Denver Harris - IR Nolan Watson - President and CEO Erfan Kazemi - CFO David Awram - SEVP

Good morning. My name is Tracy and I will be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions]. Thank you. Mr. Denver Harris, you may begin your conference.

Thank you, Tracy, and good morning. I'd like to thank everyone who has taken the time to participate in our conference call today. With me as always I have Sandstorm’s President and CEO, Nolan Watson; CFO, Erfan Kazemi; and Senior Executive Vice President, David Awram. Please be advised that some of the commentary on today’s call may contain forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. I will now turn the call over to Nolan.

Thanks, Denver, and good morning everyone. Due to the fairly straight forward quarter, I will be keeping things brief before passing the call off to Erfan Kazemi, our CFO to discuss some of our specific results and then off to Dave Awram to discuss some of our corporate development efforts. We're pleased that this quarter we recognized the record number of gold equivalent ounces sold of 12,460 thanks in part to our recently acquired Diavik Royalty. It is worth nothing that the effective date for Diavik acquisition was January 1st so included in our Q1 results with a full quarter worth of Diavik production. Although there was variation on actual production compared to budget on an asset by asset basis overall our portfolio of streams and royalties performed as expected and therefore we're reiterating our guidance 40,000 to 50,000 ounces for 2015. The ounces included in our annual guidance we expect that the front half of 2015 will be stronger than the back half as Luna's milling ramped down; however, based solely on our existing investments made our expectation is that by 2018 and 2019 we will be once again setting production records which is why our 2018 guidance is for approximately 50,000 ounces of gold equivalent production. Also we do plan on using our current cash resources and cash flow to acquire further streams and royalties and so in reality I expect that we will be setting further records sooner than that. Some of you may be wondering how the potential financing of Luna is progressing and although at this moment I precluded from talking about specifics we continue to make progress behind the scenes with a targeted completion over the coming months at which point Sandstorm will receive a 3% to 5% royalty on the Aurizona mine, a 2% royalty on the Aurizona Greenfield and 30 million of equity to be delivered in the future. Post this restructuring will have 71 streams and royalties and we'll continue to focus on our corporate development efforts to grow our company which I'll let Dave discuss in more detail this morning; however, from a high level perspective we continue to accomplish three primarily objective with the first being to increase our asset diversification which we have been accomplishing at rapid base and with the second being the increase in the strength of our average counterparty which we have also made great strides in, and the third objective being the addition of significant royalty optionality and gold exposure for our investors which we continue to grow. We're very pleased that we sit here today with record production, with 40 million of cash on hand, with $100 million undrawn revolving line of credit, with a strong technical and corporate development team and a strong pipeline of opportunities. And as a company we're only six years ago old and we've proud of the foundation that we have built thus far, and at this stage we believe that Sandstorm is ready for its next phase of evolution. And with that, I will turn it over Erfan to discuss the details of quarterly results.

Thanks, Nolan. Overall I would describe Q1 as a steady quarter for Sandstorm. We sold 12,460 attributable gold equivalent ounces during the period which was a record for the Company and translated into 15.3 million in revenue. Our average selling price per ounce of gold was $1,227 and with average cost at 323 each ounce sold generated a margin of just over $900. It is worth nothing that 70% of our ounces sold were from projects in North America and no assets contributed more than 25% at Sandstorm's total attributable production in Q1. As we continue to deploy capital into new streams and royalties, our goal is to diversify our assets and cash flow. Moving onto earnings and cash flow figures, our net income was 0.8 million for the quarter and when you compare that to the 3.8 million in earnings that we posted in the first quarter of 2014, the change is attributable to a 2.7 million increase in depletion expense and a 0.5 million increase in administration and project evaluation cost. The costs are correlated to an increase in corporate development activity as we closed the number of deals and completed due diligence on several other opportunities. As for the cash flow from operations, we generated 8.1 million during the period, a 16% increase from Q1 2014. Lastly I'll highlight our balance sheet remains very healthy with approximately 40 million in cash and no debt. With that, I'll turn over to Dave.

Great, thank you, Erfan. So both that Nolan and Erfan spoke about our ongoing pursuit and diversification and improvement in character and strength and today we feel that Sandstorm is well down that path. With the announcement of the Diavik acquisition, we have been spending more time talking about Sandstorm and one of the surprising aspects for investors is the diversification that we've been able to create within our existing forecasted cash flow. Not many realize that with the Diavik acquisition we now realize over 50% of our cash flow from the counterparties of Rio Tinto, Glencore, Newmont, Yamana, Anglo Ashanti and Primero if you had SilverCrest as one of lower cost North American producer, that number is closer to about 65%. That is start contract two years ago when we had only single asset junior companies partners 90% of our cash flow came from just four assets. Another aspect that our audience tends to be surprise by is the large amount of royalties and right of first refusal that we've been able to acquire over the last two years representing a tremendous amount of optionality value for the company. Over 60 royalties now sit in our portfolio and some of these are ascending the development curve even in these four capital markets. Many of these royalties were acquired in just the last five months as we have seen excellent valuations for this type of product in the market. One of the questions that we often receive is, is how much do you expect to deploy in each type of transaction in the future. We think that perhaps the best way to answer that question is to look backward at what we have purchased over the last two years. Of the cash and share transactions Sandstorm has invested over the last 24 months 85% was deployed into a few cash flowing or near term producing assets. Only 15% was deployed into early stage optionality type acquisitions. Just by the nature of the targets many more of the earlier stage deals are looked at and executed on it. But by far we are deploying much more of the cash and value on to the Diavik type transactions looking for really stable cash flow and good counterparties. You can expect us to continue a similar trend in the future. In the mean time we have $140 million of cash available to deploy we are continuing to feel are already packed pipeline with transactions as I just described. We've had some time using top level in our prioritization to deals because even with our new additions to the technical team we still have to work hard to keep up. However high quality deals and quality counter parties are being sourced and we anticipate more deals to this year. So with that I'll pass it over to Tracy for question more than happy to talk about each one of the individual projects here on the call.

[Operator Instruction]. And your first question comes from the line of [indiscernible]. Your line is open.

I have a few questions here, maybe first if I could ask about the Diavik asset. So I guess just wanted to confirm that basically the royalty accrues to you Jan 1 I just noticed that in the financial statements the cash flow from operation from Diavik is zero. I was just wondering if that's some sort of accounting happening.

Yes, so we're starting on accrual basis and so we received the check to subsequent to quarter end so that cash flow will be recognized in the second quarter.

Okay so it is just timing issue there. And just question on the depreciation and maybe you guys have already talked about this before I know the thing that depreciation for some of these assets are higher than the revenue is that again just reflective of some sort of accelerated accounting policy?

The accounting policies in our IFRS give us lot of guidance. But at the end of the day we are the one that effectively get to choose how we depreciate it and how rapidly and there is a lot of flexibility in some company choose to be aggressive by not depreciating our assets very much or they depreciate them slowly to get higher earnings. And my personal preference is that they should be depreciated as quickly as practicable and so we're doing that with our assets.

Okay and just a question on the Black Fox, I guess I was reading Primero's results today. It sounds like Q2 might be a bit weaker. I was just wondering if you could any sort of guidance as to how we should kind of look at that asset through the course of this year.

Yes we've obviously been preparing for earnings release in for this call this morning. So I haven’t seen their releases this morning but the Black Fox asset is one that we're optimistic on we think that they're going to spend $12 million to drilling it. I think those drilling results will prove to be good results. It's a strong asset with lot of expectations outside so I'll just say stay tuned.

[Operator Instructions] And your next question comes from the line of [John Tumazos]. Your line is open.

Now on as you plan the company going forward do you plan and structure things differently, if you anticipated $1,200 sort of gold environment $1,500 plus.

I think that if you knew for certain that the gold price is going to be 1,500 versus 1,200 you would make different decisions in those two scenarios. I would say that my personal belief is that the gold price longer term is going to be closer to that higher end, if not higher. But because we don't know that with certainty we owe to our sellers to make decisions that sometime protect the downside as well. So that's sort of the philosophy that we're using in the company right now.

Following up and using your [first] protecting the downside which is a very good [first]. You have reproducing and two not yet producing streams that are greater than the 17% threshold at Luna, which needs to be restructured as you are hopefully conclude. Do you think as a preventive measure that you should renegotiate or restructure or give leeway to Rambler [indiscernible] because of lower metals prices, the greater than 17% stream gives the operator less flexibility and there is a bump in the road, how mine sometimes have a variation

That's a very good point I think one of the things that we have learned over the years is that a portfolio of streams and royalties tends to perform better when every single one is a smaller percentage production over the very long-term so that each miner has the incentive to explore and invest capital into the asset to continue to extend the slide so it's something that we've learned more and more as we go through this business model and the very first thing have to done back -- I guess it was 11 years ago with on 15% of mine production and it was very quickly realized that that wasn’t a good idea. So, I would agree with generally the point that you made with a few exceptions being in the case of [entrée] for example they're not the private operators so the issue of it influencing their decision is not applicable, with respect to silver [indiscernible] gold and so over mine, we don't get any of their silver, so our 20% of production is only on the gold. And so therefore we're well in to the mid to lower teams in terms of total production and then the same point would be with Rambler where we're 33% to their gold but it's a comparable the deposit and its primarily copper so we're actually a very small percent of their overall production. So I think that one is reasonable as well, the one that I think is high would be Metanor, it's 20% of production and it's a gold only asset and so that's one that we have had discussions with them prompted by us. And we'll continue to have those discussions with them to see if there are ways that we can create more value in the long-term by getting a better structure and we'll continue to evaluate that.

I'm your fan and I'm concerned that the market is punishing your stock because of the perception that the arrangements are on the streams are two big a slice for some of those smaller operators and then the issue is as you correctly point out partly a perception

Yes, I would say partly a perception is one thing that we have been continuing to do is we diversify and increase our counterparty strength and we're so for example Diavik royalty obviously is 1% of revenue and doesn't impact the operation of that asset and the number of the recent purchases we've made has been along those lines and as Dave mentioned on the call, over 50% of our production comes from large billion or multibillion dollar companies as so we're continuing to evolve the company down that and so I think there is a little bit of a legacy perception if you will only three years ago Sandstorm's 90% of our production came from core assets and junior mining companies and each one represented a large percentage of their production. So, we've in the middle of the large revolution, I think we're about halfway through that process.

Your next question comes from the line of Mark [indiscernible] Your line is now open.

So again it looks like you guys have a pretty busy [dock] in front of you and you put a fair amount of cash to work in the past quarter. So I just want to know how you would look to find any larger opportunities that came your way and just how low you would be comfortable bring your balance sheet earlier cash balance?

Yes, so obviously the three primary ways that one could fund the deal would be right for -- you need to your cash and your balance sheet or your cash flow from operations or your debt or by raising equity and so we would look to fund our future acquisitions in that order. We want to obviously use our cash first, we have a lot of cash flow coming on the way in front of and reporting that as a [indiscernible] we're comfortable some more drawing on our revolving facility, if it’s the right acquisition and only than would we look to the equity markets beyond that but right now virtually all of the things expect for maybe one in our pipeline we have per cash resources to be able to do those transactions and that’s our focus going forward really.

Okay just a small housekeeping one. Are there any deductions off the revenue line for the Diavik is it a clean 1% of the top.

It is the clean 1% of the top with one exception that they get to deduct effectively their marketing cost of selling the [diamonds].

And can you give a sense of how much that is.

It's fluctuates from quarter to quarter. But it works to be around 8%.

[Operator Instructions] Your next question comes from the line of Ronald [indiscernible]. Your line is now open.

Just a quick question on our net profit it doesn’t seem large compared to our revenue. If at today's goal prices do you expect the net to increase with activity coming up?

Yes I would say that traditionally royalty companies have often been judge on your operating cash flow coming from the various assets. Net income in be funding number with respect to royalty because you look at depletion expense that you've got an ongoing cost to put into the asset. So that’s my overall philosophy on net income. But with respect to directly to your question as the gold price increases yes there will be greater margin on each ounce sold and that you have a great net income impact.

So well my actual question is if the gold price does not increase from this level, are you expecting a greater net of profit in the upcoming quarter?

So that will change overtime. I guess the earlier question that was asked about depletion, so we're aggressively depleting things. So the gold price stays the same and we continue to aggressively deplete things which are a non-cash expense. But really doesn’t reflect anything really to the value of the company and our net income would not go up. But when you are aggressively depleting things over the years as the mines continue to have expiration upside in the future what that means is that you have ounces that you get to recognize the revenue for and you don’t have depletion expense against those ounces. So in the very long term aggressive depletion does mean that at the same gold price in future you're net income would be higher.

At this time there are no further questions in queue.

Thank you very much everyone for calling into the call this morning. And as usual feel free to give us a call at our desk here if you have any follow up questions and talk to you soon. Have a great day.

Thank you for joining today's conference call. You may now disconnect.