Earnings Call: Q2 2021

Aug 10, 2021

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. Please note that today's conference is being recorded today, August 10, 2021, at 10 am Eastern Time. Today on the call, we have Mr. Sandeep Singh, President and Chief Executive Officer and Mr. Frederic Creuall, Chief Financial Officer and Vice President, Finance. I would now like to turn the meeting over to our host for today's call, Mr. Sandy Singh. Great. Thanks very much, operator, and thanks to everyone for joining us on our Q2 conference call. This is 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. 1st and foremost, a very strong quarter for us, Another in a row, frankly, the assets continued 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 continue to strengthen. So really good quarter, very happy with it. We earned, as you all know, just over 20,000 ounces of GEO gold equivalent ounces for the quarter. That sets us up really nicely at just above 40,000 GEOs for the past year. You all know that our guidance for the year remains unchanged for the time being at 78,000 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 at least one core asset ramping up, Which is the Eagle Mine, I'll talk about later. And other small at least one of the small assets that will kick into production and start to contribute as well. So Well set up in the first half of the year, looking forward to the second. Also in Q2, record revenues And cash flows from the royalty streaming business. So again, good ounce of leverage coming alongside strong commodity prices. We had the same type of cash margin that you expect from us of 94%, 97% if you exclude the Bernard ounces, So akin to last quarter and a consolidated net loss, obviously, a $15,000,000 Some of you may have listened to the Cisco development conference call just preceding ours, but that impairment has to do with Manasal Edge Phase 2, which is a satellite Projects at the Cariboo site, and I'll get into that after a little bit later. But important to note, that really that's a bit of a secondary Cleanup exercise of some old waste material, a little bit of added benefit from a training perspective and some cash flow expected, but It's not the main meal there. Adjusted earnings for the royalty and streaming business of CAD 24,000,000 almost CAD 0.14 Share, we paid our dividend for last quarter of $0.05 a share. Importantly, we bumped it up a little bit by 10% going forward to $0.055 a quarter or $0.22 annualized for the next And I think worth pointing out that despite pretty significant volatility, especially in the last several trading sessions, The strength of our business, the high margin nature of our business and our confidence in it is what allows us to increase an already Peer leading dividend. We also published our inaugural ESG report in the quarter. We announced the commitment to join the UN Global Compact. So again, advancing our initiatives to be a leader in the ESG space, we've always done things in that regard. If you look at our asset You'll know that you can see that it was probably in some ways built with VSC in mind, which it was even though it didn't used to be called ESG And we're catching up on the disclosure side of things. And then on the right hand side here, also worth pointing out That we updated and expanded our revolving credit facility. So we thank our lending partners for their continued support. On that front, we're able to add $150,000,000 to that credit facility. The drawn amounts, important to point out, also have not changed, Increased the facility, reduced the overall cost of it. So the pricing grid and portions of the grid has come down and given ourselves Great responsibility going forward. So that behind us as well. So it's just a quick snapshot again moving to Slide 4, Just one more time on the dividend, I guess. Important to note that this company has been paying a dividend since its IPO, since day 1, essentially, we've Turn significant capital to shareholders over those 7, 8 years now with By the end of this year, if the dividend remains at current levels, it would be $184,000,000 in dividends alone to shareholders by way of return of capital. It had been set up at $0.05 a share for some time, but obviously with the gold price or commodity price move, our upcoming growth in geos, We felt it was a good time even with that volatility I mentioned to increase a little bit and then watch as things go going forward. On Slide 5 here, I'll just update you on a few small transactions for us that you would have already seen, but maybe some of them we haven't talked about. Overall, I think it's worth mentioning that we've stayed true to what you've been hearing from us, which has been discipline. Early last year, I think we saw A market that we didn't particularly like, certainly felt like a bit of a seller's market, The combination of asset quality and prices being paid did not make sense to us. We've still been able to find good value for real assets On some of these smaller transactions and importantly going forward, I think that dynamic is starting to improve, frankly, Gold price volatility up and down, we'll do that for you. Last year is all pretty much straight up from the first half of the year. And we're We're starting to see some better opportunities that fit our pipeline that we like. So we'll continue to be active looking for those. In terms of things that we have Closed on in April was the Spring Valley acquisition, which we quite liked. That was an increase mainly on the Spring Valley asset And Nevada going from 0.5% NSR that we already had to between 2.5% and 3%, multimillion ounce deposit element in private equity hands, but we think that's One of the better acquisition opportunities in the sector and happy to have a significant royalty on a significant Good grade resource in Nevada. We also, in April, converted our Corral off date into an equivalent screen. So a bit of a cleanup transaction on that front to help our accounting going forward and good and positive for both us And the operator there. And then on Slide 6, the most recent one, which we haven't had a chance to talk about, would be the acquisition of Net SR on the Totec and Tocanc and Zyno projects, excuse me, it's still a mouthful. We call it TZ, as I suspect most people will. We acquired a 2.75 percent royalty there for US10 $1,000,000 But important to note that there is a buyback there with Proceeds going to previous operators. So we do expect at the end of the day that will get exercised. So what we've been what we paid for is a 0.75 percent NSR For a US10 $1,000,000 significant asset in Brazil. And obviously, most people know it. It's been non core to Eldorado Almost as they bought it as their attention just elsewhere within their portfolio almost immediately post purchase. But a real asset, 2,000,000 ounces in M and I, 1,800,000 ounces of reserves at a good grade. It's permitted and construction ready, importantly, In part of state of Brazil where there's a long legacy of mining. And so what was lacking there, what we saw was A good asset that's reserved building. What was lacking was the operator willing to do it. So we're quite happy to see just yesterday, G Mining Ventures has acquired the asset or is in the process of acquiring the asset from Eldorado, and they'll be working on feasibility within the next 6 months and updated feasibility. They're a team of builders. It's a great, incredible team, well backed. We know them well, obviously, Seeing some of their builds and we expect them to be fast tracking this asset to production. So a nice one to add to the portfolio. Moving to Slide 7, just graphically the production by asset for us. Again, as I said, the asset base performing quite well. We had a strong quarter from Canadian Malartic that had to do with Tonnage both increased tonnage and higher grades that were expected from as more ounces come from the Barnett pit. That was a nice increase. I talked about how we expect H2 to be stronger for Eagle given their seasonal effects The mine there as well as their ongoing ramp up, it was a good quarter from a CB perspective, primarily on grade as still have some catch up to be on tonnage, but they had a really nice quarter on grade. I believe it was just a tick above 13 grams. And we'll talk a little bit about that mine as well later In terms of some exploration success or potential success that they're seeing in front of them. And overall, as I said, pretty productive quarter on all our asset base. Switching to Slide 8 for just a little bit more on Canadian Malartic. Excuse me, I mentioned it was a strong tonnage quarter. It was also a good quarter from grade perspective. So the open pit continues to do what it does. It just makes an awful lot of money for Eagle and Yamana. They're on track for the 700,000 ounces of guidance this year. It's a huge important asset for both operators And our focus obviously remains on the ounces it delivers to us, but look we continue to look forward as to what the asset is becoming And continuing to evolve into the infield drilling on the underground has returned very good results As released by Nico and Yamana, a lot of that focus is obviously on East Goldie. We have a 5% royalty there. That's where 70% of the mine plan is. So that work was not unexpected, but obviously positive, which you want to see that continuing to be the case. And then in terms of upside, the Eastern Extension of that deposit is getting a fair bit of attention as well. You'll recall at one point there was 1 hole, the step out hole, 4,680 in the bottom right, which is 1,000 meters away That had a really nice interval of grade and width. It's followed up on by another, which hit Similar type mineralization where they expected it, but importantly also kind of have this offset zone 400 meters Over and you see it's tough to follow, but you see that on the bottom left hand side of the picture as well. So early days in terms of trying to turn that into ounces obviously and vinyl ounces, but certainly hugely Important, I think, and the upside and the potential there is certainly hugely important. So we expect them to continue to be active on that front. Got a big drill program this year, and we expect continued infill results and potential upside results from that program as well. On to Slide 9, just quickly on a couple of other core assets. We haven't touched on all of them here. Certainly, we're happy to talk about all of them, wanted to kind of give you the core changes, if you will, or updates and catalysts from a Mantle's perspective. That expansion is still going quite well in Chile. You would have seen that we bumped it out obviously with direction from the operator from That expansion being tied in at the very end of the year to Q1, so a pretty nominal punt into 2022 And had to do with COVID issues at one of their main contractors. So again, If those issues which everyone is dealing with frankly means you're adding a month or 2 to the program that think at the end of the day, it's pretty trivial. We're quite happy with where things are going at that expansion. And then From a slight increase perspective, you would have heard us say previously that we're expecting 5 years of 1,200,000 ounces of silver Annually for the 1st 5 years following expansion, we bumped that up to 1,300,000 ounces annually of silver based on guidance from the operator. On the Eagle side, H1 saw just size 60,000 Announces produced by Eagle, they've got a guidance of 180 to 200. So work to do in the second half, but that's just the nature of the Eagle Mine where they Stack ore in the coldest 3 months of the year plus the ongoing ramp up. So we look forward to those ounces. We thought we might get a little bit of an uplift in Q2, but I think we'll see that In Q3 and certainly in Q4. So we expect a stronger second half there. We also look forward to them continuing to Now the mine is built and it's in the process of ramping up, start to put more and more focus on the exploration side of what is a very large And Centimeters new prospective land package, as well as their previously announced plans to once they are ramped up, try to take it even further to 250,000 ounces. On Slide 10, just really quickly on too small, but nice contributors that we have coming our way in Mexico, The Santana mine of Mineral House where we have a 3% NSR should be producing 1st gold imminently from their heap leach asset And putting out more disclosure on what that asset looks like for the longer term. We expect that to be a nice catalyst Catalyst for us second half of this year and then into the beginning of next year First Majestic's Ermitano deposit is Expect to come into production, they're working on some test mining now, updating resources and we're working towards a pre feasibility study Second half of this year. They're also active on the exploration side. So those are not huge, but certainly nice contributors just starting out In terms of significant mine lines there. On to Slide 11, focusing on the ODEV assets. So 1st and foremost, the Caribou Camp. Again, some of you may have heard the update at 9 There's And expected 200,000 meters to be drilled in Caribou this year. They've done half of that to date. So, have been catching up actually. It was a bit slower at the start of the year. Again, there were COVID delays. You can't ignore them when We need to kind of quarantine folks here and there. At times, the fresh eggs of the spring thaw also That turned them a little bit as the ground was softer than expected. They went from 10 rigs down before and now they're back up to 10 rigs. So catching up And you would have seen or maybe just before that, at times, the delays on assay labs were quite ridiculous. I think Peak, it got to 3 or 4 months waiting for assays. They're now down back to regular level. So you've seen a catch up of exploration news coming up From OBEV, I think they've been on a steady clip of an expiration update every 2, at most 3 weeks, and we expect that intensity to continue And lead into a new resource later this year. So that delay has pushed that resource a little bit later into the second And we first expected and as a consequence pushed out the feasibility into the Q1 or more Cautiously, the first half of next year. Important to point out that the permitting timeline remains unchanged. The final EA was submitted in late July. That's the document that drives Permitting timeline. So that's still anticipated in the middle of next year. Again, bouncing around a little bit, but that infill drilling It's going well. It's connecting the dots as was expected. It's also pushing the resource potential down at depth, connecting some zones That we expect that will be connected. So all that's going well and the underground bulk sample permit at Cow Mountain is also a good achievement on the by the team, Beneficial to the timeline to be able to get underground early, allows some testing as well of road headers and ore sorting. So, making good progress technically. And moving forward, I did say I'd come back to the Bonanza led side of things. Worth remembering that that's a different beast. It's a satellite deposit, which is just permitted for small scale mining has undergone infrastructure. So it's somewhere you can get into, But it's not the main deposit. For instance, it's in a fault close to surface. It's got poor ground conditions in a fault zone. So it's not where you'd want to mine, That's where they can mine today. It allows Odessa to train the staff, restart the mill. They've gone through some upgrades there That are useful for both Financial Edge and obviously Caribou. And most importantly, it allows the remediation of a historical Tag pile that's on surface from previous open pit mining and that material will be used as underground backfill as the voids have been Great. You put it in. So, non cash impairment there because things have costed a little bit more than was expected. Also because some ounces have been left off the table, that production has been pushed back by about 6 months, but the Caribou production is still At the start at the same time. So the period in between where you can mine the Sponangelos portion has been reduced. So Happy with the progress that's being made at Cariboo on the main assets and I'm certainly happy with the technical achievements there. And then on the San Antonio side, as well, the team has been quite active there. Odeb will be drilling 45,000 meters in 2021, I think you guys know Sean likes the drill, so he's a bit behind on that one, but they're looking to catch up. They've got 4 rigs Turning there. And if I had to guess, I'd assume there'd be an update in August, September. So far, the confirmation work that was planned to Convert inferred resources to higher categories and hopefully fill some gaps is going well is our understanding. So we look forward to that update as well. And then in terms of 2 catalysts there, the existing stockpile that's on surface is expected to be under Leach by the end of the year. And then more importantly, it's a nice it's nice to do because it's sitting on surface. But more importantly, the bigger permit for the Sapucci open pit, Keep leach is also expected by the end of this year with construction starting in Q1. So that hopefully is a 2022 production event For us, as many of you know, the crushing plant has already been purchased, components of it, some of them are already at site, the rest are on their way. So they're also making good progress there. At Windfall, I'm on Slide 12. Again, some of you have been following what I think are exceptional exploration results that continue both from an infill and expansion perspective at Windfall. We highlight a couple of them here over 2,000 grams over 2.5 meters, 2.2 meters over 400 grams. I think in the last press release, there might have been 6 results of over 2 meters and over 200 grams, so pretty stunning exploration results. The upside there the infill and the upside there continues to prove out better than expected, including a new discovery a kilometer away That needs follow-up work, but I think the team there is doing an exceptional job advancing the asset into development phases with a feasibility expected in the first half of next year, production in 2024 type timeframe, but also continuing to make the assets bigger and And providing some upside there. And then at Upper Beaver, which is a new Miho asset where we have a 2% NSR, They're working on a fair bit of drilling of their own conversion and then potential expansion. The grades are coming in quite nicely, Both for gold, but in particular, the copper grade is seemingly coming along quite nicely. Some of the new results, we highlight one of them there. And that should have a significant impact on the size and potentially the grade of the resource. I've heard talk about a potential other structure at depth. So all good news, which will be incorporated in the study in 2022 and hopefully prove to be the construction or the decision point. Again, if you listen to some of the commentary coming out of Nikko, they're calling it a mine today And permitting is what will drive the timeline there. Last I heard from them guiding to production, this is notionally guiding, I should say, to around 2027. Just quickly maybe on some assets that we haven't put in the deck Before I pass it on to Fred to give you a little bit more color on the quarter, again, keeping with that theme of our assets working for us At Seabee, as I touched on earlier, it was a record quarter in Q2 in terms of production driven off higher grade. They also encountered some unexpected high grade at the edge of the resource, which they were going to be following up on next year. That still puts for 15 grams. Island put out their best hole ever, it was 20 meters of 70 some odd grams per tonne outside of the existing resource And on to our 2% royalty ground, they're drilling $25,000,000 they've got $25,000,000 exploration budget this year. So they're hitting the asset hard And are well on their way towards their expansion to 2,000 tons per day, permitting currently the shaft expansion, but progressing well. And on Lamaque, they continue to progress at Eldorado with the underground ramp on track that will help their mine overall in terms of reducing costs, but it also provides Better access to drill some of the other resources down there. So overall, good news across the portfolio, a really good quarter. And I'll let Fred, starting on Slide 13, walks you through some of the particulars of it. Thank you, Sandeep. Good morning, everyone. Thank you for joining us today. First, I would like to remind everyone that as we consolidate the balance sheet, P and L and cash flows of Osisko Development, we are providing additional segment information in our financial statements, MD and A and press release, where we split our results from our royalties and streams business and results from our Cisco development. As mentioned by Sandeep, another great quarter for Sysco in Q2 with strong deliveries of gold and silver, which led to record revenues, cash margins and operating cash flows from the royalties and streams business. Our operating cash margin on Our royalties and streams reached 94% or 97% if we exclude the Renard Diamond stream. On Page 13 of the presentation, we recorded record revenues from royalties and streams of $49,900,000 compared to 28,700,000 In Q2 of 2020, which was, of course, highly impacted by the COVID pandemic at the time. Cash flows from operating activities were $30,900,000 on a consolidated basis for the Royalties and Stream segment alone. Cash flows from operations reached $37,300,000 compared to $16,800,000 in Q2 of last year. If we go on Page 14, we present a summary of our earnings and adjusted earnings. The consolidated net loss to Osisko shareholders was $14,800,000 or $0.09 per share in Q2 of this year compared to net earnings of $13,000,000 in 20.20 or $0.08 per The consolidated loss in 2021 was due to impairment charges recorded by a Cisco Development of 40,500,000 including $36,000,000 on the balance alleged to that project. On a consolidated basis, adjusted earnings were $20,200,000 or dollars 12 per share comprised of adjusted earnings of $23,900,000 or $0.14 per share for the Royalties and Stream segment and an adjusted loss of $3,700,000 from Osisko Development or $0.02 per share. On Page 15, we have a summary of our quarterly results with additional details for the Royalties and Streams segment, including revenues of $57,200,000 compared to $241,000,000 in 2020 and gross profit of $35,700,000 compared to $19,000,000 last year. On Page 16, we present a breakdown of our cash margin for Q2. The cash margin on our reached $36,300,000 and the cash margin on our streams amounted to $10,600,000 Our total cash margin reached a record $47,200,000 in Q2 of this year. And for the first half of twenty twenty one, we generated cash flows of close to $94,000,000 And finally, on Page 17, you'll find a summary of our financial position. Our Cash balance was $255,000,000 at the end of Q2, including $110,000,000 for Osisko Gold Royalties and $145,000,000 for Osisko Development. Osisko Gold Royalties held investments having a value of $188,000,000 in addition to our investment in a Cisco development valued at the end of June at over $700,000,000 Our debt was stable at $400,000,000 with over $530,000,000 available under the credit facility, which was I will now turn the call back to Sandeep for closing remarks and questions. Thanks a lot, Fred. So look, again, at the risk for 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. Thank you. Your first question will come from Josh Wolfson from RBC Capital Markets. Please go ahead. Your line is open. Thanks. Good morning. 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 Q3. And I'm wondering what the difference is between construction completion and when That ramp up actually happens. And then should we expect maybe a weaker 3rd or 4th or Q1 perhaps As that commissioning process starts? Yes. No, it's a good question, Josh, and good morning. I think you're right. Think the difference is kind of mechanical construction completion, if you will. That's the 92% level. When we talk about timelines for us, that's not what we're focused on. We factor in the lag that they've relayed to us in terms of Alces are supposed to start coming out or tons 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 has not been easy. COVID in Chile has Certainly not been easy. So to keep things on track as well as they have, I think it's 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, Santenna and the upside from Eagle, You're tracking towards the higher end of guidance. So should we expect the company to be more within guidance if in fact, Mantos is a bit lower? Look, I think Mentos will I mean, there's always variability mind by mind again, especially when you're the byproduct as opposed to the 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 And the mine plan, why that should change in the second half of the year? So, no, I think our assets are mid barring That's normal variability that I talked to you about. So, no, I think we're happy with that core asset. It's doing exceptionally well for us. And Our hope is with pre gold ounces coming in, maybe we can start tracking a little bit better than the midpoint frankly. Okay. 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 Should we be speaking about this credit line used or maybe there's flexibility here, but potential 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. Looks, our hope is that that's converted in the money come the end of next year, which is probably 1.5 years and Volatility has worked against us in the last few training sessions. It 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 minds. It's Certainly a fallback for the convert at the end of 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 is 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 Manage depending on how we go in the next year and a half. But yes, absolutely, it can provide a fallback before that conversion. 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 ODEP call. Is there any more information on the timing difference for the feasibility study now at Caribou? Yes, sorry. I hope I alluded to it earlier, but I'll do it again. So timelines, I think I mentioned that the resource update into 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 You're conservatively, hopefully, it can be Q1, and I think that's what Sean said this morning as well. So feasibility into early next But the permitting timeline remains unchanged as the EA, the final EA was submitted in very late July And that's really what's driving the permitting timeframe at this point, not the feasibility. Great. Those are my questions. Thank you. No problem. Your next question comes from Ralph Giuffeti from 8 Capital. Please go ahead. Your line is open. Good morning, Sandeep. Thanks for taking my questions. Just wondering if you've had some Preliminary discussions are 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. Just wondering if you can give me more color on actually turning that into cash flow? Yes, as I'm not sure, I can. 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 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, Vin and Hal, obviously, it was non core to Eldorado for reasons that got other things they can do that they're focused on and that's fair enough, but it was an asset worth building. And that's what we saw and we're happy a group like 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. If you can put that down with a permitted Construction ready assets, they've got backing from Sprott and other supportive 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 for myself. Okay. Yes. And it was a small transaction, but it's interesting to see Osisko Gold Royalties You'll do something in the carbon streaming space. I'm just wondering when you looked at that opportunity and the body of work that you've done, is that are you taking the approach that it's sort of Complementary to the ESG strategy or do you think from an 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 Exactly. 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 So for us, it was a preference 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 vet 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. But 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 potential there and frankly, that's with a flat view on carbon pricing, which I think is the easiest thing to say that 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 the grill 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 of them. We have 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 will be net 0, not at 2,040 or 2,050, 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. Excellent answers. Thanks, Sandeep. No problem. Thanks, Ralph. Your next question comes from Cosmos Chiu from CIBC. Please go ahead. Your line is open. Thanks, Sandeep, Fred and team. Maybe my first question is on the royalty that you did not mention, Falco. I think there's been recent positive development of Falco Resources. They're raising money, dollars 10,000,000 clearly not enough for the entire CapEx, But I also see that OR is advancing $10,000,000 as well on the Silverstream. 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 you're expecting Some kind of OLIA by Q3 as well, Sandeep? Yes. No, it's a great question, Awesome. I hear you got me in trouble. I should have talked about Falco. It runs a risk of getting beaten up by Luke. And there was good progress Frankly, so I'm remiss that I didn't bring it up. So, I think 1st and foremost, The term sheet that they got into on the OLEA, the acronym, the operating license, as you point out, was a big catalyst, a significant catalyst, something that we've been waiting for, 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 Full agreement and that's happening as we speak. I forget exactly when Luke 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 tucked in a little bit of financing from an equity Obviously, just to move the asset forward to development CapEx, basically the permitting and development CapEx, we've chipped in, didn't mention it because it's Have a non event, I guess, in my mind. We owe them $20,000,000 in the near term. Based on that agreement being finalized, we're very happy with the progress they've already made On it. So, pre funded 10 of it. We have to do the next 10 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 quite some time. It was not easy work. Obviously, a lot of complexity there. Glencore is a massive group to get their attention and frankly build the trust a group like Falco, because they probably didn't know what a Falco warrant at Cisco was a few years ago when things got started. I think he's come miles from there. And the teams are working exceptionally well. So I don't know if I touched on all your questions there, but Really good progress. Happy that they've got some funding in the bank. Towards the asset forward from a growth perspective, sorry, that might have been the last piece of your question. It's a big chunk for us. It's a massive stream. It's a lot of silver ounces that we get from that asset. It's 6,000,000 ounces of reserves gold equivalent, it's 9,000,000 to 10,000,000 So the goal of Coriant Resources, it matters. And so we don't exactly know the timeline, so anything will be a hurdle. But I think if it's one of those assets that will have significant Support in Quebec. We've got our stream components that are there to be funded. And I think it's one of those things that will be tough Until it's done, but it's important for us and I think it's certainly worth building and it will have its moment in this time. Hopefully, that does touch on all your questions, Cosmos. Yes, yes, it did. Maybe switching gears a little bit, as you mentioned, I'm glad to see that as well. 10% increase in the dividend. Sandeep, I'm just trying to take 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. I did. No, no. Obviously, we have a view internally at the amount of cash flow we want to redistribute 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 to 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 with every anytime 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 it as what it is, Significant sign of confidence in our business, one that's working exceptionally well. And as those answers 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 of that way internally and that's the byproduct, the increase yesterday was the byproduct of that. Great. 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 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, good questions. There are opportunities across the board. Certainly, anyone with a royalty or royalty portfolio has been Either brought it to market or been thinking 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 was 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 until the end of the year. When you have gold prices more range bound and you have The risks are down as well as up. So 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 accelerator 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 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 when 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 newer 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 that there was a number of companies that need 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. Thanks, Sandeep. Those are all the questions I have. Thanks again. No problem Cosmos. Thank you. Your next question comes from Terry Smith from KeyBanc Securities. Please go ahead. Your line is open. Good morning, Sandeep and Fred. Sandeep, could you maybe give me a bit of an update on what's happening at Renard? The timing prices seem to have strengthened and I'm just wondering what the strategy is there now? Sure. Good morning, Carrie. 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 and A that The pricing has continued to firm up, not just for Renard, but in the diamond sector overall. Renard pre COVID Excuse me, pre COVID, in the $70 per carat range consistently and dipped down even lower, obviously, And the worst of COVID when people can travel for sales, etcetera, 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 sale, culminating in the last sale at $9,350 a carat U. S. So happy with that uptick in prices. That's what that mine needs to be profitable. And there's still So, the streams built 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, this question of where 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 from getting Paid scream. So that's something we continue to work on in terms of finding the right solution for. And at $9,350 a carat So you call it $100 a carat less, 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 $9,350,000 And we've committed to deferring Our stream proceeds into, I think it's April of 2022. So we're having those discussions as we speak, but certainly happy with the way things have gone and don't want to get too far ahead of myself because we've taken it on the chin for that asset. I'd rather it be a positive when it Well, it truly is a positive, but really happy with the progress that's been made so far. Okay. Okay, that's good. Thank you. Appreciate it. No problem. Your next question comes from Puneet Singh from IA Capital Markets. Please go ahead. Your line is open. Hi, good morning. 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? Thanks. Hi, Puneet. Yes, no problem. Yes. Look, we still think we're cheap as well. And I'll just say that I think we would certainly have that view that we've made good progress. The stock had done well to 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 little bit of time, but we do like our stock. So We've said we'll look at the ANTIB 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 N SIB and dividend. We certainly have and will continue to get cash flow back or get cash back to shareholders. Okay. Thanks, Sandeep. No problem. Thank you. 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. Olga, 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.