OR Royalties Inc. (OR) Q4 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties' Fourth Quarter and Year-End 2017 Results Conference Call. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that this call is being recorded today, February 20, 2018, at 11:00 A.M. Eastern time. Today on the call, we have Mr. Sean Roosen, Chair of the Board of Directors and Chief Executive Officer, and Ms. Elif Lévesque, Chief Financial Officer and Vice President Finance. I would now like to turn the meeting over to Mr. Sean Roosen. [Foreign Language]

[Foreign Language] Welcome everybody to the 2017 year-end and Q4 results for Osisko Royalties Corporation. We will be making forward-looking statements. I would refer you to the disclaimer that is found on page two of our PowerPoint that's on our website and we will be following for the course of this call. As we sit here today, obviously, the markets are down. Osisko is trading about CAD12.28. We have a lot of good things that happened in 2017. So I suppose we'll start out the call, there's never been a better time to buy low and sell high, and I've never been more disappointed with the share price but I'm still happy with the company. And as we get started I would point out that we have between cash undrawn debt facility and equities over CAD1.073 billion available for the company to move forward at this point in time. And as we move forward, on page three, in Q4 2017, we had almost 21,000 gold equivalent ounces earned in the fourth quarter. Revenues were CAD32.2 million, with over CAD109 million if you included the offtake agreements, which is 135% compared to Q4 2016 increase. Net cash flows from operating activities of CAD21.5 million, up 68% compared to 2016 for the same quarter. Net loss attributable to Osisko shareholders of CAD64.3 million, which closely reflects the write-down impairment charge that we took on the Éléonore change in mine plan, so these are non-cash attributable losses that we took in the course of the revision of guidance for Goldcorp, on the Éléonore mine plan. This is compared to CAD8.7 million earned in Q4 of 2016. In terms of overall, moving into 2017, as we look back, record year for gold equivalent ounces, almost 59,000 ounces earned, up 54% from 2016. Record revenues of CAD93.8 million excluding the offtake agreements up 50% compared to 2016. Net cash flows from operating activities of CAD48.7 million, with - against CAD53.4 million from 2016, however 2017 was a very special growth year for us with a lot of different moving parts. Elif will get into those numbers as we get further in the presentation. Net loss attributable to Osisko of CAD42.5 million, these are all non-cash items, including the Éléonore revision on the mine plan. Acquisition of precious metal portfolio from Orion Capital for CAD1.1 billion. The acquisition of a 100% stream from Taseko, and a 18.5% gold stream from Aquila, Michigan Properties. We also completed a CAD300 million convertible debenture on a flat deal offering and increasing revolving credit - we also increased the revolving credit facility to CAD350 million. Quarterly dividends totaling CAD0.18 a share for 2017, so the overall dividend for the year up from 2016. 2018, we've declared our first quarterly dividend for Q1, which is CAD0.05 a share for the year. Page four reflects what we see as we go forward. We have increased - and historically we've increased a total above 75% since inception, 25% happening from 2014 to '16, a 54% increase from 2016 to 2017, and looking forward to significant growth. And our growth portfolio continues to execute. And then we're also operating at an 87% cash margin on our GEO, so these are as close to royalties as anybody in the sector is going to get. A 54% increase in GEOs just in 2016 - with '18 looking for 77,000 to 82,000 ounces is a pretty strong performance in terms of being able to grow in a very competitive space. On page five, a little bit about the Éléonore royalty. We have seen the Éléonore royalty continue to grow in its contribution, even though we did have an impairment, which Elif is going to talk about. But we started out in 2015 and delivered 402 ounces, 2016, a little over 6,500 ounces, 2017, just under 6,400 ounces. And in 2018, we're looking forward to see that increase to 7,900 ounces. And the 2019 guidance, based on the current mine plan, is deliver 8,800 ounces to us. So we're seeing significant performance from that investment. However, due to accounting rules we will have to face an impairment of CAD65 million on the acquisition cost of that asset. In terms of where we are on the rest of the portfolio, I'm going to hand it over to Elif to take you through from page six forward. Elif, over to you. Elif Lévesque: Thank you, Sean. So, looking at our 2017 financial performance, like Sean mentioned, this was quite a transformational year for us. And the Orion transaction being closed on July 31, 2017, we only got to see five lines of production in 2017, and we're looking forward to have the full-year portfolio benefit in 2018. Looking at net cash flow from operating activities, the 2017 numbers had a few specific items to it. The initial one being of almost CAD9 million or Orion-related transaction fees, which was included in 2017 compared to 2016. And I would also like to note that 2017 was actually the first year we had the full amortization of our long-term incentive program, which is over a period of three years. So since inception of the company, in 2013, this was the first year we actually had the full cost. And accordingly, we also have the first payment of our RSUs in 2017, which will be actually on a regular annual basis going forward. In 2017, this represented a payment of CAD5.5 million which is reflected in the 2017 numbers. Going forward, we expect this number to be slightly lower since the initial grant was slightly higher than the following RSU grants. Now, if you look at the net earnings loss, as Sean mentioned, the CAD42.5 million loss for 2017 reflects the impairment charge of CAD65.4 million net of income taxes on the Éléonore royalty. This royalty has been paying out in terms of gold ounces on a growing basis, since 2015. And we're expecting actually 24% increase in terms of our 2018 guidance, and an initial 11% increase 2019 going forward. That being said, for accounting purposes, we need to monitor the indicators of impairment and a sustainable level of production being lower than design capacity has led us to an impairment assessment, and which reflects in terms of a reduction of CAD89 million in recurring value and then CAD65.4 million net of taxes. And this impairment is reversible in nature. And other than that, the net earnings or loss for 2017 was mainly reflected of the same similar items as the cash flow as well as higher finance costs. Now, if you look at the revenues, which shows a record quarterly of record - actually annual revenues at 50% higher compared to 2016. We are at CAD94 million if you look at the royalty midstream. If you look at the revenues without the offtake, as we have mentioned previously, I think the offtake was a nice add-on in terms of the portfolio we purchased from Orion. Unfortunately due to their material nature and their contractual nature we have to present them separately in terms of the revenues and the cost of goods sold, as per IFRS. But on a net basis, they do provide us with some marginal profit. And I think the next slide presents the situation well in terms of the breakdown of the royalties for the gross profit before depletion as well as the streams and the offtakes. Now, looking at all of this we see that in terms of the cash operating margins without the offtakes we're looking at 92% for the 12-month period, and an 86% for the three-month period for December 31, 2018 - '17. And we expect pretty much in 2018 going forward to be around that level of 86%. The next slide, I don't want to go into detail, but this slide basically lays out some of the details for the GEOs by product and the earnings per period. You can note that we have received 90% of our GEOs from precious metals in 2017. The next slide, on the dividends, we have always said that we want to reflect the growth profile in our cash flows into our dividends as well. This will be our 14th consecutive dividend payment, which is going to be based on the March 30th shareholder day table on April 16th. In 2017, in pretty much half-year, we increased our divided - quarterly dividend from CAD0.04 to CAD0.05, and we're looking forward to growing our dividend base as our cash flow is also growing. In terms of our financial position at year-end, we stood at over CAD300 million in cash. And in terms of debt, with the CAD300 million debentures that we added in the fourth quarter, we're actually looking at CAD148 million of our credit facility, CAD350 million in convertible debentures less some unamortized debt issuance costs and accretion, which comes up to CAD464 million on the balance sheet. All in all, if you look in terms of the available capacity that we have, we have an additional CAD300 million on our credit facility, which includes CAD100 million accordion, which is available to us. And if we look at our cash and the available credit facility, we're over CAD600 million in terms of what we have not even including the marketable securities.

Thank you, Elif. So on page 11, we're just going to take a quick pass through the 2017 activities. It was a very active year. And I think that as we reflect on it the CAD1.1 billion Orion was probably the largest royalty deal done since the IPO Franco back in the day. As we look back in the year, we closed on a CAD300 million debenture with proceeds being attributed to our tax balances we see today post the acquisition of Orion asset base. And we increased the credit facility to CAD350 million with another CAD100 million of undrawn. So as Elif stated, we have quite a bit of firepower left on our debt component as well. A significant expansion to the royalty and streaming portfolio, we have also added Taseko in addition to Orion and Aquila. We won't go into too many details here, but I mean these are significant assets - added 9.6% stream on Renard, 4% silver stream on the Brucejack gold mine in addition to the offtake agreement that we have there, and a 100% silver steam on Mantos, a copper mine in Chile which is currently in transition. And we expect good things from that asset as we move forward. But also CAD44 million is Gibraltar copper mine stream - copper mine, sliver stream from Taseko. We also acquired the offshore Osisko Bermuda Limited with the acquisition of a gold stream for CAD69.8 million on the Back Forty of Aquila Resources which is an asset of Aquila in Michigan. We also increased our royalty to 2.25% at Barkerville Gold Mines, and that was a pretty good step forward as we're waiting for our resource to come out from Barkerville in the first-half of this year, and a significant performer, we believe, in 2018 and 2019, as that continues to mature. Over at page 12, just to reinforce, the bulk of our assets are Canadian. We have given the sheet here of the producing assets that are denoted in the yellow color. We consider those to be cornerstone assets. Obviously, Brucejack, Mantos, Canadian Malartic, Éléonore and Renard. And then, we see of the other assets. Gibraltar is a good silver stream. Seabee has been a great performer, a bit of a surprise. [indiscernible] with Vezza, which continues to deliver a cash churn, and also Sasa in Eastern Europe has been a good start to it. Kwale in Africa as well as Matilda in Australia are also providing us with revenues offtake agreements. Page 13 is a bit of a splotch and a summary of these producing assets. Obviously Canadian Malartic continues to be our cornerstone asset and outperformed this year in terms of what we had expected from it. And it continues to be a great asset with evolution not only in terms of production but also in terms of increasing mine reserves. The Éléonore project continues to advance. And it's worth noting that we have a sliding scale of royalty here that increases as total production has increased. So even at steady state, our royalty goes up as more ounces are produced and we will get further into that. So my guidance for 2018 is looking good, but it did produce 305000 ounces in 2017, making it one of the world's top 30 goldmines. Diamond stream in Stornway, Renard mine, 9.6% of the diamond come to us. These mines produced 1.6 - will produce 1.6 million carats in 2018. And 50% of the steel erection for the ore-waste sorting facility is complete now. So we're looking to see the completion and the evolution of that ramp up continue to contribute to the overall value of the diamond that are produced and to look into the breakage that they have there and we should see some increased throughput with that added facility. Brucejack, obviously, lot of discussion in the marketplace around this mine; it's a long-term asset. I think that the company's guidance for this year looks pretty solid. It is a world class asset. And having visited this place myself in October, I was very impressed with what's going on there. And I think that that is the world class asset that's going to be around for an awful long time. And I think an IRR on assets like that don't really do justice. However, we have 4% gold and silver stream there as well as we have an offtake agreement on that project. Mantos is a primary run company. So, we don't have as much guidance as we might like for Mantos. But from what we see, it's a great project and they are making the transition from oxide to sulfides. And we are very optimistic about what happens with that project as they evolve through that and also as they continue drill out where they have significant upside, the mine plan. Sasa, we have 100% silver stream. One of the biggest zinc and lead mine - lead, silver mines in Europe. This was an acquisition by Central Asia Metals in 2017, continues to be a very strong performer. Gibraltar having a great year located in BC, about 90 kilometers from our asset, and one of the biggest operations in Canada, 5,000 tons a day throughput and with significant amount of upside linked to our exploratory system there and another great Canadian asset. Seabee, bit of a surprise I think for a lot of people as the ounces there will increase from previous management as silver gets into the PEA. It's been getting stronger quite a bit and will have record throughput in Q4 of 2017. And we think that that asset continues to grow. Page 14, just to reinforce a little bit about what's coming. This is a growth portfolio. And I think that's part of the problem what we are seeing in the market, we are exposed to several ramp ups. Five ramp ups to be precise. And we also have quite a few development assets within the portfolio. So, we have set the stage for the future. Amsular is under construction in Armenia as we speak today as is shown in the cutout on Page 14. And we think that that's a good project that's going to come online in the second half of this year. And we have quite a strong stream there. And we see that as long-term asset in a country of Armenia has done quite well in terms of where it stands financially and physically in the world. So, we are happy to see the progress there. I was over to visit the asset myself during the construction in the fall. And I think the management team there has been flown in. In terms of other assets, Barkerville is progressing well. You've seen drill results on that one. The fiscal royalty is up from 32% of the equity in this company plus the royalty. So, we see a lot of progress there as underground test mining has begun and resource is scheduled to come out in first half of this year, which should be a welcome reinforcement value there. We see Windfall. Nice project. Obviously, quite a big asset in terms of where we are going. That's the recipient of the largest drill program in the world as far as I know for development asset. At the end of 2017, more than 24 rigs returning and evolving from Osisko resource hopefully in the first half of this year and get on with PEA study. But obviously, here in Quebec Windfall is very significant asset to us and we expect good things from that camp. It is an overall camp and our royalty does not cover just the deposit. It covers over 2000 square kilometers of real estate in that package. So, we laid a lot of foundation and cornerstone blocks for the future where the portfolio should continue to evolve and make sure regardless of any future acquisitions. Falco, obviously it's a big strong deposit showing over 7 million ounces of indicated in the mine plan currently gold equivalent. And currently, capabilities are - EIA has been deposited and working towards construction financing and permitting on that project, could be one of the largest underground mines built in North America, scheduled to look at 50,000 to 60,000 tons per day. Other assets of significance, so there is a big list in here, but I won't go into them right, now probably good one to mention is Odyssey which is a discovery of Eastern Canadian Malartic, which is continuing to demonstrate what we believe all along that Canadian Malartic asset is going to be one of the biggest gold belts in the world. At 8 million ounce of historic production currently the mine plan and mine would bump another 150 million ounces a day and discovery continues at that site. So that's really the cornerstone of where we started, where we came from. And we continue to benefit from that with a 5% top line royalty on that asset and plus some royalties on the Odyssey. Page 15 really a summary of jurisdictional risk; 104 assets in North America, another nine in South America in premium jurisdiction, Peru and Chile; for the most part, you know, bringing us to 140 or 130 assets in the Americas and a really small exposure assets in Europe and in Central Asia. Only one asset in Africa at this point and then 13 royalties that are non-producing in Australia except for one of offtake agreement. I think in terms of what we plan to do in 2017, we have achieved all of our expectations. We do have exposure to ramp ups. We do have development assets. We just set the stage to be the strongest growth company in the royalty space as we go forward. Page 16, a couple of details of I want to get into here. We have talked about our accelerator model. And, the simple numbers $364 million invested. Of which, 70 million was flow through shares which provide the less than zero cost on our taxes. So, we are protecting our cash flows by making these investments. As we move forward, we are able to protect our royalty income from taxes with those methods. Current book value of those assets at the end of the year was $439 million. So, we have unrealized gain of almost $8 million in that book. We also have realized gains last year of $70 million within the equity book which includes - last year included Arizona and few other assets. So, we have already harnessed to $70 million from this strategy. We invested $90 million to buy new royalties, in conjunction with those accelerated companies. So, we reduced the realized gains from the accelerated model, from the cost on royalties, we would have been paid $20 million for that royalty book which gives us significantly higher returns in a traditional royalty investment that run through bank process or screening opportunity. So the board see returns within the accelerated model clearly demonstrated over the last 22 months went from conception to fact really in 2017, I don't think that there is lot of value being attributed for this within the marketplace but royalty within accelerated model are pretty valuable, 1% on remaining assets, 2.25% on marketable assets, 1.5% on rental and on high but these are much more valuable than the book values that we have attributed to them. We cannot speak to them because they are published resources but some of these assets are very significant and their cost space is one of the lowest in the industry for acquiring. So I think we've proven to the work in terms of the amount of capital we deployed overall, we don't have a lot of capital risk in accelerated model if you look at the net returns that we achieved already. Page 17 is covering over 130 royalty streams and metal off takes, five cornerstone assets, 16 cash flowing assets, dividend yield today is actually higher than 1.3% because of the market conditions that we're all facing. We do have dominant precious metal exposure, dominantly exposed to Canada and North America in respect to America record number of GOs presented at just under 59,000 ounces and guidance for this year roughly 77,582 for 2018 over $430 million investments, $334 million in cash on the bank account as we said today and another $250 million undrawn debt to bring overall $1 billion of available liquidity in a company market cap rate now below $2 billion. So all in all, I think we're in pretty good shape, we shall prevail and I look forward to taking questions as we move forward. Thank you very much.

[Operator Instructions] [Foreign Language] Your first question comes from the line of Cosmos Chiu from CIBC. Please go ahead.

Hi. Thanks, Sean, and Elif for the conference call here. Maybe a few questions from me here, maybe first off, on the 2018 guidance, what you put out there was a bit lower than what we'd expecting in 2018, and - but sure I'm looking through the numbers it looks like the difference at least compared to my model here is the timing or the start-up of Amulsar, as you said operated by Lydian International. And also on Éléonore, so I guess my question is on the Amulsar, as you said, Sean, you went overseas to go and visit the asset, how confident are you with that start-up and could you maybe talk a bit about the potential or the - option of the company to buy it back as well?

I'll start with the tactical visit of the site, you know, the site is essentially earth work, particularly it's operations. So, depending on the weather conditions in which they execute this winter, whether it's severe winter or light winter, it's going to guide a little bit on how those earth works get executed. And I think that's going to drive their start-up dates, and obviously when you load a heap leach pad, you're not really sure exactly when returns are going to start, because it takes a while because the lease cycle started and it is somewhat the function of energy and temperature. So all in all, we have looked at what the company has said, we provided guidance that we believe is somewhat conservative, but we've been around to see investors, and we've always tried to provide relatively conservative guidance. And we continue to work with that being our motto. If we get surprised, that's great, but we are - this is the mining business, we're aware of it, and we think that a lot of these figures have some upside to them, Cosmos, but we're not going to put them in the numbers for you right now. We'll wait and see. And in terms of the buyback, I will hand it over to Joe, Joseph de la Plante to give you a bit more insight on the buyback.

Great. Hi, Joe.

Hi, Cosmos. Yes, in terms of the buyback, I mean this is an asset company that is going through construction. I think our current understanding is that we don't expect that buyback to be a priority for the company at this point in time, given both I guess the financial condition of the company and the pricing of the buyback. At this point in time, I would say we're not expecting it to be bought back.

Okay. And Joe, can you remind me again like, when the option to buy back, when does it end?

It's essentially a one day off shift for 50% buyback.

And when is it?

I believe that to be 2019.

2019, okay. And then, may be switching gears a little bit on Éléonore. It's ramping up, but I guess compared to as Elif had sort of mentioned, as compared to the technical model, it's sort of - it's lower than what was previously expected, and so, hence the write-down here. So, after the write-down, Elif, how much book value do you still have on Éléonore? Elif Lévesque: So we're right now sitting at about $300 million.

Okay. And then, can you remind me again, if for us - do you check the impairments once a year? Elif Lévesque: No, it's actually on every period. So, on a quarterly basis, we'd to look at indicator basis of all of our assets.

But I guess as you mentioned now, the accounting rules have changed, you can actually write a backup later on if it turns out to be better than sort of expected? Elif Lévesque: Exactly. So let's say if there was sustained improvement, you approach step up their design capacity, then it's possible to reverse the impairment.

Okay. And then, maybe one last question for me here, Sean, in terms of per diem, it all clearly they've had some issues in the past, in Q4. You know, on the one hand you have royalty on it, so you wanted to do well, and on the other hand, there is a buyback right on that royalty, on that stream. So how would you look at it, Sean, from your perspective at this point in time, and as a possibility or the probability of the stream being bought back eventually decreased?

I think it's probably too early to say. I mean, you're looking at five months' worth of results in a very high grade sort of variable rate deposits. So I think it can take more than five months to come up with an opinion on where they are. Obviously you know, typically underground mines, if we look at Éléonore as an example, it also takes a while to get things up and running, get enough lateral development, and get lined up on sales preparation. I did visit the site, the infrastructure is impeccable; it's a very strong mill. And I don't really see a lot of problems there. It's really more about the execution of our underground development. The market has zero patience for that. In terms of the buyback, we've assumed that if we do get back, we would receive a USD 160 million in December 31 of 2018, and if there's step that to 2019, we would receive over USD 130 million back. So that's kind of how we look at a value of it. However, if things change, and the buyback [indiscernible] the value of that asset could go up significantly, but what we've included in our model assumes the buyback. So I think to make profit for us on our investment, but I would remind you that we still have the uptake agreement that only a portion of it has a buyback on it. So we will have exposure to that asset on a long-term as we move forward. And just the exceptional deposit is going to take some time, and I know that everybody is quite nervous whenever we do a line start-up on high grade asset like this, but having been there, looked down it, and having worked on the geology of it, we're pretty comfortable that in the medium-term, things are fine; short-term it's pumping right.

Great. Thanks, Sean and team, that's all I have. Thank you.

Okay.

[Operator Instructions] [Foreign Language] Your next question comes from the line of Kerry Smith from Haywood Securities. [Foreign Language] Please go ahead.

Thanks, Operator. Elif, for the guidance that you kind of given out for 2018 G&A and business development expenses, it's about 6.5 million bucks higher than what was, say, in 2016 before we had all the one-time costs, but it looks to me like the bulk of that increase is related to the RSUs, would that be correct? Elif Lévesque: Yeah. Exactly. So the bulk of that would be the transaction costs of Orion which is almost $9 million and the rest is related to some of the price adjustments. As we know, the RSUs re mark-to-market on a regular basis. So if the price goes up within a period, actually hits the P&L on a higher level and 2016 year end versus '17 year end, the price went up for share price, so that reflects itself in the P&L. But I think on an ongoing basis, it's safe to assume probably a level of USD20 million, all in which would include the G&A, business development, the back charges that we have. It is a cash basis. Yeah.

Right. So in that USD20 million for this year, how much are you assuming for the RSUs then? Elif Lévesque: So like I said, for this year, they were rather high for the RSUs. So going forward, we're expecting them to be lower, but then again, it depends on the mark-to-market of the RSUs going forward.

And then in the guidance for this year on production, how many GEOs have you assumed coming from Amulsar and Lamaque? Elif Lévesque: From Amulsar actually, we were on the conservative side and we assumed that it's going to go on to production at the end of the year. So we only assumed a marginal GEO from Amulsar, 1200 ounces, 1200 GEOs from the offtake and the stream. And from Lamaque, we did not budget anything.

Your next question comes from the line of Dan Rollins from RBC Capital Markets.

Sean, maybe you could provide a little commentary on what you're seeing out there in the marketplace for new royalties and streams. Are there any other packages sitting around and if so, what is the size of the package that you're looking at and if they're sort of in that $300 million range, how can you do more than 1 or 2 this year with the current balance sheet.

Sure. We are seeing packages coming out of their activity. Obviously, it's times like 2015 and '16 where there were streams being issued every quarter, most of them are to do with other expansions or people taking stuff off their balance sheet that they kind of collected up. And the real opportunities right now are mostly on development projects as we see project financings coming up. So right now, we have firepower, I would argue, Dan for three times on the balance sheet and under our debt facilities for CAD500 million, quite relaxed. We've seen some opportunities in terms of projects that are getting permitted and pending development stage where we would want to deploy. And obviously some of those assets would be in our accelerated group as we see Windfall [indiscernible] that end of the cycle as they move from resource definition to pre-feasibility and permitting and onto mine construction. So there is quite a bit to do. We did lay a lot of the groundwork for growth in 2017, Dan. So it will probably be a significantly less active year than 2017. However, we are going to place the ball on the fairway this year and just very conservative view as we go about. As your point on strategy at current share prices, we do have a specific place. So you'd probably expect to see us maybe take a look at our own stock as a better investment than some of the other market conditions that are out there right now. We have the market, if the market remains where it is on the OR stock, we're probably going to execute as soon as we're out of block to be honest.

Your next question comes from the line of John Tumazos from John Tumazos Very Independent Research.

Éléonore output were only 400,000 ounces. How much would the gold price have to rise from the price effect to reverse the impairment? Elif Lévesque: Well, actually for the reversal of the impairment, we have to look at the same reasons for taking the impairment initially. So it would be actually looking at a big change in the sustainable level of production.

Do you have to get all the way back to 600,000 ounces and does it matter if it's from Éléonore or if it were from exploration series resources? Elif Lévesque: Yeah. As long as it comes from that property, if we do see a sustainable level, they worked to get closer to their capacity, we would redo our trusting.

And John, just to add to that, I think where we see and obviously Éléonore is a camp play and that royalty covers the entire camp. So as exploration begins there, we saw Éléonore as the long-term play and their underground facilities are maturing. I think they have the same situation as we are. IFRS rules don't really take into account anything about what the potential is. It's only about looking backwards. So we think there is significant upside in the asset and we're there for the long-term. But as you know, the drill bit has been very kind to Goldcorp on that project as we were forming, regardless of what's happened on the accounting front.

I could ask one more. Why did you choose Arizona Mining to take a profit as opposed to other things in your portfolio? Is it that you don't like zinc or you just thought?

Let's be clear, John. I'm still for Arizona Mining, but improved in our accelerator model, continues to work with and through some investments. So Arizona had one of the highest gains in 2017 and if we do see that stock go back, we may be a player again. But, we have a 1% royalty there. I am very bullish on zinc. As you saw, we started also sponsors starting up on the metals this year, which is mostly dedicated to zinc assets. So [indiscernible] to get Arizona, I think, is one of the best zinc companies out there. However, what our commitment to the marketplace was, is that we would rotate these accelerator assets as we move through the cycle. We needed to demonstrate to the marketplace that these were not unrealized gains, but realized gains. That's the one thing, we have probably kept the positions up. We saw from a market standpoint and we had to prove that our investment strategy was sound and we had to demonstrate the returns in an empirical way. So that's where we are in terms of what we do and that was the first one that we had and they got through basically the feasibility study and then the permitting cycle. So I won't go too much more, but we're quite supportive of Arizona. I think they've done a fantastic job. Obviously, it's gone up in value since we sold it.

Your next question comes from private investor, George Jay.

I've been a long-term shareholder in Barkerville Gold and predecessor companies. I have a really strong belief of the value, long-term value of the Cariboo mining district. And what I'd like to know is, we, outside shareholders at Barkerville, are curious about, you had drilling going on for the last a year or so with up to 10 drill rigs going. We've had some great intercepts, but at the same time, we haven't had this 43-101 new statement of exactly what kind of an increase we've built in the resource up there. So would you comment on that please?

Well obviously, given the history of resources on this property, we are extremely prudent in terms of what we would put in a 43-101 qualified resource. The definition drilling is still ongoing where we had quite a bit of success to defining resources outside of the previous zones. So we continue to work on that and we are closing up the database and doing wire framing as we speak on that asset. And obviously whatever resource does come out there, we have to be extremely conservative. We have a history of the property. It's narrowing, high grade systems, which are demonstrably hard to manage under 43-101. But we think that we've done a pretty good job of introducing a high level of QA/QC in terms of what's there now and when we do publish the resource, we expect it to be very solid. So you'll see something hopefully in the first half of this year as I mentioned earlier in the presentation.

One more would be, you obviously have a lot of influence on the Barkerville board and encourage Chris Lodder in so many ways. I'd like to know whether you are encouraging him with regard to promotional work and getting institutional interest in Barkerville.

Short answer is yes. Chris has been on the road quite a bit and I think it's really between the legacy issues surrounding Barkerville and the pending resource, that's where the market sits. We're in this market and we'll have to get the resource out to take advantage of all the work that Chris has done. I know he was in Europe last week and he's been significantly working out there as we speak. But we're battling history of the project and I think that until there is new resources published, we're probably still facing a bit of a headwind to be honest.

That concludes our conference call for today. Ladies and gentlemen, I encourage you to buy low and sell high. Thank you.

This concludes today's conference call. You may now disconnect.