Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record gold prices boosted revenues and cash flow from operations compared to Q1.
- Business development team successfully added two long-life assets to the portfolio.
- Initial contributions from Yanacocha and growing contributions from new mines expected to boost results in the second half of the year.
- Company has a strong balance sheet with $2.4 billion in available capital as of June 30, 2024.
- Adjusted EBITDA was $221.9 million, and adjusted net income was $144.9 million for Q2 2024.
Negative Points
- Revenues and cash flow from operations were lower compared to Q2 last year due to the absence of contributions from Cobre Panama and lower production at Candelaria and Antapaccay.
- Lower quarterly production at Candelaria and Antapaccay due to operational issues.
- Precious metal GEOs sold were lower year-over-year, with a significant drop from 95,383 in Q2 2023 to 82,350 in Q2 2024.
- Energy GEOs were lower at 22,100 for Q2 compared to 28,063 a year ago, partly due to weaker natural gas prices.
- The company incurred $800,000 in arbitration costs for Cobre Panama in Q2 2024, with an expected total of $3 million for the year.
Q & A Highlights
Q: First question on the Yanacocha transaction. The returns that we calculate would be comparable to some of the, I guess, mega type of returns we saw maybe 2015, 2016, which I would note ultimately worked out fairly well for the company. If we're looking at these deals today like Yanacocha and maybe others that could be on the horizon. What's the sort of appeal here? And I would note from our perspective like the main bulk of the economics are not really happy. The project hasn't really been developed versus some of the historical low return deals, we're large producing known assets just a bit more insight on what the company sees versus what we know in the market today?
A: Thanks, Josh. Eaun speaking, we see great potential in the asset. It's been a huge producer over the years brownfield site with a very large resource and (inaudible) We do get the benefit of existing oxide production and expect the short term rule should be a decision on the sulfides, we were able to do an on-site diligence as part of the transaction, which provided additional comfort, especially in the sulfides. We see that as a great project that Newmont, which we expect will advance. I think they've put off that decision until 2025. But then on top of that, you have fantastic projects on the site, which really incentivized maintaining production in our view, you have the Conga project, which not that long ago was advancing in the fullness of time. There is potential there and the Quilish projects both very, very large. And so you have the benefit both of immediate cash flow and fantastic optionality longer term. So that is why we find it attractive. And it's a great partner at Newmont's, as I'm sure, has a great track record of both advancing projects and operating successfully. So we're happy to be involved there.
Q: And then just in terms of the opportunity for maybe more of this style transaction that skews towards the optionality’s, are these the type opportunities you're seeing out there or there's been a focus, at least from commentary from other companies about project financing type of deals.
A: We see both in short, I think there is certainly opportunity for a project financing type transactions operating assets. There's a pretty rich deal environment at the moment. So, we'll continue to advance all fronts.
Q: Thank you. And one last question, just on one of the deals that was done early this year on the energy side of things for Haynesville. I'm not sure if this is an anomaly for the quarter, but your Haynesville production or revenues hasn't really improved that much and there was a large investment made in the first quarter. When should we start to see the increased royalty revenues from this asset?
A: Hi, Josh. This is Jason speaking. You're right, we did add incrementally to install at the end of last year and despite that revenues were sort of flat. A lot of that is timing and commodity price. So gas prices, which you probably know, have fallen off fairly dramatically in the period we're speaking about that impacts the royalty, both in terms of straight royalty economics that also impacts the way the operators are managing their production. So low gas prices in the Haynesville have resulted in softer drilling rates and at times operators dialing back their production levels to trying to rebalance the market. So there's a bit of a -- there's a large commodity price, I guess, impact there in two ways. We're also onboarding, right, continuing to onboard the assets that we acquired at the end of last year. That takes some time for all of the ownership interest to transfer over. So I think as you see commodity prices rebound here in the coming quarters. I think you'll see volumes and revenues normalize a bit.
Q: I wanted to ask first of all about the (inaudible) Yanacocha, congratulations on getting another big deal done. What was the assumption in terms of the startup of the sulfides when you got to an IRR that you are comfortable is for this?
A: Thanks Lawson. Eaun again here. In terms of the sulfides, I think, what Newmont has said is 2025 that's possible that Bill will adjust it's worth noting that the oxides are currently in production. And I think that our due diligence would indicate there's potential there to continue to do leaching, there is delay, but I think we are expecting something around the 2029 time line production.
Q: Just thinking about the deal pipeline and the relative middle mix I mean, that's improved population (inaudible) used the word improve, but that's swung back in the favor of gold and silver in the precious metals quite significantly in Q2 versus Q1, where it dipped to quite a low level as you're now back to 70% of revenue from gold and silver. In that context, how do you think about adding new streams in terms of metal mix is gold and silver still a continued priority here or does the rebound in gold and silver prices and the move to the metal mix as a result, perhaps shift your focus now going forward, more to non-precious deals?
A: Lawson, it's Paul. Thanks for question. Focus, as always is precious metals and it stops as always, with asset quality. Anytime we're looking at stuff it's what are the great assets that is the biggest driver and what generates the best returns over time, then we get onto commodity mix. But so first is do we like the asset? And second, can we get it done within the guidelines of what we do with the commodity mix? So as always, gold and precious metal is number one on the list in terms of what we'd like to do, but always open-minded. If they're great assets in other commodities, we think we'll get long-term returns happy to add those two.
Q: I'm just going to start off on just some of the guidance, and Thanks, Sandip, is that Hemlo is always difficult to forecast but just as we look at the second half of the year and we do have, the Candelaria, I think was one that you had mentioned and (inaudible) Salares Norte, those ones ramping up Amicas. Thanks. Like it's a second is second-half weighted, but is it more weighted to Q4 or is it more of an even distribution plus I have the valet top-up in Q3. I'm just trying to understand Q3 versus Q4?
A: Sure as of right now, sort of the visibility that we have I would say it's probably going to be pretty even between the two may be in Q4, it might get a little bit higher, as you know, Greenstone and Solaris, no changes at ramp up, but I don't expect too much of a difference. Obviously, part of it is all dependent on commodity prices with respect to the MPI's, but for simplicity, I would say that they should be pretty close.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
