Q4 2021 Osisko Gold Royalties Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the Cisco Gold royalties Q4 and year 2021 results conference call.
After the presentation, we all kind of 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 note that this call is being recorded today February 'twenty five 2022 at 10 am eastern time.
Today on the call we have Mr. Sandeep Singh, President and Chief Executive Officer, and Mr. Fredrik to al <unk>.
<unk> financial Officer, and Vice President Finance I would now like to turn the meeting over to our hosts for todays call. Mr. Sandeep Singh.
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Okay.
Thanks, very much operator.
You can hear me okay.
Everyone for joining us this morning, I know, it's a busy.
And to the week a lot of people are reporting so thanks for taking the time, we'll try to go through the prepared materials reasonably quickly leave enough time for questions and please note. If you don't already have it be the deck.
Then I'll be walking through it with Fred is on the website and.
And we will be making forward looking statements.
Talk through it.
Jumping to slide three just in terms of a very high level recap.
Another exceptionally strong quarter, our assets continued to perform well.
And provide significant catalysts that are playing out which will will touch on some of them as we go through the documents.
But in 2021 80000, Geos earned a gold equivalent ounces at you know that was that was pre released.
That includes contributions from Bernard will talk about later is coming back online this year.
The resulting in record revenues of just just shy of 200 million Canadian median record operating cash flows as well this.
This year, we expect significantly more ounces.
We'll still have a very high frankly peer leading margin at around 93% that coupled with.
It's still a strong gold price here today.
Certainly volatile, but higher than the $200 an ounce in 2021 shouldn't lead we expect it to to continued records on all fronts.
There was a little bit of noise on the.
National's, mainly resulting I'm sorry.
From a.
Noncash impairment and Cisco development.
But to the tune of $48 million in the quarter, but really those were legacy assets.
In the James Bay area Cool and in Guerrero.
So exploration stage assets of the company is not focusing on <unk> and felt that relevant to us.
You got to take that down and given their focus is on the other three main asset.
Taking that aside we earned adjusted earnings of 14 cents a quarter.
In the quarter and 56 cents for the year and Fred will walk you through some of the details of that later on as well.
As you know we increased our dividend amidst volatility in the middle of the year. We then followed that up with a pretty significant NSAID program buying.
Buying back over $30 million.
The $14 64 per share on average.
So we'll continue to look for those opportunities that the company is in great shape.
Cash flow will grow this year and will continue to balance that between our dividend growth.
Backs when there's volatility in the market towards those cheap opportunities by stock and growth.
Subsequent to Q4, we did announce through Cisco Bermuda acquisition of a screen with.
With a range of $20 million to $40 million and on the high end, 5% on the low end two 5% of the metals.
Property that Cisco development is in the process of acquiring Sean reason, our chairman is also on the line and in the Q&A. If there are questions that drift over to Deborah Fintech side, but I cannot answer ill be available to help with that.
So that's just a quick snapshot.
On slide four.
Graphically depict thing what I said earlier, which is an asset base that is outperforming our expectations and really just just humming at this point as I mentioned 80000 geos for the year.
Traditional split that you've gotten accustomed to seeing from us of about 75% gold silver.
Silver making up the.
Most of the remainder that's obviously when when we exclude the time analysis from Bernard that was at a 97% margin. It also was right in the middle of our guidance that's not a typo it is pretty much exactly how that would be yes.
Right in the middle of our guidance.
Previously reported and I think that's worth stopping at are pausing, a little bit I think that frankly it was a good result, especially in Q4, where we saw not just our operators, but operators across the sector, having a continued issues with supply chain, we certainly felt that with one of our mines in the Yukon.
Obviously, the omicron positivity rates skyrocketing.
For mining companies as they have for the population at large.
That has added obligations with respect to quarantine.
Theism, so it didn't feel like it was on the gas.
In Q4 in the mining sector still having achieved the midpoint of our guidance certainly felt like a win.
On slide five we have come out with our 2022 guidance as well as a five year outlook for the first time in our history, which we hope will be helpful to people and they understand.
Kind of the growth embedded in this company.
But on the guidance side on slide five first and foremost you're guiding to 90 to 95000 ounces of Geos for the year at a 93% cash margin.
We're adding some more screens to that mix than last year again with the reinstatement of Bernard takes the margin down a little bit still quite high.
Which implies 12 and a half to just shy of 20% growth for the year.
Pretty material step change for us.
I would say, we expect Q1 will hopefully be the last quarter, where we hover around a 20000 ounce range.
Excuse me, where we've been for most of 2021 before that that growth really kicks in.
And the reasons for those for that are pretty obvious.
Got the expansion at Mentos, that's underway, it's tying in as we speak so clearly they have to kind of go through that tie in process.
And then there's also.
You've heard me say number of times delays of a couple of months there in terms of when they produce and when we receive but what's that.
Flows through then then we're often running.
You'll also remember that for Eagle in the Yukon Q1 is always a lighter quarter from a winter perspective, they're going to eventually get through that and have a bit more consistency, but we do expect that to be the case, especially.
Given some pretty extreme weather this year on.
The West Coast.
We also have some smaller assets like.
Santana at Aratana, which are wrapping up we have the San Antonio stockpile, which is producing and we'll start generating ounces.
You've reached this year and then the biggest the other contributor to that that skew Q1, and the rest of the year would be Bernard where we're not switching back that scream until may 1st so not giving ourselves credit for those ounces are those geos in Q1, primarily.
So again, hopefully that's a kind of a Q1 that's in line with what you saw from us.
Last quarter, maybe a little bit higher, but we'll see and then significant growth starting as early as Q2 and for the rest of the year, which should bode well.
I think just on a couple of points.
Maybe Bernard related since that is a big addition to this this guidance versus last year, and we're very pleased to be able to bring that back into the fold. We said it was a priority for us.
I think now is the time, where we can credibly do that.
And at the mine and the operator continued to be in a healthy position.
The point to that.
Besides that in December I believe it was late in the year.
Starwood payback too.
Half of the working cap facility to its partners, including US are piece of that was just shy of $4 million. We expect the rest of that working capital facility to also be paid back in the near term.
But just done in a staged manner for prudence.
And some of you may have picked up in our MD&A that the latest selling price was quite high.
$170 per carat roughly.
We're not pricing that in with the for the restart if you will that it was there was quite a bit higher than the reserve price, which was more in line with previous sales, but I think youre seeing quite a bit of demand increase, especially on the smaller scale diamonds.
Which helps us and frankly, perhaps quite probably some speculation or more than some speculation.
Which is more of a short term phenomenon, but either way, we're very pleased with.
With the health of that business right now and it's the right time to turn things off we will see if Bob.
What sanctions, which I was just reading about alrosa currently are more about providing equity and debt overall.
For diamonds.
Yeah.
Yes.
Likely a boost there as well in the near term, but frankly I think that's.
Second third order.
It is Oh I'll point out it is quite sad seeing what's happening in the Ukraine, especially given the strong and proud.
Cranium population in Canada in Toronto, So hopefully that.
Until then too poorly.
Again not to go out too much of a tangent first time in my young kids lifetime, whether old enough to ask questions about that war. So those are all pretty sad conversations I'm sure you are having some of them as well.
On slide six in terms of outlook to turn more positive. This is our inaugural five year outlook.
And its exceptional growth in our mines, a 10% to 12% CAGR for the five years data starting from last year as the starting point is.
Pretty massive for a company our size worth pointing out if it wasn't obvious that that is all organic growth, we're not including any potential acquisitions in there all of that would be external.
An additional.
Other things I would point out and we've tried to guide what assets, we see coming into those.
Not exhaustive I mean for instance in 2022, there is that San Antonio stockpile just.
Just not in the bar there is a couple of other things same for 2006. There are some other assets that are contributing there, but the chunkier contributors are shown.
And then beyond that there is a significant amount of optionality left in the business and I think frankly, the back half of our decade has also spoken for.
The other things I would say is when you look at the contributors we've included.
At this time frame.
San Antonio and Caribou, obviously held by Oded Windfall auto is K back 40, those would be the biggest chunks there other than increases from our existing mining assets.
One of the lenses, we used or the screens that we used was certainly theres permitting timelines that are embedded into those assets coming along we've tried to be conservative.
It's always a slippery slope, where we've tried to be conservative in terms of delays there.
But what we haven't done is overlaid financing risk with permitting risk and so there is other assets other partners of ours, who have guided towards being in production by that timeline.
But where we felt that the permitting risk was compounded by.
Financing plan that that wasn't yet crystallized and needed more time for clarity we left those aside to let that play out and we felt that was that was prudent so we certainly expect.
There's other things that will happen five years is a long time that will start to ship some of these assets around hopefully in our favor.
Last year was a year, where we saw a number of our assets end up in bigger Counterparties, we expect that trend to continue given the quality of our asset base. So there can be movement.
But but either way we thought this was a pretty impressive growth profile, one that we're quite proud of.
Other things I would point out and that Optionality.
Bucket and we can come back around for this in the Q&A later.
Yes.
There is many speaks of that movement, if you will.
Just yesterday, we were reading and haven't had a chance to follow up with them, but there's a lot of news in that agnico portfolio.
The press release.
Despite your teeth into but one of the things that we took away is there guidance not guidance, but their view that in 2024, there could be another another 100000 ounces of additional production coming from things like non debated kirklin.
<unk> West, which is obviously a goldcorp gold next satellite so excuse me.
And Odyssey internal zones, and those are all assets that we have in between the two and a 5% MSR on so that's not embedded into our thinking yet.
Till we get more visibility on it as.
As well casino another very chunky asset for us where the timeline is a little bit unclear as of yet, but significant progress being made including the government of Yukon committing to spending $30 million.
On road construction that benefits the mine over the next couple of years.
When you look at her most are.
The feasibility study fell.
Late last year finally, after a bit of a delay.
They're guiding to a mid 2023 production decision in 2027 production. So it is just on the other side of that that's another 5000 geos that can come into focus even excluding the Clark deposit.
Pine point, we expect the feasibility study this year and the timeline there will come into focus.
And then again upper Beaver.
Waiting for what the synergy.
Synergies need between agnico in kirklin now that the merger is closed.
That was one of the emphasis emphasis there.
There are of their press release yesterday, so a lot of good news some other assets there that we haven't included B at Hammond Reef Alt R.
Oracle Ridge or were there some pretty pretty sexy drilling on the copper side in Arizona going on so.
Frank.
Feel like we have an abundance of riches here that are going to take shape over the coming years.
On slide seven.
Again, this is not new to you, but worth pointing out that a lot of that growth most of that growth is still in the Americas still in the right countries. If you will and this is always important in mining and frankly, given what's happening this week generally happening around us in the mining sector I don't know if theres as it's ever been more so so.
Certainly we feel comfortable with where that growth is.
And who is being unlocked by frankly.
On switching to some of our assets on the Canadian Mill Arctic side, obviously that stories continues to get better 2021 was a record.
<unk> perspective.
Alright.
<unk> exceeded guidance I should say to go back and check those record, but certainly based on this Geo chart pretty close.
Wasn't.
So so that's good news.
On the open pit side.
And we factored in importantly, the guidance that we had already received from you Matt.
Updated yesterday from Agnieszka, where there's a slight dip over the next couple of years before things ramp up again, so that is worth pointing out is in our guidance.
More importantly on the melodic side on slide.
Should be slide nine.
The underground story continues to strengthen from a pure.
Progress perspective, the headframe is complete the collar.
Is complete the SaaS sinking is meant to be starting later in the year. We'll then take four or five years to finish the shaft and underground development, obviously there'll be production as early as 2023 from the ramp.
But all of that's progressing well and on schedule.
There was a small increase in resources. This February about.
About 1 million ounces importantly, there was the first indicated ounces as well.
But most of the work last year was on infill drilling and some extension work. So we weren't expecting a big increase.
What we would expect is with another kind of a similar amount of drilling at last year. Another 137 7000 meters. This year 15 rigs currently spending.
Would expect.
A lot of work to underpin resource growth.
In 2023, a year now and the operators at least one of them are certainly guiding to the potential being likely for a an updated and increased mine plan there.
Thereafter so.
Further a lot of further good news expected on this asset.
Our flagships already good for until 2039 based on less than half of the current resources.
So this is a story that continues to strengthen and then when you think about the camp.
That our founders kind of restarted here.
Between 2011, and 2021 Theres been almost 7 million ounces produced when you think about kind of the mid third 19 thirties onwards.
A 14 15 million ounces and today, there is 20 million ounces, there almost and it's growing and it will grow in leaps and bounds. So youre looking at a camp.
<unk> produced and currently sits at $34 35 million ounces.
When a lot of growth, which is puts it in pretty rarefied air in terms of mining centers in the world.
On slide 10 with respect to some of our other assets and I will try to go to the next slides quickly.
Ed mentioned I just try to be quick.
On metals, that's another really good story for US you've heard me talk about the ramp up there.
$4 3 million to $7 3 million tonnes is being tightened as we speak that will take our geos from about 9% to 10000 ounces of year gold equivalent to 16.
This year, we're kind of expecting half of that.
A bit less than half of that.
<unk>.
Increase given the dynamics I mentioned earlier, who will wrap up perspective, and then next year on.
It's off to the races.
You've also heard me say that the only thing that asset was lacking was visibility and with the merger with Capstone announced in late November meant to close I think in late March.
That visibility now on there, including the first technical report in modern times.
And a lot of positivity around that asset.
Including the <unk>.
Combined group now talking about another expansion. The first one is not done or the current one is not done and they were talking about another one to 10 million tons.
For a pretty de Minimis amount of Capex.
And we would expect and certainly we wouldn't be surprised to see some of that commentary play out as soon as the deal was closed in March that would take our ounces up significantly in terms of cents you another flagship behind behind market.
Bye bye.
Which I touched on earlier nice to see the ramp up in H two in the second half of last year.
We expect that to finish this year, they're already moving on to project $2 50 to get to 250000 ounces during calendar year 2023.
And we look forward to them getting back to the exploration side of things in a more earnest way.
Yesterday, they pronounce the pronounced they announced the first amount of deeper drilling since I think it was 2017.
On the pitch themselves.
Which were quite interesting.
<unk>.
Some intercepts pointed out 175 meters at one two grams from 150 meters depth 50 meters that 0.8 from.
400 meters depth.
Early days, but nice to see the grades increasing adept. So we've always thought there is the potential to expand the pits steeper.
On top of the satellite potential at properties like Raven, which we think are quite productive and perspective.
Haven't been backlogs from an assay perspective, but we think Victoria's on the cusp of catching up with some of those backlogs and coming out with some pretty interesting drill results.
Eleonore was nice to see the reserves increase after kind of resetting the bar over the last couple of years nice to see them growing back.
With a 44% increase in reserves and CPU CV Likewise net of depletion to an 18% increase in reserves feeling like certainly based on their commentary that they are they're going to be getting ready to talk about growth at seabee. Other its mine life extension or working on top of that so that that asset looks like and it's been good.
Great.
I'll jump past 11, but I think the story would be the same with you talked about island site level I'm not talking about some of our other assets, but in the interest of time I will move us to slide 12.
And comment on some of those growth assets underpinning.
So that five year outlook, starting with the assets within a skill development Caribbean San Antonio Some of you who have listened to sean's call. Just just ahead of ours.
It's a milestone rich year for us on.
On the <unk> side.
With caribou going through feasibility study permitting.
Bulk sample that will be run through the <unk> all of that kind of tracking reasonably well with respect to timelines with the usual kind of touring and growing.
The <unk> acquisition.
We're all quite excited about.
And certainly that the catalyst for that is provided to help finance the entirety of the asset base is quite impressive with I think by the time, it's done over $230 million, which will have been raised that will dilute our ownership and a cisco developments as we did not contribute from 75% to 45% pro forma when those deals.
But importantly, it's dilution for the right reasons were quite happy to see that asset amend the funding that followed.
Now look to now go after those assets in a meaningful way.
On San Antonio I mentioned earlier that the stockpile is now under leach are starting to be under leach. So that will start to trickle some benefit to us and <unk>.
The work there that's gone on over the course of 2021 and that's continuing now in the news flow that will stem from there.
Under lines and underscores what the group thought we would see there in.
In terms of potential both oxide and sulfide. So we look forward to that story playing out over the coming months.
But all of that bodes well and the next key milestone there will obviously be the permit on the bigger CPG project.
Which will drive drive timelines from there.
And hopefully that is something that can happen second half of this year.
Windfall.
Within a Cisco mining is a pretty stellar assets.
It's the size and grade combination there with <unk> at $3 2 million ounces that MNI at 10, five almost 7 million ounces total still growing still new discoveries being had like Golden Bear with me.
They started to poke into that's a pretty special assets.
In the right location. So we're looking forward to the feasibility study.
Adding we're more meat on the bone again this year.
The endorsement from northern Star on that convertible financing was obviously a.
Shot in the arm.
No.
The joint venture itself, obviously has been terminated but I think what you see there is a market thats frankly changed.
The scarcity value of an asset like windfall and I don't know what other assets are like windfall.
It's pretty special and so we look forward to seeing that that sort of continues to grow and evolve and take shape over the course of this year.
With upper Beaver, and an 8-K or the Kirkland Lake camp, which was within.
Previous with Nico will now be benefiting from the new with Nikko infrastructure that came over from the kirklin side, there's a lot of good things happening there.
Again as I mentioned earlier, we look forward to seeing the upper Beaver.
<unk> timelines, so that we can factor into where it fits in is it in the next five years is it just on the cusp while on the other side of it.
That's what we're waiting to see there.
They've talked about in their presentation yesterday I think they described it well not I think it's on the stage.
150 to 200000 ounce per annum type assets of $3 to 4000 Geos for us.
They also talked about 8-K.
Potentially being in production as early as 2024, so just drifting over.
The cassa.
At the 40000 ounce per year right. That's another 800 geos for US we haven't factored it anywhere.
And as I mentioned, just just a lot of good news there is as they get their feet under them as our newest new Amigo emerged agnico quick one so we look forward to that story unfolding for us.
And then on back 40, which is a significant contributor to us.
The closer to the back end of that five year outlook expecting.
Expecting a feasibility.
Two we agree with the plan that gold resource is following.
Smaller open pit bigger underground less of it.
Environmental footprint. So we look forward to seeing them go through those steps and as I mentioned to you earlier, we think we've embedded enough.
Enough potential delay to still be on the right side.
Great.
I'll jump ahead, just to get things over to <unk>.
The thread a little bit.
<unk> seen these transactions for us on slide 13, we think they are all really good contributors.
Spring Valley.
Now seeing water to sell one of their assets in Nevada for $200 million U S.
This is a bigger and I think they've been locked a lot of value on this asset. So we look forward to some more clarity maybe.
Maybe even as early as this year T Z, we're very happy to have gotten all of that on that asset and have G mining advancing its with a construction decision this year.
And the West Kenyan.
Royalty that we picked up on kind of north of a million ounces of very high grade.
Looking forward to an exploration update there in the very near term as well.
Lastly, I will talk through on 14 is that since the acquisition I think you've heard from both strong ROI on it quite a bit. So if there are more questions. We can deal with it in the Q&A, but quite happy to have that asset within the <unk> portfolio here in the near term copy as well to have.
The structure of the stream on it.
Gave a range.
And then obviously the equity financing thereafter was upsized quite a bit so we will see where we fall within that range, but either way two 5% to 5% of the metals stream there.
Which we think will be a significant contributor obviously the disclosure needs to catch up that was held in private hands, David need 43, 100 ones. They just were mining it but.
But the the new high grade all dry grain discovery there in the <unk> zone is quite special we look forward to seeing it kind of evolved.
But when you think about 'twenty 300 samples collected over 200, plus strike length meter strike length, returning 93 gas per ton gold plus a lot of silver.
So that all bodes well so.
Adding some capital, adding some modern mining techniques.
The technical team Baidu depth to that I think is going to take this asset. This mine to the next level and we look forward to seeing the news flow and the picture would be paying to them.
And then frankly, the not just the the trixie portion of it.
It does sit on 17000 acres 14000 of which are patented.
Productive mining districts. So a lot of a lot of head frames and this <unk> zone was I think something like $44 45 feet away from Kennecott mining in the mid nineties and they never stumbled upon it. So there's a lot of a lot of head scratching can do and a lot of revisiting of that land package.
Both from this minus perspective from a hybrid perspective.
Base metal a poly metallic.
Potential as well as copper porphyry potential which is what I would call electric is chasing on the boundaries.
So thats turned.
Turned out I talked for longer than I expected too, which is kind of normal.
With that I'll pass it on to Fred.
On slide 15 to walk you through a couple of more details on the.
On the financial side, and then we will conclude with Q&A.
Thank you Sandeep and Boswell Mitsubishi Duane Reade methane from the present that one Elizabeth <unk>, Santa Ana and good morning, everyone. Thank you for joining us today.
As discussed by Sandeep 2021 was a very good year for us in line with our expectations. We have met our guidance with strong deliveries from our partners. Despite some challenges with cobian for some operators and our results have led again to record revenues cash margins and <unk>.
Cash flows from our royalties and streams business. If we go to page 15 of the presentation.
We recorded record revenues.
<unk> hundred $99 6 million in 2021 compared to $156 6 million in 2020.
Cash flows from operating activities were $106 million on the consolidated basis.
For the royalties and streams segment alone cash flows from operations have reached a record $153 million compared with $214 million in 2021.
On page 16, we present, a summary of our net loss and adjusted earnings. The consolidated net loss was two Cisco shareholders was $23 6 million or <unk> 14 per share compared to net earnings of $16 9 million or 10 cents per share in 2020 comes will lead to a net.
The loss was due to noncash impairment charges and mining operating expenses incurred by Cisco development in 2021.
On a consolidated basis adjusted earnings were $59 million or <unk> 35 per share.
Comprised of adjusted earnings of 94 million or 56 cents per share for the royalties and streams segment.
And an adjusted loss of $35 million from a Cisco development or <unk> 21 per share.
On page 17, we have a summary of our quarterly results.
Additional details for the royalties and streams segment.
Including 19830 Geos in Q4 40 total of 80000 Geos in 2021, we generated gross profit of $35 million in Q4 to end the year at 139 million compared to $104 million in 2020.
<unk> cash flows of $35 1 million were generated in Q4 by our royalty and streaming business.
A total of $153 million in 2021.
On page 18, we have a breakdown of our cash margin for Q4, and they use 2021 and 2020 in Q4 of this year with the cash margin on our royalties reached $34 million and the cash margin on our streams amounted to $12 7 million for a total of $47 million in Q4.
Which brings the total cash margin for the year to a record hardware and $87 million.
On page 19, we present the progression of the dividends paid to our shareholders since the creation of a Cisco gold royalties over $184 million has been returned at the end of December in addition to $85 million used to repurchase a total of $6 7 million shares under our <unk> and CIB.
Programs.
Finally on page 20, you will find a summary of our financial position our consolidated cash balance was $116 million at the end of 2021, including $82 million from Cisco gold royalties and $2 3 million for Cisco development.
Cisco gold royalties out investments, having a value of $255 million at the end of December in addition to our investment in this fiscal development valued at over $400 million.
Our debt was stable during the year with over $1 billion available under our credit facility, which was increased in last July and extended until 2025. We've also acquired a total of $2 1 million shares under our CIP program for $21 million in 2021.
We've also acquired an additional 250000 shares in 2022.
For $4 9 million.
So in summary, 2021 was a year, where our main assets have continued to perform strongly.
And we have seen several of our partners announcing great exploration results and expansion programs for their production.
I will now turn the call back to Sandy for closing remarks and questions.
Thanks, a lot Brad and I think we can we can forgo the closing remarks, and operator open it up for any Q&A. Please.
Certainly.
To ask a question. Please press star followed by the number one on your telephone keypad, well pause for just a moment to compile the Q&A roster.
Thanks, Joe appear shortly twice GDP, telling me now.
And once again to ask a question. Please press star followed by the number one on your telephone keypad.
And we do have a question from Mike Feldman from Bank of America. Please go ahead. Your line is open.
Okay.
Oh, Hi, Sandeep, Sean everyone.
Sandeep I was just wondering.
With the.
Okay.
When Paul with Northern Star now participate in a joint venture partner.
And John Burzynski was on Bloomberg, saying, if you're going to build it on the shelf.
I was just.
The potential for a screaming deal to finance financial project for Cisco Gold royalties.
Yes look.
Good morning.
Look certainly even before and certainly after that that announcement. The team. There are this is combining can build us mind themselves.
Certainly capable of it.
In terms of and then they get massive.
Wealth of different ways, I think theres there as John has always been quite prolific from a funding perspective, yes, a lot of equity on a cash on the balance sheet. The number obviously will come into focus with the feasibility study later this year.
But he has a lot of opportunities in which you can go.
Short answer to your question is.
Certainly hope, so, but I'm not going to hold my breath, either I think theres a lot of potential for.
For John to fund that through the equity as more equity debt et cetera extreme comes into focus there.
Certainly we'll be eager it's pretty exceptional assets and certainly we trust the team. That's currently pushing it forward and so too.
Too early to tell I guess, Mike, but but no shortage of options for them as they move forward.
Okay. Thanks, I guess second question going to Kenya, MLR check on the Yamana call. They said there's potential for a second shaft on a project, possibly I guess to the east you can see it on your slide mineralization plunging to the east.
I was just wondering what you think of that.
Would be positive for your royalty.
<unk> production.
I like it.
This might be the only conversation I guess I missed it by that but.
Usually you mentioned that I mean look we.
What I was trying to guide to is just that this year we expect.
The ounces to grow significantly over the course of this year and last year. The focus was infill drilling there wasn't enough.
Extension drilling closely enough to add to those ounces, we think they'll complete that exercise when you think about the infill drilling it's going to unlock more of the <unk>.
Resources that currently arent in the mine plan and remember that only half of the current resources around the mine plan less than half now.
And then so that will add at the very least mine life. Then when you add in those extension about extension of work, especially from these Colby that will add ounces, we think in bunches of millions given the continuity there.
So I think yes every time, we heard at least one of the operators talked about it there is a comment that at some point youre going to stop just adding decades, the mine lives and sneak another job conceptually.
Put more through the mill that will only be at a third.
A third full so.
Yes, that's something we certainly look forward to if I had to guess I'd say.
This year is the resource growth year next year that gets put into a revised mine plan either way theyre success coming there, it's either coming in the form of material additions to mine life, but more likely than not it's coming in the form of additional ounces and when you think back.
What is it year and a half now maybe maybe not maybe even more.
Story was uncertainty as to whether the partnership with build the underground.
Then it was.
Is there a gap here or more.
The open pit and the underground that's now gone.
It has turned into a little bit of a dip I think if you fast forward a year again that <expletive> will turn into at least flat production, where the mine continues to produce at its current types of levels. So yes.
Yes short answer is I like.
Are you there.
Okay, and lastly, if I can put tush Sean to work.
Not only.
The conference call has happened already.
Just wondering Sean what do you envision for production from.
Caribou in San Antonio.
Thanks.
Sure Mike I'll jump in.
The profile right now is it.
<unk> two on the Caribou project is in production, we expect 20000 plus ounces this year.
The QR mill is up and running we have a bulk sample plan.
To go underground here.
Starting hearing that in Q2.
And then the transition now we're looking for the EIA approval and early works permits to come out probably by the end of 2022 for the larger Caribou project and we would start the portal and hopefully get underground account mountain.
And have some trend transitional material.
Going to the QR and continuing to optimize our ore sorter, but we'd be looking to have.
Concentrate are built out and wells by the 2024.
And set the table for at least the production up to 180000 ounces a year.
Coming out of that and as you know.
We increase that mill production from 4040 750 tons a day for that so we are setting the table for a larger project there Mike and that.
We continue to see that that evolving and certainly the work that we did in 2021 has encouraged us with 152000 meters drilled.
There and.
The project continues with strength in San Antonio.
We are in production right now with the stockpile of about 16000 ounces at 1 million tonne stockpile.
To recover in the short term and that would be the full permit quarter. This approach open said is underway and we hope to have that permit.
Available to us by the end of Q4 this year.
And we have a 15000 ton a day plant that we purchased earlier that's on site.
So we'll be looking to ramp that up for 10 to 15 $10 million to $25 million investment.
Depending on how aggressive we get in the early days.
So two small scale productions on the go there plus the <unk> asset hopefully, we'll close that up in this quarter.
Sorry in Q2.
And they are in production as we speak so we would have three small scale producers by the end of 2022 transitioning to much larger production through 2023 and 2024.
I think we've set the table pretty good for that one Mike.
Okay.
Thanks for Latam.
So both of you guys in the lobby bar next week, Thanks take care.
Alright. Thanks.
Thanks, Alex.
Look forward to.
Our next question comes from Puneet <unk> from <unk> capital markets. Please go ahead. Your line is open.
Anthony.
Hi, good morning.
At Renard, we're going to contribute again I see.
Last year, they sold about $1 8 million carats that the run rate for production on an annual basis, we should look forward to and also if I'm recalling correctly. Most of the production was coming from those higher grade or two or three area and then it would go lower grades later is that still the plan there or what's the latest update now.
That asset is doing better.
Yes look I think I would say.
Some variability as normal, but I think that that run rate that youre looking at for for 2021 probably about right.
Leased for the next next few years.
They were down I think it's around 600 foot level youre right as well as they get lower there the grades the grades will drop a little bit.
I don't have the numbers off the top of my head right now, but I think for the next several years, we've got kind of a mine plan that will be pretty steady thereafter.
I believe.
We'll see we'll see what the gold price.
Diamond price looks like.
And beside where to take the the development from there and there's also still some exploration upside there frankly, so I think for the first part of your question, yes, probably relatively steady.
The biggest change will frankly be the biggest variability will be how we turn those carried since the <unk> if you will.
But we've tried to be conservative.
And then thereafter, our primary focus is turning to stream back on which is job one and then.
With the cash they are building up right now they can start to look forward to the future. It's been obviously, a tougher them kind of living.
Hand to mouth for a little while for the last two years. So it will be nice for that team to have some.
More flexibility.
Okay and do you think they will do more larger scale exploration probably in the next couple of years.
It run for a little bit more cash and then go from there.
Yes look I think the idea is yes walk before you run, but I can tell you that even with the diamond prices that they were benefiting from before there has been are there currently is some exploration work going on so when you take when you zoom out a little bit.
The payback half the working cap facility last.
Yeah end of last year, they will probably pay back the rest of it this quarter and process. They have also been doing some not major but some exploration work in particular into the lower zones to firm up those grades and hopefully tighten up some of those grades. So so yes. They are doing a lot of good things and certainly the line is night and day from where it was.
When pre Covid.
Diamond prices hit a level, where averaging like $70 a carat hit some lows in the mid sixties. So.
What a difference a couple of years.
Yes, definitely it's glad to see it's going to contribute again, thanks Andy.
No problem. Thank you.
Our next question comes from Josh Wolfson from RBC Capital markets. Please go ahead. Your line is open.
Thank you very much.
Sandeep.
Question on the guidance.
For 2022, the numbers at least relative to our forecast for a bit better.
Part of Thats, Renard and diamond pricing.
And I was wondering.
What's the remainder components would be.
Manchester, presumably is a portion of that I'm. Just wondering if you could maybe reference what contribution year over year changes you would from Mentos given it is a ramp up year and then if there are other key assets.
That would be helpful for us thank you.
Sure Josh good morning.
Yes look I think.
A few things going on in 2022 versus 2021.
One to just take a step back to take a step lower before we talk higher.
As I said earlier, we've taken into account the guidance from Agnico and Yamana on Galactic, it's actually a touch below so.
On their numbers, we would expect.
About 335000, less geos in 2022 versus 2021 just the normal variability and mine sequencing of that mine.
So we got to get those ounces back first before we get to the growth. So it's a pretty impressive that we can have this guidance in front of you.
So yes look renard even from May onwards is it chunky contributor to that growth, which is great to have back.
Mentos you pointed out.
As we've kind of we haven't given an exact sign.
An exact science, so we haven't given an exact number but we're kind of guided to halfway.
Between that.
Current run rate and the 16000 ounces post expansion.
Of Geos, so that'll fall in between there's off Theres also the additions of San Antonio.
Santana enter matondo.
Which are small, but hopefully will work their way towards the 1000 ounce per year steady state contributions the stockpile from San Antonio will contribute the Eagle ramp up we think we'll conclude so theres a number of things many of which are kind of on existing assets, but then some new assets that are starting to contribute as well as some deal two ounces in there.
So that's generally the makeup of that of that difference and we feel pretty pretty excited about it.
Okay, and maybe specifically on San Antonio.
Is there any way you can kind of quantify what would be reflected within the guidance for that asset.
Well I think that's a bit.
Words in his mouth I mean, I think the stockpile is currently starting to percolate talked about first gold pour saw it in Q1 early Q2.
So we'll see what the ounces are there, it's not going to be a major contributor to us, but they will certainly be nice to get.
From that stockpile, Sean I don't know if you.
Obviously on what was the number I think it was kind of.
16000 going on stockpile.
Yes, I would say, it's 16000 ounces recoverable and that stockpile at present hopefully.
We will be able to get that done and then if we can get.
Get some early contribution from Pucci the main pit.
We've got an option to maybe put a little more on the pad but.
That's where we are right now until the until we have a permit on Gucci.
Yes, so it's a nice it's a nice contributor just stockpile alone and obviously the bigger milestone there is the permit and that will drive the timing of that will drive when Mr. Pucci houses can start to contribute.
Obviously, a lot of questions out there.
And then on the on the Tricksy.
Acquisition of stream funding.
There was a range that was provided.
<unk>, which I'm assuming.
With contingent on what the funding was it oh that would raise.
Oh that is funding having better visibility now is there any perspective you have on.
What <unk> contribution would be towards that stream.
Well look I won't.
But sean on the spot I think from our perspective, we were quite happy with as much as we can get but even on the lower bound I think it was a great result for us that <unk> was.
He was able to go out there and raise as much as they did.
We thought the asset once people started to understand it would would resonate.
Certainly happened a little bit quicker than I think any of us expected. So.
Regardless of where it is obviously youre right. There was more equity raised so it wouldnt be shocked to be on the lower end of that but regardless of where it is we're very happy to have that contribution to us, which we think will contribute for a lot of years once the the picture gets filled in.
And then obviously the bigger impact for us is on our equity ownership.
Which we're also quite pleased about so that will come into focus as the transaction gets closer to close.
But youre kind of thinking along the right lines I would suspect Josh.
Okay. Thank you very much.
No problem. Thank you, yes, just from my side I think any royalty on the property is going to be important.
Okay.
Our next melody and thank you.
Okay, operator or.
Our next question comes from Don Blyth from paradigm capital market. Please go ahead. Your line is open.
Hi, Sandeep.
Apologies if I ask something you covered I joined a few minutes late.
With the consolidation of <unk> into your results.
Currently obviously drags down the performance of the royalty business.
Now that this financing is diluted to under 50% will you be reviewing whether or not to consolidate.
B in your financials.
Hi, Don No we didn't in fact cover that so it's new ground.
Look I think well first things first we're not diluted today.
But just to point out we still own 75% of transactions are kind of closing we're leaning towards closing in late March maybe drifting into April but that order of magnitude.
And thereafter will be down as you pointed out the 45% level. So this is kind of what we had always said is we were going to let the market finance would be obviously quite happy to get on stream on the new acquisition Thats, our business model, but overall, let the market finance OTV and Shawn has been very prolific.
And as history, and certainly with will go down.
So with that we are miles kind of what will be miles ahead of where we were if you will.
75% it was tough to do.
Talk about that although we talk about it internally at 45% I think we're a lot closer I have been clear I think with everybody as well, but there is no bright line at 50.
So it sounds like there is no bright line of 50, northern or is there a bright line anywhere. So it's a combination of things we talk about with our.
Auditors and amongst ourselves but.
A lot closer.
I think that's something that we'll continue to talk about internally.
And when when the right time is we'll come back and tell you, but certainly we know that Thats a hiccup.
To say the least it does quite a bit of noise at the end of the day, we've done our best to segment that information, but I fully realized on that until we can we can cut that tether.
Financials perspective, it's going to be an issue and certainly you can expect that all of us on the <unk>.
That slide are are cognizant motivated about it.
Okay excellent.
That's definitely been.
Doing what you said youre going to do in terms of.
Let me know.
Finance itself become a become a separate entity so definitely good good good to see that.
Heading in the right direction. Thanks.
But maybe.
Thank you for the color on that one guys.
The financings that are underway closed plus the cash on the equity book.
It should be sitting at about $320 million plus.
Between the proceeds of the financing cash on hand in the equity book.
And my goal Don now will be to turn <unk> into a dividend paying company.
So hopefully we can that we can turn that viewpoint around over the short term to near term.
Excellent.
The equity could be.
Ah you're important.
For sure.
Yeah.
Thanks, a lot.
Our next question comes from Trevor Turnbull from Scotiabank. Please go ahead. Your line is open.
Yeah.
Hi, sorry about that.
Want to ask about one of the projects in the five year guidance and one that isn't.
The first is back 40.
I could probably dig into it but I haven't had a chance to see what gold resource Corp has been saying, but are they pretty confident I guess that they will be up and running within that five year window or maybe just give us some color sandeep on.
Why youre, putting it in the five year window, what why do you feel confident in that project.
Yes happy to Trevor.
And good morning, I'd say look that is obviously one that.
That is going to be a bit trickier, but we think we've built enough conservatism there on the permitting and that's the that's the that's the major item there.
Gold resource.
Ourselves and see the asset in the same way and we're very happy to see them come in as a partner as our new partner last year.
They've got a very similar asset in Mexico that Theyre currently mining they want this to be their growth asset for.
For a longer life kind of.
Veeva is what Theyre currently mining was out in the market cap cash access to capital to build it. So that's why we felt comfortable that they are the right group to do this with.
Clearly the permit is the hurdle there is a feasibility study that is on track for this year.
And that will form the basis to go through that permitting exchange again, obviously there were setbacks in 2021, frankly with the plan that we always disagreed with but ultimately it has to be run to ground with a larger open pit and a smaller underground.
The view was they were too far down the track to change.
That's why it pencils have racers, so we're happy with the new track.
Smaller open pit less underground no need for a wetlands permit which is where they got bogged down last time.
And with that in place, we think we have added enough buffer.
They can certainly build it within that timeframe. So that'll be one that you can continue to test us on.
Permit picture unfolds over the course of the next year.
But but we felt it was especially given that it's earmarked to salt Lake we didn't highlight it.
And all of US I think we'll be tracking that progress over the coming year 18 months.
Yes, it certainly helps that.
Sidestepping the wetland issue if they can.
My other question was really with Selco and the Horne five.
That's potentially a very material project when it does come to fruition and just wondered if you could maybe talk or maybe Sean can talk a little bit about some of the kind of next steps and what we're really watching for to.
Better about with not putting a pin on the timeline on that.
Yeah, No cover I mean, it's a good point that I think frankly, both Horne five and five point, which are assets that we quite like in our group of family and our and our group of companies.
We put them out for the time being.
With respect to warrant five specifically and this is kind of what I said earlier is including in our family of companies and others. When there was permitting risks we tried to account for and obviously all of these assets in the development space, how permitting timelines, we tried to factor those in but what we didn't want to do is overlay.
Permitting risk with financing risk so that's.
That's kind of what I was getting to you whether it's back 40.
Whether it's Cisco development I'll SK as those chunky assets move forward, we see the line of sight to how financing comes comes together when there is companies that have a financing.
Hurdle, that's a multiple of their market caps, we didn't think it.
It was reasonable for us the fact that the man until that until there's more clarity. So we do have and that optionality category of companies that are guiding production within the next five years and certainly we hope they will.
But we wanted to wait.
Until we have that visibility before putting out.
Inaugural guidance or not guidance, but outlook on that on that five year basis, So that would that would fall into that category.
Final point would be another theres there are several frankly so.
As there is more clarity, we're happy we will be very happy to shift those ounces.
But we just felt we should wait specifically with your question on progress at one five.
Look I think they are making meaningful progress.
Certainly on one of their two issues, which is the governing relationship with them and Glencore, who have the smelter on surface.
They're working through what they call on Oems, which has an operating license.
Forget the eye, but agreement.
And in there we've made progress on that but it's a pretty intensive documents. So its gone from term sheet to final documentation, taking a little bit longer but thats, one key hurdle and I think everyone is driving towards the same goal. There. So eventually that will get cleared.
And then they will.
Move forward to looking to crack the financing not but frankly 9 million ounces of gold equivalent.
It is important in Quebec, it's important it's even more so important for important and Youre right.
Some key contributor to us again to have such a chunky contributor whether it's them or casino 25000 ounce year contributors assets that I believe deserves to be built it's just a question of when so when you have those types of things in your back pocket meeting only won one of them to work and we have a list of them.
Pretty enviable position to be in.
No I can appreciate that and I.
I guess.
You kind of touched on what I was getting at with with Horn and that is you still felt goes at the table trying to kind of hammer out.
Final arrangements with Glencore.
I know, it's always hard to talk for other companies, but do you have a sense of is this something that the glencore seems focused on or do you feel like this processes at all back partnered by them or how would you characterize that.
Their intentions Lawrence warrant at this point.
I think it is the former like this is important to be.
Health and future.
Important asset for them.
The horn smelter.
Which is what leads to delays in long timelines, but it also I think leads to an ultimate positive result, and even in my.
My limited interactions there.
I would tell you that I do believe they are focused on it and it is important to them same token. It's a very large organization and they have a lot of other things to do.
Many many and most of them take precedent, but I would say despite that I've been very pleasantly surprised as to how much effort goes into this file.
And I would assure you that it is important for them and for trust.
Well, good yes, better to get it right than to be rushed on it I appreciate it thanks for that obligation.
Problems. However, it is a pretty complicated piece of business and Youre right.
Want to do it right the first time.
Great. Thank you.
We have no further questions in queue I'd like to turn the call back over to the presenters for any closing remarks.
Well, thank you operator, and thanks for taken an hour with us on again, what is a pretty busy day, but.
But a great kind of day for us the great kind of phase for US one way or there is an important amount of growth in the company at some of the best development assets in the business.
Whether it's a growth on our core existing mines, where growth from the development pipeline I think the cash flow generation and the diversification that will come with it. This company is going to be pretty special over the course of the.
This decade and every year in between so thanks for your time and.
Be well.
Thank you operator.
This concludes today's conference call you may now disconnect.
[music].
Yes.
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The House has ended this call goodbye.
A question.