Q1 2021 Osisko Gold Royalties Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the old school rolled royalties.
So they all Cisco gold royalties first quarter 2021 results conference call.
After their presentation, we will conduct a question and answer session.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad. Please.
Please note that this call is being recorded so they may 12, 2021 and 10 a M eastern time.
So they are on the call we have Mr. Sandeep Singh, President and Chief Executive Officer, and Mr. Free Daily Korea, Chief Financial Officer, and Vice President Finance.
I would now like to turn the meeting over to our host for today's call Mr. Some deep sleep well.
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Thanks, very much operator, and thanks that'd be one on the line for listening in and catching up on us on what we think is a very strong start to the year with our Q1 and with and asset base that continues to perform exceptionally well.
I'm, calling a deck Oh I'm on currently page three it's on our website. If you haven't picked it up hopefully you can follow along and we will point to the slide numbers as we go through this.
And again on slide three.
What I would say is obviously, we had pre released production numbers and nearly 20000 geos at a 97% margin.
That's quite in line with the midpoint of our guidance, which bodes well for us for the rest of the year for reasons that will explain a as we go throughout the presentation.
Our records or near records on a number of key financial metrics that's Fred.
I'll walk you through and a little bit more detail as well.
We've also done a.
We think and we hope a better job of segmenting, the Cisco royalties business and and financials and metrics from our ownership stake and Cisco development, which obviously I think most of you will know we are consolidating for the time being I think that's important.
And they don't expect many of you on the analyst side can be modeling us on a consolidated basis and hence the forecasts that are out there on us probably not on a consensus on a consolidated basis, either so hopefully that more user friendly.
And something that we'll continue to do until we no longer need to.
Hmm.
Big catalysts that came through for us over the course of the quarter and the largest obviously is the agnico and Yamana a positive construction decision on the mill Arctic underground.
And that story frankly, only continues to get better since that the underground development. The decision was made and I'll pick up on that as well.
Subsequent to the quarter, we put out our inaugural ESG report, which we are proud of.
We've always been proud of our ESG and sustainability practices.
What was lacking was perhaps putting them on paper and.
And we continue to improve those practices and improve our disclosure and that's something you'll see from us throughout the remainder of the year as well as some unique means of offsetting our carbon footprint, including the.
Partnership we went into with a private entity called carbon stream and Corp, which I'll touch on as well later in the presentation. So that's just a bit of a flavor for the quarter and the financial numbers that fed will walk you through over the next several slides and then I'll pick up again.
Thereafter to to get into some of that detail I just promised so Fred if you wouldn't mind picking up on slide four please.
Absolutely. Thank you sandeep low methane tooth, but what they had two good morning, everyone. Thank you for joining us today.
Good metal prices and rubbish deliveries led to strong results for Sysco, and Q1, Sandeep said, including record revenues and cash margins as well and solid operating cash flows from the royalty and stream business.
Our operating cash margin on our royalties and streams reached 94%, 97%, excluding revenues and cost of sales from the <unk> and our diamond stream.
And as Sandeep mentioned, we earned close to 20000, Geos and Chihuahua led by our main assets, including Canada and melodic and Ventas.
As presented on page four of the presentation and 75% of our G. E OS were derived from gold and 23% from silver.
Page five of the presentation, we recorded record revenues from royalties and streams of 49 million compared to 27 8 million and Q1, 2020 Q1 was the first quarter, where Cisco, Wisconsin debating a Cisco development results for the full quarter and as such we are now providing additional segment and from.
<unk> and our financial statements MD&A and press release splitting results from our royalty and stream business and results from our Cisco development cash.
Cash flows from operating activities were $29 3 million on a consolidated basis for the royalty and stream segment only cash flow was from operations reached $36 7 million compared to $25 7 million and Q1 of 2020.
On page six we present, a summary of our earnings and adjusted earnings and net earnings to a cisco's share orders were $10 6 million or six cents per share compared to a net loss of $13 3.002 million 20 or nine cents per share.
On a consolidated basis.
Adjusted earnings were $18 4 million or 11 cents per share, which is comprised of adjusted earnings of $23 4 million or 14 cents per share from the royalty and stream segment.
And and adjusted loss of 5 million from our Cisco development on.
On page seven we present, a summary of our quarterly results with additional details from for the royalty and stream segment, including gross profit in Q1 of $34 6 million compared to $21 6 million last year. The average realized gold price was honored and 16 nine Canadian dollar ire.
Compared to last year adjusted earnings from the royalty and stream segment.
And were $23 4 million compared to $9 3 million last year.
If we go on page eight we present, a breakdown of our cash margin for Q1, the cash margin on our royalties increased to reach $34.7 million compared to $25 6 million last year, the cash margin on our streams amounted to 11.9 point and one.
Yes.
Up from $8 8 million in 2020.
Resulting in a cash margin on our royalties and streams of 93, 6% or 96.8% extruding deal and our Diamond stream. Our total cash margin in Q1 reached $46 5 million compared to $35 3 million last year and.
And finally on page nine you may find a summary of our financial position. Our consolidated cash balance was 321 million at the end of Q1, including Andre and and 20 million for Cisco Gold royalties and two on 201 million for Cisco development.
Cisco gold royalties ELD investments, having a value of 217 million at the end of March in addition to our investment and our Cisco development valued at over 730 million and for a total of close to $1 billion. Our total debt was stable at 400 million with over $215 million available on there.
Our credit facility.
Sandy for the rest of the presentation.
Thanks, very much Fred.
Well, hopefully what you take away from that and and the reason I think we could go through that summary, as quickly as we have it was a very simple straightforward and positive quarters.
And and frankly, there's a lot of upside from our current base, which I'll talk about it and the remainder of this presentation, but the existing asset base really outperforming and doing well are almost without exception. So we expect that to continue if you look at slide 10, and you think about that portfolio for a minute.
I suspect most of you know and understand the quality of that portfolio.
And that's been constructed within or.
It provides and our view a very compelling value proposition and at any point in time, but frankly going forward even more so.
When you look at the the gold and silver mix, which is what we are we are precious metal company predominantly providing gold and silver exposure low.
Highest and our peer group when you think about the jurisdictions, where we live and breathe that's always.
Cause for.
Yeah.
Positivity, I guess, but even more so I think we're starting to see.
The importance of that jurisdictional profile play out I think we're seeing.
Risks rising and and and second and third tier countries that are stressed and increasingly stressed by COVID-19 and perhaps reacting poorly as a result.
And something that gives us an immense amount of comfort should give investors and events not a comfort going forward as well.
Importantly, as we show you later on our growth and not only our production, but our growth is also and tier one countries.
And we're also partnered with some fantastic operators and we're partnered with them on low cost mines, and we don't really have any teetering production that we worry about from a quarter to quarter basis and.
And that's also important as we're starting to see signs I think its clear of inflation and we're starting to see signs of cost creep and the op and the mining sector.
Again, it's not something we lose any sleep over so.
Solid across the board if you add to this not shown on the page, but if you add to this the long mine lives of our core assets Youre essentially looking at steady ongoing production and then growing production with new assets coming along nothing really falling off the table.
And.
And you know and.
Add to that lots of drilling momentum on our producing assets and all our development assets. So a good news story across the board starting with on Slide 11, our flagship asset that just keeps getting better.
Obviously, the Canadian Arctic open pit continues to deliver.
A very steady and significant amount of free gold to us it will until the later part of this decade.
And was already on on open pit basis, the most valuable gold royalties and the entire sector. It's only doubled if not more so and value when the underground decision was made and I'll talk about that on slide 12, if you skip head and.
And none of this will be a surprise to folks that and February agnico and Yamana made the $1 3 billion dollar go ahead and investment decision on the underground extending our mine life from initially 2028 from the open pit to at least 2039.
On that underground deposits currently contains 14 and a half million ounces only half of which are and that mine plan out to 'twenty 39, and so we fully expect that as they get underground as they ramp and to audit CSA sink the shaft and the east Goldie.
And can infill from underground and more of those ounces and the mine plan will find their way or more of those ounces will find their way into a mine plan over time.
In addition.
You've heard the operators talk about how the deposits, especially east Goldie, which is the highest grade portion of it is open and significantly open and in both directions.
And we've seen a very.
Interesting step out hole kind of thousand meter step out or where they intersect that you see the star here on the bottom of page 12.
<unk> grams over 10 and 11 meters.
Importantly, hitting it with and meters of where they expected it to.
It's still on our 5% ground lots of room to grow that east Goldie resource and between obviously will be dependent on exploration success.
But we've seen to date, how quickly ounces can add up Eddie's Colby with.
And with relatively little drilling given the continuity and the predictability of the deposits. So this is just a fantastic flagship for us.
And it continues to give the net.
And I think you know this is not our commentary, although we share it but if you hear the operators and recent discussions and describing it as early days in terms of resource delineation.
There's a lot more to come and we expect.
The added.
Potential benefit down the road as they spend more time on this that that May also not just be mine life extension from that added resource expansion, but there's also you know conceptual for the time being but conceptually you know commentary about second declined about multiple shops and time, obviously, there is a male that that'll be ready willing and able to accept.
Or all of this is just a fantastic catalyst for us and importantly, one that happened.
And a down market.
All of this came out when money was flowing out of the gold sector, and we started to see that turnaround and we.
We don't think it's properly valued within our stock and we think Theres a lot of room for us to benefit from the work that's going to be going on there going forward for not just this year, but for years.
On slide 13.
Just a couple quick other updates.
We're one quarter closer on the mantle of expansion.
They are currently on time for the end of the year now 79% complete.
So that's again a positive news story for us into into next year. A reminder, for the first five years of that expansion and we'd be expecting 1.2 million ounces of silver a year.
So it's a significant asset for us.
We see just around the corner or at least that expansion just around the corner in the meantime continues to be a very steady.
Outperformer for us.
Eagle and another one worth mentioning a little bit at least.
With the commercial production last year, it's still very much on the ramp up phase.
I think one of the reasons I mentioned, our quarter, our first quarter bodes well for the year is.
Many of you will know that and the coldest months of the winter. The Eagle mine does not stack Victoria stack wore their mind, but they don't back or so it was always meant to be their lowest production quarter. We saw that with what we received in Q1.
And the guidance is maintained and so we fully expect there to be a continued ramp up over the year with respect to our delivery ounces on Eagle.
Add to that they're working towards their project $2 50 is what it called what they call. It two to try to see if they can increase production to 250000 ounces per annum by 2023, and the engineering work for that will.
We will be ongoing and the second half of this year.
Just last point on the Eagle story, obviously, there was a fair bit of excitement.
Yesterday.
And with the announcement that on intermediate company has picked up just shy of 20000, I'm sorry, 20% of the company.
I think for us or just in general what that should show you is the scarcity value and the importance of 200000 ounce a year type assets and Canada.
Eagle's, one, which we have a royalty on but we certainly have a portfolio.
With more of those in it so we'll see how that that continues to play out.
On slide 14, and I won't spend a ton of time and certainly we can pick up on any of these names in the Q&A session. If you like but I think the overall story is the same as it's been for a while stable steady.
Production and a lot of exploration and mine life extension expansion upside potential on our producing asset base.
On Slide 15, you just see the guidance, which I think most people know as I mentioned, we're we're on track there.
There.
In terms of the ramp up assets I touched on Eagle already touched on Mantels as well Santana, we expect two to start production and the second half of this year and which is Minera Alamos mine.
It's a nice it's a.
On the large asset at that 1000 ounces a year, but it'll be nice wants to have into the portfolio. Similarly for first majestic for matane out when that kicks and most likely early next year.
I think there's a I'll pick on some of these for updates not all but we certainly expect there to be positive news via Sysco development story continues to progress well.
On the caribou side, what that meant and Q1 was a significant amount of drilling just shy of 50000 meters were drilled.
Some of that has made its way out into the market already 10 rigs running.
A lot of effort on infill, but there's certainly the and pills coming in well and.
And there's extension drilling as well or at depth drilling at depth, which continues to and.
And then between the zones, and frankly, which continues to prove out so that story continues to move towards feasibility study and permitting and.
In the meantime, we expect production from Bonanza ledge, too, which is the satellite production sorry satellite deposits.
And the near term so that's that's doing what we're expecting it to on San Antonio The story there is to push forward on a lot of work.
To get it to to catch up from a phase where the asset was dormant for a number of years that includes exploration, which is ongoing and includes engineering work and permitting.
And all of that is progressing well towards initially stockpiled production later in the year, but then the larger heap Leach project behind it.
Windfall is another one worth touching on a little bit with the revised P E and Cisco mining put out.
And at a lower throughput than the current mill configuration that they placed orders for but still at that lower throughput three.
300000 ounces a year for the first seven years I believe it was.
Long mine life lot of exploration potential there and just a really star.
<unk> combination of size and grade.
And that's playing out in front of our eyes.
Maybe the last couple of things I would point out just in terms of quick updates.
We saw a revised feasibility study for Horne five.
The Falco asset just updating from pricing and Capex numbers essentially were costing numbers I should say.
On progress there, so which was positive and progress there obviously.
Phil advancing with Glencore, which is the next major milestone.
On her most of it will be expecting a pre feasibility study and the second half of this year from South three two on what we think is one of the better if not one of if not the best applying metallic.
Development asset in the sector.
Upper Beaver and I'm getting close to the end, but theres a lot of lot of catalysts on this page I think it's worth pointing out some of them at least and high detail.
Upper Beaver was nice to see agnico, and Theyre updates have that and our pipeline. They have it kind of is potentially coming in to production and 2027 and put.
Our significant amount of drilling and and their last results with the best ever intercept at upper Beaver 60, some odd grams of one odd percent copper over 17 meters.
So it's nice to see that progressing towards a study at the end of the year and obviously, we have a 2% on a star there. That's most people probably probably forget that we own.
And I'll touch on that later, but we added exposure to spring Valley, which is a multimillion ounce deposits heap leach good grade and Nevada, which we expect to find its way into an operating company of consequence.
Over the foreseeable future.
So a lot there a lot of catalysts a lot of growth a lot of growth that we don't think we're getting value for I think Oh I'll touch on this again, but I think our current market cap could easily be justified just based on our producing assets.
This is significant value for shareholders and that's on the come and it's closer to fruition than it ever has been in the past.
It also allows us to remain disciplined for growth and what we think is a still a sellers' market.
And we're happy I'm, certainly happy that the group invested as much as it did in growth during essentially at 12 to 13 and out of all our gold price environment.
On slide 16, and just maybe finishing that story as I mentioned and you know.
Our production currently could justify our market cap.
Moving on whose numbers you look at where basically 50 50 and as our consensus numbers.
And 50 50 of our non.
As production and development. So there's a lot of built in growth. There that's paid for and then to boot we already and we also have $1 billion roughly of equities, but I don't think we get proper credit for it to the highest quality developers and the space and in a rising gold price environment and a rising inflationary environment.
And we think that torque is important and will add significant value.
And mentioned the amount of activity on our ground on the right hand side of Slide 16, you will see it graphically essentially a million meters 3 million feet a year on our royalty grounds, which is a massive amount of drilling.
And got that same type of number and 2020, even though with COVID-19 exploration was one of the easiest things to take your foot off the gas on.
Our producers kept production going as best they could but exploration was Ah and easier thing to delay and.
So we expect these numbers to only intensify in 2021.
On slide 17, just as I mentioned and I kind of alluded to it earlier, a nice tuck in acquisition for Us on Spring Valley.
Going from a 0.5% and ESR essentially to three per cent and ESR on what its 4 million ounces, mostly on the M&A and category. Historically I think water 10 will put a lot of work into this asset and we'll come out with an update in due course.
But a significant resource whatever the numbers are good grade in Nevada, and asset that we've known and well for some time and we're happy to get a bilateral.
Acquisition done there from from the seller or are sellers.
And if you look at the precedent and other public data points I think we've got a pretty good price on it so nice additions to the portfolio.
Parietal just just for your note no keeping and and modeling purposes.
And we did convert just recently our off take through a Cisco Bermuda and two a stream.
Similar economics, but nice to get it kind of and a better accounting format that was the last producing uptick that we had.
So it's a cleanup exercise small, but but helpful. We also on the process.
Yes.
Took what was a capped offtake and turned it into an uncapped scream. So added some optionality to that.
And that project.
On slide 18.
So when he S. D perspective, again, we're spending a bit of time on as we put out our inaugural report.
Just a few weeks ago, maybe it's a month now.
I think it's fair to say that.
And you could almost think of our portfolio is having built and that hasn't been built with ESG and mine and and frankly it had just wasn't.
With a moniker attached to it but clearly.
We've always emphasized proper environmental social responsibility and the assets, we get involved and if you don't diligent that if you don't audit track that and you're really not.
You're really not diligent thing and mining asset.
Those are those on some of the easiest places you can fall down and given the track record of our team having had their own environmental and social license and you'll know what it is to have it no hard and it is to get it no that it hurts when you lose it we can certainly.
We've certainly taken that into our business as a royalty company and know what to look forward on operating partner.
And when we're getting involved and assets so for us that's the bare minimum diligence auditing exerting influence through contracts being charitable when we've you know we've been blessed with the company and as individuals that thought is the bare minimum and.
And what you should do in terms of running a proper business.
Since we can't ourselves and reduce our footprint that we're reliant on the operating partners that we've chosen to get involved with to do that and we're quite happy that they are doing that.
We also chose to find something active that we can do and now on slide 19, you see and example of that.
And where we've partnered with a private.
Carbon streaming royalty company or streaming company I should say.
Through a small investment three and a half million dollars.
And also through that have bought ourselves participating right the partner.
Or to participate and 20% of their transactions should we choose to do so for us. It's a small investment with a potential high impact it's not just us buying carbon credits to offset our exposure, but us potentially funding projects and increasing the amount of off say upset that there are out there and the world doing it accretively through a business model that we know well.
And and perhaps getting better returns and are frankly available and the mining space right now so for US it's fits into our other category.
And behind precious metals, and if we can put some other into that category, that's green as opposed to anything to the contrary and we think that's a benefit but again I would point out that these are small.
Investments that can do a lot of good.
For our portfolio.
And I'll, probably alright, and I'll, probably I'm getting pretty close I think if you just go to slide 20 day and the conversation and start the Q&A I'd say, it's a business that's working at every level.
Really strong quarter sets us up nicely for the rest of the year and.
To what looked like strengthening gold and silver prices.
A significant amount of cash flow diversified clash flow 80000 ounces at the midpoint of our Geos steady long life, no real drop offs and that production.
And our flagship that's getting better at a return when you add the growth that we've paid for already and $1 billion and equities I think that's a lot of torque to that rising gold price environment.
So with that operator.
I, thank everybody for their time to date and are happy to open up for questions.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
So we draw your question press the pound all hash key please stand by while we compile the Q&A aerostar.
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Your first question comes from the line of Ralph profit D of eight capital. Please go ahead. Your line is open.
Good morning, Thanks for taking my questions.
Good morning, Ralph.
Sandeep. Thank you Sandeep can you help me understand the ultimate extent of the 5% royalty Canadian mill, Arctic and the context of the step out hole and as part of the.
The resource delineation strategy as it potentially goes further and further to the east.
Sure Ralph.
So I can do that from our perspective, obviously, we don't know the full extent of the operator strategy, except to say that they are drilling aggressively and the more they drilled and where they find all of which is hugely positive for us. So I know there was some talk about.
Obviously for the niche you run into the the Randall Arctic property line.
This is clearly.
West of that property boundaries, so that whole was squarely in our 5% East Goldie zone.
On.
Yes, I I you know if you continue drifting further east at some point.
Well past the point, where I plan on being retired you might get off of our 5% royalty ground, but I think theres a lot of ounces too.
Phil on the GAAP between the current extensive east Goldie zone, and where that all was was hit it.
Again, I think that that's where the focus will be.
And so that's all positive.
For US you know again.
It's quite the question is no longer I think he always and it's a 20 year mine life, which is currently what's on the books.
It's just a question of how many how many more decades can they add to it but obviously they need to do the work to get there.
So that's that's what we're looking at.
And and I think that's what they're looking at and and starting to turn the conversation and to not kind of add mine life or how much years or decades can I add after 2039 is how can we sorry, how can day.
On <unk>.
And add ounces and fill that mill or not and maybe I'll fill it but Phil.
And you to fill that mill higher than the 20000 tons per day.
And that is currently and visit so.
Great News and then eventually if there is anything that we don't have a royalty on I'll remind you Ralph and everybody else that we do have a 40 cent per ton.
So I think toll milling royalty on anything else that goes into that mill. So.
For now we'll take all of these 5% ounces, we can get and I think there's still a lot more of them to come.
Got it got it okay. Thanks for that.
On the on the spring Valley.
Transactions do any of these royalties have buyback options on the part of the previous owners or is this essentially on a clean transaction with all the all the exploration upside and the royalty upside and <unk>.
ESCO royalties hands.
Yeah. So the short answer is no.
There are no carnal buyback so we are.
We think there's a sizable resource are ready.
And there's some.
Ben.
Hidden if you will and in private hands for some time.
And I personally think it's.
The best asset within that portfolio of gold, Nevada gold assets that Washington has.
No well I sold them some of those portfolios and some of those assets and are in a prior life. So I know this one well we knew it well as a group having had a 0.5% and.
Sorry on it already.
And I think and a world where people are looking for good.
Good assets and good jurisdictions. This is on the shortlist. So we're quite happy to have increased our exposure to it.
Great. That's it for me thank you.
No problem. Thank you.
Your next question comes from John Tumazos of John Tumazos, very independent Research. Please go ahead. Your line is open.
Thank you and congratulations on all the progress and thank you for the.
Very clear format about OTC expenses.
And I have three simple questions.
First.
Why did you draw the revolver to pay down the convert rather than.
And just use cash.
Second.
Could you.
Reviews.
Canadian $300 million converge.
The end of next year convertible.
And $22 89, how many days do you have to trade above that level to trigger.
Inversion or force conversion.
And third.
Should we be rooting for the convert to convert so you have more cash.
And for you to regime, and so theres fewer shares.
Yeah. Thanks, Sean Sorry, I was just jotting notes down and I want to make sure I caught all of your questions and good morning, John and thanks. Thanks for.
The commentary and the questions I guess first question in terms of why we put that that $50 million convert why we refinanced it on the revolver.
No magic.
To it.
We like to carry.
Our meaningful cash balance just to be nimble in terms of looking for new opportunities. Obviously, we can for most things we can draw on our credit facility.
Usually when we want to but we just like to carry a walk around with a little bit of a little bit of money and our pockets.
And at the end of the day the credit facility has a pretty low coupon, it's lower than what the convert was that we refinanced so net better but again eventually you're right. We're making we have cash we're making cash flow.
More than we ever have before so I.
And I don't necessarily want to pay interest and I don't have to so that's something we will.
We'll keep the right balance on.
In terms of the convert itself you you had the numbers right. Its 300 million Canadian due at the end of December of 2020 two.
And 289 is the Canadian dollar convert price and maybe I'll just tackle the questions two and three together yeah. My John I'd say certainly route for the share price it's Sean.
A convert ability.
That's what we're doing we are.
And our preferences for that convertible to be and the money.
For it to be forcibly exercise it would need to be and I'm going back from memory here.
And I think it's 20 day that 30% higher.
So let's root for that too.
And we and Canadian 30 for it to convert.
No no I'm, saying convert early I think because of your question, so and anything above 22, 89%.
Or frankly, just below that one next year of $22 89 or greater converts it.
Correct correct.
And we think we have the ability to get there obviously, we'll plan for all.
For any and all eventualities, but we're not concerned about about that convert at the end of 2020 two we have.
And $1 billion of equities on a good day, we have a revolving credit facility, which is cheaper which is largely undrawn were.
We're making money we have cash we have tons of options at our disposal and we'll deal with that as we get closer to it.
I can ask one more sandy thank you for triangle on my questions No.
No problem and it looks increasingly like who are.
And OTC.
It could be over financed.
Some of the group companies.
Projects that are.
You see within their capacity to finance I'm thinking of a Cisco mining.
And in particular <unk>.
Some of the group companies.
Don't have as much market recognition.
And could be a few dollars more.
I'm thinking of a Cisco and that also.
Time point and Falco.
And as smelter.
Yeah.
Is it practical.
For <unk>.
Some of the group companies to.
To help one another.
The surplus funds versus the ones that need to raise money.
Is the right mechanism for such and inner.
Inter company loans.
Sure.
And on selling a stream.
And it looks like.
And most of our OTC has gone from being a and.
And need of funding to rolling and the money now.
And that creates a lot more capacity.
Sure.
Yeah look I mean, it's an interesting question and look I mean, whilst we love all our kind of our portfolio.
Our portfolio of companies to be doing better and it's just kind of normal course, not everybody does.
Well at the same times with Cisco metals, I think that's largely zinc price related although there's been a little bit of an uptick there over the last several months.
And theyre going through the boring work of going through studies and hydrology work et cetera.
So I think at the end of the day John.
These stories have to stand on their own two feet. We've done we have.
And the exposure to all of them as you mentioned are all the ones you mentioned.
But much like our portfolio and those are many of those are related to the group, obviously, but whether they're related or unrelated completely arms length. We are incentive to make sure our portfolio performs and so if there are opportunities to help if they make sense for us and it makes sense for the counterparty.
And then we'll look at those but at the end of the day I will point out that these stories also need to sign on more feet on their own two feet. We've made investments we've supported some.
No doubt and future will continue to do that if we see good value from and a Cisco royalties perspective, and we see.
Good reasons to do that but.
I think what we're happy to see is last year. There was a lot more equity available in the system overall and obviously some of our are our partners win it and and access debt more aggressively.
But I think overall, that's a good thing.
Wealth and I'm going off tangent here, but wealth that that means more competition for us on the new royalty side.
Would remind people that 50% of our NAV is and Belmont category, So having a more robust equity market that our partners can go tap into they can and fast track their projects.
The market commodity market's been a bit starved for equity and the last several years. So that that helps on that side of the equation and I would I would say that that should be.
The first protocol for for a lot of the things that were.
And that our and our group.
Or just anything on.
Yeah, no problem, so hopefully that answered your question Doug.
Thank you.
Your next question comes from printed thing off in those trials Alliance. Please go ahead. Your line is open.
Great. Thanks, and good morning, everybody I just had one question and I wanted to ask about regard it seems like it's recovering well and at the time and prices are also taking back up what sort of future diamond price or what level does the mine operating again for that to start contributing and we're trying to understand if there's a chance it could start.
Earlier than the April 2020 two outlined.
Yeah, Hi, I type of date and.
Good morning.
Look I think as I've said before you know happy that the mine restarted.
And into healthier diamond prices, we've seen kind of a steady.
Cut and close to 80 dollar U S carat diamond price for the mine.
That's a step improvement over the 70 prior to COVID-19 and there's a drop that low was kind of mid sixty's low sixty's at some point.
So that's and that benefit it means the at those type of pricing levels. You've heard me say that the main kind of washes its face.
We've been.
<unk> intentionally conservative to exclude that out of our guidance and and and give you numbers on and extruded basis. I think that's just the smart thing to do.
And because it's it's Washington space wealth, we and the other streamers or putting the money back and bring the stream back into the company. So it still need another leg up.
To be profitable on its own.
We think it can get there, but we were not going to stick, our necks out and and take credit for those ounces until it happens. So can't give you exact timing and and you know I don't know exactly what that well we have our views on what that those those numbers are the diamond prices need to get to but I think it's.
Premature to share, though and I think we need another similar type step change and hopefully that will and will get us into the until the black.
Okay and the meantime, it does it does it does.
As I've said, it's washing its face it's running itself, we've preserved optionality to what is $1 billion of sunk infrastructure and Quebec.
And and and I think you know torque to what we hope is improving diamond prices.
Okay, Great. That's helpful kind of need to look forward to seeing how that progresses.
No problem. Thank you.
Your next question comes from Erin kind of CIBC. Please go ahead. Your line is open.
Great. Thank you and good morning, Sandeep and for and thank you for taking my questions.
And so my first question here is on Mentos and.
And it's great to see that the expansion is on track with expected completion in Q4 and the construction expected to be completed in Q2, COVID-19 cases appear to be picking back up again and Chile. I was just wondering if you foresee that timeline getting pushed back at all or limited risk there.
Well I think it's always a it's always a risk I'd say this.
Even at the height of Yelp.
Based on its not the word I'm looking for but.
You know the first rounds of COVID-19 interruption or.
COVID-19 cases, I guess first wave Ah the mine managed to handle it well.
The mine and the expansion kept on track obviously, it's an added layer of complexity you have people that don't show up for work people like you know and needing to get corn team.
And so that adds a lot of complexity, but the team there has done a fantastic job of managing it and the fact that they are still on track and all it meant was you know a few months of additional delay as I think that was admirable so on.
Our hope is that continues on track you know could there be another small delay that's always the case I think it is the case for everything and mining for a plethora of reasons COVID-19 being one of them, but we were happy to see that.
Every time, we do get an update it's still on track and and hopefully that continues to be the case and and we're not that far from it now so and healthy.
Hopefully they can manage any of those issues that come up.
And I'm sorry.
And I think Sandeep and then maybe just switching gears a bit here too to production could you maybe provide some guidance on how it's tracking for the remainder of the ear. If I annualize Q1 actually it looks like youre tracking towards the midpoint of your annual guidance, but with Eagle through its toughest months of the year are you expecting and uptake over the next few quarters or is the midpoint on.
And kind of appropriate where I haven't modeled.
So look I think youre right and you know just just annualizing that that quarter and we're right at the midpoint basically.
But as I said, you know that that.
This is positive given the low contributions and I think it was 16 60, some odd 16, and 70000, sorry, 60 and 70 ounces.
From Eagle, if you'd take their guidance for the year. It implies nine to 10000 ounces of deals for us and obviously, there's always a bit of a timing issue, but nonetheless.
Nonetheless, a lot higher than what we're currently getting so we expect we expect now that the winter months are behind them.
Steady steady increases throughout the year, which can only bode well for us.
Again, other assets will ebb and flow, but as I sit here today I think we're really happy with.
How the entirety of the portfolio is doing and that would be one on one one big step change in our favor.
It was too soon to say what that means from a guidance perspective, but certainly something we'll keep an eye on.
As the months roll by.
Right. Okay. Thank you Sandy that's all I'm on.
Problem there. Thank you.
Your next question comes from my children of Bank of America. Please go ahead. Your line is open.
Oh, Hi, Sandeep and to Echo John's point to good to see the deconsolidation.
Oh G V.
I guess, that's my first question.
And when will you get below 50%, so that you'd have to do that anymore and I got a few more questions after that but I'll start there.
Sure well and anything we can do to make your life easier Michael we're happy to do it.
And it takes some pressure on earning seasons for you, but look I think it was important for us to do obviously the first quarter.
It was a little messy and we would like we've we've tried to put as much meat on the bowl and within the confines of what we need to operate from operate within from a financial reporting perspective that Fred and the team have done a fantastic job I think there.
I think based on some of the notes I saw this morning, I think we're still gonna have to reinforce a little bit of that and we may be calling you to that.
To make sure we're giving you all the information you need from us so that'll be a work in progress I think in terms of so we will until we will and.
And as I've said consistently.
Mike you know, reducing our ownership and and.
<unk> is a priority, but it's not something we're gonna be.
Disruptive about it and it's not something we're going to telegraph either.
First priority was to make sure that the Cisco development with financing with Sean having raised $250 million I think that in a down market I think that qualifies as wealth Nancy.
And I, certainly wasn't going to be the ones. They want to push on our strength I think in the first four months of the year.
No one wanted to hear from any gold company.
I think thats turning out whereas turned so.
You can imagine that would only really makes sense and a positive market or make more sense and a positive market.
I I E.
I think of this as a.
It's a it's a popular nightclub, whereas you know it's a liquid so theres a lineup out the door and if anybody wants to own it.
And I have to come to us So we're gonna be selective and who we let into the story because we want to make sure we are.
And we make money on the aggregate.
And I think we will I think it's one of the better development stories.
And the market and it's tracking well to become an intermediate and not too far distant future. So long winded answer I think we have a better more constructive market and it is a part.
Going forward, it's a priority for us.
But we're not going to get too specific about it and and we're going to make sure if.
If we do sell down when we do sell down and to the right groups that are like minded and and see a lot of value and the name as we could.
Okay. Thanks, I guess just following on the value you mentioned earlier that correct me if I'm wrong I interpreted you said that.
And your investments, obviously, Oh G V assist on mining are not being fully valued and your share price and did I hear that right like are they.
If that's correct does that mean.
Oh, Oh, Jesus discount on those investments and and share price, if you're just trying to flush that out and things.
And I'm, sorry, maybe I misspoke or maybe it was confusing, but but yes, I don't think we're getting credit for them because I think if you look at even the midpoint of our guidance at 80000 ounces long mine lives steady nothing falling off a cliff as I said earlier.
If you look at us from a price to cash flow multiple we are on the bottom and.
Based on that when.
When you add the fact that we have 50% of our waiting our NAV waiting as and development assets that doesn't factor into our near term cash flow multiple.
You know that's a lot of value there to be had.
That price the cash flow multiple that denominator of cash flow also does not take into account that we have a $1 billion of equity when you start to look at us on a.
EV to EBITDA basis, and net off those equities I think what you're left with is a very cheap stock and that's what is our job to rectify is nice to see some.
You know.
Appreciation for that.
And not anywhere near where we think it should be still trading on a consensus basis around one times now versus our peers of two plus so I think we asked and work to do and I think I think we'll get there I think the positive catalysts, whether it's which were both you know two of them are massive the the spin out transaction.
In December the melodic underground and go ahead and February all of that happened and to a down market.
And I suspect and I hope that we will start to get more benefit of that and a and on off market. So a lot of value three big pieces. If you think about the production.
And development and the equity book and on and in my view My humble opinion.
And we may see some examples that justify that in the near and the and the week to come but I think there's.
Precedent for just our royalties are producing portfolio justifying our market cap.
Okay. Thanks for that and just one last question just to.
On the offtake so.
So basically as of effective April 29.
Your income statement, we will never have a no.
On a more off takes and.
Have to somehow figure out how to model.
First clean just clean streams and royalties.
Correct on the on the producing side I think we do still have that was the last producing off take and not think I know we have a couple of development optics.
One is on them all Saar theres another one.
So nothing and you in the near term.
And that you'll need to worry about and and hopefully if there are others that others of those off takes that come into production will similarly look to turn them into something a little bit more user friendly for you and for us, but right now that's a that's correct from a producing perspective.
How much does this pearl gold and how much does it produce gold and silver and.
Really the production.
Well, you'll see you'll.
You'll see all maybe you don't think it's looped into the other it's on a massive contributor I don't have the number offhand Fred I don't know if you do.
But it was a it's a nice the nice little kicker to the business, but I wouldn't have said its not a material asset so.
We've just converted it into a different instrument at similar value.
Okay and she'd like.
17, or $18 million a quarter of.
I guess, right, which gets deducted off the cost but.
Okay.
That's the thing it's significant revenue, but it's the smallest margins it's not the royalty margins that we have which are 100% and then we add the streams at 97, So I'll get you that answer separately, Mike, but it's it's not a big deal. It's just some cleanup exercise for us.
Well, thank you sorry for all the questions.
No problem, Mike Thank you.
Your next question comes from Jackie preside by low ski of BMO capital markets. Please go ahead. Your line is open.
Thanks, very much asked two questions. The first one is on your <unk>.
Eagle.
And I said.
And you've got a 5% MSR on the properties and Eagle given that Victoria gold.
And what might be.
And sort of M&A speculation or at least a large investment by core.
Can you give us maybe a comment on how youre thinking about that.
And it's our I mean, it is significant enough in size that it might be.
Yeah.
Debt for anyone who might be looking to take over and Toria is is that something that you guys would be willing to.
Renegotiate or is there any wiggle room from our perspective on on that royalties.
Hi, Good morning, Jackie a short answer is absolutely not.
So you know the.
The point is we don't think it's the inhibitor or at all.
Victoria on the company was working just fine with it.
And even in a ramp up phase. The fact that curve was willing to buy or swap for 18% of the stock in place.
I think I think it's pretty safe to say that anyone who's interested and Victoria's and interested in it with that royalty and place and and I'm sure assumes that royalties not going anywhere and.
If there was a doubt I'll take that debt away.
But but we think you know as I said earlier all of that to US you know I'm sure. It causes some some.
Stress within the system from Victoria This week for shareholders I don't think it's anything.
Victoria on anything, but a positive I think it just shows you that there's a lot of interest and that story the minds working well, it's kind of coming into its stride.
And you could certainly see the timing of that being.
A little optimistic ultimately they'll they'll do what's best for them from us.
Just reinforces that its a quality asset that sought after.
And if eventually it ends up in a bigger counterparty with deeper pockets, who can get it up to.
Two production higher production and faster can explore faster that wouldn't be a bad thing, but we're certainly happy with the work that Victoria has been doing there and they've done the hard work.
It seems like they are ready for the payoff, which helps them and helps us as well.
Yeah, that's a great answer thank you and that's really helpful and my second question was on.
And the carbon streaming.
Partnership that you talked about I guess I, just I was hoping that you could give us just a little bit more color on what.
And.
Are you are you going to invest and.
Uh huh.
That would be eligible for carbon credits can you just maybe give us a little bit more color on like how how are you.
Scaling up over time.
Sure happy to Jackie and so yeah, so carbon streaming corp, as a private entity right now it's arm's length.
To us it's run by former streaming professionals in the and the precious metal and mining space.
And when we came across that we thought it was a brilliant idea honestly from from every perspective there first.
They've got a timing advantage really in terms of size of trying to do this.
And they've got a deep pipeline of opportunities and essentially for us what it means as I said with three and a half million dollars Canadian we bought ourselves and equity investment and something that we think goes up significantly.
Based on the interest we're seeing and that business. We also bought ourselves a front row seat.
And there deal pipeline.
And what it's a passive role for us, but we get to watch this nascent business evolve.
If we see something that were interested and we can partner again as I said.
For us, it's rather than going out there and buying offsets to to start buying carbon credits to offset our exposure be it direct or indirect.
And we're actually doing something tangible we cannot reduce our own footprint other than if we started dropping assets you know the only way we reduce our scope two and scope three is if our partners do it for us.
Fully on our partners are doing it for us everywhere, we look.
But we didn't think that was enough.
Think royalty companies can hide behind the fact that were non operators, it's not our footprint every investor out there that we talk to needs to justify their indirect carbon footprint. So at the end of the day, we are and investor and we felt that.
And that was coming for us as well and frankly, we felt the responsibility to do it. So this is our way of doing something tangible.
And essentially sorry to.
It took a long run up to your answer to your question, but essentially what it is is exactly what you said it's funding.
Streaming transactions so much like our traditional transactions pre funding something a development project that will then create instead of gold or silver carbon credits through a preservation and carbon sequestration and biodiversity projects.
And we would inherit those carbon credits to sell and make money on so doing something good rich.
Reducing our indirect exposure and the process and making money frankly, because we think the type of returns that are there are.
You know double digits and significant me and double digit type returns.
For us it was something real we could do to kind of be a and active participants.
And as I said, it's going to be small dollars for us but.
But small dollars with a big impact and everybody on our and our peer group has and other category. We felt if we could fill that other category was something green that wasn't a bad news.
And yeah, Okay. That's helpful and if so to be clear you're not actually.
And the screens are.
And especially in the crop.
Yourself.
You have a passive investment at this point, which which theoretically could change over time.
In some day.
Yeah, no both we have and equity investment and we have the right to participate 20% of their deals. So we are you know we're not you know and we're not just going to offload that responsibility. We we look at those deals when they show them to us and we will continue to look at those deals and the shown to us.
And decide if we want to participate in and some of them. So that's how that's how that works.
Okay. Thanks, very much that's helpful.
From.
And of course.
And look I mean, I'd say, our and our.
And our direct exposure is negligible and office space and Montreal.
Our indirect footprint.
<unk> footprint is pretty small as well and we're working on tabulating, what that is with the help of our partners and we'll come back and our kind of ongoing disclosure with that.
He is out there trying to get them net zero by 2040, 2050, we feel that with <unk>.
Relatively small investments, we can get there and lightning speed on a relative basis. So that's the end game I think theres also properties to partner with our actual mining partners.
And when you think about where some of these mining projects are there are certainly opportunities to add a.
Our carbon.
You know offset type project.
So that that's the end game, that's the long game and the meantime.
We think theres a lot of good that it can deliver for us in between.
And again, if you would like to ask a question. Please press star followed by one on your telephone.
I'm, calling from state and kisiel via a free.
The issue it was crazy cheap Oh, she votes with telephone.
Your next question comes from Kerry Smith of Haywood Securities. Please go ahead. Your line is open.
And suffering from.
Andy.
Perhaps you could just give me a bit of and update on what the status is for her Moshe hasn't actually state that close to it and obviously, it's a pretty attractive asset you have a nice royalty there could you just give me an update.
Yeah look I think the update.
And in terms of what we can say publicly will have to wait until sept 30 to put something out publicly obviously, we track it.
Behind the scenes.
So that pre feasibility is on pace for the second half of this year. It got delayed from last year, because they are incorporating a bigger project that incorporates the entirety of the the resource package there.
So stay tuned I guess, but what I would say as a reminder.
This was and albeit in a slightly better zinc environment, but this is something south of 32 spent $2 billion roughly and cash to buy it.
Again.
Really unique combination of size and grade and has the potential to get really much much bigger.
Subject to permitting other other other parts of the land package. So we.
We expect positive again, it's one of those assets that certain people forget we own but if you try to replicate that now it would cost you and awful lot of money.
Right and do you and your internal models when would you model first production from promotion.
Look we do and our internal models, but I think it's premature for me to tell you until South 32 tells us all and so I'd say.
Stay tuned, but it's whether you know.
Exactly when it hits, depending on where it falls within their pipeline, obviously, they're a big company they on the.
Do things for our accounts, but we do think this is one that.
They absolutely want to push forward.
Time will tell but I don't think we're very far from that answer the point is regardless of what it is it's chunky long mine life and it's a sell 32 assets. So all good news just needs a bit of clarity, which I appreciate and and as soon as we have it will be able to share it with you.
Okay, and then just and you follow up on.
Cathy's question about the carbon stream and Corp deal what.
The percentage of the equity do you actually own and he is that private company based on this three and a half million dollar investment.
It is forgive me, but it's give or take on our Ah <unk>.
15% on a partially dilutive basis thats the number that stuck in my head, it's a little bit less on a.
On a basic basis, so kind of a 12% to 15% color and.
And that was for three and a half million Canadian.
They've raised an aggregate I want to say by now 45, some odd million dollars.
And so they're well funded to go after there are theyre pretty deep pipeline.
So we got on early we've got a cheap and and we really like it.
Okay got you great. Thank you.
No problem.
Your next question comes from Lee way of Scotia Bank. Please go ahead. Your line is open.
Hi on the line I have a couple of questions on our fiscal 2000 and then the first one is a modeling and I noticed Q1 cash was approximately 5 million.
Fucking Xi'an day is that from a Francesco development is that.
And you would anticipate a quack quack are for fiscal 2000 and for the rest of the year or do you think it's going to increase as the company ramps up.
Highly look I think the latter is probably a pretty fair assessment. So I don't know if I have a number to give you.
You know what we'd obviously theyre fully funded or there are well funded to to fund themselves and fun that G&A, but as they're trying to build two mines you'd imagine that they need to Rev up their their footprint in particular and in Mexico, where they started from from from scratch. So you know.
And I think that will take some time to settle out but they're they're pushing those assets forward they had the debt.
Lot of the team to begin with as we split the the management teams to staff or and no deaths.
You might see some fluctuation and I, frankly don't know where that settles out but can you try and build two minds. It does require two two pretty full team. So you should expect that to grow.
And in due course, we will see what that gross too.
Right. Thanks that makes sense and my second question is on San Antonio.
And have no update on that asset are you still expecting a and the updated mine life later this year and maybe production by year end.
Yeah look I think the the good news there is they are pushing forward on all fronts and like I said from a standing start it required you know it already had a million ounces and one two grams.
And for it to you one on one so it's a pretty good starting point, but there's a lot of value to unlock through exploration and they have to do the engineering.
And the permitting is one that's you've heard me say this before slower and Mexico tough to find people and COVID-19 too.
And to do the work you need them to do.
So that's kind of advancing but all of those things are moving forward.
<unk> towards a stockpile production hopefully later this year and then the bigger project taking shape behind it on exploration that started up I can't remember if I. If I listed that that's that will be significant in terms of value unlocking.
And showing what we believe to be a bigger a bigger project there.
And the last thing I'd say is the oded team Sean have pulled the trigger on a 15000 ton per day crushing.
Crushing circuit.
It's being shipped to site.
If if you fill it that will be significantly higher production and what we're guiding to but that's early days I think the intent is to keep that as full as possible.
But they need to finish the work exploration engineering permitting to get there. So I'd say stay tuned it's still only been.
You know.
A short period of time since they've put their hands around that asset so far everything bodes well, but.
There'll be more details throughout the year for sure.
Great. Thanks, that's all my questions.
No problem. Thank you Lee.
There are no further questions and this time I was tend to call back over to Mr. Sandeep Singh for closing remarks.
Great. Thank you operator, and thanks for everyone. We've gone over probably the hour that people anticipated. So thanks for hanging in there with US if you did so at the end of the call hopefully that gives you a good impression of where we are as a company, which we are very excited about.
And without dragging on too long on all thank you for your time and and chat with you against it.
And then I conclude on.
This concludes today's conference call. Thank you for participating you may now disconnect.
He missed I'm, not calling from home social G C.
Seafood worked with participants you via a cushy soil.
Okay.
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And.
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