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.
I'll start it presents station, we will conduct a question and answer session if.
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 at 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.
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Thanks, very much operator, and thank 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 with an asset base that continues to perform exceptionally well I'm, calling a deck Oh I'm on.
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.
Again on slide three.
What I would say is obviously, we had pre released production numbers of 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 will walk you through in a little bit more detail as well.
We've also done.
We think and we hope a better job of segmenting, the Cisco royalties business and and financials and metrics from our ownership stake in Cisco development, which obviously I think most of you will know we are consolidating for the time being I think that's important as.
I 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 a lot of consensus on a consolidated basis, either so hopefully that's more user friendly.
And something that we'll continue to do until we no longer need to.
Hum.
Big catalysts that came through for us over the course of the quarter. 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.
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 in 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 my intuition. Good morning, everyone. Thank you for joining us today.
Good metal prices and rubbish deliveries led to strong results for Cisco in Q1, Sandeep said, including record revenues and cash margins as well as 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.
As Randy mentioned, we earned close to 20000 Geos in Q1 led by our main assets, including Canadian melodic and Ventas.
As presented on page four of the presentation, 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. In Q1, 2020, Q1 was the first quarter, where Cisco was canceled debating a Cisco development results for the full quarter and as such we are now providing additional segment and from.
<unk> in 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 in Q1 of 2020.
On page six we present, a summary of our earnings and adjusted earnings and net earnings to a cisco's shareholders were $10 6 million or six cents per share compared to a net loss of $13 3 million in 2020 or nine cents per share.
On a consolidated basis adjusted.
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 an adjusted loss of 5 million from our Cisco development on.
On page seven we present, the 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 andhra than 16, nine Canadian dollar ire.
Compared to last year adjusted earnings from the royalty and stream segment.
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 0.1.
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 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 Adrienne and 20 million for Cisco Gold royalties and <unk> 201 million force fiscal development.
Cisco gold royalties ELD investments, having a value of 217 million at the end of March in addition to our investment in a Cisco development valued at over 730 million for a total of close to $1 billion.
Our total debt was stable at 400 million with over $250 million available under our credit facility.
Back to you Sandy for the rest of the presentation.
Thanks, very much Fred.
Well hopefully what you take away from that 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 in 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.
That's been constructed within or.
It provides in our view a very compelling value proposition 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 in our peer group when you think about the jurisdictions, where we live and breathe that's always.
Cause for.
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 in in second and third tier countries that are stressed that increasingly stressed by COVID-19 and perhaps reacting poorly as a result.
So this is something that gives us an immense amount of comfort should give investors an immense amount of comfort going forward as well.
Importantly, as we show you later on our growth not only our production, but our growth is also in tier one countries.
And we're also partnered with some fantastic operators and we're partnered with them on low cost mines. So we don't really have any teetering production that we worry about from a quarter to quarter basis.
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 in the up in 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 day long mine lives of our core assets.
Essentially looking at steady ongoing production and then growing production with new assets coming along nothing really falling off the table.
And I'll.
Add to that lots of drilling momentum on our producing assets in all of our development assets. So a good news story across the board starting with on Slide 11, our flagship assets that just keeps getting better.
Obviously, the Canadian Mill 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.
<unk> was already on an open pit basis, the most valuable gold royalty in the entire sector. It's only doubled if not more so than value. When the underground decision was made and I'll talk about that on slide 12, if you skip head.
Again, none of this will be a surprise to folks that in February agnico, and Yamana made the $1 3 billion dollar go ahead investment decision on the underground extending our mine life from initially 2028 from the open pit to at least 2039.
That underground deposit currently contains 14 5 million ounces only half of which are in that mine plan out to 'twenty 39. So we fully expect that as they get underground as they ramp into audit CSA sink the shaft into east Goldie.
And can infill from underground more of those ounces in the mine plan will find their way or sorry 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 deposit, especially east Goldie, which is the highest grade portion of it is open significantly open in both directions.
And we've seen a very.
Interesting step out hole kind of thousand meter step out or where they intersect did you see the star here on the bottom of page 12.
<unk> grams over 10 allowed the meters.
Importantly, hitting it within meters of where they expected it to.
It's still on our 5% ground lots of room to grow that east Goldie resource in between obviously will be dependent on exploration success.
But we've seen to date, how quickly ounces can add up Eddie's Colby with.
With relatively little drilling given the continuity and the predictability of the deposit. So this is just a fantastic flagship for us.
And it continues to give the I.
I think you know this is not our commentary, although we share it but if you hear the operators and recent discussions describing it as early days in terms of resource delineation.
There's a lot more to come we expect.
The added.
Potential benefit down the road as they spend more time on this out 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 in time, obviously, there is a mill 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.
In a down market.
Oh oldest came out when money was flowing out of the gold sector. We started to see that turn around 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 that 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's another one worth mentioning a little bit at least.
With the commercial production last year, it's still very much in 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 in the coldest months of the winter. The Eagle mine does not stack Victoria I'll, just not stack wore their mind, but they don't back or so it's always meant to be their lowest production quarter. We saw that with what we received in Q1.
Their guidance is maintained 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 there.
<unk> $2 50 is what I called a 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 in the second half of this year.
Just last point on the Eagle story, obviously, there was a fair bit of excitement.
Yesterday.
With the announcement that an intermediate company has picked up just shy of 20000 or 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 in Canada.
Eagle is 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, I will spend a ton of time, 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 that touches on Eagle already touched on Mantels as well Santana, we expect two to start production in the second half of this year, which is minera Alamos is mine.
It's a nice.
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 from Italo when that kicks in 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 in Q1.
Different 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 npls coming in well.
And there's extension drilling as well or a depth drilling at depth, which continues to.
And then between the zones, frankly, which continues to prove out so that story continues to move towards feasibility study and permitting.
In the meantime, we expect production from Bonanza ledge, too, which is the satellite production sorry satellite deposit.
In 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 yes. It 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 stockpile 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. A cisco mining put out.
Yeah 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 just a really star.
<unk> combination of size and grade.
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.
It was just the Falco assets, just updating from pricing and Capex numbers essentially were costing numbers I should say our.
Progress, there, so which was positive and progress there obviously.
Still advancing with Glencore, which is the next major milestone on her most of it will be expecting a pre feasibility study in 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 deploy metallic.
Development asset in the sector.
For Beaver and I'm getting close to it to the yen, but theres a lot of lot of catalysts on this page I think it's worth pointing out some of them at least from high detail.
Upper Beaver was nice to see agnico and Theyre updates have that in our pipeline the habit kind of us potentially coming in to production in 2027.
Put out significant amount of drilling and in their last results with the best ever intercept at upper Beaver 60, some odd grams of one odd percent copper over 17 meters.
Nice to see that progressing towards a study at the end of the year and obviously, we have a two percentage of SAR there that 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 deposit heap leach good grade in 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. 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 they 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 or at all our gold price environment.
On slide 16, just maybe finishing that story as I mentioned.
Our production currently could justify our market cap.
Pending on whose numbers you look at where basically 50 $50 or consensus numbers.
50, 50 of our NAV.
As production and development. So there's a lot of built in growth. There that's paid for and then to boot. We already we also have a $1 billion roughly of equities, but I don't think we get proper credit for it to have the highest quality developers in the space and in a rising gold price environment and a rising inflationary environment.
We think that torque is important and will add significant value.
I 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 in 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 an easier thing to delay.
So we expect these numbers to only intensify in 2021.
On slide 17 are just as I mentioned I kind of alluded to it earlier, a nice tuck in acquisition for Us on Spring Valley.
Going from a 0.5 percentage of SAR essentially to a 3% net ESR on what its 4 million ounces, mostly in the M&A 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 assets that we've known well for some time and we're happy to get a bilateral.
Acquisition done there from from the seller or sellers.
And if you look at the precedent in 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 modeling purposes.
We did convert just recently our off take through a Cisco Bermuda into a stream.
Similar economics, but nice to get it kind of been 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 in the process.
Yes.
Took what was a capped offtake and turned it into an uncapped scream. So added some optionality to that.
That project.
On slide 18.
When he asked you 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.
You could almost think of our portfolio is having built that hasn't been built with ESPN mine in 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 in if you don't diligent that if you don't audit track that then you're really not.
You're really not diligent thing of mining assets.
Those are those are 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 no. What it is to have it no hard 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 for an operating partner.
When we're getting involved in assets so for us that's the bare minimum diligence auditing exerting influence through contracts being charitable when we've been blessed with the company and as individuals that thought is the bare minimum.
What you should do in terms of running a proper business.
Since we can't ourselves 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 an example of that.
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 true that have bought ourselves participating right to partner or to participate in 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 upsets.
There are out there in the world doing it accretively through a business model that we know well.
And and perhaps getting better returns than our frankly available in the mining space right now so for US it's fits into our other category.
Behind our precious metals and if we can put some other into that category. That's green as opposed to anything to the contrary, 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, 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.
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 in 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 in 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.
Who pulls day in case, you see a free issue at one three Vg Oh, she votes with telephone.
Hey, T J will quickest you placed units you see.
See if I stay on the comps from Duncan computed only calcium.
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 in 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 them, 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 all was squarely in our 5% East Goldie zone.
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 to to fill in 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.
So that's all positive.
For US you know again.
It's quite the question is no longer I think it's a 20 year mine life, which is currently what's on the books.
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 I think that's what they're looking at and starting to turn the conversation into not can I add mine life or how much years or decades can I add after 2039 is how can we sorry, how can day.
Hum.
Add ounces and fill that mill are not maybe I'll fill it but Phil.
To fill that mill higher than the 20000 tons per day.
That is currently envisaged 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 will 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 a clean transaction with all the all the exploration upside and the royalty upside.
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.
Obviously, there's some it's Ben.
Hidden if you will in a private hands for some time.
I personally think that.
The best asset within that portfolio of gold, Nevada gold assets that Washington has.
No it well I sold them some of those portfolio some of those assets in a prior life. So I know this one well we knew it well as a group having had a 0.5% interest.
Sorry on it already.
And I think in a world where people are looking for good.
Good assets in good jurisdictions. This is on a 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.
I have three simple questions.
First.
Why did you draw the revolver to pay down the convert rather than.
Just use cash.
Second.
Could you.
Reviews.
Canadian $300 million converge.
To the end of next year convertible Canadian $22 89.
How many days do you have to trade above that level to trigger conversion or force conversion.
And third.
Should we be rooting for the convert to convert so you have more cash.
For you to regain that so theres fewer shares.
Yeah. Thanks, John Sorry, I was just jotting notes down I want to make sure I caught all of your questions and good morning, John Thanks, Thanks for the.
The commentary and the questions I guess first question in terms of why we put that that $50 million convert why we refinance that on the revolver.
No magic.
I think 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.
Very easily when they want to but we just like to carry a walk around with a little bit of a little bit of money in our pockets.
At the end of the day the critical facility has a pretty low coupon.
Lower than what the convert was that we refinanced so net better but again eventually you're right. We're making you know we have cash we're making cash flow.
More than we ever have before so you know.
I don't necessarily want to pay interest when 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 'twenty 'twenty two.
<unk> hundred 89 is the Canadian dollar convert price.
I'll just tackle the questions two and three together yeah, My John I'd say certainly route for the share price.
A convertible witty that's what we're doing we.
Our preferences for that convertible to be in the money.
For it to be forcibly exercise it would need to be and I'm going back from memory here.
I think it's 20 days at 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 any of that anything above 22, 89%.
Or frankly, just below day, 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 the about that convert at the end of 2022, we have.
$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 replying to all my questions no.
No problem it looks increasingly like who are.
Oh D C.
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.
Sure.
Some of the group companies.
I don't have as much market recognition.
Their projects could be a few dollars more.
I'm thinking of a system that also.
Fine point in Falco.
The smelter.
Ah.
Is it practical.
For.
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 inner.
Inter company loan.
Sure.
Selling a stream.
And it looks like.
<unk> has gone from being a need.
In need of funding to rolling in 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 a 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.
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.
Then we will look at those but at the end of the day I will point out that these stories also needs to stand on our feet on their own two feet. We've made investments we've supported some.
No doubt in future, we'll continue to do that if we see good value from 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, obviously some of our our.
Our partners win it and access it more aggressively.
But I think overall, that's a good thing.
Well, then I'm going off tangent here, but wealth that that means more competition for us on the new royalty side I would remind people that 50% of our NAV is in Belmont category, So having a more robust equity market that our partners can go tap into they can fast track their projects.
The market commodity market's been a bit starved for equity in the last several years. So that that helps 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 we're oh.
That are in our group.
Or just anything.
Yeah, no problem, so hopefully that answered your question John Thank you.
Your next question comes from Puneet thing off in those trials Alliance. Please go ahead. Your line is open.
Great. Thanks, Good morning, everybody I just had one question I wanted to ask about regard it seems like it's recovering well at a time.
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 I'm trying to understand if there's a chance that could start contributing earlier than the April 2022 outlined.
Yeah, Hi, good.
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.
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 has a drop that low was kind of mid sixty's low sixty's at some point.
So that's a net 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.
Intentionally conservative to exclude that out of our guidance and in and give you numbers on an exclusive basis I think that's just the smart thing to do.
Because it's it's Washington space, while we and the other streamers or putting the money back and bring the stream back into the company. So it's 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 take credit for those ounces until it happens. So can't give you exact timing 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 <unk>.
Premature to share them I think we need another similar type step change and hopefully that will that will get us into the until the block.
Okay in the meantime, it does it does it does.
As I've said, it's Washington States, it's running itself, we've preserved optionality to what is a $1 billion of sunk infrastructure in Quebec.
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 friends. Thank you for taking my questions.
And then my first question here is on NAND House.
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 in Chile. I was just wondering if you foresee that timeline getting pushed back at all or limited price there.
Well I think it's always a it's always a risk I'd say this.
Even at the height of Yelp.
This is not the word I'm looking for it but.
You know the first rounds of.
COVID-19 interruption or.
COVID-19 cases, I guess first wave.
The mine managed to handle it well.
You know that 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 needing to get corn team.
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.
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 in mining for a plethora of reasons.
You know COVID-19 being one of them, but we were happy to see that every.
Every time, we do get an update it's still on track and hopefully that continues to be the case and we're not that far from it now so.
Hopefully they can manage any of those issues that come up.
I'm sorry.
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 an uptick over the next few quarters or is the midpoint.
And kind of appropriate where I haven't modeled.
So look I think youre right around you know just just annualizing that that quarter, we're right at the midpoint basically.
But as I said, you know that that.
This is positive given the low contribution I think it was 16 60, some odd 60 and 70000, sorry, 16 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 111 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.
Okay. Thank you Sandy that's all I have.
The 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.
Well 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.
We can do to make your life easier Michael we're happy to do it.
It takes some pressure off earning seasons for you, but look I think it was important for us to do obviously the first quarter.
It was a little messier than we would like we've we've tried to put as much meat on the bone 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.
So 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.
As I've said consistently.
Mike you know, reducing our ownership in <unk>.
That 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.
<unk> 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 a string 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 in a positive market or make more sense in a positive market.
I E.
I think of this as you know it.
It's a popular nightclub, whereas you know its illiquid, so theres a lineup out the door and if anybody wants to own it.
They kind of have to come to us So we're gonna be selective in.
Who we let into the story because we want to make sure we are.
We make money on the aggregate.
I think we will I think it's one of the better development stories in.
In the market and it's tracking well to become an intermediate and not too far distant future. So long winded answer.
You know I think we have a better more constructive market.
Going forward, it's a priority for us.
But we're not going to get too specific about it and we're going to make sure if.
If we do sell down when we do sell down to the right groups that are like minded and see a lot of value in the name as we can.
Okay. Thanks, I guess just following on the value you mentioned earlier that correct me if I'm wrong I interpreted you said that.
Your investments, obviously, Oh G V. Cisco mining are not being fully valued in the share price did I hear that range like are they.
If that's correct does that mean.
Oh, Oh, Jesus getting a discount on those investments and share price, if you're just trying to flush that out thanks.
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 the cliff as I said earlier.
If you look at us from a price to cash flow multiple we are on the bottom end.
Based on that when.
When you add the fact that we have 50% of our waiting our NAV waiting is in 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.
You know that price to cash flow multiple that denominator of cash flow also does not take into account that we have $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.
Uh huh.
Appreciation for that.
Not anywhere near where we think it should be still trading on a consensus basis around one times NAV versus our peers of two plus so I think we have some work to do and I think I think we'll get there I think the positive catalysts, whether it's which were both two of them are massive the the spin out transaction.
In December the melodic underground go ahead in February so all of that happened into a down market.
I suspect and I hope that we will start to get more benefit of that in a non op market. So a lot of value three big pieces. If you think about the production.
The development in the equity book and in my view My humble opinion.
And we may see some examples that justify that in the near in the in the weeks to come but I think there's.
Precedent for just our royalty our 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.
No more offtake.
We have to somehow figure out how to model.
It would be versus 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 a thing.
I know, we have a couple of development optics.
Ones on them all star there is another one.
So nothing in the near term.
That you'll need to worry about.
Hopefully if there are others that others of those optics 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 is it.
Produce gold and silver annually of production.
Well you'll see.
You'll see all maybe you don't think it's looped into the other it's not 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 assets. So.
We've just converted it into a different instrument at similar value.
Okay she'd like.
17, or $18 million a quarter of our.
Yes right.
Which gets deducted off the cost but.
Okay, well, that's the thing it's significant revenue, but it's the smallest margins. It's not the royalty margin that we have which are 100% and then we add the screams 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.
Okay well.
Thank you sorry for all the questions.
No problem, Mike Thank you.
Your next question comes from Jackie preside by Lawsky of BMO capital markets. Please go ahead. Your line is open.
I have two questions. The first one is on your.
Eagle.
You've got a 5% MSR on the properties of Eagle given that Victoria gold.
What might be.
It's been 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's significant enough in size that.
The.
Prohibiting dep for anyone who might be looking to take over Toria is is that something that you guys would be willing to renegotiate or is there any wiggle room from our perspective on that royalty.
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 The company was working just fine with it.
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 is interested in Victoria is interested in it with that royalty in place and I am sure assumes that royalty is not going anywhere.
If there was a doubt I'll take that 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 of Victoria on anything, but a positive I think it just shows you that there's a lot of interest in that story the minds working well, it's it's kind of coming into its stride.
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.
Reinforces that the quality assets that sought after it.
If eventually it ends up in a bigger counterparty with deeper pockets, who can get it up to.
Two production higher production 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 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 that's really helpful and my second question was on.
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.
Are you are you going to invest in.
Assets.
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 precious metal in the mining space.
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.
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 an equity investment and something that we think goes up significantly.
Based on the interest we're seeing in that business. We also bought ourselves a front row seat.
Who are their deal pipeline.
Well, it's a passive role for us, but we get to watch this nascent business evolved.
If we see something that we're interested in 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.
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 our partners are doing it for us everywhere, we look.
But we didn't think that was enough. We you know I don't 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 an investor and we felt that.
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 sort of.
Take 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 total much like our traditional transactions pre funding something a development project that will then create instead of gold or silver carbon credits true.
Preservation carbon sequestration biodiversity projects.
And we would inherit those carbon credits to sell and make money on so doing something good.
Reducing our indirect exposure in the process and making money frankly, because we think the type of returns that are there are.
You know double digits in significant double digit type returns.
For us it was something real we could do to kind of be an active participant.
And as I said, it's going to be small dollars for us but.
But small dollars with a big impact and everybody in our peer group has an other category. We felt if we could fill that other category was something green that wasn't a bad news.
Yeah, Okay. That's helpful flow to be clear you're not actually.
Midstream.
Sure.
Yourself.
You have a passive investment at this point, which which theoretically could change over time.
In some day.
Yeah, no. Both we have an equity investment and we have the right to participate 20% of their deals. So we are you know we're not you know 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 when they show up 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.
No worries.
And look I mean, I'd say our R. R.
Our direct exposure is negligible, it's an office space in Montreal.
Our indirect 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 Ed.
Everybody is out there trying to get to net zero by 2000 42050, we feel that with.
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.
When you think about where some of these mining projects are there are certainly opportunities to add a.
Carbon.
Yeah.
Net type project.
So that that's the end game, that's the long game in the meantime.
We think theres a lot of good that it can deliver for us in between.
Again, if you would like to ask a question. Please press star followed by one on your telephone.
I'm, calling from Pooh-poohed Satan kisiel via a free issue at one <unk> Oh, she votes with telephone.
Your next question comes from Kerry Smith of Haywood Securities. Please go ahead. Your line is open.
Thanks Sandeep.
If you could just give me a bit of an update on what the status is for her Moshe hasn't actually state that close to it 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 updates.
In terms of what we can say publicly we will have to wait until sell 30 to put something out publicly obviously, we track it.
Behind the scenes.
That pre feasibility is on pace for the second half of this year. It got delayed from last year, because they were incorporating our bigger projects that incorporates the entirety of the the resource package there.
So stay tuned I guess, but what I would say as a reminder.
You know this was an albeit in a slightly better zinc environment, but this is something south of 32 spent $2 billion roughly in cash to buy if they.
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 an awful lot of money.
Right and do you in your internal models when would you model first production from promotion.
Look we do in our internal models, but I think it's premature for me to tell you until South 32 tells us all 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 don't.
Do things for our accounts, but we do think this is one that day.
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 as soon as we have it will be able to share it with you.
Okay, and then just to follow up on.
Cathy's question about the carbon streaming Corp deal what.
The percentage of the equity do you actually own is that private company based on this trend.
Dollar investment.
It is forgive me, but it's give or take on a <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% call it.
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.
So they're well funded to go after there are theyre pretty deep pipeline.
So we got an early we 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 one I noticed Q1 cash was approximately 5 million.
Fucking Xi'an day is that from a Francesco development is that.
You would anticipate a quack quack are for assets with a thousand 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 in Mexico, where they started from from from scratch. So you know I think that will take some time to settle out but.
They're they're pushing those assets forward. They had the you know a lot of the team to begin with as we split the the management teams.
Staff or I know Deb.
But you might see some fluctuation I, frankly don't know where that settles out, but we're trying to build two minds. It does require two two pretty full team. So you should expect that to grow I think you know in due course, we will see what that gross too.
Right. Thanks that makes sense and my second question is on San Antonio do you have no update on that asset are you still expecting a net updated my life's 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 a 1.2 grams. A 43 101, so it's a pretty good starting point, but there's a lot of value to unlock through exploration they have to do the engineering.
<unk> is one that's you've heard me say this before slower in Mexico tough to find people in COVID-19.
To do the work you need them to do.
So that's kind of advancing but all of those things are moving forward are leading towards a stockpile production. Hopefully later this year and then the bigger project taking shape behind it 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 cite that as if if you fill it that will be significantly higher production than what we were guiding to but that's early days I think the intent is to keep that as full as possible.
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 at 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 at all thank you for your time and and chat with you again soon.
And then I conclude.
And this concludes today's conference call. Thank you for participating you may now disconnect.
He missed I'm not calling from home social G. Now seafood worked with participants you via a cushy soil.
Okay.
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