Earnings Call: Q4 2018

Mar 20, 2019

Morning, ladies and gentlemen, and welcome to the Franco Nevada Corporation Q4 2018 Earnings Announcement. 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 Wednesday, March 20, 2019. And 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 2018 results and company outlook. Today's presentation will be a little longer than our typical conference call as we are providing an update on many aspects of the Franco Nevada portfolio. Accompanying this call is a presentation, which is available on our website at franco nevada.com, where you will also find our full financial results. Sandy Barrena, our CFO, will provide a brief review of our 2018 results, followed by Paul Brink, our President and COO, who will provide a business development update, followed by Jason O'Connell, our VP, Energy, providing the energy guidance and David Hartwell, our CEO, discussing the company's outlook. This will be followed by a Q and A period. Our entire management team is present to answer any questions. Before we begin formal remarks, 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 Sandy Brenna, CFO of Franco Nevada. Thank you, Candida. Good morning, everyone. As we look back at 2018, there are 2 main items which impacted the financial results of the company for the year. First being Candelaria with the processing of lower grade ore from stockpiles resulted in lower precious metal deliveries to the company, which impacted the amount of gold equivalent ounces sold. And the second being the strong performance of our energy assets due to higher oil prices and increased production from our royalties. As you turn to Slide 5, you can see how the company performed against the guidance levels that were issued for 2018. The initial guidance provided by the company was 460,000 to 490,000 GEOs. We had guided to lower deliveries and sales from Candelaria for the year due to the pit slide that occurred in late 2017. With the processing of stockpile ore, we were expecting a reduction in gold and silver ounce deliveries in 2018. As the year proceeded, we realized that the deliveries would be lower than initial estimates and we revised our GEO guidance to 440,000 to 470,000. The GEOs earned for 2018 were 447,902, which is within the revised guidance range. The processing of lower grade stockpile at Candelaria is only a timing issue. We look forward to increased deliveries in 2019. The asset has been a great addition to our streams as the gold reserves have increased 100% since the asset was acquired in 2014. With respect to our energy assets, the company had guided revenue of $50,000,000 to $60,000,000 for the year using a $55 per barrel oil price. Based on higher production at our assets and higher WTI prices, the company raised energy guidance twice during the year with Q3 2018 revised guidance being $75,000,000 for 2018 is $86,100,000 which exceeds the top end of our guidance range. Overall, 2018 was a good year and we look forward to a stronger 2019. Turning to Slide 6 and looking back at the gold equivalent ounces received for each of the last 6 years, can see that it has been a significant increase from 2013. We've increased from approximately 250,000 GEOs in 2013 almost 450,000 GEOs in 2018, an increase in excess of 80% over this period. Slide 7 illustrates the movement in GEOs from 2017 to 2018 and how the reduction in gold equivalent ounces materialized. As you can see from the chart, the largest decrease in geos is from gold assets, of which Candelaria is the largest component. As mentioned, Franco Nevada received less gold ounces due to stockpile ore being processed. Our gold stream on Guadalupe also delivered lower gold ounces in Q4 2018 and full year 2018 due to less mining occurring on Franco Nevada stream lands. This was expected in the year and will continue into 2019. Our silver assets delivered lower ounces with Antamina coming in below 2017 levels, but this was anticipated based upon the mine plan we had received in late 2017. On a positive note, the company did have strong performance from our gold NPI assets, Hamlo and Goldstrike in particular. 2018 saw another volatile year for commodity prices. As you can see on Slide 8, there was a mild recovery for certain prices. The gold price average was slightly lower quarter over quarter and relatively flat year over year. The biggest gainer for the quarter, the Q4 2018 was the palladium average price, while both palladium and the WTI oil price were the largest positive movers year over year. Slide 9 highlights our gold and gold equivalent revenue for the last 8 years along with the average gold price over the same period. The company's gold and gold equivalent revenue has decreased in 2018 compared to 2017. When combining the lower GEOs earned in the year with the lower average commodity prices, the gold and gold equivalent revenue was $567,000,000 compared to $628,000,000 in 2017. However, energy revenue had a significant increase year over year, increasing from $47,000,000 in 20.17 to $86,100,000 in 2018. As you turn to Slide 10, you will see the key financial results for the company. I won't get into the detailed numbers, but I would like to highlight a few points. For Q4, the company earned a net loss of $31,300,000 This is due to an impairment being recorded on our Sudbury streams, Levac Morrison and Podolsky in particular. The amount of the impairment was $75,400,000 for these two assets and $76,000,000 in total impairments. KGHM, the operator announced in early 2019 that it would be placing the Morrison mine on care and maintenance effective March 31, 2019. Franco Nevada reviewed the carrying value of the Morrison and Podolsky mines and determined an impairment was justified. Although KGHM has decided to place Morrison on current maintenance, it has restarted the Macready mine. We expect Macready to replace the gold equivalent ounces Morrison would have delivered in 2019. Also, please note that as part of the Macready restart, Franco Nevada has agreed to adjust the fixed cost per ounce to $800 per GEO effective immediately. This new ongoing cost will be in place until December 31, 2021. For the full year, although the number of GEOs earned in 2018 was lower than 2017 and mining revenues were lower, with the mix of royalty versus stream ounces and the increase in energy revenue, adjusted EBITDA was higher year over year. $519,600,000 compared to $516,100,000 in 20.17 as well adjusted net income was also higher year over year. On Slide 11, we provide a breakdown of our revenue by commodity and geographic location. You can see that 87% of our full year revenue was generated by gold and gold equivalents in 2018, with gold being 67%, silver 12%, PGM 6% and other mining 2%. The geographic revenue profile has revenue being sourced 81% from the Americas, with Latin America being the largest component. Slide 12 highlights the diversification of our asset portfolio. The first chart highlights that only one asset contributed more than 10% of our adjusted EBITDA for 2018. Our top three assets in total generated 32% of our adjusted EBITDA, a clear illustration of our diversification. And the second chart highlights how adjusted EBITDA is distributed from a legal ownership perspective with no legal entity accounting for greater than 40% of our adjusted EBITDA. Slide 13 illustrates the strength of our business model to generate high margins. For 2018, the cash cost per GEO, which is cost of sales less depletion and oil and gas costs divided by gold equivalent ounces, is $2.39 per geo. This compares to $2.65 per geo in 2017. 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. Slide 14 summarizes the dollars dollars to partially fund the Continental Oil transaction. That drawn amount is still outstanding. The company has $890,000,000 available on the facilities to use for future transactions. When working capital and investments are included, the company currently has $1,200,000,000 of available capital. Before I turn it over to Paul, I would quickly provide an update on the CRA audit underway. As you know, the company has been reassessed with respect to its income earned 13. The amount of this reassessment is approximately $14,000,000 The management does not agree with this reassessment. The company has paid taxes at 30% in Mexico and thus will be filing a notice of objection against this reassessment. In addition, if required, we may seek relief under the Canada Mexico Tax Treaty, which calls for companies not to be double taxed. Also, please note that the company has not been reassessed for any additional years for our Mexican income. With respect to our other jurisdictions where the company carries on business, CRA still continues to carry on its audits. No formal issues have been raised. And now I will turn it over to Paul Brink. Thank you, Sandip, and good morning, everyone. Over the last 3 years, we've been investing in growth at Franco. We've contributed our 1.36 $1,000,000,000 portion alongside First Quantum and Kores of the more than $6,000,000,000 construction of Cobre Panama. In February, the project reached an exciting milestone with first ore processed through the mills. Page 16 has a photo of the opening ceremony attended by President Farella. The required pre strip is now completed. The tailings management facility earthworks are 87% complete. The second power unit is in full commissioning and was synchronized to the grid in January. Process plant commissioning and testing are ongoing. First Quantum recently provided guidance for the year and ramp up through 2022. Shown on the chart on Slide 18 is a bar chart of the expected production of copper and concentrate. You'll recall that the amount of gold and silver attributable to Franco is indexed off the copper and concentrate. In 2019, that amounts to just less than 60,000 ounces of gold equivalent assumed using the midpoint of the expected copper production. Deliveries to Franco are due when the operator receives payment for concentrate sales. And as a result, our deliveries will lag a couple of months the production of concentrate due to inventory build, the timing of shipments and the timing of payments for those shipments. We've included in our guidance for 2029 an estimated 20,000 to 40,000 ounces from Cobre. In the following years, deliveries to Franco should more closely approximate the production. Turning to Slide 19, we've recently added a couple of royalties to our portfolio. The first is a 2% NSR on Goldfields feasibility stage Solaris Norte project. Solaris is a high grade open pit gold and silver deposit in Northern Chile. The royalty was purchased from a 3rd party for a total of $32,000,000 and has an existing buyback right where Goldfields can buy back 1% of the royalty for 6,000,000 dollars The feasibility study indicates 11.5 year mine life producing 450,000 ounces of gold equivalent per year for the 1st 7 years. Goldfields is targeting construction starting in late 2020. Grades are very attractive at this deposit for an open pit at 5.1 grams per ton of gold and 57.9 grams per tonne of silver. The strip ratio is 13.9:one. The resulting project margins and returns are very strong. We believe there's great potential for additional epithermal systems undercover on the land package. Many of you would have seen Marathon Gold's announcement in February of our acquisition of a 2% NSR on their Valentine Lake deposit for CAD18 1,000,000. Rathen can buyback 0.5 percent for CAD7 1,000,000. Valentine Lake is an open pit gold project in Central Newfoundland. M and I mineral resources totaled 2,700,000 ounces of 1.9 gram per tonne of gold and inferred mineral resources of 1,500,000 ounces of gold at a similar grade. Marathon will use the proceeds of the royalty financing to complete a pre feasibility study that's targeted for the end of 2019. The property covers 240 square kilometers and has excellent upside potential, both to expand the existing deposits and a long strike. The company has yet to explore some areas of the strike extent because of lack of access. Turning to our more immediate growth drivers shown on Slide 21. We've invested over $2,000,000,000 growing the business in the last 3 years, principally on Cobre and also adding to our energy assets. These are 2 biggest growth drivers over the next 5 years. Candelaria will also return to milling ore and making a full contribution in the second half of twenty nineteen. We're also expecting good organic growth from the broader portfolio, both from expansions at existing mines and from new mines. Over the next 3 years, we'll get the benefit of expansions at Tasiast, Subika and Stillwater. We'll also be receiving royalties from a number of new mines, Yamana Cerro Moro, Pretium's Brucejack and Victoria's Eagle Mine. Endeavour announced yesterday, 4 months ahead of schedule, 1st gold pour from the ETCIL project. There are good list of developments we believe are highly likely to proceed in the next few years. Rosemont is at the top of the list having just received its final permits. Other operations where we're expecting near term developments include the Curacaoico deposit at Glencore's Antipakai operation, Premier and Centerra's hard rock project and the next phase of Premier and Barrick's South Arturo mine. The oil and gas assets we've been acquiring in the U. S. Will be strong growth drivers. Many of the properties underlying our royalties in the Permian and the SCOOPSTACK will move to full field development over the next 5 years. In addition, a large portion of the royalties we have acquired in our joint venture with Continental are included in Continental's drill plan over the next 2 years, providing good visibility and growth in the shorter term. Our business has experienced different ways of growth over the last decade as shown on slide 22. Recently, we've taken the opportunity to add to the energy side of our business. This was initially through buying royalty packages, although we have now created a new way to grow in this area with an innovative structure to partner with operators to buy royalties. We're also seeing good opportunities to add both precious metal assets and other mining assets to the portfolio. 2019 should be an active year, both for Ian Gray who's running the mining side of our business development and for Jason O'Connell who's running the energy side. That completes my comments and I'll hand over to Jason who'll give an update on the energy portfolio. Jason? Thanks, Paul. I'll start off on Slide 24 by providing a quick overview of our energy assets and how they've been performing. Our legacy Canadian assets continue to perform very well. These are generally long life, low decline assets, which have provided consistent production for many years. Weyburn represents a significant portion of our Canadian asset revenue. Through contributions from our net revenue interests, working interests and royalties, the asset comprises about 75% of Canadian revenue. Because a portion of our waybron revenue is derived from a net profit interest and revenues are recorded net of cost, there is increased revenue volatility from changes in capital spending and commodity price. Toward the end of 2018, revenues were impacted by increased capital for new wells and from a widening price differential in Western Canada. These factors are expected to normalize in 2019 as the oil market regains balance and capital at the operation is reduced. In the U. S, our assets had a strong year as operators continued development of our land base. This trend is expected to continue as those operators evolve to pad drilling and a more efficient approach to manufacturing development. As an example, Encana is now a significant operator of our STACK acreage following their recent acquisition of Newfield Exploration. Encana plans to adopt their cube pad drilling technology in the play, which should more rapidly develop our lands. The U. S. Assets also benefited from lease bonuses this year, which are derived from leasing at our lands and our acreage to operators in exchange for a one time upfront payment in addition to the ongoing royalty. Our newest contributor to the energy portfolio is the Continental Royalty Acquisition Venture, which closed in the Q4 of 2018. While the venture is still in its early days, we are very encouraged by Continental's success at acquiring New Acreage. Due to a favorable rate of acquisition in bringing our total investment at year end to 261,800,000 bringing our total investment at year end to $261,800,000 Franco's remaining commitments totaled about $258,000,000 and that would be spent over the course of the next 3 years. Importantly, the venture has been able to acquire acreage such that we've been establishing a significant royalty concentration underneath Continental's drilling schedule and in particular under the company's Project SpringBoard. Schematic of Project SpringBoard is shown on the right hand side of the slide and provides a good example of the pad drilling efficiencies that are evolving in U. S. Shale. SpringBoard is a massive multiyear project covering 73 square miles, but the reservoirs are being developed in rows to maximize efficiencies through the orderly sequencing of drilling and completion activities. Continental is currently allocated 12 rigs to the area, which are targeting 3 distinct reservoirs at depth within a concentrated land position. This development is expected to effectively triple Continental's production in the project area by the Q3 of this year. That volume growth will translate into increased royalty revenues for Frank Nevada, where we will benefit from a full year of contributions in 2019. Slide 25 provides detail on our updated energy revenue guidance. The chart on the right shows revenue from the energy portfolio going back to 2014. Revenues have nearly tripled from a low of $28,000,000 in 2015 to $86,100,000 in 2018 as a result of both improved commodity prices and the addition of assets over the course of the last 3 years. For 2019, we are expecting revenues of between $70,000,000 to $85,000,000 Positive factors driving the change from 2018 actual revenues to the 2019 guidance include a small increase in Canadian production volumes going to our Orion asset, which continues to ramp up capacity an increase in our U. S. Royalty volumes from the continued development of our acreage in the Permian and SCOOPSTACK and the addition of a full year of revenue from our assets acquired to date by the Continental Royalty Acquisition Venture. Those positive factors are offset by an approximate 15% drop in commodity prices from the 2018 average realized price down to $55 per barrel WTI, which was used in our 2019 guidance. In addition, there is an absence of budgeted lease bonuses in our 2019 guidance. While there is bonus revenue that may occur, it's highly unpredictable and therefore not included in our guidance. And lastly, we recorded some revenue in 2018 that was attributable to prior periods and that was not included in our 2019 guidance. Our 5 year outlook for energy includes significant growth in revenues from to $140,000,000 to $160,000,000 assuming a $55 per barrel WTI price. The increase in revenues is driven primarily by continued growth from our U. S. Shale assets as well as a significant increase in revenue going to the Continental Royalty Acquisition Venture. Note that the revenue outlook assumes the full deployment of our capital commitments to the venture over the course of the next 3 years. And with that, I'll turn it over to David. Thank you, Jason, and good morning on this 1st day of spring. I'm going to build on what Sandy, Paul and Jason have presented and provide you with the overall outlook for Franco Nevada. First, Slide 27. This is a snapshot of Franco Nevada's performance over the past 11 years. Sandeep has walked you through the one off factors for the dip in GEOs and revenues in 2018. I'll be showing you that beyond 2018, we're expecting a return to our longer term secular growth trend for at least the next 5 years. More importantly, adjusted EBITDA, adjusted net income remained close to record levels. That is the lifeblood of our company. I'm also very proud of the team here and how efficiently this portfolio is being managed. G and A was even lower last year and is less than 20 basis points versus the value of the assets that we manage. We are more than twice as efficient as the GLD Gold ETF. I feel that our absolute G and A spending of less than $25,000,000 compared to our peers is even more impressive when you consider that we are in both the mining and energy businesses, which require separate teams. But what I'm most proud of is our dividend track record shown on Slide 28. Some companies highlight their yields. I like to point out how much we are paying in absolute dividends. We paid close to $180,000,000 last year and have now paid out over $1,000,000,000 since our IPO. I'm highly confident that we'll be able to announce our 12th consecutive increase to our dividend at our upcoming AGM in May. Our Canadian IPO investors are now receiving an 8% yield on their cost base. On Slide 29 is our 2019 guidance. I won't belabor the GEO and energy detail, which you've already received. However, I need to bring to your attention the depletion numbers highlighted in yellow. We are not perfect. These numbers are better estimates for your projections versus what we issued yesterday. On Slide 30, it presents our 5 year outlook for to 2023. Again, the backing for all of this is our disclosure. Slide 31 gives you a better perspective of both We expect our EBITDA to grow by over 35% in the 5 year period to 2023 even if we don't buy another thing. I expect we'll do much better. Note that we do not convert our energy revenues into GEOs. If we did, then our outlook for 2023 would be over 700,000 gold equivalent ounces. That gives some perspective of what energy is contributing to our overall business. On Slide 32 is an update on our royalty ounces. Many of you will recall, we used to call these royalty equivalent units. While a lot of analysts like to focus on how many ounces are produced in any quarter or year, I like to look at how many ounces are yet to come, net of any cost such as stream payments. Essentially, we measure royalty ounces as effectively our future cost free ounces, multiplied by a gold price assumption and gives an idea of our undiscounted future cash flow. We don't need to worry about overheads or cash taxes as these are more than covered by our energy business. What I find very encouraging is that our overall inventory of royalty ounces continues to grow both in absolute terms and on a per share basis. What is happening is that our operators continue to add more ounces to our properties. Assets such as Candelaria and Guadalupe now have more than twice the contained precious metals than when we bought our interests. This tells me that the long term value story for Franco Nevada is getting even stronger regardless of what was produced in a particular period. Slide number 33 is my final one. It highlights the availability on our website as of just a few hours ago of our 2019 asset handbook that gives you supporting data for our royalty ounce calculations. We put a lot of work into this. It was posted just now, so it's the freshest snapshot of our company. We've also posted for the first time a separate ESG report as we know that's important to our shareholders. I encourage you to take advantage of this disclosure. We have our entire executive team available today. I would like now to turn it over to the operator, and we're happy to take your questions. Thank And your first question is from Chris Terry from Deutsche Bank. Please go ahead, Chris. Hi, David, Paul and Sandeep. Thanks for taking my questions. I have 2 this morning. The first one relates to 2019 guidance, 465,000 to 500,000 GEOs for the year. I just wondered if you could talk a little bit to the quarterly progression and the 20000 to 40000 ounces expected from Cobre Panama when we should expect the first ounces to come through? Is that second half? Or is there something in the second quarter there? And then my second question is just around the opportunities you've mentioned for 2019, particularly on the mining side. Just interested whether those relate to greenfield projects, brownfield, whether it's the consolidation that we've seen within the gold space recently or divestments, etcetera, if you could just talk to that in a little bit more detail? Sure. I'll take the first question and then I'll go to Paul for answering the second one. With respect to the guidance for 2019, you'll see more ounces come in for the second half of the year. Obviously, Candelaria, as we've mentioned, is going to resume normal operations in the second half of this year. So you'll see an uptick there. And then Cobre Panama. As Paul mentioned, we're not completely sure on timing, but there's potential to receive some gold and silver ounces towards the end of second quarter. And from there, it should ramp up towards the end of the year. But if you wanted to know quarter by quarter, the weighting is more towards the second half of the year than the first. Chris, on the outlook in terms of business development, the seeing a good pipeline and a good range of opportunities in the pipeline. So some of that on the gold side is principal gold streams and gold assets. Some of that is looking at byproduct streams on gold streams on byproduct assets and also a combination of greenfields and also some brownfields opportunities. Also seeing some opportunities that are mining opportunities, but non gold opportunities. So it should be an active year. Okay. Thanks, Paul. Is there any clues on the type of jurisdictions you're looking at there? Thanks. Nothing different from the usual spread in the portfolio. We like to try and keep most of our money invested in good mining countries. Thanks guys. Thank you. Your next question comes from Greg Barnes from TD Securities. Greg, please go ahead. Jason, can you give us some idea what the lease bonus payments were in 2018? Yes. In 2018, they were a little bit over $3,000,000 And as I mentioned in my comments, lease bonus revenue may occur again in 2019, but it is something that is unpredictable as to when different operators will look to lease out our land. So it's not something that we're comfortable putting in our guidance. Okay. Then secondly, on Slide 24, that schematic you provided on the I can't remember what it's called. Anyway, the increase in production that Continental is expecting, how is that going to impact you in terms of revenue? That should significantly increase our revenue over the course of the year. It's not a one to one relationship. We have royalties that cover Continental's really their entire operator position and the schematic that you've seen and the production rates that are mentioned on the slide are just one small part of their overall production base. But in general, what you should expect from our Continental assets over the course of the year is continued growth. And Project SpringBoard is an area where we have been really concentrating our acquisition. So it's going to be a big part of that growth driver. Is there a way for you to provide us a breakdown in the oil and gas revenue by Canada versus U. S. Versus SCOOPSTACK versus the other regions that you're doing it, some kind of way we can track how this revenue is growing from these various regions or changing from these various regions? Yes. We do in our asset handbook break it out into different areas. And so you'll be able to see Canadian revenue there broken out into Weyburn and the rest of Canada. You'll also be able to see our U. S. Revenue broken out into Oklahoma, which is our traditional SCOOPSTACK assets Texas, which is our Permian assets and then the Continental royalty acquisition venture. So if you look into the asset handbook, you'll be able to see how those revenues are evolving over time. Okay. Well, we'll do that when you have a chance. Thanks. Your next question comes from Josh Wolfson from Desjardins. Please go ahead, Josh. Thank you. Thanks for providing Slide 18. It helps us, I guess, model out the gold production for Franco. With regards to the Cobre Panama, I guess, difference between production and deliveries to F and V, what would that factor be after 2019? Josh, I expect it'll be less. You've obviously got to carry over year on year. But as the production rate of the asset is ramping up, you're still going to have a little bit of a lag. So I'd expect a bit of a lag in 2020, but obviously much less than we've got in 2019. Okay. And then just I guess with regards to I guess potential investments that are being evaluated, A number of other royalty companies or other competitors have sort of attempted to become one stop shops and even some public entities are relaxing constraints, it seems lending and participating in equity. I guess, what's Franco's view in terms of looking at other sort of financing options when consummating transactions to stay competitive in the market? It is a big issue in the market. No surprise to anybody that the constraint on mines getting financed in this market really is the lack of equity capital. And so there are a number of mines sitting on the sidelines because people can't raise the full financing package. Our approach to that is to try to be to partner with other providers so that we can provide a seamless package as possible to an operator. But we're still our model has always been we're a passive investor in these properties. So we don't want to be all of the capital that's provided. And so we're I think we'll stop short of doing anything that's like a one stop shop. Okay. But it sounds like Franco would be somewhat I guess in the past it has invested in equity, but it would somewhat relax constraints to provide other sort of forms of financing? Yes. And looking at our deals, often the conversation we have with people is the in doing a transaction, the bulk of what we need to receive in the transaction is a royalty or a stream where we can help with other pieces of the capital structure For some of the juniors, we've offered up to say we could provide a bit of equity as a lead order in an equity financing if that's what they want to do alongside a royalty deal. So we want to be creative in helping them to raise the full amount of equity or full amount of capital without exposing ourselves too much to the other elements of the capital structure. Great. Those are all my questions. Thank you. Thank you. Your next question is from Carey MacRury from Canaccord. Please go ahead Carey. Hi, good morning. Another question for Jason on the oil and gas side. The 5 year guidance is to get to $140,000,000 to $160,000,000 in oil and gas revenue. Just wondering, given decline rates, how sustainable is that number? And is there an attributable reserve number that we can compare their production rates against in terms of thinking about the ultimate reserve life of these assets? Thanks, Kerry. The reserve life on most of these assets is quite long and the sustainability of that 5 year number should be on the order of probably a couple of decades. It's comprised of our Canadian assets where again Weyburn is the biggest contributor there. Weyburn is a fairly long life asset. It's got another at least decade in front of it at current production rates and thereafter will slowly decline. That will be offset by our Orion asset, which will continue to grow and be a steady contributor for many decades. In the U. S, what we expect to see there and what you'll see in the 5 year guidance is a ramp up of production over a 5 year time period. That will hopefully continue to ramp up as those fields are continually developed. And those should again be producing for many years to come. There's a huge amount of drillable inventory in the assets that we've acquired. And so as those assets are drilled out, they will continue to produce revenue for 10, 20, 30 years. So we don't have a formal reserve to give you, but they are those 5 year outlook numbers are very sustainable over a long period of time. And just on the reserve, is that something that you have internally? Or is it like how do you get comfort on valuing these assets over the long run? Yes. When we value the assets, we do have internal reserves that we run on the assets. We have separate reserve initiatives that we do for our Canadian assets from time to time. And then on our U. S. Assets, we have technical input into how those reserves are calculated. We used to publish reserves for our Canadian assets when they were more material to the company, but we stopped doing that a couple of years ago just because the various energy assets individually were no longer material to the overall company. And then maybe one question on taxes. In light of the Wheaton settlement and the CRA auditing your financials or taxes. Has there been any discussion with the CRA post the Wheaton settlement? No. All we've received, as mentioned, is the reassessment on the income, which they are saying is should be taxed in Canada, and we're dealing with that through filing a notice of objection. With respect to the other jurisdictions, the audits are ongoing and nothing has been raised at this time. And I assume there's nothing to infer that the settlement or the outcome would be any different than what we would have, I wouldn't think? Well, I think it's a precedent that's been set. But first, we have to get reassessed by CRA and that hasn't happened. Okay. Thank you. Thank you. Your next question is from Alex Honchak from CIBC. Alex, please go ahead. Hi, guys. Thanks for taking the question. I just had to looking for some clarity on the 2023 guidance to reach that growth. Are you guys looking at all of your development projects on Slide 21 contributing to sales growth? Or can you give us any more color on which of those assets Rosemont or West Detour, are actually part of that sales growth? So the majority of those assets, so for example, a Solaris Norte, Rosemont, Valentine Lake, assets that where the operator or the developer has public disclosure that the mines will be operating or built by that jurisdiction sorry, by that time line have been included in our guidance. Okay. And then maybe just one more. We expect 2019 to be a busy year with the divestments from the senior producers. Do you guys have any handle on a timeline for when some of those assets might come up for sale and when you guys might be involved in any of those transactions? It's an area that a lot of people are looking at. We have 2. I'm sure we'll be involved in some of that. I don't expect that those producers would sell everything all at the same time. I fully expect that they will start with some of the assets and then slowly work through their portfolios. So I think it's going to play out over a number of years. Okay. Okay. No problem. Okay. Thank you very much. Thank you. Your next question is from Sahad Tariq from Credit Suisse. Please go ahead. Hi, good morning. Thanks for taking my question. Just a follow-up on the 2023 outlook. That guidance includes First Quantum getting throughput of 85,000,000 tons per annum. In previous presentations, you had talked about potentially reaching 100,000,000 tons per annum throughput. At that rate, can you give some color as to what the expected GEOs could be, how the guidance would change? Yes. So we have previously obviously, we're going with where the asset has been disclosed at this time by First Quantum. And if you increased it up to 100,000,000 tons per day, I guess, increased by 25%. So I think you would see 140,000 plus GEOs per year. Okay, great. And just as a follow-up on Slide 29, the updated depletion estimate, any color on that? Was that just an error? Or is there something related to maybe the Cobre ramp up? No, it was just it was an error on our part in the press release yesterday. So we're just rectifying that this morning. Thank you. Your next question comes from Mike Jalonen from Bank of America. Mike, please go ahead. Yes. Just a question for Paul. Paul, with Valentine Lake, basically you get an NSR for financing the pre feasibility study, Says to me they don't have much money, the operator. I guess this kind of follows on Josh's question, more specifically on this project, Would Franco look at a stream of this project to help them out? Because if they're doing a royalty for their pre fees, what's next for the feasibility study? You know what I mean? Kind of I just need to keep raising money. So just wondering what Franco's view here is? So the overall view is we really like the asset, Mike, in terms of projects in North America that are open pitiable that have got grades that are this high. It really does stand out. We're and so the first thing I'd say in terms of in this market where equity is so constrained, I think this is a good way to help developers to move to the feasibility stage. And so we're looking to do other royalty type deals like this. And then second, when it comes to the point of potentially putting the mine into the in production, If we can be helpful to the company and provide more of the capital to move that forward, we'd love to do something like that. Okay. Well, thank you for that. Maybe just a quick question for Sandeep. Just on the how he feels up the balance sheet now. It's I've been covering Franco, I think, since 'eighty eight, 1988 for those out there. Thanks to David getting me on it. And I can't remember, David, the balance sheet being net debt. I guess if I don't exclude the investments. So just wondering what the view is there? Mike, your memory is too short. So if you remember back in 2015, we had a little over $500,000,000 in debt. And that's why when we were doing the Antipakai deal, we did our first use of proceeds issue to be able to bring that on because we couldn't tolerate going to $1,000,000,000 worth of debt. So we have used it. We consider the debt facility like our credit card. We don't want to have it out there for too long. But when there's good assets out there, we've got the ability to buy them. Thanks for correcting my memory. Your next question is from Brian MacArthur from Raymond James. Just philosophically, following a little bit on to the last question and I see it in Solaris as well, which I think it was in place. But some of these new deals, you have an NSR and then there's buybacks going forward. Is that something I realize you inherited sometimes. Is that something structurally going forward we're going to see it because people you put an NSR on it, you obviously don't want to get it back, but some people may want the option to buy it back. Is that something you're willing to do going forward? I don't know that it's a structural change. And Brian, you're right. The Solaris Norte royalty was just an existing royalty. So that's the nature of the terms. But also in the current market, it is that there's such a shortage of capital. People are looking for meaningful capital. And so we're trying to be creative in finding ways where we can do that. Also on a royalty, we've always got to be cognizant that you don't want to put too big a burden on the property over the long term. Right. So more so the takeaway would be we and other players in the industry are just trying to be creative to find ways to provide capital in the industry when there really is a shortage of capital. And I guess the second thing on that one, you actually use shares. Is there anything magical about why that was done as opposed to just cash? Because I mean, the way that one I mean, it looks quite interesting deal. I mean you put out 32%. I assume they'll do the 1% buyback. So you get that back and you issued some shares, it's all covered. Like is that just the way it had to be done to get done? Or is there anything magical about that? Well, nothing magical there. It's just the individual who was selling the royalty was interested in taking Franco stock. Perfect. And just as another thing, there's a comment made earlier on the Sudbury assets that were going to $800,000,000 and then that was for 2021 or something. Does it go back to the old rate of $400,000,000 past then or what actually happens? Yes. So post 2021, if there's mining occurring on the Sudbury assets, Macready in particular, it returns to $400 and I think it's around $420 something right now per GEO. Great. Thank you very much. Thank you. Your next question is from Tanya Jakusconek from Scotiabank. Please go ahead. Great. Good morning, everybody. Thank you for taking my questions. Maybe the first one, just on the 2023 guidance. Thank you very much for clarifying some of the additional assets that were put into the 2023 guidance. Maybe just 3 just to confirm. Goldstrike, are we seeing something flattish from Goldstrike from now till 2023? I mean, obviously, with the joint venture that may change, but is that what you have in your guidance at this point? I have to go back and check-in detail, Tanya, but I believe it's pretty flat going forward. Okay. And then Gold Quarry, we're finished with the minimum at that point. Do we still continue with Gold Quarry into 2023? Yes. There is the minimum at 11,250 ounces does reduce to approximately 3,000 ounces going forward. So in that year, that's what it would be. Okay. And then the Sudbury complex, does that continue in 2023? Because we don't have it continuing beyond that. Correct. So as we've stated, Morrison is being placed on care and maintenance at the end of March of this year and Macready will be mined into 2020, at which time there's nothing foreseeable. Okay, perfect. Okay, that helps us out. Great. Thank you on that. And then maybe just for Paul, just coming back to the M and A side, you mentioned that you're seeing activity on the gold side and also on the non gold side and oil and gas. And I know I ask you this every quarter, but what sort of size deals are we seeing on the gold side, the non gold and the oil and gas? The so on the gold side, I'd say, continue to see midsized deals for the mining that's non gold. There's some mid sized potential for some larger deals there. And on the oil and gas, we're seeing a lot of activity and so can be really selective. Those could be anything from $100,000,000 up to far larger deals. Okay. And when you define midsize deals, what is midsize for you, Paul? $200,000,000 $300,000,000 is midsize. So fair to say then $200,000,000 to $300,000,000 on the gold and the non gold side and then the oil and gas $100,000,000 to $500,000,000 Those are the sort of things that are in the pipeline. Okay, great. Thank you very much. Thank you. Your next question is from Steven Butler from GMP Securities. Please go ahead, Steven. Hi, guys. Thanks very much, operator. Antipakay, Guadalupe and Antamina guys, you talked about those assets in your guidance. I just wanted to be clear, are all those three assets going to show declines in GEOs from in 'nineteen versus 'eighteen? Is that what you expect, Sandeep? Yes. Yes. Not material, but yes, there's declines. Okay. Slight declines. I mean, Antamina, you talked about it being below the midpoint of long term range. So I'm wondering if that's just again, it sounds like these are sort of mine that's a mine plan thing. And because I was just looking to clarify because you talked about Candelaria coming back to better order in the second half of twenty nineteen offset by lower deliveries at Andapacay. I wonder if that was also a second half thing, but Andapacay you're saying overall slight decline '19 versus 'eighteen on those three assets? Correct. Okay. Thanks. That's it guys. Thanks. We have no further questions at this time. You may proceed. Thank you, Joanna. We expect to release our Q1 2019 results after market close on May 8, 2019, with the conference call held the following morning. You for your interest in Franco Nevada. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.