OR Royalties Inc. 2026 Q2 Earnings Call

Good morning everybody. Thank you for joining us on a busy earnings day. Please note that the news release and regulatory filings are available on our website and on EDGAR and SEDAR plus. If you're logging into the webcast, we will advance the slides for today's presentation, which is also available in the investor section of our website. Please also note there are forward-looking statements in this presentation from which actual results may differ, and that all amounts presented and discussed will be in US dollars unless otherwise noted. I'm joined on the call this morning by Fred Ruel, the company's Chief Financial Officer, VP Finance, amongst others, as indicated on slide three. Fred will take you through the financial results in a few minutes. Three things to take away from the second quarter. First, our portfolio did its job.

Revenues of $97.8 million and operating cash flow of $83.2 million were both up 62% over the second quarter of last year on a 5% increase in gold equivalent ounces. That spread, five points of GEO growth producing 62 points of cash flow growth, is the whole argument for this business model. $0.968 of every revenue dollar converted to cash margin this quarter, which is the best in the sector. Also, net earnings were up 94% to $0.33 per share. Second, capital. We closed on the Gold Fields royalty portfolio and the Spring Valley acquisitions, $335 million in total, funded largely from our revolver, which stood at $215 million drawn at quarter end. In July, we closed the Murray Brook Stream as well. The second half's job is straightforward, continue to seek accretive opportunities for our owners. Third, guidance. First half deliveries were 43,497 gold equivalent ounces, which were up 12% over the first half of 2025 and has us comfortably on track for our 80,000-90,000 GEO range for 2026.

I want to spend a minute on why that remains true after the news at Canadian Malartic. As most of you are aware, on July 1st, a rock mass movement occurred along the north wall of the Barnat open pit at Canadian Malartic. Nobody was hurt, and as Agnico described on its second quarter call last week, its monitoring systems were tracking the wall and mining in the area had already been suspended as a precaution. The systems worked exactly as designed. Here is the updated picture from that call. Roughly 1 million tons of moved material will remain in place.

Agnico will spend the third quarter building safety berms and access roads, with mining in the affected area expected to resume in the fourth quarter. In total, approximately 370,000 ounces of gold are now considered inaccessible over the next three years, 60,000-80,000 ounces in the second half of 2026, and up to roughly 150,000 ounces in each of 2027 and 2028. Agnico now expects full year production toward the lower end of its guidance range at Canadian Malartic, supplementing mill feed from low grade stockpiles in the meantime. Most of you would have already updated your models for this event, but I will walk you through our math. Applying 5% to those figures means roughly 3,500 fewer GEOs to OR in 2026, and up to roughly 7,500 fewer GEOs in each of 2027 and 2028. Call it 18,500 gold equivalent ounces over three years.

This, of course, would be before any mitigation or recovery activities Agnico undertakes. Three things don't change because of this. Our 2026 guidance of 80,000-90,000 GEO stands. Our 2030 outlook of 120,000-135,000 GEOs is unaffected because Barnat was always scheduled to be mined out by 2028 or 2029. In Odyssey, the future of Canadian Malartic is untouched. It set a quarterly production record of 28,800 ounces. The first phase of shaft number one sinking was completed in July at a depth of 1,586 meters, and first shaft production remains on schedule for the second quarter of 2027. Agnico was clear on its call that its journey to 1 million ounces at Canadian Malartic by the early 2030s remain unchanged.

I'd also note on a more somber subject that Canadian Malartic's second quarter included a six-day mill shutdown following a fatal accident in April. Our thoughts remain with the family and colleagues affected, and we fully support Agnico's position that nothing at the operation matters more than the safety of its people. Two smaller items also moved against us. At CSA, concentrates sat on site at quarter end because of transport logistics, deferring some silver and copper GEOs into the second half. Harmony expects inventories to normalize over the balance of the year. Mantos Blancos delivered fewer GEOs than in the first quarter, which we had flagged last quarter as silver grades were front-end loaded this year. Net of all this, we now expect the second half to be modestly lighter than the first.

Barnat takes ounces out. The ramp-ups at Namdini, San Gabriel, Dalgaranga, CB, and CSA put some back. Scoring ourselves against what we previously committed to, the 2026 guidance is on track, the 2030 outlook intact, and it still excludes any GEOs from the additional Spring Valley coverage or the Murray Brook transactions, both of which now have closed. That outlook has contingency built in. One more thing on Malartic, because it frames how we think about everything we own. Agnico's update on the path to 1 million ounces is now expected in November. Their chief operating officer has publicly said that even at an expanded production rate, the life of mine could still extend out to 2060. Before Gene Cernan climbed off the moon in 1972, who was the last man to walk on it, he wrote his daughter's initials in lunar dust.

There's no atmosphere up there, they're still there today. A royalty and a great ore body works the same way. Mine plans get revised, pit walls get redesigned, operators may come and go. The ore body and a royalty on it doesn't move. The announcement of the wall movement changes our near-term GEOs, but it changes nothing about what we own and our shareholders as well. Briefly across the rest of the portfolio, we received the first royalty payment from Dalgaranga this quarter. At Namdini, our increased 2% royalty is becoming a significant contributor as the ramp-up hits its stride. Our portfolio currently boasts 23 producing assets, and the 24th producing asset should be Cabral Gold's Cuiú project in Brazil, with commissioning still on schedule for the fourth quarter. Slide eight lists the catalysts ahead on assets representing over half our NAV.

The three I'd watch out are Harmony's fiscal 2027 guidance expected this month with an updated mineral resource estimate and life of mine plan to follow later in the year. Also, first gold at Amulsar in September, where a stream should begin accruing from first production ahead of its first payments expected in 2028, which is largely dependent on commodity price and the pace for which the operator, United Gold, pays back their loan. Finally, an update from Agnico on Canadian Malartic's future, now expected, as I said earlier, to be coming in November. On new business, the pipeline is active and our criteria have not moved. No non-dilutive deals. We can afford that selectivity because our growth through 2030 is already bought and paid for with zero contingent capital. Beyond that, we don't comment on transactions until they're signed.

I'd like to hand it over to Fred to talk about our financial results.

Thank you, Jason. Good morning, everyone. Revenues for the quarter were $97.8 million, up from $60.4 million a year ago, a 62% growth on 5% more GEOs, driven by realized prices of $4,504 per ounce of gold and $17 per ounce of silver. Cash margin was $94.7 million or 96.8% of revenues, up from $57.8 million or 95.8% last year. Royalties, which carry essentially no cost, contributed $62.8 million of revenue. Streams contributed $35 million. Net earnings were $61.4 million or $0.33 per basic share against $0.17 a year ago. Adjusted earnings were $60.5 million or $0.32 per share, up 78%. Cash flow from operations was $83.2 million, up 62%, $0.44 per share against $0.27 last year. That per share line is the one we manage the business to.

Turning to the balance sheet, we ended June with $75.6 million of cash and $215 million drawn on the credit facility for a net debt position of $139 million. The draw funded the Gold Fields in Spring Valley closings, and we also repaid $18 million on the credit facility during the quarter. On returns to shareholders, the board raised the quarterly dividend by 18.2% to $0.065 per share in May. First paid on July 15th. Our 47th consecutive quarterly dividend with approximately $300 million returned to shareholders through dividends to date. A further $0.065 dividend has been declared, payable October 15th. Under the normal course issuer bid, we repurchased over 225,000 shares for $8 million during the quarter, and a further approximately 1 million shares for $29.1 million in July.