Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Triple Flag to Acquire Orogen Royalties 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, followed by the number one on your telephone keypad. If you would like to withdraw that question, simply press star one again. Thank you. I would now like to turn the conference over to Sheldon Vanderkooy, Chief Executive Officer. You may begin.
Thank you, Krista. Good morning, everyone. Thank you for joining this call to discuss our acquisition of Orogen Royalties, which we are very pleased to have announced this morning. Triple Flag is gaining a world-class gold royalty, and Orogen achieves a very successful exit and the launch of their business going forward. I am also really pleased that we'll be taking a significant equity stake in the new Orogen Spin Co. going forward. With me on the call today from Triple Flag are James Dendle, our Chief Operating Officer, and John Cash, our Senior Mining Engineer. I'm also delighted to be joined by Paddy Nichol, Orogen's President and CEO, and Marco LoCasio, Vice President of Corporate Development at Orogen. The transaction we announced this morning results in Triple Flag acquiring a 1% NSR royalty on AngloGold Ashanti's Expanded Silicon Project in Nevada.
This is a world-class gold asset by anyone's definition. It has scale, exceptional growth potential, it's in Nevada, and we expect this to be a cornerstone mine for a tier-one operator. High-quality royalties on new, world-class districts simply don't come around very often, and we're very excited to add it to our portfolio. Furthermore, this deal establishes a long-term strategic partnership with Paddy and his team at Orogen, who have an outstanding track record of value creation through their project generation model. In addition to generating the Expanded Silicon royalty, this team also generated a very nice royalty on First Majestic's Ermitaño mine. Paddy and his team clearly have a demonstrated track record of creating shareholder value.
I'm now going to spend a minute walking through the transaction structure before passing it over to James and John, who will give you more details on the asset and the potential we see at Silicon. Paddy will then provide an overview of the plans for the Orogen Spin Co. business going forward before we open up the line for questions. Turning to slide five, this transaction will be structured as an acquisition by Triple Flag of 100% of the common shares of Orogen by way of a plan of arrangement. Triple Flag will acquire the 1% NSR royalty on Silicon, while Orogen's remaining assets and liabilities will be retained by Orogen Spin Co., which will be led by Paddy and his team.
For each Orogen share held, Orogen shareholders will have the option to receive either CAD 1.63 per share in cash or 0.05355 Triple Flag shares, plus they will also receive 0.25 shares in Orogen Spin Co. From Triple Flag's perspective, this results in the acquisition of the single royalty. Triple Flag will pay total consideration of approximately CAD 343 million, with 50% paid in cash and 50% paid in Triple Flag shares. Triple Flag will also make a separate CAD 10 million investment into Orogen Spin Co. in exchange for an 11% ownership interest. The transaction is subject to a number of approvals and conditions, of which the key ones are noted on the slide, including approval of 66 and two-thirds % of the vote cast by Orogen shareholders.
We are really pleased to have entered into voting support agreements with larger shareholders, including LTS Minerals, Adrian Day Asset Management, and Euro Pacific, as well as Orogen's officers and directors and other shareholders collectively holding 39.5% of the shares outstanding. We expect the transaction will close early in the third quarter of this year. I'll now pass it over to James and John to talk more about the Expanded Silicon Project and the royalty.
Thanks, Sheldon. The royalty we're acquiring covers the Silicon and Merlin deposits that together comprise the world-class Expanded Silicon Project and form the core of AngloGold's BT district in southern Nevada, which is a key focus for the company's growth plans. AngloGold has drilled 430,000 meters on the property, including 150,000 meters in 2024, and so far has delineated a total resource of about 16 million ounces of gold, one of the largest new discoveries in North America. The royalty is 1% NSR for the full life of mine. It has no step-downs, buy-downs, or caps. Covering 74 sq km, it includes the entirety of the Silicon and Merlin deposits, as well as known extensions and key exploration targets that I'll expand upon later. AngloGold released a technical report summary last year on their initial assessment for the Merlin deposit.
While this study excludes the main Silicon deposit and is based on an earlier Merlin resource, the results are indicative of the future development. Namely, Expanded Silicon is contemplated to be a straightforward heap leach and milling operation processing oxide material. A high-grade core of Merlin is expected to drive strong production in the early years of the mine's life, with the technical report indicating contained ounces well in excess of a million ounces per annum during this time. During 2025, AngloGold plans to complete infill drilling at Merlin to upgrade the resources and reserves and continue to advance the pre-feasibility study for Expanded Silicon, which is expected to be released in the next 12 months. On slide nine, you can see a more detailed breakdown of AngloGold's latest resource estimates for Silicon and Merlin.
Merlin represents about three-quarters of the total resource at 1.06 grams per ton, which we view as an attractive gold grade for an oxide product in Nevada. Merlin is expected to be the first deposit developed in the Expanded Silicon Project. Turning to slide ten, you can see the history of AngloGold's resource estimates for the Expanded Silicon Project. It's noteworthy how rapidly the resources have grown since AngloGold began drilling in 2018. AngloGold declared their initial resource on Expanded Silicon of 3.4 million ounces in early 2022, which has since grown to over 16 million ounces in only three years. I'll ask John to comment on the evolution of the district on the following page.
Thanks, James. I had the good fortune to start working as a mining engineer at the Goldstrike mine in 1987 and had a close association with both Goldstrike and Cortez over a nearly 30-year career with Barrick Gold. While there's a difference in the underlying geology, the point is that the Expanded Silicon is clearly a very large and well-endowed system that will grow and develop over a long period of time. To put this in context, we've plotted the evolution of the Expanded Silicon resources against Goldstrike and Cortez, two of the most prolific mining districts in Nevada. You can see that the resource growth trajectory at Expanded Silicon parallels these two districts. In fact, its 16 million ounce resource already exceeds both Goldstrike and Cortez at the time they began reporting meaningful production in 1987 and 1995 from Barrick.
Each of these districts have ultimately delineated over 50 million ounces of resources cumulatively and are still going strong as core pieces of Nevada gold mine operations. We believe Expanded Silicon will continue to grow and has the potential to rival some of the largest gold projects in Nevada and the largest epithermal gold deposits globally. I'll hand it back to you, James.
Thanks, John. Looking at the exploration potential in more detail, slide 12 shows a plan view of the Expanded Silicon Project. In our view, the key source of potential future resource growth at Expanded Silicon is the mineralization that is already known within the mineralized footprint, but not in the current resource due to drill spacing. AngloGold is focused on infill and resource upgrade drilling through 2025, and we look forward to seeing these results adding to the resource, further delineating the high-grade core at Merlin and potentially expanding the pits. There also remains significant potential to extend mineralization in areas with limited to no drilling, including extensions to the northwest and east of Merlin, as well as the northwest of Silicon. Drilling to the north of Merlin tests the gap between Silicon and Merlin for mineralization, and it is an obvious target.
Notably, AngloGold has indicated the potential discovery of a downfaulted offset to Merlin to the southeast of the currently defined mineralized footprint. There is further mineralization below the oxide fresh boundary, which is significantly beyond our base case expectations. On slide 13, you can see a long section of the Merlin deposit, which highlights the high-grade core of the ore body that drives strong production nearly in the Expanded Silicon mine life, with recent results returning 144.5 meters grading 10.53 grams per ton gold. Looking further ahead, with significant value already derived from the current and potential oxide footprint, longer-term potential exists from underground exploration. Mineralization is open in multiple directions, with significant potential for deep high-grade feeder structures within the sulfide zones.
Turning to slide 14, Triple Flag already has an industry-leading growth profile, with geos expected to grow from our current guidance range of 105,000-115,000 ounces in 2025 to between 135,000 and 145,000 ounces by 2029. Expanded Silicon will drive further growth beyond 2029. Silicon joins projects like Agnico's Hope Bay and Montage Gold's Kone, as well as others to drive growth in the longer term. I'll now pass it over to Paddy to discuss the Orogen Spin Co. of Sioux Paddy .
Great. Thanks, John. Or, pardon, thanks, James. We're very pleased and excited to present this transaction to our shareholders. Sheldon has already highlighted the key terms of the transaction and the special nature of the royalty covering Expanded Silicon Project. At Orogen, we have watched the evolution of the Expanded Silicon Project over the last five years from discovery into a truly world-class asset. Today's announcement delivers value to our shareholders befitting of such a special royalty. At the same time, Orogen's team, assets, and business model will carry on within Spin Co., the shares of which will be distributed to Orogen shareholders. Orogen's management is excited to continue our model of organic royalty generation that produced the Expanded Silicon Project and the Ermitaño project. Of the $2 per share consideration proposed in this transaction, Spin Co. represents $0.37 per share. Spin Co.
will feature a portfolio of 28 royalties, including the cash-flowing Ermitaño royalty. In addition, there's a strong pipeline for future growth. We have seven active option agreements, all with the potential to crystallize new royalty interests for the company, four exploration alliances to generate new projects, and five projects currently available for partnership, including multiple Expanded Silicon Project analogs. On a pro forma basis, including Triple Flag's placement of CAD 10 million, Spin Co. will have a market value of approximately CAD 88 million. It will feature a strong balance sheet, an expected working capital balance between CAD 15-20 million, and no debt. Orogen has consistently been profitable since Ermitaño first entered production in late 2021, and we plan to continue that track record of profitable royalty generation. Orogen's business model is organic royalty generation.
The delineation of the Expanded Silicon Project has been a key driver of the sector-leading share price performance of Orogen over the last three years and demonstrates the power of our business model. We operate this model in Western North America and particularly in the Western United States. We utilize our strong technical team and proprietary data sets to target and develop early-stage exploration projects. We then seek to partner those projects with other mining companies, limiting our risk. Our general deal structure features upfront consideration to recover our costs and royalties to maintain exposure in the event of a discovery. Our objective is to create new royalties at zero or negative costs to our shareholders. Our portfolio of 28 royalties has largely been created through this process. Both the Ermitaño and Expanded Silicon royalties were organically created by Orogen.
Partners are actively advancing our projects, and we have exciting developments expected across the portfolio with no further investment required by Orogen. Ermitaño has underpinned the financial stability of Orogen for the last three years, three and a half years, pardon me, and will be the flagship asset within Spin Co. Operated by First Majestic Silver, Ermitaño has been in steady production since it first opened in late 2021. First Majestic has invested substantially into the mine and the Santa Elena Mill Complex to process the Ermitaño ore, resulting in continued increases in throughput and improvement in metallurgical recoveries. Importantly, First Majestic has also been active exploring the broader Ermitaño land package. In July 2024, they announced the discovery of the Navidad vein system and published an initial inferred resource in March 2025.
Navidad remains open in multiple directions, with the resource representing only a portion of the veins delineated to date, which we believe underscores the potential for mine life extension. Beyond Navidad, there are multiple vein targets on the Ermitaño claims within 5 kilometers of the Santa Elena processing plant. First Majestic has announced the intention to accelerate regional exploration at Ermitaño, utilizing the understanding gained from the discovery of Ermitaño in Navidad. Spin Co. is positioned to hit the ground running, and 2025 promises to be an exciting year with developments on multiple fronts. The Navidad discovery has significantly increased the mineral endowment at Ermitaño and a further 57,000 meters of drilling is planned this year. We also anticipate six partner-funded drill programs on our exploration properties this year.
At MPD South, Kodiak Copper is expected to release a maiden resource estimate later this year on the back of success at the Addit and West zones on our royalty ground. Nevada Gold Mines plans for deep drill testing on the Maggie Creek project in the Carlin Trend, Nevada, in the coming months, testing beneath shallower gold anomalies. At Kingfisher's Highway 37 project, the largest land package in the Golden Triangle not owned by a major, drilling is planned for this summer. At Spring Peak, Headwater Gold have partnered with Newmont to delineate several hundred meters of strike on the disco vein and has encountered further mineralization on multiple parallel structures. At Larica in Colombia, surface sampling has defined four porphyry targets over a 15-kilometer trend that is expected to see initial drilling this year. We have a track record of discovery on our projects, and Spin Co.
will start its life with a portfolio that has every chance of repeating our success. We will be working to fill the pipeline with the next set of projects through our generative alliances. These agreements cover large regions of prospective geological terrains where partners fund our team to develop innovative generative concepts and advance them to drill-ready projects. Our partners include Altius Minerals, BHP Explorer, and as of today, Triple Flag. In summary, we believe this transaction crystallizes the value of the Expanded Silicon royalty for Orogen shareholders with an attractive 38% premium, while at the same time providing exposure to Triple Flag's high-quality portfolio of royalties. Orogen continues to participate in the, pardon me, Orogen shareholders continue to participate in the company's other assets and proven business model through a well-funded Spin Co.
We are proud to present this transaction to our shareholders and are pleased that shareholders representing nearly 39.5% of the company's shares have already signed agreements in support of the transaction. With that, I will turn the call back to Sheldon.
Thank you, Paddy . To sum up, we see Silicon as a world-class royalty asset that ticks all the boxes for us while establishing a partnership with a strong management team at Orogen. We are acquiring a royalty on a tier-one gold asset located in Nevada and operated by AngloGold Ashanti, one of the world's leading gold companies. We believe this is going to be a big mine, the sort of mine that is a cornerstone asset for a major gold company. Royalties have a demonstrated track record of value creation. The royalty holder enjoys a free carry on all the exploration spending, capital spending, and operating expenditures through their participation in the top line revenues. We believe that as owners of the Silicon royalty, we will benefit from AngloGold Ashanti's efforts as they further drill, develop, and bring this asset into production.
I see this asset as being a fantastic addition to Triple Flag's portfolio. Thank you for taking the time to dial in, and we appreciate your continued trust and support. I'll now pass it back to the operator and open the line for questions. Thank you.
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw that question, press star one again. Your first question comes from Jof Wilson with RBC Capital Markets. Please go ahead.
Yeah, thank you very much. Good morning. As one of the analysts who covers AngloGold, I'll admit there's not a lot of information out there in terms of what the prospects are for Silicon Merlin. I guess first off, in terms of the process for due diligence, was the team able to visit site or meet with the AngloGold team and understand what the development outlook looks like, or is this mostly done based on the deal done based on public information? Thank you.
Yeah, thanks, Josh. This is Sheldon answering. We did not have access to AngloGold Ashanti when we did our due diligence, but there is actually quite a bit of public information available. I'll actually ask James to kind of walk through the information we had available to us and how we came to our view on the property.
Yeah, morning, Josh. We have been following the project for a number of years. Over that time, we built up a very comprehensive library of technical information. In a similar way to what we did on the Fosterville royalty, which we acquired from Centera when Coconut Gold owned it, where we built up drill hole sections and all that kind of stuff in 3D to model out the geology in fairly exhaustive detail. I think while the public domain information is what it is, there is actually a lot you can do with the right tools. That is the first piece. The second piece, particularly as it relates to permitting, is, as you know, AngloGold Ashanti is permitting the Bullfrog mine, the North Bullfrog, I should say. We were able to go through all the public documents, including all the consultation that is available through the BLM's records.
That gave us a really good window into how we would expect this asset to be permitted. Finally, as it relates to site access, obviously the process was sort of confidential in nature given that it is public company M&A. We did not engage with AngloGold Ashanti, although we, of course, looked at all their materials in detail. The site is all on BLM ground, so it is publicly accessible. John and I spent time actually on the site, and we were able to go right from the south end to the north, as well as the North Bullfrog project areas, and of course, the old Bullfrog mine.
Thank you. In terms of the approach, I guess, to forecasting for the asset, would you be assuming production would be included in your 10-year outlook and I guess it would not be included in your 5-year outlook based on the presentation?
Yeah, I mean, we currently show the outlook in our materials for 2029. We would be assuming that production comes in sometime thereafter.
Thank you. When we're thinking about what the production outlook is for the asset, I guess, is the recommendation to rely on prior disclosures from Anglo, or is there any kind of recommendation you'd suggest for the asset?
Yeah, for sure. Look, I mean, there was the technical report summary that the company put out last year that there are some profiles that have been put out. I mean, it's quite clear to us that those are a moving target because, for example, when one looks at the site's infrastructure layout, the waste dumps are covering areas that are highly, highly likely to be mineralization, and they're a natural ridge drilling. It will change, but I think that's a good starting point. One of the crucial things is the high-grade core of Merlin is a zone that's continuing to be delineated, and I referred to a very high-grade intersection in that. I think the way in which Anglo delineates, develops, and models that zone will be really important for the royalty going forward.
I think you can refer to the public materials that Anglo's put out. The other part of it is this is a very big property. It's a very big system. I'm sure there's going to be production scenarios that today we can't consider, and over many, many years, we'll see how things play out. By that, I mean the inclusion of mother load, the inclusion of fresh rock, resources beyond the oxide, that kind of thing.
Great. Thank you very much.
Thanks.
Thank you.
Your next question comes from Larry Lu with CIBC. Please go ahead. Larry, your line is open.
Hi, sorry. Morning, Sheldon. Morning, James, and morning, John. Thanks for taking my question. I would like to ask about the flip side, more on the Spin Co. I'm wondering how did you guys come up with the value of the Spin Co, and going forward, are there any risks in terms of when the transaction's closing or from a valuation perspective?
Sorry, Larry, I didn't catch the back end of your question there. You asked for risks about what?
The risks of the SpinCo in terms of the portfolio as well as when the transaction is closing.
Okay. I'll start, and then maybe I'll turn it over to Paddy because the SpinCo really is Paddy 's company. The essence of the SpinCo for us is Paddy , Marco, and the team and their track record of success thus far. They generated the Silicon royalty, which, as we've gone on, is a very, very impressive royalty. They've also generated Ermitaño. That's a track record, which I think kind of stands alone in the sector. In addition to that, they have a core of a portfolio right now. They have cash flow from Ermitaño. You can kind of look and see at their existing portfolio as well to generate the value. For me, as a Triple Flag, I just love being associated with this company going forward and basically sharing in the successes that they're going to generate going forward.
Paddy , I'll let you tell the story.
The basis for the valuation really stems from the royalty assets and then the exploration potential of the projects that we have. If you look at Ermitaño as being one of those key points for valuation, along with our cash position, the Triple Flag investment that we've got, the alliances, then the backdrop of the prospect generation business is how we came to formulate the valuation, which I think now that Silicon is going into Triple Flag's hands, I think it's a very good value proposition for where we position the company post-transaction.
For sure. Sounds good. Thanks so much, Paddy , and thanks so much, Sheldon.
Thank you.
Again, if you'd like to ask a question, please press star one. Your next question comes from Carey Macrury with Canaccord Genuity. Please go ahead.
Hey, good morning, everyone. Maybe just to start, I'm assuming this transaction is the result of a competitive process. Can we assume that?
Yeah, Carey , I'll start. It was a competitive process, and it was Paddy's process, so maybe I'll let him speak to it.
Sure. Yeah, that's correct. We evaluated things over the past probably six to eight months and looked at whether or not we wanted to continue trying to grow Orogen or if we thought that we were at a point where it might be in the hands of a larger entity. We went through sort of a process internally first and then externally probably midway or towards the end of last year. We had a process. National Bank was our advisor on that. Yeah, through the various analyses, it came to be that Triple Flag is now going to be the owner of Silicon.
Just in terms of the valuation, I mean, obviously, gold prices keep ripping here. Any context on how you thought about the gold price in terms of the valuation? Is it based on a consensus gold price, or any color there would be helpful?
Yeah, I mean, I guess there might be differences of views on the two sides of the transaction, but I'll speak to the Triple Flag side, Carey . I mean, we always look at a number of different lenses when we look at gold price. We do not just look at a single source. We did not price this off the spot gold prices. I'm a big gold bull. I think there is plenty more room to go, but I do not think anyone is pricing $3,000 gold into their models right now. We also did not use consensus prices. I think consensus is really lagging right now. At consensus at the time we were looking at this was $2,200. I think that that is a pretty low gold price. When you look at different flat pricing scenarios, we are somewhere between spot and consensus, much lower than $3,000.
Okay, great. Maybe one last one on the Spin Co. Excluding the working capital, would Ermitaño be like 70-80% of the implied value of the Spin Co, or are there other?
Sorry, could you repeat that question?
Yeah, just on the Spin Co, like X, the working capital, would Ermitaño be 70-80% of the value of the Spin Co, or is that too high?
Yeah, I would say it's not that high. I would say that you've got the existing Ermitaño deposit as it is today, and then now we've got Navidad. I would say that it roughly represents, I would say, half company.
Okay. That's great. Thank you.
We have no further questions in our queue at this time. With that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.