Triple Flag Precious Metals Corp. (TRFPF) CEO Shaun Usmar on Q1 2022 Results – Earnings Call Transcript

Triple Flag Precious Metals Corp. (OTCPK:TRFPF) Q1 2022 Earnings Conference Call May 11, 2022 8:30 AM ET

Company Participants

Shaun Usmar – Chief Executive Officer

Sheldon Vanderkooy – Chief Financial Officer

Eban Bari – Vice President, Finance

James Dendle – Vice President, Evaluations & Investor Relations

Katy Board – Vice President, Talent & ESG

Conference Call Participants

Tanya Jakusconek – Scotiabank Global Banking and Markets

Shane Nagle – National Bank

Greg Barnes – TD Securities

Operator

Good morning. My name is Joseph, and I will be your conference operator today. At this time, I would like to welcome everyone to the Triple Flag Precious Metals Quarter One 2022 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

CEO, Shaun Usmar, you may begin your conference.

Shaun Usmar

Thank you very much. Hello, everyone, and thank you for joining us to discuss Triple Flag’s first quarter results. Today, I’m joined by our CFO, Sheldon Vanderkooy; our Vice President of Evaluations and IR, James Dendle; our Vice President of Talent and ESG, Katy Board; and our Vice President of Finance, Eban Bari.

I’m pleased to report another solid quarter during, which our business benefited from continued support of commodity prices, underlying portfolio quality and the embedded resilience associated with asset diversification and installation from operating and capital cost inflation.

We’re pleased to report that we met our pre-release sales guidance in the first quarter, having achieved 2,113 ounces sold, resulting in a 7% increase in revenue year-over-year to US$37.8 million, adjusted EBITDA of US$30.5 million and earnings of US$0.10 per share. The market and pricing backdrop has been volatile during this period with the competing forces of inflation, central bank action, ongoing COVID-related supply demand impacts and geopolitical instability with the war in Ukraine, yet our margins have remained steady. Our cash balance continues to grow, and our financial results have proven to be resilient.

The business is continuing to deliver robust organic growth. Production across the portfolio in the first quarter was strong and in line with expectations. Over the quarter, the pipeline for new deals has remained very active. Triple Flag acquired a royalty on a highly prospective high-sulphidation epithermal gold deposits in Chile called Sofia for $5 million, a small tuck-in addition to our portfolio done on a bilateral basis.

We also announced earlier in the quarter the acquisition of a royalty on the Beaufor Mine in Quebec. Our latest deal announcement subsequent to quarter end is the proposed precious metal stream and gross revenue royalty on the Prieska Copper-Zinc Project in South Africa, another bilateral deal that we have exclusivity on. Prieska is a large-scale base metals VMS deposit operated by Orion Minerals, which is listed on the ASX and the JSE with an extremely large and perspective land package. We are really pleased to achieve this important step towards providing Orion with funding support for a very exciting base metals mine development.

Overall, we continue to demonstrate discipline in our deal making approach with a focus on high-quality, accretive transactions and an emphasis on cultivating direct bilateral deal opportunities.

Our dividend yield remains competitive with our Board declaring a dividend of €0.0475 for the quarter to be paid in June. In these unprecedented times of both climate and social change, Triple Flag is committed to responsible mining, providing essential metals for renewable energies through our work with responsible mine operators, primarily by precious metal byproduct stream financing and supporting the communities in which they work.

During the quarter, we also donated $100,000 in support to Ukrainian humanitarian relief to assist the most vulnerable victims of the senseless conflict. The portfolio is delivering organic growth, both in the short-term and the medium to long term. Buritica’s expansion continues to 4,000 tonnes per day this year, and our ramp-up assets are advising towards nameplate capacity. Steppe Gold resumed leaching in March, and they’re advancing the Phase II expansion.

James and I were fortunate to visit Northparkes a few weeks ago with COVID related travel restrictions finally easing. The trips underscored the quality of the management team, combined with the incredible surface and underground infrastructure in place at Northparkes and the significant optionality associated with resource conversion, the discovery of new core free deposits and potential to expand the capacity of the mine. In a world seeking copper to enable our decarbonization and climate change imperatives, Northparkes is ideally placed for a long and prosperous future ahead of it, that we are proud to be a part of via gold and silver byproduct streams and our community support commitments.

I’ll now turn it over to Sheldon to discuss our financials for Q1 2022.

Sheldon Vanderkooy

Thank you, Shaun. GEOs in Q1 were broadly in line with the same quarter in the prior year increasing by 2% to 20,113. Gold stream volumes increased by 29%, driven primarily by increased deliveries from Northparkes and gold royalties were consistent with the prior year. Silver stream volumes decreased year-over-year, but consistent with our expectations.

Q1 results as a whole were consistent with our 2022 guidance of 90,000 to 95,000 GEOs, which assumed a gold silver ratio of 77%. The markets have experienced significant volatility lately. And in Q1 as a whole, we realized a gold silver ratio of 78 times. To illustrate the impact of the gold silver ratio on GEOs, GEOs for the quarter would have been approximately 1,000 ounces higher if the gold silver ratio had remained consistent with the same period last year. Nonetheless, we had a good start to the year with strong performances at Northparkes, Fosterville, Buritica and RBPlat in particular.

I’ll now turn to the next slide. We’ve seen increasing financial market volatility as the markets grapple with inflation and rising interest rates. We are seeing input cost pressures across the economy, which can squeeze margins. The streaming and royalty model is a fantastic lower-risk model, ideally suited to today’s environment. We have top line revenue exposure, benefiting from top line revenue inflation, but with no direct exposure to operating cost or capital cost inflation and thereby preserving our margins.

I’ll now ask Eban Bari, Triple Flag’s Vice President of Finance, to provide further details on the quarter’s results.

Eban Bari

Thank you, Sheldon. The portfolio delivered strong financial results during Q1. Revenue was up 7% over Q1 2021 to $37.8 million. Net earnings were up 83% year-over-year, and adjusted net earnings were up 12% in the same period. Adjusted EBITDA was 1% higher to $30.5 million. We generated $26 million worth of operating cash flow, 9% decrease year-over-year, and the decrease was largely due to differences in working capital changes as a result of timing of bonus payments. We also maintained strong, consistent asset margins at 92%.

I will turn over to the next slide. Our pure-play precious metals portfolio is well diversified with 93% of the revenue from precious metals with over one-third of our revenue from Australia, and 87% of our revenue from the Americas and Australia, considered stable mining jurisdiction.

I will turn over to the next slide. We finished the quarter with $58 million worth of cash on the balance sheet, no debt and available credit facility of $600 million, including the accordion. All of this provides us ample liquidity for accretive new deals, as well as our dividend program.

I’ll now turn it over to James Dendle, Vice President of Evaluations and Investor Relations.

James Dendle

Thanks, Sheldon. This page sets out our GEO growth from inception as well as our 5 and 10 year annual GEO outlook. You may recall that, we issued our inaugural 5 and 10 year outlook in Q3 of 2021, indicating 105,000 GEOs to both the 5 and 10 year time frames, highlighting the embedded growth within our portfolio and the long portfolio duration. We’re pleased to be able to extend this outlook by year and increase the outlook in the five year time frame from 105,000 GEOs to 110,000 GEOs.

The majority of the production expected over the 5 and 10 year outlook is derived from mines that are currently in production and supported by Mineral Reserve estimates. The long-term production outlook requires minimal capital expenditures by the asset operators and a number of the development projects have been permitted, providing a low-risk outlook. The long-term production outlook requires no further funding from Triple Flag, with the exception of a $45 million staged payment with respect to Kemess upon a construction decision.

We continually looking to increase and extend its outlook through disciplined acquisitions that fit our technical, commercial, ESG and returns criteria. In this area, I’ll provide a brief overview of the Prieska opportunity that Shaun mentioned earlier.

Subsequent to the quarter end, we entered into a non-binding term sheet for a precious metal stream and royalty on the Prieska project. As Shaun mentioned, Prieska copper zinc project operated by ASX and JSE listed arrive Minerals and located in the Northern Cape of South Africa. It’s a brownfield project that was operated by Anglo Valve from 1971 to 1991 and a significant underground infrastructure, a very solid resource base and significant exploration potential across the extreme area of over 4,000 square kilometers.

This feasibility study released in 2020 contemplates a 12-year life of mine, with significant opportunity to extend this and all major permits in place. Once in production, we expect an average annual stream GEOs of around $12,000 per year.

Turning over, this page provides an overview of the Stream and the asset. The royalty in the Stream are subject to Orion Minerals raising AUD 20 million and completing an updated feasibility study. We expect definitive documents to be finalized in the third quarter of this year, and we’ll provide more information on this asset later in the year. This is a deal that we’ve been working on for some time, and it was originated on a bilateral basis through our networks.

Turning to our key assets. The portfolio is performing well and consistent with our 2022 guidance. At Northparkes, E26 Lift 1 North Cave is ramping up to plan and record plant throughputs were achieved in March. I’ll be plated a solid quarter with tonnes hoisted up 11%, and steel drifters is expected to reach nameplate capacity in 2022.

Fosterville outperformed during the quarter, due to higher-than-expected grades. Based on a likely sequence of mining of ultra-high grade stopes, Fosterville anticipates having lower gold production in the next two quarters, with the fourth quarter being the strongest of the year. Steppe Gold recommenced leaching ATO during the quarter, and we received deliveries under the stream subsequently after quarter end. Reagent shipments continued uninterrupted in April and the process of restocking reagents storage facilities is ongoing.

Buritica made excellent performance progress on the commissioning of the 4,000 tons a day expansion, running total nameplate in February and March, which is ahead of our expectations.

I’ll turn it over to Katy.

Katy Board

Thank you, James. As always, we strive to invest in responsible mines and projects that protect worker health, safety and the environment, where benefits accrue to local communities and a broad range of stakeholders.

As Shaun mentioned, in light of the attack on Ukraine, Triple Flag donated CAD 100,000 to the Canadian Red Cross in support of the Ukrainian humanitarian release effort to assist those most in need during this horrific crisis. The Triple Flag team also participated in packing supplies in response to the release effort. Triple Flag stands with the people of Ukraine.

At Northparkes four local students from doorstep communities have been selected to receive AUD 5,000 onetime bursaries to support postsecondary degrees. Each of these recipients has expressed a desire to return to rural remote areas of Australia upon completion of their degrees.

While in Australia, our team participated in the unveiling of four grant stand and met some of the impressive recipients of Triple Flag scholarship program and could recognize the direct benefits of our activities on the Parks and Forbes communities.

At RBPlat, Triple Flag is committed to financially supporting seven new students in pursuing mining-related postsecondary engineering degrees. This is in addition to the eight students Triple Flag continues to support from 2021.

Contributing to community and sector development through our global scholarship programs is a priority for our organization, and we’ll continue to seek out ways to complement our mining partners’ activities in these areas and enhance their privilege to operate with their host communities.

On March 8, International Women’s Day, Triple Flag again sponsored a table and invited women from within our network to attend the women for women’s college hospital lunch, a fundraising event, which raised over CAD 550,000 dedicated to breaking down barriers to healthcare for all one.

We have since seen some of our direct peers adopting various initiatives we have undertaken and take that as a sign that we’re on the right path. It is our goal to continue to be leaders in this space, and we continually seek out opportunities for further advancement.

Since inception, we have remained a carbon-neutral company and go a step further by offsetting the attributable share of emissions from our mine investments, which we believe is still unique in our industry. We look forward to sharing more of our ESG initiatives in our 2021 sustainability report, which will be published next month.

Shaun Usmar

Thank you, Katy. As the metrics on this slide demonstrates our key metrics stack up very favorably to the best in the sector. We have 80 assets over the last 12 months. Our EBITDA was US$ 124 million and provides investors with a compelling dividend yield and organic growth. We’re solidly positioned as an emerging senior streaming and royalty company.

In summary, we delivered solid financials in Q1 against a volatile market backdrop, highlighting the quality of our portfolio. Over the quarter, the pipeline for new deals remained very active.

We acquired two new royalties and entered into exclusive non-binding terms in May for a precious metal stream and royalty on the critical project in South Africa. We continue to successfully demonstrate our ability to secure exclusive bilateral deal opportunities that offer favorable risk award attributes for our investors.

Our focus remains on disciplined deal execution and value creation, exercising patients while pursuing sensible and accretive deals. With nearly $700 million in available liquidity, we have ample means to transact on the larger, high-quality transactions in our deal pipeline.

As inflation and supply chain disruption impact mining sector margins, or faithful application of the royalty and streaming business model to our investments, coupled with the diversified and resilient nature of a high-quality portfolio, largely insulates our investors from the direct effects of these corrosive forces. Our dividend remains robust and provides a competitive field.

Our business is producing strong cash flows, which are positioned to increase as the fully funded embedded growth is delivered across a number of assets. Having celebrated the six-year anniversary of our [indiscernible] IPO and approaching the 1-year anniversary of Triple Flag IPO, I’m pleased with the solid performance we’ve delivered so far and look forward to continuing to deliver strong financial results as well as disciplined growth and value for our investors. We can freely appreciate the support and trust of our stakeholders, and we look forward to providing further updates there. Thank you.

Operator, with that, if we can turn to Q&A, we’re happy to answer any questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Tanya Jakusconek. And your line is now open.

Tanya Jakusconek

Great. Good morning, everybody. So sorry, I just caught up on another call. So I did miss your talking about the deal you announced last night. Can I just — and I just quickly looked at the slide on the presentation. Can I just ask maybe you can go through what was the attractiveness of this asset for you and [indiscernible] maybe highlight what you see as the risks in the deal and what you see as the time line of getting the deal done and the key catalysts you need to see in a mine plan for it to go ahead.

Shaun Usmar

Tanya, firstly good morning and thanks. I appreciate, Tanya there’s some congested time lines of these presentations. So I’ll start, and I’ll ask James to comment and perhaps Sheldon. Look, the first thing is I think you should recognize probably by now that we’ve obviously been, I think, the first in this industry to successfully do a precious metal stream in the region of RBPlat.

The first filter there in that region is always the ESG credentials, how they’ve sorted out at like economic empowerment, the host community relations and those are things that I think before any technical merits even can contemplated that we put that to the test.

We started this over a year ago. We put a lot of ideas in front of miners all over the world. And I’ll give you the context, because I think it points to two things. One, I think this form of funding, we’ve said it before, but I think we’re seeing it in real time is becoming increasingly accepted as a sensible alternative for miners, particularly with base metal miners on polymetallics like this, where there’s a natural arbitrage.

So this term sheet originally, I think, was somewhat dismissed. And it was a great example where our mining partner at RBPlat, it’s a small community, and they strongly advocated actually the [indiscernible] to us for doing business with us, and also talked about how we have supported their local communities during COVID. And that was the difference for them to come back to us and say, actually, we’re really interested in exploring this while we consider other alternatives.

We’ve engaged for nearly a year, and the main reason is the same thing, whether it’s in this region or any other part of the world. If you look at the history of mining project delivery, whether it’s majors and peculiar name, it turns out the data over the last 10 years, people seem to think big mining companies a better project execution, but the data doesn’t support that.

In fact, the percentage and the absolute dollar numbers are higher typically when you actually look at the outcomes. And the time deliveries, in particular, tend to be longer. So the reason for our very patient approach here has really been focusing on providing them with feedback not on the equivalent of the 43-101 studies and what looks good on a spreadsheet or a technical study, but on the execution plan.

And you’ll see the way that we structured this so far, is very much with a high degree of optionality in our favor, strong security — but I’ll ask James to comment in a minute. The core thing in this area, there is great mineralization, renewed interest in the region, the massive land package, a lot of fund capital, the know-how and the ability in the region to be able to execute. And I think I’ll turn it over to James from [indiscernible] and just do you want to say?

James Dendle

Yeah, Tanya, I think on covered some of the main points there. I mean, look, it’s a past-producing mine. It’s got a very extensive production history, so the ore is a known quantity from a processing point of view, but also from a mining and rock mechanics and geology point of view. So, it’s a very well-understood ore body.

As Shaun mentioned, the stream area is large. Australian actually as contemplated is over 4,000 square kilometers — and it’s a very big CMS system. And really, this is the focus of that system, and there’s been kind of one major discovery in the area. We think there’s tremendous opportunity to discover additional parts of that very large system as you know, they sell them orphans. So I think that’s very compelling. The infrastructure is good. There are two shafts in place, and it’s a pretty simple processing flow sheet. So to us, it looks like a very compelling opportunity for all those reasons.

Shaun Usmar

And Tanya, at the high level, you’ve seen the numbers once in production, and I think the rough time lines somewhere like 2.5 to three years, and we’ll see how the studies come through. But it’s like 12,000 GEOs a year, obviously, pretty big margins. I think in our internal rough numbers, it’s probably 6%, 7% of our NAV. And you can think of it on consensus, not spot numbers in the low to mid-teens, for both those instruments. And you know what the metrics have looked like in the space on single-asset development projects of late, that hasn’t been a very PN deployment of capital for us. So we like the optionality. We like the assets and the optionality is in our favor.

James Dendle

And I should — just the other part of your question, Tanya, just on the studies, the company expects to produce an updated feasibility study later in the year. We’ll be looking for a very detailed buildup of execution, really exactly how the project is going to be implemented from feasibility to construction, so that will be one of the focal points for our analysis when that comes out. And obviously, with the way capital costs have moved recently, we’ll be paying close scrutiny to the movement in costs and operating costs for that matter. So, those are some of the focal points we’ll be working through late in the year.

Tanya Jakusconek

Okay. And — but I’m interested in the mine plan. So James, so because one of the things that you have is you can walk away if you don’t like the mine plan. So I’m trying to understand like what are the key aspects that you need to see in the mine plan. So you need to have a good comfort on execution. It appears you need to have the comfort that the capital and operating costs are reasonable and the time schedule is reasonable. Is there anything else I’m missing that you’re going to need to see that meet your criteria to go ahead on the field.

Shaun Usmar

Yes. I think the key thing, Tanya, firstly, we don’t anticipate major changes from what was contemplated in the 2020 feasibility study. What we will be looking at very closely is the things like the development rate productivities as the mine ramps up into production. So it’s really confirming the development rates and the achievability of those rates in the first couple of years as they look to build skills and capacity at the operation. So it wouldn’t be — it’s not so much that we’re looking for — is this what it looks like going forward versus the 2020 study. It’s really confirming its usability and the granular sort of execution part of what’s already been put in the project demand?

Sheldon Vanderkooy

And Tanya, that’s a common theme on every asset we’re looking at in a pipeline pretty much everywhere. Development rates we see very often in this sector are generous in the in the assumptions. And our primary focus is arithmetic is making sure these things have sufficient liquidity to get through even if there’s a risk on time line, ultimately, these teams can be very lucrative as long as obviously they deliver the mine. So those are the focal points for us. And that’s the reason we’ve been very patient on this.

Tanya Jakusconek

Okay. And then just also just on — so we’ve got the study coming midyear, are you going to be looking at these aspects to see whether it fits your criteria on the mine plan. What about the risk of financing the operator has to obviously finance that? What’s the time line for that? And then ultimately, what’s the risk in that and then ultimately closing this deal.

Shaun Usmar

Yes. So the first point on the royalty has really been making sure and you see that condition and raising another 20, that’s in their part. We want to make sure that they’ve got sufficient funds to do the study, start reordering and really progress this at a very sensible right now.

So we’ve taken that staged approach. I mean we’re senior secured, we structurally will be very well positioned on that. And I think for us, we’re actually quite happy to be patient if its online gets along. We want to make sure that at a point where we make a decision, it is the right time. We know they’ve got a — I can’t go into details on the syndicate and others, but we’ve been pretty to — they’ve been doing a lot of work for quite some time on other alternatives, and it’s going to be up to that team to finalize that. We’ve got a lot of experience working with different capital providers, as you know. And from what we see, I think we know they’ve got a good project and they’ve had other alternatives. So Sheldon, I don’t know if there’s something you would add to that.

Sheldon Vanderkooy

I think that covers it very well, so.

Tanya Jakusconek

Okay. So am I looking at potential closing this year on this deal, or do we have a timing, anything?

Shaun Usmar

That would be our expectation. I think that’s, of course, subject to the markets at this moment as much as we do. So — but yes, they’re obviously doing the work in order to sort of work through that sort of time frame.

Sheldon Vanderkooy

Yes. And Tonya, they’ve been out there with a Q3 for definitive documentation. So we’re really pleased that we have these agreed terms. The lawyers are now engaged on draft definitive documentation. And while this term sheets are non-binding, we do have exclusivity and we don’t foresee any difficulties in executing definitive agreements.

Tanya Jakusconek

Okay. And Sheldon then I have you one, I just wanted to ask, coming back to the global minimum tax, which we asked on every call. And again, we have in the Canadian budget right now. So I just wanted to have your latest views on, how you expect the proposal to impact you at all, if successfully implemented? And do you think you’re exact on it, because of their revenue threshold?

Sheldon Vanderkooy

Yeah. So there’s no change since our year-end call, Tanya, that I’ve seen come out. I think the budget actually had already come out at that point. The exemption, I mean, we did note that the revenue threshold, we do — we would fall below that and be complete of that. So I think that would be obviously very nice.

And that seems to be within the feature of the rules, but they’re not actually targeting entities of our size. So that would make things very easy. And again, even if we are subject to it when the detailed rule comes out, the impact on the NAV is pretty muted. I think we’re talking about in the 4% range.

Tanya Jakusconek

Okay. Great. So I’ll leave it to someone else ask questions.

Sheldon Vanderkooy

Thanks, Tanya.

Operator

Your next question comes from the line of Shane Nagle. Your line is open.

Shane Nagle

Thanks operator. So just on, I appreciate just carrying on from maybe some of Tanya’s questions, which I think you covered most of it, but it seems to be a pretty high return, I guess, owing to the bilateral discussions that you guys were engaged in at this stage of the project. Is this what we’re expecting to see, I think, going forward? Obviously, a lot of inflationary pressures, new project development. And there’s not a lot of kind of Tier 1 operators looking to monetize streams. Is this kind of the trade-off you guys are noticing going forward with higher returns with maybe taking on a bit more counterparty risk, if you can call it that?

Shaun Usmar

Yeah, that’s — I guess there’s one worth characterizing it. I think if you look at the deals that were done in the Canadian space, just in the last six months, those I would characterize as maybe Tier 2, Tier 3 single-asset development stage assets on extremely skinny returns. You’ve seen the execution track record in the North American market.

So I don’t think people should conflate a jurisdictional piece with, call it, execution risk. That’s the reason we’re very deliberate on this. And I think we’ve shown in our pipeline, particularly actually outside of North America, we’ve been successful in securing streams, which have been enabling to, particularly polymetallic. We’ve worked in those sectors, where it’s enabled those guys to bring projects online, IPO and do a host of things and generate decent returns. So we will continue to look at everything on its merits.

I’d say most of the stuff in our pipeline at the moment is, in fact, more North American or American or Americas-centric for what that’s worth. And some return potentials are higher and some are lower. I don’t know if there’s anything else, you guys would add, but I wouldn’t — we don’t have the luxury of being able to very nicely forecast both the cadence and the liability of what that deal flow would look like. We just see — we are seeing a lot of activity and some of them are quite large at the moment.

Shane Nagle

And then, just in terms of the jurisdiction where this would be, I guess, where this reside from a tax perspective. Has there been a change in strategy because of the global minimum tax rate discussion, or will this be — how is in Canada or Australia subsidiary like every other Street?

Sheldon Vanderkooy

Hi Shane, it’s Sheldon. I’ll take this one. This will be — it’s an international royalty so it would be in our Bermuda entity. And we’re quite comfortable with the structure. And we think it works quite well. And of course, we do have an eye to potential Global Minimum Tax when we’re entering to these.

Shane Nagle

Okay. Perfect. And then, just last one real quickly on the production, I guess, in the near-term guidance. Obviously, ATOs got the reagents sorted out. You said the Northparkes and Buritica expansions were kind of tracking ahead of schedule. Just get a sense, I mean, roughly what level of conservatism you’ve kind of baked in the near-term guidance with respect to operator guidance. I mean certainly, a couple of these assets are actually tracking fairly well compared to PRS [ph], so I guess some are challenges, but if you didn’t get a sense of what level of conservatism you have on kind of some of those assets that are ramping up in the near-term?

Sheldon Vanderkooy

Yes, it’s always difficult to talk to a level of conservatism without maybe losing the conservatism. But we’ve gone with the 90% to 95%. We’re confident in that figure. We feel we’ve gotten off to a really good start to the year. And I think I guess might leave it to that. I don’t know if–

Shaun Usmar

Okay. I think the only thing, Shane, which we’ve sort of expressed before is we have a general posture on ramping assets where I’d say we don’t tend to take management views at face value and include those in our agglomerated consensus numbers. I think you’ve seen us do that consistently and that’s just sensible given every participant’s track record candidly in the sector with a major diversified large gold producer, small single-asset producer. So, if only one in five, when you look at the data, it tends to be on time and on budget. Four and five is a good bet to make — have some degree of conservatism in there.

The only thing I’d say is a general observation with the followers of the sector right now. It’s amazing to me that people following the sector will describe the same risk view on assets that are very often unfunded, don’t even have a path to production in some cases, are unpermitted, and they’ll apply the same multiple to business, which is either iridium production and ramping eras fully funded and has a pathway to cash flow on the basis of kind of, let’s say, a fictional 42-101.

So, it’s a bit of a sub-box, but I’m seeing that across the sector and it makes no sense. We have some that are playing the same multiple to us as a group to with $1 million of cash flow and almost all the NAV tied up in assets that have no committing or deed a path to production. So, there’s a severe disconnect, I believe, in how people are looking at risk and returns at the moment in the sector.

Shane Nagle

That’s all for me guys. Thanks.

Shaun Usmar

Thank you.

Operator

Your next call comes from the line of Greg Barnes. Your line is open.

Greg Barnes

Thank you, operator. Shaun, I want to go back to [indiscernible] again and just I haven’t had a chance to review the 2020 feasibility studies. So, what kind of CapEx are they looking at to get this thing up and running, do we need to build a mill as your funding is $87 million, how much total funding do they require?

Shaun Usmar

Thanks Greg. And while James — he’s got some of the material in front of us now. And while he’s just perfect, you’ll know that for us ordinarily, we would only announce on banning [ph] In terms of how, we’ve got exclusivity and we’ve got this to a point, and this is really the trigger more by the counterparty with investors and things on the – as part of their overall funding approach. But do you want to comment, James?

A – James Dendle

Yes. Sure, Greg. So there are shafts in place and the shaft bottom infrastructure is in place. The mine needs to be dewatered in order to access that infrastructure, but the engineering evaluations of that infrastructure are positive at one camera surveys and that sort of thing. So there is already quite a lot done in terms of earthworks and physical in ground infrastructure. A lot of the plant and property was taken away when the mine was closed down and rehabilitated. So there is male workshops, offices and all that sort of the tenant infrastructure that the company will have to build.

The 2020 feasibility study estimated project start-up capital at AUD 373 million, which at the time was about ZAR 4.1 billion and the exchange rate of the rand exchange rate is about the same as in 2020 with sustaining capital of about AUD 137 million. So that’s obviously a slightly stay on number, and we’ll see where the update shakes out, but that was the 2020 figure. And I think Eban [ph] has made some progress in sort of locking in some of those components in any case, but we’ll look — again, we’ll be looking closely at the update in late in the year.

Shaun Usmar

And Greg, part of getting to this point is also site – site visits has been conducted. So it’s not just a desktop, for example, at this stage.

Q – Greg Barnes

So you’re likely two to three years away from production over mining?

Shaun Usmar

Yes. I mean again, in the feasibility study, the company estimated 32 months from basically early works through production. One of the objectives that are studying in the update is the opportunity to bring cash flow full production earlier from the extraction of open pit mining areas. So again, we’ll see that. But that’s kind of the ballpark that we’re operating on at the moment. Obviously, they have to get their funding sources out in order to start that process. But the royalty payment that we’ve done will help with some of those early works.

Q – Greg Barnes

All right. Okay. That’s helpful. Thank you

Shaun Usmar

Thanks, Greg.

Operator

There are no further questions at this time, CEO, Shaun Usmar. I turn the call back over to you.

Shaun Usmar

Yes, Freddie, thank you. And thanks very much for the questions. Thank you for your time. I know it’s a busy time of the year for all of you. We’re pleased to get another quarter away with some strong results. And we look forward to more to come. So thanks, everyone. Enjoy the rest of your day.

Operator

This concludes today’s conference call. You may now disconnect.

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