Earnings Call: Q1 2020

May 13, 2020

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalty's Q1 2020 Results Conference Call. After the presentation, we will conduct a question and answer session. Please note that this call is being recorded today, May 13, 2020 at 10 am Eastern Time. Today on the call, we have Mr. Sean Rosen, Chair of the Board of Directors and Chief Executive Officer of Osisko Gold Royalty Mr. Sandeep Inc, President of Osisko Gold Royalties and Mr. Frederic Curiel, Chief Financial Officer and Vice President, Finance. Forward looking statement is approved on set PowerPoint. Welcome to the Q1 reporting call for Osisko Gold Royalties, everybody. Thank you for taking your time this morning. Pretty good quarter because we've had obviously some challenge in the Q2 with everybody else with the COVID-nineteen crisis. So I wanted to start on Page 3, and I would defer everybody to look and read the forward looking statement because we will be making some forward looking statements throughout this presentation. This presentation is found on our website under Osisko Gold Royalties for Q1 results for 2020. I'll start on Page 3 with the highlights from Q1 of 2020. We had GEOs, gold equivalent ounces of 18,159 ounces, creating a revenue from royalties and streams of CAD 37,800,000 and cash flow from operating activities of CAD 23,800,000 with a non cash net loss of $13,300,000 mostly relating to the impairment of $26,300,000 of which $19,300,000 was to the Renard Diamond Stream net of taxes. We had adjusted earnings of $7,500,000 or $0.05 per basic share. Also due to the pandemic, we were around the 2020 production guidance as many of our associate companies and projects that we are invested in have also withdrawn theirs. And we will come back to guidance as our partners continue to update their guidance as we get further into the year and this pandemic crisis becomes more evident as to what the effects are going to be mid- to long term on the projects. Our cornerstone asset, the Canadian Malartic mine, was affected by COVID-nineteen, including a shutdown for care and maintenance on March 25th to April 15th. It is currently by ramping back up, and we look forward to seeing that mine back in full production. I want to be specific on our cash operating margins. Net of some offtake agreements. We are operating at 91% gross royalties. There's been some misinformation in the market about what our royalties are, but we have a small offtake agreement left in our portfolio that does skew that a bit, but our real royalty margins are 91%. Throughout the quarter, we also acquired just under 430,000 common shares through our normal course issuer bid process for an aggregate of CAD3.9 million and the average price per share we purchased under the N SIB was at CAD9.15 a share with the stock currently trading about CAD13.30 $0.30 We also declared a dividend of $0.05 per share. This is consistent with our dividend policy that's been in place since 2014, and we continue to be one of the biggest dividend payers in the space on a yield basis at well over 1.5 percent on average. Subsequent to Q1, we had a financing non brokered that we carry out with Investmont Quebec, and we would like to thank Investmont Quebec for stepping forward. We did a non brokered brokered premium to market deal for $85,000,000 to bring in a great cornerstone shareholders that now brings Investmont Quebec to about 5.5 percent north of 5.5 percent of the overall company and 6.2% on a full point fully diluted basis. We're very happy to have investment in Quebec as a cornerstone investor in the company. In terms of other activity, we did increase our exposure through the Gibraltar mine by investing $8,500,000 to reduce the transfer price on a silver per ounce down by $2.75 so that we had no longer have a transfer price there. So it's really become more like a royalty. We also declared our dividend, as we said, of $0.05 per share, which is payable on July 15 to shareholders who are on the record as of the close of June 30, 2020. On Page 4, COVID-nineteen impact, and I hope everybody is staying safe today. Obviously, here in Quebec and in Montreal, we've had our challenges, And we want to thank all of our frontline and first responders and doctors and nurses who've been working so hard to keep our community safe. And as we advance through this crisis, we look to honor those people as this unfolds and evolves into what we hope will be a manageable situation shortly. The transition for us involved shutting down the day to day office here in Montreal. Everybody has been equipped with printers and laptops and communication equipment that they need, and we're fully active. And we're working seamlessly from home, and we will continue to keep non essential office people at home throughout the crisis. And we've limited our exposure as much as we can and doing everything we can to support those people who have to go to work or have to be in the public. On the partner side, we have several mines. There was a Quebec wide shutdown for mining, which has subsequently been lifted in part and hopefully in full soon. And we'll see most of the Quebec mines go back to work, and we'll have better guidance as those regulations evolve and people are able to go back to some of the remote fly in, fly out sites safely. One thing to note that for us in the mining industry, we didn't miss any business. It's a deferral of revenue. The resources are still on the ground. On the social front, we've done a fundraising with our employees where Sysco has matched up to $50,000 for Molson Montreal, one of Canada's largest food banks, and we continue to rally for support for that great organization as we go forward. A few of our employees, Gide DeCharm is shown here in the photo, joined the revolution of 3 d printing and is printing protective advisors with a couple of printers on the go 20 fourseven. And also, we're contributing to some other efforts on an ongoing basis as the crisis evolves. Page 5, as a summary of what we just covered, the $85,000,000 private placement really goes to bolster the balance sheet in a time of crisis. This $85,000,000 brings our cash balances up to about 2 $30,000,000 so on hand and that allows us some flexibility in these times. And also on Page 5, you can see a little bit of a summary on the Paseko offtake agreement. This is a great mine with a 17 year mine life located in British Columbia, not that far away from the Barkerville project. And it continues to be a great mine. It's operated for a long time. It's primary copper producer, open pit of 85,000 tonne per day mine that we think has a lot of potential. And Taseko as a group has an awful lot of good projects. And we're very admirative of that management team's ability to operate that mine in the cost cycle that they have and they continue to have robust operations even at these lower copper prices. On Page 6, I wanted to go through our assets, dominantly at gold exposure. We have the most amount of gold revenues of all the royalty and streaming companies in the space. We've shown you here the Q1 GEOs by asset base. Obviously, Canadian Malartic is still our biggest cornerstone shareholder, followed up by Eleonore CB and most recently Eagle and on Island. We'll talk a little bit more about Eagle as we go on, but Eagle is the Victoria Gold's Yukon mine, the latest gold mine to go into production. And They're enjoying significant success having worked through the winter at 64.5 degrees latitude and delivered the project into production and they're pursuing commercial production as we speak and had a very good results yesterday. And we congratulate the Victoria Dean team on being able to continue operations throughout not only the cold winter, but also through the COVID crisis. It's a very exceptional management team that's been able to bring that project to fruition in these difficult conditions. Also, we showed you our silver production with Mantos being our most important silver asset, previously an Anglo American copper mine and operated by Orion now, exceptional asset with long life and we continue to see a lot of these assets continue to grow. Obviously, we had a little bit of diamond exposure with about 2,000 GEOs coming from Barnard. Obviously, diamond sector has been a little more challenging as we get into the piece, But this too shall change as we saw in 2,008, 2009, diamond prices did rally after a bit of a financial crisis at that time. So hopefully, we'll see that happen in the diamond space as well. Now I'd like to introduce you to Fred Ruel, who is going to take us through pages 7 through 11. Fred has taken over the role as CFO as of January 1. I'd like to congratulate Fred on having had his Q1 somewhat trial by fire. Fred and his team have been able to give it a reporting through and continue on even with the COVID-nineteen crisis, the challenges obviously in the accounting department being somewhat significant. So Fred, over to you for Page 7. Thank you, Sean. Good morning, everyone. Strong quarter for Sysco in terms of revenues, cash margin and operating cash flow. Despite the disruptions on activities for some of our main operators, The strong gold price more than offset the reduced deliveries at the end of March. Revenues from royalties and streams reached €37,800,000 in Q1, up €4,300,000 compared to last year, an increase of 13%. Cash flows from operating activities were slightly lower by $1,000,000 in Q1 of this year, but excluding the impact of the changes in non cash working capital items, operating cash flows were $27,900,000 compared to $22,600,000 in Q1 of last year, an increase of 23%. On Page 8 of the presentation, we show a breakdown of our cash margin for Q1. Cash margin on our royalties increased by 2,300,000 to $25,600,000 Cash margin on our streams also increased by $2,300,000 to $8,800,000 dollars resulting in a cash margin on our royalties and streams of 91% in Q1 of this year compared to 89% in Q1 2019. Our total cash margin reached $35,300,000 in Q1, including $800,000 generated from our offtake agreement, an increase of $4,700,000 or 15% compared to last year. On Page 9 of the presentation, we present a summary of our earnings and adjusted earnings. We had a net loss of $13,300,000 in Q1 or 0 point point 5 $1,000,000 in Q1 2019 or $0.17 per share. Excluding impairment charges, net earnings would have been $6,000,000 in Q1 of this year compared to €2,100,000 last year. Adjusted earnings were €7,500,000 or €0.05 per share compared to €5,800,000 or €0.04 per share in 2019. On Page 10 of the presentation, we have a summary of our results for Q1. GEOs from gold production were lower this year, partly due to the sale of the Blue Jack Offtake in Q3 2019 and the impact of COVID, but this was offset by a higher realized price on gold. Our average gold price per ounce sold amounted to CAD2,125 compared to CAD1731 in Q1 2019. The decrease in our total revenues from CAD100 1,000,000 to €53,000,000 was also due to the sale of the Busch Jack Offtake last year. Gross profit increased to €21,600,000 from €18,200,000 last year. On Page 11, you will find a summary of our financial position. Our cash balance was €158,000,000 at the end of Q1 and €243,000,000 considering the €85,000,000 equity financing completed with Investec Maquette on April 1. Our debt amounted to $423,500,000 which includes a drawdown of $50,000,000 in March on our revolving credit facility as a cautionary measure. Including the $100,000,000 accordion available, our credit our available credit on the facility was over €400,000,000 at the end of March. Our net debt position, including the IQ financing amounted to €180,000,000 In addition, our equity investment portfolio was currently valued at over €250,000,000 Back to you, John. Thanks very much for that, Fred. And I think it's just worth highlighting that our net debt position is quite manageable at $180,000,000 and our equity portfolio has been performing quite well, obviously, and these increased gold prices. So all in all, things are going pretty well and a lot of liquidity, a lot of firepower on the balance sheet to work with in this interesting market times, as I say. On Page 12, just a recap of our portfolio, Over 135 royalties in screens and precious metal offtakes acquired since we started this company in 2014 with 1 producing royalty and 4 on non producing royalties. We've gone pretty quick in terms of getting access to quality assets throughout the space in a very competitive space. And we've created the accelerator model, which is somewhat unique to us. And we're currently operating at the highest cash margins of anybody in the royalty and streaming space at 91%, with an exceptionally low North America by North America by geography. And it's I think it's a credit to our partners, Agnicolegal, Yamana and Newmont, who are all the top quality operators on the asset base that we are most exposed to. We'd like to do a shout out to Agnico, Yamana and Newmont in this time of crisis. We really appreciate the efforts that all those management teams have made to keep these assets in good stead throughout this challenge. On to Page 13. In terms of dividend yield, we're at the top quality of the investment cycle. If we're looking at this dividend yield to 1.5% being more than all the other royalty and streaming companies in the space. So therein lies the opportunity as we see it in the second line on a PNAV trading multiples. We're trading at about 1x NAV based on consensus. And therein lies the opportunity for investors today as to look at that. And we feel that as we get further into the year and the asset base continues to strengthen and also we should see some simple catalysts in the portfolio such as the Canadian Malartic underground resource that's evolving and also the evolution quick evolution we're seeing on Barkerville as that asset continues to strengthen and really show its quality in the portfolio. We also have one of the highest liquidity ratios in the business trading at $18,500,000 per day, which I think goes to the fact that this is an asset that the company is well followed. And hopefully, that sets the stage for us to increase value as we meet these criteria that we've outlined in our catalyst for this year. Again, the strong balance sheet with over $900,000,000 in total financial capability and a positive net debt balance sheet sitting at well north of the $60,000,000 In terms of our shareholder base, we have very diversified shareholder base with Case Depot sitting at around 12% and the Edesmont Quebec sitting at 5.6% and some other strong portfolio head such as the spot investment fund and some of the bigger Vanac and Fido working to round out our top 10 shareholder list. Our business model on Page 14, obviously, this is somewhat unique to us. And I think in this increased gold price, it obviously sets the stage for us to be pretty loud and proud of what we've accomplished with our business model. We are a hybrid in that we invest about 75% traditionally in our core royalty and streaming business, which obviously we've seen that happen with the largest acquisition of recent times in that business was the royalty on the Victoria asset Eagle. And we paid $98,000,000 for a 5% royalty, which is now Canada's most recent entered into production. And then some of the earlier stage businesses that we've been involved with, obviously, OSK is the most successful of the Cisco family accelerator companies to date. And we congratulate the Cisco team and John on their fine job that they've done to really take windfall to another level at a speed that's been breathtaking to watch over 1,200,000 meters get drilled there, over 3,500,000 feet drilled on that asset as we go through. We also will talk about Caribou a little bit later. North Spirit Discovery Group is our subsidiary that's looking to finance the evolution of the Caribou assets as we go forward. And that asset has gone up significantly in value since we purchased it last year when the gold price was mid-fourteen 100 dollars Obviously, with gold at $1700 now, there's a significant amount of value increase in that asset. Over to Page 15. We've seen solid growth in our GEOs since the beginning of the company in 2014, And we see that to continue for a long time to come. Our paid for royalty growth portfolio allows us to get to 140,000 ounces per year and that is things that are 100 percent financed and paid for already by the Sysco Gold shareholders. And that would exclude things like the Horn V silver stream where we still have some cash investments. So that's just purely what's already been paid for as we go forward and we see these assets evolve. So I think it bodes well for us in the future. These are competitive marketplaces, but we've been able to create an organic pipeline that we believe is somewhat unique in the space in terms of not only being on significantly gold assets for the most part as opposed to byproduct from copper mines. This is a portfolio that's dominantly Canadian as well. And as we've seen with Canadian Malartic, which we can slip over to on Page 16, The Canadian Malartic, when we sold the company in 2014, the amount that Nico purchased it and it's been one of the all star assets in both those companies portfolios. But we've also seen the underground resource here essentially double what was there before with over 10,000,000 ounces having been identified and measured and indicated and inferred categories in this asset. We had drilled some of the stuff on the Odyssey zone during the 2014 spring, but they've taken it to a whole new level. And we congratulate the AgUCO and your management team on the exploration success that they've generated here. And obviously, there has been some discussion around this asset in terms of the significance of this. But it's not really priced into our stock right now. But obviously, it's 1700 plus gold price. All these ounces are exceptional and they're located near Canada's most efficient and lowest cost gold mill, the Canadian Malartic Mill. And we look forward to seeing this value unlocked as our partners, Agnico and Yamana go further to develop that underground aspect. Page 17. Again, a quick photo of Victoria's new Eagle Mine located in the Yukon. It's the largest gold mine ever built in the Yukon, ramping up to an annual production of 220,000 ounces per year. And as I said in the preamble, they were able to operate that mine throughout the winter. It was an exceptionally cold winter this year, seeing temperatures of below -58. And they've been able to keep this mine running and is now starting to hit its stride. And we really congratulate an extraordinary effort to keep that project on its tail and wish them luck with the commissioning as they get as they move forward here. And congratulations on the results this week for seeing significant amount of gold production from April. Eleonore was acquired when Newmont did the acquisition of Goldcorp. So we welcome Newmont to our portfolio. I'm very happy to be partnered with Newmont. We have a long history with Newmont and really consider them to be an exceptional company with exceptional people. As we go forward, we look to see Newmont bring that mine back up and to push it aggressively as we move forward. We've mentioned Mantos earlier. There's 100% Silver Stream in the Antebagas Achille Belt and other long life mine and a great jurisdiction moving forward. On Page 18, a couple of things have gone on at Windfall recently that were interesting from a science standpoint with the team there having drilled Canada's deepest diamond drill hole ever, just under 3,500 meters. Congratulations to Major Drilling and to the team at OSK for that. More exceptionally, it's been the 5,000,000 ounce resource that was published within the drilling that's been done there and an additional 250,000 meters of drilling plan for 2020, continues to be one of the most impressive drill outs in the current exploration and development world. I don't think there's any other site in the world right now that's operating with 20 core rigs. So congratulations to that team for having really moved things forward. We did increase our royalty there recently. So we now have a 2% to 3% royalty depending on which part of the deposit. Hermosa has continued to move forward. Exceptional poly metallic, high grade zinc deposit at 10.4 percent, zinc grade, equivalent zinc grade, multi decade life really another exceptional discovery. South 32 is moving that to pre feasibility, is on track for the second half of twenty twenty. We retain a 1% royalty on that project. Horn 5 under Falko Resources led by our very own Luc Lessard currently at 6,000,000 ounces of GEOs and reserves. Another 3,000,000 ounces of reserves has remained one of the largest underground open pit or underground bulk tonnage deposits that's in the development pipeline here in Canada and in North America. And with a full feasibility study and reserve status here, there's a lot of work that's been done to complete the agreements with our partners there. And we look forward to getting that permitting underway in a significant way this year and in early next year, hopefully, to have completed that cycle. But it really is an exceptional asset and it's a BMS deposit that goes down with another kilometer of undrilled potential at depth, and we see that as one of the big assets here in Quebec that will be generational. And if we were to fast forward 10 years from now, we would see probably windfall and Falcos, Horn 5 and Canadian Malartic underground as the biggest assets here in Quebec. So we are staying close to home. Quebec is our premium jurisdiction and BDC is our other go to jurisdiction. On Page 19, I wanted to do a brief touchdown. On the Cariboo project. As you can see here in the image, the underground workings from the BC vein and you can see some of the clear cuts in the background. Work is ongoing on this project. And we have in less than 4 kilometers of the known trend outlined 4,400,000 ounces of underground resources in our PA study that was published in September of last year. This company is currently 100% owned by Cisco Gold Royalties. And obviously, time has been our friend on the gold price with the gold price having gone up significantly since we bought this project back in September. And we're evolving towards the permitting timeline on that with a couple of different things on the go, but we've set the stage to look at a +4,000 tonne a day operation, which would set the table for over 185,000 ounces a year in Phase 1 development of this project. But make no mistake about it, this is a mining camp, not just a project, with over 83 kilometers of mineralized trend identified in this project on north of a 2000 square kilometer land package. This is one of the big projects that is out there. And we think that this is generational asset. What we are hoping to see is a scaled investment. One of the advantages of this project is it has existing infrastructure with a QR mill in place, and we think that it can relatively simple ramp up to go to 4,000 tons a day using ore sorter and flotation technology, coupled with the existing infrastructure. We have a pretty straightforward mine with relatively low CapEx from the beginning, and we will be there with our royalty currently at 4% to 5%. So it's high times for permitting Barkerville as we move forward towards the conclusion of that project description. And the team is fully functional and pushing hard to get that done. We did spend about $5,000,000 worth of our budget on exploration drilling there, which have yielded some significant forward motion on infill drilling for the deposit. And that project continues to strengthen nicely as we move into the year. We've concluded the transaction and we did spend some money on transaction closure. And we've also invested about $10,000,000 between the transaction closure and preproduction environmental contact water management systems that will set the stage for use during the production period as well. Page 20, high exposure to gold prices with us being at 81% gold exposure and mostly driven from pure gold mines, which is somewhat unique in this space. So we're quite happy to be there, obviously, during this gold price. On Page 21, really a cycle through of our business plan. The optionality that accelerator model has brought to us, we've been able to incubate 1 or more accelerator companies with the Osisko Group on a per year basis since 2014. And really, the goal is to take highly talented exploration and development and mine building teams that put Canadian Malartic together and created $4,300,000,000 of value in that company, of which shareholders made a profit of over $3,000,000,000 And to take that team and deploy them into other assets that can duplicate the success that we saw at Canadian Malartic, but hopefully you do a bit more in parallel rather than one asset at a time. We listed for you here at Cisco Mining, which we own a 16% equity ownership, and we generated royalty there, a slight scale royalty of 2% to 3%. Sysco Metals run by Bob Wares, and currently runs the Pine Point project. We have a 1.5% royalty there. 18% equity ownership at Falco with the Horned Pye project that we talked about. And a new accelerator company that we've invested in, headed up by Terry Harbert, one of our exceptional exploration structural geologists and his team, Talisker Resources, currently working on the Bralorne project in Central BC. And Mineral Alamos, which has been moving well with the heap leachast at Santana in Mexico. So we see these early stage opportunity is really evolving and creating our own organic world in terms of doing deals earlier on and then being there to help those projects with project financing as we get further into the value creation process on those projects as they move into production. Page 22, a brief summary of things. Just over 18,000 ounces GEOs earned in the quarter. Cash margins at 91%, the highest in the sector. Over $23,800,000 in terms of cash flow, dollars 169,000,000 of investments as of March 31, 2020, and $158,000,000 of cash as of March 31, ongoing and obviously current cash balances and hence subsides to that. So to simplify the story, this is a very good exposure to gold, pays a dividend while you're invested in gold with a significant amount of upside with over 1,000,000 meters having been drilled on the share on the royalty lands that the Asysco Royalty shareholders are already exposed to last year and the year before without having to invest any further money. Our royalty lands are more important exploration wise than most other things worldwide because of flow through share system here in Canada, which encourages exploration or R and D, if you will, which is usually the lifeblood of all value creation in every sector is research and development, and we consider exploration to be that R and D factor that differentiates us from other gold investments in the space. In terms of where we are right now, obviously, our hybrid business model has been a little less valued in the marketplace in the past, but we think that we're well geared for this market. And certainly, with the evolution of the accelerator assets within the company within the project, we're seeing more and more value being ascribed to those through the analyst community. And we think that as we get further into this year, a lot of that value starts to unlock and hopefully we can turn the corner on the valuation process and see a higher share price for our supportive shareholders. And on that note, I'd like to thank everybody for participating in the call and open it up to Q and A if I Your first question comes from the line of Kerry Smith of Haywood Securities. Please go ahead. Your line is open. Thanks, operator. Sean, a couple of things on Caribou. Could you give me sort of your current thought process on the timing of the permitting process? And also bringing in a partner, what your expectation on timing is to have concluded that sort of that investment? Yes, George. Well, obviously, we've been in an uptick marketplace here, and Barkerville has gotten an awful lot of attention as of late from various partners. So we are working very hard with those partners to optimize the investment that the Osisko shareholders have made into this project. In terms of timeline on the permitting, we see we would have a construction release hopefully in 2022, probably later on. But we have been moving well within the new framework that BC has outlined, and we're quite happy with the way the process is going. And our First Nations partners have been very supportive as well. Most recently, prior to the COVID-nineteen crisis, we had the mine minister and major projects coordinator come and visit the site. And obviously, we think that given the economic outcome of a lot of different industries right now, gold mining in the Caribou, which is a brownfield site, is going to be a priority investment. And we have the ability to create significant amount of jobs, both during the construction period with probably 700 to 800 jobs during construction and then a full time workforce of somewhere between 46 100 as we continue to ramp up and build out that project. From the partnership, we see very high quality partners that are interested in this project because of its scalability and because it is a campsite project. So Sean, is your target to then try and have a partner for that project by the end of this year, let's say, or is that a 2021 event? No, I think we'll get a partner. We're in process right now, Kerry. So obviously, COVID-nineteen is creating challenges for a lot of different people. So I'm hesitant to put timelines on things, but I don't see why we wouldn't get a deal done in the current market conditions that we're in. BC has deemed mining as a necessary service. So it has not been shut down and the ministry there continues to work as do we. And the team there has really moved things forward as we got going there. So we don't really see anything that would inhibit us from getting the field done hopefully over the course of the summer or certainly by the end of the year. Okay. And then just on the permitting side, when would you file the documents with the regulators in if you want to have the permitting done in 2022? Well, the process has already begun, Kerry, and we have submitted project descriptions last year. So we're optimizing those on what's called IRTs, information requests, transfers. And we are in the process now. And hopefully, we'll be going back and forth a bit more. But we're in constant motion on the permit as we speak today, and that process is engaged. Okay, good. Thanks, Sean. Thank you, Carrie. Your next question comes from the line of George Topping of Industrial Alliance. Please go ahead. Your line is open. Great. Thank you, everyone. Sean, on the $10,000,000 to be spent this year at Caribou Gold, how much will be infill expansion and how much is going to remediation? Well, the budget right now is $5,000,000 for drilling. So we'll be doing some tidy up infill as we've finished up with that geological model. So anywhere we've identified that we need the higher density of infill drilling, we'll go back and tidy that up. We have made an investment into the contact water treatment facilities that are really for sort of pre capitalizing the infrastructure that we need to go mining. And then in terms of remediation work, it's mostly being done in function of the BC vein development, but it won't be that much. The $10,000,000 is really to go to drilling as we go forward. And we'll be a little bit opportunistic, George, as we see opportunity to do things that are going to de risk the project and move us forward and we can get the permits to do them, we may go and do that. And then also, we'll be somewhat subject to our financial partners' view on the project as well as we get further into it. Right. And then for 2021, do you have a a thought on how much you might spend there and admitting it might change if you have another partner involved with his own thoughts or their own thoughts? Yes. I think where we are on that, George, is that there's probably three answers. If we go it alone, we would probably be fairly conservative. The mid tier is assuming that we're driving hard to do everything we can to facilitate that construction release ASAP. And then the third one is assuming that we want to get aggressive not only on that, but we also want to increase the drill out that partnership that we would initiate a significant drill program in 2021. So I'll come back to you a little bit later on in the year as we fill out those goals. But I mean, you can assume that it's probably going to be a minimum of $20,000,000 to $30,000,000 And then of course, from there, depending on how aggressive we get on the exploration and underground development side. Got it. And then just lastly, just switching over to diamonds. I mean, obviously, with India being shut down, now it's coming back a little bit. Have you had any industry updates on where diamond markets, how they might recover from any of the commodity specialists? Yes, we have. And there's a couple of different viewpoints. If you look back to the last financial crisis, obviously, it didn't have the same ramifications of shutting down the diamond polishing centers in India as COVID-nineteen has. There is pent up demand that we're seeing that retailers in China who have opened back up have seen significant demand. And first indications are that the month of April was somewhere between 60% to 80% of what the 2019 April numbers were. So that demand did come back fairly strong. And you've seen now shutdown and or shut in of different mines in the space. So there is a supply demand scenario building. However, there will be a bit of an inventory clear through as diamonds go back out in the space. But we are optimistic that diamond prices will respond like they did in 2,008, 2009 with that pent up demand coming back into space. Right. Do you think, Renard, I mean, would your budgets be maybe Q4 this year or if thereabouts for a restart? It's going to be a bit speculative on my part, George, but obviously I certainly would hope that we can do that. The mine is on a dry shutdown right now as we monitor the situation. And we'll review that fairly regularly with our partners as we get further into the piece. But the mine is well groomed and well built, and it was just starting to hit its stride when the diamond prices started to pull back. And we are ready and waiting to put that mine back to work as soon as the time is right. Your next question comes from the line of John Tumazos of Tumazos Independent. Please go ahead. Your line is open. Hello, Sean. Congratulations on the progress on so many fronts. Well, I appreciate that, John, and I hope you're keeping well and safe. I know you live in a place that's had as challenges as we have met here. Yes. I just keep looking at my computer and work in the garden and I discovered the wholesale fish markets, the fishermen can't sell to restaurants and there's great fishing around here. So it isn't all in the Canadian North, there's a little bit good here. Could you update us please concerning how your investment criteria have changed as the markets have changed? First, have you raised your gold price basis in doing analyses, the $400 or so that the spot price has gone up, some of the majors have kept their criteria the same as a year or 2 ago. 2nd, have you raised your discount rate assumption because a couple of projects had charges this year or last year or the year before? 3rd, how much do you raise your discount rate outside of Canada? And 4th, how do you prioritize between these dozen or so wonderful projects that all appear promising where some of them don't have 1,000,000 meters of drilling like windfall that are at earlier stages? Okay. I'll try and tackle the task laid out before me here, John. In terms of our gold price right now, we're probably somewhere around $1400 which I think is bank consensus, and we'll obviously run sensitivities based on the asset and what we think the ability of that asset is to perform at lower gold prices. I'm a big believer in the ratios between cutoffs and mining grade. So that's probably a higher criteria for me on an individual basis. But we do look at internal rate of returns. And then on discounts or rates, we tend to focus a lot on the geopolitical risk and the life of the mine in terms of where we are in the world. Obviously, COVID-nineteen has changed the geopolitical dynamics in a lot of environments, a lot of countries. If you can't fly there or go there, it makes it much harder to monitor things. And I do like my maple syrup and poutine. So we've been sticking to Canada with Quebec and BC being our dominant jurisdictions that we've been deploying capital in. Obviously, where we've had the most success is the drill bit. And in terms of the earlier stage accelerator companies, because of the flow through share and charity flow through share program here in Canada and the low cost of drilling here, it's very much in our favor to continue to push on these brownfield stories that we've been able to focus on in Canada, the most recent one being the Bralorne asset. In terms of discount rates, we work with a 5% discount rate on premium assets, and we would increase that discount rate depending on the commodity and also on jurisdiction up to as much as 12% in some cases. In terms of allocating capital, obviously, we're trying to prioritize whatever we think is going to have the most effect on short term cash flow In terms of increasing GEOs for our balance sheet, that is the dominant allocation of capital. We do take a long term view on exceptional assets like Windfall and Horn V and Barkerville, where we feel that there's a bigger prize to fight for. But normally, the criteria would be nearest to production and nearest to GEOs. I don't know if I got all your questions, John, but I took a good run at it. No, we like the emphasis on long life and near production and safe places like Canada with all the double dips on exploration incentives. Thank you. Thank you, John. Your next question comes from the line of Carey MacRury of Canaccord Genuity. Please go ahead. Your line is open. Hi. Good morning, Sean. Good morning, Terry. Maybe another question on Barkerville. Is there a scenario once you get to a construction decision where you fund construction within Escoscope Gold or Philippines? Or do you think it's more likely at that time to either sell the asset or put it in another vehicle? Well, we'll have to cross that bridge when we get there, I guess, Kerry. But I mean, I just want to make sure everybody's clear. Our fiscal goal royalties is a royalty streaming company. Our main business is project finance. So we've got 25% of it allocated to the incubation accelerator strategy. But once a project gets to shovel ready, fully permitted, it falls back into our main strategy. So if we see the numbers are right and we can continue to invest there and meet our criteria of being a dominantly royalty and streaming company. We're obviously going to take advantage of the projects we know the best and things that we've been actively involved in the evolution of would fit in that criteria. So we will be opportunistic for the Osisko Gold royalty shareholder. So we want to make perfectly clear to everybody that royalties and streaming business is here to stay. And there won't if we do go into any other mode, that's why we created North Spirit was to have a platform that other capital could come and invest alongside of us in that space and to choose the proper partners to unlock the most amount of value in the most expedient manner with that. We think that, that is a proper strategy in this market. And we see a lot of capital, willing capital that's coming into the space right now. And we're in a fortunate position where we control a lot of extremely high quality assets, especially things that could be 5,000,000 ounces or more that have the ability to go 300,000 to 500,000 ounces a year of production in the long run and have the Canadian moniker on them. That's been our bread and butter. And we think that we've really well positioned ourselves to take advantage of that. And with the Eagle, Victoria's mine coming online and then the 3 other big Canadian projects that are sort of within our program. We have the most exposure to big Canadian assets of any group out there at this point in time. And I think that we're well suited to take advantage of that for our shareholders. Okay, great. And then maybe on the longer term guidance of the 140,000 ounces, if you can just remind us what the big components of that growth is relative to where we are today? So we would see obviously the Canadian Malartic underground, Back 40 in Michigan. We also see Mantos expansions working out for us. And we see Barkerville and Windfall following a development track. And hopefully, what we did not include in that 140,000 ounces, for example, was Falco with the Silverstream because we haven't finished paying for it yet. So we've only included the assets where 100% payment by the Osisko Gold royalty shareholders on the asset has been made. So we have quite a bit of organic growth in those assets. Maybe one last one on Mantos. You comment on how the expansion is going there and when you expect to see an uptick in your ounces from Mantos? As you know, it's a private company. It's very much on track right now. And I think that the way that we see that asset is Orion is a very good operator with deep pockets, and we see them pushing hard to get that next expansion under control. Management team there is very focused and driving hard. And we think that by 2021 in 2021, they should achieve their goal. But it's really it's been an exceptional effort and that asset is really showing its true colors and true quality. Okay. Thank you very much. Thanks, Francisco. There are no further questions at this time. I turn the call back over to the presenters. Thank you very much. And I'd just like to thank Sandeep Singh and Fred, who both stepped up to the plate here in Q1 for a great effort as well as the rest of the members of the team who joined us, Mike Spencer on our international side, Ian Farmer, who's taken on the role of Vice President and Corporate Development and then Renee, who's joined us in the Montreal office on strategic planning. The team is fully functional and I'm very happy with the way that the team has been able to come together, especially in this COVID-nineteen crisis and achieve so much in such a short time. Thanks, everybody, and stay safe. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.