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Operator
Good morning. My name is Kavita and I'll be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold Royalty's first quarter conference call. All lines have been placed on mute to prevent any background noise. Please be aware that some of the commentary may contain forward-looking statements. There can be no assurance that the forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one key on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. Mr. Watson, you may begin your conference.
Kavita
Thank you, Kavita. Good morning, everyone, and thank you for calling into this first quarter earnings call for 2021. As normal this morning, I'll provide a brief update on the company, and then Irfan, our CFO, is going to walk us through the first quarter results, and then Dave Orem will provide an update on some of the assets. After that, we'll turn it over to the operator for a question and answer period, and if anyone has any questions that does not need to be part of the live Q&A, you can ask those questions through the web portal, and we'll ensure that each question we get there will get a direct response from you after this call. At this time, we're going to be going through a prepared PowerPoint presentation on the web portal, so if you're able to, please turn your attention there now. Overall, the first quarter for Sandstorm was fantastic. We had a record number of gold equivalent ounces sold of over 17,000 ounces. We had record revenue of $31 million, and we had record operating cash flows, excluding working capital changes, of $23 million. By all accounts, our business was performing well. And it's for this reason that we're raising the bottom end of our annual production guidance up to 55,000 ounces so that our revised guidance range is between 55,000 to 62,000 gold equivalent ounces. So we're still on track for another record year of annual sales. It's important to note that starting now in the second quarter, the gold stream that we have on Endeavor's Karma mine in Burkina Faso is done, the fixed delivery period of the contract, and Sandstorm now has an effective 1.6% NSR. So the deliveries from Karma are expected to be lower by about 1,000 ounces per quarter going forward. However, As many of you are aware, we have a number of other development assets at various stages of development, and we're expecting more growth in annual production over the next years than any of our other streaming and royalty competitors. Now, Sandstorm has record amounts of capital available to allocate to either new deals or dividends or share buybacks. And as we stand here today, Sandstorm has over $150 million U.S. in the bank, plus we have approximately $60 million U.S. in equity and debt investments and other mining companies that can all be liquidated if need be. we are going to be allocating capital to what I mentioned on the last quarter earnings call of all three alternatives being new deals and dividends and share buybacks. And we've got a slide here that you can see that discusses the share buyback part. We bought back a material number of our shares each year for four years running now. And during the first quarter, we were able to pick up almost a million of Sandstorm shares and have them cancelled. So the value per share for our main shareholders is continuing to increase And over the past four years, our average cost per share has been only $5.20 US. So we think we've done a very good job of picking our spots. And we think it's been a prudent form of capital allocation for us. And we're going to continue in this spirit going forward. One of the things that makes us excited to buy background shares is not only how well the portfolio is doing from a cash flow generating perspective, but also how incredibly well the exploration upside story continues to unfold over time. We finally completed all of the number crunching for the last year, and it turns out that 2020 was the fifth straight year in a row that more gold ounces have been found on our royalty grounds than have been mined. This is an amazing track record that is exciting to us. In 2020, Sandstorm received 52,000 attributable gold equivalent ounces of production compared to 54,000 new ounces attributable to sandstorm being found through exploration. And what I find even more interesting is that the actual number of ounces attributable to sandstorm that was found was even higher than 54,000 ounces. And what we've done is we've chosen to be conservative in how we show these figures because under one of our streams, a new technical team has decided to take a more conservative set of assumptions on the resource calculation and has what we believe temporarily decreased their ounces on the books. And we have netted those ounces off against the ounces found so that the 54,000 ounce number represents a true net ounces found figure. Year after year, our portfolios continue to not only set new records in revenue and cash flow, but it also continues to replace the ounces mined with new ounces found. And before I hand it over to Irfan, I would like to remind everyone of a few important catalysts that we see for Sandstorm in 2021, starting with one of our key assets, hot modern. As I've said in the past, 2021 is expected to be a catalyst-rich year for the asset, with both a feasibility study and an EIA expected to be granted imminently with the granting of the EPCM contract to build the mine later in the year. It's still our expectation that both the feasibility study and the granting of the EIA should occur in the second quarter. However, this week, due to COVID, the government of Turkey has implemented a countrywide lockdown to contain the virus, and we're still assessing what impact, if any, this will have on the expected timelines. I think it's safe to say we're all tired of COVID, but we certainly want our partners and our employees to stay safe, and we understand that this means a slight delay in timelines. Another important catalyst this year is potential deals. I won't belabor this point, but I'm still expecting this year to be an above-average year for new deals and likely the highest level of new deals the past few years for us. Having said that, deals aren't done until they're actually done. So I'll let the actual deals, if any, speak for themselves. The next catalyst that's worth remembering, and which I've already touched on, is the return of capital to shareholders through either share buybacks or dividends. We've had the benefit of discussing this further at the board level recently, and we're targeting a decision one way or another, if not by the end of this year, then early next year. We have an incredibly strong balance sheet, a fantastic and diversified portfolio that's generating record cash flow. And so it's my belief that paying a small but sustainable and growing dividend is effectively imminent. We're very pleased with how well our portfolio is performing and the opportunities we see to grow the portfolio. And so with that, I'm going to hand it over to Irfan.
Kavita
Great. Thank you, Nolan. Hello to everyone joining us today. It's been a great quarter for Sandstrom, as Nolan's mentioned. I'd like to take some time to walk through the financial results in more detail. The chart on the left of this slide shows Sandstorm's attributable gold equivalent ounces sold, as well as sales and loyalty revenue for the last four quarters. If you've been tuning into these conference calls for a while, you may recall at the end of 2019 that Sandstorm was realizing quarterly records on a regular basis. At the time, I mentioned that we were excited for this record-breaking trend to continue. After a year of unprecedented change and global upheaval, I'm pleased to say that Sandstorm has once again hit a new quarterly record. Moving to the next slide, we can make a few comparisons between the first quarter of 2020 and 2021. Biometrics listed here, Sandstorm's financial performance was stronger in the first quarter of this year compared to the first quarter of last year. Total revenue was a record $31 million. an increase of 45% compared to the same period in 2020. A Tribal gold equivalent ounces sold with a new quarterly record at 17,444 ounces, an increase of 30% compared to the same period in 2020. These results were supported by a relatively strong gold market in the first quarter, with an average realized gold price of $1,777 per ounce. For comparison, the average realized gold price in the first quarter of 2020 was just under $1,600 per ounce. Average cash cost was $307 per attribute allowance, which translated to cash operating margins of $1,470 per ounce and a new quarterly record of $23.7 million in cash flows from operating activities. Net income came in at $5 million for the quarter compared to a net loss of $10.3 million in the first quarter of 2020. The next slide provides a breakdown of the quarterly production results by cash flowing asset. The Yamana Silver Stream was once again the leader with over 4,700 attributable gold equivalent ounces sold. This represents a 12% increase in silver ounces sold compared to the first quarter of 2020. The Saramora silver stream has benefited from an increase in the silver price. Sandstorm realized an average selling price of approximately $25 per ounce during the quarter compared to approximately $18 per ounce of silver in the first quarter of last year. A similar story can be told for the Chapada copper stream. Sandstorm received a 29% increase in the number of copper pounds from Chapada during the quarter and realized a 36% increase in the average selling price of copper compared to the first quarter of 2020. The result was a total of 2,588 attributable gold criminal ounces sold from the stream. Other notable changes in production when compared to 2020 include the addition of the Relief Canyon stream, which began fixed gold deliveries to Sandstorm in May 2020. An increase in production attributable to the Fruta del Norte mine, which commenced commercial production in February 2020, and an increase in royalty revenue from the Bracemak McLeod mine. Production from the Carman mine in Burkina Faso also increased in the first quarter compared to the previous year, partly related to timing of sales. and the delay in deliveries compared to the prior quarter in 2020. The first quarter also marks the end of the five-year period under the Karma Gold Stream that allowed Sandstorm to purchase 25,000 ounces of gold for ongoing per ounce payments equal to 20% of the spot price. And as Nolan mentioned, as of April 1st, Sandstorm's Gold Stream agreement time was now closer to 1.63% of gold produced at the Karma mine for the same ongoing per ounce payment. The operator, Endeavour Mining, is forecasting between 80,000 and 90,000 ounces of gold to be produced at Carmine in 2021. This final slide depicts the first quarter revenues by region and metal type. Sandstorm's portfolio continues to be well diversified with mines operating in stable jurisdictions around the globe. In the first quarter, 90% of revenues came from mines operating in the Americas, with approximately one-third of revenues coming from North American mines. The majority of revenues came from precious metals, with nearly half attributable to gold operations, with another 27% from silver. 17% of revenues came from copper this quarter, which provided good exposure to rising base metal prices. Overall, it was a very good start to the year for Sandstorm shareholders. We finished the quarter with over $140 million in cash and over $52 million in equity and debt investments. Sandstorm's balance sheet is strong and ready to support the next growth step for the company. Based on the company's existing streams and royalties, again, we have updated our forecast for attributable gold-to-cone ounces sold to be between 55,000 and 62,000 ounces in 2021. And with that, I'll turn things over to Dave.
Nolan
My asset update will be brief this quarter as I focus on two projects that are back in the limelight after a couple of years of us not talking much about them. The first project is the Mason project with HUD-Bay. This asset was once an Entrez Resources but has spun out into its own vehicle and was eventually purchased by HUD-Bay in 2018. Fast forward three years later, along with a $2 per pound increase in copper price, we are one of the largest greenfield copper projects in the Americas and potentially the third largest copper mine in the United States. Hutton Bay recently released the results of a PEA on the 2.2 billion ton measured and indicated resource. At 310 copper and using a 10% discount rate, the project carries an after-tax NPV of almost $520 million. The current mine life is expected to be 27 years, but they're still working on additional exploration that could extend that. more work will be completed on the asset and assets will need to be achieved. But HUD-BADE is expected to put it into the development pipeline once Rosemont is up and operating. However, it does have the potential to almost double HUD-BADE's copper output. So clearly, it could be one of the most important growth projects in that pipeline. With our 0.4% NSR on the project, Sandstorm could collect up to $75 million in proceeds based on this PEA study. At $4.50 copper price, obviously that's going to be a lot higher. This is another great example of how Sandstorm has been effective at accessing low-cost, early-stage deals on the right assets. And sometimes, like this one, even we're surprised that it doesn't take nearly as much time as we originally thought to show that great value for Sandstorm. The other projects I want to talk about now are Barry, Meroy, and Gladiator. These are all now part of what was originally the Batchelor Lake Gold Mine Stream, which provided us with a tremendous amount of cash flow for over the last 10 years. Today, under Bonterra's management, there are three projects quickly pushing forward which we hold royalties ranging from 1% to 4.9%. Gladiator and Barrie form a large land package within the Windfall Lake District in Quebec. Bonterra has been drilling approximately 10,000 meters per month on the Berry property and has been consistently getting great results. Some of the latest step-out intercepts are 14.7 meters and 7.4 grams and 6.8 meters and 3.8 grams per ton in the age zone. The deposit still appears to be open along strike and depth. With a large amount of drilling planned, Berry likely has more mineralization to be found. An updated resource is expected in Q2, and a PEA is expected before the end of the year. We've also begun to receive payment for a royalty here through the bulk sample taken underground last year. But hopefully, this project will start entering the development stage in the not-too-distant future. Moving over to the original Batchelor and Lake Marne site, not only has Leroy continued to produce good intercepts, Chasing up on the O'Brien intrusion showing, Bonterra has made another discovery within two kilometers of the bachelor mill. Two holes have begun to outline this new discovery with intercepts of 24.9 meters of 1.4 grams and 10 meters of 1.3 grams. This goes to show you that combined with the Muroi discovery only a few years ago, this is very prospective ground, only just beginning to be understood. Of course, there's also good news on the Mill expansion. The old Batchelor Lake Mill is still able to operate 800 tons per day, permitted to increase to 2,400 tons per day, and is well through that process. New tailings expansions are approved, and Bonterra can find themselves in a position to start the expansion soon. For Sandstorm, that means as soon as we get the chance to see revenue from a 4.9% NSR on all these newly discovered areas. So with that, I'll pass it over, the call back over to the operator for a Q&A. Please feel free to ask any questions about our royalties and streams.
Operator
And as a reminder, to ask a question, that's star 1 on your telephone keypad. And if you would like to ask a question, press star 1. And our first question comes from Haiko Ayo with HC Brain White.
Haiko Ayo
Hey there. Thanks for taking my questions. I'm glad you made it back on the call. Me too. I know you're still working diligently on the feasibility study for HOTMADEN. And the prior outlook was to be completed in the first half of the year, obviously, with production by the end of 23. And this timeline was affirmed in the MD&A that you guys just put out. In contrast, early on the call, you said that Turkey went into a lockdown and there may be a delay to this. But I mean, just thinking ahead, not 30 days, but six months, nine months, 12 months, how much impact does this delay really pose to you getting first production by the end of 2023? And building on that, can you maybe provide some color on longer lead time issues that you're particularly concerned about?
Kavita
Yeah, so the lockdown was just announced a couple of days ago, so it's a bit early for us to tell some of those answers because it's only been in effect for a couple of days. At the moment, we don't foresee it changing when we think the asset will get into production, some of the long lead items. which are still working their way through the system would be things like forestry permits but also EPCM contractors getting them signed up and ready to go and that work is still ongoing full force and most of that work is digital work where people are submitting their bids and phone calls are being had and that's still going ahead irrespective of the lockdown. So a lot of these long-league items are not in fact slowing down. It's just if an EIA permit was expected to be granted next month and nobody's showing up at the desk of the government for the next month, that might slow it down. But that was never really a long lead item. So we're just waiting to see how or if any it'll impact it. And at the moment, we're not updating our guidance because we don't think it'll be too material.
Haiko Ayo
Okay. Yeah, that's what I figured because, I mean, this is so far in the future. And even if they lock down for 90 days, I just don't see how that will change the 2023 timeline. yeah and a lot of a lot of the work that the project is at at the stage right now is is at the desktop level and so people are still pushing that work forward uh at the same pace even though they happen to be in their homes got it uh second question i'm not sure how much of this you're willing to say i mean you obviously renewed your uh nciv and i think that's the right move especially when i saw the uh 520 average price that you paid over the past few years in the presentation that you had You actually used the program reasonably aggressively in Q1. Have you done anything in Q2 so far? I mean, we're a third way through the quarter. I don't know if you're willing and able to comment on that.
Kavita
In Q2, we haven't. Most of Q2 so far, we were in blackout because of preparing financial statements, so we weren't allowed to legally anyway. Fair enough. I'll get back to you. Thank you. Thank you.
Operator
And our next question comes from Hillary Strack with Conocore Genuity.
Hillary Strack
Hi, thanks for taking my question. So I actually just had a question on trade gold. I see that you've been increasing the size of the investment, and I was wondering if you were able to speak about the rationale behind that.
Kavita
Yeah, it's a question that we get every now and then and answered it on some of our past calls. The gist is that we own a very significant percentage of their company already. And based on the liquidity, selling that at a reasonable price is not very feasible at the moment. And we think that there's actually a tremendous amount of value there. We think that the company's worth a lot more than what it's trading at. We have not been trying to say that publicly in the past. And so we think that picking away shares that are well below value gives us the benefit of holding a stronger position if someone wants to come along and buy them, making sure we get their value for our shares. Or if nobody buys them, then we own effectively 25% of their company on a partially diluted basis. We'll get 25% of their dividends from their equity interest and we'll see how it goes. So either way, whatever the outcome is, we're happy and we think it's intelligent capital allocation given how much capital we have available to us and the value we see there.
Hillary Strack
Okay, thanks. That makes sense. And one last question on guidance. You've increased the bottom end of the guidance and based on Q1 that implies an annual run rate about 68,000 ounces, which is above the high end of guidance. I know you said that CARMA is expected to decrease in the coming quarters, but are you expecting any other assets to decline or is this just like a conservative estimate?
Kavita
I would say we try to be conservative in our estimates. Sometimes it's tough to tell. I wouldn't say that there's any imminent declines that we're expecting from any of our other assets other than karma and IRFAN. I don't know if you have anything to comment on on the conservativeness of our guidance.
Kavita
Yeah, I think our guidance is fair, potentially on the conservative side, but we have more than just one commodity in our mix, and that impacts our guidance figures. So as the year goes on, we'll provide more clarity on that.
Hillary Strack
Okay, awesome. Thanks. That's it for me.
Operator
And our next question comes from Derek Ma with TD Securities.
Kavita
Thank you. My question relates to Chapada. Lundin puts some pretty positive exploration results with their Q1 earnings and 80% increase in its land position. Looking at the maps, I believe most of the property is still covered by the stream area, but can you confirm that the southwest near mine exploration areas are covered and more specifically, I guess the Formiga area that they're looking at north of the pit? Yeah, so under Jakarta, the way we structured that agreement is that all the land that they had at the time fell under our agreement. So if the discovery is on the land that was owned at the time, it comes under our agreement. In addition to that, we have the concept of expanding uh area of interest for another three kilometers outside that border so if they picked up new land that they did not previously have within three kilometers of the old land that they added back in 2015 that falls under uh our our deal as well so we have i think if members are correct almost 700 square kilometers of land covered by our stream that's good to hear and i guess one more question on chapada then should we expect some decrease in the geos paid to sandstorm in q2 related to the shutdown or are we through that now uh i'm not expecting a material decrease in political announcers in q2 having said that there is a cap in annual production that we get in in copper and there's a true-up mechanism. So for example, if they hit the cap in one quarter and then are under in another quarter, then we get true-up at the end of the year. So I do think we're going to get our maximum number of pounds of copper up through the year, whether or not they get delivered in Q2 or later in the year. Thank you very much.
Operator
Now our next question comes from John Thomasus with John Thomasus .
John Thomasus
Good morning. It's John Tomasos. In earlier presentations, there was a focus on the pending feasibility study update for hot modern. Has that been delayed with COVID and other complications in the world? Or is that still due in a quarter or so? And what are some of the changes possibly in CapEx or org rates, recovery rates, anything that you can comment?
Kavita
Yeah, thanks for that. So in terms of the feasibility study, it is still tracking well. It's still tracking fast. Most of the work is desktop work. We don't think the lockdown in Turkey that was just announced should have a material impact on timeline. Maybe it'll have a small impact on timeline. So it's definitely still going to be in the first half of this year. In fact, late last night, I actually got some of the first sections of the 43-101 report that's actually being drafted, sent to me in my inbox. And I've got to start reviewing that. We're expecting a fairly similar number of total payable ounces as previous studies. When you take into account BRAVE and the feasibility study and the long-term recovery, some have gone up, some have gone down, but net-net I'm expecting the total number of payable ounces to be pretty similar. And it's an incredible mine, an incredibly robust mine. And based on the knowledge that I have so far, the feasibility study will show that.
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