Q2 2024 Osisko Gold Royalties Ltd Earnings Call
Speaker Change: Good morning ladies and gentlemen and welcome to the Osisko Gold Royalties Q2 2024 Results Conference Call. After the presentation we will conduct a question and answer section.
Operator: Q2 2024 Results Conference Call After the presentation, we will conduct a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad.
Speaker Change: If you would like to ask a question during this time.
Speaker Change: Please press star 1 on your telephone keypad. Please note that this call is being recorded today, August 7, 2024 at 10 a.m. Eastern Time.
Speaker Change: Today on the call we have Mr. Jason Attew, President and Chief Executive Officer and Mr. Frdric Ruel, Chief Financial Officer and Vice President of Finance. I would now like to turn the meeting over to our host for today's call, Mr. Jason Attew.
Operator: Please note that this call is being recorded today, August 7, 2024, at 10 a.m. Eastern Time. On the call today, we have Mr. Jason Attew, President and Chief Executive Officer, and Mr. Fredric Ruel, Chief Financial Officer and Vice President of Finance. I would now like to turn the meeting over to our host for today's call, Mr. Jason Attew. Hello, ladies and gentlemen, and welcome to the results call for the second quarter of 2024 for Osisko Gold Royalties Ltd. After the presentation, we will proceed to a Q&A session.
Jason Attew: Good morning ladies and gentlemen, and welcome to the second quarter 2024 earnings conference call of Susco Ltd. After the presentation, we will proceed to a question and answer session.
Operator: If you would like to ask a question, please press the star button followed by the number 1. Please note that this call was recorded today, August 7, from 8 to 10 p.m. Eastern Time. On today's call, we have Mr. Jason Attew, President and CEO, and Mr. Fredric Ruel, CEO and Vice-President of Finance. I would now like to give the floor to your host, Mr. Jason Attew
Speaker Change: If you would like to ask a question, please press the star button next to 1.
Speaker Change: Please note that this call is being recorded today from August 7, 10 to 10 p.m. Eastern Time.
Speaker Change: On today's call, we have Mr. Jason Atoo, President and CEO , and Mr. Frédéric Ruelles, Chief Financial Officer and Vice President of Finance. I would now like to turn the call over to your host, Mr. Jason Atoo.
Jason Attew: Thank you, Joelle. Good morning, everybody.
Jason Attew: Thank you Joelle. Good morning everybody and thanks for being on today's call on this beautiful summer's day. I'm Jason Attew, President and CEO of Osisko Gold Royalties.
Jason Attew: And thanks for being on today's call on this beautiful summer's day. I'm Jason Attew, President and CEO of Osisko Gold Royalties. Procedurally, I'll run through the presentation, and then we'll subsequently open up the line for questions. For those participating online via the webcast, you can submit your questions in advance through the webcast platform.
Jason Attew: Procedurally, I'll run through the presentation and then we'll subsequently open up the line for questions.
Speaker Change: For those participating online via the webcast, you can submit your questions in advance through the webcast platform.
Jason Attew: Today's presentation will also be available and downloadable online through our corporate website. Please note that there are forward-looking statements in this presentation for which actual results may differ. Also, please note the basis of presentation will be in Canadian dollars unless otherwise noted. I'm joined on the call this morning by Fred Ruel, the company's VP Finance and Chief Financial Officer, amongst others, as indicated on slide 3. When looking at Osisko's second quarter and first six months of 2024, we had a solid first half as it relates to gold equivalent ounces earned, cash margin, cash flows, as well as overall debt reduction.
Speaker Change: Today's presentation will also be available and downloadable online through our corporate website.
Speaker Change: Please note that there are four looking statements in this presentation for which actual results may differ.
Speaker Change: Also, please note the basis of presentation will be in Canadian dollars unless otherwise noted.
Speaker Change: I'm joined on the call this morning by Fred Ruel, the company's VP Finance and Chief Financial Officer, amongst the others as indicated on slide 3.
Jason Attew: Osisko earned 20,068 gold equivalent ounces in the second quarter of 2024, which put us in a good position on June 30th to achieve our previously published full-year guidance of $82,000 to $92,000 GOP. Revenues for the period were strong in Q2, at $64.8 million. Watchers mainly by improving precious metal prices throughout the period. In addition, Osisko's cash margins remained high at 97% during the quarter. Cisco ended the first quarter with $65.7 million in cash, and net debt has now been reduced to just over $40 million after the company continued to pay down its revolving credit facility during the period.
Speaker Change: When looking at Osisko's second quarter and first six months of 2024, we've had a solid first half as it relates to gold equivalent ounces earned, cash margin, cash flows, as well as overall debt reduction.
Speaker Change: Osisko earned 20,068 gold equivalent ounces in the second quarter of 2024.
Speaker Change: which had put us in a good position on June 30th to achieve our previously published full year guidance.
Speaker Change: 82,000 to 92,000 geos.
Speaker Change: Revenues for the period were strong in Q2 at $64.8 million. Watchers mainly buy improving precious metal prices throughout the period.
Speaker Change: In addition, Cisco's cash margins remained high at 97% during the quarter.
Speaker Change: Osisko ended the first quarter with $65.7 million in cash and net debt has now been reduced to just over $40 million after the company continued to pay down its revolving credit facility during the period.
Jason Attew: So far in Q3, the company has repaid an additional $13.8 million on the facility, further increasing its financial flexibility in order to be able to transact new accretive opportunities as they present themselves. With respect to our ongoing commitment to return capital to shareholders, the company declared and paid its quarterly dividend of six and a half cents per share in QT, marking its 39th consecutive dividend with over $290 million return to shareholders to date from these distributions.
Speaker Change: So far, in Q3, the company has repaid an additional $13.8 million on the facility, further increasing their financial flexibility in order to be able to transact new accretive opportunities as they present themselves.
Speaker Change: With respect to our ongoing commitment to return capital shareholders, the company declared and paid its quarterly dividend of $0.065 per share in Q2.
Speaker Change: Marking its 39th consecutive dividend with over 290 million returned to shareholders to date from these distributions.
Jason Attew: Subsequent to the quarter, Cisco's Board of Directors approved a Q3 dividend of $0.065 per common share payable on October 15th, 2024 to shareholders of record as of the close of business on September 20th. With respect to our opportunity set, the company's pipeline continues to remain robust, with a corporate development team busier than they have ever been.
Speaker Change: Subsequent to the quarter, Cisco's Board of Directors approved a Q3 dividend of $0.065 per common share, payable on October 15, 2024, to shareholders of record as of the close of business on September 20.
Speaker Change: With respect to our opportunity set, the company's pipeline continues to remain robust.
Jason Attew: We remain optimistic that we will get at least one meaningful deal across the line this year, over and above the recently announced Kaskabel Gold Stream. Moving on to the company's financial performance for Q2, Quarterly revenue is effectively tracked higher year over year due to strong commodity prices when compared to Q2 of 2023, which is also partially offset by fewer GEOs versus the same period last year. The net loss of $0.11 per basic common share for the period was due entirely to our decision to take a full non-cash impairment charge of $67.8 million, or $49.9 million net of income taxes, on the Eagle NSR Royalty, based on our own internal assessment of the current facts and circumstances.
Speaker Change: with our corporate development team busier than they have ever been.
Speaker Change: We remain optimistic that we will get at least one meaningful deal across the line this year, over and above our recently announced Cascabel Gold Stream.
Speaker Change: Moving on to the company's financial performance for Q2, quarterly revenue is effectively tracked higher year-over-year due to strong commodity prices.
Jared Matthews: Q2 of 2023, which is also partially offset by fewer GEOs versus the same period last year.
Jared Matthews: The net loss of $0.11 per basic common share for the period was due entirely to our decision to take a full non-cash impairment charge of $67.8 million.
Jared Matthews: or $49.9 million net of income taxes on the Eagle NSR Royalty.
Jared Matthews: Based on our own internal assessment of the current facts and circumstances.
Jason Attew: And, of course, as more information continues to surface, especially as it relates to timelines associated with the potential restart of the operation and the resumption of precious metal deliveries to Osisko under its royalty agreement. A reassessment of the recoverable amount of the Eagle Royalty will be performed at that time, which may lead to a reversal of part or all of the impairment loss that has been recognized.
Jared Matthews: And of course, as more information continues to surface, as especially as it relates to timelines associated with the potential restart of the operation and resumption of precious metal deliveries to Osisko under its royalty agreement.
Jared Matthews: A reassessment of the recoverable amount of the Eagle Royalty will be performed at that time.
Jared Matthews: Which may lead to reversal of part or all of the impairment loss that has been recognized
Jason Attew: Most importantly, Q2 2024 saw a year-over-year improvement in both cash flow per share at $0.28 versus $0.26 last year, as well as quarterly adjusted earnings of $0.18 per basic common share versus 15 cents in the comparative quarter of 2023. During the second quarter of 2024, the company had 20 producing assets, including the Eagle Mine, which was producing up until the suspension of operations on June 24, 2024. Our GEOs earned come predominantly from Canada, and we derived over 98% of our GEOs from precious metals, gold at just under 71% and silver at 28%, with the remainder coming from other metals.
Jared Matthews: versus 26 cents last year as well as a quarterly adjusted earnings of 18 cents per basic common share.
Jason Attew: Some comments on some specific mine performances during the quarter before speaking about a couple of our more material assets in greater detail. Canadian Malarkey had yet another extremely impressive first half of 2024, with Ignico booking strong quarterly production from the mine in the second quarter. The asset remains Osisko's most significant contributor to GEOs earned by a solid margin. However, performance for Victoria Gold's Eagle Mine during the second quarter of 2024 was significantly short of its budgeted expectations, to the tune of about 33%. In other words, even prior to the Heath Leach facility failure on June 24th, EGLE was already underperforming through the first half of the year.
Jared Matthews: Some comments on some specific mine performances during the quarter before speaking about a couple of our more material assets in greater detail.
Jared Matthews: In other words, even prior to the Heath Leach facility failure on June 24th.
Jason Attew: It is our understanding that Victoria Gold will be reporting its Q2 2024 on August 8, so in the absence of additional information, it is our assumption that the mine will not provide us any geodeliveries in 2024. At Capstone's Mantos Blancos operation, Q2 production was lower year over year due to lower grades and recovery.
Jared Matthews: So, in the absence of additional information, it is our assumption that the mine will not provide us any geo-deliveries in 2024.
Jason Attew: Plant upgrades to reach 20,000 tons per day on a sustainable basis are progressing, despite an approximate two-month delay relative to Capstone's prior plan. Due to a longer equipment lead time, Osisko expects to see the benefit of the increased throughput in its silver deliveries starting in the beginning of 2025. As I mentioned earlier, the number of currently producing assets in our portfolio stands at twenty. Changes to the list include the removal of Eagle, partially offset by the addition of G-Mining Ventures' Tocantinzino mine in Brazil, which announced its first gold pour in early July, as well as Inigo Eagle's Akasaba West Satellite operation at its Gold Expo.
Jared Matthews: Osisko expects to see the benefit of the increased throughput in its silver deliveries starting in the beginning of 2025.
Jason Attew: On the latter, Cisco received its first payment from Agnico in July, whereas on Tocatenzino, the first payment from G-Mining is expected in November, based on a two-month lag associated with the royalty payments as structured in the contract. This current list of 20 assets also counts CSA as only one single operating asset.
Jared Matthews: As I mentioned earlier, the number of currently producing assets in our portfolio stands at 20.
Jared Matthews: Changes to the list include the removal of Eagle, partially offset by the addition of G Mining Ventures' Tocantinzino mine in Brazil, which announced its first goal for in early July .
Jared Matthews: as well as Agnico Eagle's Akasaba West Satellite operation at its Goldex mine.
Jason Attew: However, as you all know, we have two instruments associated with the mine, a 100% silver screen in addition to our now economically effective copper screen, with the Copper Stream having provided its first deliveries to Osisko in early July. Moving on to slide 8. Our company continues to distinguish itself from the rest of its relevant peers as it relates to jurisdictional exposure. Osisko is the leader when it comes to both NAV and GOs earned from what Osisko defines as Tier 1 mining jurisdictions, which include Canada, the United States, and Australia. Of note is that if we were to add Chile to that list of countries, we'd be at over 95%.
Jared Matthews: However, as you all know, we have two instruments associated with the mine, 100% silver stream in addition to our now economically effective copper stream.
Jared Matthews: Moving on to slide 8.
Jared Matthews: which include Canada, United States and Australia.
Jason Attew: This brings me to slide 9, which provides highlights on the recently announced Cascabel Gold Stream transaction with SolGold in partnership with Franklin, Nevada. As noted in her July 15th press release. Osisko believes that Caskabel is a world-class copper-gold project that has the potential to become a multi-generational mine. This new stream investment, which complements Osisko's existing royalty on Cascabel, further enhances Osisko's peer-leading growth profile at a very attractive rate of return. In terms of when we expect to receive GEOs from this investment, SolGold has guided production to the 2030s.
Jared Matthews: This brings me to slide 9, which provides highlights on the recently announced Cascabel Gold Stream transaction with SolGold, in partnership with Franklin, Nevada.
Jared Matthews: Osisko believes that Caskabel is a world-class copper-gold project that has the potential to become a multi-generational mine.
Jared Matthews: This new stream investment, which complements Osisko's existing royalty on Cascabel, further enhances Osisko's peer-leading growth profile at a very attractive rate of return.
Jared Matthews: In terms of when we expect to receive GEOs from this investment, SolarBolt has guided to production in the 2030s.
Jason Attew: All outside our five-year outlook. However, once in production, the Castable Stream is expected to contribute approximately 23,000 gold equivalent ounces per year for the first 10 years of the initial 28-year life of the mine. It should be additionally pointed out that this mine life is based on only 18% of the measured and indicated mineral resource of the Alpalla deposit.
Speaker Change: Which falls outside our five-year outlook
Speaker Change: However, once in production, the Castable Stream is expected to contribute approximately 23,000 gold equivalent ounces per year for the first 10 years of the initial 28-year life of mine.
Speaker Change: It should be additionally pointed out that this mine life is based on only 18% of the measured and indicated mineral resource of the Alpalla deposit.
Jason Attew: We are very encouraged to see that Sogold recently signed an exploitation contract with the government of Ecuador. This serves as another indicator that the current administration is pro-mining, and Cascabel remains a top priority project within the country. As noted previously, on a geo-spurned basis, it was yet another sour first half of the year for our most important half, although impressive progress continues to be made on the Odyssey Underground Project. While I won't spend too much time on the following two slides, I wanted to flag some language on slide 11.
Speaker Change: We are very encouraged to see that SolGold recently signed an exploitation contract with the government of Ecuador.
Speaker Change: This served as another indicator that the current administration is pro-mining and Cascabel remains a top priority project within the country.
Speaker Change: It was yet another sour first half of the year for our most important asset.
Speaker Change: As impressive progress continues to be made on the Odyssey underground project.
Speaker Change: While I won't spend too much time on the following two slides, I wanted to flag some language on slide 11.
Jason Attew: As evidenced by a second quarter report and subsequent conference call, Igneco Eagle continues to talk more and more comfortably about the potential for a future shaft number two for the Odyssey Underground Mine. Factoring in some basic assumptions and based on publicly released information from IGNICO. Osisko estimates that a potential second shaft could add approximately 15,000 gold equivalent ounces annually over and above what is expected from the most recently published mines. All from the early 2030s onwards and at no additional cost to Osisko or Chiu.
Speaker Change: As evidenced by a second quarter report and subsequent conference call, Agnico Eagle continues to talk more and more comfortably about the potential for a future shaft number 2 for the Odyssey Underground Mine.
Cisco: Osisko estimates that a potential second shaft could add approximately 15,000 gold equivalent ounces.
Speaker Change: All from the early 2030s onwards, and at no additional cost to Osisko or its shareholders.
Jason Attew: With 40,000 tons of Latin milk capacity still expected in the Canadian market complex from 2028 onward, Ignico has now officially made reference to a fill-the-mill strategy, with additional information on this likely to follow in the coming years.
Speaker Change: With additional information on this likely to follow in the coming years.
Jason Attew: Next slide please, slide 12. And as if the malarkey story for Osisko wasn't exciting enough, just last week Ignico Eagle provided a comprehensive update on its Upper Beaver project in Ontario. Our operating partner announced a positive internal valuation for a stand-alone mine and mill scenario at the project. Neko Eagle believes that Upper Beaver has the potential to produce an annual average of approximately 210,000 gold ounces and 36.
Nico Eagle: Neko Eagle believes that Upper Beaver has the potential to produce an annual average of approximately 210,000 gold ounces and 3,600 tons of copper.
Jason Attew: 3,600 tons of copper, with initial production possible as early as 2030. What does this mean for Osisko? Again, based on the information provided, we estimate that Upper Beaver could result in an average of approximately 4500 gold equivalent ounces earned, based on our 2% NSR royalty on the project.
Nico Eagle: with initial production possible as early as 2030.
Speaker Change: What does this mean for Osisko?
Speaker Change: Again, based on the information provided, we estimate that Upper Beaver could result in an average of approximately 4500 gold equivalent ounces earned, based on our 2% NSR royalty on the project.
Jason Attew: We were also delighted to hear that Agnico has now committed over U.S. $200 million over the next three years to further de-risk the project and collect the necessary bulk samples prior to final project approval. Now on slide 13 and touching briefly on CSA. The first delivery under the CSA copper stream to Osisko was made in the first week of July for a total of 74 tons of copper or approximately 300 geo. Further to this, just last week, Metals Acquisition Ltd announced some very impressive drill results, which served to underpin Osisko's original thesis. Significant Exploration Potential exists across their land pact.
Speaker Change: We were also delighted to hear that IGNICO has now committed over U.S. $200 million over the next three years to further de-risk the project and collect the necessary bulk samples prior to final project approval.
Speaker Change: Now on slide 13, and touching briefly on CSA, first delivery under the CSA copper stream to Osisko was made in the first week of July for a total of 74 tons of copper, or approximately 300 geos.
Speaker Change: Further to this, just last week, Metals Acquisition Ltd. announced some very impressive drill results.
Speaker Change: which serve to underpin Osisko's original thesis that significant exploration potential exists across their land package.
Jason Attew: Moving on to slide 14. Production remains suspended, and as stated previously, absent new information, Cisco's assumption is the mine will not resume production in 2020. Cisco has now taken the appropriately conservative step to recognize a full non-cash impairment loss of 67.8 million, $49.9 million net of income tax.
Speaker Change: Moving on to slide 14.
Speaker Change: As you all know and as I stated earlier, on June 24th, Victoria Gold announced that the Heat Bleach facility at its Eagle Gold line in the Yukon Territory had experienced a failure.
Speaker Change: Osisko has now taken the appropriately conservative step to recognize a full non-cash impairment loss of $67.8 million.
Jason Attew: Based on our management team's assessment of the current facts and circumstances. If there is any key takeaway from this slide, it's that Osisko has various protections with respect to its royalty, including security over the property, a Registered Interest in Land Recorded within the Yukon Territory, and an inter-creditor agreement. Senior Landings.
Speaker Change: $49.9 million net of income taxes
Speaker Change: and an inter-creditor agreement with the state.
Jason Attew: At this time, these various layers of protection provide Osisko with confidence that our rights will continue upon a restart of the Eagle Mine. As a secured creditor, we will continue to monitor the situation closely and provide further updates to the market as more Prior to the heat bleach facility failure at Victoria Gold Eagle Mine, Cisco was tracking well with regard to its previously published 2024 DO delivery guidance range of 82,000 to 92,000 gold equivalent ounces. However, under our assumption that production at EGLE will remain suspended through to the end of 2020.
Speaker Change: Senior Lending Syndicate.
Speaker Change: At this time, these various layers of protection provide Osisko with confidence that our rights will continue upon a restart of the Eagle Mine.
Speaker Change: As a secured creditor, we will continue to monitor the situation closely and provide further updates to the market as warranted.
Speaker Change: Prior to the heat bleach facility failure at Victoria Gold's Eagle Mine, Cisco was tracking well with regard to its previously published 2024 DO delivery guidance range of 82,000 to 92,000 gold equivalent ounces.
Speaker Change: However, under our assumption that production at EGLE will remain suspended through to the end of 2021.
Jason Attew: The company has decided to adjust its 2024 geo delivery guidance from 77 to 83,000 gold equivalent ounces. I have already provided additional context on this call as it relates to EGLE's underperformance versus our budget expectations for the first half of the year, and this should also help further explain why we made these adjustments. Additionally, with surge capacity equipment at Capstone's Mentos Blancos having been installed two months later than originally scheduled.
Speaker Change: Company has decided to adjust its 2024 geo-delivery guidance to 77,000 to 83,000 gold equivalent ounces.
Speaker Change: I have already provided additional context on this call as it relates to EGLE's underperformance versus our budget expectations for the first half of the year.
Speaker Change: And this should also help further explain why we made these adjustments.
Jason Attew: We took a further step in making some cautionary adjustments to our budget as it relates to the second half deliveries we are expecting from Capstone Coffee. Our investing companies continue to make great strides in de-risking their assets, which will accrue to our shareholders. Highlights of some of these efforts are provided on slides 16 and 17. We've already discussed many of these on previous slides of this presentation, so there is no need for me to add anything here today. That said, I would still suggest you take the time to go through the impressive list yourself.
Speaker Change: We took a further step in making some cautionary adjustments to our budget as it relates to the second half deliveries we are expecting from Capstone Copper.
Speaker Change: Our investing companies continue to make great strides in de-risking their assets that will accrue to our shareholders.
Speaker Change: Highlights of some of these efforts are provided on slides 16 and 17.
Speaker Change: We've already discussed many of these already on previous slides of this presentation, so no need for me to add anything here today.
Jason Attew: And if you have any questions or would like to further discuss any of the remaining line items highlighted on these two pages, please do so now. I encourage you to reach out to my colleagues here at Osisko. Moving to slide 18, which outlines the current state of Osisko's balance sheet. At quarter end, we had total debt of just under $110 million, and net debt of only $43 million, which compares to net debt of just under $250 million in the comparative quarter of 2023.
Speaker Change: And if you have any questions or would like to further discuss any of the remaining line items highlighted on these two pages.
Speaker Change: I encourage you to reach out to my colleagues here at Osisko for more information.
Speaker Change: Moving to slide 18, which outlines the current state of Osisko's balance sheet.
Speaker Change: At quarter end, we had total debt of just under $110 million, net debt of only $43 million.
Speaker Change: which compares the net debt of just under $250 million in the comparative quarter of 2023.
Jason Attew: Our focus on being responsible capital allocators is using our cash flow from operating activities, which year to date is over a hundred and one million dollars. $87.8 million in Q1 and Q2, and $13.8 million subsequent to quarter end. Also, subsequent to quarter ends, we made a U.S. $10 million payment to SolGold as a first installment under the Gold Stream Agreement to further advance the Caswell project in. In addition, as mentioned in last quarter's conference call, commodity prices, specifically gold and silver, remain above the U.S. $2400 and U.S. $27, respectively. We forecast to end up in a net cash position by the end of the year. That, of course, is absent of any material acquisitions of royalties.
Speaker Change: Our focus on being responsible capital allocators is using our cash flow from operating activities.
Speaker Change: and redeploying it in the form of paying down a revolving debt facility.
Speaker Change: which year-to-date is over a hundred and one million.
Speaker Change: and $13.8 million subsequent to quarter ends.
Speaker Change: In addition, as mentioned in last quarter's conference call, commodity prices, specifically gold and silver, remain above the U.S. 2400 and U.S. $27 respectively.
Speaker Change: We forecast to end up in a net cash position by the end of the year.
Speaker Change: That, of course, is absent of any material acquisitions of royalties or streams we make during that period.
Jason Attew: This is important as even though we've already made an announcement on a key transaction, Osisko's corporate development team remains busier than ever, with the hope of getting more deals across the line before year end. And our much improved balance sheet provides the company with the financial capacity and flexibility to continue its strategy. Disciplined allocation in the pursuit of high quality, free of precious metal streams and royalties, that will bolster the company's current and near-term gold equivalent ounce delivery and cash flows that should accrue to our shareholders' benefit.
Speaker Change: This is important as even though we've already made an announcement on a key transaction regarding Kaskabel.
Speaker Change: With the hope of getting more deals across the line before year end.
Speaker Change: And our much improved balance sheet provides the company with the financial capacity and flexibility to continue its strategy of disciplined allocation in the pursuit of high quality, free of precious metal streams and royalties.
Speaker Change: that will bolster the company's current and near-term gold equivalent ounce deliveries and cash flows that should accrue to our shareholders' benefit.
Jason Attew: Finally, I would like to take the opportunity to welcome our newest board member, Ms. Wendy Louie, whom we believe will be a tremendous contributor to our company as we go forward. Wendy brings a wealth of experience in resources and commercial and accounting matters from her impressive career credentials at Duke Energy, Ernst & Young, Hekla, Goldcorp, and most recently, Savina.
Speaker Change: Finally, I would like to take the opportunity to welcome our newest board member, Ms. Wendy Louie, who we believe will be a tremendous contributor to our company going forward.
Speaker Change: Wendy brings a wealth of experience in resources and commercial and accounting matters from her impressive career credentials from Duke Energy, Princeton Young, Tecla, Goldcorp, and most recently Sabina.
Jason Attew: And with that, I'd like to thank everyone for listening today. We will now open up the line for questions, as well as questions posted on the web. We don't get to all the questions on the line. We'll make sure to respond offline to those we don't get to cover in this webchat. Thank you for your time, Operator. Operator Thank you.
Speaker Change: And with that, I'd like to thank everyone for listening today. We will now open up the line for questions.
Speaker Change: As well as questions posted on the webcast.
Speaker Change: We don't get to all the questions on the line. We'll make sure to respond offline to those.
Speaker Change: You don't get to cover on this webcast.
Operator: 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 number on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any.
Speaker Change: Thank you for your time.
Speaker Change: Operator.
Speaker Change: 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.
Speaker Change: You will hear a prompt that your hand has been raised.
Speaker Change: If you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys.
Operator: One moment, please, for your first question. Your first question comes from Ralph. Ralph Profiti with 8 Capital. Your line is now open.
Speaker Change: One moment please for your first question.
Speaker Change: Your first question comes from Ralph.
Speaker Change: Profiti with a capital. Your line is now open.
Ralph Profiti: Thanks, Operator, and thanks for taking my questions. Jason...
Speaker Change: Thanks, Operator, and thanks for taking my questions.
Jason Attew: The syndication at Caskabel at 30%, you know; was there a desire to do more? How much of that, you know, sort of discretion was driven by the desire for things like dry powder or, or balancing country exposure? Just wondering what you think.
Speaker Change: The syndication at Caskabel at 30% you know was there a desire to do more? How much of that
Speaker Change: You know sort of discretion was driven by the desire for things like dry powder or or Balancing country exposure just wondering how you tackled some of those thresholds and criteria
Jason Attew: Yeah, thanks for the question, Ralph. Look, obviously, doing a syndicated deal with a partner like Franco Nevada, a lot of people, including myself, hadn't thought of going back.
Speaker Change: Yeah, thanks for the question, Ralph. Look, obviously doing a syndicated deal with a partner like Franco-Nevada, a lot of people, including myself, going back to my banking days, has talked about having syndicated deals and why they make the most amount of sense.
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Jason Attew: So look, the 30% level. We can tell you with a negotiated
Jason Attew: We do think the Caskovelle Project is a world-class asset.
Speaker Change: So look, the 30% level we can tell you was a negotiated level. We do think the Kaskovel project is a world-class asset.
Jason Attew: In fact, as you know, Franco-Nevada has a royalty like we do, a higher royalty than we do, and so it really came down to proportional interest both in the royalty as well as in our interest in working with Franco to give the Sobol team the amount of proceeds that they were looking for, obviously $750 million, the bulk of which will be provided to them on the construction decision. Iain Farmer, Cosmos Chiu, Fredric Ruel, Paul Martin, Guy Desharnais, Heather Taylor, Iain Farmer, Osisko Gold Royalties Ltd, Iain Farmer, Cosmos Chiu, Fredric Ruel, Paul Martin, Guy Desharnais, Heather Taylor
Speaker Change: In fact, it is also, as you know, Franco-Nevada has a royalty as we do, a higher royalty than we do, and so it really came down to proportional interest both in the royalty as well as...
Speaker Change: You know we in our interest working with Franco to give
Speaker Change: The SOGOL team, the amount of proceeds that they were looking for, obviously $750 million, which the bulk of it will be provided to them on the construction decision or construction plan.
Speaker Change: decision by either themselves or if...
Speaker Change: They are not the operator of the time, whoever is operating the time. So, look, obviously it was a negotiation.
Speaker Change: We've got a relationship clearly with Sobel. We've got a relationship with Franco. We're quite comfortable with Ecuador as a jurisdiction.
Jason Attew: The fact is that, as you know, the way that the deal was structured with Franco is that we have a number of off-ramps here. So if the country, which we do believe is very pro-mining with President Naboa right now, and we do think he likely will be quite successful in the elections in 2025, but for whatever reason, that doesn't happen,
Speaker Change: The fact is, as you know, the way that the deal is structured with Franco is we have a number of off-ramps here. So, if the country, which we do believe is very pro-mining with President Naboa right now, and we do think he likely will be quite successful in the elections,
Speaker Change: But for whatever reason that does not happen and we see Ecuador not being as
Speaker Change: We have a number of offerings, as you are very well aware, and that's how we've staged and structured the transactions. So right now, we're obviously quite comfortable with the direction.
Jason Attew: So right now, we're obviously quite comfortable with the direction, very pro-mining in the particular province. We think Snowgold is doing a very good job in terms of ensuring they have a social license and doing all the right things at the community level. But as I said, we still very much value our, as I keep saying, our tier one jurisdictions. We are actually looking to do more transactions that will actually have a bit more of a balance between Canada, the U.S., and Australia as we go forward. But we're very, very pleased with the transaction that we were able to do with Snowgold and, obviously, the partnership that we have with Frank.
Speaker Change: Very pro-mining in the particular province.
Speaker Change: We think Skoll Gold is doing a very good job in terms of ensuring they have a social license and doing all the right things from a community level. But as I said, we still very much value our, as I keep saying, our Tier 1 jurisdictions.
Speaker Change: So we're actually looking to do more transactions that will actually have a bit more of a balance in Canada, the U.S. and Australia go forward, but we're very, very pleased with the transaction that we were able to do with SolGold and obviously the partnership that we have with Franco.
Jason Attew: Yeah, I appreciate that, Clary. It does make sense. Keeping on the theme of transactions, you mentioned that Cascabel in the 2030s puts it beyond the five-year guidance. Just wondering, if you look at sort of this deal pipeline that you had talked about before your end and perhaps beyond, are you at liberty to talk about how much of those opportunities are within the five-year guidance, or is the majority?
Speaker Change: Yeah, I appreciate that, Clary. It does make sense.
Speaker Change: Keeping on the theme of transactions, you mentioned that Cascabel in the 2030s puts it beyond the five-year guidance. Just wondering if you look at sort of this deal pipeline that you had talked about before your end and perhaps beyond, are you at liberty to talk about how much of those opportunities are within the five-year guidance or is the majority outside of it?
Jason Attew: That's a great question, Ralph. Look, obviously, there are a lot of opportunities, and every one of our peers, as you probably heard, is very, very busy in both corporate development and technical services. I would say that again, our preference in terms of our strategy is obviously to have transactions that fit within our five-year outlook. That said, there are some very quality assets, development assets in particular, that have a long gestation to actually get into production and ramp up that would sit outside of it. But strategically, what I've talked to my board about and what the corporate development team is doing, really, the focus is doing transactions within that five-year outlook, but we're not going to ignore them.
Speaker Change: That's a great question, Ralph. Look, obviously, there are a lot of opportunities, and every one of our peers, as you've probably heard, are very, very busy from both corporate development and the technical services.
Speaker Change: that they're
Speaker Change: basically employ to go look at these opportunities. I would say that again our preference in terms of our strategy is obviously have transactions that fit within our five-year outlook.
Speaker Change: That said, there are some very quality assets.
Speaker Change: Development asks us in particular that there's a long gestation to actually get into production and ramp up that would sit outside of it.
Speaker Change: But strategically, what I've talked to my board with and what the corporate development team is doing, really the focus is doing transactions within that five-year outlook, but we're not going to ignore, again, a high-quality opportunity that sits outside.
Iain Farmer: Iain Farmer, Osisko Gold Royalties Ltd
Speaker Change: 5-Year Outlook, because that obviously sets the company up for the future going forward. But we're very, very busy, and so, as I mentioned on the call, we're hoping we can get one of these opportunities done before year-end that would fit within the 5-Year Outlook.
Jason Attew: So, you know, as I mentioned on the call, we're hoping we can get one of these opportunities done before year-end that would fit within the five-year outlook.
Speaker Change: Thank you Jason. Thank you. Thanks Ralph.
Operator: Your next question comes from Josh Wilson with RBC Capital Markets. Your line is now open.
Speaker Change: Your next question comes from Josh Wolfson with RBC Capital Markets. Your line is now open.
Josh Wilson: Yeah, thanks very much. The first question I have is on the Eagle impairment to zero. I'm wondering, is there any read through here on the potential recoverability of any value to the company? And is there any risk that the royalty would not survive a solvency-related event for the operator?
Speaker Change: Thank you for watching. Bye.
Josh Wilson: Yeah, thanks very much. First question I have is on...
Speaker Change: The Eagle Impairment to Zero.
Josh Wilson: I'm wondering is there any read through here on the potential recoverability of any value to the company and is there any risk that the royalty would not survive a solvency related event for the operator?
Jason Attew: You know, look, obviously, and I'll let Fred comment in a second. Obviously, we took the decision typically because we just don't have the visibility right now.
Josh Wilson: You know, look, obviously, and I'll let Fred comment in a second. Obviously, we took the decision.
Jason Attew: Iain Farmer, Cosmos Chiu, Fredric Ruel, Paul Martin, Guy Desharnais, Heather Taylor,
Fred Ruel: specifically because we just don't have the visibility right now as to when a restart is going to happen.
Jason Attew: and the Victoria Gold team is doing specifically around containment, specifically around water quality with respect to the cyanide sampling that you're doing, and specifically with respect to the remediation. Any sort of restart, obviously, will require a permit from the U.N. government, plus, as you can appreciate, there's an element with respect to the First Nations groups that they will have to get approval and get a social license there. We thought it was prudent at this point to write it down.
Fred Ruel: There's obviously a lot of work that the Victoria Gold team is doing specifically around containment, specifically around the water quality with respect to the cyanide sampling that they're doing, and specifically...
Fred Ruel: Any store to restart obviously will require a permit from the U.N. government. Plus, as you can appreciate, there is an element with respect to the First Nations groups.
Fred Ruel: We thought it was prudent at this point to write down, you know, the $67 million that I mentioned.
Jason Attew: and the 67 million that I mentioned. Iain Farmer, Cosmos Chiu, Frdric Ruel, Paul Martin, Guy Desharnais, Heather Taylor, Iain Farmer, Osisko Gold Royalties Ltd. You know, depending on the situation, that there is a strong possibility that the mine is up and running in research; we just don't have visibility as yet with respect to the question in an insolvency situation.
Speaker Change: Just because we don't have that visibility as of yet. We do think, obviously, you know, it's a big resource out there. It's very important for youth on territory in terms of employment and other things that...
Speaker Change: Depending on the situation, that there is a strong possibility that the mine is up and running in a reset. We just don't have visibility as of yet. With respect to the question in an insolvency situation.
Jason Attew: I think, as I mentioned on the call, the fact that, again, we've got security with the asset, the fact that we're registered in the Yukon, as well as we've got strong interpredator support within those agreements, we think there's obviously a very strong case when this is up and running, through insolvency, which, again, are our rights.
Speaker Change: I think, as I mentioned on the call, the fact that, again, we've got security with the asset, the fact that we're registered in the Yukon,
Speaker Change: as well as we've got strong inter-creditor support within those agreements. We think there's obviously a very strong case when this is up and going, if it goes.
Jason Attew: Our rights will be affected, our rights and the royalty and the geoequivalence deliveries. If it does take, you know, some time here, we certainly have all the protections necessary. Maybe I'll ask Fred if he wants to comment further.
Speaker Change: Through insolvency that again our rights will be affected, our rights and the royalties and the geoequivalence deliveries.
Speaker Change: If it does take, you know, some time here, that again, we certainly have all the protections necessary. Maybe I'll ask Fred if he wants to comment further.
Frdric Ruel: Thank you, Josh, for the question. It's purely related to accounting and applying accounting rules and regulations here based on information that we have as of today. And depending on how things go in the future months and quarters, we will assess on a quarterly basis if a reversal of impairment might be possible based on new information that might be provided by the company.
Josh Wilson: Got it. Thank you.
Fred Ruel: Thank you, Josh, for the question. It's purely related to accounting and applying accounting rules and regulations here, based on information that we have.
Fred Ruel: As of today,
Speaker Change: And depending on how things go in the future months and quarters.
Speaker Change: will re-access on a quarterly basis.
Josh Wilson: And then extending this sort of uncertainty to what the future impact could be. I understand the company updated its 2024 guidance, but there was no comment on what the long-term guidance implications are. Is there any sensitivity you can provide us with, you know, what the impact is of the loss of EGLE on the five-year guide?
Speaker Change: Got it. Thank you. And then extending this sort of uncertainty to what the future impact could be. I understand the company updated 2024 guidance. There was no comment on what the long-term guidance implications are.
Speaker Change: Is there any sensitivity you can provide us with what the impact is of the loss of EGLE to the 5-year guide?
Jason Attew: Yeah, look, it's a great question. We've also received a question via webcast similarly. I think, obviously, Josh, it's early days.
Speaker Change: Yeah, that's a great question. We've also received a question by a webcast similarly.
Jason Attew: Obviously, the facility failed on June 24th.
Victoria: I think, obviously, Josh, it's early days. Obviously, the facility failed on June 24th. Victoria is doing everything she can to essentially, again, contain what happened.
Jason Attew: Victoria is doing everything it can to essentially contain what's happened, and ensure that from an environmental perspective, there's no long-term damage. So I think it's clearly in the early innings of what's going to happen here.
Victoria: Ensure that from an environment perspective, there's no long-term.
Speaker Change: So I think it's clearly in the early innings of what's going to happen here. As stated before, we just don't have the visibility on the restart plan. According to Victoria, and I encourage you to listen to their call this week.
Jason Attew: As stated before, we just don't have visibility on the restart plan. According to Victoria, and I encourage you to listen to their call this week, we are a number of weeks away from being able to provide a concrete plan that could or could not get regulatory approval and the social license that I talked about. There's lots of work to be done in the remediation campaign ahead. I just think it's too early at this point to suggest that.
Victoria: There are a number of weeks away from being able to sign.
Victoria: A concrete plan that could or could not get regulatory approval and that's a social license that I talked about. There's lots of work to be done in the remediation teams in front.
Jason Attew: We do think that, obviously, they've got significant goals that they do expect to achieve.
Speaker Change: through the various communications, mineral reserves and resources. There is also, if you know the story reasonably well, they have identified a secondary heat leach facility that was going to come in later in the limelight. So there's a lot of positive attributes that
Iain Farmer: Iain Farmer, Osisko Gold Royalties Ltd.
Speaker Change: could suggest that this mine will be restarted. We just have no concept or visibility, clarity of direction at this point as to the timing. Really, we can only get that from Victoria Goals taking their direction.
Jason Attew: Clarity and direction at this point as to the timing, but really, we can only get that from Victoria.
Jason Attew: Taking their direction,
Operator: And sorry, one final question on the long-term guide. I can't recall if this was included or not, but for ODEV and their financial status, was Caribou included in the existing five-year guidance, or was that something that was incorporated after that? Great question.
Speaker Change: One final question on the long-term guide. I can't recall if this was...
Jason Attew: Great question. It was not included in our five-year oath. Thank you.
Operator: Your next question comes from John Tumazos. Your line is now open.
Speaker Change: Your next question comes from John Tomaso Zubroker. Your line is now open.
John Tumazos: Sometimes the big royalty streaming companies say the first dollar is the last. Jason, could you give us your views of the pros and cons of that? Before you came on board, Osisko had made a lot of efforts trying to get Ficks, Renard Diamonds, and Amulsar in Armenia and different things in ODV. Would you contribute good money after bad? When something blows up, would you fire the guy that originated the deal? Just what is your attitude toward trying to fix things or when to move on?
Speaker Change: Give us your views of the pros and cons of that.
Speaker Change: Would you contribute good money after bad?
Speaker Change: When something blows up, would you fire the guy that originated the deal?
Speaker Change: Just what's your attitude toward trying to fix things or when to move on?
Jason Attew: Look, John, obviously, I think you're probably talking through some of the issues now obviously heightened with the Victoria Gold facility failure. Obviously, you know, the team works very, very hard to identify opportunities that we think will accrue to shareholders. We didn't anticipate this happening, and there's obviously been some other assets that haven't proven up to expectations. With respect to going forward, I mean, we've got a very, very strong technical team.
Speaker Change: Look John , obviously I think you're probably you know talking through some of the issues and now obviously heightened with the Victoria Gold facility failure.
Speaker Change: With respect to going forward, I mean, we've got a very, very strong technical team. We've operated our technical team since I joined.
Jason Attew: We've upgraded our technical team since I joined, and so we are going to be making investments going forward. We're going to be making investments based on, again, the information that we have that we think is going to be accretive to shareholders going forward. In terms of looking at some of the historical legacy assets, yes, we did a full portfolio review. Yes, we've come to views as to which ones we should fund and which ones we should not fund going forward.
Speaker Change: And so, we are going to be making investments go forward, we're going to be making investments based on, again, the information that we have that we think is going to be accretive to shareholders go forward.
Speaker Change: Yes, we did a full portfolio review, yes.
Speaker Change: We've come to views as to which ones we should fund and which ones we should not fund go forward.
Jason Attew: I think I've conveyed that the opportunities that new opportunities far outweigh the opportunities that we see currently in terms of investing in the current portfolio that require additional capital. A lot of our portfolio, the 185 assets, as you know, require no additional costs. There are no contingent costs associated with it. Our preference for all the companies out there, if we've made an investment through a royalty or a stream, is that they should go out and source other financing and not rely on an incremental royalty or a stream that could burden the asset to the point where, again, their set of equity holders, if they're public, is disadvantaged.
Speaker Change: The opportunities that we see currently in terms of investing in the current portfolio that require additional capital. A lot of our portfolio, the 185 assets,
Speaker Change: As you know, it requires no additional cost. There's no contingent cost associated with it.
Speaker Change: Our preference for all the companies out there, if we've made an investment through a royalty or a stream, is they should be going out and sourcing other financing and not relying on an incremental royalty or a stream that could burden
Speaker Change: the asset to the point where, again, their set of equity holders, if they're public, is disadvantaged. So I'll answer that question long winded way, but we do think that there's a really good opportunity set on a case by case basis.
Jason Attew: So I'll answer that question in a long-winded way, but we do think that there's a really good opportunity to set standards on a case-by-case basis. We have additionally, from a governance perspective, set up, as I think we've talked about, an investment committee, which is some commercial and technical folks on our board, that we have to obviously pass that gate before we are allowed to..., and deploy any further capital, so there's an additional level of governance with respect to our investments in assets at Osisko Gold Royalties.
Speaker Change: We have, additionally, from a governance perspective, set up, as I think we've talked about, an investment committee, which is some commercial and technical folks on our board, that we have to obviously pass that date before we are allowed to.
John Tumazos: Jason, if I could follow up. There's a hedge fund or two friends of mine that, whenever someone in the team originates an idea, they give them a quarter of the performance fee from that idea, and the idea is tagged to a specific, Do you think having a bunch of committees dilutes responsibility, and is it better? What are the pros and cons of committee responsibility versus. Originator Responsibility?
Speaker Change: Jason, if I could follow up.
Speaker Change: There's a hedge funder to a friend of mine that whenever someone in the team originates an idea,
Speaker Change: They give them a quarter of the performance fee from that idea and the idea is tagged to a specific
Speaker Change: Person.
Jason Attew: originator responsibility on your team.
Jason Attew: So the way it ends with that, John, is the committee is really set up for oversight from an oversight perspective, plus, as you can appreciate, we've got technical folks that can really pull apart or take a look at things through a lens that maybe some of our technical folks haven't looked at, but really to assure us. Because, again, we are, as I like to say, effectively pricing risk for our shareholders or risk managers on behalf of our shareholders.
Jason Attew: So the way it ends to that, John , is the committee is really set up for oversight, from an oversight perspective, plus as you can appreciate, we've got technical folks that can really pull apart or to take a look at through a lens that maybe some of our technical folks haven't looked at, but really to assure us.
Jason Attew: Because, again, we are, as I like to say, we're effectively...
Jason Attew: pricing risk for our shareholders or risk managers on behalf of our shareholders.
Jason Attew: With respect to compensation as it relates to the origination of opportunities, we can say we don't have that philosophy here at Osisko. As I've talked through with you and many others, we have tweaked our compensation for the senior executives, which is really in the long-term, our long-term incentive pay, very much driven by per share metrics, specifically cash flow per share, growth in cash flow per share, and growth in net asset value per share.
Speaker Change: With respect to compensation as it relates to origination of opportunities, we can say we don't have that philosophy here at Osisko.
Speaker Change: As I've talked through with yourself and many others, we have tweaked our compensation for the senior executives.
Jason Attew: So as we move forward, and we continue to make investments, we are hoping we're making investments that increase our cash flow per share, and increase our NAV per share, because, as you know, there's a very strong correlation. We can do this for shareholders. So, to answer the question, there are no specific origination fees that are payable for our team. We are very much a team, and we're very much driven. The top of mind for anything that we do from an investment perspective is, will this increase our cash flow per share as well as our net asset value per share, and again, these are quantitative metrics that our committee will determine when they're compensating the executive.
Speaker Change: So as we move forward and we continue to make investments.
Speaker Change: We are hoping we're making investments that increase our cash flow per share, increase our NAV per share, because as you know, there's a very strong correlation, if we can do this, to shareholder performance.
Speaker Change: So to answer the question, there is no specific origination fees that are payable for our team. We are very much a team and we're very much driven and top of mind for anything that we do from an investment perspective.
Speaker Change: Will this increase our cash flow per share, as well as our net asset value share? And again, these are quantitative metrics that our committee will determine when they're compensating the executive team.
John Tumazos: I'll let other people have a chance. Good luck, Jason.
Speaker Change: I'll let other people have a chance. Good luck, Jason.
Operator: Your next question comes from Tanya Jakusconek with Gosia Bank. Your line is now open.
Jason Attew: Thanks, John .
Jason Attew: Your next question comes from Tanya Jakusconek with Gosia Bank. Your line is now open.
Tanya Jakusconek: Okay, great. Thank you so much for taking the time to answer my questions. Good morning, everybody. I just wanted to circle back on that 2028 guidance and not to beat this to death, but would it be fair to assume that within that 120,000 to 135,000 GEOs, at about 9,000, would have been that equal gold, and we'd more likely be towards the lower end of the range than the upper, just so that we can benchmark ourselves.
Tanya Jakusconek: Okay, great. Thank you so much for taking my questions. Good morning, everybody.
Tanya Jakusconek: I just wanted to circle back on that 2028 guidance and not to be...
Speaker Change: You know, just tip-taps, but...
Tanya Jakusconek: Would it be fair to have assumed that within that 120,000-135,000 GEOs at about 9,000 would have been that eco-gold and would more likely be towards the lower end of the range than the upper, just so that we can benchmark ourselves?
Jason Attew: So it's a great question, Tanya, and thanks for participating this morning. So, $9,000 was approximately what we were budgeting. And again, you can get it from Victoria Gold's, obviously, production guidance for 2024 per year. And so, if you actually, you know, For more information, visit www.cosmos-tumazos.com almost four and a half years out, whether it be contributions from the Eagle Mine in particular. And so we haven't changed our five-year outlook. We just don't have the information to make that adjustment. And if we do get that information, obviously, we'll let the market know, but probably in February when we put out our annual guidance for 2025 as well as their updated five-year outlook.
Speaker Change: So it's a great question, Tanya, and thanks for participating this morning. So, yes, $9,000 was approximately what we were budgeting. Again, you can get it from Victoria Goals, obviously, for action guidance for 2024 per year.
Speaker Change: and and so if you actually you know
Speaker Change: forecast that forward. It would be somewhere around that number. All that said, though, as I mentioned, we give our five-year outlook and our five-year guidance in February . I think it's far too early at this stage.
Speaker Change: information is still coming in specifically with that asset to know whether or not you know
Speaker Change: Almost four and a half years out, whether it be contributions from the Eagle Mine in particular.
Speaker Change: and and so we haven't changed our five-year outlook.
Speaker Change: We just don't have the information to make that adjustment, and if we do get that information, obviously we'll let the market know, but very likely in February when we put out our annual guidance for 2025 as well as their updated five-year outlook.
Jason Attew: Fair enough. Maybe just moving on then on to just finish off on the transaction front. I know on the last conference call you talked about one or two meaningful transactions, and now Jason, you mentioned that there's one more meaningful transaction for 2024 you hope to get done by year end. Are we still talking about the $50 to $300 million range? And are we still talking about a syndicated transaction, or are you still looking at just the extreme deal?
Speaker Change: Okay, fair enough.
Speaker Change: I'm maybe just moving off then on to just finish off on the transaction front. I know the last conference call you had talked about one or two meaningful transactions and now Jason you mentioned that there's one more meaningful
Speaker Change: For 2024, you hope to get done by year-end. Are we still talking that $50 million to $300 million range, and are we still talking a syndicated transaction, or are you still looking at just a stream deal?
Jason Attew: Great question, Tanya. Look, I think we have a very good blueprint now of what we can do as Osisko Gold Royalties, working with partners like Franco and some of the other senior royalty and stream players. So yes, I'm still a big believer in syndicated deals. Yes, we are looking at large, chunky acquisitions of the magnitude that you've mentioned. We are also looking at some smaller ones that we do think will be accretive to our shareholders going forward.
Speaker Change: Question Tanya, look I think we have just on the syndication front we have a very good blueprint now of what we can do at Osisko Gold Royalties.
Speaker Change: Working with partners like Franco and some of the other senior royalty and stream players. So yes, I'm still a big believer in syndicated deals.
Speaker Change: Yes, we are looking at large, chunky acquisitions in the magnitude that you've mentioned.
Jason Attew: Nothing is guaranteed, obviously. The team is working very hard to close some of the business issues that we may have on, again, a very important, meaningful transaction that will really set the company up and go forward. But yes, we are looking at transactions anywhere from US$50 million all the way up to US$300 million, some of them syndicated and some not.
Speaker Change: We are also looking at obviously some smaller ones that we do think will be creative to our shareholders go forward.
Speaker Change: Nothing is guaranteed, obviously. The team is working very hard to close some of the business issues that we may have.
Speaker Change: Again, a very important, meaningful transaction.
Speaker Change: That will really set the company up to go forward. But yes, we are looking at transactions anywhere from U.S. $50 million all the way up to $300 million U.S. dollars.
Speaker Change: and some of them syndicated and some not.
Tanya Jakusconek: Okay, that's helpful. And that just comes to my next question with respect to, I mean, if this is the case, and we're looking for this sort of size deal coming towards the end of the year, can I assume, you know, we're getting this debt down quite quickly? Can I assume then return to shareholders' capital allocation, you know, we have thought perhaps, you know, looking at maybe, you know, you know, share buyback, would that be out of your range in terms of being able to also take that on in addition to a larger deal?
Speaker Change: Okay, that's helpful. And that just comes to my next question with respect to, I mean, if this is the case, and we're looking for this sort of size deal coming towards the end of the year, can I assume, like, you know, we're getting this debt down quite quickly.
Speaker Change: Can I assume then return to shareholders capital allocation?
Speaker Change: We had thought perhaps looking at maybe share buyback. Would that be out of your range in terms of being able to also take that on in addition to a larger deal?
Jason Attew: So look, I think we've got ourselves to a position, as I mentioned in the call, where we have tremendous financial flexibility and capability now that we've got our net debt down to approximately $40 million. We'll be in a cash position very, very soon here. And so we obviously go through the capital allocation decision tree that you're quite familiar with. We do, as you're aware, have regulatory approval for a normal course issuer bid for buyback. We view that as a tool, though, Tanya.
Speaker Change: So look, I think we've got ourselves to a position, as I mentioned in the call, where we have tremendous financial flexibility and capability now that we're in a pandemic.
Speaker Change: Approximately $40 million.
Speaker Change: We will be in a cash position very, very soon here.
Speaker Change: and so we obviously go through the capital allocation decision tree that you're quite familiar with.
Speaker Change: We do, as you're aware, have regulatory approval on a normal course issuer bid for buyback.
Jason Attew: Obviously, our preference is to redeploy our capital into meaningful accretive transactions. However, again, if we can't get things complete, or if we get things complete that are cash flowing, that does give us, you know, the comfort that we should be essentially lowering our share count, which is really predicated on our share price at the time. Not surprisingly, you're going to hear that management and myself think we're undervalued, and I know your research suggests it in terms of our peers as well.
Speaker Change: We view that as a tool, though, Tanya. Obviously, you know, our preference is to redeploy our capital into meaningful, creative transactions.
Speaker Change: However, again, if we can't get things complete or if we get things complete that are cash flowing, that does give us, you know, the comfort that we should be essentially lowering our share count.
Speaker Change: really also is predicated on our share price at the time. Not surprisingly, you're going to hear that management and myself think we're undervalued and
Speaker Change: research suggests in terms of our peers as well so it is a tool that we certainly are contemplating using and it really will be we're really trying to be opportunistic around
Jason Attew: So it is a tool that we certainly are contemplating using. And it really will be we're really trying to be opportunistic around. Again, if we do see some pressure with respect to our stock price in the following months and moving into the year-end, understanding that we have some capital we may deploy right into projects and deals that I talked about earlier. Okay.
Speaker Change: Again, if we do see some pressure with respect to our first stock price in the following months and moving into the year end, understanding that we have some capital we may deploy right into projects and deals that I talked about earlier.
Tanya Jakusconek: Okay, so would you have a preference then if you accept capital then for dividends, or would you prefer, I know it's share dependent, but allocation to shares by the
Speaker Change: Okay, so would you have a preference then if you had to accept capital then for dividend, or would you prefer, I know it's share dependent, but allocation to share by that?
Jason Attew: So I think that's the discussion that we continue to have with both management and the board. I think they both have very good uses. As you know, we increased our dividend by 8% this year. We want to, again, see the predictability and consistency of your business. A lot of it.
Speaker Change: So I think that's the discussion that we continue to have, both management and board. I think they both have very good uses. As you know, we increase our dividends.
Speaker Change: By 8% this year, we want to, again, seeing the predictability, consistency of your business. A lot of it is underpinned by the commodity price.
Jason Attew: is underpinned by the commodity price, in particular.
Tanya Jakusconek: We do think dividends are a meaningful way to return capital to shareholders. But in the same sense, as I said, we want to be opportunistic in leading the company so that your share price is not reflective of our fundamental value. We will certainly be looking to use the buyback process.
Speaker Change: In particular, we think the dividends are a meaningful way to return the capital to shareholders.
Speaker Change: But in the same sense, as I said, we want to be opportunistic for leading the company to your share price not being reflective of our fundamental value. We will certainly be looking to use the buyback process.
Jason Attew: Okay, and then just my final question is Sorry, my final question is just on benchmarking myself. When I looked at Casabelle and I took into account the SoGold study, so based on their study, and I think we looked at it in a $1,900 gold price environment or thereabout, an internal rate of 6% to 7%, is that a fair return in terms of what you would have seen?
Speaker Change: Okay. And then just my final question.
Speaker Change: Sorry, my final question is just on benchmarking myself.
Speaker Change: Thank you.
Speaker Change: When I looked at Cathabal and I took into account the Fogel's, you know, study, so based on their study, and I think we looked at it in a $1,900 gold price environment or there about an internal rate of 6 to 7 percent. Is that a fair return in terms of what you would have seen?
Jason Attew: Look, I think there's a lot of moving pieces here. Based on the pre-feasibility study that Sogo put out, we would say that the return for our shareholders at that price is high single-digit. And obviously, anything beyond those commodity prices is more incremental. There are a number of components to the deal, as you're aware, around the condition precedent in terms of the funding. There are, obviously, buyback rights for the operator in the first three years, the buyback right being a lesser amount of 33%.
Speaker Change: Look, I think there's a lot of moving pieces here. Based on the pre-feasibility study that SolGold put out, we would say that the return for our shareholders at that price is high single digits.
Speaker Change: And obviously, anything beyond those commodity prices is more incremental.
Speaker Change: There are a number of components to the deal, as you're aware, around the condition precedence in terms of funding. There's obviously, as you're aware, buyback rights for the operator in the first three years, a buyback right lesser amount on 33%.
Jason Attew: It's within five years that gives us a guaranteed rate of return. So there are a few nuances to Tanya that, depending on what happens in Ecuador with the cascadella, is actually still operating the mine at the time, will impact. Okay, well, we'll
Tanya Jakusconek: Five years and give us a guaranteed rate of return. So there's a few nuances to Tanya that depending on what happens in Ecuador with Cascabel and who is actually building and operating the mine at the time will impact the return.
Tanya Jakusconek: Okay, well, we could take that offline. Thank you so much for taking the time to answer my question.
Speaker Change: Okay, well, we could take that offline. Thank you so much for taking my questions.
Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Brian MacArthur with Raymond James. Your line is now open.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question, please press star 1.
Speaker Change: Your next question comes from Brian MacArthur with Raymond James. Your line is now open.
Brian Macarthur: Good morning and thank you for taking my question. Jason, I just want to go back to the security on Eagle and I appreciate there are a lot of moving parts and you don't have all the information, but when you say you have an inter-creditor agreement and security over the property, is that peri-passu with the senior lending syndicate? I'm just trying to figure out, you know, this may come down to relative negotiating power, to the extent you can or are willing to comment on that.
Brian Macarthur: Good morning and thank you for taking my question. Jason, I just want to go back to the security on Eagle and I appreciate there's a lot of moving parts and you don't have all the information.
Speaker Change: But when you say you have an inter-creditor agreement,
Speaker Change: and security over the property. Is that peri pastu with the senior lending syndicate? I'm just trying to figure out, you know, this may come down to relative negotiating power, to the extent you can or are willing to comment on that.
Jason Attew: Yeah, look, Brian, thank you for that question. Unfortunately, the intercreditor is not a public document at this point. So all I can say is we feel very, very confident in our protections through that agreement. And as I said earlier, we have security over the property; we have a registered interest in land recording with the Yukon Territory. If the company does go through a CCAA process, we're quite confident that our rights will continue in any sort of restart of the Eagle Mine. And so we are a secured creditor, but the specifics, unfortunately, because it's a confidential document, I can't give you all the details around the intercreditor, but we've got the appropriate protection.
Brian Macarthur: Fair enough. Thanks very much. That still helps with the caller. Thank you.
Speaker Change #100: Yeah, look, Brian , thank you for that question. Unfortunately, the intercreditor is not a public document at this point, so all I can say is we feel very, very confident in our protections through that agreement.
Speaker Change #100: And as I said earlier, we have security over the property. We have a registered interest in land recording with the Yukon Territory.
Speaker Change #101: If the company does go through a CCAA process,
Speaker Change #101: We're quite confident that our rights will continue in any sort of restart of the evil mind.
Speaker Change #101: And so we are a secured creditor, but the specifics, unfortunately, because it's a confidential document, I can't give you all the details around the intercreditor, but we've got the appropriate protections.
Speaker Change #102: Fair enough. Thanks very much. That still helps with the caller. Thank you.
Operator: There are no further questions at this time. I will now turn the call over to management for closing remarks.
Speaker Change #102: Thank you very much. Thank you. Thank you.
Speaker Change #103: There are no further questions at this time. I will now turn the call over to management for closing remarks.
Jason Attew: Thank you very much for joining us this morning. With respect to some of the questions that have come in during the webcast, we will answer them offline, so thank you for your participation in that regard, and I hope everyone has a very good week. Thank you for your time this morning.
Speaker Change #104: Thank you very much for joining us this morning. With respect to some of the questions that have come in the webcast, we will answer them offline, so thank you for your participation in that regard, and I hope everyone has a very good week. Thank you for your time this morning.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Speaker Change #105: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Speaker Change #106: Thank you.
Speaker Change #107: www.globalonenessproject.org www.globalonenessproject.org