Long-Life Gold And Silver Royalty Growth Will Drive Strong Future Cash Generation

Catalysts

About Triple Flag Precious Metals

Triple Flag Precious Metals is a precious metals streaming and royalty company providing long life, low cost exposure to gold and silver production from mining friendly jurisdictions.

What are the underlying business or industry changes driving this perspective?

• Record operating cash flow per share, a net cash balance sheet and nearly USD 1 billion of available liquidity position the company to aggressively pursue accretive royalty and streaming deals, supporting higher future revenue and earnings growth.
• Recent capital deployment of over USD 350 million across five new investments, including Tres Quebradas, Arcata, Johnson Camp, Arthur and Minera Florida, is expected to drive a multi year ramp in GEOs and structurally lift revenue and operating cash flow.
• Open ended royalty exposure on long life assets such as Arthur and Minera Florida, both with strong reserve replacement and exploration upside, provides decades of potential volume growth with minimal incremental cost, enhancing net margins and free cash flow.
• Concentrated focus on gold and silver, with roughly three quarters of revenue from gold and nearly 90 percent from stable jurisdictions in the Americas and Australia, gives leveraged upside to strong precious metal prices while preserving low cost, high margin earnings.
• Embedded organic growth from ramping and expanding assets such as Johnson Camp, Tres Quebradas, Arcata, Koné and Beta Hunt, alongside expected production increases at cornerstone mines like Northparkes, underpins management’s GEO guidance through 2029 and supports sustained growth in revenue and earnings per share.

Assumptions

This narrative explores a more optimistic perspective on Triple Flag Precious Metals compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Triple Flag Precious Metals's revenue will grow by 18.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 59.4% today to 64.8% in 3 years time.
• The bullish analysts expect earnings to reach $373.4 million (and earnings per share of $1.81) by about December 2028, up from $204.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 34.8x on those 2028 earnings, down from 35.0x today. This future PE is greater than the current PE for the CA Metals and Mining industry at 21.5x.
• The bullish analysts expect the number of shares outstanding to grow by 2.82% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.15%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The business is highly leveraged to sustained high gold and silver prices, so a reversal in the long term precious metals cycle or prolonged price weakness would directly pressure GEOs realizations, weigh on royalty and streaming revenue, and slow growth in operating cash flow per share.
• Several growth assets, including Koné, Johnson Camp, Tres Quebradas, Arcata and Minera Florida, require multi year ramp ups and expansions. Any structural underperformance, such as ongoing negative grade reconciliation, lower than expected throughput or delays in studies and construction, could cause the company to miss its 2029 GEOs targets and underdeliver on revenue and earnings growth.
• The model depends on continuous access to large, accretive royalty and streaming transactions in the Americas and Australia. If long term competition for quality assets intensifies or financing needs from miners decline, Triple Flag may be forced to accept lower returns on deployed capital, compressing future net margins and reducing incremental earnings per share from new deals.
• There are elevated counterparty and legal risks embedded in the portfolio, illustrated by the arbitration with Steppe Gold and the need to restructure the El Mochito stream. If similar issues emerge more broadly or if some operators experience financial stress, the company may face non payment, renegotiations or asset disposals that would reduce royalty volumes, impair revenue and increase volatility in operating cash flows.
• While management emphasizes mining friendly jurisdictions, long term political, regulatory or social changes in countries such as Argentina, Peru and Chile could introduce higher taxes, royalties, permitting delays or community opposition. Over time, these headwinds could constrain production from key assets, dampening GEOs growth and limiting expansion in free cash flow and net income.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Triple Flag Precious Metals is CA$64.84, which represents up to two standard deviations above the consensus price target of CA$52.17. This valuation is based on what can be assumed as the expectations of Triple Flag Precious Metals's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$65.41, and the most bearish reporting a price target of just CA$44.44.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $576.1 million, earnings will come to $373.4 million, and it would be trading on a PE ratio of 34.8x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of CA$47.69, the analyst price target of CA$64.84 is 26.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.