Q1 2021 Sandstorm Gold Ltd Earnings Call
Excuse me. This is the operator today's call is scheduled to begin momentarily until that time your lines will be placed on hold thank you for your patience and please continue to hold.
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Good morning, My name is Kavita and I'll be your conference operator today at this time on when I said welcome everyone to the Sandstorm gold royalties first quarter conference call. All lines have been placed on mute to prevent any background noise.
Please be aware that some of the commentary may contain forward looking statements. There can be no assurance that the forward looking statements will prove to be accurate at the actual results and future events could differ materially from those anticipated in such statements.
After the Speakers' remarks, there'll be a question and answer session. If you would like to ask a question on this time simple first on the number one key younger telephone keypad. If you would like to withdraw your question. Please press the pound team. Thank you. Mr. Watson you may begin your conference.
Thank you <unk> good morning, everyone and thank you for calling into this first quarter earnings call for 2021.
As normal this morning, I'll provide a brief update on the company and in her fan our CFO who's going to walk us through the first quarter results and then David Warren will provide an update on some of the assets.
After that we'll turn it over to the operator for a question and answer period and if anyone has any questions that does not need to be part of the live Q&A you can ask those questions through the web portal.
To ensure that each question, we get there will get a direct response from you. After this call.
At this time, we're going to be going through a prepared powerpoint presentation on the web portal. So if you're able to please turn your attention there now.
Overall, the first quarter for sandstorm with Fantastic, we had a record number of gold equivalent ounces sold of over 17000 ounces.
<unk> had record revenue of $31 million and we had record operating cash flow, excluding working capital changes of $23 million.
By all accounts, our business is performing well.
And it's for this reason that we're raising the bottom end of our annual production guidance up to 55000 ounces, so that our revised guidance range.
55000 to 62000 gold equivalent ounces. So we're still on track for another record year of annual sales.
It is important to note that starting now on our second quarter. The gold stream that we have on Endeavour's Karma mine in Burkina Faso is done with fixed delivery period of the contract and Sandstorm now has an effect of one 6% and S. R. So the deliveries from Karma are expected to be lower by about 1000 ounces per quarter going forward. However.
Many of you are aware, we have a number of other development assets at various stages of development and we're expecting more growth in annual production over the next years.
Any of our other streaming and royalty competitors.
Now sandstorm has record amounts of capital available to allocate to try the new deals or dividends or share buybacks and as we stand here today sandstorm has over $150 million U S. In the bank plus we have approximately $60 million U S of equity and debt investments and other mining companies that can all be liquidated if need be.
On last quarter's earnings call.
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Disconnect the call will resume momentarily.
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And today's conference will resume momentarily please hold it will resume momentarily.
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And then you may resume your conference.
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Thanks, everybody for your patience here, we just had our work line.
On a drop off here so on Ponant in from ex up on we'll see how this goes.
So I think where I left off but I was talking about share buybacks and what I was trying to articulate.
Was that we are going to be allocating capital to what what I mentioned on our last quarter earnings call of all three alternatives being new deals on dividends and share buybacks and we've got a.
Slide here that you can see that.
Discusses the share buyback part we bought back a material number of our shares each year for four years running now and during the first quarter, we were able to pick up almost a million of sandstorm shares and have them canceled so the value per share for remaining shareholders is continuing to increase.
And over the past four years, our average cost per share has been only $5 20 U S. So we think we've done a very good job of picking our spots and we think it's been a prudent form of capital allocation for us and we're going to continue in the spirit going forward.
One of the things that makes us excited to buyback your own shares is not only how well the portfolio is doing from a cash flow generating perspective, but also how incredibly well the exploration upside story continues to unfold overtime.
We have finally completed all the number crunching for the last year. It turns out that 2020 was the fifth straight year in a row that more gold ounces had been found on our royalty ground that had been mine. This.
This is an amazing track record that is exciting to us in 2020, Sandstorm received 52000 attributable gold equivalent ounces of production compared to 54000, new ounces attributable to sandstorm being found through exploration and.
And what I find even more interesting is that the actual number of ounces attributable to sandstorm that was found was even higher than 54000 ounces and what we've done is we've chosen to be conservative in how we show these figures because under one of our screens a new technical team has decided to take a more conservative set of assumptions on the resource calculation.
And has what we believe temporarily decreased their ounces on the books and we have netted those ounces off against the ounces found that the 54000 ounce number represents a true net ounces found figure.
Year after year, our portfolios continuing to not only set new records in revenue and cash flow, but it also continues to replace the ounces mined with new ounces found.
On before I hand, it over to <unk> I would like to remind everyone of a few important catalysts that we see for sandstorm in 2021, starting with one of our key assets hard Martin as I've said in the past 'twenty 'twenty. One is expected to be a catalyst rich year for the assets with both a feasibility study and an EIA expected to be granted.
Imminently with the granting of E. P. C M contract to build the mine later in the year. It is still our expectation to both the feasibility study and the granting of the EIA should occur in the second quarter. However, this week due to COVID-19. The government of Turkey has implemented a country wide lockdown to contain the virus and we're still assessing what impact.
If any this will have on the expected timelines.
It's safe to say, we're all tired of COVID-19, certainly on our partners and our employees to stay safe and we understand that this means a slight delay in timelines.
Another important catalysts this year as potential deals.
Won't belabor this point, but I am still expecting this year to be an above average year for new deals and likely the highest level of videos in the past few years for us having said that deals arent done until they're actually done so I'll, let the actual deals if any speak for themselves.
The next catalyst fits works, remembering and which I've already touched on is the return of capital to shareholders through either share buybacks or dividends.
We've had the benefit of discussing this further at the board level recently, and we're targeting a decision one way or another if not by the end of this year. Then early next year, we have an incredibly strong balance sheet are fantastic and diversified our portfolio.
Portfolio, that's generating record cash flow and so it's my belief that paying a small but sustainable and growing dividend is effectively imminent.
I'm very pleased with how well our portfolio is performing and the opportunities we see to grow the portfolio and so with that and hand it over to Eric.
Great. Thank you know and Hello to everyone. Joining us today, it's been a great quarter for sandstorm as loans mentioned I'd like to take some time to walk through the financial results in more detail.
The chart on the left of this slide show Sandstorms attributable gold equivalent ounces sold as well as sales and royalty revenue for the last four quarters.
If you been tuning into these conference calls for a while you may recall at the end of 2019, but sandstorm worth Realising quarterly records on a regular basis.
At the time I mentioned that we were excited for this record breaking trend to continue.
After a year of unprecedented change in global upheaval I'm pleased to say the SaaS aren't because once again set a new quarterly record.
Moving to the next slide we can make a few comparisons between the first quarter of 'twenty 'twenty and 2021.
By all metrics listed here Sam from financial performance was stronger in the first quarter of this year compared to the first quarter of last year.
Total revenue was a record $31 million, an increase of 45% compared to the same period in 2020.
Attributable gold equivalent ounces sold with a new quarterly record at 17444 ounces, an increase of 30% compared to the same period in 2020.
These results were supported by a relatively strong gold market in the first quarter with an average realized gold price of 1007 hundred $77 per ounce.
For comparison, the average realized gold price in the first quarter of 2020 with just under $600 Brown.
Average cash costs were $307 per attributable ounce, which translated to cash operating margins of 1400 and $70 per ounce and a new quarterly record of $23 $7 million in cash flow from operating activities.
Net income came in at $5 million for the quarter compared to a net loss of $10 3 million in the first quarter of 2020.
The next slide provides a breakdown of the quarterly production results by cash flowing assets.
The amount of silver stream was once again the leader with over 4700 attributable gold equivalent ounces sold.
This represents a 12% increase in silver ounces sold compared to the first quarter of 2020.
The Cerro Moro Silver stream has benefited from an increase in the silver price.
Sandstorm realized an average selling price of approximately $25 per ounce during the quarter compared to approximately $18 per ounce of silver in the first quarter of last year.
A similar story can be told for their Ciabatta copper stream sandstorm received a 29% increase in the number of copper pounds from Japan during the quarter and realized a 36% increase in the average selling price of copper compared to the first quarter of 2020.
The result was a total of 2000 and 588 attributable gold equivalent ounces sold from the screen.
Other notable changes in production when compared to 2020 include. The addition of the relief Canyon stream.
Which began FIC gold deliveries to sandstorm in May 2020.
An increase in production attributable to the food a dome North day mine, which commenced commercial production in February 2020.
And an increase in royalty revenue from the brace Mac Mcleod mine.
Production from the Karma mine in Burkina Faso also increased in the first quarter compared to the previous year, partly related to timing of sales.
And our debt delay in deliveries compared to the prior quarter and 2020.
The first quarter also marks the end of the five year period under the Karma Gold stream that allows sandstorm to purchase 25000 ounces of gold for ongoing per ounce payment equal to 20% on the spot price and as Nolan mentioned as of April 1st SaaS Storm Gold stream agreement in time on now closer to 1.63% of Goldcorp.
<unk> the Karma mine for the same ongoing per ounce payment.
The operator Endeavour mining is forecasting between 80000 90000 ounces of gold to be produced at Karma in 2021.
This final slide depicts the first quarter revenues by region and metal kite.
Sandstorm portfolio continues to be well diversified with mines operating in stable jurisdictions around the globe.
In the first quarter, 90% of revenues came from mines operating in the Americas.
With approximately one third of revenue is coming from North America mine.
The majority of revenues came from precious metals with nearly half attributable gold operation with another 27% from silver.
17% of revenues came from copper at this quarter, which provided good exposure to rising base metal prices.
Overall it was a very good start to the year for sandstorm shareholders. We finished the quarter with over $140 million in cash and over $52 million in equity and debt investments.
The answer on the balance sheet is strong and ready to support the net.
I'll step for the company.
Based on the company's existing streams and royalties again, we've updated our forecast for Cuba gold ounces sold to be between 55060 2000 ounces in 2021 and with that I'll turn things over to Dave Dave.
Dave.
Thanks, Jeff on.
My asset updates will be brief this quarter as I focus on two projects that are back on the limelight for a couple of years of us not talking much about.
The first project is the Mason project with HUD day. This asset was once once an entre resources, but has spun out into its own vehicle and was eventually purchased by HUD day in 2018 passport and three years later, along with the $2 pound per pound increase in copper price and we are one of the law.
Largest greenfield copper projects in the Americas and potentially the third largest copper mine in the United States.
Hot Day recently released the results of the Pea a on the 2.2 billion tonne measured and indicated resource.
At 310, copper and using a 10% discount rate the project carries after tax NPV of almost $520 million.
The current mine life is expected to be 27 years, but they're still working on additional exploration that could extend that.
Obviously.
More work.
Completed on the assets and assets will need to be achieved but hardware is expected to put it into the development pipeline. Once rosemont is is up and operating however, it does have the potential to almost double HUD based copper outgrow output. So clearly it could be one of the most important growth projects in our pipeline.
With our 0.4% Dennis on on the project Sandstorm could collapse collect up to $75 million on proceeds based on this P. E study at $4 50, copper price, obviously, that's going to be a lot higher.
This is another great example of how sandstorm has been effective in accessing low cost early stage deals on the right assets and sometimes like this one even were surprised that it doesn't take nearly as much time as we originally thought to show that create value for sandstorm.
The other projects on wanted to talk about now are Barry we're ROI and Gladiator. These are all now part of what was originally the Bachelor Lake Gold mine stream, which provide us with a tremendous amount of cash flow for over the last 10 years today.
Under <unk> management their three projects quickly pushing forward, which we hold royalties ranging from 1% to 4.9% Gladiator and Barry form a large land package within the windfall Lake District in Quebec on.
Terra has been drilling approximately 10000 meters per month on the Berry property and has been consistently getting great results.
Some of the latest step out intercepts are $14 seven meters at 7.4 grams and six eight meters at 3.8 grams per tonne in the age zone.
The deposits still appears to be open along strike and depth.
Who is a large amount of drilling plan Barry likely has more mineralization to be found on updated resources expects in Q2 and the Pea is expected before the end of the year. We've also begun to receive payment for a royalty here through the bulk sample taken underground last year, but hopefully this project will start on.
During the development stage in the not too distant future.
Moving over to the original Bachelor Lake Mine site.
Not only has mauroy continued to produce good intercepts of chasing up on the O'brien intrusion showing on Terra has made another discovery within two kilometers of the Bachelor mill.
Two holes have begun to outline this new discovery with intercepts at 24.9 meters at 1.4 grams and 10 meters of 1.3 grams. This.
To show you that combined with the Mauroy discovery only a few years ago. This is very prospective ground only just beginning to be understood.
Of course, it's also good news on the mill expansion the old Bachelor Lake Mill is still able to operating 800 tonnes per day.
Permitted to increased 2400 tons per day, and as well through that process, new tailings expansions are proved and voluntary can find themselves in a position to start the expansion soon for sandstorm that means the sooner we get the chance to see revenue from a 4.9% MSR on all of these newly discovered areas.
So with that I'll pass it over the call back over to the operator for Q&A.
Please free feel to us feel free to ask any questions about our royalties and streams.
And as a reminder, SaaS a question Thats star one on your telephone keypad.
You and I have to ask a question press star one.
And our first question comes from Heiko.
<unk> with H C Wainwright.
Hi, there thanks for taking my questions on the glad you made it back on the call.
Me too.
I know you're still working diligently on the feasibility study for harp more than in the prior outlook was for it to be completed on the first half a day, you're obviously with production by the end of 'twenty three.
And just timeline was affirmed in D. M. DNA that you guys just put out.
In contrast early on the call you said that Turkey went into a lockdown and there may be a delay to this but I mean, just thinking ahead, not 30 days, but you know six months nine months 12 months, how much the impact of this delay really posed to you getting first production by the end of 'twenty three.
And building on that can you maybe provide some color on the longer lead time issues that youre, particularly concerned about.
Yes, so that the Lockdown was just announced a couple of days ago. So it's a bit early for us to tell from those who answers because it's only been on an effect for a couple of days.
At the moment, we don't foresee it changing when we think the asset will get into production some of the long lead items.
Which are still working their way through the system would be things like forestry permits.
But also E P C M contractors getting them signed.
Signed up and ready to go and that work is still ongoing full force and most of that work with digital work, where our people are submitting their beds from phone calls are being had and thats still going ahead irrespective of locked down. So a lot of these long lead items or are not in fact slowing down.
It's just yes, if the EIA permit was expected to be granted next month and nobody is showing up at their desk at the government for the next month that might slow down but that was never really a long lead items.
So we're we're just waiting to see how or if any it will impact it and at the moment, we're not we're not updating our guidance because we don't think it'll be too material.
Okay, Yeah, that's just us what I figure it because I mean, there's a so far on the future and even if day locked on for 90 days I just don't see how that would change a 'twenty 'twenty three time line.
Yeah, and a lot of a lot of the work that the project debt at the stage right now it is.
Is at the desktop level and so people are still pushing net work forward at the same pace, even though they happen to be in their homes.
Got it.
Second question I'm not sure how much of this you're willing to say I mean, you're obviously renewed your in CIB and I think that's the right move, especially when I saw the AR 520 average price that you paid over the past few years in the presentation that you had.
You actually use a program reasonably aggressively in Q1 have you done anything in Q2 and in Q2. So for me, we're a third way through the quarter I don't know, if you're willing and able to comment on that.
In Q2, we haven't most of Q2, so far we were in blackout because of preparing financial statements. So we weren't allowed to legally anyway. So.
Okay.
Fair enough I'll get back in queue. Thank you.
Thank you.
And our next question comes from Hillary <unk> track with Canaccord Genuity.
Hi, Thanks for taking my question on so I actually just had a question on entre gold I see that you've been increasing.
Knutsen and I was wondering if you are able to speak about the rationale behind that.
Yes, it's a question that we get every now and then and.
You answered it on some of our past calls.
Suggest is that we own a very significant percentage of their company already based on the liquidity selling that at a reasonable price.
Is a is not very feasible at the moment and we think that there's actually a tremendous amount of value. There. We think that the company is worth a lot more than what it's trading at what we have not been shy to say that publicly in the past.
And so when we think debt picking away shares there are well below value gives us the benefit of holding a stronger position if someone wants to come along and buy them and making sure we get fair value for our shares.
Or if nobody buys them then.
We owned effectively 25 percentage of their company on a partially dilutive basis will get 25 percentage of their their dividends.
From there their equity interest and well see how it goes so that.
Either way whatever the outcome is were happy and we think it's.
Intelligent capital allocation, given how much capital we have available to us on the value we see there.
Okay. Thanks that makes sense and one last question on guidance on.
Increased the bottom end of the guidance on based on Q1 that implies an annual run rate on that.
Net 68000 ounces, which is above the high end of guidance I know you said that Karma is expected to decrease in the coming quarters, but are you expecting any other assets to decline or is it just like a conservative estimate.
I would say we try to be conservative in our estimate sometimes it's tough to tell we.
I wouldn't say that there's any imminent declines that we're expecting from any of our other assets other than net carmine or fan I don't know if you have anything.
To comment on on the <unk>.
Conservative missed our guidance.
Yeah, I think our guidance is that fair are potentially on the conservative side, but we have more than just one commodity in our mix and that impacts our guidance figures. So as the year goes on we'll provide more clarity on that.
Okay awesome. Thanks, that's it from me.
And our next question comes from Derick, MA with TD Securities.
Thank you my question relates to Jakarta.
And inputs from pretty positive exploration results there just on one earnings on.
An 80% increase in its land position looking at the math I believe most of the property is still covered by the stream area, but can you confirm that the southwest near mine exploration areas are covered and more specifically I guess that for me.
Area that they're looking on north from the debt.
Yes, it's on our chip out of the way we structured debt agreement is debt all of the land that they had at the time fell under our agreement so.
If the discovery is on the land was owned at the time. It comes under our agreement. In addition to that we have the concept of an expanding.
The area of interest for another three kilometers outside that border. So if they picked up new land that they did not previously have within three kilometers of the old land that they had back in 2015 that falls under our our deal as well. So we have I think if memory serves me correct almost 700 square kilometers of Atlanta covered by our stream.
That's good to hear and I guess, one more question on your part of them.
Should we expect some decrease in the Joe's paid to Sam farming Q2 related to the shutdown or are we through that now.
Pat I'm not.
Expecting a material decrease in gold equivalent ounces in Q2, having said that there is a cap and annual production that we get.
Copper and there's a true up mechanism. So for example, if they hit the cap in one quarter and then are on great. Another quarter, but then when we get true up at the end of the year. So.
Do you think we're going to get our maximum number of pounds of copper for the year, whether or not they get delivered in Q2 or later in the year.
Got it thank you very much.
And our next question comes from John Thomas with John Thomas as Darien.
Good morning, it's John Tumazos.
And earlier presentations there was a focus on the.
Pending.
<unk> ability study update for hot model.
Yeah.
Has that been delayed was COVID-19.
Other complications in the world.
Or is that still.
Do.
A quarter or so.
And what are some of the.
Changes, possibly.
Capex ore grades recovery rates or anything that you can comment.
Yes.
Yeah, Thanks for that so.
In terms of the feasibility study and is still tracking well, it's still tracking fast most of the work is desktop work. So we don't think the lockdown in Turkey that was just announced should have a material impact on time line, maybe it will have a small impact on time line. So.
It's definitely still going to be in the first half of this year in fact late last night actually got.
Some of the first sections of the poetry went on one airport, that's actually being drafted a sense to me in my inbox.
I've got to start reviewing that but.
Where we're expecting a fairly similar number of total payable ounces as previous studies when you.
Taking into accounts grades on the feasibility study at all on shore.
Some have gone up some have gone down, but net net I am expecting the total number of payable ounces to be to be pretty similar.
And.
And it's an incredible mine, an incredibly robust mine and based on the knowledge that they have so far of the feasibility study will show that.
Thank you very much.
Thank you.
Yeah.
And our next question comes from Brian Macarthur with Raymond James.
Hi, Good morning, just following up on John's question. Since you were kind enough to comment on the ounces at heart Madden.
One of the other things I was just curious about the original study was done with a Turkish lira rate of 3.8.
Yes, it's eight or something now can you just remind me or if theres any changes any guidance you can give on how that's been impacting your capital I E are outlay and and just ongoing operating costs how much it was sensitive to the Turkish lira because of your assets and everything else on the same youre getting a better layer.
It could have turned out to be a better looking project I don't know if you can comment on that.
Yeah.
I won't comment on too much specifically, but what we're seeing generally is.
There is some cost inflation in lira, but the value of Alere I is going down.
So our expected capital on U S dollars.
Similar.
Yeah.
Thank you that's very helpful.
Yes.
And there are no further questions at this time I'll turn the conference back over to Mr. Nolan Watson.
Great well, thank you Peter and thank you everyone for phoning in today's call apologize for the little hiccup, but my cellphone held in there.
And I hope everyone has a good day and like always if you have any questions feel free to give us a shout here at the office.
Thank you.
And there are no further questions at this time.
This does concludes today's conference call. Thank you for your participation you may now disconnect.
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