Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q2 2021 Results Conference Call. After the presentation, we will conduct a question-and-answer session. [Operator Instructions]. Please note that today's conference is being recorded, today, August 10, 2021, at 10:00 AM Eastern Time. Today on the call, we have Mr. Sandeep Singh, President and Chief Executive Officer; and Mr. Frédéric 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. [Foreign Language]

Great. Thanks very much, operator. And thanks to everyone for joining us on our Q2 conference call. It’s Sandeep Singh speaking. Please note that I'm working off an IR deck that's on our website, so you can pick it up under the Presentation section. And also, please note that I'll be making forward-looking statements or we will be making forward-looking statements today. So please be mindful of that. Switching over to Slide 3, entitled Q2 Highlights. First and foremost, a very strong quarter for us, another in a row, frankly, the assets continue to perform exceptionally well, the producing assets. And we look forward to a strong second half of the year as well as we do not expect that theme to change for us. In fact, hopefully the opposite. So our core assets continuing to strengthen. So really good quarter. Very happy with it, we earned, as you all know, just over 20,000 ounces of GEOs, gold equivalent ounces for the quarter that sets us up really nicely just above 40,000 GEOs for the past year. You'll all know that our guidance for the year remains unchanged for the time being at 70,000 to 82,000 ounces. So striving right at the midpoint for the time being and as you've heard me say most of you, I'm sure, we do expect a strong second half as we have least one core asset ramping up, which is the Eagle mine, I'll talk about later. And other small -- this one other small asset that will kick into production and start to contribute as well. So well setup in the first half of the year, looking forward to the second. Also in Q2, record revenues and cash flows from the royalty/stream business. So again, good ounce deliveries coming alongside strong commodity prices.…

Thanks a lot, Fred. So look, again, the risk of repeating myself, another very good quarter, a consistent quarter from a diversified asset base that is really performing well. And frankly, our growth assets are coming along, progressing well. I think they're still largely discounted or heavily discounted, but set us up well for the coming years. So with that, happy to -- operator, see if there are any questions.

[Operator Instructions]. [Foreign Language]. Your first question will come from Josh Wolfson from RBC Capital Markets.

First question I had was on Mantos. The construction progress, at least on a percentage completion basis seems to be tracking up still fairly significantly, 92% you mentioned this quarter. So it would appear to be completed, at least from a construction basis in the third quarter. I'm wondering what the difference is between construction completion and when that ramp up actually happens? And then should we expect maybe a week or third or fourth or first quarter perhaps as that commissioning process starts?

Yes. No, it's a good question, Josh, and I think you're right. I think that the difference is kind of mechanical construction completion, if you will. That's the 92% level. When we talk about time lines for us, that's not what we're focused on. We factor in the lag that they've related to us in terms of when ounces are supposed to start coming out or tonnes are supposed to start coming out more so. So I would hope that in Q1, we can start to see some increase in production, but maybe to be more conservative, hope for Q2 that impacts that -- those ounces ramping up. Either way, I think it's -- for us, it's right around the corner, and I would commend them for the fact that COVID anywhere is not that easy. COVID in Chile, not been easy. So to keep things on track as well as they have, I think, is positive for us.

Okay. And then should we expect to see lower deliveries in the second half of the year from that asset? I know, obviously, first half of the year even without let's say potentially a small contribution from San Antonio, Santana and the upside from Eagle, you're tracking towards the higher end of the guidance. So should we expect the company to be more within guidance if in fact Mantos is a bit lower?

Look, I think Mantos will -- I mean, there's always variability mine by mine, again, especially when you're the by-product as opposed to the main commodity. But I think, overall, we've been exceptionally happy with Mantos in the first half of the year. We don't necessarily see any reason in the mine plan, why that should change in the second half of the year. So, I think our assets are barring that normal variability that I talked to you about. So, I think we're happy with that core asset, it's doing exceptionally well for us. And our hope is with Eagle ounces coming in, maybe we can start tracking a little bit better than the midpoint, frankly.

Another question on the credit line increase. When the convertible with [IQ] was due earlier this year, you guys drew down on the credit line, and there's another convert that's due next year. Should we be thinking about this credit line used or maybe, obviously, there's flexibility here, but potentially use towards repayment of that facility? Or is this potentially for transactions that you see on the Horizon materializing?

Look, I think it can be a bit of everything. Look our hope is that, that's converted in the money come the end of next year. It was not 1.5 years, and volatility has worked against us in the last 2 training sessions they can work for us in the future, and we certainly think there's a lot of value in the asset base to unlock above and beyond that. But we don't plan that way, clearly. So yes, that's certainly a fallback in our mind. It's certainly a fallback for the convert at the end in the next year. If that happened, that would just be a shifting of debt from one place to another at a lower cost of capital. We pay a 4% coupon on those converts. Currently, our credit facility in the 2% to 2.5% range. So that's certainly an option that we've kind of crafted for ourselves. A lot will depend on what happens between now and then, Josh. We've got cash. We've got cash flow. We've got significant investments. And then we'll see what we choose to do on the growth side, but that's certainly something we'll continue to kind of manage depending on how we go in the next 1.5 years. But yes, absolutely, we can provide a fallback for that convert. And that was one of -- that was part of the thinking there.

Great. And then last question, I wasn't able to dial-in for the ODEV call. Is there any more information on the timing difference for the feasibility study now with Cariboo?

Yes. Sorry, I hope I alluded to it earlier, but I'll do it again. So time lines, I think I mentioned that the resource update into a kind of reserve is going to be a bit delayed. They were behind on drilling. They're now catching up. And more importantly, the assays are catching up. Obviously, you don't want to be drilling blind all the time. You'd like to be benefiting from the results that you've already spent money on. So working towards the resource update in the second half of this year that then pushes the feasibility into H1 next year conservatively. Hopefully, it can be Q1. And I think that's what Sean said this morning as well. So feasibility into early next year, but the permitting time line remains unchanged as the EA, the final EA was submitted in very late July, and that's really what's driving the permitting time frame at this point, not the feasibility.

Your next question comes from Ralph Profiti from Eight Capital.

Just wondering if you've had some preliminary discussions or sort of the relationship with G Mining Ventures as it relates to TZ? And what are sort of the next steps from them beyond the updated feasibility study. Any thoughts on when this could come into cash flow positive on my numbers, it's kind of one of the more robust IRRs in the portfolio as it pertains to discounting it at the moment of commercial production. But just wondering if you can give me more color on actually turning that into cash flow.

Yes, I'm not sure, I can't, I certainly can't give you their view because we've not talked about it. Obviously, there aren't too many construction groups that are credible in Canada, but certainly not in Quebec. So we know them well. The group knows them well. And we saw the formation of G Mining Ventures that is earlier this year, I guess it was. So we've been looking for them to see what they would do next, very happy. It coincides with an asset that we picked up a royalty on. I think what I'd say is what we saw there was an asset worth building. Didn't know exactly where, when and how, obviously, it was non-core to Eldorado for reasons. They've got other things they can do that they're focused on, and that's fair enough, but it was an asset with building. And that's what we saw, and we're happy, a group G Mining is taking it over. We know them to be fantastic builders, not the over promotional type. They just get down to the business, and that will serve us well on this asset. It puts that down with a permitted construction ready asset. They've got backing from Sprott and other support of shareholders. So they're certainly capable of financing it. And we do expect them to fast track that asset. So looking forward to, frankly, they're hearing the update from myself.

Okay. Yes, yes. And it was a small transaction, but it's interesting to see Osisko Gold Royalties do something in the carbon streaming space. I'm just wondering, when you look at that opportunity and the body of work that you've done, is that -- are you taking the approach that is sort of complementary to the ESG strategy? Or do you think from a, say, an IRR perspective, carbon streaming can actually compete with precious metal streams for investment dollars?

It's both, frankly. We clearly are focused on doing things from the ESG perspective. When we looked at that and we started with a small investment, still a small investment, but we bought ourselves the right to participate in 20% of the new other transactions. So for us, it was a front-row seat to a new business line, it's streaming. So it fits with ours, we understand it well. Obviously, the assets are different. So we needed -- we're happy to rely on that team to those opportunities. We're kind of learning sidecar with them as they go. But in our portfolio, Ralph, we can't reduce our carbon footprint. We're reliant on our partners to do that for us. And certainly, we've chosen some phenomenal partners in great places, good assets that are doing just that. So for us, this is something proactive we can do to be part of that net-zero push. So we think it makes a ton of sense but it's also financially driven. The IRRs that we're seeing that can come out of that business. Our mid-teens, kind of 15% type IRR deals are possible. I don't think we're seeing a lot of those in the gold space right now. So I think there's this potential there. And frankly, that's with a flat view on carbon pricing, which I think is the easiest thing to say that I don't know what's happening in the future, but I certainly expect the cost of emitting carbon to increase and hence, the price of these carbon credits to grow as well, and that could end up being exponential, frankly. So small dollars, front-row seat, happy with the investment, liking the deals they’re doing so far, we'll likely take our 20% piece. Then we have the time to decide on that, but liking what they're doing, and it's both financially driven and ESG driven. If we do 1 or 2 of these, deploy a little bit of capital based on our small footprint already, we'll be net-zero, not in 2040 or 2050, but almost immediately. And I don't just mean the office space, I mean our indirect exposure of our partners. So that's how we're looking at it.

Your next question comes from Cosmos Chiu from CIBC.

Maybe my first question is on a royalty that you did not mention. Falco. I think there's been recent positive development at Falco Resources. They're raising money, $10 million, clearly, not enough for the entire CapEx. But I also see that OR is advancing $10 million as well on the silver stream. So maybe can you talk about how this kind of fits into the growth profile of your portfolio? And maybe talk about the recent agreement in principle at Glencore. And also, I think they're expecting some kind of OLIA by Q3 as well? Sandeep?

Yes, that's a great question, Cosmos. And I hear you got me in trouble. I should have talked about Falco. I run the risk of getting beaten up by Luc. And there was good progress made there, frankly. So I'm remiss that I didn't bring it up. So I think, first and foremost, the term sheet that they got into on the OLIA, the acronym, the operating license, as you point out, was a big catalyst, a significant catalyst, something that we've been waiting for quite a while. I think a lot of people have been waiting for quite a while, certainly, the Falco team. That term sheet is being turned into a full agreement, and that's happening as we speak. I forget exactly when Luc said he was guiding for that, but it's pretty soon, in this quarter. So that's a huge step forward. The pathway, I think, then becomes clearer, happy that they’ve tucked in a little bit of financing from an equity perspective obviously, just to move the asset forward to development CapEx, basically the permitting and development CapEx. We've chipped in -- I didn't mention it because it was kind of a non-event, I guess, in my mind. We owe them $20 million in the near term-based on that agreement being finalized. We're very happy with the progress they've already made on it. So prefunded $10 million of it, we’d be happy to do the next $10 million when the agreement is finalized. And then the rest of our capital comes in when it's fully permitted and on financing of the full project. So good advancement. I know it's something that people have been waiting for, for quite some time. It was not easy work. Obviously, a lot of complexity there. Glencore is a massive group…

Yes, yes, it did. Maybe switching gears a little bit. As you mentioned, it's -- I'm glad to see that as well, a 10% increase in the dividend. Sandeep, I'm just trying to think a step back. Are you targeting -- in terms of capital return, are you targeting any kind of percentage of your cash flow that you might want to return to investors? Is that how you look at potential further increases in dividend? Is that why you decided on the current increase of 10% on the current dividend?

Mainly just throwing darts at the Board, most of it. That's good. So obviously, we have a view internally at the amount of cash flow we want to distribute to investors. Historically, I think you've heard me say that at times, we were in the mid-30s, got as high as 40% payout ratio this year with the previous of the bump and based on commodity price assumptions and ounces for this year, we were in the low 20s. So we bumped it up importantly, there's still room to go in the future. Obviously, we're a little skittish based on the last week here, but felt it was -- the business is still really strong, even at much lower gold prices. This is a very sustainable dividend. But any time you change it, you want to make sure it's forever because that's how we think about these things. And certainly, our business is able to do that. So hopefully, people see as whether there is a significant sign of confidence in our business, the one that's working exceptionally well. And as those ounces start to add to the tally, distributing cash flow back to shareholders will continue to be important for us. So we haven't communicated a payout ratio or a mechanism for instance, but we certainly think it that way internally and that's the byproduct, the increase yesterday was the byproduct of that.

And then that leads into my last question here, Sandeep. In the broader picture of capital allocation, as you talked about, clearly, it's been a bit of a seller's market. However, with the recent malaise in the commodity prices, are you seeing better opportunities in terms of potential acquisitions? And then on that as well, I know you have different strategies. There's the incubator model. I don't think you mentioned that word today, but I think it's still there. And then there's also the more kind of traditional royalty acquisitions. Where are you seeing more of these opportunities?

Look, I think there's opportunities -- I think there’s 2 questions. There are opportunities across the board. Certainly, anyone with a royalty or royalty portfolio has been either brought it to market or been taking to bring it to market or has been inbound by all of us, most likely. So I think positively -- and look, I was maybe one of the first to say it was a seller's market last year and everyone else is saying the opposite. I think that you can judge what it looked like. I think last year, when the gold price was running so hard in the first half of the year, that dynamic trailed on into the end of the year. When you have gold prices more range bound and you have the risks are down as well as ups, I think the dynamic is a little bit better this year in terms of getting deals done for us on the royalty and streaming side or for everyone on the royalty and streaming side. So I actually see the pipeline looking better than it did last year. So we're optimistic about it, frankly. In terms of the incubator model or the accelerated model is still part of our business, an important part of our business, it's -- what it generates for us is the early stage. So it continues to kind of -- for small dollar investments, which we think are going to be -- give us 5 and 10 Baggers. It continues to populate the back end of the portfolio and see those things kind of evolve and mature. And it was an important part -- a more important part of the business than we were kind of starting out and needing to kind of flush out a portfolio. We now have one that's robust across the entire spectrum in terms of producing assets, near-term growth assets and longer-dated assets. So yes, I think we're continuing on that path. If we see good value there, we'll take it. But obviously, the focus is for all of us on nearer-term assets, things that can hit the bottom line sooner. And that's what we're out there looking for. If we don't do anything, we're fortunate but there was a number of companies that needed to catch up on growth spending. We weren't one of them. We had done quite a bit of it, leading up to 2020. So that growth is already embedded in the company. We can grow double-digits for several years based on not spending another dollar. But thankfully, we are -- we have found some smart things to invest in. And going forward, I think that will continue to be the case.

[Operator Instructions]. Your next question comes from Kerry Smith from Hayward Securities.

Sandeep, could you maybe give me a bit of an update on what's happening at Renard. The diamond prices seem to have strengthened. And I'm just wondering what the strategy is there now?

Sure. Look, the strategy remains the same. It's an asset that we want to kind of work back our way to a positive paying stream on. That's the end goal. That hasn't changed. You're right, and I think you would have picked us up in our MD&A that the pricing has continued to firm up not just for Renard but the diamond sector overall. Renard, pre-COVID -- pre-COVID in the $70 per carat range consistently and dipped down even lower, obviously, in the worst of the COVID when people couldn’t travel for sales, et cetera. We saw that firm up to kind of the $80 per carat level almost immediately post-COVID and then stay there for a little while, and now we've seen another couple of bumps in the last sales, culminating in the last sale at $93.50 a carat in the U.S. So happy with that uptick in prices. That's what that mine needs to be profitable. And there's still silver streams, still some debt there, but happy that they're starting to make some cash flow and can start to work their way out of that situation. So positive momentum. Need a little bit more, I would suspect, but happy with that so far. And then thereafter, it's a question of where is the right -- what is the right structure for that asset to reside in. We're not a natural owner of it. We just want to get back and getting a paid stream. So that's something we continue to work on in terms of finding the right solution for.

And at $93.50 a carat, so call it $100 carat U.S., would that be an adequate long-term price to reinstate the stream?

Yes. Look, we're having those discussions as we speak. The good news is they're making money. Is it enough? Probably not just yet, but they're making money at $93.50. And we've committed to deferring our stream proceeds to -- I think it's April of 2022. So we're having those discussions as we speak. But certainly, happy with where things have gone and don't want to get too far ahead of myself because we've taken there on the chin for that asset. Rather it’d be a positive when it -- well and truly is a positive, but really happy with the progress it's being made so far.

Your next question comes from Puneet Singh from IA Capital Markets.

Just a quick one for me. You're clearly still trading at a discount to your peers. With the volatility in the gold market, how are you looking at the NCIB for the rest of the year?

Hi, Puneet. Yes, no problem. Yes. Look, we still think we're cheap as well. And I'll just say that, I think we certainly have that view that we've made good progress. The stock has done well to kind of get to the levels it was. We saw a little bit of profit taking, which is normal when you're kind of hitting your 52-week and all-time highs. But clearly, the last week has been tough on all of us, especially tough on us. So we see a ton of value in our stock. We've obviously in a blackout today and have been for a liter a time, but we do like our stock. So we've said we'll look at the NCIB when the stock gets really cheap. We didn't use it in Q2, the stock was doing quite nicely. So we didn't chase it up. But in situations like we're in now, you might expect us to be more active on that between the NCIB and the dividend. We certainly have and will continue to get cash flow back or get cash back to shareholders.

We have no further questions. I would now like to turn the call back over to Mr. Sandeep Singh for any closing remarks.

Great. Thanks, operator. Well look, thanks for joining us. I think we've gone through a pretty good update, so I won't keep you on for longer, but really happy with where things are going and look forward to a strong second half of the year and look forward to talking to you folks about it. So thanks for your time. And have a great rest of your day.

This concludes today's call. You may now disconnect.