OR Royalties Inc.

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties first quarter 2021 results conference call. After the presentation, we will conduct a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. Please note that this call is being recorded today, May 12, 2021, at 10 a.m. Eastern Time. Today on the call, we have Mr. Sandeep Singh, President and Chief Executive Officer, and Mr. Frédéric Riel, Chief Financial Officer and Vice President, Finance. I would now like to turn the meeting over to our host for today's call, Mr. Sandeep Singh. Bonjour Mesdames et Messieurs et bienvenue à l'appel conférence des résultats du premier trimestre de l'année 2021 de redevances orifères au Cisco Limited. Après la présentation, nous procéderons à une séance de questions et réponses. Si vous désirez poser une question, veuillez appuyer sur la touche étoile suivie du numéro 1. Please note that this call is recorded today, May 12, 2021, at 10 p.m. We have on the call today Mr. Sandeep Singh, President and Director-General, and Mr. Frédéric Ruel, Director-General and Vice-President of Finance. I would now like to give the floor to your host, Mr. Sandeep Singh. Thank you. Go ahead, sir.

Thanks very much, operator. And thanks to everyone on the line for listening in and catching up on us on what we think is a very strong start to the year with our Q1 with an asset base that continues to perform exceptionally well. I'm following a deck. I'm on currently page three. It's on our website. So if you haven't picked it up, hopefully you can follow along and we will point to slide numbers as we go through this. Again, on slide three, What I would say is, obviously, we had pre-release production numbers of nearly 20,000 geos at a 97% margin. That's quite in line with the midpoint of our guidance, which bodes well for us for the rest of the year for reasons that we'll explain as we go throughout the presentation. Records or near records on a number of key financial metrics that Fred will walk you through in a little bit more detail as well. We've also done we think and we hope a better job of segmenting the Cisco royalties business and financials and metrics from our ownership stake in Cisco development, which obviously I think most of you will know we are consolidating for the time being. I think that's important. As I don't expect many of you on the analyst side to be modeling us on a consolidated basis and hence the forecasts that are out there on us, probably not on a consolidated basis either. So hopefully that's more user-friendly and something that we'll continue to do until we no longer need to. Big catalyst that came through for us over the course of the quarter, the largest, obviously, is the IGNICO and Yamana positive construction decision on the Malartic Underground. And that story, frankly, only continues to get better since that underground development decision was made. and I'll pick up on that as well. Subsequent to the quarter, we put out our inaugural ESG report, which we are proud of. We've always been proud of our ESG and sustainability practices. What was lacking was perhaps putting them on paper. We continue to improve those practices and improve our disclosure, and that's something you'll see from us throughout the remainder of the year, as well as some unique means of offsetting our carbon footprint, including the partnership we went into with a private entity called Carbon Streaming Corp, which I'll touch on as well later in the presentation. So that's just a bit of flavor for the quarter and the financial numbers that Fred will walk you through over the next several slides. And then I'll pick up again thereafter to get into some of that detail I just promised. So Fred, if you wouldn't mind picking up on slide four, please.

Absolutely. Thank you, Sandeep. Good morning, everyone. Thank you for joining us today. Good metal prices and robust deliveries led to strong results for Cisco and Q1, as Sandeep said, including record revenues and cash margins, as well as solid operating cash flows from the royalty and stream business. Our operating cash margin on our royalties and streams reached 94%, 97% excluding revenues and cost of sales from the Renault Diamond Stream. As Sandy mentioned, we earn close to 20,000 GEOs in Q1, led by our main assets, including Canadian Malartic and Mentos. As presented on page 4 of the presentation, 75% of our GEOs were derived from gold and 23% from silver. Page 5 of the presentation, we recorded record revenues from royalties and streams of $49 million compared to $37.8 million in Q1 2020. Q1 was the first quarter where Cisco is consolidating a Cisco development results for the full quarter. And as such, we are now providing additional segment information in our financial statements, MD&A, and press release, splitting results from our royalty and stream business and results from a Cisco development. Cash flows from operating activities were $29.3 million on a consolidated basis. For the royalty and stream segment only, cash flows from operations reached $36.7 million compared to $25.7 million in Q1 of 2020. On page 6, we present a summary of our earnings and adjusted earnings. And net earnings to a Cisco's shareholders were $10.6 million or $0.06 per share compared to a net loss of $13.3 million in 2020 or $0.09 per share. On a consolidated basis, adjusted earnings were $18.4 million or $0.11 per share, which is comprised of adjusted earnings of $23.4 million or $0.14 per share from the royalty and stream segment and an adjusted loss of $5 million from a Cisco development. On page 7, we present a summary of our quarterly results with additional details for the royalty and stream segment, including gross profit in Q1 of $34.6 million compared to $21.6 million last year. The average realized gold price was $169 Canadian dollars higher compared to last year. Adjusted earnings from the royalty and stream segment were 23.4 million compared to 9.3 million last year. If we go on page eight, we present a breakdown of our cash margin for Q1. The cash margin on our royalties increased to reach 34.7 million compared to 25.6 million last year. The cash margin on our streams amounted to 11.1 million, up from 8.8 million in 2020. resulting in a cash margin on our royalties and streams of 93.6% or 96.8%, excluding the Renaud Diamond Stream. Our total cash margin in Q1 reached $46.5 million compared to $35.3 million last year. And finally, on page 9, you may find a summary of our financial position. Our consolidated cash balance was $321 million at the end of Q1, including $120 million for Cisco Gold Royalties and $201 million for Cisco Development. Cisco Gold Royalties held investments having a value of $217 million at the end of March, in addition to our investment in Cisco Development, valued at over $730 million for a total of close to $1 billion. Our total debt was stable at $400 million, with over $250 million available under our credit facility. Back to you, Sandy, for the rest of the presentation.

Thanks very much, Fred. Look, hopefully what you take away from that, and the reason I think we could go through that summary as quickly as we have, is it was a very simple, straightforward, and positive quarter. And frankly, there's a lot of upside from our current base, which I'll talk about in the remainder of this presentation, but the existing asset base really outperforming and doing well almost without exception. So we expect that to continue. If you look at slide 10 and you think about that portfolio for a minute, I suspect most of you know and understand the quality of that portfolio that's been constructed within OR. It provides, in our view, a very compelling value proposition at any point in time, but frankly, going forward even more so. When you look at the gold and silver mix, which is what we are, we are a precious metal company predominantly providing gold and silver exposure, the highest in our peer group. When you think about the jurisdictions where we live and breathe, that's always a cause for positivity, I guess. But even more so, I think we're starting to see the importance of that jurisdictional profile play out. I think we're seeing risks rising in second and third tier countries that are stressed and increasingly stressed by COVID-19. and perhaps reacting poorly as a result. So this is something that gives us an immense amount of comfort, should give investors an immense amount of comfort going forward as well. Importantly, as we'll show you later on, our growth is not only our production, but our growth is also in Tier 1 countries. And we're also partnered with some fantastic operators, and we're partnered with them on low-cost mines. We don't really have any teetering production that we worry about from a quarter-to-quarter basis. And that's also important as we're starting to see signs, I think it's clear of inflation and we're starting to see signs of cost creep in the mining sector. Again, it's not something we lose any sleep over. So solid across the board, if you add to this, not shown on the page, but if you add to this, the long mine lives of our core assets, you're essentially looking at steady ongoing production and then growing production with new assets coming along, nothing really falling off the table. And, you know, add to that lots of drilling momentum on our producing assets and on our development assets. So a good news story across the board. Starting with, on slide 11, a flagship asset that just keeps getting better. Obviously, the Canadian Malarctic Open Pit continues to deliver a very steady and significant amount of free gold to us. It will until a later part of this decade. was already on an open pit basis the most valuable gold royalty in the entire sector. It's only doubled, if not more so, in value when the underground decision was made. And I'll talk about that on slide 12 if you skip ahead. Again, none of this will be a surprise to folks that in February, Agnico and Yamana made the $1.3 billion go-ahead investment decision on the underground, extending our mine life from initially 2028 from the open pit to at least 2039. That underground deposit currently contains 14.5 million ounces, only half of which are in that mine plan out to 2039. So we fully expect that as they get underground, as they ramp into Odyssey, as they sink the shaft into East Goldie and can infill from underground, more of those ounces will find their way into a mine plan over time. In addition, You've heard the operators talk about how the deposit, especially East Goldie, which is the highest grade portion of it, is open, significantly open in most directions. And we've seen a very interesting step-out hole, kind of 1,000-meter step-out hole where they intersected. You see the star here on the bottom of page 12, 2.5 grams over 10, 11 meters. Importantly, hitting it within meters of where they expected it to It's still on our 5% ground. Lots of room to grow that East Goldie resource in between. Obviously, we'll be dependent on exploration success. But we've seen to date how quickly ounces can add up at East Goldie with relatively little drilling given the continuity and the predictability of the deposit. So this is just a fantastic flagship for us, and it continues to give the – this is not our commentary, although we share it. But if you hear the operators in recent discussions describing it as early days in terms of resource delineation, there's a lot more to come, we expect. The added potential benefit down the road as they spend more time on this asset may also not just be mine life extension from that added resource expansion, but there's also conceptual for the time being, but conceptual commentary about second declines, about multiple shafts in time, Obviously, there's a mill that'll be ready, willing, and able to accept more ore. All this is just a fantastic catalyst for us. Importantly, one that happened in a down market. All this came out when money was flowing out of the gold sector. We started to see that turn around. We don't think it's properly valued within our stock, and we think there's a lot of room for us to benefit from the work that's going to be going on there going forward for not just this year, but for years. On slide 13, just a couple of quick other updates. We're one quarter closer on the Mantos expansion. They're currently on time for the end of the year, now 79% complete. So that's, again, a positive news story for us into next year. A reminder, for the first five years of that expansion, we'd be expecting 1.2 million ounces of silver a year. So it's a significant asset for us that we see just around the corner, at least that expansion just around the corner. In the meantime, continues to be a very steady outperformer for us. Eagle is another one worth mentioning a little bit, at least. With the commercial production last year, it's still very much in the ramp-up phase. I think one of the reasons I mentioned our first quarter bodes well for the year is Many of you will know that in the coldest months of the winter, the Eagle mine does not stack. Victoria does not stack ore. They mine, but they don't stack ore. So it's always meant to be their lowest production quarter. We saw that with what we received in Q1. Their guidance is maintained, so we fully expect there to be a continued ramp up over the year with respect to our delivery ounces on Eagle. Add to that, they are working towards their production. Project 250 is what they call it, to try to see if they can increase production to 250,000 ounces per annum by 2023. And the engineering work for that will be ongoing in the second half of this year. Just last point on the Eagle story. Obviously, there was a fair bit of excitement yesterday with the announcement that an intermediate company has picked up just shy of 20% of the company. I think for us or just in general, what that should show you is the scarcity value and the importance of 200,000 ounce a year type assets in Canada. Eagle is one which we have a realty on, but we certainly have a portfolio with more of those in it. So we'll see how that continues to play out. On slide 14, I won't spend a ton of time. Certainly, we can pick up on any of these names in the Q&A session if you like, but I think the overall story is the same as it's been for a while. Stable, steady production and a lot of exploration and mine life expansion, upside potential on our producing asset base. On slide 15, you just see the guidance, which I think most people will know. As I mentioned, we're on track there. In terms of the ramp-up assets, I touched on Eagle already. I touched on Mantos as well. Santana, we expect to start production in the second half of this year, which is Minera Alamos' mine. It's a nice, you know, it's not a large asset, about 1,000 ounces a year, but it'll be a nice one to have into the portfolio. Similarly for First Majestics or Metano when that kicks in most likely early next year. I think there's, I'll pick on some of these for updates, not all, but we certainly expect there to be positive news. The Cisco development story continues to progress well. On the Caribou side, what that meant in Q1 was a significant amount of drilling, just shy of 50,000 meters were drilled. Some of that has made its way out into the market already, 10 rigs running. A lot of effort on infill, but certainly the infill is coming in well, and there's extension drilling as well, or drilling at depth, which continues to, and in between the zones, frankly, which continues to prove out. So that story continues to move towards feasibility study and permitting. In the meantime, we expect production from Bonanza Ledge 2, which is a satellite production, sorry, satellite deposit, in the near term. So that's doing what we're expecting it to. On San Antonio, the story there is to push forward on a lot of work to get it to catch up from a phase where the asset was dormant for a number of years. That includes exploration, which is ongoing. It includes engineering work and permitting. And all of that is progressing well towards initially stockpile production later in the year, but then the larger heap leach project behind it. Windfall is another one worth touching on a little bit with the revised PEA that Cisco Mining put out, you know, at a lower throughput than the current mill configuration that they've placed orders for, but still at that lower throughput, 300,000 ounces a year for the first seven years, I believe it was. Long mine life, a lot of exploration potential there, just a really significant stunning combination of size and grade that's playing out in front of our eyes. Maybe the last couple things I would point out, just in terms of quick updates, we saw a revised feasibility study for Horn 5, which is the Falco asset, just updating for pricing and CapEx numbers, essentially, or costing numbers, I should say. Progress there, which was positive, and progress there, obviously, still advancing with Glencore, which is the next major milestone. On Hermosa, we'll be expecting a pre-feasibility study in the second half of this year. From South32 on what we think is one of the better, if not the best, polymetallic development asset in the sector. Upper Beaver, and I'm getting close to the end, but there's a lot of catalysts on this page. I think it's worth pointing out some of them, at least in high detail. Upper Beaver, it was nice to see IGNICO in their update have that in a pipeline. They have it kind of potentially coming into production in 2027, put out significant amount of drilling in their last results with the best ever intercept at Upper Beaver, 60-some-odd grams, one-odd percent copper over 17 meters. So it's nice to see that progressing towards a study at the end of the year. And obviously, we have a 2% NSR there that most people probably forget that we own. And I'll touch on it later, but we added exposure to Spring Valley, which is a multimillion-ounce deposit, Heap Leach, Good Grade, and Nevada, which we expect to find its way into an operating company of consequence over the foreseeable future. So a lot there, a lot of catalysts, a lot of growth, a lot of growth that we don't think we're getting value for. I think I'll touch on this again, but I think our current market cap could easily be justified just based on our producing assets So this is significant value for shareholders that's on the come, and it's closer to fruition than it ever has been in the past. It also allows us to remain disciplined for growth in what we think is still a seller's market, and I'm certainly happy that the group invested as much as they did in growth during essentially a $1,200 to $1,300 gold price environment. On slide 16, just maybe finishing that story. As I mentioned, I think our production currently could justify our market cap. Depending on whose numbers you look at, we're basically 50-50. These are consensus numbers. 50-50 of our NAV is production and development. So there's a lot of built-in growth there that's paid for. And then to boot, we also have a billion dollars roughly of equities that I don't think we get proper credit for and two of the highest quality developers in the space. And in a rising gold price environment, in a rising inflationary environment, we think that torque is important and will add significant value. I mentioned the amount of activity on our ground. On the right-hand side of slide 16, you'll see it graphically. Essentially, a million meters, 3 million feet a year on our royalty grounds, which is a massive amount of drilling. And got that same type of number in 2020, even though with COVID, Expiration was one of the easiest things to take your foot off the gas on. Our producers kept production going as best they could, but expiration was an easier thing to delay. And so we expect these numbers to only intensify in 2021. On slide 17, just as I mentioned, I kind of alluded to it earlier, a nice tuck-in acquisition for us on Spring Valley, going from a 0.5% NSR essentially to a 3% NSR, on what is 4 million ounces, mostly in the M&I category. Historically, I think Waterton has put a lot of work into this asset and will come out with an update in due course. But a significant resource, whatever the numbers are, a good grade in Nevada, an asset that we've known well for some time, and we're happy to get a bilateral acquisition done there from the seller or sellers. And if you look at the precedents and other kind of public data points, I think we got a pretty good price on it. So nice addition to the portfolio. Peral, just for your own note keeping and modeling purposes, we did convert just recently our offtake through Cisco Bermuda into a stream. Similar economics, but nice to get it kind of in a better accounting format. That was the last producing offtake that we had. So it's a cleanup exercise, small, but helpful. We also in the process took what was a capped offtake and turned it into an uncapped stream, so added some optionality to that project. On slide 18, just from an ESG perspective, again, worth spending a bit of time on as we put out our inaugural report just a few weeks ago, maybe it's a month now. I think it's fair to say that you could almost think of our portfolio as having been built with ESG in mind, and frankly, it had. It just wasn't with a moniker attached to it, but clearly we've always emphasized proper environmental, social responsibility in the assets we get involved in. If you don't diligence that, if you don't audit track that, then you're really not, you're really not diligencing a mining asset because those are, those are some of the easiest places you can fall down. And given the track record of our team, having had their own environmental and social license, you know, know what it is to have it, know how hard it is to get it. know that it hurts when you lose it. We've certainly taken that into our business as a royalty company and know what to look for in an operating partner when we're getting involved in assets. So for us, that's the bare minimum. Diligence, auditing, exerting influence through contracts, being charitable when we've been blessed as a company and as individuals, that to us is the bare minimum of what you should do in terms of running a proper business. Since we can't ourselves reduce our footprint, we're reliant on the operating partners that we've chosen to get involved with to do that, and we're quite happy that they are doing that. We also chose to find something active that we can do. And now on slide 19, you see an example of that, where we've partnered with a private carbon streaming royalty company, or streaming company, I should say, through a small investment, $3.5 million dollars, and also through that have bought ourselves the participating right to partner or to participate in 20% of their transactions should we choose to. So for us, it's a small investment with a potential high impact. It's not just us buying carbon credits to offset our exposure, but it's us potentially funding projects and increasing the amount of offsets that there are out there in the world, doing it accretively through a business model that we know well, and perhaps getting better returns than are frankly available in the mining space right now. So for us, it fits into our other category beyond precious metals. And if we can put some other into that category that's green as opposed to anything to the contrary, we think that's a benefit. But again, I would point out that these are small investments that can do a lot of good for our portfolio. And I'll probably, or not probably, I'm getting pretty close. I think if you just go to slide 20 to end the conversation and start the Q&A, I'd say it's a business that's working at every level. Really strong quarter, sets us up nicely for the rest of the year into what looked like strengthening gold and silver prices. A significant amount of cash flow, diversified cash flow, 80,000 ounces at the midpoint of our geos. Steady, long life, no real drop-offs in that production. and a flagship that's getting better at every turn. When you add the growth that we've paid for already and the billion dollars in equities, I think that's a lot of torque to that rising gold price environment. So with that, operator, I thank everybody for their time to date and happy to open up for questions.

If you would like to ask a question, please press star followed by the number one on your telephone keypad. So we draw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Pour poser une question, veuillez appuyer sur étoile suivie du 1 sur votre téléphone. Pour étirer votre question, appuyez sur le dièse. Veuillez rester en attente pendant que nous compilons les questions. Your first question comes from the line of Ralph Proffedy of 8 Capital. Please go ahead. Your line is open.

Good morning. Thanks for taking my questions. Morning, Ralph. Sandeep, thank you. Sandeep, can you help me understand the ultimate extent of the 5% royalty at Canadian Malartic in the context of this step-out hole and as part of the resource delineation strategy as it potentially goes further and further to the east?

Sure, Ralph. So I can do that from our perspective. Obviously, we don't know the full extent of the operator strategy, except to say that they're drilling aggressively. And the more they drill, the more they find, all of which is hugely positive for us. So I know there was some talk about, obviously, further east, you run into the Rand Mall Arctic property line. This is clearly west of that property boundary. So that hole was squarely in our 5% East Goldie zone. Yes, if you continue drifting further east at some point, well past the point where I plan on being retired, you might get off of our 5% royalty ground. But I think there's a lot of ounces to fill in the gap between the current extent of the East Goldie zone and where that hole was hit. Again, I think that's where the focus will be. So that's all positive for us. You know, again, you know, it's quite, the question is no longer, I think, you know, the 20 year mind life, which is currently what's on the books. It's just a question of how many, how many more decades can they add to it? But obviously they need to do the work to get there. So that's, that's what we're looking at. And, and I think that's what they're looking at and, and starting to turn the conversation into not, can I add mind life or how much years or decades can I add after 2039 is how can we, sorry, how can they add ounces and fill that mill or maybe not fill it, but continue to fill that mill higher than the 20,000 tons per day that is currently envisaged. So great news. And then eventually, if there is anything that we don't have a royalty on, I'll remind you, Ralph, and everybody else that we do have a 40 cent per ton, essentially toll milling royalty on anything else that goes into that mill. So For now, we'll take all these 5% ounces we can get, and I think there's still a lot more of them to come.

Got it. Got it. Okay. Thanks for that. On the Spring Valley transactions, do any of these royalties have buyback options on the part of the previous owners, or is this essentially a clean transaction with all the expiration upside and the royalty upside in Osisko Royalties' hands?

Yeah. So the short answer is no, there are no, there are no buybacks. So we, we, uh, we think it's a sizable resource already. Um, you know, obviously there's some, it's been, uh, uh, you know, hidden, if you will, in a, in private hands for some time. Uh, I personally think it's, it's the best asset within that portfolio of gold, Nevada gold assets that Wharton has. Um, know it well. I sold them some of those assets in a prior life. So I know this one well. We knew it well as a group, having had a 0.5% NSR on it already. And I think in a world where people are looking for good assets and good jurisdictions, this is on a short list. So we're quite happy to have increased our exposure to it.

Great. That's it for me. Thank you. No problem at all. Thank you.

Your next question comes from John Tumazos of John Tumazos Very Independent Research. Please go ahead. Your line is open.

John Tumazos Thank you and congratulations on all the progress and thank you for the very clear format about the ODC expenses. I have three simple questions. First, why did you draw the revolver to pay down the convert rather than just use cash. Second, could you review the Canadian $300 million convert due the end of next year convertible Canadian 2289? How many days do you have to trade above that level to trigger conversion or force conversion? And third, should we be rooting for the convert to convert so you have more cash or for you to redeem it so there's fewer shares?

Yeah, thanks, John. Sorry, I was just jotting notes down. I wanted to make sure I caught all your questions. And good morning, John. Thanks for the commentary and the questions. I guess first question in terms of why we put that $50 million convert, why we refinanced it on the revolver, No magic to it. I think we like to carry a meaningful cash balance just to be nimble in terms of looking for new opportunities. Obviously, for most things, we can draw on our credit facility very easily when we want to, but we just like to walk around with a little bit of money in our pockets. At the end of the day, the credit facility has a pretty low coupon rate, It's lower than what the convert was that we refinanced, so net better. But again, eventually, you're right. We have cash. We're making cash flow more than we ever have before. So I don't necessarily want to pay interest when I don't have to. So that's something we'll keep the right balance on. In terms of the convert itself, you had the numbers right. It's $300 million Canadian due at the end of December of 2022. $22.89 is the Canadian dollar convert price. And maybe I'll just tackle questions two and three together. Yeah, John, I'd say certainly root for the share price. In terms of convertibility, that's what we're doing. Our preference is for that convertible to be in the money. For it to be forcibly exercised, it would need to be, and I'm going by some memory here, I think it's 20 days at 30% higher. So let's root for that too.

So we have to have Canadian 30 for it to convert, right?

No. No, I'm saying convert early, I think, because of your question. So anything above 2289 or frankly below that.

So December 31 next year, 2289 or greater converts it?

Correct. Correct. And we think we have the ability to get there. Obviously, we'll plan for any and all eventualities, but we're not concerned about that convert at the end of 2022. We have a billion dollars of equities on a good day. We have a revolving credit facility, which is cheaper, which is largely undrawn. We're making money. We have cash. We have tons of options at our disposal, and we'll deal with that as we get closer to it.

I can ask one more, Sandy. Thank you for replying to all my questions. No problem. It looks increasingly like OR and ODC could be overfinanced. Some of the group companies have projects that are easy within their capacity to finance. I'm thinking of Osisko Mining in particular. Some of the group companies don't have as much market recognition or their projects could be a few dollars more. I'm thinking of Osisko Metals that Pine Point and Falco near the Miranda Smelter. Is it practical for some of the group companies to help one another? You know, the surplus funds versus the ones that need to raise money. Is the right mechanism for such an intercompany loan? Is it shares? Is it selling a stream? And it looks like my ODC has gone from being in need of funding to rolling in the money now. And that creates a lot more capacity at OR2.

Yeah, look, I mean, it's an interesting question. And look, I mean, whilst we love all of our kind of portfolio companies to be doing better, it's just kind of normal course. Not everybody does well at the same time with the Cisco metals. I think that's, you know, largely think price related, although there's been a little bit of an uptick there over the last several months. And they're going through the boring work of going through studies and hydrology work, et cetera. So I think at the end of the day, John, you know, These stories have to stand on their own two feet. We have exposure to all of them, as you mentioned, or all the ones you mentioned. But much like a portfolio, and many of those are related to the group, obviously, but whether they're related or unrelated, completely arm's length, we are incented to make sure our portfolio performs. And so if there are opportunities to help, if they make sense for us and they make sense for the counterparty, then we'll look at those. But at the end of the day, I will point out that these stories also need to stand on their own two feet. We've made investments. We've supported some. No doubt in the future we'll continue to do that if we see good value from a Cisco royalties perspective and we see good reasons to do that. But I think what we're happy to see is last year there was a lot more equity available in the system overall. Obviously, some of our partners went and accessed it more aggressively. But I think overall, that's a good thing. Wealth, and I'm going off tangent here, but wealth, that means more competition for us on the new royalty side. I would remind people that 50% of our NAB is in the development category, so having a more robust equity market that our partners can go tap into, they can fast-track their projects, the markets the mining market's been a bit starved for equity in the last several years. So that helps that side of the equation. And I would say that that should be, you know, the first port of call for a lot of the things that are in our group. We're just ending off. Yeah, no problem. Oh, hopefully that answered your question, John. Thank you.

Your next question comes from Pruneet Singh of Industrial Alliance. Please go ahead. Your line is open.

Thanks. Good morning, everybody. I just had one question. I wanted to ask about Renard. It seems like it's recovering well and diamond prices are also ticking back up. What sort of future diamond price or what level does the mine start operating again for that to start contributing? I'm trying to understand if there's a chance it could start contributing earlier than the April 2022 outlined.

Yeah. Hi, Piper. Good morning. Um, Look, I think, as I've said before, happy that the mine restarted and into healthier diamond prices. We've seen kind of a steady close to $80 US a carat diamond price for the mine. That's a step improvement over the $70. prior to COVID and it had dropped as low as kind of mid 60s, low 60s at some point. So that's a net benefit. It means the, at those types of pricing levels, you've heard me say that the mind kind of washes its face. We've been intentionally conservative to exclude that out of our guidance and, and, give you numbers on an excluded basis i think that's just a smart thing to do uh you know because it's washing its face wealth we and the other streamers are putting the money back in putting the stream back into the company so it still needs another leg up to be profitable on its own uh we think it can get there uh but we we're not gonna stick our necks out and and and take credit for those ounces until it happens so can't give you exact timing and and you know i don't know exactly what that well We have reviews on what those numbers are that diamond prices need to get to, but I think it's premature to share them. I think we need another similar type step change, and hopefully that will get us into the black. In the meantime, as I said, it's washing its face. It's running itself. We've preserved optionality to what is a billion dollars of sunk infrastructure in Quebec, and I think, you know, torque to what we hope is improving diamond prices.

Okay, great. That's helpful, Sandeep. I look forward to seeing how that progresses. No problem. Thank you.

Your next question comes from Erin Kyle of CIBC. Please go ahead. Your line is open.

Great. Thank you. And good morning, Sandeep and Fred. Thank you for taking my questions. So my first question here is on MANTOS. It's great to see that the expansion is on track with the expected completion in Q4 and the construction expected to be completed in Q2. COVID cases appear to be picking back up again in Chile. I was just wondering if you foresee that timeline getting pushed back at all or limited risk there?

Well, I think it's always a risk. I'd say this, even at the height of phases, not the word I'm looking for, but the you know, the first rounds of COVID interruption or, you know, COVID cases, I guess, first wave, the mine managed to handle it well. You know, the mine and the expansion kept on track. Obviously, it's an added layer of complexity. You have people that don't show up for work, people that, you know, need to get quarantined. So that adds a lot of complexity. But the team there has done a fantastic job of managing it. And the fact that they're still on track and all it meant was, you know, a few months of additional delay is I think that was admirable. So our hope is that continues on track. You know, can there be another small delay? That's always the case. I think it's the case for everything in mining for a plethora of reasons, you know, COVID being one of them. But we're happy to see that every time we do get an update, it's still on track. And hopefully that continues to be the case. And we're not that far from it now. So hopefully they can manage any of those issues that come up.

Of course. Thanks, Sandy. And then maybe just switching gears a bit here to production, could you maybe provide some guidance on how it's tracking for the remainder of the year? If I annualize Q1 production, it looks like you're tracking towards the midpoint of your annual guidance. But with EGLE through its toughest months of the year, are you expecting an uptake over the next few quarters, or is the midpoint kind of appropriate for where I have it modeled?

I think you're right, Aaron. Just annualizing that quarter, we're right at the midpoint basically. As I said, that to us is positive given the low contributions. I think it was 1670 ounces from Eagle. If you take their guidance for the year, it implies 9,000 to 10,000 ounces of geos for us. Obviously, there's always a bit of timing issue, but And nonetheless, a lot higher than what we're currently getting. So we expect now that the winter months are behind them, steady increases throughout the year, which can only bode well for us. Again, other assets will ebb and flow. But as I sit here today, I think we're really happy with how the entirety of the portfolio is doing. And that would be one big step change in our favor here. It was too soon to say what that means from a guidance perspective, but certainly something we'll keep an eye on as the months roll by.

Right. Okay. Thank you, Sandy. That's all I have.

No problem, Aaron. Thank you.

Your next question comes from Mike Gilliman of Bank of America. Please go ahead. Your line is open.

Okay. Okay. Hi, Sandeep. And to echo John's point, good to see the deconsolidation of ODV. And I guess that's my first question. When will you get below 50% so that you don't have to do that anymore? And I got a few more questions after that, but I'll start there.

Sure. Well, anything we can do to make your life easier, Mike, we're happy to do. Take some pressure off earning seasons for you. But look, I think it was important for us to do, obviously, the first quarter. It was a little messier than we would like. We've tried to put as much meat on the bone within the confines of what we need to operate within from a financial reporting perspective. The Fed and the team have done a fantastic job, I think, there. I think based on some of the notes I saw this morning, I think we're still going to have to reinforce a little bit of that, and we may be calling you to make sure we're giving you all the information you need from us, so that'll be a work in progress. I think in terms of So we will and so we won't. And, you know, as I said consistently, Mike, you know, reducing our ownership in ODEV is a priority, but it's not something we're going to be disruptive about and it's not something we're going to telegraph either. First priority was to make sure that Cisco development was financed and with Sean having raised $250 million, I think that in a down market, I think that qualifies as well financed. Um, and I, I certainly wasn't going to be the one to want to push on a string. I think in the first four months of the year, uh, no one wanted to hear from any gold company. Uh, I think that's turning or has turned. Um, so, uh, you know, you can imagine that would only really make sense in a positive market or make more sense in a positive market. I, you know, I think of this as, uh, you know, it's a, it's a, popular nightclub where it's illiquid so there's a lineup out the door and if anybody wants to own it, they kind of have to come through us. So we're going to be selective as to who we let into the story because we want to make sure we make money on the aggregate and I think we will. I think it's one of the better development stories in the market, and it's tracking well to become an intermediate in not too far a distant future. So long-winded answer. I think we have a better, more constructive market going forward. It's a priority for us, but we're not going to get too specific about it, and we're going to make sure if we do sell down, when we do sell down, it's to the right groups that are like-minded and see a lot of value in the name as we do.

Okay, thanks. I guess it's falling on the value. You mentioned earlier that, correct me if I'm wrong, I interpreted you said that your investments, obviously, ODV, Cisco mining are not being fully valued in your share price. Did I hear that right? If that's correct, does that mean Cisco is getting a discount on those investments in its share price? I'm just trying to flush that out. Thanks.

Yeah, sorry. Maybe I misspoke or maybe it was confusing. But yes, I don't think we're getting credit for them because I think if you look at even the midpoint of our guidance at 80,000 ounces, long mine lives, steady, nothing falling off a cliff, as I said earlier. If you look at us from a price to cash flow multiple, we're on the bottom end just based on that. When you add the fact that we have 50% of our weighting, our NAV weighting is in development assets, that doesn't factor into a near-term cash flow multiple, that's a lot of value that's there to be had. That price to cash flow multiple, the denominator of cash flow also does not take into account that we have a billion dollars of equities. When you start to look at us on an EBITDA basis and net off those equities, I think what you're left with is a very cheap stock, and that's what is our job to rectify. It's nice to see some appreciation for that, not anywhere near where we think it should be, still trading on a consensus basis around one times NAV versus our peers of two plus. So I think we have some work to do, and I think we'll get there. I think the positive catalyst, which were both, two of them were massive, the The spin-out transaction in December, the malarctic underground go-ahead in February, all that happened into a down market, I suspect, and I hope that we'll start to get more benefit of that in an up market. So a lot of value, three big pieces. If you think about the production, the development, and the equity book, and in my view, my humble opinion, and we may see some examples that justify that in the week to come, but I think there's precedent for just our royalty, our producing portfolio, justifying our market cap.

Okay, well, thanks for that. And just one last question just to on the offtake. So, so basically, as of effective April 29, your income statement will never have no more offtakes, we have to somehow figure out how to model it would be very clean, just clean streams of royalties.

Uh, correct. On the, on the producing side, I think we do still have, that was the last producing offtake. I'm not, I think, I know we have a couple of development offtakes. Um, one's on a Mulsar. Uh, there's another one. Uh, so nothing in the, in the near term, uh, that you'll need to worry about. And, and, uh, hopefully if there are others that others of those offtakes that come into production, we'll similarly look to turn them into something a little bit more user-friendly for you and for us. But right now, that's uh that's correct from a producing perspective how much is this pearl gold and how much is it produced gold and silver annually the production well you'll see uh you'll see or maybe you don't i think it's it's looped into the other it's not a massive contributor i don't have the the number offhand fred i don't know if you do uh but it was a it's a nice it's a nice little kicker of the business but i wouldn't have said it's not a material asset so uh We've just converted it into a different instrument at similar value.

Okay. Well, it's like $17 or $18 million a quarter, I guess, which gets deducted off the cost.

Yeah, that's the thing. It's significant revenue, but it's at the smallest margins. It's not the royalty margins that we have, which are 100%, and then we add the streams, it's 97%. So I'll get to that answer separately, Mike, but it's not a big deal. It's just some cleanup exercise for us.

Okay. Well, thank you. Sorry for all the questions.

No problem, Mike. Thank you.

Your next question comes from Jackie of BMO Capital Markets. Please go ahead. Your line is open.

Thanks very much. I have two questions. The first one is on your ego question. asset. I see you've got a 5% NSR on the properties of Eagle. Given that Victoria Gold is in what might be some sort of M&A speculation or at least a large investment by CORE, can you give us maybe a comment on how you're thinking about that NSR? I mean, it's significant enough in size that it might be... sort of a prohibiting step for anyone who might be looking to take over Victoria. Is that something that you guys would be willing to renegotiate, or is there any wiggle room from our perspective on that royalty?

Hi, good morning, Jackie. Short answer is absolutely not. So, you know, the point is we don't think it's an inhibitor at all. Victoria, the company, was working just fine with it. Even in a ramp-up phase, the fact that Kerr was willing to buy or swap for 18% of the stock in place, I think it's pretty safe to say that anyone who's interested in Victoria is interested in it with that royalty in place and I'm sure assumes that that royalty is not going anywhere. If there was a doubt, I'll take that doubt away. But we think, as I said earlier, all that to us, I'm sure it causes some stress within the system from Victoria this week. For shareholders, I don't think it's anything of Victoria, anything but a positive. I think it just shows you that there's a lot of interest in that story. The mine's working well. It's kind of coming into stride. You could certainly see the timing of that being a little opportunistic. Ultimately, they'll do what's best for them. From us, it just... reinforces that it's a quality asset that's sought after. If eventually it ends up in a bigger counterparty with deeper pockets who can get it up to higher production faster, can explore faster, that wouldn't be a bad thing. But we're certainly happy with the work that Victoria has been doing there. They've done the hard work. It seems like they're ready for the payoff, which helps them and helps us as well.

Yeah, that's a great answer. Thank you. That's really helpful. And my second question was on the carbon streaming partnership that you've talked about. I guess I was hoping that you could give us just a little bit more color on what your role would be in that. Are you going to invest in assets that would be eligible for carbon credits? I mean, can you just maybe give us a little bit more color on how you see this business sort of scaling up over time?

Sure. Happy to, Jackie. And so, yeah, so Carbon Streaming Corp is a private entity right now. It's arm's length to us. It's run by former streaming professionals in the precious metal and the mining space. When we came across it, we thought it was a brilliant idea, honestly, from every perspective. They're first. They've got a timing advantage, really, in terms of size of trying to do this. They've got a deep pipeline of opportunities. And essentially, For us, what it means is, as I said, with $3.5 million Canadian, we bought ourselves an equity investment in something that we think goes up significantly based on the interest we're seeing in that business. We also bought ourselves a front row seat to their deal pipeline. It's a passive role for us, but we get to watch this nascent business evolve. If we see something that we're interested in, we can partner. Again, as I said, for us, it's rather than going out there and buying carbon credits to offset our exposure, be it direct or indirect, we're actually doing something tangible. We cannot reduce our own footprint other than if we started dropping assets. The only way we reduce our scope two and scope three is if our partners do it for us. Thankfully, our partners are doing it for us everywhere we look. But we didn't think that was enough. I don't think royalty companies can hide behind the fact that we're not operators It's not our footprint. Every investor out there that we talk to needs to justify their indirect carbon footprint. So at the end of the day, we are an investor and we felt that was coming for us as well. And frankly, we felt the responsibility to do it. So this is our way of doing something tangible. And essentially, sorry to take a long run up to your question, but essentially what it is, is exactly what you said. It's funding investment. Through a streaming transaction, so much like our traditional transactions, pre-funding something, a development project that will then create, instead of gold or silver, carbon credits through preservation, carbon sequestration, biodiversity projects. and we would inherit those carbon credits to sell and make money on. So doing something good, reducing our indirect exposure in the process and making money, frankly, because we think the type of returns that are there are double digits and significantly double digit type returns. So for us, it was something real we could do to kind of be an active participant. And as I said, it's going to be small dollars for us, but small dollars with a big impact and Everybody in our peer group has an other category. We felt if we could fill that other category with something green, that wasn't a bad move.

Yeah, okay, that's helpful, Cindy. So to be clear, you're not actually writing the streams or assessing the properties yourself. You have a passive investment at this point, which theoretically, I guess, could change over time in somebody else's business.

Yeah, no, both. We have an equity investment and we have the right to participate 20% of their deals. So we are, you know, we're not, you know, we're not just going to offload that responsibility. We look at those deals when they show them to us. We will continue to look at those deals when they show them to us and decide if we want to participate in some of them. So that's how that works.

Okay. Thanks very much.

No problem. No worries. And look, I mean, I'd say, you know, our direct exposure is, It's an office space in Montreal. Our indirect footprint is pretty small as well. And we're working on tabulating what that is with the help of our partners. And we'll come back in our kind of ongoing disclosure with that. Everybody's out there trying to get to net zero by 2040, 2050. We feel that with, you know, relatively small investments, we can get there in lightning speed on a relative basis. So that's the end game there. I think there's also opportunities to partner with our actual mining partners. When you think about where some of these mining projects are, there's certainly opportunities to add a carbon offset type project. So that's the end game. That's the long game. In the meantime, we think there's a lot of good that it can deliver for us in between.

Again, if you would like to ask a question, Please press star followed by one on your telephone. Encore une fois, pour poser une question, veuillez appuyer sur étoile suivie du 1 sur votre téléphone. Your next question comes from Carrie Smith of Haywood Security. Please go ahead. Your line is open.

Thanks, Alfred. Sandy, perhaps you could just give me a bit of an update on what the status is for Hermosa. I haven't actually stayed that close to it. Obviously, it's a pretty attractive asset. You have a nice world here. Could you just give me an update?

Yeah, look, I think the updates, you know, in terms of what we can say publicly, we'll have to wait until South 32 put something out publicly. Obviously, we track it behind the scenes. So that pre-feasibility is on pace for the second half of this year. It got delayed from last year because they're incorporating a bigger project that incorporates the entirety of the resource package there. So stay tuned, I guess. But what I would say as a reminder, this was, and albeit in a slightly better Zinc environment, but this is something South32 spent $2 billion roughly in cash to buy. It's a, again, really unique combination of size and grade and has the potential to get really much, much bigger subject to permitting other parts of the land package. So we expect positives. Again, it's one of those assets that certain people forget we own, but if you tried to replicate that now, it would cost you an awful lot of money.

Right. And do you, in your internal models, when would you model first production from Hermosa?

Look, we do in our internal models, but I think it's premature for me to tell you until South32 tells us all. So I'd say stay tuned, but it's whether, you know, exactly when it hits, depending on where it falls within their pipeline. Obviously, they're a big company. They don't do things for our account, but we do think this is one that they absolutely want to push forward. You know, time will tell, but I don't think we're very far from that answer. The point is, regardless of when it is, it's chunky, long mine life, and it's a South 32 asset. So all good news, just needs a bit of clarity, which I appreciate. And as soon as we have it, we'll be able to share it with you.

Okay. And then just to follow up on Kathy's question about the Carbon Streaming Corp deal, what percentage of the equity do you actually own in that private company based on this $3.5 million investment?

It is, forgive me, but it's give or take 15% on a partially diluted basis. That's the number that's stuck in my head. It's a little bit less on a basic basis, so kind of 12% to 15%, call it. And that was for $3.5 million Canadian. They've raised an aggregate, I want to say by now, $45-some-odd million. So they're well-funded to go after their pretty deep pipelines. So we got in early, we got in cheap, and we really like it.

Okay, got you. Great. Thank you.

No problem.

Your next question comes from Lee Hue of Scotiabank. Please go ahead. Your line is open.

Hi, everyone. I have a couple questions on Cisco development. The first one is a modeling one. I noticed in Q1 there was approximately 5 million customers Booking G&A, is that for Cisco development, is that what you would anticipate quarter over quarter for Cisco development for the rest of the year, or do you think it's going to increase as the company ramps up?

Hi, Leigh. Look, I think the latter is probably a pretty fair assessment, so I don't know if I have a number to give you. Obviously, they're well-funded to fund themselves and fund that G&A, but as they're trying to build two mines, you'd imagine that they need to rev up their footprint, in particular in Mexico, where they started from scratch. I think that will take some time to settle out, but they're pushing those assets forward. They had you know, a lot of the team to begin with as we split the management teams to staff OR and ODEV. But you might see some fluctuation. I frankly don't know where that settles out. But if you're trying to build two minds, it does require two pretty full teams. So you should expect that to grow. I think, you know, in due course, we'll see what that grows to.

Right. Thanks. That makes sense. And my second question is on San Antonio. Do you have an update on that asset? Are you still expecting an updated mine life later this year and maybe production by year end?

Yeah, look, I think the good news there is they're pushing forward on all fronts. And like I said, from a standing start, it required, you know, it already had a million ounces of 1.2 grams. in 430101. So it's a pretty good starting point, but there's a lot of value to unlock through exploration. They have to do the engineering. Permitting is one that's, you've heard me say this before, slower in Mexico, tough to find people in COVID to do the work you need them to do. So that's kind of advancing, but all those things are moving forward, leading towards stock cloud production, hopefully later this year, and then the bigger project taking shape behind it. Expiration has started up. I can't remember if I listed that. That'll be significant in terms of value unlocking and showing what we believe to be a bigger project there. And the last thing I would say is the ODEP team, Sean, have pulled the trigger on a 15,000 ton per day crushing circuit. It's being shipped to site. That is, if you fill it, that will be significantly higher production than what we were guiding to, but that's early days. I think the intent is to keep that as full as possible, but they need to finish the work, exploration, engineering, permitting to get there. So I'd say stay tuned. It's still only been a short period of time since they've put their hands around that asset. So far, everything goes well. but there'll be more details throughout the year for sure.

Great. Thanks. That's all my questions.

No problem. Thank you, Lee.

There are no further questions at this time. I will turn the call back over to Mr. Sandeep Singh for closing remarks.

Great. Thank you, operator. And look, thanks for everyone we've gone over today. probably the hour that people anticipated. So thanks for hanging in there with us. If you did, to the end of the call, hopefully that gives you a good impression of where we are as a company, which we are very excited about. And without dragging on too long, I'll thank you for your time and chat with you again soon.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Thank you for your participation. Please stand up.