9 slides from Triple Flag Precious Metals's conference presentation, Mar 10, 2023
Slide 1: Why Alternative Finance Is an Important Part of Project Finance
WHY ALTERNATIVE FINANCE IS AN IMPORTANT PART OF PROJECT FINANCE March 2023 Shaun Usmar Triple Flag Precious Metals Corp TSX:TFPM | NYSE:TFPM
Slide 2: Introduction to Streaming
ALTERNATIVE FINANCING INTRODUCTION TO STREAMING A growing piece of the mine financing package • Metal streaming contracts are transactions under which mining companies sell future production or revenues in return for an upfront cash payment • Normally focused on specific commodities produced by a pa
Slide 3: Debt Is Favourable?
ALTERNATIVE FINANCING DEBT IS FAVOURABLE? Historically, yes… • Cost of debt has been historically low over past ~10 years due to central bank policy • Typically, debt has been the favoured source of funding for mining companies – Non-dilutive to equity holders; obligations and payments end when faci
Slide 4: Debt Is Favourable? Cost of debt has risen substantially
ALTERNATIVE FINANCING DEBT IS FAVOURABLE? …but the cost of debt has risen substantially • The Secured Overnight Financing Rate (“SOFR”), which is the basis for many companies’ cost of debt, has increased dramatically over the past year • The portion of cash flows needed to service that debt has also
Slide 5: Increased Burden of Debt
ALTERNATIVE FINANCING INCREASED BURDEN OF DEBT Especially for developers Date of Peer Group Facility Size Terms Agreement 7-Feb-23 Silver Producer US$100M 5.00% + SOFR 21-Dec-22 Base Metals Developer US$150M 6.95% + greater of SOFR and 2.00% 26-Oct-22 Silver Developer US$25M 12.5% + greater of 90-da
Slide 6: Budget and Schedule Overruns
ALTERNATIVE FINANCING BUDGET AND SCHEDULE OVERRUNS Average overrun of 60% vs. feasibility study Source: McKinsey & Company TSX:TFPM | NYSE:TFPM 6
Slide 7: Cost Inflation Adding to Woes
ALTERNATIVE FINANCING COST INFLATION ADDING TO WOES Operators getting squeezed What will these costs look like given the inflation experienced in 2022 and beyond? Source: Wood Mackenzie TSX:TFPM | NYSE:TFPM 7
Slide 8: Closing Thoughts
ALTERNATIVE FINANCING CLOSING THOUGHTS Big risks, ongoing uncertainty, but big opportunity • Decades-high inflation and supply chain problems likely to make mine build delays and cost blowouts far worse than historical norms – Choose your funding structure and partners wisely for when things don’t g
Slide 9: To Summarize
ALTERNATIVE FINANCING TO SUMMARIZE Patient, partnership-focused, and informed financing Stream Equity Debt Non-dilutive form of funding ? Initial value creation for both parties Improves project IRR ? Flexible financial or hedging covenants Endorses technical merits of mine/project Share