Q3 2022 Osisko Gold Royalties Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the call.
Royalties Q3, 'twenty results conference call.
After the presentation, we will conduct a question and answer session.
If you'd like to ask a question. Please press.
So the number one on your telephone keypad.
Note that this call is being recorded today November 10, 222 at 10 am Eastern time.
Today on the call we have Mr. Sandeep Singh, President and Chief Executive Officer and Mr. <unk>.
Chief Financial Officer, and Vice President Finance.
Now I'd like to turn the meeting over to your host for todays call. Mr. Sandeep thing.
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Sandeep Singh please about that your next bill.
Shifting to today's call.
Yes. It is.
No no.
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Sandeep Singh.
Okay.
Thank you operator, and good morning, everyone and thanks for joining us.
I know, it's a busy busy period, obviously made busier theres a transaction in the market today as well as a CPI print, which was fractionally lower than what was expected. That's it's pretty amazing what qualifies as a good news, but we will we will take it as there certainly seems to be more glimmers in sparks.
And positivity and are in the gold market.
Happy to be talking to you. This morning also talking to you at a time when we're continuing the simplification of our business quite significantly and we will go through that hopefully you've already seen that in the quarter that youre looking at.
I am gonna be pointing to some slides not doing a page slip are pointing to some slides that are on our deck. So please if you haven't already you can go pick up the Q3 results deck on our website I think.
To finish off the preamble maybe.
Our business as I said in our.
Our press release, our business has never really been stronger it's doing exactly what it's meant to be doing is providing inflation protected gold exposure of our assets are big they're getting bigger they're long life, they're getting longer there and fantastic jurisdictions that we're partnered with some of the best in class, we're doing exceptional things on.
Our collective behalf so.
The portfolio is doing well the growth assets are moving forward in the meantime, we continue to make records, we continue to return capital to shareholders.
And we continue to invest in our future and all the while simplifying.
Simplifying the company, which is what we've said all along is Theres two things that you've heard me say over and over and over again over the last three years, it's been discipline and simplification and hopefully you're seeing that in.
In our kind of progress over that time.
So on a on the deck I will just jump straight to slide four in terms of the the Q4, Oh, sorry, the Q3 results forgive me and very happy.
As a non accountants to be talking to you about that [laughter] deconsolidation, our financial results for the first time. This is something we pointed to you that we would get to them. It was just a byproduct of the spin out about depth that we have to kind of turn our way through and with the reduction in our share ownership over the course of the year as well as.
Other fine tuning of our investment right.
Happy to kind of draw that line on September 30th and show you a set of financials for Q3, which are significantly cleaner Frederic.
Fred real our CFO will help you interpret them a little bit later on but hopefully hopefully.
Yep.
Fairly self explanatory.
I'm happy to have that accounting noise behind us you've already seen and.
And I think with many of you have already talked about the high level numbers for the quarter again, it was a successive quarter of records on all fronts.
Terms of Geos delivered to us revenues cash margins revenues and cash margins, despite gold and silver prices being down quite significantly over the quarter.
Versus Q2 and records on Geos, despite the gold silver ratio not really working in our favor either with the same silver ounces.
Converting into fewer G. O is at the time that that's kind of since resolved itself. So happy to have that.
That be the case in Q3, especially as some of our core assets continue to grow.
Hit their stride hopefully in Q4 and beyond so.
Good place to be that has resulted.
Adjusted earnings for the quarter.
Slide $26 million of 14 cents, a share and again as I mentioned there'll be a friend will walk you through the numbers a little bit more closely later in the deck.
We've been active we've.
We've been perhaps more active than you've seen us I think we were.
In a minority at least in terms of saying that our 2020 and 21, we didn't like.
The look of a lot of the deal so that was out there and we're gonna be disciplined and we're going to let our organic.
Growth play out and pick our spots and now I think we certainly have been talking about a better pipeline that we like are not an infinite one but a finite quote pipeline that is better.
And we've started to pick away the 1% or an assault on Meramec are a very nice addition to the portfolio team, we quite like a large prospective land package I'll talk to you about it a little bit later.
And then more recently the.
Solar will transaction.
And then if SAR on a truly world class.
Copper gold porphyry that that term world class gets thrown around quite a bit in our sector, but I think this is one of the few that actually qualifies on and we're pleased to be partnering with that team, but we know we know extremely well.
We also closed there was a little bit long in the tooth.
So it's not as recent but we did close the the tintack deal to tip. The extreme I'm very happy to see that toward a lot of thought that land package that high grade starter. If you will are starting to take shape.
So that's just a bit of the high level.
On slide five you've got a breakdown of the geos by asset will pick on some of these are individually as we move forward.
Starting with Canadian Arctic on six.
In terms of our flagship asset frankly couldn't be more pleased with the turn of events that are happening.
Both acne go and your bad I have been doing exceptional work here to unlock value grow the girl of the deposits are the catalysts that they've been talking about and the catalysts that we see in front of us are tremendous and then more recently.
Can be happier to see the assets are.
In all likelihood getting consolidated under Nico.
Is the group that knows you know that part of the world best in and in the Abitibi.
<unk> has a number of operations and we fully expect that under kind of 100% banner. They can unlock even more value is certainly what they've already indicated without being able to talk about the transaction all that much but certainly our sense is there is that there's more upside for us.
Yeah.
You know as we talk about the go forward for the asset over the next maybe a several months three to six months. Yeah. If you just follow the disclosure from the operators East Goldie is growing in leaps and bounds, we already knew that it was growing to the to the east down plunge.
With significant hits, a kilometer plus away its now growing in the other direction.
And kind of be internal zones.
And currently based on the drilling seems to have an extent a strike length of about four kilometers only a kilometer and a half of which is in the current resource.
And as well our recent commerce commentary from the operator suggests that a large component of the inferred resources up I'm looking at slide seven will migrate into indicated as early as year end. So.
Infill drilling it's gone well.
With grades have exceeded what the resource suggested we expect the ounces to grow significantly we expect the conversion about this to happen quickly and we certainly look forward to Acme go having the asset 100% and they're in their company to unlock further value.
Jumping to slide eight maybe picking up on Mentos and Eagle there.
I'm quite happy with with the progress at Mentos Ah, it's going in and definitely the right direction in Q3, they did average lower throughput frankly, probably lower than Q2, or maybe akin to it I would ask geography, a little bit lower.
They are in the 14000 ton per day.
Range, seven 3 million tons would be 20000 tonnes per day are on the full steady state that was due to some unplanned and planned downtime activities or events I should say in October though the mill operated.
Much right at that if not higher than that 20000 tonne per day level. So that bodes well, they're also talking about the wrap up kind of being complete by year end. So our Q3, we didn't see that uplift that we're expecting again that bodes well that we were able to have a record year of sorry, a record quarter without manto is hitting its full stride.
And we look forward to that.
More of that in Q4, and and all of that in 2023.
Similarly for Eagle again that record didn't have as much additional contribution from eagle as they're still working their way up to our nameplate, making methodical progress obviously, the conveyor belt failure.
Or setback in Q3 was a was not ideal, but they've resolved it and they're working their way up so those ounces for us whether they flow one quarter. The next doesn't obviously you have as much impact as for the operator, but we're certainly happy to see.
Some continued progress on both of those which are core assets for us.
And on the Eagle side.
Whilst that that progress is being made on the operational side, a really nice catalyst on the upside side of things with rave and coming in at a maiden resource of just over 1 million ounces at 1.7 grams about three grabs right about two to three times the great of.
Eagle <unk>.
Early days early days in terms of ounce count. We believe are in early days in terms of seeing.
How that flows into an eventual.
Scenario, a binding scenario, but that's certainly encouraging that they're now being able to get to some of the exploration upside that we always thought was on that very large land package.
I'll jump ahead, and certainly we can come back to any and all of the assets are perhaps in the Q&A portion.
But jumping to slide 11.
Again, you've seen this from US before we have a significant amount of production now our core assets are going to unlock even more production from us for us our producing assets are going to unlock even more production for us in 'twenty 'twenty three and beyond.
And to that we'll be adding some pretty chunky contributors.
That are moving forward at a at a pretty good rates that are well funded well backed in this market even more.
In our gold market that wasn't as conducive until this past week or so moving forward.
And then the Optionality category some of the best things in the sector, we believe that matter and adding things like cascabel.
And matter of market too that I think are only strengthening our arlo wire longevity.
Maybe let's jump to slide 13 in terms of some of those recent transactions.
Touched on a couple we didn't talk about CSA at the onset. That's one that is kind of nearing hopefully the finish line. Obviously a lot has happened to the copper market since that deal was announced but we were backing it not only an asset but a team.
And and and have a lot of confidence that that team can can.
Get things done on this transaction.
So looking forward to to them finalizing their financing plans, obviously, a little bit of that is market dependent or more than a little bit of that is market dependent but again, it's a strong team and by all accounts they seem to be getting closer and closer to some positivity on that transaction. So that'll be good 10 thick, we already touched on a number of times.
But having the team sink their teeth into that high grade Ultra high grade deposit and start to see how it's growing.
<unk> is positive.
On the Meramec, we touched on it a little bit earlier as well.
Really really nice addition, simple ticks all the boxes, it's a large very prospective land package, even since we've acquired the MSR. The resource has grown nearly two acts of.
Obviously to diligence we knew that that was that was coming and we paid for a little bit of that but we're really happy with the growth not only in resources, but also the expectation that there's perhaps a larger production scenario, there, which again we were privy to.
And so as the market so good additions to the portfolio things that matter and things that get built.
And are you now or things that operate regardless of the commodity cycles, just really good assets to have in the fray.
And two that are on slide 14, where over the next few slides.
We think the addition of the sole Golden S. R is tremendous.
It's it is a phenomenal generational asset I think it's a win win for us in the company. There obviously, we're running low from a treasury perspective, but but happy to step in there and support them. It's a team that I have known since 2016 2015, when they made the discovery.
Nick may either as the founder and the cornerstone team.
Led by Brooke Mcdonald's, so happy to find a way to to reinsert ourselves or insert myself into that story and to support it.
They've done a tremendous job finding as I said, something that's world class and we still think that there's potential for them to find the considerably more.
As you maybe skip to slide 15.
Might've said that it is it is a generational asset it's a big company asset I believe there have been something like nine or 10 separate investments by BHP in Newcrest tallying up to about U S $250 million and got them to their current 13, 5% ownership in.
And the company are the merger still sorry, the merger with cornerstone.
Ah is a very logical step in our in the progress of <unk> of that asset.
And huge upside you know when we looked at it obviously when the PFS. The PFS that's out there only uses the reserves that's 20% of the time, that's the high grade core of the asset it's amazingly shockingly continuous that high grade core, but that still leaves over 2 billion tons of additional.
Mineralization that once the Capex is spent and paid for we think has a part to play in this story as well as tremendous exploration upside on that.
On that large land package.
Nick and his team were first movers in country.
The cornerstone.
Folks as well and they've locked up a lot of tremendous ground. So.
So we were happy to to associate ourselves with the with that asset.
Yeah.
I won't go through the Optionality assets I think you you know them from US on 17 18, I think on 19, you've seen this from us as well the free upside in our story, that's continuing to unfold is tremendous.
I don't know anybody else that can that can say they had circa half a billion dollars of work done on their ground in one year alone that.
That other people paid for so 25% of our market cap roughly at that point in time.
And that's the effort the outcome on the right hand side of the slide has been also tremendous and we look forward to that continuing with we know already additional ounces that raven.
We know we certainly expect based on the commentary from from Agnico and team that the ounces will grow at a Apple Arctic we don't know what all of that will look like in totality over our portfolio, but we certainly expect the level of work and intensity that our partners are putting into their core assets that we share with them to continue to be high.
And for our shareholders to benefit from that quite significantly.
So that's a that's just the I guess 20 minute updates of our of the portfolio and I will pass it on to Fred who is the I guess the star of the show the the accounting is the star of the show today with a much more simpler offering so it's a thread I pass it over to you to to finish up.
Thank you Sydney.
Those will have to respond to smell seed was weighing that had to do some ethane collapses on tests on the lizard touch it wasn't meant to be Miss that good morning, everyone. Thank you for joining us today. So we are very pleased to finally presents you with the simpler set of financial statements.
The deconsolidation of our Cisco development.
As of September 30th the entire financial statements now present the assets.
<unk> of operations and cash flows of the royalty and streaming business with a single line item in the statements of earnings and cash flows representing the natural result of our Cisco developments for the periods being.
Being to discontinued operations. The comparative results have also been restated to reflect the deconsolidation will have a similar set of financial statements at year end, but starting October 1st at these discontinued operations will only be presented for the comparative figures.
As it states contact us if you have any questions about our simpler financial statements and will be happy to guide you to them.
If we start with page 21 of the presentation. So we we recorded revenues of $53 7 million this quarter compared to $51 5 million in Q2, and 50 million in Q3 of last year. This translated into cash flows from operations of $51 1 million, which.
Compared to 44 million in Q3 of last year, a 16% increase.
On page 22, and net earnings from continuing operations.
Which as I said, we presented the royalty and streaming business. We're in 28 million or 15 cents per share compared to 23 million or also <unk> 15 cents per share in Q3 of last year. Adjusted earnings were 20, almost 26 million or 14 cents per share compared to a 23 million last year.
Or 14 cents per share as well.
On page 23, you have a summary of our quarterly results, including our 23850 G O as in Q3 of this year compared to 20000 Geos in Q3 of 2021, a gross profit of 35 million compared to just.
Just below $34 million in 2021 and strong cash flows from operations of 51 5 million this year and for you our year to date outlet and $26 5 million.
On page 24, we present the breakdown of our cash margin.
Cash margin for our royalties reached $34 4 million.
Cash margin for from our streams.
It was $15 3 million for a quarterly record of $49 3 million or <unk>, 92% year to date, the total cash margin reached $145 million.
On page 25 that we show the progression of the dividends that we have paid two additional orders since the creation of the company. Our current yield is approximately one point to one 4% and 215 million and then returned to our shareholders. In addition to over $100 million used to repay.
<unk> a total of eight point.
1 million shares under our <unk> programs.
And finally on page 26.
You'll find a summary of our financial position our cash balance at the end of Q3 was a $200 million, we out investments, having a value of traveling and $88 million, including our investments in our Cisco development valued at over 200 million our debts stood at 200 million. We currently have 715.
Available under our credit facility, including the accordion of 200 million that was increased.
September we've also acquired a total of one 3 million shares in the quarter for $16 5 million for an average acquisition price of $12.77.
So in summary, we've had record deliveries.
<unk> three as Sandeep mentioned, which allowed us to generate strong cash margins and record operating cash flows and we expect the next quarters.
And you went that direction.
I will now turn the call back to Sandeep <unk> for questions.
Or yes over over to you operator, thanks Brett.
Thank you ladies and gentlemen, we will now begin the question and answer session should you ask a question. Please press star followed by the.
Number one on your telephone keypad.
Your question. Please press the star followed by the two.
Two.
Using a speaker phone please lift he heads.
Pressing any keys.
Please for your first question.
Your first question comes from Trevor Turnbull from Scotiabank. Please go ahead.
Yeah. Thanks.
For taking the question and congratulations on the so called deal.
It appears to have been a good one judging by some of the comments from their shareholders.
I wanted to ask about a couple of the assets that are expected to start contributing soon.
I was wondering how quickly do you expect deliveries to ramp up from CSA co bar in Australia, and then I just wanted to know if you had any update on when we might want to factor in San Antonio.
Sure morning, Trevor so.
Yeah look I think that was a win win for both we're certainly happy to step in and obviously the treasury. It's all gold was was running down that overhang was a problem. So we were happy to step in there and.
Just like that that company and that asset.
You know as I said, it's one that we know quite well if we'd looked at it we watched it for.
For a long time developed.
And to be quite honest I think in the last few years. It was probably one of the few that I felt like we might have missed.
As we were internally focused in 2020 kind of cleaning ourselves up a little bit, but certainly happy to rectify that situation on.
On CSA look I think Trevor it's as I've said, a number of times, it's contingent on them on back on the stack concluding that transaction.
The world is different the copperweld is different now than it was in March although they've been buffered a little bit on that by by the Aussie dollar.
But we really like that asset I know, we've got a motivated buyer and a motivated seller.
So it's a function of them.
Advancing a pretty complicated transaction with senior lenders mezzanine financier is ourselves and then ultimately the equity piece. The good news is I think they're they're at that are you know.
Whatever you want to call it starting liner, finishing with the finish line in terms of putting that all together. So our hope is they can complete that successfully and if they do timing wise.
That should be early Q1 type event, then obviously, it's in production. So so deals would start flowing thereafter, but.
They've got that last hurdle to clear essentially.
Yes, yes, that's great.
If there's a follow up to that no no follow up I was just yes, just going to remind you about San Antonio Yeah, Yeah, No no noise on.
On San Antonio are really the I think you'd know that there are small scale production from the stockpile there.
Which is which is just kind of they are for a here and now type of event are the bigger catalyst there is the permit for the.
The new the larger oxide deposit and.
And then hopefully some sulfides thereafter, but at least initially the oxide deposit. So that's what a Cisco development is waiting for is that permit.
Thereafter, I think things can move pretty quickly, it's not a larger complicated.
Mine is a large complicated.
Development scenario. So so yeah. That's the that's the the catalyst when will that happen I don't know Mexico has.
He'd been tougher from a permitting perspective, not really just in terms of timelines and getting people to do things.
Aircrafts to sign on the dotted line our hope is.
That will come in and in a manner in 2023, where we can start to see some some stream ounces in 2023, but I can't quite yet tell you when but but but once it does come in I think things can move pretty quickly thereafter.
Great I appreciate that.
Maybe just one other question.
If you could give me maybe a little bit of background on on lithium I I know that when they.
Went into creditor protection that you ended up with with Orion.
With that project and I just wondered in addition to to your original interests. There is there potentially some upside for you if if someone comes in and wants to put that into production.
As a vendor is there some potential upside that we should think about from that aspect as well.
Sure.
Yeah look you're right, we did a largely ourselves in Orion kind of take that asset private to protect it for it for them.
The crux of it is the debt for us it's the stream the gold and silver stream that we were protecting one that is sizable for us and I would remind you an asset that is somewhere between 70 and 80% built with.
With the potential to roughly 250000 ounces a year for for a long time. So it's a it's apprise. It was important we protected it its been pretty minimal burn for us to do so.
And all the while we've been working on finding the right partner.
To come in and finish that up.
It is not billed at a point, where and and and and improve the situation in country, which I would tell you. The team there has done a tremendous job they've got unfettered access had it since September I want to say 2020.
And have all the permits in place to to to move so just really need the funding partner and the funding slashed operating partner to finish the job.
Yeah.
In terms of of.
Can it be more I guess theoretically yes.
It's already pretty sizable for us I think it's it's it's it's already a healthy size our streaming on on the asset. So we're comfortable with that I think it's a matter of protecting that asset more than growing it and if we can reactivate something chunky that people have written off to zero for us that's been our objective we've been working on that.
Said, all the time some of it needed some time to heal if you will you know that the situation in the country and that's happened the social license is improved dramatically and I think people are starting to recognize that don't know how many people have picked it up so just to kind of clear the decks.
For everyone because I have I have gotten some questions on it there was a.
You know a U K company Surat that put out a press release, a couple of weeks ago talking about how they were in discussions.
May not lead to anything but an example of discussions that are ongoing.
And all I can say is we continue to have those types of discussions and we'll continue to have them until we find.
The right partner to come in and finish the job for us.
Okay I appreciate that thanks Sandeep.
No problem driver. Thank you.
Ladies and gentlemen.
Should you have a question. Please press star followed by the number one.
Chris centers.
At this time. Please proceed.
Perfect. Thank you.
Again, thanks for your time busy morning, So let you get back to your days and a more bullish gold sector out there. So thanks again as Fred mentioned, if you do have any follow up questions for us.
Please feel free to reach out thanks, so much.
Ladies and gentlemen, this concludes your conference call for today, we thank you for joining us.
These disconnect your lines. Thank you.