Hello, my name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Triple Flag Q2 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mr. Shaun Usmar, CEO. Please go ahead, sir.
Lisa, thanks. Good morning, everyone, and thanks for joining us to discuss Triple Flag's Second Quarter Results. Today I'm joined by my partners, my CFO, Sheldon Vanderkooy, and my Vice President of Evaluations and IR, James Dendle. Onto slide four. We're pleased to report solid results for the second quarter. Gold equivalent ounces sold in the second quarter declined versus last year's record results for the same period, due mostly to quarter end timing of shipments and a higher gold-silver ratio. This has still represented our third best quarter of operating cash flow in the life of the company. We expect full year 2022 gold equivalent ounce sales to be weighted to the second half of the year, with sales volumes of gold and silver on track for a record in 2022.
Operating performance across the portfolio was broadly in line with our expectations, with underperformance of our two ramp up assets at Pumpkin Hollow and Gunnison, both in the U.S., offset by solid performance at the other 13 operating assets. James will provide a bit more color in his asset update a bit later, and Sheldon will cover the financial results in more detail shortly. We're also pleased to announce that after our first full year as a listed company, we're increasing our annual dividend by 5% from $0.19 U.S. per share to $0.20 U.S. per share, equating to a sector-leading dividend yield of around 1.8%. This is made possible due to the underlying delivery of our portfolio, and we believe it is important to return capital to our shareholders as we continue to grow our business.
As well, today, we announced that Triple Flag is in the process of applying to list our common shares on the New York Stock Exchange to increase our trading liquidity and provide greater access to U.S. investors. Subject to all our required approvals and completion of the New York Stock Exchange listing process, Triple Flag will publicly announce its first trading date on the stock exchange and will trade on both the NYSE and the TSX under the symbol TFPM. On the corporate development front, our team continues to be extremely active. We've evaluated many deals this year, engaged in several bilateral deal opportunities, and conducted various site visits. We've seen the deal landscape unusually aggressive over the past 12-18 months among larger peers.
Implied consensus returns have generally been notably lower than historic norms, including on riskier development stage assets, which we've seen dominate the deal pipeline population and at a time of significant cost and capital inflation and supply chain disruption. We see this as a temporary phenomenon against an increasingly attractive landscape for alternative financing in the mining sector, as debt and equity become more expensive and unreliable sources of capital for miners in this inflationary environment. Although we have ample liquidity for new deals at nearly $700 million, we feel no pressure to transact for the sake of growth at the expense of value. We'll continue to remain disciplined as we look to deploy capital in the best way possible to grow value per share, in keeping with our strategic focus as a high margin precious metals investment vehicle.
Consistent with this patient and disciplined approach, we previously announced the exclusive non-binding AUD 10 million royalty and $80 million stream agreement with Orion Minerals on the Prieska copper-zinc project in South Africa, as well as the royalty we acquired on the Sofía gold project in Chile for $5 million. The portfolio is delivering organic growth both in the short term and medium to long term. Steppe Gold resumed leaching from ATO phase one in March, and they're advancing the ATO phase two expansion. At Beta Hunt, the processing facility is currently undergoing a ramp-up expansion to 4,000 tons a day that is expected to be reached later this year. Northparkes achieved record plant throughput in May of 682,000 tons following the completion of the expansion program and the ramp-up of the E26 Lift One North block cave.
James will comment further on the many development highlights within the portfolio. I'll now turn it over to Sheldon to discuss our financials for Q2 2022.
Thank you, Shaun. We had a solid quarter that was in line with our expectations, and we remain on track for the balance of 2022. We pre-released our Q2 metal sales, which totaled 19,500 in the quarter. In H1 as a whole, we have achieved 40,000 GEOs. Our 2022 expected production is weighted to the back half of the year, and we remain on track to achieve our 2022 expected guidance of between 88,000 and 92,000 GEOs. Q2 metal sales were impacted by a higher gold to silver ratio and also by timing of shipments near quarter end, but the portfolio continues to perform consistent with our expectations. Adjusted net earnings came in at just under $15 million or $0.10 per share. A key measure for us is the operating cash flow we are able to generate.
Operating cash flow in the quarter was $30 million, representing our third highest quarter yet for operating cash flow. On a per share basis, we realized operating cash flow of $0.19 per share. We are very pleased to announce an increase in our dividend to $0.05 per share per quarter. We are pleased to achieve this dividend increase one year following our IPO. Turning to slide 6, I'd like to comment on the consistently high margins we have realized. The dominant economic story of 2022 has been the sharp increase in inflation to levels not seen in over 40 years and a consequent sharp increase in interest rates. The streaming and royalty model is very well suited to a high inflation environment. We have top-line revenue exposure, allowing us to benefit from general price increases, but shielding us from operating and capital cost inflation.
We don't experience the operating leverage that mining companies do and have experienced very consistent margins despite volatility in price levels, and that in turn results in stable cash flows, as illustrated on the next slide. Slide 7 sets out the strong and consistent quarterly cash flows we have realized over the past 2 years. These dependable cash flows give us the confidence to increase our quarterly dividend in the current inflationary environment. Since our IPO, we have already paid $30 million in dividends to shareholders, and we are increasing our dividend rate going forward. On a quarterly basis, this now represents approximately $7.8 million in aggregate, which is comfortably supported by cash flow generation of the portfolio. Turning to slide 8, our cash balance at the end of the quarter was $74 million, and we are debt-free.
We have maintained our discipline with respect to new stream and royalty acquisitions, as conditions for acquisition of new streams and royalties have become more competitive over the past year. We believe that there will be good opportunities to deploy cash in the future, but we will continue to maintain discipline and are happy to build cash in the meantime. This management team are also shareholders with a significant stake in the business. We will always guard shareholder value and never pursue growth for growth's sake. The higher interest rate environment does not affect our financials. We have no debt drawn and indeed we benefit through higher rates on our cash deposits. Last, I'd like to turn to slide nine to quickly highlight our asset diversification, our strong precious metals focus, and our strong focus on tier one mining jurisdictions.
We are well diversified by asset, with no asset exceeding 30% of Q2 revenues. Nearly 60% of our Q2 revenues were from gold and nearly 35% were from silver, maintaining the strong 90% plus precious metals focus. Finally, our portfolio was predominantly focused on tier one mining jurisdictions. Our single largest country exposure is Australia, and other than Australia, we are predominantly weighted in North and South America. Today's environment has an increased focus on jurisdiction risk, and our portfolio is very well positioned in that respect. I'll now ask James to speak to some of the asset highlights.
Thanks, Sheldon. Production across the portfolio was generally in line with expectations. As Shaun mentioned, Northparkes achieved record plant throughput in May of 682,000 tons, which represents an annualized rate of over 8.1 million tons per annum, which is significantly beyond the stated nameplate capacity of 7.6 million tons per annum following the completion of the recently completed expansion program. Ramp up of E26 Lift One North and the cave performance is in line with expectations. Rail disruptions have occurred between Northparkes and Port Kembla due to severe weather causing flooding and landslips at points in the route utilized by Northparkes, as well as industrial action by Pacific National. Concentrate shipments have continued using an alternative rail provider that takes a longer route between the mine and the port.
This has not impacted us, and the main line is expected to be back online in Q3. Northparkes has progressed an order of magnitude study on a new zone that is proximal to existing mine infrastructure called MJH, which has not yet been included in the mineral resource and mineral reserve. We'll provide more updates as studies progress. Staying in Australia, Fosterville delivered strong performance year to date. Agnico expects third quarter production to be lower than second quarter. However, the fourth quarter is expected to be the strongest of the year. In the second quarter of 2022, the Robbins Hill and Lower Phoenix exploration decline were completed. The completion of these exploration drifts puts the company in a good position to accelerate exploration and conversion drilling in these prospective areas in the second half of 2022.
In Australia, Aurelia reported its highest quarterly mined tonnages, backfill placements, mill tonnages, and gold production at Dargues. We noted in the first quarter that the mine was impacted by record rainfall in southeastern Australia. During the second quarter, water levels reduced and the planned tailings storage facility raise is now expected to be completed in September. Dargues is also progressing regulatory approvals for additional mechanisms to manage tailings storage facility water levels. Cerro Lindo in Peru performed as planned despite the challenges of processing high proportions of harder volcanic ore during the year. Silver grades in the first half of the year have been higher than average, and we will continue to see the benefit of this in our sales during the second half of 2022, reflecting the roughly four-month lag between mine production and saleable metals.
At ATO in Mongolia, mining proceeded ahead of schedule for the year and heap leaching is proceeding as planned. Stack is currently constructing the crusher and other surface infrastructure for the fresh rock expansion. The status of reagents is good, with additional deliveries expected in August. Turning to the U.S., at Pumpkin Hollow, Nevada Copper announced it had encountered weak rock structures in the main ramp of the east south zone, which restricted access to the planned stoping zones. Activities were adjusted to develop plans to address this while prioritizing development work through the dike structure on priority headings to the northeast mining zone, which has significantly high copper grades and better geotechnical conditions. The work on this is close to complete, but liquidity constraints have forced the curtailment of underground mining activities.
Last week, the company announced that it had advanced restart plans at Pumpkin Hollow, which were focused on accelerating capital items, followed by the development of significant scope in the inventory in advance of a mill restart and completion of the ramp-up. The company has secured interim financing and is in discussions with financing partners, including Triple Flag, to secure a longer-term funding package to finance the restart and ramp-up its commercial production. Excelsior reduced operations at the Gunnison Project well field while work on the Johnson Camp mine restarts and planning for well field stimulation trials aimed at improving flow rates and sweep efficiency of the well field is undertaken, with the objective of overcoming the challenges associated with the CO2 generation. Drilling results for JCM pits have been encouraging. Leach pad permitting is ongoing and test work and drilling activities continue at site.
Delays in stream deliveries due to Pumpkin Hollow and Gunnison do not impact Triple Flag's 2022 guidance. Closer to home, we've been pleased to see mining rates exceed 8,000 tons a day for the fourth consecutive quarter at Young-Davidson. Since we acquired the royalty in 2018, we've benefited from the excellent work that Alamos has undertaken to expand Young-Davidson and provide the long-term low mine infrastructure. I'll turn the presentation back to Shaun.
Thanks, James. During the second quarter, we released our 2021 sustainability report, showcasing our contributions and commitments to helping evolve market-leading ESG performance. Our scholarship programs at ATO, Northparkes, and RBPlat continue to provide support for young people interested in careers in the mining sector. We continue to be carbon neutral for all our Scope 1, 2, and 3 emissions since starting this business by purchasing offsets, and are now working on setting out our roadmap towards net zero emissions by 2050. Finally, we joined the World Gold Council in May and are proud to support responsible development across the gold supply chain as an active part of this industry forum. Onto the next slide. We built this business over the past 6 years with the major streaming and royalty competitors in mind as a way to create value for our investors and mining partners alike.
For our mining partners, we held the view that precious metals, royalties, and streams presented an underappreciated opportunity to satisfy the growing capital needs for underserved miners in a competitive and symbiotic manner, satisfying the needs of a sector requiring large amounts of long-term capital. For our investors, we chose to demonstrate the benefits of the precious metal streaming and royalty business model to create value over time and offer a preferred investment vehicle for precious metals exposure. The value of the business model is on full display, as Sheldon mentioned, during these generational inflationary times, where our low overheads and the high margins of our portfolio underpin strong cash flow generation at a time when operating mines and development stage assets are experiencing significant margin compression and growing liquidity pressures.
Our 15 operating assets have generated $115 million in free cash over the past 12 months, allowing us to pay a sector-leading dividend yield of 1.8%, while our exploration and development stage assets in our portfolio of 80 streams and royalties offer substantial organic growth in a portfolio that has grown gold equivalent ounces at a sector-leading CAGR of 26% since 2017, and is on track to grow again this year for the sixth consecutive year. Our investing track record and portfolio performance over the past 6 years has enabled us to derive a portfolio net asset value that is approaching double our net cash deployment since we started the business. We trade at a modest multiple compared to our target peer set, allowing for ample rerate potential as we continue to grow scale, diversification, liquidity, and portfolio quality.
Our portfolio duration ranks amongst the best with the sector leaders at more than 20 years, highlighting the quality of the key assets and the predominance of by-product ounces from long-life base metal and PGM mines in the portfolio, which accounts for roughly 70% of our GEOs. Finally, in summary, we delivered solid financial results in Q2 against a volatile market backdrop, highlighting the quality and value of the portfolio. We increased our dividend by 5%, further enhancing our dividend yield, and intend to list on the New York Stock Exchange to increase the investor access and trading liquidity in our shares. We're on track to meet our 2022 guidance of between 88,000 and 92,000 gold equivalent ounces while delivering on our ESG objectives.
Our business is producing strong cash flows, which are positioned to increase as the fully funded embedded organic growth within the portfolio is delivered across a number of assets. We continue to consistently see a variety of deal opportunities that are concentrated predominantly in the $100 million-$300 million size range at the moment, particularly for development stage assets, which are underserved in these challenging market conditions. We expect the outlook for deal opportunities to improve as more conventional forms of funding prove increasingly expensive and perhaps unreliable in this market. Miners require additional liquidity due to cost and capital inflationary pressures. Against this backdrop, having no debt and nearly $700 million in available liquidity to deploy in value-enhancing deals for our portfolio is a strategic advantage that we will utilize intelligently and patiently in pursuit of growing our value per share.
As major shareholders ourselves, our focus remains on disciplined deal execution and value creation, pursuing sensible and accretive deals in a patient manner rather than pursuing growth at any cost. I believe that the current market is setting up nicely for an acute need for knowledgeable, patient, long-term capital in the mining and metals sector, providing opportunities for us and our competitors to pursue further value-enhancing acquisitions. We are well-placed in this environment to grow value for our investors in time. We sincerely appreciate the support and trust of our stakeholders, and we look forward to providing further updates soon. Thank you. Let me turn it back over to the operator, and we're happy to answer any questions anyone has.
At this time, I would like to remind everyone, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from the line of Fahad Tariq with Credit Suisse.
Hi, good morning. Thanks for taking my question. Maybe looking ahead to 2023, if you could discuss how we should think about this production guidance for next year, given the issues particularly at Pumpkin Hollow and Gunnison. I appreciate that, you know, there's no impact to 2022 from the issues at those mines, but just trying to get a sense of, you know, are you still confident in the 110,000 ounces average for the next several years? How do these issues impact next year in particular? Thanks.
Well, yeah, thanks for the question. Look, we're not providing 2023 and beyond guidance for this time. I think we'd recently have reaffirmed our outlook. If you look at the combination of things that are included in our portfolio, and maybe you contrast that with some of the things that you and others have looked at that have taken place in the sector recently. I mean, there are NAVs that are being attributed to assets that are quite a long way out from funding, that are quite some time out, in some cases, from even permitting that are being included in those sort of time frames.
In our case here, you know, we're talking assets that essentially, if you look at our portfolio, I think it's about 90% that are really by value, are in the sort of operating and certain ramping categories. We will provide that guidance at a sort of opportune future time. You can see what the portfolio has done to date, what it's on track to do this year, and I think our portfolio continues to be sort of well-placed. You know, stay tuned. We'll give you the timely guidance shortly.
Okay. Maybe without getting into the statistics, but, do you feel there are offsets in the portfolio if, for example, underground development at Pumpkin Hollow remains delayed for some time or, you know, the Johnson Camp doesn't come online in next year at Gunnison? You know, I'm just trying to get a sense of, like, are there offsets in the portfolio where you can see production growth?
I guess the best way to answer that would be to look at our natural orientation so far. You know, if you consider that notwithstanding that the gold-silver ratio, I think, had gone from this time last year, 68-83, and I think we're projecting over 90 for the remainder of the year. Then you look at the performance this year, even with the, you know, the underperformance of those ramping assets, our actual volumes that we've included in guidance for this year are tracking at the top end or beyond the physical numbers, excluding the price movement. You see our natural orientation, and we'll continue to maintain that posture.
That just points to the reality that we always have things in the portfolio that, you know, could be pluses or minuses, and we're always gonna maintain a sort of slightly conservative posture as we set guidance. Yeah, I believe it's there, and we can't really comment at this point as to what's gonna happen in 2023 and beyond. I just think our portfolio, when you compare to the peer set, is actually generally more mature than many others out there from a risk perspective.
Okay, great. Appreciate that color. Maybe just one last question. On the deal pipeline, you mentioned most of the opportunity set that you're looking at right now is between $100 million and $300 million. Can you just touch on, like, the types of geographies that you're looking at? I know there's a certain preference for Triple Flag. I'm just trying to get a sense of where these development assets that are in the opportunity set, where are they located? Thanks.
Yeah. Look, we are seeing. I'd say it's. I've sort of highlighted the 100-300 almost like, on a histogram. We're seeing a lot that are much smaller. I think we've seen the deal activity that took place probably the last year or so in that sort of smaller end become a little more subdued. On the big end, you know, we've seen a lot of activity quite recently, including, you know, something of $500 million quite recently. We are active on some larger opportunities, but I think the fuse of those is longer, and it remains something that's sort of less predictable.
Jurisdictionally, I think as Sheldon had sort of alluded to in his comments, we've always said that our primary jurisdictions are really, call it Australia and the Americas, and only in circumstances where we've got a very solid case, good return, security of tenure, will we go elsewhere. I think that framework, particularly in these times, remains as relevant right now as it ever has been. Jurisdictionally, it's definitely concentrated more in those areas. I think, you know, the Orion Minerals one, which is still yet to reach, you know, the funding milestone and finalization of the documentation is sort of the one small exception. There's, you know, we'll see how that unfolds. But that would be really how to think about it. We continue to prioritize our core jurisdictional exposures.
I understood. Thank you, Shaun.
Thanks.
Your next question comes from the line of Josh Wolfson with RBC Capital Markets.
Thanks. On the topic of Gunnison, just 'cause I'm a little bit less familiar with the different parts of the camp, with the recent operating changes, is it reasonable to expect any production for the remainder of the year or 2023, in the event that the economics or pending the economic decision?
James, do you wanna?
Yeah. Hi, Josh. It's James. Yeah, look, the way it's split out is you essentially have the very large in-situ leach deposit, and then there's a Johnson Camp mine, which is a series of open pits and related mineralization that is connected to the SXEW plant that treats the fluids from the in-situ leach. For the balance of the year, we expect to receive small quantities of copper in a manner broadly consistent with what we have received to date this year. As for 2023, you know, the company is working through their analysis of the restart of the Johnson Camp open pits, as well as their analysis and test work associated with getting the in-situ leach up and running again.
We'll have to await their determination on those two elements before, you know, making any sort of statement on what we expect from that operation in 2023. There will be some contribution this year. There's essentially residual copper in the leach system.
Okay. Sorry, beyond the residual component, is there any additional production we can expect, or is that it until they make this or determine the economic outcome?
Yeah, that's it until they determine if the outcome of the work that's ongoing at the moment. That residual production is sort of not far off what we've been receiving year to date, again, which is obviously a fairly modest figure.
Okay. Along the same lines, I know the company doesn't provide the 2023 guidance, at least as of today, but looking at the existing 5- and 10-year guidance, what proportion of that would have or would have been represented by Gunnison and Pumpkin Hollow?
Josh, we'll confirm. I think it was around or just under 10% over that timeframe. There's just a question of absolute timing that's associated with that. I think, particularly in the Nevada Copper case, our team's been to site fairly recently. You know, we see the line of sight to the production we're working on with the team, you know, on liquidity side. I think importantly, you know, we're actually very supportive of what we're seeing with the CEO and his senior team. I think the key thing, just given some of the earlier comments, we've got members on our team like John Cash, who've you know, spent decades in Nevada and actually confirmed that, you know, from their point of view, some of the best ground conditions that they've seen in Nevada.
I think for us, it's just a question of, you know, timing associated with that.
One last question. With the new U.S. listing, you know, that opens the stock up obviously to a lot of potential shareholders, is there any evaluation of, you know, ways or mechanisms to improve liquidity along with the listing, or is that sort of a secondary thought?
Sheldon?
Hi, Josh. It's Sheldon. I'll take that one. I mean, I think the first thing we should maybe just make explicitly clear is that, you know, no offering of shares is contemplated at this time in connection with the with the listing. This is just a listing where we'll have, you know, the access to the U.S. market, that'll free up U.S. retail. There's some case studies out there in which, you know, Canadian companies have cross-listed to the States and seen nice increases in their liquidity. We see that as a positive catalyst for the liquidity.
Okay. Okay. Those are all my questions. Thank you.
Thanks, Josh.
Your next question comes from the line of Greg Barnes with TD Securities.
Yes, thank you. Shaun, as far as I can tell from reading through the Nevada Copper disclosure, they're looking for a funding package in the range of, I believe around $70 million. Is that your understanding as well?
Look, I'm not gonna front line Greg the team on that. Look, we've been working with them, and I think our priority with the management team is ensuring that they've got the liquidity they need to get through to commercial production. You know, they will be putting statements out when they're ready. They've got a number of supportive shareholders. I just think the context for us, other than the site visit that we've been on, is when you look around and you saw BHP's announcement, or at least read in the announcement, I guess it was OZ Minerals and others you saw Mather last year. There's not a lot of U.S. copper mines with, you know, near build underground mines and open pit projects, in this situation.
They're pretty scarce and, you know, you've got nearly, I think it's $900 million or so of actual assets associated with this already. We're very constructive on copper and the copper outlook and, you know, I think that team will find the support it needs, and we'll be part of helping them get through that.
Okay. For James then, on this higher grade zone that they're trying to get to, how far away in terms of development work required are they to getting there through this more tricky zone?
Yeah. I mean, if you look at the dike crossings, there's basically three dike crossings. When we were at site, they were virtually completed one, they're partly through the second, and the third is not required imminently. You know, in reality, Greg, the dike crossings, whilst they have represented a challenge for the company, you know, there's no material reason that they should represent a challenge going forward. The dike, the actual bad ground associated with the dike is only about 5-10 feet thick, depending on the angle of the development, right? So it's not a hugely problematic zone, so it should really be a non-event. And then the total meters of development are pretty limited.
I haven't got a figure to hand, but the figure that I do have in mind is, you know, the development one had to do to set up all the scoping infrastructure, and all the crosscuts, which is still, you know, a fair bit of work to do. You know, really there shouldn't be any impediments to setting up that East North Zone, for, you know, productive mining at the rates, you know, contemplated in the study.
Okay. Timing on that, assuming they get the funding, James, are we talking 6 months? 5 months? A quarter?
Yeah.
What do you think?
You know, the company is working through the engineering of that, Greg. You know, with the development that's ongoing, some of the additional infrastructure work that's required to complete that, you know, I think it is gonna take a bit of time, but I won't comment necessarily specifically on that timing right now. Again, I don't wanna get ahead of the company's disclosures.
Okay. Well turning to Gunnison and skimming through the technical report they put out earlier this year. As far as I can tell, the washing or the cleansing of the well field will take 12-15 months to wash out the CO2 and what have you. Likely no production there in 2023. The Johnson Camp development is still a question mark how that goes ahead. That would take a year or so, I assume. Just judging from that, we're at least a year away from, probably a year and a half away from additional production from Gunnison. Is that fair?
Yeah. I think that, again, you know, Excelsior are in a position where they're currently drilling out parts of the Johnson Camp. There is historical drilling that they're looking to assess and prove up. We don't have a clear picture right now as to what the ramp up of Johnson Camp would look like, presuming they go ahead with it. On the in-situ leach side of things, you know, there's the raffinate neutralization and the well field stimulation. Depending on the performance of the well field stimulation, it might negate the need for the raffinate neutralization, which could speed things up. You know, again, they've got work to do in order to determine which of those options or which combination of options between stimulation and raffinate neutralization is the best one.
Until they've come to that determination, I think it would be, you know, challenging to put an exact timing on when we can expect to see, you know, the ramp up commence, or recommence on the well field.
Okay. That's helpful. Thanks, James.
Yeah.
Once again, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Cosmos Chiu with CIBC.
Hi. Thanks, Shaun, Sheldon, James, for the conference call. Maybe first on Northparkes. You know, good to see that there was record plant throughput in May, 682,000 tons. I think, James, as you mentioned, that's, you know, higher than nameplate. Could you maybe talk about is this the sustainable level of throughput that we can expect? Or could it go even higher with the expansion now complete?
Yeah, good question, Cosmos. Thanks. You know, look, the mine had the opportunity to run at those throughputs, as they had you know, good levels of surface stockpiles. The E26 Lift One North block cave is actually slightly exceeding plan, which led to you know, part of that outperformance. What it does point to is that there is potentially more capacity in the plant. There are other expansion opportunities to take it beyond even that you know, plus 8 million ton level. Those expansion opportunities are very much dependent on the availability of new mining areas and ore feed.
You know, with some of the studies that the mine is doing at the moment, you know, it does represent an opportunity in the future to see further output from Northparkes above the 7.6 million tons per annum level. You know, there are various studies ongoing at the moment, you know, that's something we're watching closely and, you know, we'll look forward to providing an update, you know, when those studies work through. You know, I think particularly with E22, there's a good opportunity around that. That's before any additional discovery that they might make, you know, with other deposits. You know, they've got a lot of mineralization there, and it's really about maximizing the underground infrastructure in order to fill the surface capacity.
Yeah. Cosmos, look, it's good to chat to you.
Yeah. Hi. I think just to add just broader color as well. I think it's a point we try to emphasize in the headlines and then in some of the details. You know, James did mention the operating piece where they're the controllables are going well, but you have seen these weather and logistic events that have created sort of timing issues. Hence the commentary. You call it the first half of the year and then moving to the back end of the year. We've even seen. I think I might have seen Greg's comments even on things like Beridika, where, you know, they're performing really well. They're doing great stuff, but there's just timing differences on a quarterly lens. We're very happy with, you know, how the operating teams themselves are performing.
Just at times, you know, there's lags between when they get that and when we finally get the turnout. They're not significant. We don't have, like, huge working capital delays, as you know.
Of course. You know, speaking of new discoveries, maybe switching gears a little to Cerro Lindo, you know, clearly, and a very important asset for Triple Flag. Even better if silver prices were higher, but I'm sure that will come one day.
Yeah.
As you mentioned, you know, Shaun, in your MD&A, they recently made a new discovery, VMS deposit discovery, the Pukaqaqa. Just wondering, you know, is there any kind of timing in terms of when those, some of those new discoveries could come in? Maybe not so much, you know, maybe it's Pukaqaqa, but maybe some other, some of the other ones that you might have highlighted in the MD&A as well.
Yeah. I'll ask James to comment. We're actually heading out both to Beridika as well as Cerro Lindo in the next few weeks now that we can travel again. We'll certainly have more color for subsequent calls. James, you wanna expand?
Yeah. Pukaqaqa is quite a long way north of the mine. It's outside of the stream area. The stream area extends to southeast, which is a very prospective area for VMS mineralization. They've actually been mining new zones, you know, for the last couple of years that have been discovered since we made the investment. Like Cero B Nine , which is a zone that's being mined at the moment, is a copper zone with very high silver grades, which is part of driving the silver outperformance we've seen of late. What we expect for that mine is for them to continue to find extensions to Cerro Lindo towards the southeast.
At the same time, you know, Pukaqaqa represents the opportunity to provide incremental additional mill feed to keep the concentrator going, you know, long after the current reserve life. Then there are certain areas within the Stream area that have the potential to yield Cerro Lindo's size deposits of meaningful scale that are currently being explored. The exploration work associated with that is quite time and labor intensive, so they're currently putting in underground development and some quite long drill holes in order to test those areas. The reason it's underground is, of course, 'cause of the, you know, hilly topography in that area. Yeah, we're very excited about the extension of Cerro Lindo. You know, it's already significantly replaced the silver reserve, you know, from the time of our investment to today.
You know, they have the track record. They're, you know, their next flagship assets. They're heavily incentivized to extend the life of it through exploration expenditures.
Great. Thanks, James. Then maybe one last question, switching gears a little bit once again, you know, it's always good to see. It's great to see that Renard contributing once again. Shaun, could you maybe talk about, you know, diamond prices? I'm sure you're closer to the market than I am. It's been a while since I last got married. Then, you know, profit, profitability at the asset and, you know, the sort of longer term projections here.
Yeah. Cosmos, I'm closer to sixty years than from my wedding day, so I'm not quite sure about the diamond market myself. No, look, I think, when you look at the, we call it the restart case that was there, it was, I mean, diamond prices close to, I think, $55 a carat. I think the last number was more like $132 a carat, the last batch. That obviously points to quite significant, you know, contribution margins that are coming, from that operation. I think it also points to the resilience, and also the experience of this team of, you know, really wading through and being patient to, you know, to realize value on assets.
I know there's been questions around timing, associated with, you know, certainly the ramping assets that we've talked about. Bear in mind, we've had, you know, five assets ramp, three of them, we've had two delays. Then this is something that was about 1% of NAV that, you know, I think we've really demonstrated the ability to not just conserve value but move forward with that and realize value for our investors. Going forward, I'm gonna see if Sheldon has anything he wants to add to that. I think obviously we're part of the consortium. There, the diamond market appears to be reasonably robust, so maybe if you wish, Sheldon.
Yeah. Thanks, Shaun. Thanks, Cosmos.
Thanks, Sheldon.
It's been a good news story for us. You know, first of all, like, in the smaller size diamonds, which Renard, you know, has a lot of, we've actually seen stronger pricing, and part of that is the diamond supply chain, and part of that is Argyle going offline, and that's actually been a positive catalyst. That's something I think that was a long time coming and was a little slower in coming, I think, than some people thought. You know, that's now happened, and we're seeing some good tailwinds there.
One of the things is, you know, Renard, the Renard Stream, we had been, as you know, not been getting the cash flow from that for a while. That's now been turned on. We're getting the full cash flow from that, and they're actually paying back some of the what had been effectively prepaid before. We saw that in Q2, and I expect we'll see that going forward 'cause the underlying operation is generating positive cash flows, and that's what it's all about. You know, we're actually really excited about that story. It's a good one.
Yeah, I guess the only other thing, Cosmos, is obviously the world's a pretty complicated place right now with Russia, Ukraine, you know, what's happening with our Alrosa supply, and that is probably, you know, fairly supportive for the supply outlook for this mine and for the second.
Great.
Yep.
Yeah. Thanks again, Shaun, Sheldon, and James. Those are all the questions I have, and thanks again for answering my questions.
No, thanks. Thanks, Cosmos.
Your next question comes from the line of Tanya Jakusconek with Scotiabank.
Great. Good morning, everybody. Thank you for taking my questions. Just a gentle reminder that, I know, Cosmos, you mentioned, diamonds for weddings, but diamonds are beyond just weddings. Just
Yes.
Right? I have a couple of questions. Just some admin first, maybe Sheldon, just on the listing on the New York Stock Exchange, when are you expecting that, and what sort of cost should we think about going forward beyond 2022 for this listing?
Hi, Tanya. I would say it's pretty imminent. I would look to see filings being made in the next couple weeks. By filings I mean SEC filings of documentation. Then the shares would actually be trading, probably in 1 or 2 weeks after that. I would expect the shares to be up and trading, if not by the end of the month, then shortly into the next month. On costs, we wanted to give people some guidance, so there's a number of one-time costs that are gonna be coming through in H2. We kinda see about $600,000 of costs in H2 of 2022. On a run rate basis, it'll be a little less than that.
It's probably going to be you know, maybe $1 million or $2 million on a run rate basis, you know, going forward. Those are really just you know, the D&O insurance premiums go up, the audit fees go up when you have a U.S. listing. There's New York listing fees, and there's probably some incremental legal spend as well when you have to, you know, just be cognizant of the U.S. rules.
Tanya, just to add, I mean, we were going through it yesterday. We've actually, even though there's increases, I think we've been pleasantly surprised compared to expectation about a year ago on things like D&O. So that was reasonably positive compared to expectations not that long ago with what's happened to that market. To your other point, having just come from a Y 50th , and contributing to demand on earrings, I agree it's not just weddings on diamonds.
Good. Thank you for that. Sheldon, $1-$2 million 2023 per annum going forward would be reasonable to your G&A?
That's right.
Yep.
Okay. So I'll leave diamonds and although I could talk about diamonds all the time, but I'll leave diamonds and G&A for now. If I could move on to Prieska Royalty and Precious Metal Stream, can I just get an update on where we are and some of the critical steps to get this going through? Just as a reminder, there was just very little in the release.
Yeah. I'll start, and I'll ask Sheldon to expand. Look, I think the rate determining step from our vantage point is twofold. One is just, you know, the documentation which, you know, is taking its course. But primarily, you know, the ability of them to raise the additional $20 because importantly, we've set this up so that really the funds that we put in, as you've seen on other deals, are really contingent upon them achieving the minimum funding requirements that are there. I believe they're advancing quite nicely with that. But it's up to them to, you know, be able to finalize the $20 to secure the $10. And then of course, the other will be contingent on the studies and things like that that are there to follow. Anything you wish to contribute to that?
No, I think that covers it. I mean, the legal documentation, I would expect that to be completed in Q3, but it's really the AUD 20 million that's the gating item.
Yep.
Okay. Thanks for that. That's what I thought, but I just wanted to know if there was anything else. Maybe just lastly, if I could ask just back on your transaction environment, M&A environment. Thank you for the size of $100 million-$300 million. Can I ask, you mentioned, you know, more in the development or helping fund development stage projects. I was quite surprised about the royalty, you know, royalties available, you know, is still there in the market. I just wanted to ask whether you are seeing any royalty portfolios and/or other out there that would be of interest or are there any more, or are there not besides the funding of the mine projects?
Yeah. Tanya, it's a really good question. You know, the funny thing is, if I look back, I suppose, you know, over six years now, some of the stuff you can forecast and you put a lot of time in. Even the recent transaction, I think I heard Bill comment that tracked that for 14 years. I guess we tracked it for four. You know, some of these things emerge and you, they're quite visible. I'm always surprised at how some of these things seem to emerge which are less visible. Even last week, we've seen some things in the Americas come to the fore which just really were not visible.
I think that fairly steady cadence of opportunity sets seems to be a consistent theme that's there. The one thing, you know, you saw my comments, you know, we've seen particularly single asset producers, and, you know, even intermediates. We've seen majors. I mean, look at some of the issuers in the last period. Some on this call have talked about year-on-year operating costs and capital cost increases for majors and others of 7.5%-15%. You know, we've seen some logistical challenges, and then we've seen, you know, big issuers like Newmont and others talk 12-18 months delays in key projects and 15%-25% increases in capital. I think the sector as a whole is starting to really reveal some of those pressures.
I think if you're a large company, as some of those guys are, they're, you know, they're well capitalized and, you know, it's a bump in the road. I do believe that for other businesses, particularly if this inflationary environment and you saw the jobs report on Friday, you know, we're gonna see more rate increases. I do think the inflation situation is perhaps with us for some time. Debt's more expensive, margins have definitely compressed, and we're seeing some issues with their equity, you know, from a year or so ago, down 70%-80%. Equity is very dilutive. I think it's a very constructive environment. To your question, yes, we continue to see these royalty portfolios. Variable quality as always.
I think for broader funding, particularly the stream funding byproducts and otherwise, I think it's setting up actually as a very interesting environment for the next 12 months plus.
Do you see opportunities of creating royalties? I understand that streams is, you know, allows, you know, better taxation for operator to.
To fund their project. Sometimes, you know, if you're strained by, you know, your ability to, you know, and you need the funding, you know, obviously royalties is another form of funding. Are you seeing opportunities creating royalties in some of these?
Yeah. The short answer is yes. I mean, we're active on some right now. The caveat is they're not usually then particularly large checks for the reasons you've alluded to. I'd just say tactically for us, you know, the analysis I just took our board through yesterday is looking at some of the recent deal activity, the terms around just challenging our thought process, saying, you know, what, if anything, if we deployed, would we perhaps feel different about how do we think about this? Because, you know, we've got significant growth, we've got a lot shown there. Once you've deployed some of this capital, it does restrict your degrees of freedom as you go through it.
I think for us, as we look through it, our prioritization, if you remember, Tanya, on formation, I think is as relevant today as it was six years ago. By that I mean, normally $1 million-$500 million checks. We've done smaller, we've done bigger, but usually producing or new producing assets with a lot of optionality on the back end, because I think particularly in this environment, there's more likely to be a lot of these studies which NAVs are being built on are rearward-looking. I think you will see revisions of those in the sector, and I think you will see more delays over time, and I don't believe that's priced in at the moment. I think that creates a time lag, but I think it creates opportunity.
$100 million-$300 million sort of streams and under $100 million, let's say, on royalties.
Yeah.
Would that be fair?
I think that's fair.
Okay, great. Thank you so much.
Thank you.
Your next question comes from the line of Brian MacArthur with Raymond James.
Good morning. Most of my question's been answered, but can you just remind me on ATO, because it looks like you said they're getting leach in there. How much delay there is until you get it? Because it looks like your third quarter is supposed to be pretty good. The second part of the question then is how that cap works again. I mean, is it on a trailing annual basis or their quarterly run rate? Just any guidance on how you think that might play out now that that looks like it's catching up.
Yeah, Brian, it's great to chat to you. It's always unfortunate when other people steal your thunder in the sequence, right? Yeah. Look, ATO, I think, you know, you've seen it's another example, I think, of the patience of this model. If you're an equity investor, you carry the fixed costs and the cash associated with, you know, the delays that they experienced with your reagent shortfall. They've done well to secure supply. They are not limiting the ramp-up with the ounce provision and rock and, you know, rock on the pad, crush rock on the pad. It's really more taking a cautious approach on just as they look at access to reagents from multiple sources. You can see their guidance.
I think they are guiding, as you said, for. They did pretty well restarting, you know, earlier this year, and they're guiding for that to continue to ramp through into Q3 and beyond. The cap is not a function of the current oxide arrangement, which is really the initial basis of our investments. Recall it was sort of a high teens return on that back at $1,250 gold, and it was something which really had a pretty quick payback. We'll have our cash back on the original investment likely this year.
The cap applies really to the fresh rock where we've got no incremental investment due to that, you know, that study's ongoing and, you know, I think the company's provided some meaningful guidance, and they're also making major progress on the crusher that they've been installing on that. I don't know, James, if anything you wish to add to that.
Yeah. I mean, the actual cap amount, Brian, comes in after you've streamed 46,000 ounces.
Right.
The annual cap is 7,100 ounces of gold and 59,300 ounces of silver. That basically takes you slightly beyond the
You originally stated mine life for the oxide deposit.
as you catch up here, effectively the near term, you get everything. There's nothing that's gonna cut you off or anything?
No, we won't. We don't get cut off. Yeah.
No. Yeah.
Okay. Thank you very much.
Thanks, Brian.
Your next question comes from the line of Mikel Abasolo with Solo Capital Management.
Hello. Well, thank you for taking my question. I think that, you know, my question has been partially addressed, but I think from a different angle. The thing is, you know, I see stocks, stock prices of junior and senior miners coming down and cash flows still healthy despite cost inflation that you've mentioned. I mean, in that environment, shouldn't capital be deployed in buying the stocks rather than developing mines? And do you see that happening?
If that is the case, I mean, wouldn't the logic suggest that a small miner, instead of talking to Triple Flag for capital to develop a new project, that they should be talking to some of the big guys and try to sell their stock to them or sell their mines to them and buy back their own stock? I mean, is this arbitrage that I'm talking about reasonable or fact-based, actually? How do you see that?
Yeah, it's a very good and quite broad question. You know, you're talking about the fundamental make or buy decision that I think every management team confronts as they sort of consider the strategic alternatives over time. You know, to your point, I think, you know, we've seen in the news just this week, you know, the BHP moves on OZ Minerals, which of course, you know, the management team sort of described as opportunistic, despite as I recall, I think a 32% premium that was implied by that bid. To your point, I don't think it's easy to make broad generalizations for different businesses at completely different ends of the development spectrum, from exploration, pre-revenue development, where they are dealing with some of these supply chain and inflationary pressures.
Then there's a question of their access to funding, which I do think represents an opportunity set. To your point, if they are going to perhaps look to sell themselves as a means to be able to unlock shareholder value, is that the right time for them to be able to do that? Or is it an opportunistic time for the acquirer to be able to do that?
Uh-huh.
I think there's enough. You know, you don't wanna sell from a position of weakness. If the teams believe they have the ability to successfully execute in this environment, usually that can actually have the significant discounts a lot of those assets would trade at, you know, unlock that and set themselves up for a more valuable outcome for their shareholders. Of course, there's risk associated. I don't think, you know, there's any one general rule that can be applied. I think it's very specific to each situation. I do think you're gonna see a lot of guys out there shopping for copper assets at this time. Well, not just copper assets. I think it's an interesting environment for shopping, perhaps for some of these strategics.
Okay. Well, thank you. If I may, looking at your presentation, I am looking at the accounts. I see, when you go from net earnings to adjusted EBITDA, I see a line that says decrease, increase in fair value of investments, and I see a decrease of $3.8 million. What's in your portfolio of investments? Is that stakes in miners, by any chance?
Yeah. I'll let Sheldon comment on the specifics, but I'll just say if a lot of the people on this call know about for the last six years, our strategy's been very clear that we are, we take very limited equity exposure in our approach to investing in streams and royalties. Ordinarily, when we do, it's as part of a much larger funding package. Where we've had limited equity alongside putting a new stream in place, it's been a small check on a relative basis, and ordinarily we will look to monetize and cycle out of that in order to minimize the volatility. Sheldon?
Yeah, certainly. As Shaun said, we have a relatively small portfolio of equity investments and, you know, you'll find that on the balance sheet. It's listed as the investment, and then there is reference to Note 7. Like at the quarter end, it was about $5.3 million. And then Note 7 gives you the detail as to what that consists of. You know, we've harvested some gains, GoldSpot and Talon, and we've also, as you see, have some losses reflected through there. It's somewhat volatile, and it comes through the income statement. We don't regard that as part of our core business.
Okay, thank you very much.
Thanks, Mikel.
Thank you.
At this time, there are no further questions. Are there any closing remarks?
Lisa, thank you. Look, just thanks to all. Look, we're trying to evolve the format obviously to touch on the high points and really have the sort of engagement that I think we've got on this call, which we really appreciate. I think the questions are thoughtful. I believe the environment is really interesting at the moment for not just ourselves, but for the sector at large. I think it sets the table for good opportunity. Look, at the end of the day, you've seen the track record and really quite an undemanding multiple and implied valuation for a diverse, you know, significantly growing high margin portfolio that at the moment is trading at a dislocated value compared to where we've seen assets trade, single assets trade in the market with peers.
I think, you know, this team continues to stay the course. We'll continue to be transparent, keep you informed. On a parting point, I just encourage those of you with the interest there, we put out our second sustainability report. I think the best form of flattery there is when you've got competitors reaching out, actually looking to engage on our approach, which we've been receiving, and we'll continue to be part of evolving that process and thought process. I think it is very key to be a good catalyst for this in the sector, and that's what we aim to do. Thanks, everyone, and enjoy the rest of your day.
This concludes today's conference. You may now disconnect.