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Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q1 2022 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, May 12, 2022, at 8 A.M. Eastern Time. Today on the call, we have Mr. Sandeep Singh, President and Chief Executive Officer and Mr. Frederic Ruel, Chief Financial Officer and Vice President, Finance. I would now like to turn the meeting over to your host for today's call, Mr. Sandeep Singh. [Foreign Language]
Thanks very much, operator, and good morning, everybody. Thanks for being with us on a busy day, following a busy week. So I appreciate your time. We'll go through a short presentation, Fred and I and we'll certainly open it up for questions. Just note that I'll be referring to the presentation that's now on the website. So jumping in on Slide 3, in terms of highlights for the quarter. We had obviously pre-released our GEOs at 18,250 for the quarter. With that, comes a lot of information given our business model, but happy to fill in the gaps for you this morning. That excludes GEOs from the Renard stream as you've probably gotten used to us doing for the last significant period of time. Happy to report that hopefully, that's the last time we have to say that with the Renard stream having been reactivated over the course of the quarter as we had previously guided. So I think that's a very important step for us. A combination of the mine doing better and the diamond market having recovered. So that's a very good news for us, not only has the stream been reactivated, but the last half of the working cap facility has also been repaid to us and the other lenders to our account that was CAD 3.94 million. So happy with the progress there. Revenues from the royalties and streaming segment just over $50 million. Operating cash flow as well of just over $40 million. So we continue to benefit from our business model with the highest cash margins in our history. Last quarter, obviously, based on the gold price, hasn't been quite strong. Margin at 94%, again, continues to track exactly towards our guidance. Adjusted earnings, again, from that segment of $0.15 per share. And over the course of the quarter, we completed the bought deal financing that you're all well aware of. Timing those things is always challenging. Obviously, we were busy on the corporate development side, on the new acquisition side in Q1, and that's largely what that funding is meant to go towards. Always a challenge, timing those types of things, but certainly happy in the current market with the volatility that we're seeing that the balance sheet has been strengthened as a result. We also paid a dividend of $0.055 on March 31 and we announced this morning the same for July 15 for the quarter ending on June 30. In terms of those transactions in Q1, obviously, Tintic and CSA what I was referring to. There'll be a couple of slides later on where I can update you on the timing for both those deals. But simply put, still tracking towards end of Q2 for Tintic and we've said second half for CSA, but certainly hopeful that, that will be in the third quarter. In terms of things subsequent to Q1, we did as opposed to sitting on the cash, waiting to make those payments. We did choose to repay the amounts outstanding on our revolver as opposed to, as I said, paying those interest payments. The Renard stream has been reactivated as I pointed out and we published our expected ESG report, which we're quite proud of the progress on that side as well as our inaugural asset handbook. So trying to catch-up on the disclosure side of what is a very important asset base and an important thing that we're doing on the ESG side as well. If you skip to Slide 4, it is a slide or some version of the slide you've seen from us very many times. I believe most people on this call know the strength of our portfolio when it comes to the asset quality, the geographic focus, the precious metal focus and the quality of the partners that we're involved with, but it's always worth highlighting. I think, overall, when you take a look at the market that we're in at the transactions that are being done, I think you look back at this portfolio, you understand the replacement value of it, the embedded growth within it that is all kind of taking shape as we speak. On Slide 5, that pieces I'm referring to continues to strengthen. Overall, I think it's fair to say that Q1 was a little bit lighter. We expected that. That's baked into our guidance. So we're buying from that perspective and we do expect a strong strengthening kind of year quarter-by-quarter and certainly a very strong second half. The reason for that in Q1 was obviously, I think, fairly well known as the seasonality of Eagle, which we have talked about, the tie-in of the expansion of Mantos, so essentially kind of taking your stuff, you put off the gas a little bit before you step on it again and other ramp-ups at a couple of assets. So that's the rationale behind a steeping curve of GEOs, if you will, over the course of the year. But I think it's also fair to say that if you're looking at the whole sector, if you're watching the reporting over the course of Q1, I think the sector as a whole had kind of a little bit of a pullback in Q1 for a variety of reasons; labor, COVID, absenteeism, supply chain issues. So I think that's a pretty fair statement pretty broadly. For us, the good news is it's just a shift from one quarter to the other. We don't get the cost impacts as our operating partners do or the operating sector does. So certainly, I think that inflation protection and that business model protection that we offer is proving itself out given the volatility that we're seeing out there in some of the reporting. Over to Slide 6. I mentioned earlier, we do expect a strong second half of the year in terms of 2022. And then over the long term, I would say that our growth assets continue to steadily advance towards these projections. So this is an important slide for us. We've put out, as you all know, our inaugural 5-year outlook in February and try to put a focus for the market with is a pretty deep portfolio, a lot of moving pieces to it, some that are better known than others.
But when you take a look back and you look at 10% or double-digit CAGR growth over the next 5 years and then you look at some of the assets that are in this arrow that aren't factored into that 5-year outlook, but that are undergoing pretty material catalysts as well, maybe the time line a little bit more pay-off right now. We certainly expect the visibility to grow 5 years is a long time. So when you take that all together, it's an incredible amount of organic growth. And to it, when we can, and we can do things like 10 seconds CSA, we're happy to add external growth to that, but this is what's going to be fueling the company for the rest of this decade. On top of it already in there factored in terms of those assets, those assets continue to strengthen, as you see on Slide 7. We've been talking about 1 million meters drilled on our properties over the last 4 years. In 2021, that was 1.4 million meters. Despite a period where I think everyone is scrambling to access rigs or ground, our partners have always been putting good work in and that work is only intensified last year and we see that continuing on into this year.
And then even more important, the work is paying off. And you see that on the right-hand side here. So geographically added to our asset handbook over the last couple of months and we've had increases on attributable ounces. So worth pointing out that these are kind of apples-to-apples. Royalties are easy when we have streams. We deduct the transfer prices so that we can compare them kind of on MSR equivalent basis, if you will. So growth in reserves, growth in M&I, growth in inferred across all categories. And we can't sum these up. You certainly can if you want to, but these are ounces that don't have any extraction costs associated with them for us. So we expect that to continue and are fully upside that we're benefiting from across our entire portfolio [indiscernible]. On to Slides 8 and 9. As we mentioned, those 2 transactions, really nothing changed on both, just waiting for both to complete. Both were slightly more complicated transactions than the average. So hence longer time period I think was the acquisition by ODV of 2 private companies. So a lot of kind of paperwork, but our understanding is that's going well. There's a lot of moving pieces to those transactions, the acquisition and NYSE listing for ODV and the financing closing, but that's all tracking well or being completed by the second half -- sorry, in the second quarter, and we look forward to adding those outfits to our portfolio in the second half of the year. We'll find out here in the near term where within that range of $20 million to $40 million ODV chooses to right-size that stream. And on the CSA side, slightly longer because of a destocking process that Metals Acquisition Corp. needs to go through. So they're working methodically through that process. But I don't recall if we've had a chance to talk to everybody about this transaction, this is another one. Tintic, we were very pleased that came through our network. This is another one that we bought outside of participating in the process and paying the most that came through relationships that we had and the funding acquirer, but we're quite happy to be associated with and this hit all of our criteria in terms of production now, geography, upside potential, long life, getting longer throughput of upside potential. So really hit all of our criteria, and we'll be very happy when Metals Acquisition Corp. complete that transaction on the silver side, and then there's also still a potential that may tap us on the shoulder with some of the exposure as well. So that's a bit of a high-level update. I'll pass it off to Fred to give you a little bit more color on the quarter itself, and then we'll return to happy to answer any questions you might have.
Thank you, Sandeep. [Foreign Language] Good morning, everyone. Thank you for joining us today. As you can see on Page 10 of the presentation, we recorded revenues of $50.7 million this quarter from royalties and streams compared to $49 million in Q1 of 2021. Cash flows from operating activities were $23.6 million on a consolidated basis. For the royalties and streams segment alone, cash flows from operations reached $40.5 million compared to $27 million in Q1 of last year. On Page 11, we present a summary of our net earnings and adjusted earnings, The consolidated net earnings to Osisko shareholders was $200,000 compared to net earnings of $10.6 million or $0.06 per share in Q1 2021. The lower consolidated net earnings was mostly due to mining operating expenses incurred by Osisko Development in Q1 2022. On a consolidated basis, adjusted earnings were $2.2 million or $0.01 per share, comprised of adjusted earnings of $24.8 million or $0.15 per share from the royalties and streams segment and an adjusted loss of $22.7 million from Osisko development or $0.14 per share. On Page 12, we have a summary of our quarterly results with additional details for the royalties and streams segment including as Sandeep noted, 18,251 GEOs in Q1, gross profit of $36.2 million compared to $34.6 million last year and operating cash flows of $40.5 million that were generated in Q1 from our royalty and streaming business from a record quarterly cash margin of $47.5 million. If we go on Page 13, we present a breakdown of our cash margin. The cash margin on our royalties reached $25 million and the cash margin on our streams amounted to $12.6 million for, as I said, a quarterly record of $47.5 million. On Page 14, we showed the progression of the dividends paid to our shareholders since the creation of Osisko Gold Royalties. At the end of Q1, over $194 million have been returned to our shareholders by dividends, in addition to $86 million that was used to repurchase a total of 6.7 million shares under our NCIB program. And finally, on Page 15, you will find a summary of our financial position. Our consolidated cash balance was $449 million at the end of Q1, including $293 million for Osisko Gold Royalties and $57 million for Osisko Development. The Osisko Gold Royalties held investments, adding a value of $250 million at the end of March, in addition to our investment in Osisko Development, which was valued at over $400 million. Our debt was stable at $407 million at the end of Q1. In April, we have repaid the outstanding balance under our credit facility. As of today, we have $650 million available under our credit facility, including the accordion of $100 million. We have also acquired in Q1, 250,000 shares under our NCIB program for $4.9 million. So we have continued to benefit from strong commodity prices in Q1 which allowed us to generate once again, strong cash margins and operating cash flows from our royalty and stream interest. I will now turn the call back to Sandeep for questions.
Operator, feel free to open the lines, please.
[Operator Instructions] Your first question comes from Trevor Turnbull from Scotiabank. Please go ahead.
I guess my first question was about the CSA transaction. You mentioned the potential timing of closing of that deal later this year. I just wondered if you had a sense of when you might know if Metals Acquisition Corp would make a decision as to whether or not they would take advantage of that additional copper stream.
Yes. Look, I think that will come into focus in the nearer term. Obviously for these factors, there's hoops you need to jump through. But the intent of that was always -- and that copper stream needs to be mutually agreeable to us and to them. The silver part was binding, the copper was not. But we expect I would say, over the next several weeks or months their funding package to come into focus. They have to then obviously describe that in their disclosure documents to go through the de-SPACing process. So I would say over that time period, we and they should know if that's something they want to avail themselves of and if it's something we want to pursue. So roughly, I think that's a fair timeline.
Okay. And then the other question I had is strategic and related to Sandstorm and Nomad's merger. Consolidation clearly makes sense for Sandstorm and its strategy, and we've seen other smaller royalty companies feel consolidation also makes sense for them. Given your organic growth and the opportunities in your pipeline, it seems that it doesn't make sense to you really think much about consolidation for Osisko right now. But is there a scenario down the road where you think that might be part of your toolkit going forward?
Yes. Look, there's still a lot there [indiscernible], but I'll try to answer it. I'd say, look, I don't disagree with your conclusion let's put it that way. I'd say our prime focus and you've heard me say this over and over again is to unlock the value of our current portfolio. It's incredibly valuable and it's not trading where we really wanted to when we were close. So that's job one. We've all said frankly up there were a lot of companies created over 2020, 2021 or part of 2021 in the royalties sector. We didn't think there was enough, especially on the smaller early-stage side for those companies to necessarily thrive. So I think some consolidation is warranted and we've been happy to kind of watch it with interest given that we're in the sector, but nothing more. So I think that's normal and it's healthy. And then the royalty sector in particular, there's no such thing as amassing too many royalties and streams. It's not like an operating company eventually becomes too big that you can certainly pile-up royalty checks. So I think all that makes sense. We'll stay focused on our business overall when we just think about growth, if I can zoom out a little bit Trevor, we'll grow when it makes sense for us. And again, you've heard me for few months say that we didn't like the look and feel of transactions out there. So we took a hiatus and we focused on our own assets. And then over the course of Q1 with Tintic and CSA, we found transactions that we got off the beaten path, if you will, and we've got good deals on and we acted on them. So that's how we'll continue to conduct ourselves. And I think that organic growth that we have that you highlighted, that's pretty special. On top of trying to do things like Tintic and CSA when we see them makes for a pretty important and pretty special pipeline.
[Operator Instructions] There are no further questions at this time. I will turn the call back over to the presenters for closing remarks.
Okay. Thank you, Operator and thanks for taking the time. Thanks for taking it easier on us than usual because my voice is not in best shape today. But look, we're always available if there are follow-up questions. I do realize it's a busy week. There's a lot of -- you folks are catching up on. So if you need anything else from us, we're always available. But otherwise, I sum it up by saying pretty standard quarter for us and looking forward to the ounces starting to pile up. Very happy to have sold one of our problem, sold an asset in Renard. We work on the other diligently. So I think there's a lot of good things happening in the portfolio and we certainly look forward to closing those deals as well that we've announced, hopefully by the time we next speak. So all the best and have a great rest of the week. Thank you, Operator.
This concludes today's conference call. You may now disconnect.