Sandstorm Gold Ltd.

Good morning, my name is Grant, and I will be the conference operator today. At this time, I would like to welcome everyone to Sandstorm Gold Royalty's 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 forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. After the speakers and marks, 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 on your telephone keypad. If you would like to withdraw your question, please press the star, followed by the two key. Thank you. Mr. Watson, you may now begin your conference.

Well, thank you, Grant. Good morning, everyone, and thank you for calling into this second 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 second quarter results. And then Dave Orem will provide a more in-depth look at some of the assets underlying the acquisitions that we made during the quarter. After that, we'll turn it over to the operator for a question and answer period. And if anyone has a question that does not need to be part of the live Q&A, you can ask those questions through the web portal, and we'll be sure to make sure that everyone gets a direct response from us after this call. At this time, we'll be going through a prepared PowerPoint presentation on the web portal, so if you are able to, please turn your attention there now. Overall, Stansform had another strong quarter in terms of production and cash flow, and Irfan's going to walk us through those details momentarily. As most of you are aware, each quarter I like to take the most common questions that we're getting from investors during the quarter and provide answers for them publicly on these quarterly conference calls and During Q2, the vast majority of the questions related to the acquisitions that we completed, as well as the timing expectations for both the HODMOD and EIA being granted, as well as timing expectations for the HODMOD and feasibility study being released. And as part of this, investors have been asking questions about our most recent understanding of timing for HODMOD and construction and first production. So I'll address these questions now, and then we'll hand things over to Irka. Starting first with the acquisitions that we made during Q2. During the quarter, Sandstorm made more acquisitions than any other quarter over the last four years. And so far in 2021, it's already been the third highest year in Sandstorm's history in terms of value of acquisitions made. During the quarter, Sandstorm first purchased for $7 million a royalty portfolio of 21 royalties on development, advanced exploration, and exploration stage projects in the U.S., the vast majority of the value of which related to precious metal projects. Then Sandstorm purchased a $30 million gold stream on the operating Batacola gold mine in Fiji, which has produced 7 million ounces of gold over the past 80 years. And then finally, we invested $108 million U.S. purchasing a royalty on a number of alleys producing and exploration assets in Brazil that include revenue from iron ore, copper, and gold. I've been purposefully telegraphing for a couple of quarters now that we believe that we were close to making a number of acquisitions. We're pleased that we were able to close a number of deals this quarter. And later in this call, Dave Orem will talk in more detail about the specific assets underlying those deals. Having closed these acquisitions, we're now in the process of restocking our deal pipeline, and we already have some quite interesting things that we're working on for potential future acquisitions. Candidly, it feels fantastic to have been able to make $150 million worth of acquisitions and still be sitting here with no debt and cash on hand so that we can continue making acquisitions. As our investors know, we're conscious of deletions, And as a result, we have begun discussions with our banks about upsizing revolving debt facilities, and we'll continue working on that so it's available for potential future deals. Now, on to hot model. It's clear to me that a number of our investors are wondering what's going on behind the scenes with respect to the timing of both the EIA and the feasibility study, and I'd like to take the opportunity to talk through where the process is at in more detail, and I believe that doing so will actually give investors a lot of comfort. Starting with the EIA. The EIA was submitted originally to the government quite some time ago. As is normal in Turkey, the government departments involved in the permitting process are provided time to review the EIA and make comments and ask questions. This period of initial comments and questions was completed several months ago, after which Lydia has worked with the various departments to answer those questions and address any comments. And I've now been told that all comments have been cleared and all questions have been answered. Once each of these departments signs off, the EIA then goes out to a public comment period where anyone can comment on the proposed EIA. And I've also been told that not only has each of the government departments signed off, but also that this public comment period is now complete with literally zero comments coming from the public. Zero. So the next and final step is a final government sign-off, which we have been told will hopefully be granted by the end of next month. Overall, although there have been some delays, largely due to COVID lockdowns in Turkey, The process is now in the very final stages and appears to be going well. Moving on to the timing of the HUD modern feasibility study. I'm happy to report the feasibility study is nearly complete, and the actual final report is in the final stages as we speak, and we're hoping to have it both announced and filed around the time of the granting of the EIA. One of the things that's become clear is that due to the slight delays in the EIA, as well as a couple of the longer lead items that were identified in the feasibility study, possibly taking a few months longer than originally anticipated, we're updating our guidance for the start of production from HODMOD into mid-2024. And accordingly, we've updated our guidance for the company in terms of our company-wide goal production to 125,000 ounces in 2025. We've always believed that HODMOD was a permittable project that will be exceptionally profitable, and we're hoping that by the end of September, we'll have both the EIA and the feasibility study that illustrates both points. One last thing that I would like to address before handing it over to Irfan is the possibility of Sandstorm paying a dividend in the future. As our shareholders know all too well, I've been telegraphing that I believe it makes sense for the company to eventually become a dividend-paying company, and that this is something that obviously needs to be approved by the board of directors. Sandstorm is a very well-diversified realty company with strong diversified cash flows coming from a variety of assets around the world, which has been further bolstered by the acquisitions that we've made during the quarter. Yesterday, As part of our Q2 board meetings, we discussed at length the possibility of Sandstorm becoming a dividend-paying company, and for the first time, permission from the board to publicly state that they also agree that Sandstorm should become a dividend-paying company, and that the declaration of such a dividend policy is imminent, and we expect to have the full details of our policy publicly announced by the end of this year. Year after year, Sandstorm has continued to prove that it's a growth-focused company, And I believe we proved that yet again this quarter. We're excited with the royalty portfolio that we built, and we'll endeavor to continue along the same path for the benefit of our shareholders. And with that, I'll hand it over to Irfan to discuss in detail the quarterly results.

Thanks, Nolan. Hello, everyone. Thank you for joining us today. This was an exciting quarter for Sandstorm in terms of new acquisitions and financial results. This first slide provides a snapshot of the company's financial results over the last four quarters. We've included a third bar in this chart, which, in addition to sales and royalty revenue, includes income from other interests. The income from other interests is again related to the recently acquired Valley Royalties. As some of you may know, the payment for the Valley Royalties from the first half of 2021 will be payable to Sandstorm on September 30th. reflecting a net sales royalty for the period January 1st, 2021 to June 30th, 2021. As the majority of these sales occurred prior to Sandstorm's acquisition of Valley Royalties, Sandstorm has recognized these accrued amounts as the pre-acquisition receivable. I think it's important to clarify that in subsequent quarters and going forward, the income received from the Valley Royalties will be classified as revenue and operating cash flow. similar to how our other royalty interests are treated and how you would normally expect. With that in mind, total sales royalty revenue came at $26.4 million for the second quarter and $32.3 million including income from other interests. This represents an increase of 41% and 73% respectively when compared to the same period in 2020. Sandstorm set a new record of approximately 18,000 attributable gold equivalent ounces during the quarter. When compared to last year's second quarter, when we were at the height of the operational shutdowns due to COVID-19, this represents a 65% increase in gold equivalent ounces, quarter over quarter. The average realized gold prices remain relatively constant over the first half of 2021, which has helped support these strong attributable ounce numbers. As a management team, we continue to be bullish on the long-term price of gold and certain other metal prices given the current global economic outlook. And so I anticipate Sandstrom's financial results to benefit from strong precious metal prices for the foreseeable future. We can dive a little deeper into the quarter over quarter comparison on the next slide. Revenue was comprised of $17.5 million in sales and $9 million in royalty revenue. If you direct your attention to the third line from the bottom, average cash cost per tributary ounce was $227. As a result, Sandstorm realized cash operating margins of $1,569 per ounce during the second quarter, which is an 8% increase when compared to the same period in 2020. Cash flow from operating activities, excluding changes in non-cash working capital, totaled $17.6 million, a 31% increase the same period in 2020. Net income was $8.6 million, up from $7.1 million in Q2 last year. The increase was attributable to an increase in revenue as well as a $5.9 million gain on the revaluation of the company's financial instrument related to the Valiant royalties, which was both entered into and disposed of during the second quarter. The gain was partially offset by an increase in the cost of sales. an increase in tax expense, and a decrease in gains recognized on the revaluation of other investments. Moving on to the next slide, we see a breakdown of trivial gold equivalent ounces by asset. Cerro Moro, under the Yamada Silver Stream Agreement, continues to lead the portfolio in trivial production. This stream agreement benefited from a 58% increase in the average realized selling price of silver compared to the same quarter of 2020. As well, There was a 10% increase in the number of silver ounces sold when compared to the same quarter last year. As we've discussed, the majority of the 3,400 gold equivalent ounces attributable to Valley Royalties package are represented by the gain on the revaluation of Valley Royalties financial instruments. With respect to the second quarter valet royalty receivable, royalty payments are paid by valet on a semiannual basis, reflecting production in the preceding half-calendar year period. As mentioned previously, Sandstorm will accrue the royalty revenue on a quarterly basis going forward. During our last conference call, I discussed that the first quarter of 2021 marked the end of the five-year fixed-ounce delivery period from the Karma Mines. As of April 1st, Sandstorm's gold stream entitlement is now 1.625% of gold produced at the Karma mine for an ongoing per ounce payment equal to 20% of the spot price. These terms will continue for the life of the mine. The ounces sold from the Karma in the second quarter are representative of these updated terms. Looking at these top producers, I'm encouraged by the diverse portfolio that Sandstorm has built with strong counterparties and a range of stable jurisdictions. Subject to closing conditions in the second half of the year, we'll see production from the Vatikula Gold Stream added to this list, further diversifying our cash flow. The final slide provides a breakdown of tributal gold equivalent ounces by region and metal type. Approximately 60% of ounces came from operations in South America, largely tributal to Saramoro and the New Valley Royalties. With only three months of Vale Royalties revenue being recognized in Q3 2021, I expect the weighting of production from South America and base metals will be reduced in the third quarter. Sandstorm remains a precious metals focused royalty company, and this year we anticipate approximately three quarters of revenue from gold and silver, increasing to more than 80% by 2024. With the addition of the Vale and Vatacoola transactions, Sandstorm has increased its production guidance, and is now forecasting between 62,000 and 69,000 attributable gold ounces in 2021. And as Nolan mentioned, we expect production to be over 125,000 ounces in 2025. I'll leave it there and pass the mic over to Dave.