OR Royalties Inc. (OR) Q1 2020 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q1, 2020 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, May 13, 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. [Foreign Language]

Thank you, operator. [Foreign Language] Welcome to the Q1 reporting call for Osisko Gold Royalties everybody. Thank you for taking your time this morning. Pretty good quarter because we’ve had obviously some challenge in the second quarter with everybody else with the COVID-19 crisis. So I want to start on Page 3 and I would refer everybody to look and read the forward-looking statements as we will be making some forward-looking statements throughout this presentation. This presentation is found on our website under Osisko Gold Royalties first quarter results for 2020. I’ll start on Page 3 with the highlights from Q1 of 2020. We had GEOs, gold equivalent ounces of 18,159 ounces creating revenue from royalties and streams of C$37.8 million. Cash flow from operating activities is C$23.8 million with a non-cash net loss of C$13.3 million mostly related to the impairment of C$26.3 million of which C$19.3 million was to the Renard diamond stream net of taxes. Then adjusted earnings of C$7.5 million or C$0.05 per basic share. Also due to the pandemic we’ve withdrawn the 2020 production guidance as many of our associate companies and projects that we are invested in have also withdrawn therefore we will come back to guidance as our partners continue to update their guidance as we get further into the year and as pandemic crisis becomes more evident as to what the structure going to be mid to long-term on the projects. Our cornerstone asset, the Canadian Malartic mine, was affected by COVID-19 including a shutdown for care and maintenance from March 25 to April 15, it is currently by ramping backup and we look forward to seeing online back the gold production. I want to be specific on our cash operating margins, net of some offtake agreements we are operating at 91% gross royalties has been some of this information in the market about what our royalties are where we have a small offtake agreement left in our portfolio that squeeze out a bit when our real royalties margins are 91%. Throughout the quarter, we also acquired just under 430,000 common shares through our normal course issuer bid process for an aggregate of C$3.9 million and the average price per share we purchased [indiscernible] it was of C$9.15 a share with the Canadian stock currently trading about C$13.38. We also declared a dividend of C$0.05 per share this is consistent with our dividend policy that’s been in place since 2014 and we continue to be one of the biggest dividend payers in this space on yield phases at well over 1.5% on average. Subsequent to Q1, we had a financing non-brokered, we carry out with Investissement Québec and we would like to thank Investissement Québec for stepping forward. We did a non-brokered premium to market deal for C$85 million to bringing in a great cornerstone shareholders that now brings Investissement Québec to about 5.5% of the overall company and 6.2% on a full point and fully diluted basis. I’m very happy to have Investissement Québec as a cornerstone investor in the company. In terms of other activity, we did increase our exposure to the Gibraltar Mine by investing C$8.5 million to reduce the transfer price on zero per ounce down by $2.75 so that we had no longer have transfer price there, so it’s really become more like a royalty. We also declared our dividend as we said a $0.05 per share which is payable on July 15 to shareholders who were on the record as of the close of June 30, 2020. On Page 4, COVID-19 impact and I hope everybody is staying today, obviously here in Québec and in Montréal we’ve had our challenges and we want to thank all of our frontline and first responders and doctors and nurses who’ve been working so hard to keep our community safe and as we advance through this crisis we look to honor those people as this unfolds and evolves into what we hope would be a manageable situation shortly. The transition for us involves the shutting down the day-to-day office here in Montréal everybody has been equipped with printers, laptops and communication equipment what they need and we are fully active and we are working seamlessly from home and we will continue to keep non-essential office people at home throughout the crisis and we’ve limited our exposures much as we can and doing everything we can to support those people who have to go to work or have to be in the public. On the partner side, we have several mines, there was Quebec [White] shutdown from morning which is subsequently been listed in part and we hopefully enforce soon and we will see most of the Quebec mines go back to work and we have better guidance as those regulations evolve and people are able to go back to some of the remote client site safely. One thing to note that for us in the mining industry, we didn’t miss any business, it’s deferral of revenue, the resources are still underground. On the social front, we’ve done fund raising with our employees, where Osisko matched up to C$50,000 from Montreal, one of the Canada’s largest food banks, and we continue to rally for support for that great organization. As we go forward, a few of our employees [indiscernible] shown here in the photo have joined the revolution of 3D printing and printing protective advisors with a couple of printers on the go 24/7 and also we are contributing to some other efforts on ongoing basis as the crisis evolve. Page 5, the summary of what we discovered, the C$85 million private placement really goes to bolstering balance sheet in a time of crisis, this C$85 million brings our cash balances up to about $230 million so on hand and allowed us some flexibility in these times. And also on Page 5, we can see a little bit summary on the Taseko offtake agreement, this is a great mine with the 17 year mine life located in British Columbia not that far away from the Barkerville project and it continues to be a great mine as to operate for a long time -- is primary a copper producer, open pit of 85,000 ton per day mine and we think a lot potential on Taseko as group have not [a lot of] good projects and we are very [adamant] of that management team’s ability to operate that best mine in the cost cycle that they have and they continue to have robust operations even at the lower copper prices. On Page 6, I want to go through our assets dominantly gold exposure we have the most of gold revenues of all the royalties and streaming companies in the space. We have shown you here the Q1 GEOs by asset base obviously Canadian market is still our biggest cornerstone. Our shareholder follow that by Éléonore or Seabee and most recently Eagle and on Island and we will talk a little bit about Eagle as we go on, but Eagle is the good for year goals Yukon mine the latest gold mine to go into production and so, they are enjoying significant success having work through the winter and 64.5 resulted and delivered the project into production and they are pursuing commercial production as we steak and had a very good results yesterday and congratulate the Victoria team on being able to continue operations throughout not only the cold winter but also through the COVID crisis, it’s very exceptional management team has been able bring that project to through [indiscernible] in these difficult conditions. Also we showed you our sliver production with Mantos being our most important silver asset previously in -Anglo American copper mine and operated by Renard exceptional asset with long life and we continue to see a lot of these assets continue to grow. Obviously we had a little bit of diamond exposure with our 2,000 GEOs coming from Bertrand obviously diamond sectors been a little more challenging as we get into the piece but too sharp change as we saw in 2008, ‘09 diamond purchase in reality after bit of financial crisis at that times also you will see that happen in the diamond space as well. Now I’d like to introduce you to Fred Ruel, who is trying to take us through Page 7 through 11. Fred has taken over the role as CFO as of January 1 and I’d like to congratulate Fred on having, had his first quarter so much by trial by [indiscernible]. Fred and his team have been -- being able to give a reporting through and continue on even with the COVID-19 crisis, the challenges obviously in the [indiscernible] are being somewhat significant. So Fred over to you for Page 7.

Thank you Sean, good morning everyone strong quarter for Osisko in terms of revenues, cash margin and operating cash flows despite the disruptions on activities for some of our main operators. The strong gold price more than offset the reduced deliveries at the end of March. Revenues from royalties and streams reached $37.8 million in Q1, up $4.3 million compared to last year, an increase of 13%. Cash flows from operating activities were slightly lower by 1 million in Q1 of this year but excluding the impact of the changes in non-cash working capital items operating cash flows were $27.9 million compared to$ 22.6 million in Q1 of last year, an increase of 23%. On Page 8 of the presentation, we show breakdown of our cash margins for Q1, cash margin on our royalties increased by $2.3 million to $25.6 million cash margin on our streams also increased by $2.3 million to$ 8.8 million resulting in a cash margin on our royalties and streams of 91% in Q1 of this year compared to 89% in Q1, 2019. Our total cash margin reached $35.3 million in Q1 including $800,000 generated from our Offtake agreement, an increase of $4.7 million or 15% compared to last year. On page 9 of the presentation, we presented summary of our earnings and adjusted earnings we had a net loss of $13.3 million in Q1 or $0.09 per share compared to a net loss of $26.5 million in Q1, 2019 or $0.17 per share. Excluding impairment charges net earnings would have been $6 million in Q1 of this year compared to $2.1 million last year. Adjusted earnings were $7.5 million or $0.05 per share compared to $5.8 million or $0.04 per share in 2019. On Page 10 of the presentation, we have a summary of results for Q1, GEOs from gold production were lower this year probably due to the sale of the Brucejack offtake in Q3, 2019 and the impact of COVID but this was offset by a higher realized price of gold. Our average gold price per ounce sold amounted to C$2,125. compared to C$1,731 in Q1 2019. And the decrease in our total revenues from $100 million to $53 million was also due to the sale of the Brucejack offtake last year, gross profit increased to $21.6 million from $18.2 million last year. On Page 11, you'll find a summary of our financial position. Our cash balance was $158 million at the end of Q1 and $243 million considering the $85 million equity financing completed with Investissement Québec as at April 1, 2020. Our debt amounted to $423.5 million, which includes a drawdown of $50 million U.S. in March on our revolving credit facility as a cautionary measure. Including the $100 million accordion available -- our available credit on the facility was over $400 million at the end of March. Our net debt position including the IQ financing amounted to [$180] million in addition of equity investment portfolio was currently valued at over $250 million. Back to you Sean.

Thanks very much for that Fred. And I think it's just worth highlighting that our net debt position is quite manageable at $180 million and our equity portfolio has been performing quite well. Obviously, these increased gold prices. So all in all, things are going pretty well and a lot of liquidity, a lot of firepower on the balance sheet to work within this -- in this interesting market times, as they say. On Page 12, just a recap of our portfolio, over $135 royalties and streams and precious metal offtakes acquired since we started this company in 2014 with one producing royalty and four non-producing royalties. We've gone pretty quick in terms of getting access to quality assets throughout the space in a very competitive space. And we've created the accelerator model, which is somewhat unique to us. And we currently operating at the highest cash margins of anybody in the working streaming space at 91%. With an exceptionally low geopolitical risk with over 68% of our assets being in Canada 86% here in North America by geography, and it's, I think it's a credit to our partners, ÉLÉONORE, Eagle, Mantos and Newmont, who are all the top quality operators on the asset base that we're most exposed to. And we'd like to do a shed out to ÉLÉONORE, Mantos and Newmont in this time of crisis. We really appreciate the efforts of all those management teams have made to keep these assets in good stead throughout this challenge. On to Page 13. In terms of dividend yield, we're at the top quality of the investment cycle, if we're looking at this dividend yields at 1.5%, being more than all the other royalty and streaming companies in the space. So therein lies the opportunity, as we see it in the second line on a P&L of trading multiples. We're trading at about one times NAV based on consensus. And therein lies the opportunity for investors today is to look at that. And we feel that as we get further into the year, and the asset base continues to strengthen, and also we should see some, some simple catalysts in the portfolio, such as the Canadian MALARTIC underground resource that's evolving and also the evolution -- and quick evolution we're seeing on [indiscernible] and that asset to continues to strengthen and really show its quality in the portfolio. We also have one of the highest liquidity ratios in the business trading at $$18.5 million per day, which I think it goes to the fact that this is an asset that the company is well followed and hopefully that sets the stage for us to increase value as we meet these criteria, then we want to run in our catalysts for this year. Again, the strong balance sheet with over $900 million in total financial capability and a positive net debt balance sheet sitting at well north of $60 million. In terms of our shareholder base, we’ve have very diversified shareholder base with case depot sitting around 12% and the [indiscernible] and some other [indiscernible] portfolio had and such as a [indiscernible] investment fund and some of the bigger [indiscernible] working to go round out our top 10 shareholder list. Our business model on Page 14, obviously this is a -- this is somewhat unique to us and I think in this increase gold price and obviously set the stage for us to be pretty loud and proud but what was accomplished with our business model. We are hybrid and that we invest 75% traditionally, in our core royalty and streaming business, which, obviously we've seen that happen with the most the largest acquisition of recent times in that business was the royalty on the Victoria asset Eagle, and we paid $98 million for a 5% royalty, which is now Canada's most recent entered into production. And then in some of the earlier stage businesses that we've been involved with, obviously OSK is the most successful of the Osisko family accelerator company’s today. And we congratulate the Osisko team and John on their great job that they've done to really take windfall to another level at a speed it’s been breathtaking to watch over 1.2 million meters get drilled there are over 3.5 million feet filled on that asset as we go through. We also will talk about Cariboo a little bit later North Spirit Discovery Group is our subsidiary that's looking to finance the evolution of the Cariboo assets as we go forward. And that asset has gone up significantly in value since we purchased it last year, when the gold price was mid 1,400. And obviously the gold is 1,700 now on the significant amount of value increase in that asset. Over to Page 15, we've seen solid growth and our GEOs, since the beginning of the company in 2014. And we see that to continue for a long time to come. Our paid for royalty growth portfolio allows us to get to 140,000 ounces per year. And that is things that are 100% financed and paid for already by Osisko Gold shareholders. And that would exclude things like the Horne, 5 silver stream where we still have some cash investments. That's just purely what's already been paid for. As we go forward, we see these assets evolved. So I think it bodes well for us in the future. These are competitive marketplaces, but we've been able to create an organic pipeline that we believe is somewhat unique in the space in terms of not only being on significantly gold assets, for the most part, as opposed to byproducts from copper mines. This is a portfolio that dominantly Canadian as well. And as we've seen with Canadian Malartic, which we can switch over to on Page 16. The Canadian Malartic when we sold the company in 2014, the amount of [indiscernible] purchased it. And it's been one of the well set assets in both of those companies portfolios, but we've also seen in the underground resource here, essentially double what was there before, with over 10 million ounces having been identified and measured indicated and inferred categories in this asset. We had drilled some of the stuff of the Odyssey zone during the 2014 spring, let's say taking it to a whole new level. And we congratulate the [indiscernible] management team on the exploration success that they've generated here. And obviously, there has been some discussion around this aspect of asset in terms of the significance of this, but it's not really priced into our stock right now. But obviously, it's 1,700 plus gold price all these ounces are exceptional, and they're located near Canada's most efficient and lowest cost gold mill, the Canadian Malartic mill and we look forward to seeing this value unlocked as our partners and Eagle and Matos go further to develop that underground aspect. Page 17, again a quick show of Victoria's new Eagle mine located in the Yukon is that largest gold mine ever built in the Yukon ramping up to an annual production of 220,000 ounces per year. And as I said in the preamble, they were able to operate that mine throughout the winter was an exception in cold winter this year, seeing temperatures of below minus 58. And they've been able to keep this mind running and is now starting to hit its stride and really congratulate extraordinary effort to keep that project on its go and wish them luck with the conditioning as they get -- as they move forward here and congratulations on the results this week after seeing significant amount of gold production from April. Éléonore was acquired when Newmont did the acquisition of Gold Corp. So we're welcome a Newmont to our portfolio and very happy to be partnered with Newmont. We have a long history with Newmont and really consider them to be an exceptional company with exceptional people. As we go forward we look to see Newmont bring that mine back up into push it aggressively as we move forward. We've mentioned Mantos earlier is a 100% silver stream and Antofagasta, Chile, built another long life mine in a great jurisdiction moving forward. On page 18, a couple of things of going on at windfall recently that were really interesting from a science standpoint with the team they're having drilled Canada's deepest diamond drill hole ever just under 3,500 meters. Congratulations to major drilling and the team that are more exceptionally has been the 5 million ounce resource that was published with -- within the drilling that's been done there and an additional 250,000 meters of drilling plan for 2020 continues to be one of the most impressive drill outs in current exploration and development world. I don't think there's any other site in the world right now that's operating with 20 core rigs. So congratulations to that team for having really moved things forward. We did increase our royalty there recently. So we now have a 2% to 3% royalty depending on which part of the deposit. Hermosa continue to move forward exceptional polymetallic high grade zinc deposit, 10.4% zinc grade equivalent zinc grade, multi decade life really another exceptional discovery. South32 is moving at feasibility is on track to the second half of 2020. We retain a 1% royalty on that project. Horne 5 under Falco resources led by -- our very own [indiscernible] are currently at 6 million ounces of GEOs and reserves and other 3 million ounces of reserves just remains one of the largest underground open pit or underground bulk tonnage deposits that's in the development pipeline here in Canada, and in North America. And with a full feasibility study and reserve status here, there's a lot of work has been done to complete the agreements with our partners there. And we look forward to getting that permitting underway in a significant way, this year and early next year, hopefully, to have completed that cycle. But it really is an exceptional asset and it's a BMS deposit that goes down with another kilometer of undrilled potential at depth and we see that is one of the big assets here in Québec that there will be generational if we were too fast forward 10 years from now. We will see probably Windfall and Falos, Horne 5 and Canadian Malartic underground is the biggest assets here in Québec. So we are staying close to home to practice our premium jurisdiction. And we see is that our other go to jurisdiction on Page 19, I wanted to do a brief touchdown. On the Cariboo project, as you could see here in the image, the underground workings from the BC [indiscernible] and you can see some of the clear text in the background work is ongoing on this project. We have in less than four kilometers of the known trend outlined 4.4 million ounces of underground resources and our PA site it was published in September of last year. This company is currently 100% owned by Osisko Gold royalties, and obviously time has been our friend on the gold price with the gold price having gone up significantly since we bought this project back in September. And we're evolving towards the permitting timeline on that, with a couple of different things on the go. But we set the stage to look at a plus 4,000 ton a day operation, which would set the table for over 185,000 ounce a year Phase 1 development of this project. But make no mistake about it. This is a mining camp, not just a project with over 83 kilometers of mineralized trend identified in this project on North of a 2,000 square kilometer land package. This is one of the big projects that is out there. And we think that this is generally a slow asset, what we were hoping to see is a scaled investment. One of the advantages of this project is that it has existing infrastructure with a QR mill in place. And we think that it can relatively simple ramp up to go to 4,000 tons a day using all sorted and floatation technology coupled with the existing infrastructure. We have a pretty straightforward mine with relatively low capital from the beginning. And we will be there with our royalty currently at 4% to 5%. So it's a high times for permitting in Barkerville as we move forward towards the conclusion of that project description and the team is fully functional and pushing hard to get that done. We did spend about $5 million worth of our budget on exploration drilling there, which yielded some significant forward motion on infill drilling for the deposit net project continues to strengthen nicely as we move into the year. We've concluded this transaction and we did spend some money on the transaction closer. And we've also invested about $10 million between the transaction closure and pre production environmental contract water management systems that'll set the stage for use during the production period as well. Page 20, high exposure to gold prices with us being at 81% gold exposure and mostly driven from [pure gold bars], which is somewhat unique in the space. So we're quite happy to be there. Obviously during this -- with this gold price. On page 21, really a cycle through of our business plan. The optionality that accelerator model is brought to us we've been able to incubate one or more accelerator companies with the Osisko Group on a per year basis since 2014. And really, the goal is to take highly talented exploration and development and mine building teams that put Canadian market together and created $4.3 billion of value in that company of which shareholders made a profit of over $3 billion and to take that team and deploy them into other assets that can duplicate the success that we saw at Canadian Malartic for hopefully to do it more in parallel rather than one asset at a time. I'll be listed for here at Osisko Mining which we own a 16% equity ownership. And we generated work [indiscernible] of 2% to 3%, Osisko metals run by Bob Wares and currently around supplying client project data 100% there 18% equity ownership it's also with the Horne 5 project and we talked about, and a new accelerated company that we've invested in, headed up by Terry Harbor, one of our exceptional exploration structural geologists and his team Taseko resources, currently working on the Bralorne project in Central BC and mineral Alamos which has been moving well with the [indiscernible] , Santana in Mexico. So we see these early stage opportunity is really evolving and creating our own our own organic world in terms of doing deals earlier on, and then being to help those projects with project financing as we get further into the value creation process of those projects as they move into production. Page 22 a brief summary of things. Just over 18,000 ounces GEOs earned in the quarter. Cash margins at 91% the highest in the sector over $23.8 million in terms of cash flow, $169 million of investments as at March 31, 2020, and $158 million of cash as of March 31 ongoing and obviously current cash balances enhance some sizes of that. So to simplify the story, this is a very good exposure to gold, pays a dividend why you're invested in gold with a significant amount of upside with over a million meters having been drilled on the royalty lands that Osisko royalty shareholders are already exposed to last year and a year before, without having to invest any further money. Our land -- our royalty lands are more important exploration wise than most other things worldwide because of the flow through share. Our system here in Canada, which encourages exploration our R&D if you will, which is usually the lifeblood of our value creation, in every sector is research and development. And we consider exploration to be that R&D factor that differentiates us from other gold investments in the space. In terms of where we are right now, obviously, our hybrid business model has been a little bit less valued in the marketplace in the past, but we think that we're well geared for this market and certainly with the evolution of the accelerator assets within the company -- within the project we're seeing more and more value being ascribed to those through the community -- through the analyst community. And we think that as we get further into this year, a lot of that value starts to unlock, and hopefully we can turn the corner on the valuation process and see a higher share price for our supportive shareholders. And on that note, I'd like to thank everybody for participating in the call and open it up to Q&A.

[Operator Instructions] [Foreign Language] Your first question comes on the line of Kerry Smith of Haywood Securities. Please go ahead. Your line is open.

Thanks, operator. Sean a couple of things on Cariboo, could you give me sort of your current thought process on the timing of the permitting process? And also bringing in a partner what your time your expectation and timing is to have concluded that sort of a time investment?

Yes, well obviously, we've been in an uptick marketplace here and Barkerville has gotten an awful lot of attention as of late from various partners, so we are working very hard with those partners to optimize the investments of the Osisko shareholders have made into this project. In terms of timeline on the permitting, we see -- we have a construction release, hopefully in 2022. Probably later on, but we have been moving well. Within the new framework that BC has outlined, and we're quite happy with the way the process is going in our first nations partners have been very supportive as well. Most recently, prior to the COVID-19 crisis, we had the mine minister and major projects coordinator come and visit the site. And obviously, we think that given the economic outcome of a lot of different industries, right now, gold mining in the Cariboo, which is a Brownfield site. It’s going to be a priority investment and we have the ability to create significant amount of jobs, both during the construction period with probably 700 jobs to 800 jobs during construction and then a full time workforce of somewhere between 400 and 600 as we continue to ramp up and build out that project, from the partnership we see very, very high quality partners that are interested in this project because of its scalability and because it is a camp size project.

So Sean, is your target to then try and have a partner for that project by the end of this year, let's say or is that a 2021 event?

No, I think we'll get a partner. We're in process right now, obviously COVID-19 is creating challenges for a lot of different people. So I'm hesitant to put timelines on things, but I don't see why we wouldn't get a deal done in the current market conditions that [indiscernible] BC has as deemed mining as a necessary service. So it has not been shutdown. And then ministry there continues to work, as do we. And the team there has really, move things forward as we got going there. So we don't really see anything that would inhibit us from getting the field done, hopefully, and over the course of the summer, or certainly by the end of the year.

Okay, and then just on the permitting side, when would you file the documents with the regulators, if you want to have those permitting done in 2022?

Well, the process has already begun Kerry and we have submitted projects descriptions last year. So we're optimizing those on what's called [IRTs] and permission requests transfer. And we are in the process now and hopefully be going back and forth a bit more. But we're in constant motion on the permit as we speak today, and that process is engaged.

Okay. Okay, good. Thanks Sean.

Thank you, Kerry.

[Operator Instructions] Your next question comes from the line of George Topping of Industrial Alliance. Please go ahead. Your line is open.

Thank you for everyone. Sean when the [$10 billion] to be spent this year Cariboo Gold, how much will be then so, expansion and how much is going to remediation?

Well, the budget right now is $5 million for drilling. So we'll be doing some tidy up in so as we've finished up with that geological model. So anywhere we've identified that we need the higher density of infill drilling, we'll go back and tidy that up. We have made an investment into the contact water treatment facilities that are really sort of pre capitalizing the infrastructure that we need to go mining. And then in terms of remediation work, it's mostly being done in function of the BC [rain] development, but they won't be that much the $10 million is really to go to the drilling as we go forward, and we'll be a little bit opportunistic George as we see opportunity. To do things that are going to de risk the project, and move us forward, and we can get the permits to do them. We may go and do that. And then also, we'll be so much subject to our financial partners view how the project as well as we get further into it.

Right. And then for 2021, do you have a thought on how much you might spend there? And, admitting it might change that you have another partner involved with his own thought, their own thoughts?

Yes, I think where we are, on that charges, that there's probably three answers, if we go alone we would probably be fairly conservative, the mid-tiers, assuming that we're driving hard to do everything we can to facilitate that construction release, [ASAP] and then the third one is assuming that we want to get aggressive not only on that, but we also want to increase the time allowed that partnership that we would initiate a significant drill program in 2021. So, I'll come back to you a little bit later on in the year as we, fill out those goals. But I mean, we can assume that it's probably going to be a minimum of $20 million to $30 million, and then upwards from there, depending on how aggressive we get on the exploration and underground development side.

Got it. And then, just lastly, just switching over to diamond some and obviously with the India being shutdown now, it's coming back a little bit. Have you had any industry updates on we're diamond monitored? So they might recover from many of the commodity specialists?

Yes, we have. And there's a couple of different viewpoints. If you look back to the last financial crisis, obviously it didn't have the same ramifications of shutting down the diamond polishing Centers of India as COVID-19 has. There is pent up demand and we're seeing that retailers in China who have opened back up have seen significant demand. And first indications are at the month of April was somewhere between 60% to 80% of what the 2019 April numbers were. So that demand did come back fairly strong and you've seen them shutdown and or shut in have different mines in this space. So there is a supply demand scenario building. However, there will be a bit of an inventory cleared through as diamonds go back out in that space. But we are optimistic that your diamond prices will respond like they did in 2008, ‘09 with that pent up demand coming back into space.

All right. Do you think, [indiscernible] I'm in with your budgets be maybe Q4 this year or there [indiscernible] for and we stopped.

It's going to be a bit speculative on my part, George, but obviously, I certainly would hope that we can do that. The mine is on -- on a dry shutdown right now as we monitor the situation. And we'll review that fairly regularly with our partners as we get further into the piece, but the mine as you know, is well groomed and well built and it was just starting to hit its stride when the diamond prices started to pull back, and we are ready and waiting to put that mine back to work as soon as the time is right.

Got you. Great, thank you.

Thank you very much, George.

Your next question comes from the line of [indiscernible]. Please go ahead. Your line is open.

Hello Sean. Congratulations on the progress on so many fronts.

I appreciate that, John, and I hope you're keeping well and safe. But I know you [indiscernible] place that that has challenges as we have bet here?

Yes, I just keep looking at my computer and work in the garden and I discovered the wholesale fish markets, the fishermen can sell the restaurants and there's great fishing around here. So it is an all in the Canadian North. There's a little bit good here. Could you update us please concerning how your investment criteria have changed as the markets have changed. First, have you raised your gold price basis and doing analyses, the $400 or so that the spot prices start-up some of the measures have kept their criteria the same as a year or two ago. Second, have you raised your discount rate assumption because a couple of projects had charges this year and last year and a year before. Third, how much do you raise your discount rate outside of Canada? And fourth, how do you prioritize between these dozen or so wonderful projects and all appear promising, where some of them don't have a million meters of drilling like Windfall in earlier stages?

Okay, I'll try and tackle the tax laid out before [indiscernible]. In terms of our gold price right now, we're probably somewhere around 1,400 U.S., which I think is bank consensus, and we'll obviously run certain sensitivities based on the asset and what we think the ability of that asset is to perform at lower gold prices. I'm a big believer in the ratios between cut offs and in mining rate. So that's probably a higher criteria for me on an individual basis. But we do look at internal rate of returns. And then I'm just countering rates, we tend to focus a lot on the geopolitical risk and the life of the mine. in terms of where we are in the world, obviously COVID-19 has changed the geopolitical dynamics and a lot of environments, a lot of countries. If you can fly there or go there, it makes it much harder to monitor things. And I do like my maple syrup and protein. So we've been sticking to Canada with Quebec, and BC being our dominant jurisdictions that we've been deploying capital in, and obviously, where we've had the most success of the drill bit. And in terms of the earlier stage accelerated companies, because of the flow through share and quote and charity flow to share program here in Canada, and the low cost of drilling here. It's very much in our favor to continue to push on this brownfield stories that we've been able to focus on in Canada, the most recent one being the Bralorne asset. In terms of discount rates, we work with a 5% discount rate on premium assets. And we would increase that discount rate depending on the commodity, and also on jurisdiction of too much as 12%. In some cases, in terms of allocating capital, obviously, we're trying to prioritize whatever we think is going to have the most effect on short-term cash flow. In terms of decreasing GEOs for our balance sheet that is dominant, the dominant allocation of capital, we do take a long-term view on exceptional assets like Windfall and modified and Barkerville where we feel that there's a bigger prize to [indiscernible]. But normally the criteria would be nearest production and nearer to GEOs. I don't know if I got all your questions done yet, right –

Oh, we like the emphasis on long life and near production and safe places like Canada with all the double dip sign explorations. Thank you.

Thank you, John.

Your next question comes from the line of Carey MacRury of Canaccord Genuity. Please go ahead. Your line is open.

Yes good morning, Sean.

Good morning Carey.

Maybe another question, maybe another question on Barkerville. Is there a scenario once you get to a construction that soon where you fund construction within Osisko Gold? Or do you think it's more likely at that time to either sell the asset or, put it in another vehicle?

Well, we'll have to cross that bridge when we get there, I guess Carey but I didn't, I just want to make sure everybody's clear Osisko’s Gold royalties is a royalty and streaming company. Our main business is project finance. So that 25% of allocated to the incubation accelerator strategy but, once our project gets to shovel ready, fully permitted, it falls back into our main strategy. So if we see the numbers are right, and we can continue to invest there and meet our criteria of being a dominantly royalty and streaming company, we're obviously going to take advantage of, of the projects we know the best and, things that we've been actively involved in the evolution of within that criteria. So we will be opportunistic for the Osisko Gold royalty shareholder. So we want to make perfectly clear to everybody that royalties and streaming business is here to stay. And there won't -- if we do go into any other mode, that’s why we created in our spare was to have a platform that other capital could come invest alongside of us in that space and do choose the proper partners unlock the most amount of value in the most expedient manner. With that, we think that that is the proper strategy in this market, and we see a lot of capital, willing capital is coming into the space right now. And we're in a fortunate position where we control a lot of extremely high quality assets, especially things that can be 5 million ounces, or more than have the ability to go three to 500,000 ounces a year production in the long run and have the Canadian monitor on them. That's been our bread and butter. And we think that we're really well positioned ourselves to take advantage of that. With the Eagle, Victoria's mine coming online, and then we have three other big Canadian projects that are sort of within our program, we have the most exposure to big Canadian assets of any group out there at this point in time. And I think that we're well suited to take advantage of that for our shareholders.

Okay, great, and then maybe in the longer term guidance of 140,000 ounces, can just remind us what the big components of that quote is relative to where you are today?

So we would see obviously, the underground back 40 in Michigan. We also see Mantos expansions working out for us. And we see Barkerville and Canadian Windfall following a development track and hopefully, what we did not include in that 140,000 ounces, for example is Falco with the with the silver stream because we haven't finished paying for it yet. So we've only included the assets where 100% payment, but it's a still [indiscernible] shareholders on the asset have been made. So we have quite a bit of organic growth in those assets.

And maybe one last one on Mantos. Can you comment on how the expansions going there when you expect to see an uptick in your counselors for Mantos?

Yes, it's a private company. It's very much on track right now. And I think that the way that we see that asset is [indiscernible] a very good operator with deep pockets. And we see them pushing hard to get that next expansion under control management team there. It’s very focused and driving hard and we think that by 2021. In 2021, they should achieve their goal, but it's an exceptional effort. And that asset is really showing its true colors to colors and through quality.

Okay. Thank you very much.

There are no further questions at this time. I turn the call back over to the presenters.

Thank you very much. And I just like to thank Sandy of saying and Fred who both stepped up to the play here in Q1 for a great effort as well as the rest of the members of the team who joined us, Mike Spencer, on our international side and [Ian Farmer] has taken on the role [indiscernible] and corporate development. And then one, [indiscernible] who's joined us in the Montreal office on strategic planning. The team is fully functional and I'm very happy with the way that the team has been able to come together, especially in this COVID-19 crisis and achieve so much in such a short time. Thanks, everybody and stay safe.

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