Franco-Nevada - Q4 2022
March 16, 2023
Transcript
Operator (participant)
Good morning, and welcome to Franco-Nevada Corporation's 2022 year-end results conference call and webcast. This call is being recorded on March 16th, 2023. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a Q&A session where you may ask a question through the phone line or the webcast. If you are joining by webcast, you may submit a written question for the Q&A session at any time during this call by typing your question in the Q&A section of the webcast platform. If you require immediate assistance during this call, please press star zero at any time for the operator. I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations. Please go ahead.
Candida Hayden (Senior Analyst and Investor Relations)
Thank you, Michelle. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's 2022 year-end results. Accompanying this call is a presentation which is available on our website at franco-nevada.com, where you will also find our full financial results. The presentation is also available to view on the webcast. During our call this morning, Paul Brink, President and CEO of Franco-Nevada, will provide introductory remarks, followed by Sandip Rana, our Chief Financial Officer, who will provide a brief review of our results.
This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by telephone or via the webcast. We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our detailed cautionary note on slide three of this presentation. I will now turn the call over to Paul Brink, President and CEO of Franco-Nevada.
Paul Brink (President and CEO)
Thanks, Candida, and good morning. I'm pleased to report strong fourth quarter and annual results for 2022. Our diversified assets outperformed, driven by elevated energy prices in the year. The benefit of our top-line business was again apparent. While inflation impacted the margins of many operating companies, our EBITDA margins actually expanded slightly, and our business generated record profits. It's good to see our efforts on ESG being well-received. Most recently, we were awarded a Sustainalytics Global Top 50 rating given to the top 50 companies in their ratings universe. This January, we announced our 16th consecutive annual dividend increase. The roughly 6% increase takes our quarterly dividend to $0.34 per share. Many of our largest shareholders have held the stock since the IPO, and they're now realizing a 12% yield in Canadian dollars or almost 9% in U.S. dollars.
The renegotiation of the Cobre Panamá concession contract over the last few months and the brief production halt caused some sleepless nights. It was a relief, I'm sure for everyone last week when First Quantum and the government reached agreement on a refreshed contract. We hope it moves swiftly through public consultation and parliamentary approval. Turning to outlook. For 2023, our precious metal GEOs and our diversified production are expected to be consistent with 2022. Although total GEOs are expected to be lower as current energy prices are off from the highs of last year. We're looking forward to Cobre Panamá reaching its expanded throughput capacity of 100 million ton per annum by year-end, and also to initial contributions from three new gold mines during the year, Magino, Séguéla, and Salares Norte. Our five-year outlook shows ongoing growth in the business.
This organic growth comes from both mine expansions and new mines. The most significant new additions during the period are expected from Tocantinzinho, Vale's Southeastern Iron Ore System, and Hardrock in Ontario. We expect Mine Waste Solutions will have reached its cap in 2024 and also a step-down in the Candelaria stream rate in 2027. Resource optionality continues to drive our business. Success at the drill bit will provide one of our biggest annual increases in reserves from our underlying assets. The biggest impacts are reserve increases at Detour Lake and Cascabel. We'll publish our attributable royalty ounces with our asset handbook in April. The global drive for electrification will be good for Franco-Nevada's longer-term outlook. Along with a deep portfolio of royalties on gold exploration properties, we have royalties on what are likely some of the next generation of copper and nickel mines.
Our business development team is seeing good opportunities for precious metal financings, in particular financing new gold mines. We expanded the scope of our financing package with the Tocantinzinho transaction with G Mining Ventures last year and are seeing good interest in similar structures. To wrap up, Franco-Nevada has no debt, $2.2 billion in available capital, and in these uncertain markets, couldn't be better positioned to continue its growth record. I'll now hand over the call to Sandip.
Sandip Rana (CFO)
Thanks, Paul. Good morning, everyone. As mentioned by Paul, Franco-Nevada ended 2022 with a strong fourth quarter, resulting in record financial results for the full year. The company saw strong underlying production from our diverse portfolio of assets during the quarter. The majority of our mining assets performed in line with our expectations. However, revenue and earnings were impacted by weaker precious metal commodity prices and timing of deliveries for certain assets.
The one area of the business that continued to deliver strong financial results was the energy assets. As you turn to slide four, you can see how the company performed against the guidance that was issued for 2022. The initial guidance provided by the company for the year was 680,000-740,000 Total GEOs sold. Of this total, we guided to 510,000-550,000 precious metal GEOs, with the balance being from diversified assets. The company ended the year with 729,960 Total GEOs sold, which is at the high end of the guidance range. However, we were at the lower end of the range for precious metals with just over 510,000 GEOs sold.
This was due to lower GEOs than expected from Stillwater, Antamina, and Cobre Panamá, with a portion of the lower GEOs being related to price impact on conversion of non-gold commodities to GEOs. The diversified assets had a strong year, driven by higher energy prices. This resulted in coming in ahead of our expected guidance with 219,575 total diversified GEOs. On slide five, we highlight the Gold Equivalent Ounces sold for the last five quarters as well as the previous five years. Overall, GEOs sold were relatively flat when compared to prior year, with Q4 2022 GEOs sold being 183,886, compared to 182,543 in fourth quarter last year.
Of this, precious metal GEOs were 129,642, down 6.6% from prior year. For the quarter, the largest contributors to the lower precious metals were Cobre Panamá, Antamina, and Guadalupe. At Cobre Panamá, First Quantum had another strong quarter as it moves towards production of 100 million tons per year. However, for the quarter, due to timing of shipments, gold and silver deliveries and ounces sold were lower than expected for the company. As we look to Q1 2023, we do expect a delay in precious metal deliveries from Cobre Panamá due to the temporary production curtailment that did occur. We expect to have a stronger Q2. Antamina delivered less ounces than prior year, but was in line with our expectations for the quarter.
The operator at Guadalupe mined less ounces on lands to which our stream applies, resulting in lower GEOs delivered. Partially offsetting the lower precious metal GEOs from these assets mentioned were Hemlo and Tasiast, where we had strong fourth quarters. For diversified GEOs, our Vale royalty resulted in just over 4,000 GEOs for the quarter. This was lower than prior year due to lower production and lower iron ore prices. As you know, each quarter we make an estimate of what the royalty will be, with the actual amount being announced by Vale in late March and September each year. As a result, you will see adjustments to our accruals twice a year in Q1 and Q3. The strong fourth quarter closed out the year with 729,960 GEOs sold for 2022, the highest annual level thus far for Franco-Nevada.
Precious metal GEOs represented approximately 70% of total GEOs for the quarter and for the full year. 2022 saw continued volatility in commodity prices. As you see on slide six, most precious metal prices were lower for the quarter and the year. This did impact the conversion of metals to GEOs. Energy prices were again strong in 2022, reaching multi-year highs. However, oil and especially natural gas prices have both retreated in the first part of 2023. Slide seven highlights our total revenue and adjusted EBITDA amounts for the three and 12 months ended December 31st, 2022, and 2021. As you can see from the bar charts, revenue and adjusted EBITDA has decreased slightly for Q4 2022 compared to prior year.
The company recorded $320.4 million in revenue in fourth quarter and $262.4 million in adjusted EBITDA. A margin of 81.9% was achieved. Fourth quarter continued the strong contribution from the energy assets as revenue increased from $62 million a year ago to $82.7 million this quarter. The increase was due to the continued strong energy prices, especially natural gas. West Texas Intermediate oil price averaged $82.65 a barrel in the quarter. Natural gas prices increased significantly, with Henry Hub averaging over $6 in MCF in fourth quarter compared to $4.85 in MCF a year ago. For the full year, the company recorded $1.31 billion in revenue and $1.1 billion in adjusted EBITDA, both records for the company.
As you turn to slide eight, you'll see the key financial results for the company. Although GEOs were slightly higher for the quarter, revenue was lower because of lower precious metal prices. On the cost side, we did have a decrease in cost to sales as less stream ounces were delivered and sold compared to prior year. Cost of sales is dependent on which assets deliver stream ounces as not all fixed payments per stream ounce are equal. Depletion decreased to $73.5 million versus $78.2 million a year ago. Depletion is based on actual mining GEOs sold in barrels of oil equivalent received on the energy side. As we received less GEOs from Antamina, Cobre Panamá and Vale, this impacted depletion as those assets are higher per ounce depletion assets.
For the full year 2022, adjusted net income was $697.6 million. Slide nine highlights the continued diversification of the portfolio. As shown, 70% of our 2022 revenue was generated by precious metals. The geographic revenue profile has revenue being sourced 91% from the Americas, with Canada and the U.S. being the largest. With respect to asset diversification, Cobre Panamá was again our largest revenue generator at 17% of total revenue, followed by Candelaria and Antapaccay. Cobre Panamá is the only asset greater than 10% of revenue. The last chart highlights our operator diversity. Our largest exposure to revenue being generated by any one operator is 17%, which is First Quantum, who operates Cobre Panamá. Slide 10 illustrates the strength of our business model to generate high margins.
For 2022, the cash cost per GEO, which is essentially cost of sales divided by Gold Equivalent Ounces sold, is $242 per GEO. This compares to $245 per GEO in 2021. This amount will fluctuate depending on the mix of royalty versus stream GEOs, including mining and energy. As you can see at current average gold prices, the company generates significant margins. The margin was over $1,500 per ounce in 2022. In a rising commodity price environment, we expect to benefit fully as the cost per GEO sold should not increase significantly. We consider our cost structure to be essentially fixed. The other cost component for the company, besides cost of sales, is our corporate administration costs. The chart on slide 11 highlights our quarterly revenues and quarterly corporate administration and share-based comp expenses since our IPO.
As you can see, revenues have grown significantly over the period shown, while corporate costs have remained fairly stable. For 2022, corporate administration, including share-based comp, was $32.6 million, or less than 3% of revenue. We continue to believe we can add to our portfolio and grow our business without adding significant overhead to the company. As you can see on slide 12, for 2023, we are guiding to lower Total GEOs sold, with the range being 640,000-700,000 GEOs sold. Of this total, we are guiding to 490,000-530,000 precious metal GEOs for the year. The balance would be GEOs from our diversified assets, of which we expect energy to account for about 70% for 2023.
The overall main drivers for GEOs year-over-year are for precious metals. We do expect higher GEOs from Antapaccay, MWS, Tasiast, and Musselwhite, where the NPI should be payable for the full year. At Cobre Panamá, we've guided for a range of 115,000-135,000 GEOs, accounting for the recent production curtailment and timing of deliveries. We expect first deliveries from new mines Magino, Séguéla, and Salares Norte. We are anticipating that less mining will occur on our stream lands at Antamina and Candelaria, and expect the Hemlo NPI to be less in 2023. Our guidance has been calculated using $1,800 per ounce for gold, $21 for silver, $900 platinum, $1,500 palladium, and $120 per ton iron ore.
Obviously, prices are volatile, and as they change, it will impact the conversion of non-gold commodities to GEOs. On the energy side, we're using $80 per barrel WTI and $3 MCF natural gas. This provides a range of 105,000-125,000 GEOs from our energy assets. As we look forward to 2027, we're proud of the built-in growth that the company already has in place. Our outlook for 2027 is 760,000-820,000 GEOs sold. Of this range, precious metals will be 565,000-605,000 GEOs. Main contributors will be Cobre Panamá ramped up to 100 million tons per year. We will benefit from expansions at Stillwater, Detour, and Tasiast.
We're expecting a number of new mines to be in production by 2027, Chiizad , Greenstone, Valentine Gold, Stibnite, and Eskay Creek. We do expect McCreedy West and Sudbury to remain in production at 2022 levels until 2027. The initial step down in GEOs at Candelaria will occur during this time frame in 2027. It should be noted that Mine Waste Solutions will reach its cap at the end of 2024. For diversified GEOs, we do expect an increase in GEOs from our Vale royalty as attributable production should increase with planned expansions. For the energy assets, we've assumed a slight increase in production over the next five years, resulting in a marginal increase in GEOs. We've held energy prices flat at $80 a barrel WTI and $3 an MCF natural gas for the period.
Overall, when you look at the outlook for GEOs sold, the company has over 18% built-in organic growth to 2027 at budgeted commodity prices. This assumes that no additional assets are added to the portfolio. Slide 13 summarizes the financial resources available to the company when including our credit facility of $1 billion. Total available capital at December 31st, 2022 is $2.2 billion. With that, I will pass it over to the operator, and we're happy to take your questions.
Operator (participant)
Thank you. During this Q&A session, if you would like to ask a question, simply press star one on your telephone keypad. If you would like to withdraw your question, please press star two. If you are joining on the webcast, please submit your question through the Q&A section of the webcast platform. One moment please for our first question. First question comes from Heiko Ihle of H.C. Wainwright. Please go ahead.
Heiko Ihle (Managing Director of Equity Research and Senior Metals and Mining Analyst)
Hey there. Thanks for taking my questions and congratulations on the recent Cobre Panamá news. Not surprised it all worked out, but it's still good to see ink on paper here. Speaking of Cobre Panamá and given the importance of that asset to your franchise as a whole, can you provide some color on how much mine production has shifted backwards in time versus just changed for good or as you see it right now? I assume that given how fast this all happened, I assume that there'll be limited loss, and the inefficiencies that are encouraged should be somewhat limited just because of, you know, timing. I know there is no scientific answer to this, but I'm just trying to gauge the longer term impact and also the timing part, given that you're still expecting 115,000-135,000 ounces this year, please. Thank you.
Sandip Rana (CFO)
Hi, Heiko. How are you? Yeah. At a high level, obviously, First Quantum has not adjusted their guidance for the year. Even though the mine was shut down roughly for three weeks, they think they can make it up. During that period, they did do some maintenance activities on some of the lines. From our standpoint, in Q1, we will be impacted. I would say of our range of 115,000-135,000 GEOs, roughly 20% of that will come through Q1. There'll be the catch-up deliveries in Q2, and then it'll be even in Q3 and Q4. That's our sense. Obviously, it'll be dependent on how the mine ramps up. From my understanding, it's back to normal operations.
Heiko Ihle (Managing Director of Equity Research and Senior Metals and Mining Analyst)
Very good. Okay. Okay. Paul, I mean, you were talking earlier on this call, one of your quotes was, "In these uncertain markets, you're still able to contribute or continue your growth." Gold's at $1,930 an ounce right now, we've discussed in the past that the demand for royalties and streams is quite high, though you also play in a ballpark bigger than many of your, many of the other people. You are nonetheless diversified into energy assets as well. Is it maybe fair to say that management has been spending more time lately on non-gold or even energy acquisitions?
Paul Brink (President and CEO)
No, the focus mostly recently has been on precious metal assets. There is a range of things that we're looking at, but the by far the most of it is precious metal related. You know, by my comment, more of where I was going is we're providing capital to the mining industry, particularly the gold mining industry and what we've seen for the last number of years that, you know, we've been in a world awash with cash and cheap capital. That is drying up. The cost of funds to many developers is higher than it was. Particularly with the current liquidity issues in the market, I expect it will only go higher. Those are all, you know, very good tailwinds for us being able to deploy more funds and to do it with good returns.
Heiko Ihle (Managing Director of Equity Research and Senior Metals and Mining Analyst)
Okay. That's what I assumed, you were trying to say, but I just want to clarify. That was it on my end. Thank you very much.
Operator (participant)
Thank you. The next question comes from Erin Kyle of CIBC. Please go ahead.
Erin Kyle (Director of Equity Research)
Great. Thanks, Paul and Sandip, congratulations on a strong fourth quarter. Maybe my first question here is just on your five-year outlook, starting with Vale. Your outlook points to increased production from the Northern and Southeastern system. Could you maybe comment on when you expect this Southeastern system to start contributing? We have about mid-2024 in our model. Does that sound right?
Eaun Gray (Chief Investment Officer)
Hi there. It's Euan speaking. Yeah.
Erin Kyle (Director of Equity Research)
Hi, Euan.
Eaun Gray (Chief Investment Officer)
Vale, as Sandip indicated at the end of this quarter, will provide an update typically as to when they expect the Southeastern system to begin contributing. As there's a threshold of production that needs to be met. The last time they provided an update was in September, and they indicated between 2024 and 2025. I think our expectation is for towards the end of 2024. But that's the range that is available.
Erin Kyle (Director of Equity Research)
Okay. Thank you, Euan. Maybe just switching gears here, Heiko touched on this briefly in terms of the deal environment, but, you know, debt financing remains difficult to access for junior miners and developers with rising interest rates. Could we maybe expect more deals in the future structured similar to the deal that you did with G Mining comprised of stream debt and equity components, or are we focused primarily on stream?
Eaun Gray (Chief Investment Officer)
It's Euan again. Happy to answer that question.
Erin Kyle (Director of Equity Research)
Thank you.
Eaun Gray (Chief Investment Officer)
I think that transaction was well-received and, you know, provided an elegant solution to financing in that particular case. We are following up with others with that type of structure, and, we're hopeful we'll be able to do more deals like that. That's not exclusively what we're looking at. You know, we're looking at things across the spectrum. We are hopeful that will be an avenue for growth.
Erin Kyle (Director of Equity Research)
Okay, great. Thank you. Then maybe my last question here is just to the extent that you can comment on it, what type of size of deals are you seeing? Are they primarily in the $100 million-$400 million range, or are you seeing primarily royalty packages, or is it primarily streaming deals that you're seeing?
Eaun Gray (Chief Investment Officer)
Sure. I guess a couple comments. First off, the pipeline is active.
Erin Kyle (Director of Equity Research)
Mm-hmm.
Eaun Gray (Chief Investment Officer)
Yes, there are kind of more medium-sized deals and, you know, that is kind of sub, you know, $400, million I would say. It was a mix of primary gold and by-product. I guess one trend is we're seeing more and more project financing type transactions.On lines of what I just mentioned.
Erin Kyle (Director of Equity Research)
Okay, great. Thank you. That's all the questions I had. Thanks again.
Operator (participant)
Thank you. The next question comes from Greg Barnes, TD Securities, please go ahead.
Greg Barnes (Managing Director and Head of Mining Equity Research)
Yes, thank you. Sandip, the Musselwhite NPI, any idea what kind of number we're talking about there?
Sandip Rana (CFO)
You know, it's paid in Canadina dollars. It could range, my guess at this stage or my estimate is, you know, CAD 5 million-CAD 7 million based on a full year of production.
Greg Barnes (Managing Director and Head of Mining Equity Research)
Okay, great. I assume your guidance for the five-year regarding Candelaria does not include the potential for them to go underground. I assume when they do go underground, that would be captured under the streaming deal you have there. Increase underground, I should say, increase the underground production.
Paul Brink (President and CEO)
Yeah, Greg, it's Paul. They don't yet have the increase in the underground in their mine plan. Our assumptions reflect the mine plan that they've put out there in their guidance. That if they do go ahead with the underground expansion, that's upside on what we're currently guiding.
Greg Barnes (Managing Director and Head of Mining Equity Research)
Okay, great. Thank you.
Operator (participant)
Thank you. The next question comes from John Tumazos, Private Investor. Please go ahead.
John Tumazos (Shareholder)
Thank you. Could you explain which of your projects had bigger reserve and resource extensions? Just looking down the list, Detour Lake, Brucejack, for example, had reserve gains or discoveries last year.
Paul Brink (President and CEO)
it does-
John Tumazos (Shareholder)
Your revenues rose 1%, but your depreciation fell 4.5%. Could that imply a 5% increase to your reserve life?
Paul Brink (President and CEO)
John, I'll take the first part here. The big changes for the year in reserves will be Detour Lake, Cascabel, where they moved M&I into the reserve category. You know, next on the list is the increase in reserves at Malartic with the underground, and then the new assets that we have, Tocantinzinho and also Magino. Those will be the biggest increases.
Sandip Rana (CFO)
John, just on depletion, yes, revenue was higher, that was driven off of higher energy prices, essentially. Production was slightly higher on the energy side. On the mining side, we did have lower production, which results in lower depletion. The lower production was from high depletion assets at Cobre Panamá, Antapaccay and Antamina. As a result, we had lower depletion. The additional reserves and resources, that'll impact depletion for 2023 going forward.
John Tumazos (Shareholder)
Thank you.
Operator (participant)
Thank you. The next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
Lawson Winder (Senior Equity Research Analyst)
Thank you very much, operator. Good morning, Franco-Nevada team. Two questions from me. One, just in terms of operator concentration. Obviously the issues at Cobre Panamá highlighted the benefits of First Quantum or sorry, Franco-Nevada, pardon me, diversified asset base. However, I mean, Cobre Panamá remains a relatively large proportion of the asset base. Sandip, I think you mentioned 17% of 23, and I think with net asset value or using that as a basis, it would be a bit higher. Does this experience increase FNV's desire to, like, potentially reduce the exposure to any individual operator? Like, what's your latest thinking in terms of sort of concentration risk with operators?
Paul Brink (President and CEO)
Lawson it's, you know, we're trying to be a low risk way for investors to invest in the gold sector. Obviously the more diversified, the better. At the same time, we're trying to expose our investors to that resource optionality and the ability for assets to expand over time. Often those two things, they go in different directions. Our experience has been it's the big ore bodies that get better over time that are the most likely to be expanded and often that have the longest lives and the greatest long-term potential. It's a reality of our business.
I, you know, I have to say if there was another Cobre Panamá that came along and we had the opportunity to invest in it, we would do it in an instant, to expose ourselves to that growth. As our portfolio grows and we add more assets, we dilute the individual influence of each of them. The, it's the nature of the business that assets will go through these bumps in the road, but we think our business is well set up. We have no financial leverage. The nature of our investments is such that the impact of these events is fairly minimal. So it's if they're big assets that we can bring on board, we'll do it again.
Lawson Winder (Senior Equity Research Analyst)
With the same operators. Is that what I'm hearing?
Paul Brink (President and CEO)
You know, we're on all aspects, if it's political risk, if it's assets, if it's operators, we try and diversify it. Again, if they're great assets that come along, you got to bring them on board when you have the chance.
Lawson Winder (Senior Equity Research Analyst)
Okay. Thanks. That's very clear. Just secondly on metal mix. Gold in 2022 was about 55% of the overall, revenue mix. What is your thinking on, where gold should be, how low it can go or, how much higher you would want it to go? Thanks.
Paul Brink (President and CEO)
Our focus is on precious metal. We would love to do as much precious metal as we can and as much gold as we can in the portfolio. As we've always said, we recognize that the business is cyclical and there are times where it's better to invest in other commodities. Also there's some great ore bodies that are in other commodities, and if we can get exposure to it, we would do it. You know, we have last year, we're up to roughly 30% diversified. It's not the target, if there were great assets that we need to bring on board that were diversified and we're at that level, we're comfortable with that.
Lawson Winder (Senior Equity Research Analyst)
Fantastic. Thanks very much, Paul.
Operator (participant)
Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. Next question comes from Tanya Jakusconek of Scotiabank. Please go ahead.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Good morning, everyone. Can you hear me?
Paul Brink (President and CEO)
Coming through clearly, Tanya.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay, great. Thank you for taking my questions. The first one, maybe just to finish off with Sandip, if I could. Just looking at the year, Sandip, you mentioned Q1 is gonna be weaker on Cobre Panamá because of the shipment coming through 20% of that annual production. Any other assets within the portfolio that are going to be weighted either way to, you know, first, second, third that, you know, we should think about as we go through the year?
Sandip Rana (CFO)
You know, Cobre Panamá is probably the largest. Antamina was shut down for about 11 days earlier in January 'cause of some protests. It's up and running normal operations right now. That's had a little bit of impact on production. Other than that, top of mind, I don't really think there's much more. On Vale, we've always guided that production's usually less in the first six months of the year versus the second six months. It's usually like 45%, 55%. You can take that into consideration. Other than that, everything else is operating, as expected.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. That's. Thank you.
Sandip Rana (CFO)
Sorry. At Stillwater. Stillwater had an incident at Stillwater West. That section of the mine is shut down for four weeks. That will impact the royalty there a little bit for Q1 as well.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. No, I appreciate that. Just looking at your 2027 guidance and appreciate, you know, was a bit higher than our expectations, but I really think it was down to two assets that we may differ on. I just wanted to review Stibnite and the Rosemont Copper World. Can you just give me an idea in your 2027 number, I mean, Stibnite would be about 8,000 GEOs, and I just wondered on the Rosemont Copper World, what you have there? We're a bit more conservative in production starting later. I just wondered what you had there for that asset.
Sandip Rana (CFO)
Yeah. I'd have to check the detail, Tanya. If I can get back to you separately on that one.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay, great. Thank you for that. Just lastly, on transactions, and thank you for the color on, you know, looking at, both of, you know, project development, both on precious metal and also on byproduct, credits from other producers. Just wanted to ask what your appetite is right now, given that 70/30 precious metals to non-precious metals. What is your appetite for non-gold deals? Where does lithium fit into your transaction, if at all?
Paul Brink (President and CEO)
The preference is precious metal, and most of what we're active on is precious metal. You know, as I say, on the diversified side, it's more about, you know, are they great assets? You know, often we look at it and say, are there things that we can do in diversified assets that we can't do in gold? That's often. You know, either great ore bodies or ore bodies with very long lives, those are the sort of things we're looking for. We have been spending time on lithium. There's a lot of capital that'll get spent building lithium mines over the next 5-10 years. I'm not expecting to get anything done in the short term.
You know, with spot prices roughly 4x higher than consensus on long-term prices, it's hard to get the bid and the ask to match at present. If there's a great lithium deposit and we could get a deal done, based on longer term prices where we can honestly believe there's more upside than downside, we'd be interested in doing something.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. Would it be fair to say then, Paul, that, you know, on the non-gold or non-precious metal side, it is not in energy, it would be in assets like would you increase further iron ore, lithium, and other electrification metals rather than the energy side?
Paul Brink (President and CEO)
Yeah. On energy, we're as you know, we've got it to 20% is where we're comfortable on energy. We wouldn't look to acquire energy above that level. Obviously, when prices run as they did last year, then energy gives you a greater contribution and that's all upside. That's why you do it. At our current levels, we're not looking to add more energy. You know, no bright line in the sand. In due course, if it was a lower percentage of our portfolio, we may consider it again.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Appreciate that. Thank you so much and look forward to hearing from you, Sandip, on the Rosemont and Copper World.
Greg Barnes (Managing Director and Head of Mining Equity Research)
Thanks, Tanya.
Operator (participant)
Thank you. There are no further questions on the phone lines. I will now turn the Q&A session over to Candida Hayden, who will take questions from the webcast.
Candida Hayden (Senior Analyst and Investor Relations)
Thank you, Michelle. Our first question comes from Barry Dunaway from sorry, America First Investment Advisors. Will the First Quantum agreement on Cobre Panamá lead to any change in terms on your contract with them?
Paul Brink (President and CEO)
It's Paul speaking. No. The terms that have been negotiated and there's a draft agreement on, or, you know, principally relate to the taxation on First Quantum or MPSA, the entity that operates in country. No direct impact on the contract that we have.
Candida Hayden (Senior Analyst and Investor Relations)
Thank you. Our next question comes from Bernard Picchi, Palisade Capital. Other than delay in deliveries of TGEOs in Q1, is there any impact on FNV for the higher cost that First Quantum will incur at the operation?
Paul Brink (President and CEO)
Again, you know, similar comment before, there's no direct impact there. You know, for us to do well over time in the asset, you're obviously hoping that the operators will spend capital and expand the asset over time, spend money exploring the asset. The... That obviously is impacted by the overall economics of the asset. A higher tax burden is, you know, can be a detriment. I think that the tax rate that has been agreed, you know, given the margins on the asset, shouldn't be a disincentive, so I don't expect a longer term impact.
Candida Hayden (Senior Analyst and Investor Relations)
Thank you, Paul. There are no further questions from the webcast. This concludes our 2022 results conference call and webcast. We expect to release our first quarter 2023 results after market close on May 2nd, with the conference call held the following morning. Thank you for your interest in Franco-Nevada.
Operator (participant)
Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.