OR Royalties Inc.

Good afternoon, ladies and gentlemen, and welcome to the Cisco Gold World Peace Q3 2024 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 1, followed by the 1 on your touchtone phone. Please note that this call has been recorded today, November 6, 2024, at 5 p.m. Eastern Time. I would now like to turn the meeting over to our host for today's call, Mr. Jason Attu. Bonjour, mesdames et messieurs. Et bienvenue à l'appel conférence des résultats du troisième trimestre de l'année 2024 de redevances horrifiées et hostilités limitées. 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. Veuillez prendre note que cet appel est enregistré aujourd'hui le 6 novembre 2024 à 5 heures hors de l'est. J'aimerais maintenant céder la parole à votre hôte, M. Jason Atwood.

Merci, Joël. Good evening, everybody, and thanks for being on today's call. I'm Jason Attu, President and CEO of Asisco Gold Royalties. Procedurally, I'll run through the presentation and then we'll open up the line for questions. For those participating online via the webcast, you can submit your questions in advance through the webcast platform. Today's presentation will also be available and downloadable online through our corporate website. Please note there are forward-looking statements in this presentation from which actual results may differ. Of particular note is that from Q4 2024 onwards, the Cisco will be making a change to its presentation currency as it will also be reporting exclusively in US dollars. But for today, please note the basis of presentation will be in Canadian dollars unless otherwise noted. I'm joined today on the call by Fred Drouel, the company's VP Finance and Chief Financial Officer, as indicated on slide three, with some of my other colleagues also available as necessary. When looking at a Cisco's third quarter and first nine months of 2024, we had a solid first three quarters as it relates to the gold equivalent ounces earned, cash margin, cash flows, as well as overall debt reduction. especially when considering the loss of the Eagle Mine royalty as a key contributor in late June of this year. Cisco earned 18,408 gold equivalent ounces in the third quarter, which has us in a good position as of September 30th to achieve our previously published full year 2024 guidance of 77,000 to 83,000 gold equivalent ounces. Cisco's operating cash flows for the period came in at an impressive $47.2 million at a cash margin of 96.3% during the period. More on Cisco's cash margin in a couple of slides. We came true on our commitment to cement at least one more deal that meets our investment criteria in 2024. Over and above, the Casco Bell Gold Stream announced earlier this year, which we discussed in our second quarter results presentation. This came in the form of the acquisition of a 1.8% gross revenue royalty on Spartan Resources' Dalgaranga Gold project in Western Australia, with the transaction expected to close in Q4. This transaction is only subject to approval by Australia's Foreign Investment Review Board. With respect to our opportunity set, the company's pipeline continues to remain robust, with our corporate development team as busy as it's ever been. So while we might be running out of time to announce any more deals in calendar 2024, I would advise everyone to continue to watch the space over the next several months as we all head into the first half of 2025. Cisco ended the third quarter with $58.5 million in cash and net debt has now been reduced to just over $20 million after the company continued to pay down its revolving credit facility during the period. Over the past 12 months, the state of our balance sheet has improved tremendously, increasing the Cisco's financial flexibility to enable transactions on new accretive royalty and stream opportunities as they present themselves. With respect to our ongoing commitment to return capital to shareholders, the company declared and paid its quarterly dividend of $0.065 per share in Q3, marking its 40th consecutive dividend with over 300 million returned to shareholders to date from these distributions. Subsequent to the quarter, Cisco's board of directors approved a Q4 dividend of six and a half cents per common share payable on January 15th, 2025 to shareholders of record as of the close of business on December 31st, 2024. In addition, and you'll have seen this in our Q3 MD&A, we tried to be opportunistic by being active on our normal course issuer bid during the period. However, we were only able to repurchase a total of 26,000 shares during the quarter, or just under $600,000 prior to our share price making a step change higher. Moving on to the company's financial performance for Q3, quarterly revenues of 57.3 million track modestly lower when comparing to Q3 of 2023. The lower year-over-year revenue in Q3 2024 comes as a result of ASISCO having received just shy of 1,600 gold-equivalent ounces on September 30th, a Canadian holiday, meaning that while these gold-equivalent ounces were earned during the period, they were not sold and the associated revenue will be booked in Q4. Stronger commodity prices in Q3-24 versus Q3-23 were effectively offset by fewer geos this quarter versus the comparable quarter last year due to the suspension of the Eagle Mine. Earnings of $0.10 per basic share for the period marked a year-over-year improvement compared to last year when the company took the full non-cash impairment and write-off associated with its diamond stream at Bernard. Most importantly, Q3 2024 saw a year-over-year improvement in both cash flow per share at 25 cents, as well as a quarterly adjusted earnings of 15 cents per basic common share. Moving on to slide six, I thought I would highlight a key metric that we frequently make reference to in our public disclosure, because we think it's an important one, and one that sees a Cisco stand out amongst its peers, and that's cash margin. The Cisco's cash margin as defined by deducting our cash cost of sales, excluding depletion from our revenues was 96.3% for the third quarter and 97% year to date. This owes more to our company's royalty heavy portfolio and makes a Cisco the leader amongst our relevant peers on this metric. At a Cisco, we think margin matters. When it comes to cash margin, not all gold equivalent ounces are created equal. And in the case of a Cisco, we effectively capture more value per gold equivalent ounce delivered versus those delivered to our peers, with our company and its shareholders benefiting to the tune of about 97 cents of every dollar of revenue generated. During the third quarter of 2024, the company had 20 producing assets, Our geos earned come predominantly from Canada, and we derived over 91% of our geos from precious metals. Gold at just over 65%, and silver at just over 26%. New this past quarter was a significant contribution of copper to the commodity mix, driven by a first of many deliveries from the CSA copper stream. Some comments on specific mine performances during the quarter before speaking about a couple of our more material assets in greater detail. Canadian Malartic had another solid quarter in Q3, albeit with a slight dip from the previous quarterly period. This mild difference was expected given IGNICO's previously well-tallegraphed planned downtime for scheduled maintenance, which took place during the third quarter. As we've experienced many times in the past, we're expecting our cornerstone contributor to end 2024 on a strong note. At Capstone Copper's Mentos Blancos operation, Q3 production was lower year over year due to a combination of lower throughput, grades and recoveries, as well as some unplanned downtime during the period. Plant upgrades to sustainably reach 20,000 tonnes per day are now complete, despite a roughly two-month delay from Capstone's initial plan due to longer equipment lead times. Assuming Capstone continues to find success in pushing the plant's throughput higher and keeping it at Phase I expansion design levels, ASISCO expects to see the benefit of the increased throughput at Mantos Blancos translate into growing silver deliveries starting at the beginning of 2025. I'll touch more on Mantos Blancos in just a little bit. Finally, in the top right, you'll see our commodity mix, which in Q3 was just over 26% silver. With the improvements expected in Mantos Blancos, Cisco's revenue derived directly from silver is expected to rise around 30% over the next few years. This is why the company was officially included in the sole active Global Silver Miners Total Return Index, effective as of November 1st. This index is tracked by the top by the Global X Silver Miners ETF, where Cisco now holds a top five weighting. Moving to slide eight, and as I mentioned earlier, the number of currently producing assets in our portfolio stands at 20. Changes to the list include the recent removal of the Eagle mine, partially offset by recent additions of G-Mining Ventures' Tocantinsino mine in Brazil, which announced its first gold pour in early July. as well as Mignico Eagle's Akasaba West Satellite operation at its Goldex mine. On the latter, ASISCO received its first payment for Mignico in July, whereas on TZ, first payment from G-Mining is still expected this month based on a two-month lag associated with the quarterly royalty payments as structured in the contract. This current list of 20 assets also counts CSA as a single operating asset. However, as you all know, we have two instruments associated with this mine. 100% silver stream in addition to our copper stream. With the copper stream having provided its first deliveries to Cisco in early July of this year. The next asset that we believe will be added to this list should be Nandini. With commissioning of the mine and mill expected this month, and potentially first gold poured before end of year. Moving on to slide nine, our company continues to distinguish itself from the rest of its relevant peers as it relates to jurisdictional exposure. Ascisco is the leader when it comes to both NAV and GEOs earned from what we define as tier one mining jurisdictions, which include Canada, United States, and Australia. Of note is that if we were to add Chile to that list of countries, we'd be at over 95%. This is why we think the announced acquisition of the Dalgaranga Gold or Dalgaranga Gross Revenue Royalty on September 30th was very much on brand for Cisco. Not only does the asset check the tier one mining jurisdiction box, but the investment ticks all the important criteria of being a near-term long-life gold asset. This brings me to slide 10, which provides some highlights related to our recent Dalgaranga 1.8% gross revenue royalty transaction. On September 30th, we purchased from Tambo Capital, a production royalty for US 44 million, along with an additional royalty for US 6 million on a massive proximal exploration land package, which for context is about half the size of Rhode Island. As noted previously, this transaction is expected to close in Q4 of this year after a customary review and approval from Australia's Foreign Investment Review Board. Over the past 24 months, Spartan Resources has reimagined and retooled the planned approach to Dalgaranga, from an open-pit bulk-tenant operation to a high-grade underground concept. With all the necessary permits for the processing infrastructure already on site, The team there started refocusing on underground exploration and discovered the high-grade Never Never deposit in 2022. Spartan moved rapidly to unlock the potential of the significant discovery, and the discovery of the high-grade underground pepper deposit quickly followed suit. The project now comprises of a current JORC-compliant mineral resource estimate that includes a high-grade resource of 1.9 million ounces at 8.7 grams per ton. The exploration potential of this emerging resource is what really attracted us to this asset. We see parallels to the early innings of Alamosa's island gold mine with this asset. As noted previously, this is a straight down the fairway transaction for Cisco, given it is an asset that checks all our boxes in terms of near-term geos, near-term cash flow generation, a top-tier mining jurisdiction, management quality, and significant exploration upside. We are expecting the key catalysts from Dalgaranga in the second quarter of calendar 2025, whereby Spartan has indicated they plan to release a maiden reserve estimate and project feasibility study. This information is likely to coincide with a final investment decision which could see Dalgaranga restart mining and milling operations as early as late 2026. We see this exciting project fitting comfortably within our five-year outlook when we update our outlook out to 2029 in February of next year, with Dalgaranga potentially contributing well over 2,500 gold equivalent ounces annually to a Cisco over the life of mine. Finally, with over 95 kilometres of drilling planned for Spartan's financial year 2025, we also expect the project will continue to grow in scale. Switching gears to slide 11 and focusing on our cornerstone asset, the Canadian Malartic Complex, was front and centre in Agnico Eagle's impressive Q3 2024 results announced last week. As noted, production was a tad lighter quarter over quarter, but this was expected, and her partner remains well on track to achieve production guidance from Malartic this year. Perhaps even more exciting were the headline drill results from the shallower parts of the East Goldie deposit, on which Asisco has a 5% NSR. Agnico specifically noted in their release that, and I quote, continued conversion drilling success in this area would confirm the potential to add mineral reserves that could provide additional production for the operation that would require modest additional lateral development considering the area's proximity to the existing ramp infrastructure. Moving to slide 12, underground development at Odyssey progressed well in Q3 as ramp development continued to progress on schedule. And as of September 30th, 2024, the main ramp had reached a depth of 873 metres. Recall that IGNICO continues to study the potential to accelerate the first underground production from East Gouldie into 2026 from 2027 previously, as ramp progress remains ahead of schedule. On the exploration front, we're excited to report that exploration drilling at the Odyssey Mine and regional exploration drilling around the mine totaled 68,800 meters during the third quarter. or nearly 150,000 metres during the first nine months of 2024, with up to 11 underground drill rigs and 13 surface drill rigs in operation, primarily targeting the East Gouldie and the various Odyssey deposits. Cisco would also like to congratulate members of the Gneco Eagles Canadian Malartic Exploration Team as it was announced yesterday that they were selected to be the recipients of the PDAC 2025 Bill Dennis Award for their extraordinary discovery of the East Gouldie gold deposit. This discovery, made in 2018, represents a major milestone in Canadian mineral exploration due to its size, geological significance, and economic value. The exploration team's perseverance, technical expertise, and commitment to innovation been central to the success of this discovery consequently cisco couldn't think of a more deserving group for this award on to slide 13 which touches on capstone copper's mentos blancos mine our second most important contributor we're excited to say that things there finally appear to be turning the corner in july a successful two-week planned shutdown was completed which included the installation of a new holding tank and additional pumps in the tailings area. These investments addressed deficiencies identified preventing the sustained achievement of the 20,000 ton per day throughput capacity from the sulfide operations. Following the plant ramp up period in August, ore throughput averaged 18,062 tons per day through to the end of Q3, with plant throughput meeting or exceeding the nameplate capacity of 20,000 tons per day on 23 operating days. The overall variability of the milling process has been significantly reduced, and if you listen to management on their Q3 results presentation, higher throughput is expected in Q4. Given our two-month delivery lag on the stream, our year end at Mantos Blancos effectively ended last week on October 31st. But this is very directionally good news as it bodes well for our cisco as we head into 2025 with improvements at Mantos Blancos expected to be the key year-over-year gold equivalent ounce growth driver for our cisco. Additionally, we are looking forward to a potential phase 2 expansion at Mantos Blancos over the next few years with a feasibility study on this expected from our partner late next year. Moving to slide 14. And after a solid Q3 2024, Cisco is on track to meet its 2024 gold equivalent ounce delivery guidance range of 77 to 83 gold equivalent ounces, which was revised last quarter after the suspension and subsequent full write down of Eagle. I also just want to quickly flag Nandini on the slide The mine and the mill are expected to be commissioned by operator Cardinal Nandimi at some point during this month, with the potential for first gold poured before the end of the year. Based on previously published technical studies, which we understand still underpin the expected mine plan, the grade profile at the mine sees higher grades up front in the first few years, meaning Nandimi should represent another key year-over-year growth driver for ASISCO as we head into 2025. With a 15-year life of mine, we also expect Nandini will be a meaningful contributor to ASISCO for many years to come. Our investee companies continue to make great strides in de-risking their assets that will accrue to our shareholders. Highlights of some of these efforts are provided on slide 15. If there is one we haven't really discussed and one that I would like to highlight today, it would be Oceana Gold's WKP, which in early October was approved under the New Zealand Government New Fast Track Approvals Bill. We're expecting to find out more about Oceana Gold's plans for the WAHI North WKP project before the end of the year, as the results of project pre-feasibility study are expected this quarter. Cisco owns a 2% NSR royalty on WKP. Finally, we'll end the formal part of the presentation on slide 16, which outlines the current state of a Cisco's balance sheet. At quarter end, we have total debt of just over 80 million and net debt of only 22 million. This compares to net debt of just under 250 million in the comparative quarter of 2023. As responsible capital allocators, we have focused on using our cash flow from operating activities to pay down a revolving debt facility. Year-to-date, these repayments amount to over $115 million. During the quarter, Cisco Bermuda Limited also made a U.S. $10 million payment to SolGold as their first installment under the Gold Stream Agreement to further advance the Cascavel project in Ecuador. As we are now in the fourth quarter, it is also worth recalling that we're expecting to pay Tambo US $50 million during this current period, once a Dalgaranga transaction closes. Assuming no new transactions are announced by a Cisco or any of its subsidiaries between now and year end, the company should be in a net cash position by early 2025. This is important as a Cisco's corporate development team continues to be active with the hope of getting more deals across the line over the next several months. Our much improved balance sheet provides the company with the financial capacity and flexibility to continue its strategy of disciplined allocation in the pursuit of high quality accretive precious metal streams and royalties that will bolster the company's current and near-term gold equivalent ounce deliveries, as well as cash flows, all of which should accrue to our shareholders' benefit. Lastly, on behalf of all the employees and board of ASISCO, We'd like to thank Rob Krichmaroff for his valuable guidance and advice over the past two years as he moves on to take the helm at Hekla Mining. And with that, I'd like to thank everyone for listening today. We'll now open the line for questions, including those from the webcast. If we don't get to all the questions on the line, we'll make sure to respond offline to those that aren't covered on the webcast. Operator?

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wait to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Ralph Profit with a capital. Your line is now open.

Thanks, operator. Good afternoon. Jason, I want to ask a question on the Dalgaranga production profile, specifically your reference to 2,500 ounces annually, which I believe was a life of mine estimate. When we get into that high-grade core in those early years, do you have sort of a more of a near-term profile? If you look at potential diluted grades. I mean, my numbers come almost double that in the first few years. Just wondering if that is sort of a, you know, a rational assumption. And then just to follow up, if we're not going to get a mine plan until the second quarter of 2025, do you anticipate still including it in your next guidance update or will you wait?

Thank you, Ralph, for your question. And you noted the most important thing with respect to disclosure. from Spartan Resources. We will not see publicly the feasibility studies I mentioned into 2025. So it's really difficult for us to comment on a mine plan that hasn't been developed. However, I will pass the microphone over to Guy, who's very familiar with, again, that investment and was one of the bigger advocates here at ASISCO of us pursuing and transacting on that. So Guy, please.

Yeah, Ralph, you correctly pointed out that the grade, they have potential to hit high grade earlier in the life of mine. We're trying to be a little bit conservative with respect to how those ounces are going through that plant. But there's also a buy down provision and we don't know what's going to happen with that piece as well.

Okay. All right.

Fair enough. Sorry, Ralph. The other point is that they, The mill allows for 2.5 million tons per year. However, the company has sort of been communicating that they'll be using a portion of that, at least in the initial life of mine.

And with respect to your question on the five-year outlook, yes, in February of next year, we will be providing five-year outlook. And you can expect that there'll be some inclusion of Dalgaranga within our five-year outlook.

Okay, thanks for that clarity. And I apologize if I missed this on Nandini. Are we expecting first revenue, including sort of that one to two month lag that, you know, first gold is poured in towards the end of the year. We may not see those first revenues until say Q1 or Q2 of 25.

I think that's a very good assumption. And yes, so yes, Ralph, I think that's what we're expecting here, Q1. 2025, if again, they pour first gold by the end of this year.

Okay. Thanks, Jason. Thanks, Keith. Thanks, Ralph.

Your next question comes from Carrie Smith with Haywood Securities. Your line is now open.

Thanks, Dr. Bader. Jason, would the plan be for Dogaranga when it closes? I guess you would just draw down on your facility. Is that the plan in the short term, at least?

Yes, that's exactly right, Gary. Again, it's 50 million U.S. dollars that will be coming out. We expect it's going to be coming out in Q4 of this year. It is subject, as I mentioned, to the firm approval in Australia. But the plan is to just draw on a revolver facility. But as you also note and note from our quarter this year, we're making close to 50 million in operating cash per quarter, especially at these elevated gold prices. So we'll quickly pay that down. based on our operating cash flow.

Right, okay. Okay, that's great. And then, as you mentioned, you're going to switch over for calendar 2025 to U.S. dollar reporting then, correct?

Yes, that's correct. So our presentation currency go forward for 2025 will be in U.S. dollars. Our functional currency still will remain as Canadian dollars.

And with a large proportion of your revenues coming from Canada, would you think about doing any currency hedging then? I mean, I know you wouldn't hedge the commodity, but might you hedge some of the exchange exposure?

Look, that's a really good question. No, look, it's a good question, Kerry. And given, again, we consider any sort of hedging, FX, others, as effectively a risk management exercise. If we see that there's a discrepancy, for example, today, there was obviously a very strong reaction and a very positive reaction to the U.S. dollar, whether we believe that's sustainable or not, go forward. We, again, we'll get together as a team and potentially put on some U.S. dollar hedges, but it won't be material and it's really as a risk management exercise as opposed to any sort of speculation on currency.

Gotcha. Okay. Okay. Thank you very much.

Thanks, Gary.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Tanya Jakoff with Scotiabank. Your line is now open.

Great. Good evening. I think that's me. I just wanted to ask on the transaction environment, and I know, Jason, you mentioned it's really busy and Maybe you don't get another one in this year, but watch out in the first half of next year. Can you just comment on what you're seeing out there still? Is it in that 50 to 300 million range? And are you seeing opportunities that require you to do a little bit more, put different parameters on your transactions? Like we saw, one of your competitors have to put collars in. for the transaction they did. So I'm just kind of wondering what the structure is looking like. Has that been changing for you as well?

Thanks, Tanya. Really good question. So as I said, the opportunity set is very, very robust. Again, our sweet spot, as we've articulated many, many times, is anywhere between 50 U.S. million all the way up to 400 to 500 million U.S. So it really will depend case by case. And first and foremost, we look at asset quality. And so, yes, there's been a number of transactions that we've obviously seen one of our senior peers transact at. It was a transaction that also involved a debt facility. So what I would say around that is we try and be as bespoke to our operating partners or our potential operating partners as possible. But it really comes back to the asset quality. If we think the asset quality is very good and if we think the management quality is very good in a jurisdiction that we're comfortable, we'll be as bespoke as we can to be competitive around ensuring that, again, we're disciplined with our capital deployments. And so you're seeing in the marketplace that everybody has to, it is competitive, but everybody's having to be, again, providing that bespoke solution to some of the operating partners out there.

So would that be, should I conclude from that, that you would be open to equity and debt, et cetera, and callers if you, you know, if the opportunity was great and you had to provide that?

Look, for the right asset, and the team got excited and knew we were going to actually provide very good returns to our equity holders, yes, I think everything is on the table in terms of what you've seen historically.

Okay. And would most of the opportunities you're seeing still be in the development phase, or are we seeing any that is more in the production phase? Okay.

We're seeing, I would say we're seeing a lot in the cash flow development stage. Sorry, the cash flowing stage more so. And a lot of it has to do with, obviously, there's a lot of activity in our sector right now. So we're across a number of companies assisting them with acquisition finance. And so those acquisition finance, they're all cash flowing opportunities at this stage. There are also some high quality development assets that, we're across from as well. So case by case, but again, the focus of this team and the company is really to focus on opportunities that will have an impact and hopefully a significant positive accretive impact in the next five years.

Okay. And did I hear correctly that... you will be changing your reporting currency to U.S. dollars from Canadian dollars starting in 2025?

That's correct.

Okay, so Q4 will still be Canadian, but starting with Q1, it would be all USC?

Q4 will be U.S. dollars, and then into 2025, it will all be U.S. dollars.

Okay, so Q4 and going forward. Okay, that's great. Thank you for the clarity on that.

There are no further questions at this time. I will now turn the call over to Jason for closing remarks.

Look, thank you very much for everyone participating in this evening. As I said, we had a very solid quarter at Cisco Gold Royalties, and we look forward to coming back and another solid quarter in Q4. So thank you for your time. Thank you for your support. And if there are any further questions, you know how to get to us. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in that. Please disconnect your lines.