Goal: To Build the Best Gold Company
Transcript of Goal: To Build the Best Gold Company
Goal: To Build the Best Gold Company
NOVEMBER 2016
Non-Commercial Individual Reference Use Only
• The entire contents of this presentation are protected by copyright and may be used and copied for non-commercial, individual reference only. Any other use of the contents of this presentation is prohibited unless the user first obtains the Company’s written permission.
No Offer to Purchase Securities
• The information in this presentation is intended for use only by persons resident in jurisdictions where such use is lawful. Nothing on this presentation constitutes, and under no circumstances is to be construed as, an offer or solicitation to purchase securities of, or advertisement for, securities of the Company. The securities of the Company have not been registered under the United States Securities Act of 1933, as amended or any state securities laws.
No Warranties
• The information in this presentation is provided “as is” and without warranty of any kind. Although it is believed to be accurate as of this date, the Company disclaims all liability for any failure to update it. This presentation could include inaccuracies, typographical errors, or out-of-date information, and changes to it may be made at any time without prior notice. You are therefore advised to use this presentation at your own risk.
Forward Looking Statements
• Certain statements contained in this presentation (including information incorporated by reference) are "forward looking statements". Our forward-looking statements include, without limitation: The sensitivity of earnings, cash flows and financing to gold and other metal prices; Statements as to the projected exploration and development of certain properties, including estimates of development and other capital costs and financing plans for these projects; Estimates of future production costs and other expenses; Estimates of future capital expenditures and other cash needs, and expectations as to the funding thereof; Estimates of future costs and other liabilities for environmental matters; Estimates of reserves, and statements regarding future exploration results and reserve replacement; Statements regarding future transactions relating to portfolio management or rationalization efforts; and Estimates regarding timing of future capital expenditures and exploration, development, production or closure activities. This list is not exhaustive of the factors that may affect our business, our value as a company, and our forward looking statements. Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Such risks include, but are not limited to: the price of gold; currency fluctuations; geological and metallurgical assumptions; the results of exploration; operating performance of equipment, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions; the ability of the Company to obtain or maintain necessary financing; and other risks and hazards associated with mining exploration, development and operations. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.
Use of Information
• Any information communicated to the Company through this presentation becomes the Company’s exclusive property. the Company shall be entitled to use any such information for any purpose without restriction or compensation to any person. Such information provided by the user shall be deemed to be non-confidential.
Technical Information
• Unless otherwise indicated, the technical information presented herein has been reviewed by the Company’s Chairman, Glenn J. Mullan, P.Geo, a qualified person in accordance with National instrument 43-101 – Standards for Disclosure for Mineral Projects.
Disclaimer
2
3
$40.5 MMSecurities/Cash
NO DEBT
15 Royalties3% NSR
Odyssey North(CDN Malartic)
$91.1 MMMarket
Capitalization
GeneratingCash Flow
11.3 MM SharesBuying Back
Shares
Investment Highlights
To Build “The Best Gold Company”Corporate Philosophy
• Structure: Small Number of Shares – Not Just About Size
• Value: Meaningful Cash Flow per Share
• Gold: Keep on Balance Sheet. Continue to grow
• Buybacks: Share Count not
• Exploration: Exposure to exciting discovery
• Growth: Through Cash Flow/Creative Alternatives
4
To Become The ‘Best Gold Company’RZZ vs. Royalty Co.
*As of November 25, 2016. All performances shown in Canadian Dollars.
2015 PerformanceJan 1, 2014 – Current Performance
5
2016 - Current Performance
(31%)
(27%)
(27%)
(17%)
(9%)
7%
11%
29%
Royal Gold
Silver Wheaton
Altius
Osisko Gold Royalties
Sandstorm
Gold Spot
Franco-Nevada
Abitibi Royalties
(14%)
2%
7%
14%
27%
77%
89%
2197%
Osisko Gold Royalties
Altius
Sandstorm
Silver Wheaton
Gold Spot
Franco-Nevada
Royal Gold
Abitibi Royalties
(6%)
11%
21%
23%
36%
42%
83%
140%
Osisko Gold Royalties
Gold Spot
Franco-Nevada
Altius
Sandstorm
Silver Wheaton
Royal Gold
Abitibi Royalties
To Become The ‘Best Gold Company’RZZ vs. Small Gold Producers
2015 PerformanceJan 1, 2014 – Current Performance
6
2016 - Current Performance
(83%)
(35%)
2%
10%
20%
29%
44%
45%
Timmins Gold
Argonaut
Wesdome Gold
McEwen Mining
Richmont
Abitibi Royalties
Kirkland Lake
Klondex
*As of November 25, 2016. All performances shown in Canadian Dollars.
45%
97%
97%
109%
127%
134%
140%
149%
Kirkland Lake
Richmont
Wesdome Gold
Argonaut
Klondex
Timmins Gold
Abitibi Royalties
McEwen Mining
(61%)
(53%)
74%
174%
299%
331%
717%
2197%
Timmins Gold
Argonaut
McEwen Mining
Kirkland Lake
Klondex
Wesdome Gold
Richmont
Abitibi Royalties
About PerShare Value
Small Share Count: 11,336,243
Authorized Buyback: 566,812*
Repurchased: 77,600/Avg. Cost $3.19**
#1Building Wealth for Our Owners
*Authorized between Oct. 6, 2016 – Oct. 5, 2017**As of Sept. 30, 2016, and repurchased under the Oct. 6, 2015 – Oct. 5, 2016 NCIB
7
GOAL:REDUCE SHARE COUNT TO 10 MILLION OVER 3 YEARS
Cash Flow
2017 Estimated CF: $2.4 – 2.9 million
2017 Estimated CF/Share: $0.21 – 0.26
Growth: Barnat Royalty ($1.4 million 2018)
2018 Estimated CF: $4.1 million (Excludes Odyssey North)
#2Reoccurring & Growing Cash Flow
8
*Cash flow estimate for 2017 is based on estimated royalty payments from the Canadian Malartic mine, dividend payouts by Agnico Eagle and Yamana Gold, premiums beinggenerated from the sale of covered calls on shares owned by the Company and other investment income. There is no guarantee that the Company will sell the required number ofcovered calls to meet this estimate. Cash flow estimates for the Jeffrey and Barnat royalties are based on Canadian gold price of $1625/oz. and royalty production schedule (seepress release dated March 29, 2016 for further details). The 2018 estimated cash flow is based on mid range of potential covered call premiums and estimated Jeffrey/Barnatroyalties.
Odyssey – New Discovery Canadian Malartic MineC$13.5M Exploration = 95,000 m Drilling (2016)
9
Canadian Malartic Mine – Additional UpsideNear Pit / Underground Opportunities
10
$40.5 Million
*Agnico Eagle & Yamana share values based on market prices as at November 25, 2016 **As at September 30, 2016
Yamana Shares$13.9 M*
Agnico Eagle Shares$24.4 M*
Cash$2.2 M**
#3Strong Balance Sheet
11
#3Strong Balance Sheet
12
Golden Valley49%
Board / Management(CEO uses all of after-tax salary for share purchases)
4%
Other Shareholders29%
Rob McEwen(Doubled Investment June 2, 2016 to Cdn$4.3 million)
12%
Quebec Labour Funds6%
*As of June 24, 2016
#4Unique Ownership Structure
13
#5
14
Exposure to Exciting Discovery
Odyssey North Significant Discovery at Canada’s Largest Gold Mine
“Of note was the drilling on Odyssey and we continue to intersect the zone at Odyssey andwe would expect to be in a good position to put out a resource on Odyssey before the endof this year. It has similarities in terms of thickness and a bit better grade than Goldex andthe intention when we got involved with our partner Yamana with the Canadian Malarticopportunity was certainly we had a sense that Odyssey could be an important component tothat mine and that property going forward. So we are certainly starting to see that.”
Agnico Eagle Q1 – 2016 Results Conference Call(April 29, 2016)
15* There are no assurances that all or any of the recent expansion at Odyssey North has occurred on Malartic CHL where Abitibi Royalties holds a 3% NSR. For full disclosure, see Abitibi Royalties’ press release dated May 6, 2016.
“The Odyssey drill program continues to define the north and south mineral bodies and hasdiscovered two, previously unknown mineralized structures. Geologic and mineralizationmodels have identified two zones within the north zone where cross-cutting structureshave created blow-out zones of mineralization much wider than other portions of thedeposits. Additional focused drilling of these swell zones will follow the initial 100 meter by100 meter program in the third quarter to better define the mineral inventory.”
Yamana Gold Q1 – 2016 Results News Release(May 4, 2016)
Odyssey North Significant Discovery at Canada’s Largest Gold Mine
“Canadian Malartic were still drilling the Odyssey deposit and expect a sizable addition tothe resource base based on that discovery in 2016.”
Yamana Gold Q4 – 2015 Results Conference Call(Feb. 19, 2016)
16* There are no assurances that all or any of the recent expansion at Odyssey North has occurred on Malartic CHL where Abitibi Royalties holds a 3% NSR. For full disclosure, see Abitibi Royalties’ press release dated January 18, 2016 and August 2, 2016.
“Exploration drilling of the Odyssey deposit transitioned to definition drilling in the fourthquarter…(t)he tighter grid spacing will allow for the reclassification of the mineralization asinferred mineral resources, will provide a basis for an in house scoping study(.)”
Yamana Gold Q4 – 2015 Results News Release(Feb. 18, 2016)
“The initial infill program also encountered three unexpected high grade intercepts thatappears to strike north-south, cross-cutting the east-west trending main Odyssey deposit.These structures will also need further drilling to be completely understood.”
Yamana Gold Q2 – 2016 Results Conference Call(July 29, 2016)
17
Gold Royalty Ranking (Net Asset Value – CDN$)
Abitibi Royalties Positioned For Organic Growth
Abitibi Royalties 3% NSR AdjoinsOsisko Royalties 5% NSR at Canadian Malartic
Source: BMO Capital Markets Equity Research. NPV shown using a 5% discount rate and BMO commodity pricing for gold of US$1,292/ozfor 2016, US$1,350/oz for 2017, US$1,250/oz for 2018 and US$1,200/oz for 2019 and LT. 1.30 CDN/US Exchange rate used.
18
Royalty Company Valuations Potential for Re-rating as Odyssey North Advances
Source: Factset
Odyssey NorthResource Estimate as of
Year-End
Canadian Malartic Mine (Long-Section)Bulk Tonnage Underground Mining – Next Evolution
*Norrie Zone: Osisko Mining drill hole; remaining are historic holes
19
Innovation = Organic Growth #620
Surrounding EldoradoEfemcukuru Mine - 3% NSR Drilling Planned
21
22
Surrounding EldoradoEfemcukuru Mine - 3% NSR
Red Lake and Madsen PropertiesRed Lake Mine - 1% NSR
23
5 KM Southwest Goldcorp Red Lake Mine - 2% NSR / 15% Sale Proceeds
24
2 KM West New Gold Rainy River Mine - 2% NSR / 15% Sale Proceeds
25
3 KM East MetanorBachelor Mine - 2% NSR/15% Sale Proceeds
26
South & Southwest Agnico Eagle Lapa Mine- 2% NSR
27
$-
$2
$4
$6
$8
$10
$12
2014 2015 2016
Share Structure + Treasury
Share Structure
Price (November 25, 2016) $8.04
52 Week Range $2.55- $10.00
Shares Outstanding 11.3 million
Options 766,003
Restricted Share Units 583,365
Market Cap $91.1 million
GZZ Ownership 49%
Rob McEwen 12%
QC Labour Funds 6%
Treasury
Cash $2.2 million
Long-Term Debt $0
YRI/AEM Share Value $38.3 million
28
Odyssey North
Discovered
Lawsuit Settlement
Odyssey North
Update
Ian Ball Joins
As President Share Buyback
Announced
Odyssey North
Update
APPENDIX
Net Smelter Royalties (NSR)
1. Abitibi Royalties has the right to receive 15% of total proceeds should the property be sold.2. There is a mutual 3 year option for Abitibi Royalties to pay an amount equal to the annual claim maintenance fees whereby the 2% NSR will increase by 1% for each annual payment.
Property Nearest Mine Distance Operator NSR
McDonnelCreek Property Young-Davidson (Alamos - Ontario) ~6 km SW Private 1.5%
Rainy River West Prospect1 Rainy River (New Gold – Ontario) 2 km E Private 2%
Whitehorse Island Property1 Red Lake (Goldcorp – Ontario) 5.5 km NE Frontline Gold 2%
Menderes Efemcukuru (Eldorado – Turkey) adjacent Frontline Gold 3%
Baden Prospect2 Young-Davidson (Alamos - Ontario) 12 km S Private 2%
Smokehead Prospect1,2 Canadian Malartic (Agnico / Yamana – QC) 1 km NW Golden Valley Mines 2%
Bachelor East Prospect1,2 Bachelor (Metanor – Quebec) 3.5 km W Private 2%
VMS Prospect 777 (Hudbay – Manitoba) 5 km NE Private 2%
Bogside & Riverside Lapa (Agnico – Quebec) ~1.5 – 3 km Golden Valley Mines 2%
The Royalty Search – Near Mine Royalties
Canadian Malartic RoyaltiesProperty Status Operator NSR
Jeffrey & Barnat Permitting Agnico / Yamana 3%
Odyssey North Advance Exploration Agnico / Yamana 3%
Norrie Discovery Agnico / Yamana 3%
30
Canadian Malartic – Royalty Overview3 Largest Gold Royalty Companies Present
31
6 KM Northeast Alamos GoldYoung-Davidson- 1.5%
32
12 KM North Alamos Gold Young-Davidson - 2% NSR
Selective Rock Samples 14.15 gpt gold 8.00 gpt gold 21.69 gpt gold 31.61 gpt gold 14.40 gpt gold
33
5 KM Southeast Agnico Eagle/Yamana Canadian Malartic - 2% NSR / 15% Sale Proceeds
34
5 KM Southwest Hudbay777 Mine - 2% NSR / 15% Sale Proceeds
35