Q1 2022 Osisko Gold Royalties Ltd Earnings Call
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Good morning, ladies and gentlemen, and welcome to D O Cisco Gold royalties Q1, 2022 results conference call. After the presentation, we will conduct a question and answer session. If you'd 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 May 12, 222 at eight a M eastern time.
Today on the call we have Mr. Sandeep Singh, President and Chief Executive Officer, and Mr. Rubin, Chief Financial Officer, and Vice President Finance.
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Thanks, very much operator, and good morning, everybody, thanks for being with us on.
On a busy day and busy week. So appreciate your time.
We'll go through a short presentation, Fred and I and then we'll open it up for questions.
Note that I'll be referring to a presentation. That's now on the website.
Jumping in.
On slide three just in terms of highlights for the quarter, we'd obviously pre released our Geos at 18 point to 5000 for the quarter are without that comes a lot of information given our business model, but I'm happy to fill in the gaps for you the rest of it this morning that excludes.
Geos from the Renard stream as you've probably got used to us doing that.
Last a significant period of time I'm happy to report that that's hopefully that's the last thing we have to say that with the Renard stream, having been reactivated over the course of the quarter as we have previously guided.
That's a very important step for us a combination of the mind doing better the dining markets having recovered.
So that's very good news for US not only is the stream then reactivate it but the last half of the working cap facility.
There's also been repaid to us and the other.
Their lenders to our account that was $3 94 million Canadian to.
So happy with the progress there.
Revenues from royalties and streaming segment of just over 50 million in operating cash flows as well just over 40 million. So we continue to benefit from our business model.
With the highest cash margins.
Our history last quarter.
Obviously based on the gold price having been quite strong.
The margin of 94% again continues to track exactly towards our guidance.
<unk> earnings are again from that segment of 15 cents per share and over the course of the quarter. We completed a bought deal financing that you're all well aware of.
Finding those things is always challenging obviously, we were busy on the corporate development side on the new acquisition side in Q1.
And that's largely what that funding is meant to do to go towards a always a challenge timing planning those types of things, but certainly happy in the current market with the volatility that we're seeing that the balance sheet has been strengthened as a result.
We also.
Paid our dividend of five five cents on March 31.
We announced this morning the same.
For July .
July 15 for the quarter ending June 30.
In terms of those transactions in Q1, obviously can't thicken CSA is what I was referring to there'll be a couple of slides later on where I can update you on the timing.
For both of those deals but.
Simply put still tracking towards end of Q2 for 10 days and we've said second half for CSA, certainly hopeful that that would be in the in the third quarter.
In terms of things subsequent to Q1, we did as opposed to sitting on the cash wait.
Waiting to make those payments, we did choose to repay the amounts outstanding on our revolver.
As opposed to paying those old interest payment.
The Renard stream has been reactivated as I pointed out and we published our second ESG report, which we're quite proud of the progress on that side as well as our inaugural asset Handbook, So trying to catch up on the disclosure side of what is a very.
Our asset base.
Important things that we're doing on the ESG side as well.
If you skip to slide four slide four some version of a slide you've seen from US very very you know very many times I believe most people on this call note the strength of our portfolio when it comes to the asset quality. The geographic focus the precious metals focus and the quality of the partners that were involved with but it's always worth.
Highlighting I think overall when you take a look at market that we're in.
At the transactions that are being done.
You look back at this portfolio you understand the replacement value of it the embedded growth within it that is all kind of taking shape as we speak.
On slide five.
That thesis.
Referring to continues to strengthen overall I think it's fair to say that Q1 was a little bit lighter than we expected that is baked into our guidance settlement. So.
We're flying from that perspective would you expect a strong a strengthening and a year a quarter by quarter. It's certainly a very strong second half.
The reason for that in Q1 was obviously I think fairly well known as the seasonality at Eagle.
Which we had talked about the tie in of the expansion that manto. So essentially kind of taking your foot off the gas a little bit before you step on it again and other ramp ups at a couple of assets. So thats the rationale behind.
A steepening curve of Geos, if you will over the course of the year, but I think it's also fair to say that if you're looking at the whole sector. If youre watching the reporting over the course of Q1.
I think the sector as a whole.
<unk>.
A little bit of a pullback in Q1.
For a variety of reasons labor Covid.
Since he has a supply any supply chain issues, so I think that.
Yes.
Pretty fair statement pretty broadly.
For us the good news is it's just a shift from one quarter to the other we don't get the cost impacts as our operating partners do you have the operating expertise.
Certainly I think that inflation protection and that business model of protection that we offer is proving itself out given the volatility that we're seeing out there in some of the reporting.
Over to slide six I've mentioned earlier, we do expect a strong second half of the year.
Turning to 'twenty, two and then over the long term I would say that our growth assets continue to steadily advance.
Towards these production of these projections so.
This is an important slide for us we put out as you all know our inaugural five year outlook in February .
And.
Try it too.
Try to put a focus for the market what is pretty deep portfolio a lot of moving pieces to it some that are better known than others, but when you take a look back and you look at 10% or double digit CAGR growth over the next five years and then you look at some of the assets that are in this arrow that aren't factored into that five year outlook.
Undergoing pre material catalyst as well.
The timeline is a little bit more opaque right now, but we certainly expect the visibility of row five years is a long time, so when you take that altogether.
Carnival amount of organic growth and to it when we can and you can do things like Tinsley can PSA we're happy to add external growth to that this is what's going to be feeling the company for the rest of this decade.
On top of what's already in there and factor in terms of those assets those assets continued to strengthen as you'll see on slide seven.
We've been talking about a 1 million meters drilled on our properties for the last four years in 2021 that was one 4 million meters.
Despite a period, where I think everyone is scrambling to access rigs are grounds. Our partners have always been putting good work in and that work has only intensified last year and we see that continuing on into this year.
And then even more importantly, the work is paying off and you see that on the right hand slide here, it's a new graphic we've added into our asset Handbook.
Yes.
Excuse me over the last couple of months.
And we've had increases on attributable ounces are worth pointing out that these are kind of apples to apples.
When we royalties are easy even when we have screens, we deduct the transfer prices. So that we can compare that to kind of have an MSR what basis. If you will.
So growth in reserves growth in NOI growth.
Across all categories.
Categories.
And these are a week, we can sum. These up you certainly can if you want to but these are ounces that don't have any extraction costs associated with them for us. So we expect that to continue and that free upside that we're benefiting from across our entire portfolio to only intensify.
Onto slide eight and nine as I mentioned those two transactions really nothing changed on both just waiting for both two to complete both were slightly more complicated transactions than the average so hence longer time periods can take was the acquisition by <unk>.
Two private companies.
So a lot of kind of paperwork, but my understanding is thats quite well, there's a lot moving pieces to those transactions the acquisitions at NYSE listing for EV and the financing closings, but thats all tracking well.
Were being completed by the second half sorry in the second quarter.
And we look forward to adding those those assets to our portfolio in the second half of the year, we'll find out here in the near term where within that range of $20 million to $40 million.
D V chooses to right size that screen and on the TSA side slightly longer because of a destocking process that metals acquisition work needs to go through so they are working methodically to that process.
But I don't recall, if we've had a chance to talk to everybody about this transaction. This was another one.
Typically we're very pleased with that came through our network. This is another one that we got outside of participating in a process of and paying the most of this came through.
The relationships that we had in funding the acquirer.
We're quite happy to be associated with and has hit all of our criteria in terms of production now.
The graph geography.
Upside potential long life getting longer throughput upside potential so really hit all of our criteria and we'll be very happy when when metals acquisition Corp to complete that transaction on the silver side and then there's also still a potential that we have a they may a tap on the shoulder for southern copper exposure as well.
So thats a bit of a high level update ill pass it onto Frac to give you a little bit more color on the quarter itself and then between the two of US happy to answer any questions you might have.
Thank you Sandeep <unk> was one of the items I think represent a somewhat normal. This is Doug let me finish the Midland.
Good morning, everyone. Thank you for joining us today and as you can see on page 10 of the presentation. We recorded revenues of $60 7 million this quarter from royalties and streams compared to 49 million in Q1 of 2021.
Cash flows from operating activities was $23 6 million on a consolidated basis.
The royalties and streams segment alone cash flows from operations reached $40 5 million compared to $37 million in Q1 of last year.
On page 11, we present, a summary of our net earnings and adjusted earnings the consolidated net earnings to a Cisco shareholders was $200000 compared to net earnings of $10 6 million or <unk> <unk> per share in Q1 2021.
The lower consolidated net earnings was mostly due to mining operating expenses incurred by our Cisco development in Q1 2026.
On a consolidated basis adjusted earnings were $2 2 million or one cents per share comprised of adjusted earnings up $24 8 million or <unk> 15 per share for from the royalties and streams segment.
And an adjusted loss of $22 7 million from our Cisco <unk> or <unk> 14 per share.
On page 12, we have a summary of our quarterly results with additional details for the royalties and streams segments include.
Including as Sandeep noted 18251, Geos in Q1 gross profit of $36 2 million compared to $34 6 million last year and operating cash flows up $40 5 million that were generated in Q1 from our royalty and streaming business from a rec.
Quarterly cash margin of $47 5 million.
If we go on page 13, we present, a breakdown of our cash margin D cash margin on our royalties reach a $35 million and the cash margin on our streams amounted to $12 6 million for as I said, a quarterly record of 75.
$747 5 million.
On page 14.
So the progression of the dividends paid to our shareholders since the creation of a Cisco gold royalties.
At the end of Q1 over $194 million has been returned to our shareholders via dividends. In addition to $86 million that was used to repurchase a total of $6 7 million shares under our in CIB program.
And finally on page 15, you will find a summary of our financial position our consolidated cash balance was $449 million at the end of Q1 <unk>.
Including $293 million for Cisco gold royalties and $57 million for Cisco did love them.
Cisco gold royalties ELD investments, adding a value of $250 million at the end of March in addition to our investment in our Cisco development, which was valued at over $500 million. Our depth was stable at $407 million at the end of Q1 in April we have repaid the outstanding balance under our credit facility.
As of today, we have $650 million available under our credit facility, including the accordion of $100 million.
We have also acquired in Q1 250000 shares under our CIP program for a $4 9 million.
So we have continued to benefit from strong commodity prices in Q1, which allowed us to generate once again strong cash margins and operating cash flows from our royalty and stream interests.
I will now turn the call back to Sandy for questions.
Yeah, operator feel free to open line system.
Thank you as a reminder, if you'd like to ask a question press star followed by the number one on your telephone keypad.
Your first question comes from Trevor Turnbull from Scotiabank. Please go ahead.
Yes, Hi, Sandeep.
I guess my first question was about the CSA transaction, you mentioned the potential timing of closing of that deal. Later this year I just wondered if you had a sense of when you might know if metals acquisition Corp would make a decision as to whether or not they would take advantage of that additional copper stream.
Yes. Good morning, Trevor look I think that will come into focus in the nearer term obviously each of these factors theres hoops, you need to jump through.
But the intent of that was always.
It's that copper stream and it needs to be mutually agreeable agreeable to us and to them the silver partly binding the copper was not.
But we expect.
Middle of May we expect kind of.
I'd say over the next several weeks.
And we're months Theyre funding package to come into focus they have to then obviously you've described that in their disclosure documents to go through the Destocking process. So I would say over that time period.
And they should know if that's something they want to avail themselves of and if it's something we want to pursue.
Roughly I think Thats a fair timeline.
Okay. Thank you.
And then the other question I had is strategic and related to sandstorm and nomads merger.
Consolidated consolidation clearly makes sense for sandstorm in its strategy and we've seen other smaller royalty companies feel consolidation also makes sense for them.
Given your organic growth and the opportunities in your pipeline.
It seems.
That it doesn't make sense to really think much about consolidation for Cisco right now, but is there a scenario down the road, where you think that might be part of of your toolkit going forward.
Yes.
So a lot there chuckle boots or I'll try to answer it.
I would say look I don't disagree with your conclusion look let's put it that way I would say our prime focus and you've heard me say this over and over again is to unlock the value of our current portfolio is incredibly valuable and it's not trading where we wanted to or anywhere close to that.
That's job one.
We've said.
I think we've all said for Ipos there were a lot of companies created.
For 2020, 2021 or part of 2021 and the royalty sector. We didn't think there was enough, especially on the smaller early stage side.
For those companies didn't necessarily.
Thrive.
So I think some consolidation is warranted and we've been happy to kind of watch it with interest given that we're in the sector, but nothing more.
So I think I think that's normal healthy and in the royalty sector. In particular, you know there's no such thing as a mass thing too many royalties and streams, it's not like an operating company that eventually becomes too big So you can certainly pile up royalty checks. So I think all of that makes sense.
We'll stay focused on our business overall, when we just think about growth.
And if I could zoom out a little bit Trevor will grow when it makes sense for us.
Again, you heard me for 18 months say that we didn't find we didn't like the look and feel of transactions out. There. So we we took a hiatus that we focused on our own assets.
And then over the course of Q1 with 10 thick and TSA. We found transactions that we we got off the beaten path. If you will and we got good deals on and we acted on them. So that's how we will continue to conduct ourselves in I think.
Organic growth that we have that's that you highlighted that's pretty special.
On top of.
Trying to do things like Fintech and PSA when we see them it makes for a pretty important and pretty special.
Pipeline.
Great. Thank you very much that's all I.
Yes.
Again, if you'd like to ask a question press star followed by the number one on your telephone keypad.
And there are no further question at this time I will turn the call back over to the presenters for closing remarks.
Okay. Thank you operator, and thanks for taking the time, thanks for taking it easier on us unusual because my voices.
Not in the best shape today, but.
Look we're always available if there are follow up questions I do realize it's a busy week there is a lot.
You folks are catching up on so if you need anything else from us, we're always available but otherwise.
That up by saying a pretty standard quarter for us.
And looking forward to the ounces starting to pile up very happy to have solved one of our problem children assets in Renard.
Work on the other.
Diligently so I think there is a lot of good things happening in the portfolio and we certainly look forward to closing those deals as well that we've announced hopefully by the time, we next week.
All the best and have a great rest of your meeting thank.
Thank you Ofer.
This concludes today's conference call you may now disconnect.
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Yes.
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A question.