Dundee Corporation

Good morning, everyone, and welcome to the Dundee Corporation third quarter 2021 results conference call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions could ask constitute forward-looking statements that are subject to risk and uncertainties relating to Dundee Corporation's future financial or business performance. Actual results could differ materially from those anticipated in those forward-looking statements, The risk factors that may result are detailed in Dundee's Corporation's third quarter 2021 management discussion and analysts and periodic filings and registration statements. You can access these documents under the company's profile at CDAR.com. I'd like to remind everybody that this conference call is being recorded today, Monday, November 15, 2021. On this call, management of Dundee Corporation will be quoting dollar figures. All figures are in Canadian dollars unless otherwise noted. Participating on this call will be Mr. Jonathan Goodman, President and CEO of Dundee Corporation, and Ms. Lila Manassa-Murphy, Executive Vice President and CFO of Dundee Corporation. At this time, I would now like to introduce Mr. Jonathan Goodman to provide an update on the quarter. Please go ahead, Mr. Goodman.

Thank you, operator. Good morning, everyone, and thank you for joining us today. With me on the call is Lila Manassa Murphy, Dundee's Executive Vice President and Chief Financial Officer, who will go over our financial performance. Dundee Corporation released its third quarter 2021 financial results after the market closed on Friday, November 12th. You can find our consolidated financial statements and MD&A on the Dundee Corporation website and under our profile on CDAR.com. Turning to slide four, I'm pleased to report that Dundee Corporation made significant progress across all three of our strategic objectives during the third quarter of 2021. These objectives are doing more mining deals, rationalizing our legacy investment portfolio of non-core assets, which was highlighted by the recent completion of the sale of the Blue Goose Beef Division, and reducing our run rate corporate G&A and cash overheads and streamlining our capital structure. Dundee's continued execution against these pillars is critical to bringing the company back to its roots as a mining-focused active investor and setting us up to deliver long-term sustainable value for our shareholders, stakeholders, and partners. Moving to slide five. In Q3, our mining group, through Dundee Goodman Merchant Partners, remained active in identifying de-risking and investing in mining companies with significant value propositions. Our DGMP group was involved in several mining deals and acted as finders in a number of financings during the quarter. We also continue to increase our positions in high-quality, well-run mining companies. Two examples are Mako Gold and Magna Mining. We initially took a 6% stake in Australia-listed late Mako Gold in July and increased our position to 9.9% later in the quarter. Mako is focused on discovering gold deposits in West Africa. Mako are currently accelerating their exploration and drilling program at the Napier Gold Project in Cote d'Ivoire, to extend already identified high-grade gold mineralization. Lately, Mako's exploration efforts have yielded encouraging results as the company reported multiple gold intercepts, which illustrates the potential for delineating multiple deposits along the 30-kilometer Napier Fault as they work towards targeting a multimillion-ounce gold resource. Subsequent to quarter-ends, We also increased our ownership position in battery metals exploration development company Magna Mining from 11.8% to 19.4%. While we accumulated these shares in October, much of the work being behind this investment was done by our team in Q3. Magna has a significant deposit and a large unexplored land package in the world-class Sudbury Mining District that is highly prospective for nickel, copper, and PGMs, with many anomalies already identified. Magna has had some recent exploration success at their Shakespeare project, including a new nickel-copper PGM discovery in September, which speaks to the potential for the project to host multiple deposits within the property. We remain committed to working with all our investee companies as trusted long-term advisors and partners as they advance their projects. We will continue to share our team's demonstrated knowledge and expertise across all aspects of the mining business to ensure we maximize the value of these assets and help them realize their full potential while eliminating as much risk as possible. I want to commend the entire Dundee investment team for staying as active as they were in Q3. Deal flow across the whole mining sector was significantly slower in the summer months compared to prior quarters. This was largely a result of cooler metal markets relative to Q3 2020 and many people in the sector taking time off due to the lifting of some COVID restrictions. We are seeing more normalized deal flow in September and into the early part of Q4. Our team's progress is a testament to their agility, their industry connections, and the pipeline of deals that they have worked to cultivate. Looking at slide six, Our mining investment portfolio was down quarter over quarter because it attributed to the volatility of the valuations for gold, base metals, and mining stocks due to the slower deal flow across the sector, which we have seen a reverse love in the fourth quarter so far. The decrease in assets under management is due to the market depreciation of $14.4 million, which was largely in line with the performance of the GDX during this period. During Q3 2021, Goodman & Company Investment Council recognized financial services revenue of half a million dollars from the services provided by DGMP, a division of Goodman & Company Investment Council, consisting of finders and advisory fees, compared to one million in the year-ago period. Despite the short-term market softness, we believe the investment fundamentals for mining are as strong as ever, and we remain committed to being disciplined investors who are investing for the long term. We have a well-developed investment thesis for our portfolio companies and invest heavily in management teams that we believe can execute and deliver results. Turning now to slide seven, we achieved a significant milestone in rationalizing our legacy portfolio by completing the sale of Blue Goose's beef division for aggregate gross proceeds of $71 million. There were two pieces to this deal. the sale of Lambert Creek Organic Meats, which was completed in September for approximately $8.1 million, and the sale of Blue Goose Cattle for proceeds of approximately $63 million, which was completed in October. Completing the sale of Blue Goose is a major step in the company's transformation and represents clear execution on our strategic plan. Lila will speak a bit more on the use of proceeds, but the sale of Blue Goose provides several benefits to Dundee. The cash proceeds of the DLC not only significantly deleverage our balance sheet, this divestiture also substantially eliminates further quarterly cash expenditures on Blue Goose and frees up management time, attention, and resources to focus on our core mining investment business. We made additional progress in simplifying our non-core legacy portfolio by exiting our position in EuroGas International in late September. And as mentioned on the last call, In August, Dundee entered into an amending agreement to monetize its loan with aid capital for $15 million. The payments are to come in three $5 million installments, one which we received during August of Q3, one before the end of the year, and the final payment due in early 2022. Moving to slide eight, we took further steps to drive down our run rate tax G&A in the third quarter of 2021. But Lila will provide more detail later in the call. We reduced total corporate G&A during the period, and we see a clear path to additional G&A improvements in leasehold costs, IT costs, insurance costs, and other items. We remain strongly committed to reducing our cash overheads in the final quarter of 2021 to a level that is more sustainable and more closely aligns the interests of management with our shareholders. With regards to streamlining our capital structure, our normal course issuer bid to purchase for cancellation up to 10% of the public flow of the company's Class A subordinate boni shares, as well as our cumulative five-year reset first preferred share Series 2 and Series 3 remains in place. I would like to now hand the call over to Lila Manassa-Murphy to provide an overview of our financial results. Lila?

Thank you, Jonathan, and good morning, everyone. First, I'd like to take a brief moment to thank the entire Dundee team, but in particular, I would like to thank the Blue Goose Deal team for their work in getting that transaction over the goal line. Turning now to slide 10, Dundee Corporation incurred a pre-tax loss of $48.7 million in the third quarter of 2021, compared to earnings of $16.5 million in the third quarter of 2020. The company generated consolidated revenues of $4.8 million compared to $5.1 million in the third quarter of 2020. The market value of our publicly traded securities decreased to $94.4 million as of September 30, 2021, from $100 million at June 30, 2021, reflecting a pullback in several key commodity markets. Our portfolio of investments carried at fair value through profit or loss had a valuation decrease of $42.5 million from $209 million at the end of the second quarter of 2021 to $167.2 million at the end of the third quarter of 2021. This is primarily from the aforementioned market factors as well as from the non-cash loss from a fair value adjustment for TauRx, which was determined using pricing from the latest fully subscribed rights offerings. Moving now to slide 11, operating results during Q3 of 2021 reflect a $48.7 million market depreciation as compared to an appreciation of $16.5 million in Q3 of 2020. Net loss from investments during the third quarter of 2021 includes $1.6 million in dividend and interest income distributed from our portfolio investments compared to $700,000 in the year-ago period. Looking at our operating subsidiaries performance for the quarter, as Jonathan mentioned earlier, GCIC's assets under management decreased from $73 million in Q2 of 2021 to $58.6 million in Q3 of 2021. Again, this was attributable to market depreciation of $14.4 million. During the third quarter of 2021, this segment recognized the net pre-tax loss of $700,000 compared to earnings of $100,000 in the year-ago period. Blue Goose generated a pre-tax loss of $800,000 in the third quarter of 2021, of which $200,000 was incurred by the discontinued operations of the Blue Goose Beef Division. This compares with $2.7 million in pre-tax earnings generated in the same quarter of the prior year, of which $4.3 million was generated by discontinued operations in the beef division. During Q3 of 2021, Blue Goose recognized a $5 million impairment loss as a result of reassessing the fair value of certain real properties and reducing their carrying value to their estimated realizable amount. As Jonathan mentioned earlier on the call, Blue Goose's beef division was sold for aggregate proceeds of $71.1 million, with the final piece of the deal closing subsequent to quarter end. After using the proceeds to pay indebtedness owed to Dundee, bank indebtedness, and $5.3 million in transaction costs, the company recognized a loss of approximately $100,000 on the divestiture. The proceeds from this transaction have allowed us to significantly deliver our balance sheet by paying down approximately 32.3 million in corporate debt subsequent to quarter end. The result is a dramatically reduced corporate debt position going from 37.1 million at quarter end to now having only the 4.9 million in corporate debt from Dundee Sustainable Technologies. For TowerX in the third quarter of 2021, the fair value of the corporation's investment in TAL was adjusted to $35.8 million, generating a non-cash investment loss of $33.4 million in Q3. UHIC reported a pre-tax loss of $2.3 million in Q3 of 2021, compared to a $1.7 million gain in Q3 of 2020. This fair value change was due to the increased uncertainty surrounding the Delinex trip. strategic alternatives process as well as heightened geopolitical risks in the Republic of Chad. The company's carrying value of its 84% interest in UHIC is approximately $18.7 million as of September 30th of 2021. Dundee Sustainable Technologies incurred a pre-tax loss of $800,000 in the third quarter of 2021 compared to a loss of $1.7 million in in Q3 of 2020. Third quarter 2021 revenue for DST was $1.2 million, up from $900,000 in the prior year. Ag Marine reported a pre-tax net loss of $900,000 in the third quarter of 2021 with sales revenues of $1.9 million, compared to a loss of $500,000 and $1.5 million respectively in Q3 of 2020. As mentioned on the last call, in August, there was a temporary loss of power related to swapping out a generator at the agri-marine facility, which resulted in a subsequent lack of circulation and oxygen in the tanks. The resulting impact is an inventory loss of $326,000, which will translate to lower levels of cash inflow in future quarters. During the third quarter of 2021, Dundee 360 generated pre-tax earnings of $600,000 compared to $400,000 in the year-ago period. Now looking at slide 12. The third quarter of 2021 consolidated G&A inclusive of stock-based compensation with $5.9 million compared to prior year of $6.6 million from continuing operations. Excluding stock-based compensation, consolidated G&A was $5 million in Q3 of 2021 compared to $5.3 million in the prior year period. Head office G&A, excluding stock-based compensation for Q3 of 2021 was $2.3 million compared to $2 million in 2020, a 12% decrease. At quarter end, we had $84.1 million in consolidated cash, down from $90.9 million at the end of Q2 of 2021. Finally, we have had no further significant developments with the CRA and continue to have $13.8 million on deposit regarding the 2014 to 2016 tax years. This deposit is separately disclosed on the balance sheet as deposit with taxation authority. That concludes my comments. Back to you, Jonathan.