Osisko Gold Royalties Ltd (NYSE:OR) Q4 2022 Earnings Call Transcript

Osisko Gold Royalties Ltd (NYSE:OR) Q4 2022 Earnings Call Transcript February 24, 2023

Operator: Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q4 2022 Results Conference Call. After the presentation, we will conduct a question-and-answer session. Please note that this call is being recorded today, February 24, 2023 at 10:00 AM 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.

Sandeep Singh: Thanks very much, Joel, and thanks to everyone on the line with us this morning. Look forward to walking you through a very exciting quarter and a very exciting year for us. In 2022, as I do, I will be referring to a presentation on our website. If you haven’t picked it up already on the main page, just on the left hand side, if you hit Q4 in 2022 results, it will take you to it. And I’ll be referring to page numbers as I go along, obviously making some forward-looking statements or urge you to review that disclaimer on Slide 2. So looking at Slide 3, I’ll (ph) start. As I said, 2022 was a very important — I’d say frankly pivotal year for us. We made significant strides on a number of fronts, that may have listed on this page.

If we start with the simplification, the ongoing simplification of our business, 2022 in particular, the third quarter took a massive leap forward with the deconsolidation of our financials with Osisko Development Corp., the — just an accounting issue, but it wasn’t a meaningful one of kind of combining a company that generates cash flow all day long and one that is advancing its projects and investing in the future of the growth, just didn’t leave a recognizable entity. So happy to have that situation behind us. In terms of the portfolio of assets, our asset base continues to strengthen. We had three consecutive record quarters on most of the things that matter to us from a royalty company perspective and we’ll talk about what the outlook looks for — looks like for us as we move forward.

We also reset the balance sheet. And in spring of last year, I think we reset the balance sheets for our next wave of growth and delevered at the right time. We continued our consistent trend of returning capital to shareholders in aggregate, $63 million return to shareholders last year, really almost exactly two-thirds of that via dividends and a third of it via our buyback program. And we’ll show you a slide later on. But over the last five years, we’ve consistently done that essentially returned to a third of revenues or third of every dollar of derived from announced delivered to us back to shareholders through a combination of dividends and then said, we think that sets us in a pretty select company. We continue to have a tremendous amount of free upside and optionality playing out in our portfolio against the presentation, we’ll touch on a few examples of that.

We look forward to being able to tally the amount of work that our partners did in 2022 and share that with you, but certainly, we’re seeing the impact of that work all around us. With respect to our largest asset, our flagship asset, that’s Malartic, the consolidation that Agnico Eagle is currently underway, very close to completing in terms of buying the second half of that asset is a very important catalyst. One that we’ll spend some time on talking about today. But, I think even last week in terms of their release and some of the commentary that they’re guiding towards in terms of what the synergies can be with them now only 100% of Malartic, what they need for us is quite impressive. And then as we’ve talked about a number of times, 2022, we didn’t really see the benefit of some pretty important step changes at assets like Mantos and Eagle.

We do expect that we’ll start to see the benefit of that in 2023. Those aren’t the only assets that we have that are undergoing either material ramp-ups or expansions over the next few years. Island falls into that category. Lamaque falls into that category. There’s just an awful lot of good work being done on our producing asset base, lengthening it and growing it, which underpins. I think this company for a long time. To that, there’s an exceptional amount of growth. 2022 saw 12% increase over our GEOs delivered to us over the year before. We put out our guidance which shows a meaningful uptick again this year and really a sustained level of growth for quite a long time with the existing asset portfolio. And then in 2022, we did not just for larger transactions with a few smaller ones that sliced in, but we were very happy with the manner in which we were able to allocate capital in 2022.

Just finishing on that growth box, if you will, I think the growth for us is very multi-layered, I would say. It’s again those existing producing assets that are getting stronger. It’s new assets that are coming into the mix for the rest of the decade if that optionality that I talked about of our portfolio, highlighting some pretty hidden gems and then as the external growth, all of which I think is working well for us. I won’t spend too much time on Slide 4, that’s just a reset, we love showing that slide. We do it every chance we get because I think it’s important almost alone and kind of tells the story of Osisko in terms of commodity focus obviously, geographic focus, partner quality, asset quality. And then on the top right-hand side, we’ve taken the step of just highlighting again some of those assets — core assets to us.

Many of them are steady state and continuing to do a good job and then make additional significant chunk, some of the biggest ones are going through step change improvement. On Slide 5, again these are names we’ve talked about in terms of the recent acquisition story for us in 2022. I won’t go through the specific names, but we can certainly come back to that later. But I will remind everyone that all four of these, and probably the smaller ones that we did as well. We’re all bilateral underscore all, not a single process on that list. I think they were all fair transactions for us and our partner’s, good jurisdictions, good operators, partners, big upside and all, and I think frankly think significantly better than — better returns than we’ve seen in pockets of the sector for the last couple of years.

And frankly, that’s what it takes for us to transact all of those — all of the above. And if we don’t see that, we’ll be very patient, extremely patient and we’ll continue to return capital to our shareholders. But if we do see it, I think we’ve shown the conviction to fall through on things that we believe in. Moving to Slide 6. Again, I think we got to spend a bit of time, given the importance and given the kind of recent story that continues to strengthen. I’ve said this before, I mean it literally every time we hear from our partner here at Agnico, the story is getting better. Obviously, it’s an important asset. Even if it was just what it was kind of put on paper, a couple of years ago, kind of transitioning to 500,000 ounces or 600,000 ounces a year from the underground, that’s the plan, that’s how most people currently think about it.

Our wager that’s how most people currently model it from an analyst perspective and that in itself is great. That too I would remind you is only based on half of the current 15 million ounces that are available underground. 2022 saw an important year in terms of infill drilling and that’s on the next slides, if you want to jump ahead basically just over 6 million ounces moved into the — in aggregate in the M&I category. So, pretty material lift of inferred into M&I. The overall resource stayed the same. And I think are largely the same from the drilling in 2022 but happy to see the infill drilling, improve the M&I. Overall, if you look at this last bullet, the extension drilling that they’ve done has been very productive, with the boundaries of the deposit, if you will, growing in both directions to the East by 1.7 kilometers to the West by 500 meters, so quite a big footprint that currently isn’t in any kind of category in terms of resources.

And I think certainly, my expectation, our expectation is that after another similar year of drilling kind of the third in a row, 164,000 meters envisions 2023, not only will we see that continued trend of category improvement but also hopefully that’ll be the year where we see an uptick with enough infill drilling or enough — tight enough spacing in that footprint to add more ounces. And I think that could be (ph) released from Agnico last week, but certainly seems to be what they’re pointing to over the course of 2023. So that is a phenomenal story. If you look at the next slide, Slide 7, then you turn your attention to the spare 40,000 tonnes of per day of capacity in the mill that will be in place by 2028 or available by 2028. So, we’re certainly looking forward, I’m looking forward to seeing down with our friends at Agnico next week to make sense of everything they said in their Thursday afternoon release.

Because frankly, it was a bit head spinning, but overall, all of it was extremely positive for us. I’m sure you folks would — I assume they would like to get some more details on that plan. But I think, it’s — the upshot of it is the Canadian Malartic mill with 40,000 tonnes roughly of spare capacity later in the decade is the center of gravity for the Abitibi, and I think what’s the next leg of that, you’re not that kind of given. I would imagine, most people have in their minds. But when you take into account, the rail line that runs through the mill basically, through the property, all through all of these assets that you see on the bottom of 7 — Slide 7 in the Abitibi on the Ontario and Quebec side. That significantly, obviously based on the commentary increases the area of influence if you will or the catchment area that that mill can benefit from — have a scenario where our partner is talking about potentially 500,000 ounces of annual regional goal coming into that mill is a huge benefit to us, not just because of our $0.40 per tonne mill royalty, but also because many of the names that they mentioned, we also have 2% royalties on whether it’s Upper Beaver wish to think could go East as opposed to the West to Macassa that shows you the — that center of gravity that Canadian Malartic will become once that has spare capacity or whether it’s talking about things like Upper Canada, obviously AK is already in the mix at Macassa.

But essentially most things on all the most things that we’re discussed in that update have significantly important implications for us and so we look forward to getting, maybe not immediately, but over the span of this year or some period of time more clarity on what that looks like. It only could mean positives versus, I think the way most of you on the line from the analyst community certainly, look at us and value us and I would imagine the same is true on the investor side. And that was without really even talking a whole lot about additional mill feed from Canadian Malartic itself, from the Odyssey project itself. Again 20 years give or take two decades of production based on half of these underground resources, most of that is now in the M&I category, I would imagine, not deferred anymore.

So, not only will drill spacing. I think add more mine life. I think the extension drilling will add mine life is our assessment, my belief that prefers to long you will also add throughput. So that, obviously, it’s preferential for us to see our partners putting through, up to 5% NSR material through that mill as opposed to even 2% or just benefiting from the mill royalty. So that is tremendous news flow for us. It’s recent days back, the Thursday, I think it was. And so, I think more visibility on that, more understanding above that will only strengthen the story. On Slide 8, I will speed up here a little bit to get to the actual financials. On Slide 8, I think we’ve talked about already, Mantos maybe one layer deeper. We do expect a significant uplift from Mantos this year that deferrals from 2022 and 2023, not a big deal, but we’re certainly happy and looking forward to seeing those deals come through.

I think Q1 will still be a little bit volatile for at least we’re assuming it will, and thereafter we expect to see deliveries steadily pick up. So that’s good news, and then the commentary around the next expansion and the study that will come out in H2 of this year, again I think feels very, very positive. So we’ll wait for our partners at Capstone to make that determination. But everything we’re seeing and hearing, I’m sure the same is true for you bodes well. With respect to Eagle, we saw collectively with us and them a tougher 2022, we were all expecting them to take a step forward which turned into a step sideways and back a little bit if you will. The guidance for 2023 is positive again. And the study that they put out, and the trend to get to essentially 200,000 ounces which is, what their new mine plan press release, not report but new mine plan press release today highlights or the pics.

I think it’s still a very positive place to end up. They need to do work to get there but at first glance, that study looks positive, little bit higher cost for them, obviously. But we were pleased to see that the total ounces in fact a little bit higher and the average production still in that 200,000 ounce range that you’ve talked about project 250, probably discussion for another day best, but I think even ending up at 200 steady state is a win right now and is a step change improvement for us. So we look forward to them making progress on that. And with respect to Eleonore at Newmont again just last night, I think it was overnight or yesterday morning, Newmont came out with their numbers. And we were quite pleased in terms of the commentary around increased productivity, increased flexibility, 2022 top 215,000 ounces produced and to be pointing to 265% to 295% for those reasons I think is good news.

So, we’ll see how that flows into the year. On Slide, subsequent number of the Slide 9, again, good things happening across the portfolio, whether it’s the ongoing expansion work at Island that will fully kick in by 2026 and in time will mean current production being between 120,000 to 130,000 — 135,000 range, I believe it was to more than doubling, but also more of that, currently, none of that production comes from the 2%, 3% royalty ground in time more will, so that not only the expansion, but their transition onto our better royalty ground will be a massive benefit to us. In 2022, we saw a little bit of a dip from Lamaque, their guidance for 2023 show the opposite, a significant improvement. So, good news happening for us on those assets as well.

We’re spending some time on 10, Slide 10. It says, this morning, entering an important phase of growth, I think we’ve entered it. I think we’ve seen now a step change that hopefully should maintain and strengthen in terms of how many deals we’re getting on our quarterly and annual basis, again 12% growth last year without our core assets kind of hitting their full stride guidance this year of 95,000 ounces to 105,000 ounces and that includes growth from our existing asset base. It also includes the assumption that the CSA transaction will close here in the very near term at least to silver component, but the only component of that deal that’s certain, if you will, and has a February 1 effective date. So, 11 months of silver from CSA. We haven’t factored in either into the guidance or the outlook, the copper stream potential because we don’t know how much if any of that will come in.

But certainly, we’re optimistic that we’ll be getting a fair chunk of it. But until we know what that looks like, we’ll keep it out of the guidance. And then an outlook for five years from now in the calendar year 2027 of between 130,000 ounces and 140,000 ounces. So again that sustained level of growth on assets that we have. There has been, I think it’s obvious, and it happens in our portfolio some slippage for sure. I’ll point to permitting at San Antonio. We had been talking about seeing permit, San Antonio in 2023. Sorry, and maybe as early as the end of 2022, obviously very few people if any are getting permits out of Mexico right now. So, we still hope that that will be something that can move forward. This year, maybe it has to wait till one election 2024, but we still have plenty and still see plenty of time for a catch-up, but that is a fairly simple or simpler project from a mining perspective, so caught in that five-year time horizon for sure is our expectation right now.

Similarly, our Back Forty, probably a slippage of a year that one, I think we saw coming in 2026, maybe it comes in 2027. But the slippage has to do with delays and feasibility study and then they’ll actually get re-permitted. So, some slippage, but that’s the beauty of our portfolio as deep as ours because there are other things that are coming on. Important to point out as well that in that 2027 year, we do see Renard based on the current plans, petering out. The diamond stream there, although there are resources currently in place and a healthier entity that could potentially extend that, that’s to be determined for the time being. We just assume that it’s not the case to be cautious on that asset. Obviously, we always want to be cautious on that asset because history of it, but five years is a long time.

And on the current trajectory, but there’s certainly an expectation that things can potentially extend based on resources that currently exist. And if it doesn’t, then that’s coming out of that bar can be replaced by a silver of production, and I would emphasize a silver based on some of the things that are not optionality category. Any small — any combination or subset of initial production from Hermosa or Marimaca, for West Kenya or even Pine Point, can you take any couple of those and that can make up the difference. So, really pleased with the way things are shaping up. Nothing in the mining sector is a straight line, but very happy with the progress that our partners are making. And again, when I remind you about what this company looks like in terms of the existing producing assets, getting stronger with the one exception of a short-life asset in Renard, otherwise all our core assets really have a long runway in front of them and they’re getting bigger, not smaller, many of them and the new ounces, the new assets that are coming on strengthening us as each when comes onto the portfolio.

Very pleased with this growth trajectory that growth stays in rate jurisdictions and we’ll look to supplement it as things are progressed. So, I will point out, it is on this, just because I was asked a couple of questions we’re going to do it otherwise. But, we’re also doing good work. We’re seeing good work progressed on Amulsar, and in Armenia, we try not to talk about it until there is an ultimate end game there, but I think everyone realizes that we’ve been trying to reactivate that stream. It’s a really important asset that comes in, north of 200,000 ounces a year and it was about 70% complete two years ago. So, yesterday, the folks have picked it up would have highlighted that we’ve noticed that the government of Armenia had a trilateral — tri-lateral agreement signed with the company, as well as the Eurasian Development Bank for $150 million debt piece to the assets which goes a long way towards fully funding the rest of the construction still need the right entity that come in there and finish that for us.

But a great step and the government squarely behind the asset, making a lot of positive commentary around it and the need for it to move forward. So, I would call that progress. I would call that significant progress, but we’re not factoring that into any of our numbers until it’s a done deal and really only mentioning it because I was asked from start to finish. Once that actually moves forward, that’s probably an 18-month to 24 at most rebuilder completion of build cycle. So, hopefully that’s something that is hitting this five-year outlook sooner than later. On the next few slides, we’ve taken a different approach at kind of highlighting some of the catalysts in our portfolio, somewhat chronologically ordered, somewhat not, but all other things that are happening in the next year or plus 2023, 2024.

I talked about the first four, so I won’t talk about them again on this page. But underscore the fact that these are real assets, emphasis on the real. These are real catalysts. We’re not stretching to come up with good news about our portfolio. Even if you took a few of these fact patterns alone, they would be impactful to our company. If you take them in aggregate, it’s an embarrassment of riches. So, if we’re talking about the progress at Windfall, obviously with the feasibility, the power deal with the Cree, this is an asset that has a ramp down somewhere well below 600 meters. It’s got 15 rigs on it, 13 plus kilometers of underground development that is a phenomenal story for us, that’s continuing to take shape. We’re bullish on zinc. I personally, bullish on zinc at least the right assets and I think we have two of them in Hermosa.

So, we look forward to the FID decision mid-year. That’s an important asset for us. At Osisko Metals, we were very pleased to see Appian, the private equity group out of London step in and make essentially $100 million investment into that project. And company over the next four years to earn up to 60% of it, $75 million of that will go into the asset. Under somewhat expedited basis, it’s a lot faster advancement to FID than Osisko Metals could have done on their own. So, that’s supercharging was an important asset for us. Based on the old PA to put into perspective that could be 9,000 GEOs depending on your commodity price assumptions. 9,000 GEOs a year once in production. So, to have that starting to gain momentum is excellent. Corvette is another one I’ll talk about, and I will probably skip the next two just to get to the Q&A faster, but Corvette and the 2% lithium royalty that we have on what looks like most of the potential Patriot Battery Metals deposit doesn’t, yeah, there is no resource yet.

But it looks like covers 70%, 80% of what might it be meaningful, basically just missing a corner. That’s turned into over the span of a year, a microcap company to a $1.3 billion entity long way from production, obviously. But some of the most important and impressive drilled I’ve seen in lithium space, and best one I remember is 25 meters of 5% lithium oxide, that’s the direct shipping or basically. So that was in the back of our portfolio. We basically paid nothing for it. We didn’t pay anything for it and we have a 2% royalty on that entity that shows you again the optionality of the royalty sector, and then I think more specifically the optionality of our portfolio. So, good things happening. Again I’ll jump to it, but good things happening on these — on all three of these pages.

I’ll turn back now to Fred — Fred Ruel to walk you through the specifics around the year and the Q4, and then I’ll be back with you to just tie the things up.

Frederic Ruel: Thank you, Sandeep. Good morning. Thank you for joining us today. Let’s start with some highlights on Page 15 of the presentation. So, as discussed record 89,367 (ph) GEOs in 2022, an increase of 12% over 2021. We had record revenues from royalties and streams of $218 million compared to $200 million in 2021, which translated into record cash flows from operations of $175 million compared to $153 million in 2021, which is a 14% increase. Our cash margin was stable at 93%. We have increased our accordion feature of the revolving credit facility. We have extended the maturity date as well to September 2026. We have repaid our converts at the end of December, using $150 million from our cash balance and we drew the remaining $115 million from our credit facility.

We’ve also repurchased 1.7 million shares in 2022 at an average price of $13. On Page 16, we present our GEOs by asset and by commodity, gold represented 69% of our GEOs in 2022, silver 19%, and diamonds and other commodities, 12%. On Page 17, we present the growth in our revenues from royalties and streams and the growth in our operating cash flows compared to — 2022 compared to 2021. If we move to Page 18. Net earnings from our royalty and streaming business were $85.3 million or $0.47 per share compared to $76.6 million or $0.46 per share in 2021. Adjusted earnings amounted to $111 million or $0.62 per share compared to $94.4 million or $0.56 per share in 2021, of course, 2022 was an annual record. On Page 19, we have a summary of our quarterly and annual results, including 25,000 GEOs for the fourth quarter for a total of over 89,000 as previously mentioned, compared to 80,000 GEOs in 2021.

Gross profit amounted to $43 million in Q4 for a total of $150 million in 2022 compared to $139 million for the previous year. Adjusted earnings in Q4 reached $34.9 million or $0.19 per share compared to $23.8 million or $0.14 per share in Q4 of 2021. On Page 20, we present a breakdown of our cash margin. So the cash margin from royalties reached $40.8 million in Q4 and $143 million for the whole year. The cash margin from our streams amounted to $17.4 million in Q4 and slightly below $59 million for the year for a record $201.7 in 2022 compared to $187 million in 2021. On Page 21, we present the value of shares buyback and dividends paid and function of the average gold price on an annual basis. During the last five years, we have returned in dividends and share buybacks approximately one-third of our GEOs. And finally, on Page 22, you’ll find a summary of our financial position at the end of last year.

Our cash balance was that $90.5 million, we held investments adding a value of just slightly below $400 million. Our debt stood at $150 million following the repayment of the converts. We currently have $600 million available under our credit facility, including the accordion of $200 million. So in summary, another great quarter led by strong deliveries and a strong gold price. The year 2022 saw record quarterly and annual cash margins and operating cash flows. We’ve completed the realignment of Osisko as a pure royalty and streaming company, and we look forward to continue to grow in 2023 and in the coming years. I will now turn the call back to Sandeep before we open the lines for questions.

Sandeep Singh: Yeah. Thanks. Thanks, Fred. And maybe just the last thing, I would point out on those last two slides that Fred alluded to. On ’22, worth noting that we still have to fund the CSA transaction hasn’t closed yet. So that will come off our credit facility, depending on how much of that deal we take, certainly, the silver, but depending on the copper. But nonetheless, our balance sheet remains exceptionally strong, have a lot of firepower at the right time on the credit facility still, to our cash flow, which was meaningful last year depending on gold price should grow this year quite substantially, and then the equity book as well, which is less liquid, but we certainly want to make some inroads on this year and we think that’s very much achievable.

So when you look at Slide 23, we think we have the right mix. We’ve got meaningfully or credibly senior scale assets. We focused and we will continue to focus on high-asset quality. We’re going to maintain the level of consistency. You’ve seen from us level of simplicity and we’re going to allow our assets work and that organic growth that we talked about and let it unfold. That said, we see things we’d like, that we sourced ourselves, we will have the conviction to fall through with them. And as I said, we have the balance sheet to do it. And if we don’t, we’ll remain completely disciplined. It’s a pretty simple formula for us. But one that I think unlocks a significant amount of value. If you look at the bottom of the slide and I think if we stay focused on what I just described to you at the bottom of the slide, frankly takes care of itself because this is a portfolio is too important.

We’re doing the right things with it. And if you look at how the sector as a whole, I think is fair to say is, challenged for growth and struggling for growth. I think we’ve got the right formula to succeed within it. And that’s what we hopefully have shown you in 2022 in prior and that’s what we think will unlock a lot of value in 2023 and beyond. Thanks for listening to Fred and I on that piece, and certainly open to any questions, operator when you’re ready.

Q&A Session

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu: Great. Thanks, Sandeep and team, and congrats on a very strong Q4. And Sandeep, good talking to you again it’s been a while. Maybe my first question is on your Battery Metals here, the Patriot Battery Metals. As you mentioned, Sandeep, it’s a pretty long term. And it kind of speaks to the optionality of your model here. But how do you value it, at this point in time, given that there’s only a few drill holes, but also given the fact that it is now over a $1 billion market cap company? So, how do you internally value it? How should we look at it? And then from that perspective, what are you going to do with it? Are you just going to keep in the portfolio for optionality, or is there alternatives in terms of potentially monetizing it shorter-term?

Sandeep Singh: Yeah. Sure. Those are good questions and it’s funny where you started your question, your comment, Cosmos because I did see you at the airport at yesterday. As you walk, pass me the board of plane. No, look, I think on the Battery Metals side, it’s something we’ve said, our focus is going to remain gold and silver maybe to start with the back end to your question, our focus is going to remain growing our precious metals, cash flow and NAV per share in the other category, which we just had more flexibility. And I think anybody, I think what we’ve shown you and said and then shown you in 2022 is a preference for copper in that space, especially, if we get better deals and accept the longer life assets and the process.

But that’s, in moderation without changing what I’ve said to you about the focus. The fact that we can pull something like 2% NSR on most of Corvette out of our back pocket, I think it’s just — is an exceptional example. And then maybe a big example but it’s an example of the optionality of this portfolio. The fact that we do have such a large development waiting. We have a large exploration waiting that people don’t even get to. Because you don’t need to get to it, if you’re trying to value us and get to one times NAV. You don’t need to focus within that other category, but it matters. And those are the types of things that have driven the incumbents, larger peers in our group for a long time. We just haven’t had the benefit of it as a relatively — the relative newcomers.

So, to have those types of wins and potential wins in the portfolio, I think is special. In that scenario — that specific scenario, again, we paid nothing from it — for it as ground that we had from the Virginia acquisition that eventually ended up in Patriot Battery Metals. And yeah, I mean obviously we value it, it’s early days. I mean how right can meet our evaluations when there is a resource is the question mark, but obviously, we try to keep tabs on everything we have. At the end of the day, it doesn’t matter. It’s worth a heck of a lot more today than it was six months ago. And I think the market is telling that with the way they are valuing the company obviously, lithium will ebb-and-flow and we’ll see where it shakes out. But all it is, is a good new story.

We also, I should point out through fiscal development, they took the rest of background that within James Bay, they’ve already joint ventured out pieces of it because it’s not going to — they’re not going to get around to it themselves, but they’ve retained upside but joint venture pieces of that to different companies. And so, hopefully there’s other folks doing drilling there. We have a 3% royalty on all of it. Hard to say that we’ll get another example like this one, but if there’s something that kind of continues to get value out of nothing. I think that’s good news. In terms of the core — corners (ph) if you will of that asset to us. I’ve often said when I asked would we sell royalties, I’ve often answered no. These things are very hard to assemble and you don’t want to get them up.

If you don’t have to. But I think the truth is everything always has a value or at least, it should. And this is one where like you said its long-dated if it matters more to somebody else than it does. We will listen, and that’s true of a lot of it should be true of everything. But I think in this case, given the commodity and the and the time horizon to it. I think that’s true of this one than anything else. So, great to have it. If you’d asked me about Corvette or specifically the SGI claims, a year ago, I would have had a dumb look on my face and making something else because we didn’t know we had it, essentially or when you add it. We didn’t know it mattered. A few drill holes in the mining sector can change a lot.

Cosmos Chiu: Of course. Maybe switching gears a little bit. Going to Victoria Gold, you kind of touched on it, Sandeep earlier in the presentation. But Eagle, the Eagle mine had an updated mine plan earlier today. As we saw lower annual production but longer mine life and it seems like higher CapEx. I’m sure, as you said, you keep internal models on all your assets, like how does that compare in terms of your internal expectations, were you expecting sort of a longer mine life, lower annual production? I think you mentioned that it was good news story earlier during the presentation, but could you maybe walk us through, did it meet your expectations?

Frederic Ruel: Yeah, look. I’d say, yes. In terms of the mine plan, we obviously have conversations with our partners at all times. They can share a little bit more with us and then, now we’re dealing with the same information that everybody has. But I will caveat my comments with the fact that I still need, we as the team still need to pour through that press release. So I just skimmed it this morning and we had a brief discussion about it. But overall, I think, when I saw and again with that caveat, maybe I missed something. I think in the full — life of mine, there’s a trickle higher production. To be honest, that’s obviously spread out over a longer. So, the back end is a little bit different. Over the next few years, I think we’re seeing kind of what we expect to see.

And I think on average over the next eight years or over an eight year period of about that 200,000 ounce mark. So that’s kind of where we’ve been expecting them to go. Obviously, for the time being or maybe for the foreseeable — maybe for wherever the project 250 is not in the cards but even so, I think just getting up to that 200,000 steady-state level, I think good news, it’s coming at a cost. I think the truth of the mining sector. And I think if you’ve been following as I’m sure all of you have, the guidance number is coming out for 2023 so far. I think we’ve seen generally speaking, a little tougher to get the ounces out of the ground and cost more, right? So I think that’s a thematic across the entire sector. That’s not specific to Victoria.

But just as a function of where we are from an inflation perspective for the next, for a while, if it’s sticky in the world, it’s even stickier in the mining sector. So, we’re comfortable with what that is and again that’s a little bit of a dichotomy of operating company versus royalty company. But I think we’re pretty pleased with what they’ve put out. We look forward to, as I said, spending more time going through it. And then obviously, getting the technical report within the next 45 days. So further look into it. But overall I think for us, we’re happy with what we’re seeing. I think the transition for them from single asset developer to producer, that’s one that’s crippled a lot of companies. I think they’ve actually dealt with it well, especially during a COVID period, inflationary period.

We’re certainly pleased with our partner, but we brought to market participants are looking forward to a better 2023.

Cosmos Chiu: Perfect. Thanks, Sandeep, again for your very good answers, and I’m sure I’ll keep bumping into you at airports.

Sandeep Singh: Yeah. Try not to forget talking to me today.

Operator: Your next question comes from John Tumazos. Please go ahead.

John Tumazos: Thank you. Just looking at the stock prices of your operators as lead indicators, Sandeep. Island Gold, Alamos appears to be doing well, Capstone appears to be doing well. Some of these far away companies I’m not familiar with that. But what are some of your other operators where the share price is a good lead indicator? And then after you give me the good news, I’ll ask you some questions about the other ones.

Sandeep Singh: Yeah, look, I mean, that’s — let me explain right slides. I think, look, I think that’s a good point. I mean, generally speaking, share prices will do what they do. I think our partners overall had a very strong 2022 and I think they’re poised to have a strong 2023 whether you look at. Obviously, it was a tough day last week for Agnico for instance. But I think that story is still exceptionally strong. You mentioned, Capstone, you mentioned, Alamos. I think if you look at our partners as a whole, you throw in Newmont in there with Eleonore, so in SSR and Eldorado, I think our partners are on the upswing. I do think, there is a — as I touched on it with Cosmos questions, I do think there is a difference a little bit in that.

On the operating side, we are seeing cost pressures. We’re still seeing CapEx pressure. So I think if you’ve seen some weakness in share price, it has to do with that side of the equation, and then the beauty for us as we’ve re-positioned ourselves is the cash — the cost side of the equation doesn’t factor or as much as long as our partners are pushing forward with the initiatives that we need to push forward with as long as our assets continue to matter to our operators and our partners. And from that perspective, I would tell you that they absolutely do. Because we’re generally talking about assets that are top one or two to our partners. They’re spending a lot of energy on them and they are important to their business, they’re low-cost mines for the most part.

So, I think we’ll continue to see a lot of positivity from our partners on our assets.

John Tumazos: So, talking about the ones where the stocks didn’t go up. Where do you think is a good time frame to expect Agnico to have East Gouldie as a proven and probable reserve or do you think it’s going to be like, Odyssey where they just produce the gold and don’t bother to document reserves.

Sandeep Singh: Yeah. Look, I mean, I think we had the first trickle of reserves this year in the entire Odyssey deposit. I think the M&I is — M&I for Nickel probably reserves for most people. I think that’s the way — they’ll probably position it. So to have north of 6 million ounces in the Alumni category, a big lift, almost 3 times versus what was in there last year, good news. They’re drilling from surface largely some underground drilling now in 2022, I think. And I hope that, that definition drilling will just intensify has to have more access on the ground, still hitting it really hard from a drill perspective in 2023. I think it’s still the same 13 rigs doing basically the same amount of drilling as the last two years.

John Tumazos: If we move to Odyssey, that’s down almost 80% from when you first announced the formation of the company. What are the things that attracted you to the Barkerville acquisition? And would you never like make a property acquisition again or not in a narrow vein structure, what are the outlooks for those?

Sandeep Singh: Yeah. Look, I mean, I think we can go back and play our business history. Certainly, there was a logic at the time to protect an asset that mattered and put it back into the right vehicle that are funded better back in that — not massive, but that’s exactly what ended up happening, unfortunately, with a lot of pain in between from a market perspective. So no, that’s not something we’re looking to ever revisit. I still think that — and you’re absolutely right, the share price of Osisko development was tough in the last two years. It wasn’t a lot better for most development companies, but it certainly was tough on the Osisko development side. My hope and expectation is that, that can bottom out and start to have an upward trend again in 2023.

I think it will be driven largely off the enthusiasm that the market has for Tintic and that high-grade story in Utah. That initial resource, I think, on a postage stamp was really good. The fact that, that postage stamp (ph) of 7% to 10% of the potential mineralized envelope, really good, the fact that I have a whole electric and Robert drilling on their immediate boundary for deep copper porphyry potential that if they find the whole world will hear about, and we’ll transition over the boundary. So I think all that will be the good news story. Otherwise, you get paid to wait from a Caribou perspective with the feasibility in and the permitting is still expected for this year. I don’t take that in the stock. So hopefully, between those two kind of flagship assets and some permitting good use from a San Antonio perspective.

Hopefully, it can be a turnaround year. We’re happy to see them take in some more money and have the funds to go after their assets continue to go after their assets aggressively. So yes, tough one, absolutely. We all take it on the

John Tumazos: technical reports and they’re in permitting, but their stock lags, do you just write that off to the batch stock market for gold stocks?

Sandeep Singh: Yes. I don’t think you could do anything else. I mean the asset’s tremendous. The catalyst they’ve had are real. I touched on them earlier. So I think it’s unfortunate that the market still doesn’t give development companies enough credit. I think the investment dollars have, especially in 2022 gone towards producing names. And hopefully, we’ll see a market that’s a little bit better for the development names. That matters to us on the share price. It matters to a small perspective. We want to see that company succeed in every way. We’ve got the royalty on the royalty side. We think the value of our assets has grown on the share side, it hasn’t. But I don’t lose any sleep over Osisko mining. It’s just too special of an asset, and it fits on one hand, very easily in terms of the things you could compare it to in the market. So I think that will have its momentum, so I’m not sure (ph).

John Tumazos: Is Falco one that has a timetable to proceed. That’s one where the share is sort of pretty dormant.

Sandeep Singh: Yes. Look, if it does, I mean, I think it’s tough to point to it right now. That’s not one where we have to kind of commit it dollars until their success going forward. So we hope that there is, but we’re not kind of advocating today and tallying (ph) all the table that there will be in any kind of time line that we can point to. Again, I hope that there is because I think it’s an important 10 million ounces that’s valuable. I mean if Wasamac or, for instance, can be railed to Malartic then those ounces should matter too in that area. But until Glencore kind of figures out what it’s doing with the government in terms of their emissions until they kind of figure out how to be — how to fit in the town of from a long term perspective, I think it’s tough to say that the underground ounces below the Horne 5 are going to get a lot of attention.

So that’s kind of option value, I think I would point at this point. I hope it does come good, but I don’t have a time line for you, John.

John Tumazos: So if I could follow up on the earlier question from Cosmos. There’s a number of emerging battery metals royalty companies. That’s a good promotional theme, I guess they need assets. The lithium prices come off, the EVs aren’t selling well this month, but the stock market has an appetite. Two of the worst proposals I ever got that I refuse to have to speak in my conference with lithium companies, either on the basis of metallurgy or one of them had 3.4 million tons of resource per assay, like no data. So why not sell Corvette into the lithium bubble to somebody that might be able to promote it better as a pure play on lithium?

Sandeep Singh: No reason other than we’re not in the business of giving away value for less than what we think it’s worth. So I think that, that logic holds. I don’t know what happens to lithium sector in the medium term, long term. I do know that the world needs more lithium assets, does it need all of them, time will tell. But this — even though it’s an early stage one, I think it’s one of the better ones out there that we can see. So we like what we see here. It’s early days. We’re very happy with the progress they’re making. We look forward to seeing more both on the exploration, ultimately the resource on the metallurgy side, but it all bodes well. The level of importance that the Quebec government is placing on battery metals, lithium, in particular.

I think you’ve seen it and the other things that are involved in is high. The government wants Quebec to be a major player on the world scale from that perspective. So a lot of good things, even though it’s very early, there’s a lot of good things pointing in the direction of that and we’ll either let that unfold if someone wants to — that’s in the other category where I think analysts prescribe $100 million in that too, if you believe in the rule of thumb that says every point of royalty is worth four or five of the assets and the market cap will imply that this asset alone is worth nine figures. It sits in another NAV basket that has nine figures to it in totality, a lot of good things in there. So it’s a good place to be. We’ll take us for the time being and watch it.

But if ever it matters more to somebody else than it does to us than to be it.

John Tumazos: Thank you, Sandeep.

Sandeep Singh: My pleasure, John.

Operator: Your next question comes from Ralph Profiti with Eight Capital. Please go ahead.

Ralph Profiti: Hey. Thanks, Sandeep. Just one quick question for me, if I may. The first half of 2023, that’s what you have in your presentation with respect to the CSA transaction. Just wondering, is that — should we be thinking about that as a place holder? It’s been a while since we’ve heard from the Metals Acquisition Corp guys on the progress of this complicated transaction. So just wondering what you’re thinking about the timing of that — and is the silver and potential copper stream would we possibly see those enter into the guidance when the deal closes, meaning that silver and that copper would come in immediately upon deal closing?

Sandeep Singh: Yes. Look, good question, Ralph and good morning, and you’re right. As that transaction has been very long in the . I don’t for destacking transactions, if you want to keep your life simple. But I think the team there has done a phenomenal job out — put out lasting, a pretty nasty drop in the copper price last year, recutting a deal with Glencore that makes more sense, recutting a deal with us that makes more sense for us and now coming to the very tail end of that transaction. So just before Christmas, the odd timing, but just before Christmas — or sorry, between Christmas and New Year is, I can’t exactly recall — they launched their F-4 statement with the SEC, their prospectus essentially going back and forth now.

And that was one gating item. So our hope is that, that gets done in the very near term. They’re putting a pin in their pipe financing and getting to a factual (ph) or vote, if not late March, let’s probably call it, April. So that one is coming to a head. We have factored in the silver into that guidance number for 2023 with an effective date of February 1. So we factored in 11 months of silver if that doesn’t come in, then the guidance, the range that I would point you to is more middle of that range than on top of that range. But that’s what we’ve done because we’re pretty confident about it after and that hasn’t always been true. I was describing it as a coin flip in the middle of 2022. And now I see very good visibility to the end result.

In terms of the copper, it doesn’t really matter because there’s — even though the copper, it’s all producing today, obviously, I’d remind you that in the deal, we gave them essentially a one-year hiatus on the copper. So it starts — it would start in 2024 anyways. So that would be in the guidance number for next year. So it’s not in the 2023 number nor is it in the 2027 number, we’d have an opportunity to revisit that next year depending on how much of that copper has taken. But yes, after — yes, after a long lull, trust me, we felt it, it’s nice to be seeing daylight there.

Ralph Profiti: Understood. Thanks very much.

Sandeep Singh: No problem, Ralph. Thank you.

Operator: There are no further questions at this time. Please proceed.

Sandeep Singh: Okay. Great. Thank you, operator. Thanks, everyone, for bearing with us for almost exactly an hour and really happy with the way we ended the year, really happy with how we’re set up to unlock value in 2023. We do think we’ve done a lot of the heavy lifting and the story is resonating right now. So we intend to kind of keep after it, and hopefully, we’ll have good things to come back to you with. Our partners are certainly doing that. And hopefully, we’ll continue to see a good pipeline of opportunities for us. So thanks for your time, and we’ll talk soon. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.