OR Royalties Inc.

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q4 and Year 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, February 25th, 2022 at 10 a.m. Eastern Time. Today on the call, we have Mr. Sandeep Singh, President and Chief Executive Officer, and Mr. Frederic Ruel, 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 quatrième trimestre et de l'année 2021 de Redevances Orifères Aussie School 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 will be recorded today, February 25, 2022, at 10 a.m. Eastern Time. 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 hand over to your host, Mr. Sandeep Singh.

Thanks very much, Operator. I hope you can hear me okay. And thanks, everyone, for joining us this morning. I know it's a busy end to the week, a lot of people reporting, so thanks for taking the time. We'll try to go through the prepared materials reasonably quickly, leave enough time for questions. And please note, if you don't already have it, the deck that I'll be walking through with Fred is on the website, and we will be making forward-looking statements as we talk through it. Jumping to slide three, Just in terms of a very high-level recap, we had another exceptionally strong quarter. Our assets continue to perform well and provide significant catalysts that are playing out, which we'll touch on some of them as we go through the document. But in 2021, 80,000 geos earned, gold equivalent ounces, as you know, that was pre-released. That includes contributions from Renard, which, again, we will talk about later as coming back online this year. resulting in record revenues of just shy of 200 million Canadian record operating cash flows as well. This year, we expect significantly more ounces. We'll still have a very high and, frankly, peer-leading margin at around 93%. That coupled with still a strong gold price here today, certainly volatile, but higher than the $1,800 an ounce we averaged in 2021. should lead, we expect, to continued records on a number of fronts. There was a little bit of noise in the financials, mainly stemming from a non-cash impairment in Cisco development to the tune of $48 million in the quarter, but really those were legacy assets in the James Bay area, Coulomb, and in Guerrero. So exploration stage assets that the company is not focusing on and felt relevant to take that down given their focus is on their other three main assets. Taking that aside, we earned adjusted earnings of $0.14 a quarter in the quarter and $0.56 for the year. And Fred will walk you through some of the details of that later on as well. As you know, we increased our dividend amidst volatility in the middle of the year. We then followed that up with a pretty significant NSIB program, buying back over $30 million at $1,464 per share on average. So we'll continue to look for those opportunities. The company is in great shape. Cash flow will grow this year, and we'll continue to balance that between dividend growth, buybacks when there's volatility and the market affords us cheap opportunities to buy stock, and growth. Subsequent to Q4, we did announce through ASISCO Bermuda acquisition of a stream with a range of 20 to 40 million, and on the high end, 5%, on the low end, 2.5% of the metals from the Tintic property that ASISCO Development is in the process of acquiring. Sean Ruzin, our chairman, is also on the line, and in the Q&A, if there are questions that drift over to the ODEB or Tintic side that I cannot answer, he'll be available to help with that. So that's just a quick snapshot on slide four, you know, graphically depicting what I said earlier, which is an asset base that is outperforming our expectations and really just humming at this point, as I mentioned, 80,000 geos for the for the year and the traditional split that you've gotten accustomed to seeing from us of about 75% gold, silver making up most of the remainder. That's obviously when we exclude the diamond ounces from Renard. That was at a 97% margin. It also was right in the middle of our guidance. That's not a typo. It is pretty much exactly 8,000 geos right in the middle of our guidance previously reported. And I think that's worth stopping on or pausing on a little bit. I think that probably was a good result, especially in Q4, where we saw not just our operators, but operators across the sector having continued issues with supply chain. We certainly felt that with one of our mines in the Yukon. Obviously, the Omicron positivity rates skyrocketing for mining companies as they have for the population at large. So that has added complications with respect to quarantines and absenteeism. So it didn't feel like the foot was on the gas in Q4 in the mining sector. Still having achieved the midpoint of our guidance certainly felt like a win. On slide five, we have come out with our 2022 guidance as well as a five-year outlook for the first time in our history, which we hope will be helpful to people as they understand kind of the growth embedded in this company. But on the guidance side on slide five, first and foremost, we are guiding to 90 to 95,000 ounces of geos for the year at a 93% cash margin. We're adding some more streams to that mix than last year. Again, with the reinstatement of Bernard, that takes the margin down a little bit, but still quite high, which implies 12.5 to 20% growth for the year. Pretty material step change for us. I would say we expect Q1 will hopefully be the last quarter where we hover around the 20,000 ounce range. excuse me, where we've been for most of 2021 before that growth really kicks in. And the reasons for that are pretty obvious. We've got the expansion at Mantos that's underway. It's tying in as we speak. So clearly they have to kind of go through that tie-in process. And then there's also, as you've heard me say a number of times, delays of a couple months there in terms of when they produce and when we receive. But once that flows through, then we're off and running. You'd also remember that for Eagle in the Yukon, Q1 is always a lighter quarter from a winter perspective. They're going to eventually get through that and have a bit more consistency. But we do expect that to be the case, especially given some pretty extreme weather this year on the West Coast. We also have some smaller assets like Santana and Oritano, which are ramping up. We have the San Antonio stockpile, which is producing and will start generating ounces off the heat bleach this year. And then the biggest other contributor to that skew Q1 and the rest of the year would be Bernard, where we're not switching back that stream until May 1st. So not giving ourselves a credit for those ounces or those geos in Q1 primarily. So again, hopefully that's kind of a Q1 that's in line with what you saw from us Last quarter, maybe a little bit higher, but we'll see. And then significant growth starting as early as Q2 and for the rest of the year, which should bode well. I think just on a couple of points, maybe Bernard related, since that is a big addition to this guidance versus last year. And we're very pleased to be able to bring that back into the fold. We said it was a priority for us. I think now is the time where we can credibly do that and have the mine and the operator continue to be in a healthy position. To point to that, I want to emphasize that in December, I believe it was, late in the year, Storway paid back half of the working cap facility to its partners, including us. Our piece of that was just shy of $4 million. We expect the rest of that working capital facility to also be paid back in the near term. but just done in a staged manner for prudence. And some of you may have picked up in our MD&A that the latest selling price was quite high, $170 per carat roughly. We're not pricing that in for the restart, if you will. That was quite a bit higher than the reserve price, which was more in line with previous sales. But I think you're seeing quite a bit of demand increase, especially on the smaller scale diamonds. which helps us, and frankly, perhaps quite probably some speculation or more than some speculation, which is more of a short-term phenomenon. But either way, very pleased with the health of that business right now, and it's the right time to turn things off. We'll see if what sanctions, which I was just reading about at El Rosa, which currently are more about providing equity in debt, but sanctions overall mean for diamonds that, you know, likely a boost there as well in the near term. But frankly, I think that's second and third order. It is, I'll point out, it is quite sad seeing what's happening in the Ukraine, especially given the strong and proud Ukrainian population in Canada and Toronto. So hopefully that doesn't end too poorly. It is, again, not to go on too much of a tangent, first time in my young kids lifetime where they're old enough to ask questions about that war. So those are all pretty sad conversations. I'm sure you're having some of them as well. Um, on slide six, in terms of that outlook, uh, to turn more positive, uh, this is our inaugural five-year outlook, uh, and it's successful growth in our minds, you know, a 10 to 12% CAGR for the five years dating, you know, starting from last year as the starting point is, uh, Pretty massive for a company our size. Worth pointing out, if it wasn't obvious, that that is all organic growth. We're not including any potential acquisitions in there. All that would be external and additional. Other things I would point out, and we've tried to guide what assets we see coming into those. It's not exhaustive. I mean, for instance, in 2022, there is that San Antonio stockpile. It's just not in the bar. There's a couple of other things. Same for 2026. There are some other assets that are contributing there, but the chunkier contributors are shown. And then beyond that, there's a significant amount of optionality left in the business. And I think, frankly, the back half of our decade is also spoken for. You know, the other things I would say is when you look at the contributors we've included in the timeframe, San Antonio and Caribou, obviously held by ODEV, windfall at OSK, back 40. Those would be the biggest chunks there, other than increases from our existing mining assets. One of the lenses we used or the screens that we used was certainly there's permitting timelines that are embedded into those assets coming along. We've tried to be conservative. It's always a slippery slope, but we've tried to be conservative in terms of delays there. But what we haven't done is, is overlay financing risk with permitting risk. And so there's other assets, other partners of ours who have guided towards being in production by that timeline. But where we felt that permitting risk was compounded by a financing plan that wasn't yet crystallized and needed more time for clarity, we left those aside to let that play out. And we felt that was prudent. So we certainly expect there's other things that will happen. Five years is a long time that will start to shift some of these assets around, hopefully in our favor. Last year was a year where we saw a number of our assets end up in bigger counterparties. We expect that trend to continue given the quality of our asset base. So there can be movement, but either way, we thought this was a pretty impressive growth profile, one that we're quite proud of. Other things I'd point out in that optionality bucket. We can come back around to this in the Q&A later. I'm going to speak to that movement, if you will. Just yesterday, we were reading and haven't had a chance to follow up with them, but there's a lot of news in that Amico press release to bite your teeth into. One of the things that we took away is their view that in 2024, there could be another 100,000 ounces of additional production coming from things like Nalgamated Kirkland, Akasaba West, which is obviously a Goldex satellite, and Odyssey Internal Zones. And those are all assets that we have in between a 2% and a 5% NSR on. So that's not embedded into our thinking yet until we get more visibility on it. As well, casino, another very chunky asset for us where the timeline is a little bit unclear as of yet, but significant progress being made, including the government of Yukon committing to spending $30 million on road construction that benefits the mine over the next couple of years. When you look at Hermosa, where the feasibility study fell late last year, finally, after a bit of a delay. They're guiding to a mid-2023 production decision and 2027 production, so it's just on the other side of that. That's another 5,000 geos that can come into focus, even excluding the Clark deposit. Pine Point, we expect a feasibility study this year, and the timeline there will come into focus. And then, again, Upper Beaver, waiting for what the synergies mean between Agnico and Kirkland now that the merger is closed. But clearly that was one of the emphasis of their press release yesterday. So a lot of good news. Some other assets there that we haven't included, be it Hammond Reef, Altar, Oracle Ridge, where there's some pretty sexy drilling on the copper side in Arizona going on. So, Frank, I feel like we have an abundance of riches here that are going to take shape over the coming years. On slide seven, just again, this is not new to you, but worth pointing out that a lot of that growth, most of that growth is still in the Americas, still in the right countries, if you will. And this is always important in mining. And frankly, given what's happening this week and generally happening around us in the mining sector, I don't know if it's ever been more so. So certainly we feel comfortable with where that growth is and who it's being unlocked by, frankly. On switching to some of our assets on the Canadian malarctic side, obviously that story continues to get better. 2021 was a record from a production perspective. Sorry, it exceeded guidance, I should say. I have to go back and check those records. But certainly based on this geo chart, pretty close if it wasn't. So that's good news on the OpenFit side. And we factored in, importantly, the guidance that we had already received from Yamada and then updated yesterday from McGeeko where there's a slight dip over the next couple of years before things rev up again. So that is worth pointing out is in our guidance. More importantly, on the Malarctic side, on slide, should be slide nine, you know, the underground story continues to strengthen. From a pure progress perspective, the head frame is complete. The collar is complete. The shaft sinking is meant to be starting later in the year. It will then take four or five years to finish the shaft and to do underground development. Obviously, there'll be production as early as 2023 from the ramp. But all of that's progressing well and on schedule. There was a small increase in resources this February, about a million ounces. Importantly, there were the first indicated ounces as well. But most of the work last year was on infill drilling and some extension work, so we weren't expecting a big increase. What we would expect is with another kind of similar amount of drilling as last year, another 137,000 meters this year, 15 rigs currently spinning, we would expect a lot of work to underpin resource growth in 2023, a year from now. And the operators, at least one of them, are certainly guiding to the potential being likely for an updated and increased mine plan thereafter. So a lot of further good news expected on this asset. Our flagship's already good for until 2039 based on less than half of the current resources. So this is a story that continues to strengthen. And when you think about the CAMP, that our founders kind of restarted here. Between 2011 and 2021, there's been almost 7 million ounces produced. When you think about kind of the mid-1930s onwards, that's closer to 14, 15 million ounces. And today, there's 20 million ounces there almost, and it's growing and will grow in leaps and bounds. So you're looking at a camp that's produced and currently sits at 34, 35 million ounces today. with a lot of growth, which puts it in pretty rarefied air in terms of mining centers in the world. On flight 10, with respect to some of our other assets, and I will try to go to the next slides quickly because I did mention I'd try to be quick. On Mantos, that's another really good story for us. You've heard me talk about it. The ramp up there from 4.3 to 7.3 million tons is being tied in as we speak. That will take our geos from about 9,000 to 10,000 ounces a year, gold equivalent to 16. This year, we're kind of expecting half of that. a bit less than half of that increase, given the dynamics I mentioned earlier from a ramp-up perspective, and then next year on, it's off to the races. You've also heard me say that the only thing that asset was lacking was visibility, and with the merger with Capstone announced in late November, meant to close, I think, in late March, that visibility is now on there, including a first technical report in modern times and a lot of positivity around that asset, including the combined group now talking about another expansion. The first one's not done, or the current one's not done, and they're talking about another one to 10 million tons for a pretty de minimis amount of CapEx. And we would expect, and certainly we wouldn't be surprised to see some of that commentary play out as soon as the deal is closed in March. That would take our ounces up significantly and turn this into another flagship. behind uh behind malarkey which i touched on earlier uh you know nice to see the ramp up in h2 in the second half of last year um expect that to get finished this year they're already moving on to project 250 to get to 250 000 ounces during calendar year 2023 and we look forward to them getting back to the exploration side of things in a more earnest way. Yesterday, they announced the first amount of deeper drilling since I think it was 2017 on the pits themselves, which were quite interesting. Some intercepts to point out, 175 meters at 1.2 grams from 150 meters depth, 50 meters at 0.8 from 400 meters depth, early days, but it's nice to see the grades increasing at depth. So we've always thought there's the potential to expand the pits deeper. That's on top of the satellite potential at properties like Raven, which we think are quite productive and prospective, have been backlogs from an assay perspective, but we think Victoria is on the cusp of catching up with some of those backlogs and coming out with some pretty interesting drill results. El Unuar, it was nice to see the reserves increase after kind of resetting the bar over the last couple of years. Nice to see them growing back with a 44% increase in reserves. And CB, likewise, net of depletion, an 18% increase in reserves. Feeling like, certainly based on their commentary, that they're going to be getting ready to talk about growth at CB, whether it's mine life extension or on top of that. So that asset looks like it's in good shape. I'll jump past 11, but I think the story would be the same if you talk about Island, talk about LMAAC, talk about some of our other assets. But in the interest of time, I will move us to slide 12 and comment on some of those growth assets underpinning that five-year outlook, starting with the assets within a fiscal development, Caribou and San Antonio. Some of you have listened to Sean's call just ahead of ours. It's a milestone-rich year for us on the ODB side. with Caribou going through feasibility study, permitting bulk sample that will be run through the ore sorter, all that kind of tracking reasonably well with respect to timelines, with the usual kind of to-ing and fro-ing. The Tintic acquisition, we're all quite excited about, and certainly the catalyst that it's provided to help finance the entirety of the asset base is quite impressive. I think by the time it's done, over 230 million Canadians which will have been raised. That will dilute our ownership in Osisko Development, as we did not contribute from 75% to 45% pro forma when those deals closed. But importantly, it's dilution for the right reasons. We're quite happy to see that asset come in. The funding that followed to now go after those assets in a meaningful way. On San Antonio, I mentioned earlier that the stockpile is now under leach or starting to be under leach, so that will start to trickle some benefit to us and to ODEV. The Work there that's gone on over the course of 2021 and that's continuing now and the news flow that will stem from there kind of underlines and underscores what the group thought we would see there in terms of potential, both oxide and sulfide. So we look forward to that story playing out over the coming months. But all that goes well and the next key milestone there will obviously be the permit on the bigger Cipucci project. which will drive timelines from there. And hopefully that is something that can happen the second half of this year. Windfall within a Cisco mining is a pretty stellar asset. It's the size and grade combination there with 3.2 million ounces at M&I, at 10.5, almost 7 million ounces total, still growing, still new discoveries being had, like Golden Bear, which they started to poke into. That's a pretty special asset in the right location. So we're looking forward to the feasibility study adding more meat on the bone again this year. The endorsement from Northern Star on that convertible financing was obviously a shot in the arm. The joint venture itself obviously has been terminated, but I think what you see there is a market that's frankly changed Um, you know, the scarcity value of an asset like windfall, and I don't know what other assets are like windfall, uh, is pretty special. And so we look forward to seeing that, that story continue to grow and evolve and take shape over the course of this year. Uh, with Upper Beaver and NAK or the Kirkland Lake Camp, which was within, uh, previous Agnico, uh, will now be benefiting from the, the new Agnico infrastructure that came over from the Kirkland side. There's a lot of good things happening there. Um, Again, as I mentioned earlier, we look forward to seeing the upper viewer synergy timeline so that we can factor into where it fits in. Is it in the next five years? Is it just on the cusp or on the other side of it? You know, that's what we're waiting to see there. They've talked about in their presentation yesterday, I think they've described it, well, not I think, it's on this page, as a 150,000 to 200,000 ounce per annum type asset, so 3,000 to 4,000 geos for us. They also talked about AK batteries. potentially being in production as early as 2024. So just drifting over from Macasa at the 40,000 ounce per year rate. That's another 800 geos for us. We haven't factored in anywhere. And as I mentioned, you know, just a lot of good news there as they get their feet under them as a new Igneco emerged, Igneco Kirkland. So we look forward to that story unfolding for us. And then on BAC 40, which is a significant contributor to us closer to the back end of that five-year outlook. Expecting a feasibility in 2022, we agree with the plan that Gold Resource is following of a smaller open pit, bigger underground, less of an environmental footprint. So we look forward to seeing them go through those steps. And as I mentioned to you earlier, we think we've embedded enough potential delay to still be on the right side. I'll jump ahead just to get things over to Fred a little bit. You've seen these transactions from us on Flight 13. We think they're all really good contributors. Spring Valley, we've now seen Waterton sell one of their assets in Nevada for $200 million. This is bigger, and I think they've unlocked a lot of value on this asset. So we look forward to some more clarity, maybe even as early as this year. TZ, we're very happy to have gotten in on that asset and have G-Mining advancing it with a construction decision this year. And the West Kenyan royalty that we picked up on, kind of north of a million ounces, a very high grade. Looking forward to an exploration update there in the very near term as well. Last slide that I will talk through on 14 is that Tintic acquisition. I think you've heard from both Sean and I on it quite a bit. So if there are more questions, we can deal with it in the Q&A. But quite happy to have that asset with the NeoDev portfolio here in the near term. Happy as well to have structured a stream on it. We gave a range, and obviously the equity financing thereafter was upsized quite a bit. So we'll see where we fall within that range. But either way, 2.5% to 5%. of the metal stream there, which we think will be a significant contributor. Obviously, the disclosure needs to catch up. It was held in private hands. They didn't need 4301. They just were mining it. But the new high-grade, ultra-high-grade discovery there in the T2, T4 zone is quite special. We look forward to seeing it evolve But when you think about 2,300 samples collected over a 200-plus strike length, meter strike length, returning 93 gas per ton gold plus a lot of silver, that all goes well. So adding some capital, adding some modern mining techniques, the technical team behind ODEV to that, I think, is going to take this asset, this mine, to the next level. And we look forward to seeing the new flow and the picture be painted in. And frankly, not just the Trixie portion of it, it does sit on 17,000 acres, 14,000 of which are patented in a very productive mining district. So a lot of head frames. And this T2 zone was, I think, something like 44, 45 feet away from Kennecott's mining in the mid-90s, and they never stumbled upon it. So there's a lot of head scratching to do and a lot of revisiting of that land package. both from this mine's perspective, from a high-grade perspective, base metal, polymetallic potential, as well as copper porphyry potential, which is what Ivanhoe Electric is chasing on the boundaries. So that's a – it turned out I talked longer than I expected to, which is kind of normal. But with that, I'll pass it on to Fred on slide 15 to walk you through a couple more details on the –

on the financial side, and then we'll conclude with Q&A. Thank you. Thank you, Sandeep. Good morning, everyone. Thank you for joining us today. As discussed by Sandeep, 2021 was a very good year for us in line with our expectations. We have met our guidance with strong deliveries from our partners despite some challenges with COVID for some operators. And our results have led again to record revenues, cash margins, and operating cash flows from our royalties and streams business. If we go to page 15 of the presentation, we recorded record revenues of $199.6 million in 2021 compared to $156.6 million in 2020. Cash flows from operating activities were $106 million on a consolidated basis. for the royalties and stream segment alone. Cash flows from operations have reached a record $153 million compared to $114 million in 2021. On page 16, we present a summary of our net loss and adjusted earnings. The consolidated net loss to a Cisco shareholders was $23.6 million or 14 cents per share compared to net earnings of $16.9 million. or $0.10 per share in 2020. The consolidated net loss was due to non-cash impairment charges and mining operating expenses incurred by Cisco development in 2021. On a consolidated basis, adjusted earnings were $59 million or $0.35 per share, comprised of adjusted earnings of $94 million or $0.56 per share for the royalties and streams segment. and an adjusted loss of 35 million from a Cisco development or 21 cents per share. On page 17, we have a summary of our quarterly results with additional details for the royalties and streams segment, including 19,830 geos in Q4 for a total of 80,000 geos in 2021. We generated gross profit of $35 million in Q4 to end the year at $139 million compared to $104 million in 2020. Operating cash flows of $35.1 million were generated in Q4 by our royalty and streaming business for a total of $153 million in 2021. On page 18, we have a breakdown of our cash margin for Q4 and the years 2021 and 2020. In Q4 of this year, the cash margin on our royalties reached $34 million, and the cash margin on our streams amounted to $12.7 million, for a total of $47 million in Q4, which brings the total cash margin for the year to a record $187 million. On page 19, we present the progression of the dividends paid to our shareholders since the creation of our Cisco Gold royalties. Over 184 million have been returned at the end of December, in addition to 85 million used to repurchase a total of 6.7 million shares under our NCIB programs. And finally, on page 20, you will find a summary of our financial position. Our consolidated cash balance was 116 million at the end of 2021, including 82 million for Cisco World Royalties and 33 million for Cisco Development. Cisco royalties held investments having a value of $255 million at the end of December, in addition to our investment in the Cisco development, valued at over $400 million. Our debt was stable during the year with over half a billion dollars available under our credit facility, which was increased in last July and extended until 2025. We've also acquired a total of 2.1 million shares under our NCIB program for 31 million in 2021. We've also acquired an additional 250,000 shares in 2022 for 4.9 million. So in summary, 2021 was a year where our main assets have continued to perform strongly, and we have seen several of our partners announcing great exploration results and expansion programs for their production. I will now turn the call back to Sandeep for closing remarks and questions.