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spk05: Good morning. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold Royalties 2022 First Quarter Results 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 speaker's remarks, we will have a question and answer session and instructions on how to queue up will be provided at that time. I would now like to turn the conference over to Mr. Watson. You may begin your conference, sir.
spk02: Thank you, Michelle. good morning everyone and thank you for calling into this 2022 q1 earnings call i will please to be able to once again talk about record results and in a few minutes i'm going to hand it over to irfan kazemi our cfo to talk about the specifics of the q1 results as many of you are aware last week we announced two company transforming acquisitions totaling 1.1 billion dollars u.s because of those transactions we're excited that In addition to these record revenue and cash flow results this quarter, we'll now be expecting new revenue and cash flow records going forward for years to come. When we announced these transactions last week, we went through a comprehensive presentation at that time. Therefore, I won't be going through it on today's call, but I would like to use this opportunity to remind everyone of a few key details of what the new SANS firm will look like to help investors better understand what they can expect from our financial results in the future. We really do believe that with these acquisitions, Sandstorm will be the go-to mid-tier streaming and royalty company. Not only will it be approximately 90% precious metals revenue, but we have what I believe to be a portfolio with the highest quality assets underlying its streams and royalties in terms of how low cost the underlying mines can produce their primary product for. In fact, 64% of Sandstorm's production will be coming from assets that produce in the bottom quartile of total all-in sustaining costs. Our portfolio is also now the most diversified in the entire industry, with only 38% of our NAV coming from our top five assets. Even the majors average 65% of their NAV coming from only five assets, which when you think about it is not really diversified. And finally, we have the highest amount of growth now built into our portfolio. As a quick reminder, and I won't go into detail on this morning's call, but the two transactions are an acquisition of one of our peer streaming companies called Nomad for an all-share deal that was valued at approximately $590 million U.S. on announcement, as well as a $525 million U.S. acquisition of a portfolio of royalties from a company called BaseCorp. Both of these portfolios are built on high-quality, low-cost, long-life minds, and we're very pleased to be bringing them into our portfolio. It's exciting that Sandstorm will now be the largest, highest growth, and most liquid mid-tier royalty company. I've been talking to many of our institutional investors since the announcement of the transactions, and 100% of the institutional shareholders that I have talked to are in favor of these deals. So it's rewarding to see that despite the broader stock markets falling apart, despite all gold companies treading off, including and especially Sandstorm, our institutional investors are very supportive of these deals and they very much like what the new Sandstorm is going to look like. And speaking of what the new Sandstorm will look like, you can see from this chart that Sandstorm will now be the largest intermediate royalty company by production, but we also have a lot of growth to go before our growth years slow down and we become like one of the majors. I believe we're moving into the most rewarding phase of Sandstorm's life, where we are large enough, strong enough, and diversified enough to be a safe, stable, and profitable company, but we still have enough creative growth ahead of us to be able to add further value to shareholders in the years to come. Once we close these acquisitions at $1,800 US gold prices, Sandstorm's cash flow after tax will be both substantial and diversified. And by 2025, our cash flow is expected to exceed $180 million US per year. And it's my expectation that our actual cash flow will be even higher than this for a couple of reasons. Firstly, because I expect commodity prices to be even higher than they are now. But secondly, because we're going to be continuing to buy streams and royalties between now and then. So with that, I'll hand it over to Irfan to talk about the quarterly results. But I hope that you can tell that I'm both proud of what Sandstorm has become. And upon closing of these acquisitions, Sandstorm will be the largest, the highest growth, and the most liquid mid-tier streaming royalty company in the world. Irfan.
spk03: Thanks, Nolan. It was certainly an exciting first quarter for Sandstorm with a number of big announcements for the company. It was also another quarter where Sandstorm broke a number of records. Let's look at some of these new records in more detail. If you're joining us via our webcast, this first slide shows the revenue and production numbers from the last four quarters. During the first quarter of 2022, Sandstorm realized record revenue of $35.4 million and sold 18,741 attributable golden ounces, also a new record. This compared to revenues of $31 million and approximately 17,400 ounces in the same period of 2021. The increase in revenue was due to a number of factors, including the additions of the Valley Royalties and the Vatikula Gold Stream. The Valley Royalties were added to Sandstorm's portfolio in June of last year, and the Vatacoola Gold Stream began making deliveries to the company in December. The increase in quarterly revenues was also part due to the rise in commodity prices when compared to the same period in 2021. In particular, a rise in diamond prices increased royalty revenue attributable to the Dyabic mine, and an increase in the selling price of copper contributed to higher revenue from the Chapada Copper Stream. The Chapada mine also had a 13% increase in the number of copper pounds sold. This increase in revenues was partially offset by some decreases in production of certain assets, which I'll touch on in a moment. It's exciting to see another record quarter for Sandstorm, and this is before we had announced the transformative acquisitions that Nolan described. Subject to closing those transactions, Sandstorm has increased its 2022 production guidance range to be between 80,000 and 85,000 gold equivalent ounces, increasing to 155,000 ounces in 2025. It's clear to see that this is shaping up to be a significant season of growth for Sandstorm. On the next slide, you'll see a summary of the first quarter results compared to the same period in 2021. Revenues in attributable gold equivalent ounces were up by 14% and 7% respectively. The $35.4 million in revenue came from $22 million in sales and $13.4 million of royalty revenue. Moving down the list, the average realized gold price in the company's gold streams for the first quarter was $1,887 per ounce. The average cash cost per tributary ounce was $283, which resulted in cash operating margins for the three-month period of $1,604 per ounce. In a time when we're seeing increasing inflationary costs on all fronts, it's remarkable to see operating margins like this, and I think it's a testament to the royalty business model. This quarter, cash flows from operating activity, excluding changes in non-cash working capital, was up 16% from the first quarter of 2021, at $26.7 million. It represents another new record for Sandstorm. Finally, net income was $9.1 million, which is an increase of about 80% when compared to the same period in 2021. This was primarily driven by the increase in revenue, as well as an increase in the gains recognized on the revaluation of the company's investments that go through the P&L. As you may know, Sandstorm began paying its first dividend this year and recently paid the second quarterly dividend out to shareholders. We're very pleased to be able to add another way to allocate capital back to shareholders. Looking at the contributing assets for the first quarter, we see the Yamana Silver Stream as the largest producer, which is on the Saramoro mine at approximately 4,500 attributable gold ounces. Next to Saramoro, is the Chapada Copper Mine with approximately 3,200 ounces, followed by Relief Canyon, the Valley of Royalties, and Diavik, which I discussed earlier. The increase in gold equivalent ounces sold compared to the first quarter in 2021 was partially offset by a decrease in ounces sold from the Santa Elena Mine and the Karma Mine. The decrease at Santa Elena was partly due to decrease in production at the mine as well as the timing of sales. At Karma, The decrease was primarily due to the conclusion of the five-year fixed delivery period in accordance with the terms of the Gold Stream. Sandstorm Stream and the Karma Mine is now at 1.6% of production. Portfolio diversification has been a key tenant underlying the previously discussed announcements this year. As these transactions close over the course of 2022, I expect this list will look very different a year from now. will be adding more high-quality and low-cost assets to Sandstorm's portfolio that I think will nicely complement these existing royalty and stream assets. The next slide provides a breakdown of the quarter's attributable gold equivalent ounces by region. Sandstorm's production continues to be largely weighted towards mining assets located in the Americas, with South America contributing nearly two-thirds of production. Approximately one quarter was attributable to North America, of which 18% came from mines in Canada. Finally, I want to mention the upsized credit facility that we announced alongside the BaseCorp Nomad transactions. Sandstorm has secured a commitment to upsize their existing revolving credit facility to $500 million US. In addition, will have $125 million uncommitted accordion feature for total credit capacity $625 million U.S. The upsize is conditional on meeting the closing requirements for the base core transaction and the accordion features contingent on closing the Nomad acquisition. The credit facility also maintains the sustainably linked incentive pricing which we announced last fall, a first for a royalty company. This increase in credit capacity ensures that Sandstorms continues to be position for future growth, even with the announcements we've made this quarter. And with that, I'll turn the mic over to Dave to highlight some of the new assets included in the transactions we recently announced. Dave?
spk01: Great. Thanks, Stefan. Obviously, big quarter for new acquisitions, lots of new assets in our portfolio. It's been a busy last six months of travel for me and the Sandstone technical team. as we were lucky enough to see a bunch of these impressive assets in person. I'm actually in South Africa right now, attending the mining and data, and getting a chance to speak to the operators of our new South African assets in Blythorne and Platte Reef, both of which I'll speak about today. But first, I'd like to talk about Antamina, the main asset of the base core package of royalties. For those that don't know about this amazing asset, it's jointly owned by Glencore, BHP, Tech, and Mitsubishi. A scar deposit that produces primarily copper and zinc concentrates, but is a true polymetallic mine that ranks within the top 10 mines in the world in terms of production volume. Getting a chance to meet the elite team that operates the mine was a great pleasure, as was meeting their executive and ESG teams in Lima. The mine is located in the Ancash region of Peru and is commonly regarded as the best mining operation in the entire country. The management team is proud of the fact that they are regarded as a top mining employer and have a great relationship with all the local and regional communities. Since the mine started commissioning almost exactly 21 years ago, this has always been a world-class mine. With a large expansion in 2010, Antamina is now the second largest producer of silver in Peru, in addition to the saleable copper, zinc, lead, and molybdenum products. All of the concentrates produced are transported to port by an approximately 300-kilometer pipeline, rather than by truck or train. This is one of the key aspects to the low-cost production of a mine. The current reserves are limited by tailings storage, which is being addressed by the Antimedia team. With the options they are looking at, there is likely to be ample space to provide decades of room for tailings, which is good, because the team is already planning additional expansions. With decades of open pit material still available, the Antamina is preliminary planning future underground mine to extend the mine life even further. The Antamina mine is a true treasure for the Peruvian people and Sandstorm is proud to have a small stake alongside them. Moving on to Platte Reef, this project is located on the northern limb of the famous Bushveld Complex of South Africa. and sits near to some of the largest platinum group element producers in the world. Plat Reef is an enormous platinum group metal deposit with significant gold, nickel, and copper content as well. The deposit has a PGM plus gold equivalent measured and indicated resource of close to 42 million ounces and another 53 million ounces of inferred resources. Reserves are just a fraction of this resource. but already the project has a 24-year mine life. Production is currently set to begin in Q3 or Q4 2024, with shaft one completed already and shaft two construction has begun. The first lateral blast, our blast of lateral development was completed in April 2022, and Ivanhoe is planning on spending $150 million for the remainder of 2022. On the ESG front, Platte Reef will become Africa's first electric-only mining fleet with equipment already ordered. Also, they'll rely heavily on solar power throughout the development and mining, with an array beginning to be installed this year. With 770,000 tonnes per annum throughput planned in Phase 1, 3 million tonnes per annum in Phase 2, and future potential plans of up to 12 million tonnes per annum throughput, The Platte Reef operation will be amongst the largest PGM mines in the world, potentially producing more than 24,000 tons of nickel and 1.1 million ounces of palladium, rhodium, platinum, and gold per year. The Platte Reef project's ore body is up to 60 meters thick in places with 26 meters on average. This ore body thickness allows for low bulk tonnage and safe mining methods with potentially much higher productivity levels than neighboring PGM mines. It will be no small task getting this asset into production, but fortunately, the project is being built and operated by one of the most accomplished mining groups in the world today. The Ivanhoe mining team is responsible for discovering and developing some of the best worldwide mining projects for the last 25 years, and we hope Plant Reef will rank amongst the top of those. This is a great asset to add to our portfolio. For the last slide, I'll touch on a few of the other highlights in the portfolio Sandstorm is purchasing. On the precious metal side of the equation, the first one I'm excited to talk about is a Robertson project within Nevada Gold Mines Cortez Complex. This is the latest mine to be developed in the Cortez Complex with first production expected Q4 2024 conditional on the permits. The operators don't elaborate publicly too much on the asset, but Barrick does categorize this as a Tier 2 gold asset, which is defined as a gold project designed to deliver a minimum of 10-year mine life, annual production of at least 250,000 ounces of gold per year, and total cash costs over the life of mine that are in the lower half of the industry curve. Greenstone is an asset in Ontario currently being constructed by Equinox Gold. With over 400,000 ounces annual production expected per year in the first five years, Equinox sees this asset as a key part of their growth portfolio, and we expect to see lots of news as they build one of Canada's largest gold mines. Bonacro is an ex-Newcrest asset in Cote d'Ivoire that is operated by private company Allied Gold. With the current layback underway, new resources are exposed and it should make a big contribution to the ounces delivered to Sandstorm in the next few years. Blyvor is a re-emerging mine with an exceptionally well-experienced team and a tremendous expansion potential. We have high hopes that this project continues to ramp up and seize its past glory in the South African mining space. On the copper side, it's hard not to get excited about the Casarones in Chile, which is operated by the Japanese group Nippon. This mine lies near the emerging new district that straddles the border with Argentina that the Lundin group of companies has been so successful in making discoveries over just the last few years. And the El Pilar project, operated by Southern Peru Copper, is expected to be getting $310 million spent on its development by 2023 and is a key part of their near-term growth. Lastly, it would behoove me not to mention the largest copper mine in our home province of British Columbia in Tex Highland Valley. Despite Sandstorm being 13 years old, this is the first cash flowing royalty in the portfolio that comes from our home province. And what a mine to have that cash flow from. Anyhow, thanks for bearing with me on this brief overview. As you can tell, we're really excited about these and all of the assets in our new portfolio. It's great to have so much growth on such high-quality assets. It helps set us up wonderfully for an expos phase of growth beyond even this. So with that, I'll pass over the call to the operator, Michelle, to the Q&A. Please feel free to ask questions about any of our royalties and streams.
spk05: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number two.
spk04: Please stand by one moment for your first question. Your first question comes from Trevor Turnbull of Scotiabank.
spk05: Please go ahead.
spk00: Hi. Thank you, guys. I just had a couple of questions on timing and next steps. The first with respect to Hod Madden, you mentioned you're moving into that final phase of permitting since you've gotten the environmental approvals. And I just wondered if you could provide a little more detail on what that entails and maybe give us a sense of the milestones we should be watching for with Hod Madden.
spk02: Yeah, absolutely. There's a few things that will be going on. One is they're going to be working on getting the finalization of the forestry permit, which by all accounts is going well. My understanding is they expect to get that by the end of this year based on their conversations with the government. In fact, they're already getting their minor permits from the Department of Forestry on some smaller things like having to upgrade electrical transformers and those types of things. So the permits are already coming in from that department, which is a good sign. They're looking to complete putting together their syndicate of debt providers and that process is well advanced and they're looking at pulling the trigger on the long lead items of beginning construction towards the end of this year including building of the tunnels. That's an important milestone to watch for and we can actually see in advance when they give us cash call notices if they're planning on actually doing those things and for the first time ever they actually have given us The cash draw, this is for spending. That won't be item money. So things are trucking pretty well there.
spk00: Great. And maybe that transitions a bit into my question about Horizon Copper. I'm just curious on that transaction. You've said that you expect that to close in the second half of this year. There's a number of kind of details that need to be completed. I just wondered, and forgive me if you've already answered this, but Do you have any further color on the timing of, say, Q3 versus Q4 on getting that finalized?
spk02: Yeah, the guy who's most in the weeds with respect to that is Airpond.
spk03: Yeah, I'd be happy to answer that. There's a couple things that are going through the process. One is regulatory process with the TSX fee, which is going well. There's a shareholder vote required with Horizon Copper's existing shareholders, and so we anticipate that once that shareholder meeting is held, the closing of the transaction with respect to the Hauptmann and Smith out on the Entamina will occur towards middle to late Q3.
spk00: Oh, okay. So obviously the shareholder vote for the Horizon Copper entity would be happening, obviously, in Q3 sometime. So it sounds like it's all on track to happen fairly soon.
spk03: Yes, it's going well. Certainly the announcement of the Antamina transaction kind of resets the timetable with respect to having that shareholder vote. But we've had a lot of cooperation with the Venture Exchange, and things are going well.
spk00: Great. Thank you very much. That's all I had.
spk04: Once again, ladies and gentlemen, if you would like to ask a question, please press star 1 now. There are no further questions from the phone lines.
spk05: I would like to turn the conference back over to Mr. Watson for closing remarks.
spk02: Great. Thanks, Michelle. And thanks, everybody, for calling in to today's call. And as always, we're here and ready to answer questions if you have any follow-up questions. Thank you very much. Have a great day.
spk05: Ladies and gentlemen, this does conclude your conference call for today. We would like to thank you for participating and ask that you please disconnect your lines.
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