Gold Royalty Corp.

good morning everyone i'm your host joanne jobin and i'd like to welcome you to the gold royalty town hall forum hosted by vid media today's town hall will be focused on gold royalties quarterly performance including financial results and will be hosted by ceo david garofalo cfo andrew gobbles and peter benke who's the manager of corporate development and investor relations After the presentation, I will be delighted to moderate submitted questions from our audience. And now a few words on the company. Gold Royalty Corp is a precious metals focused royalty and streaming company offering creative financing solutions to the metals and mining industry. It currently has a diversified portfolio of over 190 royalties located in mining friendly jurisdictions throughout the Americas. The company's business model includes acquiring royalties, streams and similar interests at varying stages of the mine life cycle to build a balanced portfolio offering near, medium and longer term attractive returns for you, the investor. Now, one more item before we commence. If you do have any questions for the company, please place them into the Q&A tab at the top of your chat sessions. And please ensure that you fill in the short questionnaire at the end of the presentation. This really helps us and the company communicate more effectively with you for future town halls. And before I turn it over to the team, please note the forward-looking statement at the beginning of this presentation. David, the stage is yours.

Well, good morning, everybody. And Joanne, thank you so much for the kind introduction. As Joanne said, I will be joined shortly by Andrew Goebbels, who will talk about our quarterly results for the second quarter. And then Peter Benke, who will talk about the portfolio and update on our many assets with a diversified portfolio. But what I thought I'd do to kind of launch this discussion with you today is talk about the broader business, the gold markets, the state of the equity markets and our prospects going forward and the growth that we've achieved and expected to achieve going forward. So thank you so much for your time today. Delighted to take questions after our presentation and have a more fulsome discussion over the course of this hour. But thank you so much for your time today over the summer weekend. What I thought I'd do is what I'd like to welcome our existing shareholders. Delighted that you could join us today. But I thought for the newer shareholders, just give you a brief overview of the business. We are a precious metal focused royalty company, as the name of the company might indicate. But I would also say that while we're focused on precious metals, we have a very well diversified portfolio. with over 220 royalties in the portfolio across the Americas. So we have diversified asset exposure. And I would say that's the beauty of the royalty model is that we can offer a measured diversification far beyond what an operating company can offer. There's a practical limit to what even the biggest gold producing companies can manage within their portfolio, no more than maybe a dozen assets. There's really no limit to the amount of diversification we can achieve in our royalty portfolio because we're not managing the mines, we're effectively just managing a portfolio of contracts on these mines on which we own royalties. And so with a very small contingent of employees, eight full time equivalent employees, we could run a business ten times the size with the same contingent. So that means our cost structure is quite stable and is by virtue of our top line exposure. In other words, we get a royalty on the gross revenue from these mines. We have a very scalable business, one that has increasingly higher margins as our portfolio growth is achieved over the course of the next several years. So our margins will continue to expand our ability to return capital to shareholders we think will expand over time as well. As I said, over 200 royalties in the portfolio, a lot of expiration stage royalties, but we have a broad array of assets across the broad spectrum in the mining business from early stage expiration right through to production. We have five cash flow producing royalties, but I would say we also have a royalty on three of the biggest producing gold mines in North America. So it's not just a quantity proposition, it's a quality one as well. So we have tier one assets to provide an underpinning foundation to our business that will provide royalties for many, many decades to come. and significant optionality within all those early stage expiration opportunities. And the beauty of this model is once you own a royalty, you own it outright. You never have any capital calls. We don't have any capital commitments in our portfolio, which means that we have nothing but upside in our royalties once we own them. And so that's a lot of optionality for shareholders, not only for the gold price, but in the exploration and development success of our operating partners, which is also quite well diversified. And the reason we've been able to grow this business so rapidly over the last couple of years, I would say, is is a testament to the organizational depth that we have within our board and management collectively. We have over 400 years of industry experience. And that's given us unmitigated access to anybody in the mining industry. That's why we've been able to pick up assets almost all on a bilateral basis rather than competitive processes, which tend to result in royalty companies overpaying for assets. We have not overpaid for assets. We've had significant value, not only on an absolute basis, but on a per share basis since we launched this company a little over two years ago. And I'll get into a little bit more detail over the course of the presentation on that very topic. But before I do that, I thought I'd spend a little bit of time talking about the gold market. And the question I quite commonly get these days is, why isn't the gold price responding in these volatile times? And I would say it actually is responding extremely well on every front, in every major currency. In fact, gold is... is at an all-time high in every major currency other than the us dollar and even against the us dollar in spite of a flight to the us dollar across the world we've seen gold hold its value uh hovering around two thousand dollars an ounce very close to its all-time nominal high in spite of the fact that we've seen a flight to the us dollar from uh other countries where there's been political and economic volatility. And we've also seen rising nominal interest rates, which generally tends to drive capital out of gold. But what we've actually seen is that gold has held its value in US dollar terms. And the reason quite simply is, is while nominal interest rates have been increasing an unprecedented clip through the tightening efforts of central banks globally, the reality is with inflation so deeply entrenched, real interest rates, we believe, are starting to fall. As real interest rates fall, the gold price tends to go up. And that's really been the historical correlation or negative correlation we've seen really since the early 1970s when the U.S. dollar abandoned the gold standard. And we've seen a significant decline in the purchasing power of the U.S. dollar. In fact, The purchasing power of the U.S. dollar since the early 1970s has gone down 90%. And you can see that gold has done extremely well and is an accurate barometer of that inflation that's become so deeply entrenched in our economy and has been amplified recently with the monetary expansion we've seen in the great financial crisis since 2008. And also the amount of economic and political volatility we've seen globally. A lot of parallels in this inflation cycle to what we saw in the 1970s when we had a war and an oil embargo in the 70s. And we have a war and an energy embargo today. We had widespread inflation in the 1970s driven by the monetary expansion as well. The U.S. dollar abandoned the gold standard. We've had that same type of monetary expansion since the great financial crisis. In fact, it's been multitudes and multiples of what we saw in the 1970s. And we do believe that the Federal Reserve and central banks are on the cusp of pivoting on nominal rates, and that will more deeply entrench inflation. And we think we'll drive gold prices to real all-time highs well beyond what we've experienced recently. In fact, if you took the gold price back in the early 1980s, which was a little over $800 an ounce, and inflation adjusts that to today's dollars, that would be over $3,000 an ounce. And the other question I quite often get asked is, why aren't the gold equities performing well? And if you look at all the bellwether stocks in the industry, whether it's Newmont, Agnico Eagle, Barrick Gold, they're at half the valuations they were back in 2000, 2020, excuse me, when the gold price was last $2,000 an ounce. There's been a significant compressions of multiples in the gold sector. And there's a few factors that really are behind that. You know, one is We've seen strong performance in the general equity markets. This year alone, in spite of the volatility we've seen in the markets and rising interest rates, the S&P 500 general equities are up 17% this year. So there hasn't been an imperative to drive investors into gold and gold equities as a hedge against volatility in the general equity markets. We think that's about to change. Because the valuations in the general equity markets are extremely lofty, particularly in the technology sector, which continues to rally quite strongly. But there are valuations and multiples that are really unsustainable in the long term. And we do think there'll be a rotation back into resource stocks, given the scarcity of resources in the ground. Also, I think the other fact that is driving depressed valuations, particularly in the producer universe in the gold sector, is the fact that inflation is infecting their cost structures as well. And that's put pressure on their margins. And as a result, we've seen valuations depressed on the producer side. That's why the royalty model is so attractive. If you believe in this bull scenario for gold, it's because it provides you that top line exposure value. by protecting you from inflation. That's the great thing. And also gives you the expiration upside of our operating partners. So as our operators drill out these deposits and grow them from an expiration standpoint and grow the resources, we get that exposure without having to pay for it. Last year alone, And this year, our operating partners invested each year over $200 million in exploration in their underlying assets. We got the benefit of that exploration upside, and we contributed precisely zero to their exploration budgets. That's another great feature of the royalty model. And as we start to see the gold price gather its momentum in the face of declining real interest rates, which we think is inevitable in this inflationary environment and the amount of debt that's been strapped on globally, we think the royalty companies are going to provide the best upside with the best protection against inflation. And the opportunity you see within the royalty sector, more specifically, is a re-rate potential for the smaller cap players. What we offer in the smaller cap universe in the royalty space is the ability to grow. We offer a quality portfolio, which I think is comparable in quality. in quantity with the most seniors in the space at Gold Royalty Corp. But what we offer is an ability to grow off a much smaller base. As great as Franklin, Nevada, Wheaton Precious Metals and Royal Gold are, and they are great companies, it's very, very difficult for them to grow off such a substantial base. And we think in time, you're going to see a rotation of the larger cap names as the gold price drives momentum into the smaller cap universe that offers that growth. We have 60% compounded annual growth in revenue right through the end of the decade. from our existing portfolio. So it's all organic. It's already all paid for. And as we realize and crystallize that growth, we see a rotation out of the larger cap players into the smaller cap ones. And that reprieve potential is immense, particularly given that we're trading at very depressed valuations on a consensus basis of about 0.5 times NEV. Things that we've been able to control is how we grow our business. And since our IPO, we've seen our royalty portfolio increase 12-fold. From 18 royalties, these are our foundational royalties back in our IPO to over 220 royalties today. And on a consensus basis, we've seen a five-fold increase in our net asset value, the underlying value of our business. And again, this is based on analyst consensus estimates. These are not our internal estimates. But we've been very careful about husbanding our share count. We've only seen our share count go up three and a half fold over the same period of time. So what that translates into is a 50% increase in the underlying value of our business on a per share basis. That's tremendous value growth over the course of the last two and a half years. And the other important milestone that we expect to achieve next year is free cash flow generation for the first time. That's remarkable in any business. From inauguration a little over two years ago to free cash flow positive within three years, I would challenge any business in any industry to be able to do that that quickly. That's, again, a testament to the quality of the assets we've assembled, the quality of the management team. that's affected this tremendous growth in our net asset value. And as we'll see a little later on in the presentation, as Andrew and Peter get into it, tremendous revenue growth, free cash flow growth in the short to medium term. We have had in the face of scarce capital resources, to defer and suspend our dividend. But that's for a specific reason. We had the opportunity to acquire a very high quality copper silver royalty on an existing world-class mine in Mexico operated by one of the largest copper producers in the world, Capstone, which will add tremendous revenue growth in the short term. And I'm very confident that over time, as we start to generate free cash flow, positive free cash flow next year, that we'll revisit that dividend and reintroduce it back into the company. So with that, what I'd like to do is pass it on to Andrew to talk about our operating results for the second quarter of 2023. Andrew? Thanks, Dave.

As they've mentioned, I'll run you through some of the highlights of our second quarter. In Q2, you'll note we've maintained our financial guidance of $5.5 to $6.5 million of revenue and land agreement proceeds for the year. Now, this is despite lower revenue in the second quarter, which has really been due to resequencing of production within the Barnett pit at the Canadian Malartic mine. We are confident that that cash flow expected from Malartic will be substantially recovered in the second half of this year. And as a result, have maintained our financial guidance for 2023. Our Q2 2023 cash operating costs were down 30% compared to the second quarter of 2022. Now, this continues a trend which occurred in the first quarter, and we expect to continue going forward as well. It has been a concerted effort to focus on ensuring we have cost discipline in our business, which has been borne out in the last two quarters. The lower operating costs has helped offset the lower revenue, as I mentioned before, and contributed to an unchanged adjusted net loss per share of two cents in the quarter. We're also on track to meet our expectations for recurring cash operating costs of between $7 and $8 million for the year. In the quarter, our operators, including Niko Eagle, IAM Gold, Barrick Gold, Wallbridge, and I-80, amongst others, all announced positive developments at their respective projects. Given the weighting in our portfolio towards the growth end of the market, this has further de-risked our world-class portfolio and given us even more confidence about our future. To compliment the positive momentum of these growth assets, as Dave mentioned just previously, we announced the acquisition of the producing Cozumel royalty at the end of July. This royalty adds immediate cash flow from established copper mine in Mexico and fits quite well with our current portfolio. Finally, our team in Nevada has generated two new royalties through our proprietary royalty generator model. This is something that's unique to Gold Royalty. We're the only royalty company that does have a dedicated team focused on generating new royalties in this manner. And we've created 37 new royalties within the company since 2021. Now, taking a quick glance at our capital structure and capital markets activity in the second quarter, Our share and capital structure remained fairly consistent in the quarter with the company continuing to generate strong trading liquidity of around a million dollars of shares traded per day. That again is in excess of many of our smaller competitors. We also had two new analysts initiate research coverage in the second quarter. which also adds to more of the flow in our stock. Scotiabank initiated with an outperform recommendation and a $3 target price, and National Bank also initiated coverage also with an outperform recommendation and a $2.85 share target price. Scotiabank and National joined our five other existing analysts, all of which have target prices well above Gold Royalty's current share price. Now, let me add a few points on the new Cozumel royalty. As I mentioned at the end of July, we acquired a 1% NSR on the Cozumel copper silver mine in Mexico. Many on the phone who are familiar with capstone copper will be familiar with this mine. It's been operating for quite a while. The Cozumel royalty is immediately cash-flowing. It's generated roughly a million dollars in royalty proceeds for the holder of the royalty over the last 12 months. So we do expect it to be additive to our near-term cash flow profile as well. We're bullish on copper prices. We are primarily a precious metals royalty company, but we do see the appeal of good quality assets in commodities such as copper as well. And in this scenario, consistent with some of the other assets in our portfolio that are more growth-weighted, we're very excited to be working with a great operator that our team knows very well in Capstone Copper. This team has had a strong performance track record at the mine over a number of years, which is very positive for us as well. The royalty, as I mentioned previously, fits very well in our existing portfolio, complements our growth profile by adding that immediate cash flow in the near term. A few more words on Cozumel. The mine itself has consistently operated within the first quartile of a copper cash cost curve, which gives it quite a bit of defensibility in a volatile market. The mine life extends to 2030 based on its current reserves. And with current brownfield exploration, we see good potential for continued resource conversion. and potential mine life extension. Moving forward, we were also encouraged by drill results in the Malinoche and Malinoche footwall zones, which could add additional resources into the mine plan. Now, for more information, as with all the royalties in our portfolio, I do encourage you to review Capstone Copper's disclosure on the Cozumel mine. Now, with that, I will pass it on to Peter to provide an update on our portfolio.

Thanks, Andrew. So continuing to speak to the recent acquisition of the Kosman Royalty, this was really a strong complementary fit to our existing portfolio. It's widely known that we have a development and exploration heavy portfolio with a lot of very strong key assets coming down the pipeline and entering production in the near term. However, Cozumel immediately stimulates our revenue and our free cash flow in 2023. Also, with Cozumel being operated by Capstone Copper, a multi-billion dollar producing company, it really fit in well with our existing suite of operating partners that represent the largest gold mining companies in the world, such as Newmont, Barrick, and Agnico Eagle. An important point on this chart, the pipeline of exploration development and producing assets, is that it's dynamic. We've seen several advanced exploration assets move forward towards development. Assets like phenylon have a PEA defined around them and seeing those projects move towards production over the next several years. And we'll continue to see that in future quarters as early exploration stage assets have resources delineated on them, given the significant amount of drilling that's been completed across the portfolio. and more economic studies completed across the advanced expiration stage assets within our portfolio.

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What this pipeline delivers to us is pure leading revenue growth. Despite a lighter Q2 in revenue, our long-term outlook, based on consensus estimates of revenue growth, are unchanged. We see several assets coming online over the next few years, Canadian Malarctic ramping up at Odyssey, and now the addition of Cozumel into our revenue profile, fueling our revenue growth over the next three years. Beyond 2026, towards 2027, 2028, and the end of the decade, we see even more significant revenue growth as Odyssey fully ramps up as an underground operation at Canadian Malarctic, specifically with the Odyssey North and East Malarctic deposits ramping up over the last two years of the decade. Speaking to the specifics of some of the specific catalysts across the portfolio that are driving that growth I highlighted on the previous slide, three of our producing assets, Odyssey Mine, Borden Mine, and the recently acquired Kozum & Mine, are all expected to increase in revenue over the next several years. The first initial production from Odyssey South started in 2023, March of this year. And they're transitioning to over 500,000 ounces a year of underground production by the end of the decade. A key area of upside at Odyssey is the internal zones, which are primarily located under our royalty coverage area and are identified as potential increased production from the internal zones during the transition period per Agnico Eagle. The transition period being between the years 2024 and 2028. At Borden, we expect to see increased production as Newmont continues to mine further at depth where our royalty is covering the existing mine workings. We had a strong Q2 and are bullish to see that trend continue going forward. Finally, Cozumel will have partial or expect to have partial revenue in 2023 for the second half of the year, but will benefit from a full year of revenue at Cozumel in 2024. And Capstone has continued to highlight the area under our royalty as a key area of exploration upside. So we're bullish to see that mine life extended into the future beyond the existing mine plan based on reserves. Beyond these producing assets, Cote Gold is the most immediate catalyst within our profile in terms of revenue growth. IAM Gold came out with their Q2 results yesterday and outlined that the project is 86% complete construction, and they are on track to deliver initial production in early 2024. By early 2024, our estimate would expect that to be sometime in Q1. And Gold's Royalty would then benefit from the majority of 2024 being cash flowing from Cote. Beyond Cote, we have a suite of Nevada-based assets fueling our revenue growth between 2025, 2026, 2027. Gold Rock is a satellite deposit to the Pan Mine operated by Caliber. There's an expected release of a feasibility study and a construction decision to be made in 2024. And given the proximity to existing infrastructure, this asset could be brought into production shortly thereafter. Wren, one of our cornerstone assets, the northern extension of the Gold Strike mine, continues to be advanced by Barrick, and they're looking to incorporate this into the mine plan in the near term. Currently, I believe they're in the process of reviewing the internal studies on how to incorporate it into the overall mine plan at Carlin. The last two Nevada assets here, Railroad Pinion, acquired by Orla Mining from previously Gold Standard Ventures. Permits are expected in the second half of this year for Railroad and then advancement thereafter with potential production by the end of 2025, early 2026 from Railroad Pinion. And finally, Granite Creek, one of the assets in IAD Gold's hub and spoke strategy in Nevada. They gave a comprehensive overview of the asset and are looking to update studies in the second half of 2023, an updated feasibility study and an updated PEA and resource estimate for the South Pacific zone, a key area of high grade upside at Granite Creek. They are doing some smaller scale mining at Granite Creek already. and some toll milling with the ore there, but are ramping up production towards 1,000 tons per day in 2024. Beyond these development and producing assets really fueling our growth, a couple of key development stage assets that we don't have a clear line of sight to cash flow or revenue on, but are coming down the pipeline and have had significant investments put into them. The first being Fenelon, a PEA was published on the project in June of this year, which outlined a 12.3-year mine life, over 200,000 ounces a year of annual production, and Gold Royalty holds a full 2% NSR over this project. So we're excited to see Walbridge continue to deliver and de-risk that asset in a great jurisdiction in Quebec. Finally, our royalty over the Whistler Project in Alaska. This was recently spun out into a company called U.S. Gold Mining Inc., who raised $20 million through an IPO on the NASDAQ and have just commenced their inaugural expiration program on an asset that is fully permitted and fully funded now for a two-year program driving forward towards a PEA later next year. This just reiterates a lot of the key highlights I just spoke to. Advancements at Odyssey, specifically with East Malartic and Odyssey North ramping up at the end of the decade and the internal zones representing near-term upside. Cote, well on track for production next year. Wren, continuing to be advanced. And then the suite of development and advanced exploration assets fueling our growth for the second half of this decade. Beyond those key assets, and not to run through the laundry list of the 220 plus royalties we have in our portfolio, It really is that optionality within our portfolio we want to highlight. With nearly 2 million meters of drilling across the portfolio in the last three years, all that exploration investment really does accrue to gold royalty and is somewhat difficult to quantify in the near term. But over time, all that investment results in increased resources, de-risking of assets, economic studies, and ultimately increased production and cash flow for the gold royalty portfolio. We're still primarily anchored in the best mining jurisdictions in the world in Quebec, Ontario and Nevada. And we do have the recent addition of one royalty in Mexico, our first entry into that country. To briefly touch on our commitment to sustainability, as our existing shareholders and many of you will know, we published our inaugural sustainability report and asset handbook earlier this year, really striving for best practice and disclosure in terms of our quarterly reporting, but also in terms of these annual reports that provide a deep dive into the portfolio. And I'd implore you to review them when you have a chance. it's an exercise that we'll be completing annually and we'll update as the portfolio advances and develops and changes over time, given, given how dynamic it is. We, uh, We've made a commitment to sustainability across our business. As a royalty and streaming company, we don't have a direct influence on the operations. So it's very important we do that due diligence up front to make sure we're partnering with the right operating partners. And I think that's reflected in the quality of the portfolio we have and the quality of operators that are running the mines we hold royalties over. So with that, I bring Dave back on to wrap things up before we go into Q&A.

Well, thanks very much, Peter. And we will open it up to Q&A first. But what I thought I would do is just, again, summarize the compelling story behind gold royalty, the opportunity we see in terms of our tremendous growth, but also deal head on with the fact that our stock has been significantly underperforming over the last year or so. And I think we're in a market right now where growth is very heavily discounted given the rising interest rate environment. As I said earlier on, we've seen even the bellwether stocks in the industry significantly underperform the general equity markets. The largest cap players in the gold universe are at half the valuation they were back in 2020 when the gold prices last through $2,000 an ounce. We've been significantly hit on a relative basis because growth is being very heavily discounted. This is a very growth-oriented story with 60% compounded growth through the end of the decade in our revenues. It puts us in a position to start to generate strong free cash flow next year and start to talk about reintroducing our dividend, growing that dividend over time But in the meantime, in this market, the smaller cap universe is being very severely discounted, and particularly the names that have the most significant growth. But what we've been able to control is our cost structure. And with Andrews joining the company less than a year ago, we've seen a significant reduction in our cash operating costs, well over 30%. And so our margins will continue to expand as we start to see that revenue growth crystallize over the next year, particularly with Cote coming on next year. That'll represent a significant step change in our revenue and start to see free cash flow generation by the middle of next year, which puts us in an excellent position to continue to fund growth within our portfolio. And we have delivered significant value growth. And we have to focus on value in this very difficult market for gold equities. And we've been doing that by driving down our costs and adding high quality assets in the portfolio like Cozumel that not only deliver short term cash flow growth, but offers another long term, long life asset to provide an annuity for our shareholders and growth in our revenue for the long term as well. So with that, Joanne, I'd be delighted to take any questions from our investors today.

Thank you, David. And thank you for taking that question about being undervalued. That is one of the questions I was going to bring forward to you as there have been a few shareholders or people on today that have been asking about that. So it's great to see you talking about that first and foremost. All right. So let's get on to our first question, which has to do, of course, with the dividend. We're getting lots of questions about that. And, you know, are you going to reinstate it or are you just going to keep investing in the properties that you have or or potential M&A that you see coming down the pipeline?

You know, it's a suspension of our dividend for the time being. We do expect to be free cash flow positive next year. It's something that we're going to reintroduce at the right point. But we were faced with an opportunity to bring in a very high quality asset to the portfolio in the face of a market where capital is very scarce. The smaller cap players in the gold universe, whether it's junior explorers, royalty companies, are not able to raise fresh capital. So what we're having to do is reallocate scarce internal capital. And I would add, we've added the Cozumel deal without any dilution to our shareholders. We've grown the value of our business by doing that, but also added cash flow per share growth, immediate cash flow per share growth by introducing a very high quality long life deposit into and mine into the portfolio.

Okay, great. Next question. What are the main areas for cost savings and for further decreases in cash costs? Because you did such a great job with Andrew this year or this quarter.

I could take that. Thanks, Joanne. The main areas for cost savings was really... I guess first and foremost, people on the phone are aware that the company grew quite quickly since its inauguration through a couple of corporate acquisitions in particular. With those acquisitions came consolidation of some corporate entities. There was some overlapping in roles within the company. I think some of the savings have come from a decrease in consulting fees and professional costs by bringing in administrative activities in-house in Vancouver. There has been a focus on sharper negotiations with our insurance providers, and particularly with our track record year on year, we've been able to bring some of the insurance costs down. We've taken a more holistic view on some of the cash spent on marketing activities and really focused on the most value add areas. And lastly, with respect to just general office and IT spend, just tightening up in areas where I felt we could make some tangible savings. So all in all, I think with where we're tracking and with the line of sight on what our peers are doing, I think we've done a great job of bringing those costs down. And I expect with the team we have, we should be able to operate the company on a very efficient, effective manner on the cost base that we're projecting for 2023.

Thank you, Andrew. I'm going to ask you this question again, because I think you did address it when you at the top before you got into Q&A. But can you comment one more time on why you think other royalty companies are not down as much as gold royalty?

Well, I think the reason is, is quite frankly, in a rising interest rate environment, any growth oriented stock, not only in the mining industry, but I think more broadly has been very severely discounted. This is not a market that's paying for growth. It's paying for free cash flow today. It's a very defensive market, particularly in the commodity space. And the ones that offer that free cash flow immediately are the ones that are getting discounted. at least the better relative valuations. The whole sector is down dramatically. There's been a severe compression of multiples in the sector generally. But the ones that offer free cash flow now are generally the ones that are providing defensive postures in a declining market for gold equities, more broadly speaking.

Thank you, David. So what is the mix between royalty revenue and land agreement proceeds for the year?

Yeah.

Yeah, so outlined in our recent financials, we're expecting approximately 3.2 million in land agreement proceeds in 2023, assuming all existing option agreements are fully exercised by the counterparty. The way we structure these agreements through our royalty generator model is really to incentivize the operator to move forward the asset. And the prize jewel for us is retaining a royalty on these assets. So we do fully expect that that $3.2 million is realized. And then the balance of our guidance of $5.5 to $6.5 million will be made up in royalty revenue this year.

And I just want to emphasize the unique aspect of that pillar of growth within our business. We're not only generating those royalties for free, we're getting paid to generate those royalties for our shareholders. Jerry Boffman in particular in Nevada, he stakes exploration claims around existing mines, existing deposits, waits for the neighbors to knock on the door and says, yeah, you can have the property, but you're going to have to pay me an option payment. You're going to have to make a work commitment on the property and you're going to have to give me a royalty. So we're not only generating getting the royalty back for free through Jerry's Sweat Equity, they're giving us options as they're exploring those properties. So it's going to become a meaningful pillar of our revenue going forward. We're not assuming that we're going to be able to sustain it long-term. When we look at our projections of our revenue, we've just only included our revenue projections, the ones where we have committed option agreements today. But the reality is this is a sustainable business. This is a business that will continue to deliver revenue for the long term, given the expertise that we have on the ground through Jerry and his small teams efforts in Nevada in particular.

I think I'll just add to that. It's a very cost-effective business as well. Our mineral interest maintenance expenses in the first half of the year is only about $80,000. We've got Jerry Siler. He's really a one-man team for the most part. So the cost of this business, given the cash flow it brings in, is a great addition to our normal course royalty business.

Okay, excellent. Next question. What is your expected ROI on your latest announced royalty acquisition?

Yeah. Yeah. So based on our estimates and the historical revenue from Cozumel, pick your copper price. But IRRs are estimated between eight and a half and twelve and a half percent for the Cozumel acquisition. So quite accretive and very competitive based on other precedent transactions recently, especially given the quality asset and the fact that it is immediately cash flowing.

And I should add, that's just assuming reserves to the end of 2030, if you include resources, and they've had a very strong track record of converting resource to reserve, that would bring the mine life out to 2036. And just remember, Cozumel started production in 2007 with about five years of reserves ahead of it. And here we are almost 20 years later, it's still producing, still adding reserves, still very prospective, with a very well-capitalized, strong operator in Capstone.

Thank you. Next question. Why was Canadian malarctic revenue so low for this quarter? And will this revenue be made up in future quarters?

I can start with that. The Canadian Malartic Revenue, I must say, Canadian Malartic, Agnico Eagle, through their Malartic operation, is one of our best operators in terms of providing us advance notice of expectations on their mining throughout the year. So we do have a plan from them. for the year and expectations on which would help us with our projections. Simply put, given how mining is progressing within the Barnett pit and where our royalty sits, and a number of mining companies do this, throughout the year there has been some changes in their plan in terms of resequencing mining. We've been assured that that the ounces will come. It's a matter of a decision that the team at Agnico made throughout the first half of this year in terms of where they mined in that pit. As I mentioned before, we haven't made adjustments to our expectations in the back half of this year. In fact, we expect probably a little bit more from what they told us initially to catch up some of the revenue with the remainder coming through 2024. So from our perspective, we're very comfortable with respect to what the team at Unico is doing. Inherently, one of the major benefits of doing transactions such as Cozumel provides additional diversification of our cash flow sources because some of our mining partners do make decisions throughout the year in terms of where they mine. Looking forward with respect to Canadian Malartic and Odyssey as the mine heads from an open pit to going underground, I'm comfortable and confident that we will see more consistency in the cash flow profile from Canadian Malartic. But in this particular case, it really is just a resequencing of where the production happened throughout the year.

Thank you, Andrew. And Mr. Murphy from the UK wants to know, next year, the three-year warrants from the IPO expire. Is there any plan to extend the expiry date, given the outlook in the sector in general in the last 12 months?

No, there's not.

Okay. Is the company still focused on growth through consolidations?

Well, I think there are several avenues for us to grow. I think consolidation is more difficult in this depressed environment. It's very difficult to have a conversation on M&A with a counterparty whose share prices are plumbing 52-week lows as well. There's not a lot of financial incentive for them to look at consolidation in the sector. I think you'll see a lot of consolidation in the producer universe, all of whom are dealing with declining reserves and production are having to do that out of existential necessity. But I would say it's more difficult in the royalty universe where all the royalty companies are experiencing depressed valuations currently, at least in the smaller cap universe. I think we're going to continue to grow through other avenues. I've talked about our royalty generator model. We continue to generate two to three royalties per quarter, and that adds to our revenue to the option payments we get on the royalty generation. And it continues to pile on, which is positive. We'll continue to look at the acquisition of third party royalties as we did with the Cozumel transaction, which delivered very strong rates of return on a high quality long life deposit with a high quality operator. And from time to time, we'll look at project financings. Given the scarcity of capital in the gold universe, particularly for the junior explorers and developers, we're seeing more and more opportunities to help them finance their businesses. And what will drive our decision to acquire those assets is the length and quality of the life of the mine, the deposit quality, the geological quality of what we're acquiring. But also, is this something that will be cash flowing either immediately or in the very short term to add to the cash flow growth that we're going to have in the short to medium term?

All right. And speaking of M&A and organic growth, how are we being protected from a takeover?

Really, there's nothing to protect us from a takeover other than good share price performance. And obviously, we've underperformed. And I understand that. I understand the frustration that our shareholders have. But as long as we're continuing to fundamentally add value to our business, block by block, asset by asset, that is the best prediction. Ultimately, the market will pay you for that growth, particularly when it's crystallized. And this market is a show me type of market. Show me the growth and then we'll pay you for it. In better markets, when there's some momentum in the commodity and there's some momentum in the equities, the market starts to anticipate that growth and pay for it. We're not in that market today, unfortunately. But we will continue to do good things with our business, add good fundamental assets to the portfolio, as we've done with Cozumel, as we've done with Granite Creek last year, and bringing good shareholders like Barrick and Newmont, good strategic shareholders, gold mining who vended our initial assets into the portfolio, long-term strategic investors that support the stock because they understand the strategic vision, adding value over time with good long life, high quality assets in the best jurisdictions in the world.

And since you've already spoken about future cash flow, which you expect in the next quarter, can you talk a little bit about a potential buyback program? Would you consider it?

Yeah, and to me, that's the flip side of the same coin as the dividend. You know, buying back stock, returning capital to shareholders in any form is something we will look at as we start to generate free cash flow. We get back into free cash flow positive territory, or get into it for the first time next year, making sure that we do the things that drive our share price up, like returning capital to shareholders in whatever form is something that we're going to keep a keen eye on. At the end of the day, royalty companies are a collection of annuities. And there's no reason we shouldn't share those annuities with our shareholders in the form of returns of capital in whatever form.

Okay. And can you comment about the Monarch deal allowing buyback of royalties?

Yeah, no, absolutely. In that case, Monarch was in financial difficulty last year. In that case, we restructured the royalties in order to make them more attractive on their expiration properties, your expiration stage assets around the Brownfield Beaufort project. In fact, if those buybacks are exercised, we'd get all our capital back that we put into Monarch from day one, but we've retained fully the royalties on the Beaufort mine and Beaufort mill.

Great. And maybe we can just one more time reiterate how many assets we'll be producing by 2024, and then we can wrap it up as we are at the top of the hour.

Peter? Yeah, so we'll have five cash flowing royalties expected in 2024 with Cote entering production in addition to the four existing cash flowing royalties. We have currently Cozumel, Canadian Electric, Isabella Pearl and Borden.

Great. So, as I said, we are at the top of the hour, so we will end our town hall. But before we go, David, would you like to say a few words to the shareholders and audience members?

I'd just like to say thank you for your time and your patience today and your questions. And please don't hesitate to reach out to us directly, whether it's through our website and through our 1-800 number, through our emails. We're all available and accessible and happy to talk to you individually.

Thank you, David. And thank you, team. And thanks, everyone, for tuning in. The presentation will be on the website. We've had a few questions asking about that. And we will see you soon on the next Vid Town Hall Forum. Please don't forget to fill out the questionnaire as you exit. Goodbye, everyone. And thank you for tuning in.