OR Royalties Inc.

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q1 2020 Results Conference Call. After the presentation, we will conduct a question and answer session. If you would like to ask a question, please pick up your receiver and press star, followed by the number 1 on your telephone key card. Please note that this call is being recorded today, May 13, 2020, at 10 a.m. Eastern Time. Today on the call, we have Mr. Sean Rosen, Chair of the Board of Directors and Chief Executive Officer of Osisko Gold Royalties. Mr. Sandeep Singh, President of Osisko Gold Royalties, and Mr. Frederick Ruel, Chief Financial Officer and Vice President Finance. Hello, ladies and gentlemen, and welcome to the first quarter of the 2020 year of Osisko Gold Royalties. After the presentation, Nous procéderons à une séance de questions et réponses. Si vous désirez poser une question, veuillez décrocher le combiné du téléphone et appuyer sur la touche étoile suivie du numéro 1. Veuillez prendre note que cet appel est enregistré aujourd'hui le 13 mai 2020 à 10 heures de l'aise. Nous avons sur l'appel d'aujourd'hui M. Sean Rosen, président du conseil d'administration et chef de la direction de redevances orifères au Cisco, M. Sandeep Singh, Président de Redevance Orifère au Cisco, et Monsieur Frédéric Ruel, Chef de la Direction Financière et Vice-Président Finance. J'aimerais maintenant céder la parole à votre hôte, Monsieur Sean Rosen. Merci. Allez-y, Monsieur.

Merci, Operator, et bienvenue à tout le monde à l'appel confidentiel du premier trimestre 2020 pour Osisko Gold Royalties. On va se trouver sur le site Web de Osisko Gold Royalties, Welcome to the Q1 reporting call for Osisko Gold Wealthies, everybody. Thank you for taking your time this morning. Pretty good quarter because... We've had obviously some challenge in the second quarter with everybody else with the COVID-19 crisis. So I want to start on page three, and I would defer everybody to look and read the forward-looking statement, as we will be making some forward-looking statements throughout this presentation. This presentation is found on our website under Cisco Gold Royalties for first quarter results for 2020. I'll start on page three with the highlights from Q1 of 2020. We had GEO's gold equivalent ounces of 18,159 ounces, creating a revenue from royalties and streams of $37.8 million Canadian, and cash flow from operating activities of $23.8 million, with a non-cash net loss of $13.3 million, mostly relating to the impairment process. of $26.3 million, of which 19.3 was to the Renard Diamond Stream net of taxes. We had adjusted earnings of $7.5 million, or 5 cents per basic share. Also, due to the pandemic, we've withdrawn the 2020 production guidance, as many of our associate companies and projects that we are invested in have also withdrawn theirs, and we will come back to guidance as our partners continue to update their guidance as we get further into the year and this pandemic crisis becomes more evident as to what the effects are going to be mid to long term on the projects. Our cornerstone asset, the Canadian Malartic Mine, was affected by COVID-19, including a shutdown for care and maintenance on March 25th to April 15th. It is currently ramping back up, and we look forward to seeing that mine back in full production. I want to be specific on our cash operating margins. Net of some offtake agreements, we are operating at 91% gross royalties. There's been some misinformation in the market about what our royalties are, but we have a small offtake agreement left in our portfolio that does skew that a bit. But our real royalty margins are 91%. Throughout the quarter, we also acquired just under 430,000 common shares through our normal course issuer bid process for an aggregate of $3.9 million Canadian. And the average price per share that we purchased under the NCIB was of $9.15 a share, with the stock currently trading about $13.30. We also declared a dividend of $0.05 per share This is consistent with our dividend policy that's been in place since 2014, and we continue to be one of the biggest dividend payers in the space on a yield basis at well over 1.5% on average. Subsequent to QE1, we had a financing non-brokered. We carry out with Investment Quebec, and we would like to thank Investment Quebec for For stepping forward, we did a non-broker premium-to-market deal for $85 million to bring in a great cornerstone shareholder that now brings Investment Quebec to about north of 5.5% of the overall company and 6.2% on a fully diluted basis. We're very happy to have Investment Quebec as a cornerstone investor in the company. In terms of other activity, we did increase our exposure to the Gibraltar mine by investing $8.5 million to reduce the transfer price on a silver per ounce down by $2.75 so that we no longer have a transfer price there. So it's really become more like a royalty. We also declared our dividend, as we said, of $0.05 per share, which is payable on July 15th to shareholders who are on the record. as of the close of June 30th, 2020. On page four, COVID-19 impact, and I hope everybody's staying safe today. Obviously, here in Quebec and in Montreal, we've had our challenges, and we want to thank all of our frontline and first responders and doctors and nurses who've been working so hard to keep our community safe. And as we advance through this crisis, we look to honor those people as this unfolds and evolves into what we hope will be a manageable situation shortly. The transition for us involved shutting down the day-to-day office here in Montreal. Everybody has been equipped with printers and laptops and communication equipment that they need, and we're fully active, and we're working seamlessly from home. And we will continue to keep non-essential office people at home throughout the crisis. And we've limited our exposure as much as we can and doing everything we can to support those people who have to go to work or have to be in the public. On the partner side, we have several mines. There was a Quebec-wide shutdown for mining, which has subsequently been lifted in part and hopefully in full soon. and we'll see most of the Quebec mines go back to work, and we'll have better guidance as those regulations evolve, and people are able to go back to some of the remote fly-in, fly-out sites safely. One thing to note that for us in the mining industry, we didn't miss any business. It's a deferral of revenue. The resources are still in the ground. On the social front, we've done a fundraising with our employees where Cisco has matched up to $50,000 for Monceau, Montreal, one of Canada's largest food banks, and we continue to rally for support for that great organization as we go forward. A few of our employees, Guy Deschamps is shown here in the photo, has joined the revolution of 3D printing and is printing protective advisors. with a couple of printers on the go 24-7, and also we're contributing to some other efforts on an ongoing basis as the crisis evolves. Page five, you know, is a summary of what we just covered. The $85 million private placement really goes to bolster the balance sheet in a time of crisis. This $85 million brings our cash balances back. up to about $230 million on hand, and that allows us some flexibility in these times. And also on page five, you can see a bit of a summary on the Paseco offtake agreement. This is a great mine with a 17-year mine life located in British Columbia, not that far away from the Barkerville project, and it continues to be a great mine. It's operated for a long time. is primary copper producer, open pit at 85,000 ton per day mine that we think has a lot of potential. And Toseco as a group has an awful lot of good projects and we're very admirative of that management team's ability to operate that mine in the cost cycle that they have and they continue to have robust operations even at these lower copper prices. On phase six, I wanted to go through Our assets dominantly at gold exposure. We have the most amount of gold revenues of all the royalty and streaming companies in the space. We've shown you here the Q1 GOs by asset base. Obviously, Canadian Malartic is still our biggest cornerstone shareholder, followed up by LA North CB and most recently Eagle and on Island. We'll talk a little bit more about Eagle as we go on, but Eagle is the Victoria Gold's Yukon mine, the latest gold mine to go into production. They're enjoying significant success having worked through the winter at 64.5 degrees latitude and delivered the project into production and they're pursuing commercial production as we speak and had very good results yesterday. We congratulate the Victoria team on being able to continue operations throughout not only the cold winter but also through the COVID crisis. It's a very exceptional management team that's been able to bring that project to fruition in these difficult conditions. Also, we showed you our silver production with Mantos being our most important silver asset, previously an Anglo-American copper mine and operated by Orion now. exceptional asset with long life, and we continue to see a lot of these assets continue to grow. Obviously, we had a little bit of diamond exposure with about 2,000 GOs coming from Renard. Obviously, the diamond sector has been a little more challenging as we get into the piece, but this too shall change. As we saw in 2008 and 2009, diamond prices did rally after a bit of a financial crisis at that time, so hopefully we'll see that happen in the diamond space as well. Now I'd like to introduce you to Fred Ruel, who's going to take us through pages seven through 11. Fred has taken over the role as CFO as of January 1st. I'd like to congratulate Fred on having had his first quarter somewhat trial by fire. Fred and his team have been able to give their reporting through and continue on even with the COVID-19 crisis. The challenges obviously in the accounting department being somewhat significant. So, Fred, over to you for page seven.

Thank you, Sean. Good morning, everyone. Strong quarter for Cisco in terms of revenues, cash margin, and operating cash flows. Despite the disruptions on activities for some of our main operators, the strong gold price more than offset the reduced deliveries at the end of March. Revenues from royalties and streams reached $37.8 million in Q1, up $4.3 million compared to last year. an increase of 13%. Cash flows from operating activities were slightly lower by $1 million in Q1 of this year, but excluding the impact of the changes in non-cash working capital items, operating cash flows were $27.9 million compared to $22.6 million in Q1 of last year, an increase of 23%. On page 8 of the presentation, we show a breakdown of our cash margin for Q1. Cash margin on our royalties increased by 2.3 million to 25.6 million. Cash margin on our streams also increased by 2.3 million to 8.8 million, resulting in a cash margin on our royalties and streams of 91% in Q1 of this year compared to 89% in Q1 2019. Our total cash margin reached 35.3 million in Q1, including $800,000 generated from our offtake agreement an increase of $4.7 million, or 15% compared to last year. On page 9 of the presentation, we present a summary of our earnings and adjusted earnings. We add a net loss of $13.3 million in Q1, or $0.09 per share, compared to a net loss of $26.5 million in Q1 2019, or $0.17 per share. Excluding impairment charges, net earnings would have been $6 million in Q1 of this year compared to $2.1 million last year. Adjusted earnings were $7.5 million, $0.05 per share, compared to $5.8 million, or $0.04 per share, in 2019. On page 10 of the presentation, we have a summary of our results for Q1. GEOs from gold production were lower this year, partly due to the sale of the Bruce Jack offtake in Q3 2019 and the impact of COVID, but this was offset by a higher realized price on gold, Our average gold price per ounce sold amounted to $2,125 Canadian compared to $1,731 Canadian in Q1 2019. The decrease in our total revenues from $100 million to $53 million was also due to the sale of the Bush-Jackoff take last year. Gross profit increased to $21.6 million from $18.2 million last year. On page 11, you will find a summary of our financial position. Our cash balance was $158 million at the end of Q1, and $243 million considering the $85 million equity financing completed with Investor's Market Deck on April 1st. Our debt amounted to $423.5 million, which includes a drawdown of $50 million in March on our revolving credit facility as a cautionary measure. Including the $100 million accordion available, our credit Our available credit on the facility was over $400 million at the end of March. Our net debt position, including the IQ financing, amounted to $280 million. In addition, our equity investment portfolio is currently valued at over $250 million. Back to you, Sean.