Sandstorm Gold Ltd.

Good afternoon. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold Royalty's 2023 Second 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, 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 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Thank you. Mr. Watson, you may begin your conference.

Thank you, Jenny, and good morning, everyone, and thanks for calling into this Q2 earnings call. Shortly, I'll hand it over to Irfan to discuss the Q2 results, but before I do that, I'd like to provide a corporate update and specifically briefly talk about five things, being one, Sandstorm's updated production guidance methodology, two, the sale by Glencore and Yamano or Pan American of the Sandstorm shares, three, share buybacks, four, production growth, and five, debt repayment. So starting with our updated production guidance methodology and over the last couple of months, I've had some conversations with larger investors and it's clear to me that our updated production guidance methodology is not yet fully understood, especially as it relates to how we have historically made our guidance and how our royalty peer companies have guided the market. Sandstorm and our peer companies have a challenge that when we are guiding future production, we have a large portfolio of royalties on development stage mines. And we have to make an educated guess as to which mines will be in production in the future. When you're projecting four years out, that can be hard to do if you have dozens of mines that have a chance of going into production. But on the balance of probabilities, many of them won't for various reasons, often relating to financing or permits. Historically, Sandstorm and its mid-cap peers, as well as smaller royalty companies, have showed forward guidance that includes mines that in reality have a lower chance of getting into production soon. and although they may well produce sometime in the future. The future guidance in this case is more of a statement of if everything goes perfect and these mines and companies get the permits and the money they need, then this is what our production would be. When in reality, everything isn't going to go perfect. This year, we made a decision to go to more of a meaningful measure of forward guidance and only include mines that are permitted or effectively permitted in the hands of companies that will definitely build or are actually building the mines and who have almost certain access to the capital to build those mines. For example, if it's a permitted mine, but it's sitting in a company with only $100 million market cap and the capex for the mine is $300 million, we will not include that production in our guidance. Fortunately for Sandstorm, we can show over 30% growth in production to 125,000 ounces per year by 2027 from assets we already have purchased and on mines that are already in construction or going into construction imminently. With the four primary mines being Greenstone, currently being built by Equinox, Platte Reef, which is currently being built by Ivanhoe, Hodmodern, which is going into construction next year by SSR, and the Robertson Mine, which is part of the Cortez trend and is being built by Barrick. These are all impressive mines, an important part of Sandstorm's future. The point I'm trying to make though is that we may have other things And in some cases likely will have new minds come online that will happen that will cause the production to be even higher than our guidance and we have a list of those things in our corporate presentation and our production charts slides. Those are all upside to our guidance. One such potential upside that I think is worth mentioning is that we have an option to purchase a gold stream of 20% of the gold produced at the MARA project for $225 million. As some of you may have seen this week, Glencore just announced that it's purchasing the remaining 56% interest in Mara for half a billion dollars. Many people have assumed that this asset won't go into production anytime soon. It's not in our guidance. However, Glencore is a very intelligent mining company and their purchase of this interest suggests to me that this project will be moving forward more quickly than people anticipate and would further increase Sandstorm's production guidance beyond our current guidance numbers. Moving on to the second topic, as many of you are aware, in the last quarter we had to absorb $100 million of share sales. Within a one-month period, both Pan American, who received Sandstorm shares when they acquired Humana, and Glencore, who received Sandstorm shares in the Basecore transaction, both respectively sold their Sandstorm shares. We do have some insight into the buyers of those shares, who for the most part were long-term large institutional investors, and so those shares have found their way into stronger hands. A few of the buyers of those shares were more short-term oriented funds, and when gold prices started dropping, they decided to sell them. Which leads me to my third point of discussion, being share buybacks. Fortunately for us, we had our share repurchase program in place and we were able to buy some shares at low prices, and we cancelled those shares and have tightened up our share structure a bit. Over the last quarter, we've purchased around 2.6 million shares. In addition, during the quarter, we had a very odd trading day on June 12th. when we were notified by ICE Data Industries, the index manager for the NYSE ARCA Gold Index, that we were unexpectedly removing Sandstorm from the index. We spent the entire day reaching out to them and explaining that they clearly made a calculation error, literally a mistake. And at the end of the day, they announced they were reversing their decision and we were appropriately put back into the index. However, during the trading day, we traded nearly 19 million shares and at some points were down over 10%. Again, fortunately for us, we had our share buyback program in place and we were able to buy the maximum allowable number of daily shares at a very cheap price on that day. It wasn't a fun day, but it worked out well in the end. On a side note, we do have some insight into the funds that stepped in big and bought shares on that day and they're great long-term funds. So at the end of the day, we ended up with a stronger, better shareholder base and fewer shares outstanding. The fourth topic I want to talk about because I always get this question from investors, is about growth. The point I want to make will be brief because it's simple and it leads into my last topic of discussion. We have already bought our growth. Last year, we acquired a billion dollars worth of new streams and royalties, much of which is for mines that are in construction now. Those purchases are our future growth and we have the Mars stream option and a number of other potential development assets in the portfolio. If we make no new acquisitions, we have a lot of solid assets high confidence growth built in. In order to get that growth, we had to take on debt last year, which leads me to my last point, debt reduction. At the peak of last year, if you took our debt, plus payments we had yet to make on streams that have been purchased by Nomad, but not yet paid for, such as Greenstone and Platte Reef, our debt or amounts owed was close to 625 million dollars. We have been diligently bringing that down, and we stand here today with net debt below 460 million dollars. So it's come down massively. You can see here on this chart, it shows that if we don't make any further acquisitions and depending on the gold price, the debt will get to zero sometime in 2027. Now we have a revolving facility of 625 million that we can draw on for future acquisitions, but with interest rates where they are today, the most likely outcome is it will keep paying debt down to save on interest. I think it's also worth noting, Sometimes in the past, we have purchased a gold stream. We may have lent a mining company money. Or in the case of the sale of the Antamina MPI to Horizon, one of the things we took back was a loan. It was a cash sweep on the MPI cash flows. And therefore, Sandstorm has a portfolio of loans to other mining companies from which we receive interest income on. In total, the mark-to-market value of those loans that we have made is $234 million U.S. So if you take Sandstorm's net bank debt of around $457 million, which has an interest expense to us, and you net that debt against the loans we have made to other companies, which yield income to us, the net interest isn't that bad. Having said that, our business is doing well, our cash flows are strong, and we'll be applying those cash flows against our debt as our first capital allocation priority. It's very exciting to be in this position today with a strong portfolio, four amazing mines being constructed and with debt falling rapidly. Quarter by quarter, Sandstorm is becoming a bigger, stronger and more stable company. With that, I'll hand it over to Irfan for the detailed results.

Thanks, Nolan. It was another strong quarter in terms of financial results for the company. We set another record in quarterly revenues at $49.8 million. with attributable gold equivalent production of over 24,500 ounces in the second quarter, and nearly 53,000 ounces in the first half of 2023. Sandstorm is on track to comfortably achieve its production guidance of between 90 and 100,000 attributable ounces this year. Our gold and silver prices during the second quarter helped boost revenues, and the company realized an average gold price of $1,972 per tributal ounce. This resulted in cash operating margins of $1,744 per tributal ounce sold. Comparing the three months ended June 30th, 2023 to the comparable period in 2022, gold revenues and attributable gold equivalent production increased by 39% and 27% respectively. The increase in production and revenues was primarily driven by the assets added to Sandstorm's portfolio in the second half of 2022 via the Nomad and Base Core transactions, as well as an increase in the average realized price of gold. The average cash cost per tributal ounce in the second quarter was $228, a 16% decrease compared to the same period in 2022, contributing to the strong cash operating margins that I mentioned earlier. As a result, the company had record cash flows from operating activities of $42.1 million, or $38 million in operating cash flows excluding changes in non-cash working capital. These cash flows and the strong margins that underlay them really highlight the benefit of the royalty model business. Over the last 12 months, we've added considerable scale to Sandstorm's cash flowing royalty portfolio, while also increasing our operating margins. Even in a high inflationary environment, Sandstorm continues to turn out exceptional operating results. Net income for the three-month period was $2.7 million, compared to $39.7 million in the comparable period of 2022. This change was driven by approximately $35 million in gains recognized in the second quarter of 2022, related to the sale of a portfolio of royalties to Sandbox Royalties and the sale of the company's equity interests in Entrez Resources, to Horizon Copper. On the next slide is a breakdown of attributable gold equivalent production sold from the company's top assets. At the top of the list, we have the Mercedes mine in Mexico at almost 4,100 attributable ounces sold. Sandstorm required a gold stream on Mercedes in April 2022, which pays fixed deliveries until nearly 30,000 ounces have been delivered. Part of the Nomad acquisition last year, the company also acquired a silver stream on the asset, along with fixed additional deliveries. Their moral continues to be a strong contributor to Sandstorm production profile, with over 3,300 attributable gold equivalent ounces sold during the quarter. July and August mark one year since the completion of the base core Nomad acquisitions, respectively. As I look at the contributing assets on this list and compare it To this time last year, it's great to see so many significant cash flowing streams and royalties from those acquisitions. Antemina, Casaronis, Bonacro, Blyborg are just some of the assets that are contributing meaningful cash flow to Sandstorm this year, with many more in development. Speaking of Antemina, in June, Sandstorm completed the final component of its transaction with Horizon Copper, whereby Sandstorm sold a portion of its net profits interest on the Antemina copper mine. In consideration for the MPI, Sandstrom received a 1.66% stream on the silver produced at Antemina, as well as a $20 million cash payment, plus a combination of debt and equity, and retained a portion of the MPI as a residual royalty. The cash received from this transaction contributed to the strong quarterly cash flows that I mentioned earlier that helped further pay down the company's debt balance, while also investing in share buybacks, as Nolan discussed. Operations And the Americas contribute significantly in terms of the majority of gold equivalent production to sandstorm at 86% in the second quarter. Compared to the same period in 2022, attributable production from mines in North and South America is up 37 and 18% respectively. This is largely due to the regional exposure from mines acquired in 2022. Sanestrone remains a precious metal-focused company. During the second quarter, approximately 75% of tributary production came from precious metals. Of the 25% production that came from base metals, about 20% was in copper. And with that, I'll turn it over to Dave for updates on some of our development assets.