OR Royalties Inc. (OR) Q4 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q4 and Year 2019 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 2020 at 10 a.m. Eastern time. Today on the call we have Mr. Sean Roosen, Chair of the Board of Directors and Chief Executive Officer of Osisko Gold Royalties; Mr. Sandeep Singh, President of Osisko Gold Royalties; and Ms. Elif Lévesque, Chief Financial Officer and Vice President of Finance. I would like to now turn the meeting over to our host for today's call Mr. Sean Roosen. [Foreign Language]

[Foreign Language] Forward-looking statement. We will be talking about the future so I'd like everybody to observe that forward-looking statements and we are following the PowerPoint that is on our website entitled Q4 and Year-end 2019 Results. 2019, big year for Osisko and lots of things going on within the portfolio and at the management level. Q4 started as a pretty good end of the year with over 20,000 GEOs earned in the fourth quarter and for a total of 78,006 GEOs earned into the 2019 period, which has actually met our guidance for 2019. Exceptional revenues of $38.9 million, obviously, a lot driven by oil price with record revenues for the year of CAD 140 million compared to $127 million in 2018. Net cash flows from operating activities of $17.2 million [indiscernible] in the fourth quarter sorry, and cash flows for the year at $91.6 million compared to $82 million for 2018, so all in all a pretty solid operating year. However, we did incur some noncash write-down within the portfolio related to some of the acquisitions that we did in 2017 from our partner Orion and also from the Virginia acquisition in 2015 related to Éléonore for the most part. And we've have a net loss based on noncash items of $155 million in the fourth with the net loss of $234 million for the year, reflecting the impairment of the stream and offtake interest that we're taking on through the auditor's report under our accounting process over the year. However, our continued guidance means what we've said out as we move forward. Adjusted earnings right now for the fourth quarter is at $10.3 million and $41.1 million for the entire year, compared with $31 million last year. 2019 also saw the evolution of our portfolio, a lot of things going on both in our accelerator model and also in the asset base that we created. We've created a range high growth portfolio over the last five years. As those of you know, we started out 2015. We created the new business models for royalty and streaming companies by introducing the accelerator model as some of the activities that we carried out in Q4 were almost all related to the accelerator companies with the purchase of the Santana Royalty Entrepreneurial Alamos in Mexico, the Fine Point Royalty of 1.5% on Osisko Metals, which is one of the most promising in any projects in the world right now. We also have a 1.2% royalty on the free loan deposit British Columbia being led by Callister. And we completed the acquisition of Barkerville Gold Mines in November of 2019. We also saw some of the investments from 2018 come to fruition with First Gold Port at the Eagle Mine owned by Virginia. And we'd like to congratulate Virginia by having -- sorry Victoria Gold, my bad. They're in place to get that mine under construction and completed ahead of time and we have a 5% top line royalty there, which I think is probably the most significant royalty that's been done in the last 24 months in the royalty and streaming space. And as they march forward, they were supposed to have nine months a year of loading onto their pads. They've been able to work through this winter and achieve better than that. So we congratulate that team for the extreme effort that they put forward. And we look forward to seeing our results as they move through their commissioning here ahead for commercial production, hopefully, sometime in the second or third quarter of this year. Last year, in Q3, we also sold the Pretium offtake agreement which created some confusion on our balance sheet as to how the accounting works. So that should clear up some of the – some of the misconceptions about our margins, we delivered a 91% gross margin on our royalty and streaming portfolio as we stand today. Other items that we worked through where there were no credit bid on the acquisition of the mine here in Quebec, the Renard mine, with our partners from the Caisse de dépôt and placement du Québec and Triple Flag. We also had exceptional results from our friends at -- Mantos Blancos is run by our friends at Orion. And Sable Resources, we made strategic investments for a 2% royalty on the portfolio of assets that they run between British Columbia, Mexico and Argentina. Q2, we did one of the biggest share repurchase buybacks in the entire mining sector at $175 million. We repurchased about 8% of our outstanding shares, giving us a pretty big buyback in Orion's ownership and the company now sits between 5.2% to 5.4% of the outstanding equity. In Q1, we also closed the silver financing on a stream to the south or HORNE 5 project which is moving ahead quite nicely, has a long mine life for over 17 years. And located in Rouyn-Noranda, Quebec, one of the biggest underground development projects left in North America with 6.1 million ounce of gold equivalent, resources of 9.1 million ounces of overall resources, remain a strategic asset that's undervalued with building a Osisko value accelerator company, so things that we see as bringing value in the future. Over to page five, production of GEOs. As you can see, we've had pretty good growth in our portfolio since 2014 when we IPO-ed this company. Ending this year at 78,000, GEOs equipment with a 90% cash operating margin, quite a spectacular margin, because most of our assets are actually royalties and obviously anchored by the big cornerstone asset of Canadian Malartic which continues to deliver value with the new resource having been published by Yamana and Agnico of quite a big significance so we'll talk about it later. And we've see our market cap go from $500 million at the IPO, $2.1 million, which I think is exceptional given that we bought back well in access of $300 million of our own stock over the last five years. The revenue breakdown, I'm going to pass it over to Elif Lévesque our CFO. And I want to congratulate Elif on celebrating her 10th year with us, but she will be leaving us to pursue her own interests as we go forward. And I'd like to take this occasion to thank Elif on behalf of the Osisko management and shareholders for her contribution in creating not only Osisko one, but also what is now Osisko Gold Royalties, which we believe is a distinct business in a royalty and streaming space and she has been key to developing of our financial plan and strategy throughout the last five years. Elif? Elif Lévesque: Thank you so much, Sean. It's an amazing privilege and a lot of fun working with you in past years. So going back to the presentation on slide six, as you mentioned, we had a very strong quarter in terms of revenues and cash margins. On slide six we see the breakdown of the revenues by type of interest. On our royalty and stream interests we finished the year with a 90% cash margin. In 2019, we sold the Brucejack Mine offtake to Pretium for a gain of $7.6 million and effectively reduced our low-margin offtake instruments to just one as of today. On the next slide seven, revenues from royalties and streams increased by 10% to 140.1 million compared to the last year, mainly due to the increase in streams as well as the addition of ounces from Eagle gold mine, which started at the end of last year at high metal prices. We also recognized record operating cash flow of $91.6 million compared to $82.2 million, mainly reflecting the increased cash margins and elimination of cash settled share based payments. The slide on impairment, we had to do some valuations and assessments during the year, coming from the information that we received from the operators. In December, Lydian, the owner of the Amulsar project announced that it has applied to CCAA, and this was considered an impairment this year. We evaluate assets to its recoverable value of US$22.3 million resulting in impairment charge of US$51.3 million on the Amulsar stream and offtake for the fourth quarter of 2019. But Osisko's stream interest is secured and we're working closely with Lydian to be a part of their restructuring solution and protect our interests going forward. Also in February 2020, recently Newmont the operator of the Eléonore mine announced undated mineral resource and resources decreasing the total amount by approximately 50%, which resulted in an impairment of $27.2 million and $20 million net of income taxes, bringing the recoverable value of the Éléonore royalty to $101.3 million. We've also incurred an impairment on grow -- the project which we had acquired with Virginia Mines acquisition in 2016, basically on the fact that we no longer plan on putting further exploration evaluation expenditures into that project. So we brought down recoverable value to $10 million. And including these impairments, total impairments for the quarter is at 148.6 and 260.8 for the year. Next slide our financial performance reflecting all of these non-cash impairments and adjustments. Losses excluding the impairments stood at $26.2 million compared to earnings of $18.1 million last year. Variance is really related to the loss on due disposal of Barkerville shares that we already held at the acquisition for $24 million, which is another non-cash item. We have completed the acquisition of Barkerville during the quarter and the transaction has been recorded as an acquisition of assets. You will find details on the transaction and the purchase price validation in a note to our financial statements. And if you look at on adjusted earnings basis you will see the nice increase compared to last year 33%, up year-over-year basis mainly related to higher gross profit that we've seen during the year. So Slide 10 basically just kind of a summary of the different production from different metals that we have received. You will see that the realized gold price this year compared to 2018 was at CAD1945 per ounce compared to CAD1817 which had a very positive on the results. And currently as we speak gold is actually trading at over CAD2100 per ounce. So, with that, Sean, back to you.

Thank you very much Elif. Obviously with the non-cash losses statement is a little bit of confusing year end and quarter, so you give the way that the accounting is more here. But with regards to the first principles we've made about $2.6 million a week for the last 52 weeks in a row. With a gross margin of 90%, so that's probably summary of what we should take away from today's presentation. As we look at Page 11 you can see obviously our cornerstone asset Canadian Malartic continues to deliver with over 33,000 ounces from the year and an overall contribution of 78,000 ounces with 68% coming from gold, 17% coming from silver, 13% from diamonds and 2% from other small metal groups. And we continue to be one of the more dominant precious metals based assets in the pragmatic space. Currently by market cap we are the fourth largest precious metal royalty and premium company in the world with a dominant focus on Canadian brownfields with 65% of our assets, producing assets located in Canada. And as geopolitical issues continue to exaggerate and create pressure on the rest of the world in terms of investability, we think that Osisko Gold Royalties and our focus on ESG in the past and in our current life sets the table for the Osisko Gold Royalties is to be one of the most investable companies at the precious metal space. If you look at our cornerstone asset, that’s on Page 12. Over 670,000 ounces – 670,000 ounces produced in 2019 making it I believe the 10th or 11th large gold mine rolling by fine largest gold crusher producer here in Canada was one of the best margins. And we wanted to take this moment to congratulate our partners Yamana and Agnico for their exploration success at depth as we get further into it with 33 million – 33 ounces – 32000 ounces delivered to us in Q4. If we look to Page 13, we have a little bit of a long section showing the way that this development has come off on Malartic as the partnership there has evolved and we continue to see Malartic as being one of the most fantastic things that we've ever been involved with 8 million ounce of historic production before we've got there and over 30 million ounces booked when we were drilling there, 8.4 was in the open pit. And now we see a conglomerated resource here that continues to grow with East Gouldie, East Malartic and Odyssey having made major contributions to the ounces. This is indicated at 694,000 ounces 5.1 million ounces of inferred and then East Gouldie is adding another 2.7 million ounces. Any of these would have been exceptional discoveries on their own but flat to being mixed which is the lowest cost operating mill in Canada 55,000 tons a day same large mill that operate Ontario electricity from Hydro-Québec makes us an exceptional discovery and evolution. And our partners Agnico have a significant amount of expertise, low-grade underground development with their success at East Gouldie and continued work at Lauren. So we think that the generational asset that continues to deliver value to the Osisko Gold Royalties shareholders far into the future well over and above of what we've seen in the past and add a significant amount of mine life that has not really been included in our valuation in the marketplace with a lot of the analysis that's been published. So we look forward to seeing that come in this year as one of the big catalysts to drive future share prices here in the near to mid-term as we see that project try to well. Page 14, again, a little shadow to our friends at Victoria Gold for their contribution having evolved the Eagle mine in the Yukon, now the largest gold mine in the Yukon and operating quite well and having gone through a fairly cold winter this year and having been executing construction last year during the winter. Very proud to be partnered with the Victoria team and celebrate their success. And we actually have a model of their first gold bar sitting in our office today. So, that is quite accomplishment to put Canada's most recent gold mine into production in one of the toughest environments around. They're located at 64.5 degrees latitude which is just up the Arctic Circle and they're on-road and on-time and on-budget. In terms of things that we've done with our shareholder base, I think that the evolution of Osisko Gold Royalties if we look at it, it's an IPO of 2014 with a quite exceptional outcome. If you look at page 15, you see that we've -- between dividends and share repurchases; we've returned $336 million to shareholders in quite a short time both through dividends and share buybacks. So, we continue to be what we think is one of the leaders of returning capital to shareholders in this space and we remain focused on the ability for us to generate opportunities that allow us to give significant return back to shareholders. We have created a business model that have higher troupe and a lot of the vanilla envelope sort of royalty and streaming companies that are out there. We believe this is a superior model and as we go forward, obviously, today is a big day in terms of our accelerator model with our friends at Osisko Mining having put out their resource update. And would like to congratulate John Burzynski and the Osisko Mining team at this point for having published their updated resource at Windfall Lake, one of the biggest exploration projects in the world right now with over 23 drills turning this morning and almost $500 million invested in a million meters of drilling in for our America friends, so that's actually over 3 million feet of drilling has been executed on this project in the last four years. John took on a task of this company at an $8 billion market cap in 2016 with Bob Wares and a few of the other founders of the Osisko Group and they now formulated, a process project world-class standard with an inferred resource which is 3.94 million ounces averaging 8.4 grams and another 1.2 million ounces of indicated at 9.1 grams making it one the most significant discoveries at a recent times here in Quebec, located just inside the footprint of the planned ore in Quebec. And they've also been announced by the Quebec government yesterday that there will be a power line for over $100 million investment going into that project. So, it's been a pretty big win for the Osisko Mining this week. Actually John and the Osisko Mining people that have led that charge. It's been a very intense project. But it goes the character on the Osisko Group and the Osisko platform. We are a little bit biased here at some of our competitors in this space, but we're also delivering a significantly higher return with us having upgraded our royalty on that project by the existing contractual rate that we are at the conception of the company because we were there incubated. So, we've been delivering significantly better returns than most of the other royalty of streaming deals have been done in the space through the accelerator model. And those things are just coming into their fruition right now. So, I think you should look forward to Osisko Gold Royalties to accelerator model leading the charge in terms of innovation in the royalty and streaming space. We were there first and we carved the space for our shareholders. And I think you're going to see the delivery of those goods as we go forward and on to the future. In terms of our balance sheet, $480 million available on our credit line $108 million of cash, net debt sits at $349 million. Our investments in equity portfolio sits at $277 million with 157 million share and paying a quarterly dividend of $0.05 a share or $0.20 per year. In terms of our royalty interest, obviously, we have royalty streams and some offtakes. So, the one thing that does for our results a bit is we got 100% margin on all of our royalties, with zero cost gold 60% on our streams. Our offtakes, however, is smaller margin and they too kind of biased at the P&L sheet looks at times. So, it's worth taking into consideration. It is a small part of our business. But those markets are small because basically a look back system where we have a time period to look back on those royalties and realized sale price, but it's essentially zero risk money because we always look back and pick the share prices the most favorable to us. Onto page 18, over 135 royalties and streams, up from 705 when we IPO-ed the company in 2014. Canadian brownfield exposure we're over 25,000 square kilometers of brownfield camps are covered by our royalty footprint, making us one of the biggest royalty footprints in the world in terms of number of kilometers that we cover. NPD sits at 76% in North America and our assets is 64% Canadian. We did record cash flow this year at $91 million, $277 million in cash on the balance sheet, $100 million of cash. We've had balance sheet with $850 million of firepower. And that leaves us today where we can compete with the -- both with the larger private equity groups and the larger royalty companies in terms of opportunities that reduces the royalty and streaming space and we can easily reach to do a US$500 million deal. 2019 saw a fairly big change in how the succession planning at Osisko has worked out with Sandeep Singh having joined us. Sandeep is taking over as President of Osisko. Sandeep is 40 years old and has been an investment banker close to us since – it’s actually at the beginning of 2007, 2008 when he was at BMO subsequently at Dundee and then as a founder of Max Capital, one of the most successful boutique advisory firms in the world. In the mining space he joins us to take up the hunt for the evolution as we evolve our Osisko into the most investable streaming company and the world with a dominated Canadian portfolio. We're looking to Sandeep to help us lead that plane. Fredric Ruel has moved up. He's worked for five years with Elif, who has done a great job in putting us in a solid financial position. With the listing on the New York Stock Exchange in 2016, Elif was one of the first CFOs in Quebec to lead a mining company, a resource company on the NYSE with us. Fred, takes up where she left off and gives us a great foundation with the team that she had tried to put in place here in Montreal. We also have Iain Farmer who has stepped up to VP of Corporate Dev who has been working with us and doing a lot of the hard work along the way. Iain’s been with us for five years as well. So very happy to see him evolve into the space. A new addition to our team will be Benoit Brunet who joins us. He has the CA from -- and was an honor in PWC [ph] and subsequently he went on to work at the Caisse de depot. He is joining us as a new VP to take on the challenges with Sandeep and Iain and Fred as we move forward with the new model. And he has quite an experience both in private equity and with ESG, so we're looking forward to Benoit to help lead us through that project. And I'd like congratulate Kevin Connan who is sitting to my right on his new appointment as Director of Communications as we move forward. The team is refreshed and ready to go. And just before I go to Q&A, I'm going to pass it over to Sandeep for just a couple of words. A lot of you in the industry already know him. I don't think he needs – he’ll surprise you too much.

Sure. Thanks Sean. I won't speak too much other than I’m very pleased to be part of the team. Also very pleased that a number of the right pieces were already in the company and ready to take over that come before. And with the new additions, you mentioned Benoit and promotions internally, we feel like we are set to take thing to next step in our next phase of growth. Thanks you as well. Feeling there's a lot of value to a lot with our existing portfolio and that's going to be the key focus. Obviously we'll continue to look for growth but there's a lot of interesting things to do in-house already. So excited about what’s going to come.

All right. On that note, we'll turn it over for questions. If anybody have anything, sorry, my oversight. Before we pass over to your questions, I'd like to mention that Murray John, a long-standing member of the resource and mining community previously at Dundee Wealth Management and both a geological and mining engineer of some record with a lot of portfolio, management experience under the Dundee has joined us as a member of the board. So congratulations and welcome to Murray John for joining the Board to fill out some of our space that has been created by departures over the last couple of years by people who either retired or moved on. So with that note, we'll go to our first question.

[Operator Instructions] Your first question comes from the line of Lawson Winder. Your line is now open.

Hello, Sean and team thank you for taking my call. Just a question on the Canadian Malartic royalty. One of the two partners in that partnership had commented on the call that they were in discussions with you guys on the economics of the underground with respect to the royalty. I'm just curious what -- I mean to the extent that you can. How flexible you might be on those and what your current thoughts might be on those discussions? Thank you.

Well, I believe the discussions and the negotiations between the three parties of this asset should remain -- which is at discussions and negotiations. However, I will comment that at the current gold price, this project is a slam dunk and the anxiety I believe that's been expressed has been around $1,000 to $1,100 gold price and we've seen some publication on that level. Obviously life is a negotiation and some of our friends have chosen to negotiate through the shareholder base and through the advisory base. That's their slide, so it's not the way we would do business. But we'll take that as we get. We're really more interested in the information to come. We feel the deposit has been 100 drilled so far and we'd like to see a larger commitment event from the partnership, executing a more significant drill program there, taking up the pace by context. We've drilled a million meters in 5 years and we have followed and we drilled 350,000 meters at Barkerville. And we would like to see our partnership at Canadian Malartic to pick up the pace and intensify the drilling for us to make a financial decision on our most significant asset. Our shareholders need to know what that project represented. So we would go with the Osisko model which is called SUDS which stands for Shut Up and Drill.

Thank you for that perspective. And then just maybe one more for me, how do you guys think about the dividend going forward? It would certainly seem at current gold prices, you would have the capacity to increase that? What are your thoughts? Thanks.

We always look at the dividend. And obviously we're – mostly, fairly big shareholders ourselves so it's close to our heart. However where we sit today, there's a lot of opportunity on our screen and we've been focusing on share buybacks, so I think right now at the current share price level, we'd probably focus more on share buybacks and the dividend increases, the stock is extremely undervalued in the current marketplace.

Great. Thank you.

Your next question comes from the line of Don Blyth from Paradigm Capital. Your line is now open.

Thanks guys. I missed the first few minutes of the call so excuse me if any of these have already been addressed. But on Barkerville, do you have any estimate of how much you'll be spending in 2020 to continue advancing that February.

Yes Don where we stand right now obviously there's been significant step drill result, there are some pending updates both on the resource level and on some exploration discoveries that have been made both on the major trend and on the parallel trend. So that will be an update coming out under the title of our as we evolve that right now. And we're looking at a couple of different decision points both based on the resource update in terms of further budget commitments as to how we move forward. However, we are – we are in fact very proud of our Barkerville acquisition and we believe that we're going to drive a lot of value on that project as we set the table for the North Spirit financing off late in the first half of this year. So stay tuned. There will be some updates coming. But in terms of funding commitments right now, we know we have some work to do. And some of that's going to be delivered and some of that budget decision will be driven by permitting requirements line of sight. As you know there's been some changes to the Canadian permitting process that are quite favorable to Barkerville that from a federal level, we only need to work on a provincial permit right now as they've increased the test for federal level from 600 tons a day to 5000 tons a day. We had put a bit apart at 4000 tons a day. So we're looking to take advantage of some of the things that have occurred in our favor at Barkerville had to take into account the exploration success and expertise that we've gained and the knowledge of that -- not only that portion of the project, but also the deep geological knowledge that we gained in the last 18 months of that project. So as we get forward, we will come forth with a more precise budget.

Okay. And with regards to taxes, can you give a sense of the tax pools and how long you think you can defer being into a cash taxable payable?

Well I'll hand this question over to Elif. She's the pioneer of all the tax. Elif Lévesque: Yes. So sure. So in terms of our tax actually -- we're sitting in a very good position given that we've done quite a few investments in terms of the royalties that actually end with the base that we started off in 2014, we've built some pretty interesting topical. So we're not actually foreseeing any cash taxes the next quite to four to five years actually. We're going to be paying withholding taxes from some of the international royalties there, but it's going to be limited to that our tax-affected tax pools are at a pretty good level right now.

Okay. And assuming you continue to invest in rates we expect that to sort of just keep moving forward. .

Maybe I would just add a couple of comments on the tax pool for those who may not be that familiar with the Canadian charity flow-through and flow-through tax regime. And creating as long as we invest in Canadian projects, especially here in Quebec DG in Ontario. Using flow through shares our flow-through share investments into places like Canadian Malartic -- or into projects like Osisko Mining and also in the Barkerville. Those investments as long as you're an equity nature can be used to track from our royalty revenue. So it's a rather unique advantage that we have with our accelerator model that by investing in those equities we can actually increase our taxable pool. And it provides roughly a 22% advantage for us, when we invest in those equities. It is unique to the Canadian companies in half-half brownfield projects and big drill programs to do that. But our friend Mr. Burzynski and our friends at Pine Point, the White Pine project, Barkerville and Victoria have done extremely well and taking advantage of that business and providing significant value to new Osisko shareholders. Especially, if you look at Windfall Lake, there's been over $400 million of flow-through and carry flow-through raised to advance that project and nobody else in the world could have ever executed that drill program without that tax program and of the push – of the been a major benefactor for that.

Excellent. Thanks very much.

Your next question comes from the line of Kerry Smith from Haywood Securities. Your line is now open.

Thanks, operator. Sean, I had a couple of questions. What is the rough timing now to complete the feasibility for Barkerville? And the second question was, what are you seeing on the diamond price trends? It seems like diamond pricing is improving but I'm just wondering what you're seeing at Renard generally, if you're seeing any favorable trends there?

Yeah. We see an increase. So I'll start with the diamonds first. We see an increase of between 5% to 7% sale on sales. There's a couple of contributing factors. So that obviously slight mandatory development with the furniture of the Victoria and Ontario and Argo. And some of the diamond market has been changing as the millennials come more into the space. However, there has been some discussion about whether the coronavirus would affect the diamond prices as we move forward. But we do think that there's a slight demand story that's pretty solid in the diamond space and that was when we went forward with our partnerships with Triple Flag and Caisse de dépôt et placement du Québec on the credit bid for Renard. That was one of the things we did take into consideration as a lot of people are quite bullish about diamonds, including some of the bigger groups like BHP and Rio Tinto having made significant exploration commitment to the diamond space as we move forward. And just a general comment, you know, this pursuit – this world there's a lot of wells around. And the pursuit of purchasing genuine articles and luxury articles continues to grow as we've seen across the board, with all the LVMH products with test look, and especially in the gem space and also the appreciative gold and platinum and palladium. There's a lot of pursuit for valuable so-called precious metals, precious stones, as we go forward. I think that growth increases as the rarity goes up. And Canadian diamonds from an ESG standpoint are pretty popular as we speak today. Your other question in terms of Barkerville feasibility, we'll announce that once we finish up with the current drill program that will be driven by the resource update and also some of the aspects that we're quite excited about in terms of the permitting opportunities that we have there. But we feel that in terms of where we wanted to be with North Spirit, we closed the acquisition in November. We wanted to take the time to do a lot of this work. We've been pleasantly surprised by a lot of things that have gone on with that project, especially from the drilling side. Some of the things that we've identified within the mining process in terms of being able to use road-headers, force orders and some of the new technology that we believe is going to drive Barkerville to be one of the more valuable projects. As you saw in the study it calls for CAD310 million or $225 million of CapEx so 185,000 ounce a year mine for five years. It uses about half of the existing reserve. So on a CapEx intensity level Barkerville still remains probably the most interesting project in the world right now in terms of being able to put almost 200,000 ounces of production on the table for US$225 million, so that's the basis from where we start and then everything else prepare on its optimization. And we have quite a few drill plans on the go with a $12 million exploration budget – and exploration drilling on the Gulf for that product so some of those answers will be driven by those results.

Okay. And the reserves I think would be when and when should we expect that?

Well, the reverse updates are freckle thing these days. So I would guide you to somewhere in early Q2 or late Q3.

Okay. Okay. That's helpful. Thank you.

All right. If there are no further questions, I'll thank everybody for participating today. It's exciting time to our Osisko Gold Royalties with obviously big things happening in Osisko Mining further success at the Barkerville program, advancements on the White Pine Project and our friends Victoria Gold heading into commercial production and the gold price sitting at a seven-year high of US$1,615. But I would remind everybody that at CAD 2,137 this morning which is an all-time high Canadian dollar an all-time high. Australian dollars has a great time to have a Canadian-based portfolio especially Brownfield assets where other people are spending their money and drilling our royalty land as we speak. And we thank everybody for their participation. I look forward to 2020 evolution as we think this is our time. We did create a very high-growth portfolio over the last five years and now it's starting to mature and should start to drive and deliver result to shareholders as we evolve through the next phase of this company. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.