Sandstorm Gold Ltd. Q1 2023 Earnings Call

Okay.

[music].

Please be aware that some of the commentary may contain forward looking statements there can be no assurance.

The forward looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.

After the Speakers' remarks, there will be a question and answer session.

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Thank you Mr. Watson you may begin your conference.

Thank you Joanna and good morning, everyone and thank you for calling into this Q1 earnings call.

In a minute I'll hand, it over to her fan to discuss the Q1 results, but before that I just wanted to provide a high level update on a few qualitative things that have occurred over the past few months that are worth, noting specifically for things that I think are material.

The first of those things and most material, which was announced earlier this week is that SSR.

$1 billion Canadian mining company has announced that they are buying a 40% interest in the Hod modern project from Libya.

Let Dave talk about this a little bit more when he gets to his part of the call. But this is obviously a positive update for us as we believe it there this will give sandstorm shareholders and prospective shareholders much much more confidence that hod maden will be built and it's progressing immediately into construction.

This leads me to my second update I think that I think is worth mentioning.

As soon as the announcement was made on Monday after market close about SSRI to hot button some of our investors and prospective investors saw there's such good news that they made a bid to one of our shareholders that we inherited from the base core transaction for their entire block of $50 million Canadian work for Sandstorm stock.

This was a block of shares that was understood by the street that was potentially available for sale and it was causing some pressure on our share price and that purchase of shares successfully happened this week.

In addition to that it's worth mentioning that one of the shareholders that ended up with sandstorm shares as part of the Nomad acquisition with Humana.

Also had nearly $50 million in sandstorm shares and Humana was recently purchased by Pan American Silver, who was liquidating a lot of it is noncore share asset base and they also sold their entire block of $50 million worth of sandstorm shares in the past couple of weeks.

So in the past couple of weeks, we have now successfully cleared a.

Around $100 million worth of shares which were purchased by new shareholders and so I think that's a good thing and removes a bit of the overhang.

The third thing that I think is worth noting before I turn it over to urban is that on the quarterly calls the other streaming and royalty companies. They have been discussing the impacts of the new proposed global minimum tax of 15%.

This is something that the OECD has had in the works for nearly the past decade, and it's finally coming to fruition.

It's expected that all companies, including streaming and royalty companies will have to pay an effective tax rate on their global earnings of at least 15% specifically this impacts other streaming and royalty companies are structured themselves offshore and outside of Canada to minimize tax.

As we have noted many times in the past at Sandstorm, we are purposely structured ourselves. So that we do pay tax in one jurisdiction or the other parts of its new global minimum tax, which some of our competitors expect to start affecting them in the next couple of years does not at all affect sandstorm.

I know that some people are concerned about how this tax will affect streaming royalty companies and I'm pleased to say that is not expected to affect sandstorm in any way.

Finally, I think it's worth noting that with today's gold prices that are above $2000 per ounce. Our debt repayment is happening at a rapid pace nine months ago, we had over $625 million of debt by the end of this quarter, we expect that to be down to $450 million and dropping rapidly.

One year from now I expect that to be sufficiently reduced into the mid 300 millions range.

And I also expect at the same time that our equity and debt investments in other mining companies to be in a similar $300 million range such that next year, our debt net of our investments and other mining companies should be effectively zero.

I think it's worth noting that we're very proud of the company.

Sandstorm has become we're excited about our collective future I would be remiss. However, if I didn't acknowledge it along the way in building. This company that there had been some bumps along the road.

Hey, it is to acknowledge that we're not perfect as a team and we recognize that we have a very intelligent investor base, who we value the feedback of.

For our investors, it's worth noting that your opinions vary so greatly if any of you disagree with each other such that we cannot follow everyone's advice. However, it doesn't mean that we don't want to hear that advice.

Even though in our own shareholders disagree with each other hearing each shareholder's opinion is helpful to us having.

Having over 50000 investors it makes it impossible for me to hear and synthesize every individual investors thoughts, but we have recently decided to do our best and to create a new portal on our website, where you can fill out your thoughts and feedback will be reviewed by a member of our team feed.

Feedback that is considered both constructive and thoughtful will find its way specifically to my desk. So I can review it and help our senior management team make decisions to take into account what we're hearing from shareholders.

And the 18 years that I've been a C level executive in New York listed streaming companies I received a lot of feedback and some of that feedback has improved and changed how I view the business.

We're proactively looking for more of that feedback.

I myself am not only a significant sandstorm shareholder, but over the past nine months I purchased another $2 $5 million worth of sandstorm shares with my own money.

Because I believe the share price will go up clearly I want the share price to be as absolutely as high as possible and it'll be endeavoring to accomplish that and to the extent that you can provide feedback that will help that objective come true. Please do so.

So for those of you who want to do that at the web address is sandstorm gold dot com forward slash feedback.

And with that I'll hand, it over to urban for the detailed results urban.

Thanks Nolan.

In terms of the financial results <unk> had a very strong start to the year setting a number of new quarterly records.

<unk> sold over 28000 attributable gold equivalent ounces during the first quarter and realized revenues of approximately $44 million, both quarterly records for the company and an increase of 24% for the comparable period in 2022.

Early in the quarter, we received a onetime contractual payment of $10 million from amount Hamilton royalty.

This resulted in a quarterly record of $54 million in total sales royalty income from other interests.

Okay.

Larger macroeconomic conditions helped drive the price of certain commodities higher.

As a result.

Average realized gold price per ounce for the company's gold stream was 18, $182, which is comparable to the first quarter of 2022.

We continue to see indicators for strengthening global market and sandstorm portfolio well positioned to profit from these rising gold prices.

Diving into the details of the financial results a bit further.

Revenue was comprised of $26 4 million from sales from our streaming contract and $17 6 million from our royalty assets.

Sandstorms average cash cost was $200 $230.

We went out.

Down approximately 20% from the comparable period in 2022.

This resulted in cash operating margins of $652 per attributable ounce.

These are impressive margins that are indicative of the quality.

Set of assets and also low cost mining operations underlying our portfolio.

Cash flow from operating activities, excluding changes in noncash working capital was nearly $43 million for the quarter of.

A 60% increase from the first quarter in 2022.

Net income was $15 6 million or <unk> <unk> per share on a diluted basis.

Looking at a breakdown of the assets that contributed this quarter, Cerro Moro and Mena in Japan.

The top performing assets contributing approximately 35%.

One ounces.

Lundin mining the operator of Chicago recently updated the Ciabatta mineral reserves and resources and reported that exploration success of Ciabatta has offset mine depletion since the previous mineral estimate.

Australia also released a maiden estimate all of this while the deposit which is located within sandstorm streams ground.

There are other positive operational updates to assets, including the food to del Norte, and Catherine its mines, which I'll, let Dave speak to in a moment.

As many of you will recall sandstorm purchased net profits interest on the anthem unit copper mines in the second half of 2022, and we're encouraged to see strong results from this app in the first quarter.

In addition to anthem Barnet grow cast their own its in blackboard and additional streaming contracts of the Mercedes mine in Mexico are new to this list when comparing the same periods in 2022.

It's exciting to see these assets on this list generating meaningful cash flow sandstorm shareholders.

The other category, which includes production from the other 27 royalties not specifically listed here contributed nearly 9000 attributable gold equivalent ounces.

And store now has.

<unk> cash flowing assets in the portfolio and many more in development truly diversified royalty company.

From a jurisdictional perspective.

Production remains primarily focused in the Americas with 41% of Goldman Goldman production coming from North America.

In the comparable period in 2022 production attributable to North America was 28%.

This increase in the Americas was primarily driven by the addition of some of the streams and royalties I mentioned earlier that were acquired and then no matter based core transaction as well as an increase in attributable ounces from the <unk> del Norte mine in Ecuador, and the Auras Ona mine in Brazil.

Finally, I'd like to make a quick mention of the progress on horizon copper in the transaction with sandstorm relating to the and to meet the NPI.

Horizon recently announced the $20 million financing, which will form part of the cash consideration payable to transform.

Horizon is working diligently in the background to complete the transaction, which we expect to close over the coming months.

With that I'll turn it over to Dave for some further updates on our assets.

Great. Thanks, everyone.

So we're just a few days after this announcement of welcoming the new partner into hub on it so.

So that's going to be my lead in todays asset update.

With SSR, becoming the operating partner, we enter a new phase of project execution on the asset.

Same team that launched the pressure oxidation plant that trips or to great success, both timing and budget.

B building Hod maden.

Core's SSR has operations in North America, and South America, but Turkey operations have always been a big economic driver of that company.

The new plan for her modern will be to use the same team responsible for the development of the <unk> expansion start focusing on project optimization within the existing EIA. That's been filed and accepted a new technical report is expected in 2024 and construction is expected to start that year as well.

It's important to note that essentially all of its track record of performance post merger with Lance or in 2020 with regards to Trippler is fantastic.

It was a great performance in both budget and time, but what's most notable is their ability to consistently outperform on production costs and extending the mine life.

Churn on slide 12 shows how since only 2020, yes. Our team has increased life of mine production by 82% and increased reserves net of depletion by 85% certainly feels like we're going to have the right operator on this asset.

One of the best aspects of the new partnership is that or.

Is that R and asset size partner Lithia made in Chile is still part of that execution team.

<unk> has been partners with Lithia made in Chile for 15 years, now or more combined execution on.

Multiple projects demonstrates the great working relationship already established.

I was just on site last week, where I was brought renewed excitement with how truly exceptional this project is.

The early works on the project well underway and the site is starting to look like a mine and the lost land acquisitions are finalized soon however, what excites me most is the untapped exploration potential that exists it's been over two years since any Julian has occurred on the site still the Russian zone in.

North offset drill targets are anxiously awaiting some additional work.

So more drilling in the existing Self-sown resource is a good potential target for additional reserves. It's a great time to have an ambitious new partnership to work towards.

Now on the next slide <unk> two has a new operating partner in her friends in Lundin mining.

Almost the same things I've said about SSR sufficiency could apply to lundin.

Very successful.

Advising and improving the operations that they are involved in looking at the history. We're taking a candle area you see an amazing improvement of just over nine years of ownership at Kendall area Lundin has increased forecast production.

60% increased MNI by 175% amazing improvements when they assumed ownership this remarkable Chilean asset.

Combine that history of improvement with the synergies that can to Larry I catch <unk>, you had a real winning formula.

During construction ramp up in the first few years of operation casserole against that she's a little to no exploration drilling on the property book, we canceled remotely rolling as being one of the final pieces and the consolidation of the school district in Chile, and Argentina, We're looking forward to a renewed focus on exploration in an area that is known better bye.

No other management team.

More good news from Lundin, but this time up from Lundin Gold's <unk> del Norte.

The mine is consistently outperforming expectations quarter over quarter in the last update from the project highlighted the successful discovery of projects at the existing <unk> mine. This comes in addition to the conversion of the inferred resources in the South zone to reserves for almost 17 years.

Servers have been awaiting potential results from other areas pulled apart basin and now we seem to be finally fine.

Almost adjacent to the sales recruiter count nor team new drilling has revealed grades similar to FDA, along with similar textures epithelial mineralization with open targets along strike.

Bonds are sure. It's just south of this target and covered by an extensive gold anomaly, which some initial drill hole intercepts up eight three grams per tonne.

Gold over 39 meters and almost 47 grams per tonne over 3.5 figures.

The soil in the army to lead these drill holes are on extends over one two kilometers.

Steel is another area when horizon.

Mineralization and the pull of corporation or <unk>.

<unk> mineralized type mineralization will be followed up on together. These three drill rigs will be utilized to continue a drill program that near mine Julien 23000 meters and regional exploration of 12500 meters.

All of this exploration drilling is in addition to the 7600 meters expected drilling.

And the conversion program.

Nor team.

2023 drilling has initial results that confirm the continuity grade of the resource areas. So we're very optimistic that the $1 five 8 million ounces added since the beginning of mining.

Continue to increase over the next few years.

So with that I'll pass the call back over to the operator Joanne.

Questions and answers please feel free to ask questions about any of the royalty stream.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.

He would like to withdraw your question. Please press star followed by Kim and if you are using speaker phone. Please lift the handset before pressing any case.

First question comes from Heiko.

H C. Wainwright. Please go ahead.

Hi, everyone. This is Marcus Giannini, calling in for Joe Thanks for taking my questions.

So given that SSR mining recently.

Taken operational control over have you talked with them about any potential changes given a different development team now being there when it comes to deciding on priorities for the site going forward.

Regarding capital allocation funds spent and so on.

We've been in significant conversations with them at all levels and so far the plant is a straight ahead, but Dave you were just at site. So let turn it over to you. If you have any other insights.

Yes, the worst that theyre going to be doing is going to be focused really just within the existing DAA theyre looking at some some project optimizations in a couple of different spots, but.

Really what was outlined on what was permitted the EIA what the land acquisition is really focused on we're very pleased with the work that Lithia and artisan has really put into this project. So far they're ready just to really expand upon that and start executing certainly theyre going to put their assets our stamp on this.

But of course being partners with video for some time.

<unk> got a lot of experience doing that.

They certainly are very pleased with works at Lydia is put into the project thus far.

And are happy really just to continue to one so you can expect something.

Even with the updated technical report as it comes to be simple quite.

Quite similar with the exception of some additional project optimizations within within the existing plant.

Okay that makes sense. Thanks for the color there and then just changing gears a bit.

We were going through your quarterly unnoticed. The Colossus severance lawsuit is still ongoing Asbury page 36 of the report and obviously 8 million is not a huge amount of money, but regardless I mean.

Full enough to warrant asking.

If you have any idea when this might come to a conclusion.

And to be clear, you're not forced to keep his money in Brazil, and some sort of restricted accounts like a bond right.

Sure.

Yeah that is correct that that has been.

Nuisance totally unmerited.

Lawsuit that was launched many many many years ago and nothing ever happens on it. So it's one of those accounting note things, but we expect it to have absolutely no effect in any way at all ever.

Okay perfect Yeah. That's it for me thanks for taking my questions guys.

And just a reminder, so do you have any questions. Please press star one now.

We have no further questions you may proceed.

Perfect well, thank you very much everybody for calling into the call.

As always feel free to ask questions. We'll be here all day, if anyone has any follow up questions and for those of you who listened to this on the podcast. Please do go and say that the feedback from them. So that I'd say, thank you everybody have a good day.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.