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spk05: Good morning, my name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold Royalties 2023 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 in 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 on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. Thank you, Mr. Watson. You may begin your conference.
spk01: Thank you, Joanna. Good morning, everyone, and thank you for calling into this Q1 earnings call. In a minute, I'll hand it over to Irfan to discuss the Q1 results, but before that, I just wanted to provide a high-level update on a few qualitative things that have occurred over the past few months that are worth noting, specifically four things that I think are material. The first of those things, and most material, which was announced earlier this week, is that SSR, a multibillion-dollar Canadian mining company, has announced that they're buying a 40% interest in the Hodmodern project from Lydia. I'll let Dave talk about this a little bit more when he gets to his part of the call, but this is obviously a positive update for us as we believe that they're This will give Sandstorm shareholders and prospective shareholders much, much more confidence that HodMod will be built and is progressing immediately into construction. This leads me to my second update that I think is worth mentioning. As soon as the announcement was made on Monday after market close about SSR and HodMod, some of our investors and prospective investors saw this as such good news that they made a bid to one of our shareholders that we inherited from the base core transaction. for their entire block of $50 million Canadian worth of Sandstorm stock. This was a block of shares that was understood by the street that was potentially available for sale and it was causing some pressure on our share price. And that purchase of shares successfully happened this week. In addition to that, it's worth mentioning that one of the shareholders that ended up with Sandstorm shares as part of the Nomad acquisition was Yamana, who also had nearly $50 million Canadian in Sandstorm shares And Yamana was recently purchased by Pan American Silver, who is liquidating a lot of its non-core share asset base. And they also sold their entire block of $50 million worth of Sandstorm shares in the past couple of weeks. So in the past couple of weeks, we have now successfully cleared around $100 million worth of shares, which were purchased by new shareholders. So I think that's a good thing and removes a bit of the overhang. The third thing that I think is worth noting before I turn it over to Irfan is that On the quarterly calls of the other streaming and royalty companies, they have been discussing the impacts of the new proposed global minimum tax of 15%. This is something that the OECD has had in the works for nearly the past decade, and it's finally coming to fruition, where it's expected that all companies, including streaming and royalty companies, will have to pay an effective tax rate on their global earnings of at least 15%. Specifically, this impacts other streaming and royalty companies who have structured themselves offshore and outside of Canada to minimize tax. As we have noted many times in the past at Sandstorm, we have purposely structured ourselves so that we do pay tax in one jurisdiction or the other, such that this new global minimum tax, which some of our competitors expect to start affecting them in the next couple of years, does not at all affect Sandstorm. I know that some people are concerned about how this tax will affect streaming and wealthy companies, and I'm pleased to say that it is not expected to affect Sandstorm in any way. Finally, I think it's worth noting that with today's gold prices that are above $2,000 per ounce, our debt repayment is happening at a rapid pace. Nine months ago, we had over $625 million of debt. By the end of this quarter, we expect that to be down to $450 million and dropping rapidly. One year from now, I expect our debt to be sufficiently reduced into the mid-$300 million range. And I also expect at the same time that our equity and debt investments in other mining companies to be in a similar $300 million range, such that next year our net of our investments in other mining companies should be effectively zero. I think it's worth noting that we're very proud of the company that Sandstorm has become. We're excited about our collective future. I would be remiss, however, if I didn't acknowledge that along the way in building this company that there have been some bumps along the road. I say this to acknowledge that we're not perfect as a team, and we recognize that we have a very intelligent investor base that we value the feedback of. For our investors, it's worth noting that your opinions vary so greatly that many of you disagree with each other such that we can't follow everyone's advice. However, it doesn't mean that we don't want to hear that advice. Even when our own shareholders disagree with each other, hearing each shareholder's opinion is helpful to us. Having over 50,000 investors, it makes it impossible for me to hear and synthesize every individual investor's thoughts, but we have recently decided to do our best and to create a new portal on our website where you can fill out your thoughts and the feedback will be reviewed by a member of our team. Feedback that is considered both constructive and thoughtful will find its way specifically to my desk so I can review it and help our senior management team make decisions that take into account what we're hearing from shareholders. In the 18 years that I've been a C-level executive of New York listed streaming companies, I received a lot of feedback and some of that feedback has improved and changed how I view the business. and we're proactively looking for more of that feedback. I myself am not only a significant Sandstorms shareholder, but over the past nine months I've purchased another $2.5 million worth of Sandstorms shares with my own money because I believe the share price will go up. Clearly, I want the share price to be as absolutely as high as possible, and I'll be endeavoring to accomplish that. And to the extent that you can provide feedback that will help that objective come true, please do so. So for those of you who want to do that, the web address is sandstormgold.com forward slash feedback. And with that, I'll hand it over to Irfan for the detailed results. Irfan.
spk04: Thanks, Nolan. In terms of the financial results, Astron had a very strong start to the year, setting a number of new quarterly records. Sandstrom sold over 28,000 of Trueville's gold equivalent ounces during the first quarter and realized revenues of approximately $44 million, both a quarterly record for the company and an increase of 24% for the comparable period in 2022. Early in the quarter, we received a one-time contractual payment of $10 million from a Mount Hamilton royalty. This resulted in a quarterly record of $54 million in total sales, royalties, and income from other interests. Larger macroeconomic conditions help drive the price of certain commodities higher. As a result, the average realized gold price per ounce for the company's gold stream was $1,882, which is comparable to the first quarter of 2022. We continue to see indicators for a strengthened gold market, and Sandstorm's portfolio is well positioned to profit from these rising gold prices. Diving into the details of the financial results a bit further, Revenue was comprised of $26.4 million from sales from our streaming contracts and $17.6 million from our royalty assets. Sandstorm's average cash cost was $230 per trivial gold equivalent ounce, down approximately 20% from the comparable period in 2022. This resulted in cash operating margins of $1,652 per trivial ounce. These are impressive margins that are indicative of a quality set of assets and also low-cost mining operations underlying our portfolio. Cash flows from operating activities, including changes in non-cash working capital, was nearly $43 million for the quarter, a 60% increase from the first quarter in 2022. Net income was $15.6 million, or $0.05 per share on a diluted basis. Looking at a breakdown of the assets that contributed this quarter, Cerro Moro, Antemina, and Chapada were the top-performing assets, contributing approximately 35% of attributable gold equivalent ounces. Lundin Mining, the operator of Chapada, recently updated the Chapada Mineral Reserves and Resources and reported that exploration success at Chapada has offset mine depletion since the previous mineral estimates. The operator also released a maiden estimate on the Suava deposit, which is located within Sandstorm's streaming grounds. There were other positive operational updates to assets, including the Fruta del Norte and Cateronas mines, which I'll let Dave speak to in a moment. As many of you will recall, Sandstorm purchased a net profits interest on the Antemina copper mine in the second half of 2022, and we're encouraged to see strong results from this asset in the first quarter. In addition to Antemina, Bonacro, Cacerones, and Blybor, and additional streaming contracts of the Mercedes mine in Mexico are new to this list when comparing to the same period in 2022. It's exciting to see these assets on this list generating meaningful cash flow to Samsung shareholders. The other category, which includes production from the other 27 royalties not specifically listed here, contributed nearly 9,000 attributable gold equivalent ounces. Sandstorm now has 40 cash-flowing assets in its portfolio and many more in development, a truly diversified royalty company. From a jurisdictional perspective, Sandstorm's production remains primarily focused in the Americas, with 41% of gold equivalent production coming from North America. In the comparable period in 2022, production attributable to North America was 28%. This increase in the Americas was primarily driven by the addition of some of the streams and royalties I mentioned earlier that were acquired in the Nomad and Base Core transactions, as well as an increase in attributable ounces from the Fruta del Norte mine in Ecuador and the Arizona mine in Brazil. Finally, I'd like to make a quick mention of the progress on Verizon Copper in the transaction with Sandstorm relating to the Antemima MPI. Horizon recently announced a $20 million financing, which was more part of the cash consideration table to Sandstorm. Horizon is working diligently in the background to complete the transaction, which we expect to close over the coming month. With that, I'll turn it over to Dave for some further updates on our assets. Dave.
spk03: Great. Thanks, Irfan. So we're just a few days after this announcement of welcoming the new partner into Havana. So that's going to be my lead in today's asset update. With SSR becoming the operating partner, we enter a new phase of projects execution on the asset. The same team that launched the pressure oxidation plant at Chirpler to great success in both timing and budget will now be building Had Madin. Of course, SSR has operations in North America and South America, but Turkey operations have always been the big economic driver of that company. The new plan for Had Madin will be to use the same team responsible for the development of the Chirpler expansion to start focusing on project optimization within the existing EIA that's been filed and accepted. A new technical report is expected in 2024 and construction is expected to start that year as well. It's important to note that SSR's track record of performance post-merger with LASRR in 2020 with regards to Chirpler is fantastic. It was a great performance in both budget and time, but what's most notable is their ability to consistently outperform on production costs and extending the mine life. The chart on slide 12 shows how since only 2020, the SSR team has increased life of mine production by 83% and increased reserves net of depletion by 85%. It certainly feels like we're going to have the right operator on this asset. One of the best aspects of the new partnership is that our and SSR's partner, Lydia Made in Chillick, is still part of that execution team. SSR has been partners with Lydia Made in Chillick for 15 years now, and their combined execution on multiple projects demonstrates the great working relationship already established. I was just on site last week where I was brought renewed excitement with how truly exceptional this project is. The early works on the projects are well underway and the site is starting to look like a mine, and the last land acquisitions are finalizing soon. However, what excites me most is the untapped exploration potential that exists. It's been over two years since any drilling has occurred on the site, but still the Russian Zone and the North Offset drill targets are anxiously awaiting some additional work. Also, more drilling in the existing South Zone resource is a good potential target for additional reserves. It's a great time to have an ambitious new partnership to work toward. Now, on the next slide, Kesaronis II has a new operating partner in our friends in Lundin Bining. Almost the same things I've said about SSR's efficiency could apply to Lundin. They've been very successful in revising and improving the operations that they're involved in. Looking at their history when taking over Candelaria, you see an amazing improvement in just over nine years of ownership. At Candelaria, Lundin has increased forecast production by 160% and increased M&I by 175%. Amazing improvements when they assumed ownership of this remarkable Chilean asset. Combine that history of improvement with the synergies that Candelaria and Casarones make, you have a real winning formula. During construction wrap-up in the first few years of operation, Casa Ronas has seen little to no exploration done on the property, but with Casa Ronas being one of the final pieces in the consolidation of the Cunha District in Chile and Argentina, we're looking forward to renewed focus on exploration in an area that is known better by no other management team. More good news from Lundin, but this time from Lundin Gold at Fruta del Norte. The mine is consistently outperforming expectations quarter over quarter, and the last update from the project highlighted the successful discovery of projects at the existing Fruta del Norte mine. This comes in addition to the conversion of the inferred resources in the south zone to reserves. For almost 17 years, observers have been awaiting potential results from other areas of the Polar Park Basin, and now we seem to be finally finding them. Almost adjacent to the South Recruiter Del Norte, new drilling has revealed grades very similar to FDM, along with similar textures and epithermal mineralization with open targets along strike and down dip. Bonza Sewer is just south of this target and covered by an extensive gold anomaly with some initial drill hole intercepts of 8.3 grams per ton gold over 39 meters and almost 47 grams per ton over 3.5 meters. The soil anonymously these drill holes are on extends over 1.2 kilometers. Castillo is another area of mineralization in the Pullapark Basin where FDN mineralization type mineralization will be followed up on. Together at least three drill rigs will be utilized to continue a drill program at near mine drilling of 23,000 meters and regional exploration of 12,500 meters. All this exploration drilling is in addition to the 7,600 meters expected drilling in the conversion program at Fruita del Norte. 2023 drilling has initial results that confirm the continuity grade width of the resource areas. So we're very optimistic that the 1.58 million ounces added since the beginning of mining will continue to increase over the next few years. So with that, I'll pass the call back over to the operator, Joanne, for questions and answers. Please feel free to ask questions about any of the royalties in stream.
spk05: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. If you would like to withdraw your request, please press star followed by two. And if you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Heiko Ehle at HC Wainwright. Please go ahead.
spk02: Hi, everyone. This is Marcus Giannini calling in for Heiko. Thanks for taking our questions. So given that SSR Mining recently has taken operational control over Hod Madden, have you talked with them about any potential changes given a different development team now being there when it comes to deciding on priorities for the site going forward? regarding capital allocation, funds spent, and so on.
spk01: We've been in significant conversations with them at all levels, and so far the plan is straight ahead. But Dave, you were just at site, so I'll turn it over to you if you have any other insights.
spk03: Yeah, the work that they're going to be doing is going to be focused really just within the existing EIA. They're looking at some project optimizations in a couple of different spots. But really, what was outlined and what was permitted in the EIA, what the land acquisition is really focused on, they're very pleased with the work that Lydia and Artman have really put into this project so far. They're ready just to really expand upon that and start executing. Certainly, they're going to put their SSR stamp on this. But of course, being partners with Lydia for some time, they've got a lot of experience doing that. They certainly are very pleased with the work that Lydia has put into the project thus far and are happy really just to continue on. So you can expect something, even with the updated technical report as it comes, to be quite similar with the exception of some additional project optimizations within the existing plan.
spk02: Okay, that makes sense. Thanks for the color there. And then just changing gears a bit, We were going through your quarterly and noticed the Colossus severance lawsuit is still ongoing as per page 36 of the report. And obviously $8 million is not a huge amount of money, but regardless, meaningful enough to warrant asking if you have any idea when this might come to a conclusion. And to be clear, you're not forced to keep this money in Brazil in some sort of restricted account, like a bond, right?
spk01: Yeah, that is correct. That has been a nuisance, totally unmerited lawsuit that was launched many, many, many years ago, and nothing ever happens on it. So it's one of those accounting note things that we expected to have absolutely no effect in any way at all ever.
spk00: Okay, perfect. Yeah, that's it for me. Thanks for taking my questions, guys. And as a reminder, should you have any questions, please press star 1 now. We have no further questions. You may proceed.
spk01: Perfect. Well, thank you very much, everybody, for calling into the call. And as always, feel free to ask questions. We'll be here all day if anyone has any follow-up questions. And for those of you who listen to this on the podcast, please do go and fill out those feedback forms on the website. Thank you, everybody. Have a good day.
spk05: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.
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