Sandstorm Gold Ltd.

Good morning. My name is Alan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold Royalties 2023 Third 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 be proved 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 questions during this time, please 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.

Thank you, Alan. Good morning, everyone, and thank you for calling into our Q3 earnings call. As usual, in a few minutes, I'll be handing things over to Irfan Kazemi, our CFO, to review our quarterly earnings highlights. And before I do that, I would like to take the time to give a high-level update of the business, focusing specifically on four things. One, the progress we're making in bringing down our debt levels. and the things we are doing to continue that trend. Two, production expectations over the next year. Three, our production growth expectations and long-term production profile. And four, based on that long-term production profile, how much cash flow we expect to generate. So starting off with the progress we're making with bringing down our debt. You can see on the left of this chart that $637 million was the amount of money in total that we owed in the middle of 2022, including bank debt as well as money we owed on streams that Nomad had purchased but not yet paid for, which we inherited when we acquired Nomad. As you know, we have now paid all of those stream payments and there are no more remaining payments owed on any streams, and we've been using our free cash flow to pay down our bank debt. Bank debt on our Q3 balance sheet that we just released said we owed $456 million. However, As you can see on this slide, as of today, the bank debt has been further paid down by another $13 million already since quarter end to $443 million as of today. And this only includes $3.5 million from the recent non-core asset sales, and we'll be getting another $6.5 million from that shortly, which will apply to our bank debt. It's our goal to get bank debt below $350 million by the end of next year. with a combination of cash flow from operations as well as continued cash from non-core asset sales. We're going to be working on non-core asset sales throughout the remainder of next year, and as you can already see, we have kicked that process off with the sale of a couple of non-core, non-cash flowing royalties for which we're receiving $10 million in cash as well as some share consideration. This particular deal had been in the works for nearly a year, and all future non-core asset sales will prioritize cash. Currently, we're working with a bank advisor to help us market these various non-core assets, and we're expecting that it will be in a series of smaller transactions to different parties rather than one large transaction to a single party, because we're trying to find the most logical home for each of the assets that we're marketing. To be clear, the range that we give of $40 million to $100 million of non-core asset sales is in reference to the cash we would receive in such transactions alone. We're not counting any share consideration we may or may not receive because we want the target of $40 to $100 million to be useful in estimating our debt reduction capabilities, again, with the goal of getting our debt below $350 million by the end of next year. I believe it's also worth noting that Sandstorm has $220 million of loans to other mining companies that is generating interest income. The $220 million figure is a mark-to-market fair value based on current high interest levels. which in layman's terms means we're receiving today's high levels of interest on that $220 million figure. I bring this up because as we pay our debt down, our interest expense will come down. And as the interest rates eventually come down, our interest expense will come down even further. And at the same time, because we're generating interest income on these loans that we've made, at some point in the future, our interest expense will have come down so much that our interest income will entirely offset the interest expense And we believe that that can happen within the next two to three years, at which point 100% of our cash flow generated by our stream and royalty portfolio will be free cash flow, or stated another way, our net interest expense will be zero. Overall, with strong cash flow that we've had and our plan for non-core asset sales over the next year, we are very comfortable with where our balance sheet is and happy with where it's headed. The second thing I wanted to talk about was our quarterly production expectations over the next year. to help our investors estimate future production. In 2023, we have three sources of gold equivalent ounces that will be non-recurring items going forward. And in 2024, we have two very important significant new sources of gold equivalent ounces that will be starting and will continue for decades to come. In 2023, the non-recurring sources of gold equivalent ounces were one, a one-time royalty payment on the Mount Hamilton royalty that we received in Q1. Two, a step down in fixed ounces for Mercedes. And three, we sold a portion of the Antemina royalty during 2023. And since I mentioned Mercedes, which is run by Bear Creek, I'd like to give my condolences to the Bear Creek team as their very recent former CEO, Tony Hawkshaw, passed away a few days ago after a tough battle with cancer. I've known him for many years and he's a good man with lots of integrity and he's going to be missed. Overall, it's our expectation that Q4 production should look relatively similar to Q3. Looking forward to next year, what we're expecting is a year of transition where the majority of our portfolio stays the same, but we'll have less production from things like Mercedes, but by the middle of the year, we'll have positive catalysts from such things as Greenstone Stream coming online, as well as the Plow Rate Stream. Both mines are nearing completion of construction. It will become significant contributors to Sandstorm's production and free cash flow. It will become an important part of Sandstorm's future. All nine ramp ups take a while. So we're expecting payments from those streams to start slow, but then really pick up and keep growing both our production profile and our cash flow. Which brings me to the next thing I want to talk about this morning, which is our production growth expectations and longer term production profile. This is a new chart that we're showing for the first time in this form. And for me, it's a very exciting chart. It was inspired by an analyst that we sat down with from one of the banks at the Denver Gold Forum who said to us that Sandstorm was the only royalty company that used to show year by year production expectations. And I was hoping the other royalty companies would follow your guidance, but instead you stopped it. I wish you would bring it back. So based on that feedback, we're bringing it back and we've decided to go even further and show our expectations for the next 15 years. You can see here that after next year, and assuming no new acquisitions other than perhaps our MARA stream exercise, we're expecting increases in production and cash flow every year, year after year, for many years. Speaking of the MARA project, some of you may have noticed that Glencore recently announced that they're paying $475 million to buy the remaining 56% stake of the MARA project from Pan American. Glencore are an intelligent company, and they wouldn't be doing that if they didn't plan on building in a timely manner. It's my expectation that this will start much sooner than people currently think. Sandstorm has an option to buy a 20% gold stream on the Mara mine for $225 million, which we would only pay once they are building it. Based on the last technical report that was done on the project, the average annual production for the first 10 years of the 28-year mine life would be 107,000 ounces of gold per year, which would translate to over 21,000 ounces per year on average for Sandstorm's 20%. At today's gold price, that would be an incremental $30 million per year in cash flow. On this chart, the boxes represent this average annual production for illustrative purposes. But once Glencore updates their MARA technical report next year, we'll update this slide for the numbers from that report. This brings me to my fourth and final point, which is how much cash flow we can generate at those production levels. At today's gold price, that would translate into well over $200 million US per year annual cash flow for a very long time that's a huge amount of cash flow for a company that only has a market cap of 1.4 billion dollars and i'm very bullish on the price of gold and if i'm right those cash flows will be even higher than that from a high level perspective when you look at the macro factors affecting our business today with high interest rates not only increasing our interest expense but also increasing the attractiveness of investing in things like long-term bonds versus stocks like sandstorm it can be frustrating in the moment However, when I think what Sandstorm is and especially what it's going to look like one year from now, I get genuinely excited. I know it's tough to look at the stock price today and be excited. However, one year from now, we should have debt below $350 million. I believe we will have declining interest rates and therefore increasing cash flow as well as possibly increasing gold prices. And then we'll have a production profile that will be increasing year after year for years to come. It's this picture that makes me confident in Sandstorm. It's this picture that has led me to borrow millions of dollars personally over the past couple of years to buy Sandstorm shares. And as I have some stock options expiring in the next month, it's this confidence that will have me borrow hundreds of thousands of dollars more to get even longer Sandstorm shares. Fortunately for me, I've already borrowed so much money buying Sandstorm shares that I'm running out of borrowing room and I won't be able to exercise all of them. Or if our share prices go up, we'll have to sell some to exercise those options. to pay the exercise price, but not only will I not be taking any money off the table, I will be borrowing more money personally to hold these shares and hold more of them than otherwise could. I believe in this company. I'm excited about this portfolio of assets. I have faith in our long-term growth profile, and I'm looking forward to that future and profiting from it together. And with that, I'll hand it over to our friend to discuss the quarterly results.

Thanks, Nolan. In terms of financial results, it was another strong quarter for Sandstorm. The company recognized revenues of over $41 million and sold over 21,000 attributable gold equivalent ounces. Year-to-date, Sandstorm has sold nearly 74,000 gold equivalent ounces, which positions the company comfortably within reach of achieving our 2023 production guidance of between 90,000 and 100,000 ounces. As such, I expect this to be another record-breaking year for Santorum in terms of revenue and production. Moving on to the results, we had $41.3 million in revenue for the quarter, which is an increase of $2.4 million from the same period in 2022, comprised of $22.5 million in sales from the company streams and $18.8 million in royalty revenues. Despite many macroeconomic headwinds and general market volatility, the price of gold has continued to perform relatively well. As a result, the company's average realized price per gold equivalent ounce sold this quarter was $19,019. The average, $1,919. The average cash cost per trivial ounce was only $220, resulting in cash operating margins of approximately $1,700 per ounce. This equates to nearly 90% cash margins on the average a trivial ounce sold, which is an incredible testament to the strong operating profile of the portfolio. The strong cash margins contributed to nearly $34 million in cash flows from operating activities when you exclude changes in non-cash working capital. an increase of $2.6 million from the same period in 2022. Net income for the three months ended September of 2023 was $14,000, compared to $31.7 million for the third quarter in 2022. This change in net income was driven by a combination of factors, including a $24.9 million gain that was recognized in the third quarter of 2022 from the sale of the company's hot mod and interest, a decrease in gains recognized on the revaluation of the company's investments, a decrease in deferred income tax recovery driven by the sale of some interest in 2022, and an increase in finance expense related interest paid on the company's credit facility. This change in net income was partially offset by 2.4 million increase in revenue compared to the same period in 2022. In September, we announced the renewal of the company's revolving credit facility, which allows Sandstorm to borrow up to $625 million U.S., and we have extended the term of the facility for an additional two years, maturing in 2027. The company ended the third quarter with $456 million drawn on its revolving credit facility, which was used to partially finance the acquisitions made in 2022. As Nolan mentioned, as of At today's date, the balance on the credit facility was down to $443 million. The next slide provides a breakdown of gold equivalent production sold by asset, with the Cerro Moro silver stream leading the way with over 3,100 gold attributable ounces. The Mercedes mine in Mexico was the second largest contributor for the corridor. The contract that was acquired in the Nomad transaction in 2022 that entitled the company to receive monthly fixed deliveries of gold from Mercedes concluded in the third quarter as expected. The restructured gold and silver stream that was announced in September is expected to commence in January 2024. The Antamina mine in Peru contributed 1,754 gold ounces to Sandstorm during the quarter. This is the first full quarter since the closing of the Antemina transaction with Horizon Copper, whereby the company sold its 1.66% NPI to Horizon to retain a silver stream and a residual NPI. The production numbers from Antemina in the third quarter include the gold equivalent ounces attributable to the silver stream and the residual royalty. Additional cash flows, primarily principal repayments of the debenture associated with the Antemina transaction, are accounted for in the company's cash flow statement under investing activities. Finally, this last slide shows the companies' attributable gold production by region and metal. For the third quarter, 40% of attributable production came from operations in North America, 23% from Canadian mines. Nearly 50% was from the South American operations, with the remaining 11% from the regions around the world. Precious metals continues to be our focus, with 65% of production coming from gold and silver operations for the quarter. 24% of retrieval allowances were from copper mines, largely driven by Chapada, Casaronas, and Antamina. As we close out on the last bit of 2023, I'm encouraged to look back over the last 12 months and see significant growth and transformation in sandstorms. The portfolio is stronger than ever, and it's generating meaningful, diversified cash flows. We have two significant mines expected to come online in 2024 with Greenstone and Platte Reef, and we'll have to reduce the remaining debt balance considerably over the next 12 to 18 months, further fortifying the balance sheet. I'm certainly looking forward to Sandstorm's continued success as the portfolio continues to mature over the next few years and generate value for shareholders. I'll leave it there and pass it over to Dave for a few specific asset updates.