Good morning, everyone. Thanks for joining us for the 27th annual CIBC Western Institutional Investor Conference. My name is Cosmos Chiu. I'm a research analyst here at CIBC. I'm excited. I'm excited about 2024. I'm excited about what, that's gonna be for precious metals. Hopefully, our panel today, our panelists are as excited as I am.
We have the royalty panel, which is usually a very good kickoff, for our Western conference. I've asked each speaker to give us a 5-minute introduction for the company, and then thereafter, we'll sit by the, the fireplace, and we'll have a fireside chat. And so first off, we'll have Jason Attew, President and CEO of Osisko Gold Royalties, newly minted. It's not his first time at the, Whistler Conference, but certainly his first time presenting at a conference as CEO...n President and CEO of Osisko Gold Royalties. And so I'll hand it off to Jason.
Thank you. Do you have the clicker?
Yes.
Thank you, Cosmo. I appreciate everyone attending. At my age, I will take the first selection to open a conference, which is the CIBC Western Conference, Institutional Conference, every day. So look, as Osisko Gold Royalties, this is our cautionary statement. I have to point this out, given, you know, the size two font that our lawyers say I will be making some forward-looking statements.
At Osisko Gold Royalties, what I want to convey, and hopefully the one takeaway that everyone takes away today, is we are on a path of revitalization. In fact, obviously, everyone knows it's a new year, new CEO, and we have a newish strategy. The fact of the matter is, over the course of the last five years in particular, there's been a lot of confusion with respect to this story.
Mainly because the old management team went out a number of years ago, as I think people knew, and acquired mining assets. I'm here to tell you our newish strategy is we definitely are a pure-play, gold-focused, royalty streaming company that investors have to own, and we want to substantially grow the business in that fashion.
The project generator or accelerator model clearly did not... although it was a very interesting concept, it did not produce the shareholder returns that people expect with respect to a royalty company. It also created a lot of confusion, and confusion does have its costs. It also created much of governance issues and related party issues. So, as I said, I'm here today, the cleanup has started. I'm here to finish the cleanup as it relates to the related party and governance issues.
But underpinning the business, and again, our focus has just really become a pure play, Royalty-Mine Finance, Royalty, and Streaming company, and Economic interest company. The business is tremendous. The assets that underpin the Osisko Gold Royalties, as you can see on the slide, we have over 180 assets. The fact of the matter is, this is a very young company. I think people will know or recognize if you've been in the business for some time, it was last week, 10 years ago, that the evil Goldcorp went hostile on Osisko Mining, and this Osisko Gold Royalties, obviously was a product of that defense.
And so what they've obviously done with an asset such as the Canadian Malartic, which was the first asset that came out of the hostile transaction, there's over another 180 assets that investors have exposure to. We do have 22 producing assets at this stage, and I will tell you, the approach that we're taking around capital allocation is different.
We'll be very, very disciplined. We have a number of metrics, specifically on return of invested capital, that we'll be disciplined as we go out and be a mining finance company around a pure play, Gold Royalty and streaming assets. As I said, we have the highest quality portfolio. The concentration, Canadian Malartic, again, is the anchor asset within the portfolio.
If people weren't aware, Canadian Malartic is the largest and most profitable mining asset in Canada. It's the seventh largest mining operations, gold mining operation in the globe, and we have a 5% NSR associated with it. In addition to the high-quality portfolio that you see here, obviously, we have assets across the globe.
But what I would say, in addition, is we have a pure leading growth profile, and so we're expecting to get a 30% growth over the next five years. And the subset of that 30% growth is actually, as you can see, some of the highlighted or yellow boxed ones here, are actually in the producing asset stage. So these not are all- they are not all...
50% of it are not coming from development assets, 50% are, but 50% are coming from either mine expansions, or extensions of the very, very well-known assets you see here. And some of the other cornerstone assets we have in the portfolio include companies that are presenting here at the CIBC Western Institutional Conference, Mantos Blancos, which Capstone operates.
The Eagle Mine, which Victoria operates, and we recently signed a deal on the Metals Acquisition Limited, which owns the copper asset in Western Australia, called CSA, for which we get this year, we'll get 100% of the silver credit, and we will also, the second half of next year, get. There's a copper stream that will also contribute to our portfolio. So very, very high quality portfolio.
In terms of the mining jurisdictions, and I do think this will be topical, this is a, you know, heavily weighted to our resources. There'll be a lot of resource conversations just around jurisdictions, given some of the events that have happened in the past.
But what we've conveyed here, and recognized, this might be somewhat simplistic, given, you know, Canada, U.S., and Australia makes up 80% of our NAV. And it's a simplistic view, arguably, of jurisdictions. However, what we can say is Canada, U.S., and Australia are very, very well-known mining and the safest of safe jurisdictions, and we have, the peer-leading best exposure, as 80% of our NAV is associated with those jurisdictions. Lastly, just wanna talk about...
Again, it comes down to the related party aspects and what we did at the end of last year to really firm up our balance sheet. We did sell the Osisko mining block for CAD 132 million. Why we did that was for two reasons.
As I said, Osisko Gold Royalties has one focus, one focus only: to provide mine finance to the best assets in the best jurisdictions for the best management teams, and we've got a really great opportunity set and pipeline to do that. And in order to do that, we obviously needed to provide some capacity within our revolver facility, so we sold down the whole 100% of the OSK block, the Osisko mining block, for CAD 132 million. Proceeds went to pay down our debt.
So our total debt right now is CAD 190 million, CAD 192 million. You can see on the, on the slide, Canadian dollars. From a net debt perspective, we're under CAD 130 million. So we have approximately CAD 550 million of capacity to go out and do very smart, disciplined deals with, again, operators that we think are best in class, in the best jurisdictions, and really grow the business.
So overall, I hope the one takeaway from you folks is the fact that we're simplifying the business. We're really just focused on royalties, streams, economic interests, with the best partners, and again, cleaning up everything that's happened in the past to produce superior returns. Thank you for your time, and I appreciate your interest.
Thanks, Jason. Next up, we have Nolan Watson, President and CEO of Sandstorm Gold. Welcome back, Nolan. I think it's been a few years since you've come to the Whistler Conference. I don't know if you heard but we had David last year from Sandstorm. He scared away a number of the journalist investors. So hopefully...
Correct.
I don't think they've come back yet.
David tends to do that, yeah.
Hopefully, Nolan... I'm sure you won't. So, Nolan.
Sounds good. All right, I just have a few slides to talk to you here. Sandstorm's business model is pretty simple. It's a lot of the stuff that just been said about Osisko. Sandstorm is a similar-sized company, got a similar amount of production that came this year. You can see from this chart, our production guidance going forward.
I think one of the things that we've done that's unique to Sandstorm is, we've gone out and we've bought a lot of our growth or all of our growth for the next several years, bought and paid for. We did a number of transactions that totaled about $1.3 billion a couple years ago, and those acquisitions were for things where mines going into construction or in construction.
And so you'll see our production profile, growing year over year as these mines that we've acquired, streams and royalties on the mines that we've acquired, get into production. You can see those gray bars there is, we've got an option to acquire a gold stream on Glencore's Mara project. They've recently spent $500 million buying out the minority interest there, and they've then informed us that they're gonna go full bore ahead with that project, and that'd be about another $30 million a year free cash flow for us if we exercise, that option.
So in terms of, of cash flow, at $1,800 gold, once these mines come online, we see ourselves up over $200 million per year in free cash flow from the portfolio of things, again, that we own and have, have the right to.
I think one of the, one of the themes for Sandstorm is that because we have already pre-bought and locked down all of this growth, we don't plan on actually being very active in making new acquisitions over the next couple of years. We took on a bunch of debt to make these acquisitions, and we've been paying that off aggressively over the last year and a bit, and we'll continue to pay that off aggressively over the next couple of years.
Our share price has suffered a little bit in interest rate environment where interest rates are once in a generation rate hiking cycle, and you've taken on a bunch of debt. Investors, I think, shied away from the stock a little bit, and it's caused us to trade at low multiples, and I think you're really gonna see that part of our story reverse. Our debt's coming down super fast. Hopefully, interest rates will be coming down, and you'll see this cash flow kicking in massively. $2,200 gold used to be a big stretch. I don't think it's a big stretch anymore.
It's basically 2% inflation for the next four years, gets us to $2,200 gold, and we'd be $250 million of free cash flow per year, again, based solely on the things that we've already bought, locked down as those mines get built. So if you juxtapose that $250 million of cash flow per year against our market cap, we basically look at these debt numbers, and the cash flow relative to that debt and then to our market cap. So when we did all those acquisitions, we took on about $640 million worth of debt and IOUs at the time. We've been aggressively paying that down since.
Today, as I stand here, we've got that paid down to $427 million, so massive amounts of debt reduction since we've made those acquisitions. Our goal is to have our debt below $350 million by the end of this year. And, assuming that we achieve that objective, then our debt will be approximately equal to the loans that we have made to other mining companies and the equity that we've invested in other mining companies. So we have $240 million of loans to other mining companies and $80 million of equity investments in other mining companies. So our debt will approximately equal our investments in other mining companies.
Then my job over the next several years will be to harvest those loans and equity and use that to pay off the debt, so that the free cash flow, that $250 million we talked about, that free cash flow generated by the portfolio of streams and royalties will be truly free cash flow, and that's, that's the place we're hoping to get to by the end of the year.
And if you juxtapose $250 million a year of free cash flow against a market cap, that as of this morning is $1.39 billion, if things don't change, then, you know, eventually Sandstorm will be trading at 5.5x cash flow, which is pretty, pretty rare for a, a stable, diversified, streaming and royalty company with high-quality assets around the world. So I think we've done the right things, we're doing the hard work, and it's a pretty value-driven story at the moment. And that's basically it.
Thanks, Nolan. Next, we have, Sheldon Vanderkooy, the CFO of Triple Flag Precious Metals. It's your first time here, I think, presenting Sheldon, and Shaun's not here today, so feel free to, you know, let us know anything that, Shaun wouldn't tell us. But with that, Sheldon?
Thank you very much, guys. Good morning, everyone. I'm Sheldon Vanderkooy, CFO of Triple Flag Precious Metals. I too will be making forward-looking statements, and the customary cautions apply. As I introduce Triple Flag to you, there are two main points that I want to leave you with. The first is a significant embedded growth that's within our portfolio right now, and that's over the next five years.
The second is our strict focus on financial returns and, in particular, on cash flow. We created Triple Flag in 2016. We didn't have an existing portfolio. Every asset in the portfolio has been acquired by the current management team through a series of acquisitions. Our goal was to create a premier streaming and royalty company. I'm really pleased with the progress we've made.
Today, we have over 230 assets in the portfolio. We have a market cap of $2.6 billion. We just released our 2023 production figures. It was 105,000 gold equivalent ounces. That's actually the fourth highest total in our sector. On the screen, you see the track record of growth that we've achieved. Our first year of production was 2017. We had 33,000 gold equivalent ounces in that year. We just achieved 105,000 ounces in the last year. That's three times growth, over three times growth in just six years. So that's a track record that we're quite proud of.
But what I really want to focus you on is the bar that says five-year average, and we are actually looking at 140,000 ounces a year on average over the upcoming five years. And most of that growth is from existing producing assets. It has to do with increasing gold grades on Northparkes.
It's not dependent on permitting, it's not dependent on financing, it's not dependent on a junior company being taken out by a senior company and building something. So that's a significant uptick in growth that we're looking at over the next five years from our current existing levels of production. This model is fantastic because that production translates very effectively into cash flow.
If you look at the two charts on the left, they map very closely to the production chart. And if you go to the far right, you see part of the reason for that is the strong margins, and that's inherent in this business model. We have over 90% asset margins. This model is fantastic for translating the top-line revenue growth into bottom-line free cash flow.
We benefit from top-line growth of our partners, but we're not susceptible to the operating cost inflation, the capital cost inflation, the sustaining capital expenditures, the exploration expenditures, all the things that take cash flow away from the operating companies. Our model allows us to fully benefit from that. Ultimately, this model is quite simple. Our free cash flows are primarily going to depend on our production volume and the gold price.
The gold price today, today it's down a little bit this morning, but overall, it's still over $2,000 an ounce. If I compare that to the average price of last year, it's higher. So if prices stay exactly the same, if we don't benefit from the interest rate cuts, which people largely think are gonna happen this year, they stay the same, we're gonna see year-over-year increases in cash flow just from the price impact on this year's production.
And then when you overlay that on increasing production growth, you're gonna get this, gearing effect, where you benefit both from the gold price effect and the production effect, translating into cash flow available to shareholders. I won't dwell too long on this slide. There's been increasing focus on asset diversification and on, on jurisdiction risk. We're well-diversified by asset diversification.
Our single largest exposure is Northparkes. I'll touch on Northparkes later. The key fact there, I think, is it's located in Australia. The next circle chart there is our commodity exposure. We are very much a precious metals investment vehicle. 95% of our revenues are gold and silver....
With respect to geography, our single largest country exposure is Australia, and over 60% of our NAV is Australia, Canada, and the United States. Very good jurisdictions to be in. This is a bit of a report card. It's on an asset-by-asset view, some investments that we've made in the past and seeing how we've done, with the benefit of the passage of time.
What we've done is we've taken our initial investment and looked at the cash flows we've received, we have received to date and also compared to the existing NAV that analysts are putting on it. These aren't our own internal figures. These are consensus analyst figures. This is what the market looks at, and as you can see, we've generated cash flows and value significantly in excess of our invested capital in many of these cases.
The one I'd actually like to draw people's attention to is the bottom left, the ATO investment, because there is the potential with this model to have higher returns. ATO, we put in $28 million in a series of staged payments starting in 2017. We've harvested nearly $40 million at the end of Q3.
It's, it's higher than that now to date, and we have significant value ahead of us. They're undertaking a phase 2 expansion. We're gonna benefit from that expansion without putting our own capital to work there. So again, it's, I think, indicative of the strength of the model, how you benefit at the back end as you get into the parts of the spreadsheet that you actually didn't pay for at the front end. I want to touch on Northparkes.
It's our cornerstone asset. It's located in Australia. It's been operating for decades. The mine team thinks that this could be the, the 100-year mine. It has lots of mine life ahead of it. It's a, it's a copper mine. It's, 80% operated by Evolution. They just stepped in last year. The remaining 20% is Sumitomo.
They draw from numerous different ore sources, and these sources have differing gold grades. What's exciting for us is this is primarily a copper mine, so they're going after the copper and then the gold, and then we benefit from the gold there. They're gonna be accessing zones of this mine, which have higher gold grades than we've experienced in the past.
So what that's gonna do is that's gonna drive an increase in our, in our deliveries. The picture there is of the E31 open pit. They started mining that late last year. They're mining that right now, and we're gonna benefit from those higher gold grades in 2024 and beyond. The gold grade at E31 is about four times higher than what they have been traditionally been mining.
Now, they draw from multiple ore sources, so this is just gonna blend into the average, but it's gonna raise up the average. This is one of the sources of our growth in the next five years. What I want to leave you with is, we're very proud of the portfolio we built. We have embedded growth in the portfolio, and we are strictly focused on financial returns and cash flow. Thank you.
Thank you, Sheldon. Next, we have Bill Heissenbuttel, President and CEO of Royal Gold. I think you're the longest-serving participant on this panel, so-
Nolan.
Nolan missed last year, so-
Oh, I see.
We started-
Got it
... the clock again. So any wisdom that,
Well, good morning, everybody. I really like to thank CIBC for the opportunity to participate in today's panel discussion. I will be making forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially, and these risks are discussed in our 10-K filings with the SEC.
If you could just take away a few words or a phrase from this high-level description of our company, I think it'd be consistency, efficiency, and uniquely positioned. We are consistent in terms of our leadership and our team. We are the oldest continuously traded public royalty company in the sector, and since we adopted a gold strategy in the mid-1980s, we've only had three CEOs, including me.
Our team averages 10 years in tenure, and that allows our personnel to develop a wealth of corporate history, knowledge and experience, and I also think it speaks very highly of the work environment we have and our culture. We are consistent with respect to our strategy. We're focused on streaming and royalty investments.
We generate 70%-75% of our revenue from gold and almost 90% from precious metals. Since 2021, we closed over $1 billion in transactions on primary or by-product gold producers with good operators in good jurisdictions. While we can consider investments in other metals, we do not lose sight of what we offer investors, and that is a lower risk exposure to gold. We are consistent with our financing strategy.
We finance investments from existing cash, cash from operations, and a revolving credit. Once we borrow money for an acquisition, we look to pay back quarterly in order to position ourselves for the next transaction. Well, that does not guarantee that we will never issue equity in the future if good investments present themselves.
There's a reason we only have 66 million shares outstanding, which is the lowest in the GDX. We haven't done a public equity issue since 2012. In the period from 2000 to 2022, our operating cash flow increased 99x , while our shares outstanding increased 4x , and the gold price increased 6x . We benefit from a consistent share register. In the last year, our top 10 shareholders did not change, and the average holding period of our institutional investors is over 15 years.
We're also consistent in our approach to our dividends. In November of last year, we increased our dividend to $1.60 per share for 2024. That was the 23rd consecutive annual increase in the dividend, and we're a member of the S&P High Yield Dividend Aristocrats Index, which reflects that accomplishment,
And we're the only precious metal company in that index. In terms of efficiency, we only have 30 people within the team, but we're able to manage new business identification, new business acquisition, portfolio monitoring, risk identification, and still produce EBITDA margins of about 80%. And for the nine months ended September 30 of last year, we earned $453 million in revenue and had cash G&A of $23 million.
That's a real insulating factor when it comes to things like inflation. As a U.S. company, with Newmont as the only other major U.S.-based source of gold exposure, we are uniquely positioned to potentially attract generalists' money when their attention turns to gold. We're members of over 200 equity indices in the U.S., and also, as a U.S. company, we do not expect to see our results be negatively impacted by a global minimum tax.
And in fact, we may actually see that level the playing field with our key competitors that may face a higher tax burden. So in closing, there were a few portfolio events that impacted our results in 2023. Primarily the strike at Peñasquito and the slower-than-anticipated ramp-up at Pueblo Viejo.
I invite you to watch a few key events this year: the return of full production at Peñasquito, steady-state production to Pueblo Viejo, a PEA at Great Bear, the commissioning of the Goldr ush project at the Cortez complex, construction progress at Back River, a potential new owner at Khoemacau with a possible focus on expansion, the opportunity to fully repay our revolving credit, and first production from Manh Choh, Coté, and Mara Rosa, three assets that on their own aren't all that material, but in the aggregate, represent good organic growth from our portfolio. Thanks for your time and look forward to the panel discussion.
Thank you, Bill. I don't think I'll give you any time to rest, but, let's start off with you again, Bill. Out of a scale of 1 to 10, 10 being best, how was last year's acquisition environment, and what are you expecting for 2024?
You know, I think my view on 2023 is a little bit jaded because we had such a good 2022. So you want one to 10, I kind of thought, well, it's probably a three or a four.
Mm.
That's just really our, sort of our perspective on it as a whole. We had one transaction that we did announce publicly. We weren't able to close it due to other closing conditions that were not satisfied. I would say that the transactions that we saw, you know, maybe we had some technical concerns, maybe we had some jurisdictional concerns. So maybe that's just a reflection of how we look at the market and not, you know, the market as a whole.
What do you think about 2024?
I mean, the funny thing about this business is you never know what's going to come up. If you had told me at the beginning of 2022, you know, we're gonna do 2 Cortez transactions and buy Great Bear, what are we... Great Bear Royalties, I would said, "Like, that wasn't on the radar." I still think interest rates are high, which is good. I think the equity markets are relatively closed, so that's good. So I am pretty bullish about the potential in the market.
Nolan, do you agree? Was it a three out of 10 for you last year, or is it, was it a, a higher number, a lower number? What, what are you thinking with 2024?
I think for us, it's irrelevant. So, similar to what Bill said, 2022 was a big year for Sandstorm. We acquired over $1 billion worth of new assets. Five of our top 10 assets came in through those acquisitions, and we are dilution sensitive, so we borrowed money to do it. We just, in 2023, used all of our cash flow to pay down debt instead of buying new things. In 2024, we plan on doing the same thing. In 2025, we plan on doing the same thing. We're gonna grow by 50%, potentially as high as 60%, if I do nothing but sit on my hands.
You know, being in a situation where you could conceivably buy back your entire company with 5.5 years of free cash flow, when you've got mines that are gonna be producing for decades, doesn't really make sense to make acquisitions. It makes sense to buy back shares. So probably at the end of this year, we'll be looking at buying back shares, not buying new streams and royalties.
Sheldon?
Yeah. So we actually closed the Maverix transaction in January of last year, so we kinda had our big acquisition early on. I'd say it'd be a seven or an eight overall. It was actually a fantastic acquisition for us. I think we were a little disappointed we didn't have more activity during the balance of the year 'cause memories are short, and we're impatient. But we had some tuck-ins and all that, so I think it was a really good year with respect to Maverix and then probably a little bit slower after that.
Jason, understanding that it was someone else who ran the company last year, how would you rank it, and how would you do it this year?
Yeah, no, great question, Cosmos. So I do have 70 days, eight days context here, but clearly, I've done a look back in terms of what transactions were done. And so the transactions that were closed, that really, again, sets the company up for growth.
The CSA transaction, people might know or have followed Mick McMullen, who's a very well-known mining entrepreneur, Stillwater Mining Company, Detour Gold Corporation, and his vision is to create a mid-tier copper company in Australia, where there's a dearth of those opportunities. And so we were his financing partner in the CSA Mine, and total consideration for us was $190 million, which essentially got him that mine, and if people don't know what CSA is, it is the highest grade underground copper mine in Australia.
So a very solid asset with a very solid management team, great jurisdiction, as I said, this is what we're going to be doing looking forward. And I think the genius part of that transaction, as well as we're truly a partner with Mick going forward, is if people aren't aware, we have a seven-year ROFR associated with anything that he does to grow the company. And we all know he's not gonna sit still. He will build out a mid-tier copper company, and we're going to be his financing partner as he goes through it, and that's also why it was important-...
As you think about late 2023, where we did sell off the 100% of the OSK, the Osisko Mining Block, that brought our revolver down, as I talked about, to our total debt down to CAD 190 million approximately, and gives us a lot of financial flexibility to go out and do transactions that I believe, and maybe it doesn't happen in 2024, but certainly in the flow around the whole energy transition push.
And it's perfectly set up for our companies here, 'cause as you can appreciate, we can provide very good financing for byproducts such as silver and gold, around big polymetallic a big chunky polymetallic assets that, you know, are generational assets. So very much looking more forward than backwards, but Osisko was obviously active in that transaction and another transaction called Namdini.
So exactly the strategy that I talked about around we're 100% focused now on mine financing through royalties and streams. I promise you, we will not go buy a mining asset, 'cause that clearly, again, it was an interesting concept, but it just didn't provide the shareholder return and just simplifying the business and being a mining finance partner for groups like CSA, Capstone, and others is what we're going to do.
Great. And, you know, maybe next question, and since Nolan didn't really answer my last question, we'll start off with you. Let's spice things up a little bit here: What's the one asset in the industry that isn't yours, that you wish you had given the... you were given the opportunity to acquire?
Oh, my gosh!
And irrelevant-
Pass.
is not an answer.
Pass. That means I have to say nice things about someone else on the stage.
You're a nice guy.
That's a really tough one. I'm gonna have to come back to you on that, I-
Okay. Anyone else wanna give it a crack?
I, I'll take a crack.
Okay.
I mean, the transaction that started this business, and I'm going back to 1986, Goldstrike, for sure. I mean, who would have guessed... I don't know if people understand the context there, but it was a small heap leach asset in Nevada before even Barrick owned Goldstrike.
It was a couple, a company called Western Mining. Then the American Barrick got it, but obviously, Pierre and Franco got in on a royalty there, and 50 million ounce endowment now, and that created Franco, for sure. And so yeah, that's something we would have loved to have in our portfolio. It's obviously something that really created, I think, an industry and interest around kinda novel ways around mine finance.
So for sure, that's, that's one that stands out to me as, you know, if we could do those transactions, we would do it every, every day, three times on Sunday.
Yep. Sheldon, do you have a-
I've got an answer now.
Oh, you got an answer. Okay, cool. Thank you, Nolan.
It took me a moment. I apologize.
I sent you these questions beforehand.
So I would say of, of assets that we were interested in when we were looking at making acquisitions, that we had the opportunity to buy, that we were in the process of, the closest one that we came to and ended up not being the winning bidder was Cerro Lindo. We were up against Triple Flag, and we were like: "Boy, they just paid a little bit too much," and we passed on it, and, and we... I regret that decision.
Do you agree, Sheldon? But that you can't say.
That you overpaid?
We're really glad that we got Cerro Lindo. It was our first asset and got us kicked off, so thank you. You know, because you did send the questions before, and I kinda came back to Royal's assets in Nevada, right? Royal Gold, and, you know, we're somewhat. I guess we're the new kids on the block, and we came starting in 2016, and those were largely in your portfolio already. I know there's a bit of an add-on more recently, but, yeah, those are wonderful assets. Malartic's also a wonderful asset, and, you know, Nolan's got a fantastic portfolio as well.
And then, Bill?
Yeah, I'm not shy about extending compliments. You know, we always talk about good people, good project, good place, and I think of Salobo, and I think of Malartic as ones that are, you know, very attractive. We had an opportunity on Salobo, not Malartic, but both great assets.
Thank you, Bill. Maybe, you know, something else here. As we've all followed in 2023, there were some fairly, highly, you know, publicized issues in the mining space that had an issue or had repercussions for the royalty and streaming companies, including the shutdown of Cobre Panama. So, Sheldon, maybe we'll start off with you. I think you're the only lawyer on this panel here. Does that change the way you structure deals? And also, does that, you know, change the way you look at due diligence, concentration risk, geopolitical risk, Sheldon?
Yeah, when big events happen, I think you have to take notice and maybe adjust or at least course-correct, you know, give some contemplation. What Panama has done is, it's very destructive, right? It's destructive for the mining sector, the value those companies have gone through. I think it's also bad for Panama as a jurisdiction.
So anyway, I don't quite understand why they're taking that course, but they are. I think it's primarily... There's structuring things you can do, and I think we all kind of understand that. I think this just primarily comes down to jurisdiction. I think there's been increasing focus since then on concentration risk and jurisdiction risk where you're located, and I think people are having a different view there.
It wouldn't surprise me if at the end of the day, first, Franco-Nevada comes out okay on this, because it seems almost insanity for something else to happen. So I think I might be okay at the end of the day, but again, this has been a very bumpy road, and obviously, it's gotten everyone's attention.
Bill, any comments?
Yeah, I mean, in certain jurisdictions, we will build things into our agreements, you know, that primarily deal with expropriation. Basically says, if you get expropriated and you receive proceeds, if we haven't gotten our money back, we get the money back first, and then we share the economics. You cannot protect against every political risk out there, but that's one way we do try to do it.
I think the other thing that really strikes home is when you're looking at these jurisdictions, is mining part of the culture? Is there an industry? And I think, you know, the one thing about Panama, when they do this, and they say, "Well, you're ruining your mining industry," you say, "What mining industry?" So it's just kind of a unique. It's a unique risk and a unique situation.
And-
The other thing I'll just say is, we make investments over decades. We'll do the political risk due diligence, but we have no idea, where governments may go, where countries may go. That's just, you know, that's just a risk that we have to accept when we make these investments.
Nolan?
Yeah. When I look back in how I got into the mining industry, I was 22 years old, I got sent off to the jungles of Myanmar to audit a mine that was a joint venture between the military and a Vancouver-based company. And I got thrown right into political risk pretty quick. And, my, you know, second place I went to was Mongolia, right as Robert Friedland was finding Oyu Tolgoi.
And then I, shortly thereafter, founded a personal charity and worked over in Sierra Leone, and very quickly started to realize how risky the place the world is, and how any country at any given point in time can go crazy, to levels you can't imagine. And so the philosophy that I've always carried at Sandstorm is, you know, you can change the politicians, and it can get worse or better, but you can't change the rocks.
Mm.
So focus yourself on really high-quality assets and diversify politically. So at Sandstorm, we don't have any one country more than 14% of our NAV, and we're gonna keep it that way.
And Jason?
Yeah, look, I've always said, even given my history, even going back as a banker and at Goldcorp, there's no place like home. So to the extent that you can get assets and be able to finance in Canada from a jurisdictional perspective, that's our lens. We're always looking at jurisdiction first.
And obviously, you know, as these are all contracts at the end of the day, and so there's a continuum for which you can get the security associated with assets. So obviously, trying to get the best security package you possibly can, with overlaying with the lens of obviously the jurisdiction that everyone here talked about. At the end of the day, the group of us out here up on stage, we're risk managers on behalf of shareholders' capital.
That's the way I look at, that's how our team looks at it. So you just have to do transactions in jurisdictions that you're comfortable with, the security packages that you're comfortable with, teams that you're comfortable with.
Great. And I think, you know, we go way back. We talked about Goldstrike and how the industry first started. And certainly, there's been, you know, royalties and streaming and the entire evolution of the industry. Maybe Jason, we'll start off with you. This is your first conference. You know, you have had 17 days, a fresh pair of eyes. How do you see the evolution of the industry from the outside in, and how does that factor into your vision and strategy for Osisko Gold Royalties now that you've had a number of days in the captain's seat?
Yeah.
I guess, you know, I didn't really put this in the questions that I sent you: Is this your dream job? You know, you've worked for producers-
Yeah.
You've worked at a bank, you were an investment banker, but now is this your dream job?
And I'll answer that last question first. I can unequivocally tell you, Cosmos, this is absolutely an amazing job and opportunity, and I think we're all fortunate to be on this side. Because you think of you know, being associated, and some of us have been associated with operations and operators, it is a tough, tough, tough business. And you see the materiality and the magnitude of some of the misses in the marketplace and things that you can't even control as an operator. So that would, you know, be the... This is just a remarkably fantastic business, so very, very excited to be leading the Osisko Gold Royalties.
In terms of the outlook go forward, again, I'm a big believer, as I said before, on the whole energy transition piece and really partnering with groups that we think that are gonna actually, from a polymetallic mining perspective, really provide the commodities that are important to the energy transition. So quite optimistic. Having 17 days in the seat, and remember, I was an investment banker for 16 years, I haven't seen an opportunity set, and this is just obviously within Osisko, this rich and this broad, even back when I was doing banking. And clearly, again, it's not that I've run a royalty, but there is a lot of opportunities out there. There are a lot of very good assets out there.
There's a lot of very good management teams. So we're gonna obviously pick our spots. I think all of the companies here have very good opportunities to finance, again, what's gonna be very meaningful for the planet going forward around the energy transition, as well as obviously making really good returns for our shareholders. So that's the context I can provide. Again, the opportunity set that we see within our organization is very good, but we have to be disciplined. We cannot be chasing things. We've got set parameters in terms of our returns. But it...
You know, to answer the last question, again, I'm just—this absolutely is the dream job, and I'm very, very pleased to be here, and thank you to CIBC for hosting me.
... Thanks. And then Bill, as you talked about, consistency has been a key factor for Royal Gold. How do you see, you know, you've been around the industry, how do you see the evolution of the industry, and how does Royal Gold fit in?
Well, I think what you've seen, you go back to the start and, you know, Silver Wheaton was doing transactions where, you know, it was a life of mine, and the stream percentage didn't change, and the cash price changed a little bit. And you've really seen the industry evolve into sort of a total capital structure provider. You know, we now have step downs in our streams to incentivize the operators to continue to explore. You now see stream investments with debt and equity associated with it. And the only thing I would say is I hope the industry doesn't go too far down that road. We're streaming and royalty companies.
The other stuff that we may provide is really around getting that stream, that 10, 15, 20, 25 year stream investment and hopefully minimizing the other stuff that we do because it provides a little noise in the industry and for our investors.
Nolan, what do you think? Have we gone too far?
I think we've gone as far as we're gonna go.
Okay.
You know, if I look at Sandstorm's evolution, when you're growing a company, sometimes you have to be a little bit more creative and bend a little bit more than you would like to sort of make that incremental acquisition. And we've done that in the past, and we've ended up with, you know, a portfolio of loans and equity that's larger than what we want. And so we're gonna clean that up and monetize it and scale that down and streamline our business. So I think we'll be doing much less of that in the future going forward. There's absolutely no doubt, to Bill's point, that the industry of mining needs streaming and royalty capital, full stop. It needs it more than it's ever needed it, I think.
I think that will allow us, collectively, to be more disciplined in the level of creativity that we need to bring. I think we don't need to be as creative to be value-added. We're just... We're needed.
Thanks, Nolan. Sheldon?
Yeah, I really agree with everything that's been said. It's... The opportunity set on the electrification story is huge, and I think the way, you know, certainly Triple Flag, and I think my peers here, is how we participate in that is funding, you know, taking gold streams, silver streams as byproducts off those polymetallics. The opportunity set is fantastic. And so in the longer term, I think there's gonna be great opportunities to deploy capital. And this is a... There's barriers to entry to deploying this capital. There's a skill set to this, and part of it is working within the capital structure and, you know, working with the debt providers, working with the equity providers, to create a full capital stack that works for the operator.
We, we personally wanna really shy away and minimize our own debt and equity 'cause we don't think that that's what our, our investors are signing up for. We wanna have that top-line exposure, where we're not exposed to the OpEx and the CapEx and all those things that I spoke, I spoke to. The last point I think I'll make is, if you look back 10 years, streaming and royalty funding was really seen as alternative, it was something people did if other things weren't there, and I think that that's changed. I don't think anyone looks to finance a mine now without making a call and looking to see how, how a stream fits into that, into that capital structure.
There's some really good work done there that shows that it actually can reduce the risk for the operator, because otherwise they're diluting with equity, or if you have too much debt, if there's a time delay or something like that, that interest accrues and can really handicap the operator. So I think actually streaming makes for a more robust capital structure in total, so we're actually adding some value.
Great. See if there question coming from the audience, Georgia?
Good morning. Just in terms of the electrification and the energy transition, a number of you have mentioned that topic and obviously the potential for larger polymetallic deposits, but some of those are not necessarily in North America. Some of them might require you Great. See if there's any questions coming from the audience. Georgia? go to new jurisdictions. How open are you to entering new jurisdictions weighing the political risk, environment as well?
So the question, to repeat, is electrification and metals and how, you know, willing each of these companies is willing to go into new jurisdictions to seek these new opportunities. Jason, since you talked about, you know, electrification-
Yeah
... and how excited you are, maybe we'll kick it off with you.
Yeah, look, I think it comes back down to you got to take a lens of jurisdictions that you're comfortable with. And clearly, there's a bunch of South American countries that have been producing these polymetallic and will be very important around expansion of those assets. That's something certainly we're in the flow of and we're considering, and we have investments in South America, just nothing that's significantly producing.
So I think you just really do have to step back and get comfortable with jurisdictions. I can tell you from at least the Osisko perspective, we are not going to be making investments, polymetallic assets in places like Russia or China or Venezuela. But you do have to... You have to test those assumptions at some times too.
But we want to, as I said, as Dale said, it all comes down to risk management, and we're deploying shareholders' capital. As long as we have a risk management framework in place around jurisdiction, security, asset quality management, that all basically the calculus is into the fold. But hopefully that answers the question.
Bill, what do you think? You tried to get into electrification this past year. In 2023, it didn't really work out too well. You tried to get into Brazil, so, you know, maybe elaborate on that, or you can talk about other just more general as well.
Well, I would agree with Jason. I mean, you, we are open to new jurisdictions within reason. Chasing cobalt in the DRC is not something we're gonna do. Chasing nickel in Indonesia, I don't really know Indonesia that well, probably not something we're gonna do. Brazil, we're very comfortable with. So, you know, I don't think we're gonna... We would pursue energy transition metals and just throw political risk to the side and say, "This is so important, we'll overlook that risk," 'cause right now, as we all know, political risk is huge.
Nolan?
Yeah, clearly, there's a list, a whole list, and it's a very long list of countries that you just don't go into under any circumstances, in any investment size. You know, I think it's funny when we sit in our corporate development meetings, and we'll have some corporate development person say, "Oh, we found a good opportunity in Russia.
" I'm like: Okay, well, then you're the guy who's enforcing it when they decide not to pay. I'm sending you personally. So there's a whole list of countries we just won't go into. Outside of that, I think one of the most important things to evaluate is a two-step process. One is: How big is it relative to the size of your company, and does it add risk to how people will view you as a company?
If the answer is yes to that, then it's probably not a good decision for your company. But then the second layer is: In this investment, how experienced is the operator, the mining company, in this jurisdiction? Because there are some jurisdictions where it's okay to operate if you know how to operate there, and you've been doing it for a long period of time, and you're experienced at it.
If you're, you know, a Vancouver-based company trying to build a mine in this new country for the very first time, and you don't know what you're doing, and you're probably gonna step in it a whole bunch of times, that's a risky investment to be making as a streaming and royalty company.
When we're evaluating that, we go: What is, what is the total risk to Sandstorm in terms of percentage in our portfolio? And do these people know what they're doing on the ground, and have they done it before?
Sheldon?
Yeah. I don't know if I have a lot to add to that. I mean, it's really risk on a holistic basis. We will want a little bit more return, probably. It's not a formula, but there's obviously a long list of countries you just aren't gonna go to, and then there's other ones where you have to look at the specific context. As Nolan said, that operator, where it is in the country, like different places with... there's different provinces, just like different states are different within the United States. And then, you just have to be willing also to say, "You know what? We're not gonna do this. This is gonna be an opportunity we'll let somebody else potentially take.
Anita?
So just to follow up on that, what role does diversification of royalties play in active ownership? For example, over the last few years, we've seen, royalty producers take increasingly bigger stakes, you know, whereas, where historically they were probably, 2% or 3% royalty. So do you think about the size of production that's at risk if, if it was, you know, unforeseen circumstances, not just geopolitical, but, you know, just operational as well?
To repeat the question, diversification within a portfolio. In the past, that's been a key benefit for royalty companies, but we've seen a larger and larger concentration in each portfolio. So, you know, how should we look at it? Maybe Sheldon, we'll start off with you.
Yeah. I think one of the... And, again, partly it's what you're comparing it to. So if you're comparing it to an operating company, you know, and I came from an operating company before, diversification seems fantastic, but I think there's benefits as you grow. So right now, our largest asset is Northparkes, it's a little over 20% of our NAV.
As we grow, that will come down. I think you're right. We've seen one example where a large asset has, you know, come under fire, and I think that's kind of gotten everyone focused on that. So it's something we pay attention to, but it's also something that changes over time as you add to the portfolio. It can... any one asset can decrease its concentration.
Bill?
It's an absolute focus for us. You know, when we do our strategic planning, it's one of the things that we set out is we you know we want our portfolio you know our top one not to be more than X and our top five not you know to be less than that. And you know we have suffered at times from having a concentration. You know Milligan or Thompson Creek had debt issues, Milligan had water issues, and when your top asset has issues, you're gonna have issues. So to me it's probably one of the first things I always think about and one of the goals we set out is to try to reduce any concentration we have.
Nolan, what, what percentage is too big, you think?
Yeah, I mean, right now, we're fortunately in a position where no one asset is more than 12% of our company's NAV. I had this conversation yesterday with one of our corp dev guys, who was looking at an acquisition where it would be 20% of our NAV, and we just kinda went: "No, thanks." You know, we've been there, don't wanna go there again. And so we're... I think all four of these companies are in a place today that we weren't in 10 years ago, that we've got enough maturity and diversity in our portfolios. We don't need to go there again, and so diversification is important.
Jason?
Maybe I'll just take the contrary view, and I think it really would depend on the investment. But for example, if we could get another Malartic, which is 25% of our concentration, again, in a great jurisdiction, Canada, operated by the best operator on the planet, we would double down on that for sure, 100%.
I think, though, the philosophy that Bill, in particular, shared is the philosophy, because we're not gonna find another Malartic. We understand that. But if that opportunity came along, for sure, we would have that concentration, and debate it. But I think the other side of the equation is when you're actually doing big, chunky transactions like that, you also have to look at the burden from the operating company's perspective, especially if commodities do roll over.
If you stress the assets so much that the operator is gonna have a lot of trouble as a going concern. But it is an important consideration as we think about, again, the diversification and concentration of all our assets in our portfolio.
Yeah, as a plug, we'll have the other companies, royalty companies, presenting this afternoon, and I'll ask the same question. Maybe one last question, expanding this on this a little bit. ESG. ESG continues to be a key topic for the industry. Maybe not as hot as last year, but certainly still very important. Bill, maybe we'll start off with you. I know this is especially important to you. How do you think about ESG and your approach to ESG, given your role as a passive investor in the mining space?
So we're a little, little unique. We're a U.S. company with primarily U.S. investors. I can go a full day of one-on-one... back-to-back one-on-ones and not get one ESG question. That's just where our investors are. Now, we have some in Europe, and that's all they want to talk about, and so I take the approach of, if you wanna talk about it, I'm ready to talk about it. But if you don't, I'm not gonna force it. I'm not gonna start asking you about it. My only issue with ESG is, and I think Jason said it best, we're risk managers. ESG is an acronym that covers a subset of risks.
They're important risks, but if you were to sit there and ask us just about ESG, and you didn't ask us about commodity price, you didn't ask us about technical risk in the portfolio, you didn't ask us about competition, liquidity, leverage, those are the things that I kind of think about. And so what we're trying to do is sort of take a total risk approach, knowing that certain risks are covered by ESG, and we have to be ready to talk about those if that's where investors wanna go. And I'll just... You know, I think if for me to rank the three letters in the acronym, I always say G for governance comes first, 'cause if you can't do governance, you can't do either of the other two.
S is second because that covers human capital and our team, and our team is the most important asset that we have. And then E is always the challenge for us, 'cause as you say, Cosmos, we are a passive investor. And I just state, you know, whenever we're talking to operators, if they have a project that will help them address their emission reduction program, improve water quality, improve relations with community, come talk to us. We'd be happy to support it.
Jason, what do you think? Bill says we should be GSE. Do you think we should be GSE?
Well, given the context that I laid out in the presentation, we're certainly working on governance, because our governance has not been fantastic. There's a bunch of related party transactions that has happened, and we're in the process of unwinding it. And that's clearly had an impact on the investment thesis and the investors and the shareholders.
So yeah, from our perspective, G is absolutely top of mind as something that we're focused on right now, to get things in order and to get things that we don't have related party transactions and that we can operate as an independent mine finance company. But I will also agree with you know, Bill, social license is incredibly important. We do have, for example, in our company, one person that focuses on that, around the sustainability piece.
It's not incredibly. It was very informative, but we're not operators of the assets. We can go down and see what companies are doing, but it really is the reputation of the companies that we partner with. If they don't have a reputation, clearly we're gonna have to do a lot more work on social to make sure that they're doing things the right way to continue to have their license. And lastly, again, I completely agree with Bill. Environment, yes, we can provide subject matter experts. Yes, we can analyze our investments, but at the end of the day, we're not the operators. So it's something that, again, we're relying on our partners to be best in class around that.
Nolan, two votes for ESG. What's your vote?
Well, Sandstorm's currently ranked third in the world for gold mining companies by Sustainalytics for ESG. And I think really where it gets to the heart of that is, and I think all the royalty companies do this, it's just, you know, maybe we articulate it better in the ranking checklist things.
But it gets to the heart of what we are as a business, which is it's a bad investment to invest in something that has a lot of social risk or has environmental risk. Our job is to make sure we're only putting our capital in play in situations that have stable social situations and good environmental situations that, you know, aren't gonna have permitting problems and aren't gonna have political issues because of environmental things.
And so just making sure that we basically do our fundamental job of being good investors brings ESG to the forefront.
Sheldon?
Yeah, we have, we have a lot of control before we make the investment, and, you know, we, we take a really rigorous look at the environmental aspects, the ESG aspects, before we make an investment. And there are certainly investments that, on its face, looked appealing from a risk-return, that sort of thing, that we decided we just weren't comfortable with some element of the, of the ESG components.
And so that... But then I think what your question is really getting at was the more... The, you know, after you have the asset, yeah, you're not operating it, so you wanna be aligned with the right people, the right management teams. They can change.
There is moral suasion possible, where you can, like, kind of, you know, as you're doing site visits, you have experienced people that see lots of different mines. They can make, you know, little value-added points, and a lot of times operators are very receptive. We've also tried to partner with our operators, where we say, like, for example, at RB Plat, we fund scholarship programs to send people that live in the near mine community at RB Plat in South Africa.
They can go get a university education, and it's full ride because some people can't afford... You know, given free tuition, they can't afford to, the living expenses. And that benefits the local community, it benefits the people, and also benefits the mine because they get a pool of labor that's, you know, skilled labor, good jobs.
So we try to piggyback off the local operators in places like that as well.
Great. That's all the time we have. Thanks again for joining us for the royalty panel, and thank you, Jason, Nolan, Bill, and Sheldon.
Thanks, Cosmos.