OR Royalties Inc.

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q2 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 one on your telephone keypad. Please note that this call is being recorded today, August 6, 2020, at 10 a.m. Eastern Time. Today on the call, we have Mr. Sean Rusin, Chair of the Board of Directors and Executive Officer of Osisko Gold Royalties. Mr. Sandeep Singh, President of the Cisco Gold Royalty, and Mr. Frédéric Ruel, Chief Financial Officer and Vice President Finance. I'd now like to turn the meeting over to our host for today's call, Mr. Sean Rosen. Bonjour, Mesdames et Messieurs, et bienvenue à la conférence des résultats du deuxième trimestre de l'année 2020 de Redevance pour y faire au Cisco Limited. Après la présentation, 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 6 août 2020 à 10 h de l'Est. Nous avons sur l'appel d'aujourd'hui M. Sean Wilson, président du Conseil d'administration et chef de la direction de Redevance Orifère Osisko, M. Cindy Singh, président de Redevance Orifère Osisko, et M. Frédéric Ruel, Chief Financial Director and Vice-President of Finance. I would now like to give the floor to your host, Mr. Sean Roussin.

Thank you very much, and welcome to our conference call for the second quarter of Cisco. For everyone on the line, we will follow the PowerPoint on our website, which is on the second quarter of 2020 for Cisco. And I ask everyone, from a Q&A point of view, ask us questions in French, there's no problem. And we're going to move forward today with the announcements, more or less in line with what you have wished, I hope, for all the situations that exist. And I wish you all the best. And to all our partners, in a difficult time, we will be sure that we, as Cisco, will try to be a leader from a health perspective here in the sector. And we are moving forward with all our projects, our partners, with all the consequences that exist in the health situation. And I'll switch to English now. And just to recap what I had said, you know, we really are trying to make sure that we are the best partners out there for COVID-19 for both of our operators, our employees. and our investors. We've taken a lot of steps and tried to be a leader in terms of how things should be done and can be done during this pandemic. We've taken a very strong position in terms of supporting all of our operators and to do the best we can to take care of all of our associated partners and employees. and families that are associated with us and those in the greater good of our society as we go through this pandemic. I'll start off with a basic recap of the business. I don't want to lose sight of where we are in this pandemic, but we did produce 12,386 GEOs in the quarter. We had $228.7 million in of revenues and royalties from our products that we invested in. Cash flow from operating activities was at $15.4 million. Net earnings at $13 million with about $0.08 per share. Adjusted earnings of $5.7 million after several payments, including dividends. We withdrew production guidance due to COVID-19. In Q1 and Q2, we are back now guiding to about 63,000 to 65,000 ounces a year. And for the first half of the year, somewhere between the second half of the year, from 33,000 to 35,000 ounces as the mines come back online. We also did a financing in the second quarter of $85 million with Investment Quebec and We really thank the government of Quebec and Investment Quebec for having partnered up with us during a hard time. It was more, you know, sort of a vote of confidence, I think, from our partners at Investment Quebec to really to come in and, you know, bolster our balance sheet in a time when things were unclear. And obviously, we have a lot of commitments in Quebec and Canada partnerships with Investment Quebec. So this makes great sense for us to continue to have our partners invest in us and with us as we move forward. We also improved the silver stream from Gibraltar, having paid $8.5 million to transfer price to go from $2.75 an ounce in transfer costs down to zero. So we basically had a royalty status on that silver stream, which I think is an exceptional asset. um, to achieve during this, uh, this market where we, we see a lot of competition, uh, for royalties and streams. So it's, you know, it's Austin to, to the team for, for getting the deal done. And, uh, obviously a big vote of confidence from our partners at your broker, uh, you know, and, and just take in terms of their confidence, choose us as a partner on that deal as we go forward. Um, also we saw the commercial production declaration from Victoria gold. obviously a huge milestone for us. We have a 5% top line royalty on that project. I'd like to congratulate John McConnell and the whole team at Victoria for just, you know, exceptional mind build. Just getting that project going during a time when, you know, we faced a couple of cold winters and we saw the thing through and, you know, John and his team our building in Canada's next best gold mine, and it was the largest gold mine ever built in the Yukon. And, you know, heading for 200,000 ounces a year plus of production and just an exceptional outcome on that project with our partners from Orion Mine Finance and ourselves having led the charge to get the project financed back in 2018 and 19 when everybody else was hiding under the bed. We were able to get that project finance and John's management team huge kudos and hats off for the work that they did there to make that project work the way it is working now and obviously hitting a premium gold market it couldn't have been smarter and it couldn't have been better so that's the way we see it you know in terms of our COVID-19 results I mean it obviously Osisko really hasn't hasn't had a big impact on us in terms of you know, what has been for other industries. And we're quite humble about taking advantage of the situation. But, you know, the price of gold has gone through the roof. And, you know, our partners continue to operate at a very good pace. And we see a lot of things positive happening in the gold space in terms of the projects that we're involved in as we go forward. We declared a $0.05 dividend in July 15, 2020. So that continues to be a leading dividend in the gold space. Subsequent to the Q2 results, we are looking for 33,000 to 35,000 ounces of GEOs in the second quarter. Obviously, it's a good school price. Anything that's not pure gold is taking a backseat in terms of GEOs. on an equivalent basis. So, you know, we're definitely seeing revenues increase based on the pure gold assets in a proportionate basis to other assets. I'll move on right now to page 12, and I'm going to hand it over to Fred to take that through, if we could, please.

Okay. Good morning, everyone. As previously noted by Sean, our deliveries of precious metals were affected by the COVID impact in G2. Several of our operating counterparties have announced temporary operational restrictions due to the COVID-19 pandemic, including reduced activities and operations based on care methods. As of today, most operators have restarted their activities and have reached, for our in the near term. The strong gold price offset the reduction in EGLs earned during the second quarter, which should lead us to a great second half of the year, both in terms of cash margin and cash flows. If we go to page five of the presentation, revenues from royalties and streams amounted to 28.7 million, compared to 33.8 million in June 2019. Cash flows from operating activities were 15.4 million compared to 21.4 million last year. Excluding the impact of the changes in non-cash working capital items, operating cash flows were 18.6 million compared to 23.5 million. On page six, we show a breakdown of our cash margin for Q2 and near today. The cash margin on our royalties decreased by 3 million to 20.7 million in Q2. For the first half of the year, the cash margin on royalties reached 46.4 million, less than 1 million lower than in 2019, despite the COVID impact on our deliveries due to the strong hold prices, which offset the lower delivery in Q2. The cash margin on our streams was 6.4 million in Q2, similar to 2019, and 15.4 million for the first half of the year, which was 3.2 million higher than last year, resulting in a cash margin on our royalties and streams of 95% in Q2 of this year compared to 90% in Q2 of last year. Our total cash margin reached 27.8 million in Q2, including 0.6 million from our uptake agreements, $3.7 million lower than in 2019. Year-to-date, our total cash margin was $63.1 million, an increase of $1 million. On page seven, we present the summary of our earnings and adjusted earnings. Net income was $13 million in Q2, $0.08 per share, compared to a net loss of $6.5 million in Q2 2019 of $0.05 per share. Adjusted earnings were $5.7 million, or 3 cents per share compared to 8.2 million or 5 cents per share less. We can go on page 8, representation, where we have a summary of our results for Q2 and year-to-date. Geos from goat production were lowered this year, partly due to the sale of the goose jet off stake in 2019 and, of course, the impact of COVID. The decrease in our total revenues from $132 million to $41 million was also due to the sale of Prusak off-state, as well as low deliveries as a result of the COVID pandemic. But this was partially offset by the higher realized price on our gold. Our average gold price per ounce sold amounted to $2,363 Canadian in June of this year. compared to $1,766 in Q2 of last year. Gross profit for Q2 was relatively flat at $19.1 million compared to $19.7 million in 2019. On page 9, you find a summary of our financial position. Our cash balance at the end of Q2 was over $200 million. Our debt amounted to $422 million. which includes the drawdown of $50 million done in March on the revolving credit facility as a cautionary measure. Our net debt amounted to, at the end of June 2, $220 million. If we include the $100 million accordion available under our credit facility, the total facility available is over $400 million at the end of June, which places Cisco in a very good position to deploy its capital. In addition, our equity investment portfolio is currently valued at over $300 million for a total firepower of over $900 million. On page 10, you may find our updated guidance for the second half of the year. As you know, after requiring our guidance for the year in March due to the uncertainties related to the pandemic, we have now reissued a new guidance. We expect GLs of between 32,000 to 35,000 in the second half of the year, with a cash margin on our royalties and streams of 95%, or an annual daily guidance of 63,500 ounces to 65,500 ounces. It's good to know that CO3 will be slightly impacted, again, by the reduced mining DVDs, In Q2, as some of our royalties are delivered with a delay of one to three months, we expect the situation to be pulled back to normal in Q4 to benefit from this exceptional low price. Back to you, Sean.