years is Not exactly linear. For many assets, there will be sort of a reasonably steady increase in production, for example, from our portfolio assets in the U. S. For those assets, we're expecting a continued ramp up in drilling activity. So you should see good relatively stable year on year growth on those assets. For our Canadian assets, there's not a lot of growth out of those assets other than increased revenue through better commodity prices. And the other U. S. Asset that has a bit of a step up call it at some point in the next few years will be Continental. We have a structure there within that agreement that allows us to take additional distributions from that partnership Should the company fall short of certain volume targets, we expect that that could occur depending on where drilling rates are within the next 2 or 3 years. So there will be A bit of a step up around 2023 or so. And then in terms of the sensitivity to oil and gas prices? I don't have an exact number to give you. The sensitivity on our Canadian assets is related to mostly the Weyburn NRI where we have We're responsible for our operating and capital costs of that operation. So there is a fair bit of sort of financial leverage there. With the U. S. Assets, there is leverage in the form of drilling rates. And so as prices increase, typically operators will increase Capital that they spend and increase the drilling rates on the acreage. So it's more than a one to one relationship with price, but I don't have an exact Ratio for you at this point. Got you. And then just on the acquisition front, I guess, could you talk a little bit about What you're seeing more recently, I don't know with base metal prices having increased, are you seeing more companies, base metal producers looking for streams on the metal side if they have it or just more precious metal deals, just kind of any color around that and sort of deal size and sort of items like that? Hi, it's Ian here. Yes, I would say the 3 legs of the stool at the moment in terms of deal flow are probably acquisition finance As people start to look at M and A again, seriously, development finance and existing royalties. And in terms of development finance, certainly, byproducts lend themselves well to that. So we're hopeful we'll see some deal flow there. That's what I would point you to in terms of new transactions. Great. Thanks so much. Thank you. The next question comes from Cosmos Chiu from CIBC. Please go ahead. Thanks, Paul, Sandeep, Ian and Jason and the team here, great to see a very strong Q4 and also great to see the dividend increase here. Maybe my first question is on energy as well. It's kind of funny. Sometimes you don't want to talk about it and now everyone wants to talk about it. Jason, I don't know if you have this handy in front of you, but could you maybe remind me what percentage of your revenues Sensitive to the different commodities, I know you have some exposure to WTI, exposure to AECO, exposure to WCS, Exposure to Henry Hub, like what percentage are we talking about based on your revenue? Sure, Cosmos. And I always love to talk In terms of where we have exposure, our portfolio as of Q4 was about 35% gas. Most of that is referenced to Henry Hub. So call it 35% of our revenue would have Henry Hub exposure. We do have a bunch of exposure to natural gas liquids, so that would be propane, ethane, those various commodities. So they're exposed to a different benchmark. And then within the oil side, call it 55% of our revenue as of last quarter. I don't have the exact split, but I'd say it's probably 1 third exposed to Canadian light oil. So that's an Alberta benchmark, probably another 10% exposed to WCS, which is a heavy benchmark in Canada, And then the remainder would be WTI exposure. So the broad buckets are 35% gas, 10% NGLs and 55% or so oil. Great. Thanks. Maybe digging a little bit deeper here. Certainly, back in 2020 with a rising gold price. The NPI at Hemlo did really well, just given that there's more leverage to it. On the energy side, Jason, given the recent increase in the WTI oil, gas prices, is there anything Similar to it, because I know, for example, you talked about Weyburn. Weyburn has a NRI, which is kind of like an NPI. There's also a working interest. Can we expect the same thing happen here in terms of more I don't want to say parabolic, but giving greater leverage Either at Weyburn or somewhere else? Yes. As mentioned, the biggest sort of form of financial leverage is from the Weyburn asset, which It's a good portion of our Canadian revenue. And there we do have direct leverage to increases in commodity prices. That leverage obviously changes depending on what the price is. For example, in the spring when commodity prices were $30 a barrel, we were earning Next to nothing from that royalty. And so every $5 incremental increase in the oil price generated a big lift in revenue. We'll continue to see Good leverage there as oil prices are moving to $65 a barrel or so in today's environment. The other form of leverage, which I sort of touched on a little bit is from the level of activity that's associated with drilling on our U. S. Assets. As commodity prices increase, operators are earning more money, they're putting more capital to work, they're drilling more wells and all that Benefits are royalties. It's just very difficult to give you an exact ratio of how that unfolds. I think in this environment, we saw drilling rates really get reduced in 2020 across North America, I think as prices rebound, we're going to get not only the benefit of higher revenue, but we're going to get the benefit of higher volumes Associated with that increase in drilling. Of course. Maybe more of an accounting question here based on the energy front. Early last year, WTI was negative. And as a result, I think Franco Nevada did about a $200,000,000 write down On the energy portfolio, maybe a bit premature at this point in time, but when would you start considering Taking a look at that, the I guess value of your energy portfolio and potentially kind of writing it back up. Cosmos, Sandeep here. Hi, Sandeep. Hey, we look at it every quarter as we're required to under accounting rules. The big trigger for us will be that sustained capital spend. As Jason alluded to, the spending by operators on the well drilling, Especially in the United States, if that really comes back at significant levels, we'll take a look at it then. But I wouldn't expect a reversal in the near term. Okay. Got it. Maybe switching gears a little bit on the contestable or I just want to get a better understanding of the buyback or buy down right here. My understanding is that if it were to get exercise, say, tomorrow, which I know, Ian, you said It's very restricting the 1st year. So but just as an example, if it gets exercised Tomorrow then, really what happens is that, I would have to figure out the value of 25% of what that's worth And then say over 15 years because in your presentation it says 15 plus years. And if I were to come to a value and I did yesterday in my note I'll say $90,000,000 based on spot. We essentially have to add that $90,000,000 to $119,000,000 that they have to pay you. So over $200,000,000 For something whereby you paid $165,000,000 for. I guess my question is, is my understanding correct or is my concept here correct? And number 2, if that's the case, then is the conclusion that it would be fairly expensive for the operator to buy it back? Is that correct as well? Hi, Cosmos. Yes. Hi, Ian. So the exact buyback amount is $118,750,000 and yes, they would have to deliver that Value of gold to us, it would be subject to the same 20% transfer price or delivery costs For those ounces, so you would net that off. And yes, it would be 25% stream would then commence immediately. And so you have to value that. So I think you're looking at it the right way. But perhaps we just need to count the 20% transfer price on what gets That's a part of the buyback. For sure. And then maybe as a follow-up here, Buy downs, I think Frank and Nevada never really liked to dabble in buy downs in the past. And I'm sure that's not ideal at this point in time as well. But given the current dynamics of the environment, Is this now sort of like a ticket to entry? Should we look at it that way or is it just on a case by case basis? No, I don't think so, Cosmos. There are certain circumstances here which made it particularly important in terms of having this as a feature that was salient. And so for us, optionality is key. We have the full land package, which is really important, The stream in a size such that our optionality is right over time and we're not giving up too much of that. So we have to balance that out versus what the operator is looking for. You have seen more of these things, But certainly not something we strive to do. Of course. Thanks a lot. Those are the questions I have. Thanks a lot once again. Thank you. The next question comes from Greg Barnes at TD Securities. Please go ahead. Thank you. Sandeep, just trying to understand what we should be thinking about Hemlo now. You said we should expect lower revenues in 2021. Is there any way to give us some kind of framework we should think about going forward? So I will give you our range, Greg. I think And it will be a wide range, but I think between 20000,301,000 GEOs for 2021 Based on current commodity prices and what we know of the mine plan at AMLO for Intralake, that it will be in that range. I know it's a wide range, but That's what I can tell you at this stage. And do you have enough visibility to guess, I suppose, at what happened Post-twenty 21? We do. We do. It will tail off over time. And I think 2021, 2022 will be similar in terms of production on our claims. And then starting 2020 3, it will start to tail off and carry on every year at a lower rate. Okay. And how big will be the tail off? At these prices, I would estimate about 10,000 GEOs a year. Okay. Perfect. Thank you. That's it for me. Thank you. The next question comes from Carey MacRury at Canaccord Genuity. Please go ahead. Hi, good morning everyone. Maybe in the similar veins, Andy, you mentioned Macready West production going through 2026. And I know your guidance for 2021 is lower than 2020, but just on that particular stream, what we should expect maybe over the is there a number we can use over the 5 year period? Sure. So I think for 2020, we did about 21,000 geos. We'll do half of that For 2021, that's our estimate. And we see that just being carried through to 2026 at this stage. Okay, great. And then maybe 2 more questions. So I guess on Gold Quarry, it's transitioned from the minimum. Just wondering is that Planned or sort of what how that came about? And secondly, on Antipakay, obviously, a record quarter. Was some of that sort of carry Through from Q2, Q3 or is that relating to Q4 production? Sure. So on Gold Quarry, yes, The annual minimum is $11,250 We did expect that to drop off starting in 2022, so it's a year ahead of schedule. So we did about 6,000 GEOs. We'll do about 6,000 for 2021. And then post-twenty 21, right now, our estimate is $13.50 going forward. However, the caveat with that is how the reserves change at Gold Quarry. So there's certain laybacks that if they get included, the reserves will increase when our minimum will go back up. So those are the numbers at this stage. But as we get more information from the operator, the minimum could change. And then with respect to Anza sorry, Anza Pekai, yes, it had some carryover of deliveries from Q3 or production from Q3 into Q4. Okay, great. And then maybe just one question on the new I'm not going to try to pronounce it in Peru, but just thinking about the mine life that you guys talk about a sort of 15 year sort of planning mine life, but Based on the resource base, it looks like there's more than 40 years there and obviously it looks like it's still open from exploration. So I'm just trying to understand The context around 15 years in terms of my life potential. Dan here. Yes, there is a very large resource base there. It's one of the things that we really like about the asset. In terms of the immediate mine life, Obviously, you have to look at what is highest level of confidence around it in terms of that resource which we provided. And so that's how we come up with that. We think there will be very long and fruitful mine life. The asset It has been operating now in some capacity for over 50 years and continued good drill results. And how we look at it, yes, we do see the potential for life well beyond that. Great. That's it for me. Thanks, everyone. Thank you. The next question comes from Brian MacArthur at Raymond James. Please go ahead. Hi, good morning. A lot of my questions have been answered, but maybe going to another stream here. Just on the restructuring of Sabiola, it talks about $105,750,000 cumulative. Is that from September 21st or is that like day 1 exactly how does that one work now And then what's the 6% true up based on the time period now or what you would have seen before? Yes. So what happens with Sabodala is there's a fixed delivery profile, Which continues as outlined and there's quite a bit of detail in the MD and A. So they continue to deliver through to that total ounce threshold and at the end of that threshold, you have a look and say, okay, how much actually came from Sabodala Versus if you would assume the 6%, which is what the stream went to anyway versus what came from elsewhere Dean, Maslow. And then effectively what would happen is if there was a lot of displacement from Maslow, which It's likely that we will go on hiatus and the 6% won't start again until they've caught up to that cumulative amount With production from Sabadell. So I mean you're starting I'll take that further in more detail offline as well, if it would be helpful. Okay. Maybe I'll do that. Thank you very much. Next question comes from Tanya Jack Ushonek at Scotiabank, please go ahead. Yes. Good morning, everybody. Just a couple of questions. I'm going to start On Antipakai, if I could. And just turning on to the Koryowakko project, The scope and the timing, I just wanted to ask, number 1, what changed there? And number 2, is it still included in your 5 year guidance I think it was last year. Hey, Tanya, it's Paul. The Socorico, the And Andapakai, it is an additional deposit. It's a Skon deposit. It's about 3 quarters the size of Andapakai itself. Glencore have been planning to develop it. The plan they work on was a combination open pit underground, Mostly on the ground. We limit the footprint. They have had some success with the community there. Believe now they can build a mine with a bigger footprint and so can make it largely an open pit mine. So they are back to the drawing board on the asset, looking at that bigger mine plan. So there's good and bad news there. It means over time more metal, But they have moved it back in terms of the timing. We expect it's more likely to contribute at the back end of the Atavacay mine plan. Okay. So it's not in your 5 year guidance? It doesn't impact our 5 year guidance. We expect that all that production is from Anupakay. Okay. And then maybe just turning over back to Combi stable guidance that you provided this morning. Does the higher end of the production guidance range assume expansion to just 8,400 tons a day or 10,000 tons a day? Hi, Tanya, it's Ian. Yes, so the bottom end of the range is closer to the 8,400 tonnes per day And the 10,000, I believe, would be more towards the middle end of the range. As I said, we see good potential there to increase further with time given the size Okay, perfect. Thanks. And then just turning on to the energy portion. I'm just trying to understand a little bit your guidance for 2021. We have seen significant You're showing significant growth in existing assets despite the big CapEx cuts that we've seen and most Operator seem to be aiming for flat rather than growing production. So what are you assuming in terms of operator CapEx increases relative to your Yes, Tanya. For 2021, we're assuming a modest improvement over what we saw this year. There was a lag in 2020. If you recall, at the beginning of the year, oil prices were still reasonably strong And operators, we're still carrying out a fairly robust level of drilling. And so what happened is 2020 had kind of, Call it half of a normal year and then half of a very depressed year. For 2021, we're assuming a continued rebound, Still not to the levels that we saw though in sort of pre COVID, pre OPEC shock levels. Okay. And then maybe just on your just transaction wise, you talked about What you're seeing out there in terms of acquisition finance, development and existing royalties? Maybe just Sort of the size of the transactions, number 1. And number 2, can we see you do more in the oil and gas space? So Tanya, in terms of pipeline, it's a good pipeline. As Ian mentioned, the combination there of New mines and acquisitions, so I'd say those are most of the themes. On the energy side, very happy to add the Haynesville here. We continue to look. Although I'd say in terms of what's active at the moment, most likely precious metal and also other metals is the high likelihood through this year. And are we looking still in the range of a couple of $100,000,000 to $500,000,000 $5,000,000 range? Yes, I'd say everything in the pipeline is meaningful to move the needle, but also not so big that it would And also for the assets that increase our diversification. Okay. Thank you very much. Thank you. There are no further questions. I will now turn the call back over to Candida Hayden for closing remarks. Thank you, Joanna. We expect to release our Q1 2021 results after market close on May 5 with the conference call held the following morning. Thank you for your interest in Franco Nevada. Goodbye. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.