"Nowadays, there is seldom a sales process for a mine development project where a leading bank will refuse to consider involving a streaming and royalty provider in the capital formation stack."

Shaun Usmar

FOUNDER AND CEO, TRIPLE FLAG PRECIOUS METALS CORP.

February 16, 2024

What are some recent highlights at Triple Flag Precious Metals Corp.?

We established our seventh consecutive annual GEOs sales record in 2023. From 2017 through 2023, we experienced a CAGR in GEOs of more than 20%, thanks in part to the Maverix Metals (Maverix) transaction completed earlier in 2023. Furthermore, 2023 was our second largest year of capital deployment, with nearly US$700 million in completed deals. 

We currently pay an annualized dividend of US$0.21 cents per share, a figure which has increased by approximately 5% each year since our IPO in 2021. Sustainability is core to our identity, and we now rank third out of 117 companies on the Sustainalytics’ ESG Risk Rating in the global precious metals sector, up from fourth place in 2022. Moreover, we had several stock index inclusions and our trading liquidity has increased – again thanks to the Maverix transaction. 

What role do streaming and royalty companies play in times like these?

Global conflicts have continued and escalated in 2023, which has been reflected in commodity prices. Interest rates have also remained elevated, and therefore debt has been expensive to service and has stressed the liquidity of smaller companies. We observed that even if issuers can raise equity capital, it is extremely dilutive.  

Despite recent signs of moderation, the persistence of inflation has resulted in cost escalations on mining projects. With project studies experiencing significant inflationary pressures, it has made it even harder for producing companies to attract investors. Project delays due to permitting and other factors put stress on companies’ liquidity and balance sheets. With stream financing, we share the risk like an equity shareholder – if they do not produce, we do not get paid. Some in the mining sector are starting to appreciate these favorable risk and return characteristics. We have demonstrated over the last seven years that we are long-term, patient investors and are willing to help our mining partners when the markets are closed. When our partners are successful, we are successful. 

What are the main challenges facing streaming and royalty companies like Triple Flag?

We have seen a lot of deal activity in 2023, however, the size of the deals has been smaller on average than in recent years. I think the market often gets too preoccupied with when the next big deal will come. It is important to create value over time and be patient with capital allocation. Our primary opportunity set tends to lie in intermediate, single-asset companies that are either acquiring or producing, as they do not have the balance sheet of the majors.

Our biggest challenge is to continue to demonstrate discipline in execution. We have seen a return of large deal-flow opportunities and more demand for our capital than we could possibly underwrite. Despite this, we have also had to think a lot about risk. I am happy we have controlled our costs well, exercised patience, and proved ourselves as good custodians of shareholder value, while delivering sector-leading growth for comparable capital deployment to our peers. 

Have you considered changing your investment strategies considering the current climate? 

A strategy that constantly changes from year to year is not much of a strategy. Nevertheless, it is important to be agile to reflect the realities of shifting market circumstances in the execution of a longer-term strategy. Our investment strategy remains unchanged – a focus on gold and silver in good jurisdictions, writing larger cheques to compete with the biggest players in this space who have the highest quality, most valuable portfolios and tend to be the most rational and rigorous in their approach to dealmaking. From a risk-reward point of view, we target producing assets with good expansion or life-extension potential. For development-stage assets, there are loads of opportunities, so we seek fully funded and permitted projects. 

What are some common misconceptions about streaming and royalties?

I think the situation has improved vastly in the past eight years. Banks now appreciate streaming and royalties as a form of financing, which many of them did not previously. Nowadays, there is seldom a sales process for a mine development project where a leading bank will refuse to consider involving a streaming and royalty provider in the capital formation stack. 

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