Elemental Royalty Corporation

Hello and welcome to the Elemental Royalty Corporation quarterly earnings announcement. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad. For those of you viewing online, you can make questions at any time using the component on the webcast console. I would now like to turn the conference over to David Cole, CEO. You may begin.

Yeah, thank you very much, and thanks to everybody for joining. I'm particularly pleased to be here today representing this great company. What a wonderful time to be in the mining business with these strong metal prices, but I've had a chance to reflect on that when I woke up this morning. I was thinking about when I started my career, the mining industry was not very popular, and we're in a situation today where there's been a paradigm shift, and I'm sure we've all seen this. of people recognizing the strong contribution that we make to society across the globe. And that is recognized in commodity prices, but it's also been recognized in the capital markets, where many companies are starting to get the recognition that they deserve for their production. And more and more people are focused on understanding We're in a particularly good situation to take advantage of that. Those of you that heard us speak before, you know that we understand that royalties are phenomenal financial instruments. The value of mineral rights augments over time, and the best way to be exposed to that is through royalties, and specifically the optionality that the royalty instrument affords to us as the owner of that. And one way that we've done that and to create further portfolio effect as scale is rewarded within the royalty space, is to affect the merger between EMS Royalty Corporation and Elemental Altus Royalty. And I'm very pleased with how that merger has come to fruition and the results that we're seeing, which are producing the numbers that we have seen today in the quarterly report. And near and dear to my heart is the team, and it's my pleasure to introduce Frederick Bell and Stephan Wenger, a great example of the integration of the two teams. coming forward with an immense amount of experience base to put us in a position where we can make the right decisions to allocate your capital moving forward. So if we look at some of the highlights, we are gold-focused. We will remain gold-focused, but I'm very pleased that we, as per announcement today, we are augmenting our silver exposure. I believe that silver is a strong commodity in the current world from an industrial demand perspective, but also from an investment perspective. And to ensure that we remain precious metals focused so that we have the strong potential to be GDXJ index included in other various index funds that are focused on precious metals, on an ongoing revenue basis. We have 300 mineral property assets in the world in 20-some countries, and 200 of those are royalties. And this is a portfolio that has an immense amount of over $100 million a year in exploratory drilling ongoing, creating that discovery optionality. which is the real reason why you want to own royalties and royalty portfolios long term. We have crossed an important boundary from my perspective in the last quarter where we have reached the point where we feel very comfortable paying the dividend. And our inaugural dividend gives our shareholders the option to take that dividend with an in-kind instrument, with the XAUT tether gold stable coin. We're the first company to do this. I wouldn't be surprised if this ends up becoming popular within the business. And it's a nice option for our shareholders to have to be able to take the dividend in cash or in XAUT, which is fully convertible into physical metal on demand. I'll point out that our dividend payout ratio is modest. and that is because we're confident that we can continue to allocate capital within the space, document our portfolio, and do exactly what you want us to do. We've also increased our revolving credit facility to $200 million, and this is a good example of how the gaining of scale through the merger is increased our capital availability and decreased our cost of capital, enabling us to further our business transactions, and today's a great example with the deal that we have announced today. We've also uplisted now onto the TSX big board from the TSX Venture Exchange, and I'll point out that the augmentation of our liquidity, trading liquidity, on NASDAQ, which is done fantastically well. In addition to now on the big board on the TSX, our trading liquidity is multiples ahead of where the two companies were combined pre-merger. And we're very pleased to see that. Once again, that is very likely adding to the probability of us being included in a number of index funds in the near future, which is a salient point. There's a whole host of smaller deal flows that are ongoing within the company, and I'm pleased that even though we're in a competitive environment, we don't bemoan that competition. We're confident that we have the alpha to be able to outperform our competitors, and that's exemplified by the deals that we continue to do, both base hit, small individual deals that we're doing, in addition to M&As such as the one that was announced today. And I will point out that there will be a call specifically for this transaction with FISLA after this call later, in an hour after this call, in fact. And so we will focus on that. This call is to highlight the quarterly results. And with those quarterly results, I want to introduce the very capable Stephan Wenger, who will walk us through the record-breaking numbers that we have today.

It's a little bit funny that these fantastic financial results are going to get overshadowed by a really fantastic deal we announced this morning, but as a CFO, I'll take that any day. And I'm excited to share with you. Q1 of 2026 that we reported last night is really the first quarter of our combined results as the new combined elemental following the EMX merger. And I'm really pleased to report that the results are tracking even better than we anticipated when we did the deal. Today we're reporting record quarterly revenue, record EBITDA and cash flow, and we're well on track to meet our 2026 guidance. And on this slide, you can see that our revenue of $24.3 million is an 83% increase over the prior year for elemental. And if you annualize that number, you know, we're pushing up towards that $100 million run rate for revenue, which is advanced beyond our guidance on a revenue basis. From a GEO perspective, just about 5,000 GEOs sold during the quarter, which is right slightly just under our guidance for the full year. We're on track to meet that and demonstrating what we're going to be. at that 20,000 GEO a year level solidly. And from a cash flow perspective, nearly $18 million in adjusted EBITDA. I'll discuss our cost side on the next slide, but that EBITDA I see strengthening even more because this quarter we had quite a higher cost number than our anticipated annual run rate, just as you can imagine from all of the closing deal costs. the uplist on the TSX and NASDAQ, our inaugural dividend, upsizing the credit facility. We had quite a busy quarter, and that doesn't even speak to the fact that we are spending and quite active with respect to new loyalty acquisitions, which we also expensed during the quarter for most of those costs. So really excited about the $18 million in just EBITDA, 55% increase over the prior year. Operating cash flow of nearly $15 million, a substantial increase. And then, as Dave mentioned, we upsized our credit facility during the quarter as well. We have a $150 million undrawn credit facility with a $50 million accordion feature, so $200 million potential available, and add that to $70 million on the balance sheet. even after the cash component of the B-School transaction we announced this morning, will be net cash positive and fully ready to continue to transact in our space. And as we look a little deeper into the financials, just to follow up on my comment on a couple of the items, revenue continues to be strong. Our G&A expenses at $5.5 million are above our annualized run rate that I would expect. I would expect us to be closer to a $16 million annualized run rate on the G&A. Royalty generation expenses are right on budget and on track for a full year expectation there. We continue to generate strong cash flow. There were a couple non-cash items in the net income, including a mark-to-market on some warrants that are outstanding, and taxes and others. But we continue to generate strong results on a cash flow basis. You also see the first full quarter of full Casarones reflected in our revenue line item as a royalty instead of as an investment. So, on a comparative basis, we continue to show sort of that revenue plus attributable share of Casarones, but all of Casarones is baked into our revenue line for this quarter. And we're quite pleased to have Casarones along with T-Mark, Bonacro, and Carl Winda really driving these results from our cornerstone assets. Casarones with copper at $6.20 a pound right now, we're not going to argue with that either. And just moving forward to the cash flow bridge, we really had tremendous cash flow during the period and driven by collection of royalties primarily from our December quarter. Some transaction costs related to the credit facility and some deal costs that came out of it. We also had quite a positive impact from stock option exercises for some options that were expiring during the quarter. But a very clean, very targeted growth in our cash flow that we're quite pleased with. I'm not going to spend a lot more time. It was a fantastic quarter, really driven by our assets, and I'd like to ask Craig Bell to go ahead and give you an update on the portfolio. And again, I invite you all to join us for the conference call on the transaction in about 45 minutes' time.

both of these quarterly presentations when we go through the financials there. The real focus of our presentation here is on the producing assets and we touched on a few of the development assets that are really progressing. But I think that one thing that often gets underappreciated is that greater portfolio of call it 200 royalties at various stages and we are seeing record investment and record exploration dollars going into those projects by our counterparties around the world. So I think for that it doesn't always make the front page of the news, but that is a really important level of optionality that is inherent in our portfolio that I think stands out versus a lot of other companies our size and scale. We'll talk through on the next slide then just to uh a couple of the key assets here and we had record revenues this quarter from carla winder from from the bill from bonacro and from timok and you can see with catherine's that it was a it was a near record um quarter as well from that and on the carla winder front one of the important developments there that has been progressing over the last year has been this mine expansion that they are looking to do 150,000 ounces per annum from H2 onwards. And as of their last results, that is on track for commissioning in Q3 of this year. And I think they're looking to complete the build-out around middle of the year. And that is going to add approximately 30,000 geos in terms of what they're doing. 30,000 ounces of production there, attributable to us on the royalty going forward. We have broken it out here between the Enumex and the elemental portions historically, so that you can see it on a like-for-like basis, but you can see both Q4 and Q1 there as being historically high contributions from that asset. And it's great to see alongside the gold price, it's great to see strong copper prices. And of course, after gold, copper is the second most material commodity for us and where we get our exposure. Going on to the next slide, we talk here to Timok and that was a record quarter for Timok and again really important for I think people to appreciate that this is just from the upper zone and they have been over the past They have been increasingly in development in the lower zone and we're looking forward to a site visit shortly to the mine and getting an update there on progress and development. And as we have previously spoken to, that lower zone at Timok is going to be an order of magnitude larger than what they are currently doing at the upper zone and will be operating in parallel with the upper zone and is all subject to our royalties. So as well as hitting record revenue from the upper zone where they completed the expansion in December last year, they are also going to be going forwards, getting into that lower zone. So a really important asset for us there. We have record revenue at Quanticrobe, as the market is aware. That is Allied Gold currently being acquired by Zijin. And that has been, I believe, approved by shareholders and subject to getting that closed shortly. And then Leeville, where we were fortunate to get an update from the operator there on the plans going forward. And I think we remain really positive on the exploration upside in that royalty coverage area. And it was also a record quarter in terms of absolute revenue for us from what they are currently mining. On the next slide here, we do just pull out a few of the assets here that are, I think, experiencing key catalysts from that wider portfolio. And Laberton have said that they're updating their five-year plan. And they will have that out around the middle of the year in Q3. And we expect that to show for the first time some of the focus of Laverton ground, where we have our royalty, 2% to 4% royalty, to have that coming into the mine plan as part of that. And I think there is one deposit in particular at Beazley Creek, where we have 4% royalty coverage that they have highlighted as being a key resource, approximately double the grade of what they're existing mining, that they would like to get into that mine plan straight away. That will be an important update from Genesis there. At Cactus, we saw Arizona and Sonoran being acquired by Hub Bay. They had the shareholder vote 99% approval recently. So again, like Allied Gold's decision, we see the operator here moving to a bigger, larger mining company, which I think will have positive read-through for the project development going forward. We had Avrosilver's Diabolos actually putting out a resource update this week and they have guided to a feasibility study expected this year and a construction decision alongside that. And that is, I think it's great to see the resource growth that we saw just in the last week and it talks a bit to the quality of some of these underlying assets that are out there and Diabolos a bit like the Panuco Realty that we're acquiring today. It's one of the assets in the portfolio that gets us some silver exposure. At Mac Tongue, this is a royalty we only acquired in the last couple of years, but they are updating the historical feasibility study, still continuing to expect that to come out in 2027. I think we've seen a surge in tungsten market interest, both in the commodity pricing and look, this is the world's largest, highest grade deposit. On a standalone basis, we expect it to be a material contributor to the West's constant demand in the coming decades. So that will actually be a really material property for us going forward, and we look forward to seeing Farby's updates coming out later this year on it. On to the Bay, an asset that I think historically has really been underlooked. We have a 2% to 2.5% NSR on this. The previous feasibility was targeting 200,000 ounces plus a year of production. They are updating that feasibility study now. The majority shareholder acquired the company, consolidated their ownership, and that was done this quarter in Q2. So they are now wholly owned by Mansa. which is a private operator in West Africa. And they already operate the Caruso mine. It's about 100,000 ounces a year. And they are looking to now develop the base and talking about a construction decision in H2 of this year. And look, it's now a private company, so there's limited visibility. But for us, this is an asset that if they get through to that final customer, and fully financed, we are talking about a 2% to 2.5% uncapped royalty on 200,000 ounces a year plus of production from the last feasibility study. So essentially a really, really material contributor to the portfolio going forward. And then lastly, Viscaria, where they're working on the debt financing and they have first production targeted for 2027. So just taking those six projects alone in the portfolio, I think it contributes to our organic growth profile that we see if you go to the next slide here. We highlighted a bit here, but if we're looking in the years ahead, we're seeing order of magnitude, I think 50% organic growth to 2029. just from our existing portfolio before the addition of Panuco and Vizzla. And with that coming in, we are seeing the growth going up 75% in terms of organic growth from where we are today. So that is one of the strongest if not the strongest absolute growth profile in the industry in the multi-space in the coming years. And the great position that we're in today is that even after closing this acquisition, we will be in a net cash position. We will have an undrawn credit facility. We have a very supportive shareholder base that would like to see us continue to grow the company. So with that, I think I'll hand over to the next slide and let Dave take it from here.

Thank you very much.

And I'd like to point out that in the conversation I had with Mike Pettengill and CEO of Isla, we were negotiating and talking about the merits of a potential merger. And I started in talking about this portfolio that we have. And Mike interrupted me. He says, Dave, we're familiar with the portfolio. We know how great it is. You don't need to convince me. And that was music to my ears. And it's always good to see recognition of the portfolio that we have from outside sources. And it's producing the results that we're seeing in the numbers today and enabling us to be able to attract such strong merger candidates as Vizsla. And that's going to enable us to do exactly what Fred just said, and that is further this portfolio even beyond what the numbers from the and so just continuing to march forward with our management team, and I would like to point out specifically that a real catalyst for our advancement has been the investment from Tether, and as a significant shareholder and highly supportive shareholder, and specifically Juan Sartori as a passionate chairman of the board. who believes in this business model even more than we do. And it's just a delight to work with Juan and to have the support of one of the most profitable private companies in the world, Heather.

We'd be happy to take questions, Matt.

Thank you. If you have dialed in and you would like to ask a question, please press star 1 on your telephone keypad. Your first question from the phones comes from Brian MacArthur with Raymond James. Your line is open.

Good morning, and thank you for taking my questions. I'll keep them away from the transaction until the next call. But just on two assets, you mentioned Bonicro did very, very well. But that, if I remember that royalty, doesn't cover everything, and it moves around a fair bit. Was the outperformance gold price only, or were you just on a better part of royalty land? And how does that look for the rest of this year?

Fred, do you want to take that call? That question from Brian? Good morning, Brian. Morning. Good morning.

Appreciate the question. I think it's partly related to the timing of some of the sales that fluctuate from quarter to quarter. In terms of the all that went through, I think that was relatively consistent. So I think it was partly just sales falling into the quarter, more than displacement or coming in and out of the royalty area.

Got it. And do you expect it to kind of remain the same the rest of this year?

Look, I think in terms of where it is, I think we're sticking with the guidance we had for the year, so I think that was a strong quarter for us versus where we expect it to be. It has fluctuated sometimes quarter to quarter in terms of the timing of sales and where it is. But, yeah, ahead of where we had it for the year, certainly on a quarterly basis.

Great. Thanks. And my other one is Corelli Stud where you got zero, and I know it's supposed to be down. How should I think about that for the rest of the year? And are there any of those payments still left that you could get any time soon?

so yeah that's a good question look i think in terms of the mine planning i think obviously there is a with the precision coming in um there is a there's probably going to be a sort of refreshed mine plan alongside that deal closing um we do expect some further payments from that relating to both already mined royalty revenue and some of the milestone payments. So that is something that we are working on in parallel. But in terms of the mine plan, look, we don't have something that is up to date from the new operator yet. We do have certain rights under the royalty agreement. But I think that given the acquisition of Allied and the new ownership coming in, we're waiting to get an updated plan there. But we do expect some residual payments, either from the royalty revenue or from the milestones this year.

Great. Thanks very much. Thank you.

And there are no further questions from the phone line. I will turn it back to you.

With that, there are no questions on the webcast either.

Dave Cole, would you like to close this up?

Well, I just invite everybody to join us on the call where we'll discuss this next M&A deal with FISLA. We're very pleased. We think it fits into the portfolio exceptionally well. And we're always driven by the potential for discovery optionality because that's what drives royalty valuation long-term, and we think this aspect is an exceptional example.

Thank you for joining us. Thank you. This concludes today's meeting.

You may now disconnect.