OR Royalties Inc. (OR) Q3 2020 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen and welcome to Osisko Gold Royalties Q3 2020 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, November 10, 2020 at 10:00 AM Eastern Time. Today on the call, we have Mr. Sean Roosen, Chair and CEO of Osisko Gold Royalties, Mr. Sandeep Singh, President, and Mr. Frédéric Ruel, Chief Financial Officer and Vice President, Finance. I would now like to turn the meeting over to your host for today’s call Mr. Sean Roosen. [Foreign Language]

[Foreign Language] Welcome to our third quarter conference call. We will follow format this morning with Fréd Ruel, presenting our financial results as reported. And then Sandeep Singh, our President and to be CEO will be coming on and giving us the rest of the corporate presentation for today. We will be referring to some forward-looking events and we have a presentation on our website, titled Q3 2020 Results that you can follow this morning. I will give quite a small preamble this morning and then pass it over. As you know, we are in the evolution of the Osisko story with the purification of the royalty model for Osisko Gold Royalties through the spin-out of the Barkerville and San Antonio assets into the new entity of ODV. That vehicle will probably start trading in early December. And some more work left to do on that as we get into it. And that should simplify the business of Osisko Gold Royalties on a forward go basis. Quite excited about the evolution there and the aspects of what’s happening with the ODV assets both at Barkerville and San Antonio as we move forward. And I think it goes well to explaining why we believe Osisko Gold Royalties has the best business model in this space with the sidecar accelerator business providing unequal opportunities to Osisko Gold Royalties as we evolve in the space and continue to execute our business plan to build the best business around the royalty model in the sector. On that note, I will hand it over to Fréd Ruel to give you the financial highlights. And then Sandeep will take over after that. Fréd, over to you. Frédéric Ruel: Thank you, Sean. Good morning, everyone. Thank you for joining us today. A strong quarter, a strong third quarter for Osisko, with production rebounding very well from Q2 in the COVID impact. We earned 16,739 GEOs in Q3, generated record revenues of $41.2 million, record operating cash flows of $36.1 million. And an operating margin on our royalties and streams of over 96%. Net earnings were $12.5 million or $0.08 per share, while our adjusted earnings were $17.5 million or $0.11 per share. We also acquired during the quarter the remaining 15% ownership in a Canadian precious metal royalty portfolio, which includes royalties on the Island Gold and Lamaque mines. We also announced a strategic partnership with Regulus for $12.5 million. And of course, as you all know, we announced in October the spin-out transaction and the creation of Osisko Development. On Page 4 of the presentation, we show our production by assets and by products, again the Canadian Malartic mine delivered strong results and Victoria continued to increase the deliveries. In Q3, 70% of our production came from gold and 27% from silver. As presented under Page 5 of the presentation, we recorded record revenues from royalties and streams of $41.2 million compared to $33.9 million in Q3 2019. Cash flows from operating activities reached a record $36.1 million compared to $28.3 million last year. If we go to Page 6, we have a breakdown of our cash margin for Q3 and year-to-date. The cash margin on our royalties and – on our royalties increase in Q3 to reach $30.1 million compared to $23.4 million last year. For the first nine months of the year, the cash margin on royalties reached $76.5 million, an increase of $5.9 million compared to Q3 2019, despite the COVID impact on our deliveries during the second quarter. The cash margin on our streams was $9.6 million in Q3 compared to $7.4 million in 2019 and $25 million for the first nine months of the year, $4.5 million higher than 2019. This resulted in a cash margin on our royalties and streams of over 96% in Q3, in fact 96.4% compared to 91% in Q3 of last year. Our total cash margin reached $40.5 million, $8.7 million higher than last year. Year-to-date our total cash margin was $104 million, an increase of close to $10 million. On Page 7, we have a summary of our earnings and adjusted earnings. Net income was $12.5 million in Q3 or $0.08 per share, compared to a net loss of $45.9 million last year or $0.32 per share. The loss in 2019 was due to impairment charges. Adjusted earnings for Q3 reached $17.5 million or $0.11 per share, similar to last year. On Page 8 of the presentation, we have a summary of our results for Q3 and year-to-date. GEOs from gold production were lower this year, partly due to the sale of the Brucejack offtake in Q3 2019 and the remaining impact of COVID. But this was more than offset by strong silver deliveries. The decrease in our total revenues from $109 million to $56 million was also due to the sale of the Brucejack offtake last year, partially offset by a higher realized price on gold. Our average gold price per ounce sold amounted to a record $2,545 in Q3 of this year compared to $1,952 in Q3 of last year. Our gross profit for Q3 increased to $30.8 million from $20.9 million in 2019. On Page 9, we have a summary of our strong financial position. Our cash balance at the end of Q3 was $161 million, our debt amounted to $422 million, unchanged from Q2, including the $100 million accordion available under our credit facility. The facility has over $400 million available at the end of September, allowing us to quickly deploy capital as needed. Finally, on Page 10, you may find our updated guidance that was released in early August. We expect GEOs of between 33,000 to 35,000 in the second half of this year with the cash margin on royalties and streams of approximately 95%. We anticipate a continued upward trend in GEOs deliveries in the fourth quarter and we believe that we are in an excellent position to meet our forecast for the second half of 2020. I’ll pass it back to Sandeep for the rest of the presentation. Sandeep, to you.

Thanks a lot, Fréd, and good morning everyone. It’s Sandeep Singh here. Look, hopefully what you’ve taken away from Fréd’s presentation and our Q3 results is that this was an excellent quarter. Records in terms of cash flow despite the fact that our operator’s assets were largely still revving up over the course of the quarter, post-COVID. The asset base is performing extremely well overall. As Fréd mentioned, production bounce back well with still further upside expected in Q4. I’ll also touch on that a little bit. We’ve talked about timing deliveries in the last quarter in our press release for instance CB, we didn’t get any ounces delivered to us in Q3. They’re certainly producing in Q3. So that was kind of the hangover of COVID where we didn’t get that impact in Q2, we got it in Q3. Island as well, the mine is doing extremely well as everyone I’m sure knows, but our ounces were down in Q2. That’s kind of behind us as well and looking forward to kind of getting over the hump on those types of issues. Malartic obviously our flagship assets, a good quarter, by every respect but also included some processing of low grade stockpiles as they look for increased flexibility until Barnett – the Barnett high-grade zone starts contributing, it did a little bit in Q3. We certainly hope that that will continue. And then Victoria is the large asset for us, ramping up this year, it’s still ramping up and deliveries are growing to us all the time. I’ll touch on that in a little while. I’m still looking at Slide 10 by the way, if you’re following along in the deck. And as Fréd mentioned, meeting our guidance that equates to about 16,000 to 18,000 ounces, just a touch above for the low to the high in terms of Q4, and we certainly think given the dynamics we just mentioned or I just mentioned we don’t see any of the assets will do what they do, but we feel pretty comfortable heading into the last quarter of the year. In terms of growth during the quarter, we spent about $67 million on royalty and stream growth in the quarter between the acquisition of the case portfolio, the $12.5 million and the San Antonio stream fund basically facilitating that transaction was delivered us to San Antonio stream. So that – between those two transactions, there is immediate growth on assets that we already own in that case portfolio like and that have big upside. And then the additional stream, we think has the potential for significant contribution in the near term as well. If you look at Slide 11, next two slides, I will touch on the important transaction that we announced post the end of the quarter. And I want to make sure everyone understands the impact on us. I’m sure everyone does understand the transaction structure, by now we’ve had a chance to talk to most of you about it. As Sean mentioned, it remains on track or the trading of ODV remains on track for early December. We’re just going through the last of the listing process now. And that bodes well. Again, I won’t go through the transaction particulars. I’m sure, they’re all well understood. In terms of the financing, I will say that it was a good result. And what’s been a choppy market generally speaking leading into the U.S. election, good demand, a good set of shareholders that Sean and team will take forward in Osisko Development, and significant interest in that company even though the structure was a little bit complex for some groups to be able to participate in. So, we think there is a good launch in store for us on the ODV side and some meaningful catalysts in the next six months that the team will be able to unlock value with. In terms of the – maybe I’ll touch on it because the preamp hopefully the question a little bit. The only real question we get left in OR perspective is on the retained ownership. Obviously, 88% in the hands of one entity is not a sustainable level. We are structured in such a way that we wanted and we want that retained upside as the ODV team moves the assets forward we will be diluted. We expect the team to move the assets forward quickly to meet those catalysts. And then as well as I’ve mentioned before, we look for opportunities to reduce as well. But the price there is a significant amount of value so we’re going to look to do that in a smarter way as possible. On Slide 12, I think it’s worth reemphasizing one more time. I think it’s a win for both sets of assets frankly. I think we’ve set up Osisko Development well as a strong portfolio, well funded, on its way to becoming an intermediate company solely with asset base in North America, winning production and a good mix of near-term production potential as well as the flagship assets. Obviously, the team we have the utmost confidence in terms of unlocking that value. On the OR side, I think accomplished quite a lot frankly, I mean it’s a lift – we got our shareholders a lift from what’s been invested into the asset base there, which is significant. We’ve crystallized the value of those development assets, they’re now off of our balance sheet, they’ll have a see-through value, they have one based on the financing, they’ll have one every day thereafter, which we think will be beneficial to our overall shareholders. We’ve reduced – or will be eliminating the spend in terms of the asset exposure in Q3, that was roughly $16 million on Cariboo so in keeping with previous quarters, when you flow that through, that’s almost – that’s about $0.10 a share to the bottom line. We’ve also reduced or will be reducing our G&A as part of the transaction. Essentially, the full team required to run both companies was in place and we’re just segmenting them between the two. And not last but not least, we secured and fashioned at least 20,000 ounces of GEOs for Osisko subject to unlocking value on those assets. But that’s a hugely significant chunk of growth that we got paid to take in the end. So a rough ride perhaps to get there, but ultimately happy with the end result and we certainly feel like we’ve set the company up for a significant rerate – the assets, the royalty portfolio that is in Osisko Royalties today deserves a better valuation and has pretty substantial growth profile that we don’t think we’re getting proper value for. So that’s our job going forward is make sure we can unlock that for the benefit of our shareholders. I think, we’ve done a lot of the heavy lifting and we’ll continue down that path. If you look at Slide 13, it’s the growth profile. I touched on it a little bit before. Essentially, the ability to more than double production organically with things that we’ve already bought and paid for, some of those contributing this year, some of those contributing next and a pipeline of assets that are coming on behind. So, we feel pretty comfortable in terms of where we sit currently and this provides us the ability to be disciplined in what certainly can feel like a bit of a heavy transaction market out there. We’ll look to pick our spots when we see value. If we don’t, we’ll sit on the sidelines given the dynamic I just mentioned. I’ll spend a little bit of time on Slide 14 and 15 talking about the Malartic underground given that it’s a huge catalyst for us we hope and we certainly expect over the course of the next coming months, not just for us but obviously our joint venture partners, Agnico and Yamana are doing a tremendous job with the asset. The open pit continues to deliver like clockwork. So, I’ll focus you on the underground. I’m sure all of you who follow those companies are aware of the underground work that was announced in Q2 in terms of ramping down the portal work that’s under way now almost complete and the two years’ worth of ramping into East Gouldie, Odyssey and East Malartic. In Q3, a lot of the discussion was around drilling update at East Gouldie, which should translate into a new resource earlier in the year, followed by a PA, which we – and I’m sure the market how we look forward to. The drill results were nothing short of a fantastic frankly, with widths and grades increasing. If you look at the bottom right here, you’ll also notice and the continuity has never really been an issue, but it continues to be reinforced. And I think it goes a long way toward adding confidence to the operators to push that asset forward including a potential shaft decision off the back of the PA in New Year. And if you look at the bottom right, as I was trying to say, East Gouldie and East Malartic dipping toward each other was certainly – the potential of those two converging at depths as well, open in – open at depth to help benefit that. So lot of good news from a Malartic perspective and Malartic underground perspective, and we look forward to that getting further advanced by our partners. If you look at Slide 15, just a little bit more on the exploration update. 12 rigs turning at East Gouldie, generated 38,000 meters of drilling in Q3, that takes us to about 77,000, 78,000 ounces – sorry meters, I think for the first nine months. And a similar kind of Q3, Q4 level of drilling. So intense drilling and certainly, we expect that to lead to a significant increase in resources by the time they update that in the New Year. As I mentioned, you’ll notice a snapshot of some of these results here. Nothing short of exceptional frankly, fantastic continuity, average widths if I remember correctly, north of 10, I think it’s 11 meters averaging greater than three grams per ton in the East Gouldie portion. So, this is going to be one of the core facets, one of the core catalysts for us. We’ve always felt this year that this was shaping up to be the best development project maybe in the sector or certainly one of, it has continued to trend that way. And our view is the more the operators do their work, the more they are comfortable talking about it earlier in the year, the better will be for all of us and shareholders. So, we look forward to that ongoing work. If you move to Slide 16, just other – some of the other producing assets to touch on a little bit, and then if I miss something, we can certainly pick it up in the Q&A. Eagle, I touched on earlier, ramping up – continues to ramp up well, I guess the ramp up, continues. If you follow Victoria, you would have heard us in bottlenecks on the processing, largely crushing side that are being addressed through a variety of optimization work. Importantly, I think the grade and the recovery if you listen to the operator reconciling quite well. So it’s just really a methodical march up in terms of tons being stacked and so we are quite confident that the team is doing the right things there, we’ll keep a close eye on it and look forward to that production growing, it’s growing to us all the time. And then from an exploration perspective, everyone has been focused on the production there as they should be, but we’re starting to see some really good stuff come out of Victoria on the exploration side, including most recently on the Raven target, a drill hole about 65 meters, just shy of three grams which was a large step out hole. So again, speaking to character and the potential of a large – a very large prospective land package. Mantos, again, a strong contributor in Q3 for us, performed quite well, even with all the challenges of COVID in South America, Chile, especially. So, we commend them for that. And in terms of the expansion, I think we say here mid-2021, there could be some small delays again COVID related but that pushed that into the second half of the year, but still overall we’re quite pleased with the updates we are seeing in terms of their expansion work and how little impact COVID has actually had on them. Eleonore, again it was a COVID impact in the quarter, slower rev up there. As I guess they’re being a little bit more cautious and lower tons mined, but certainly we expect them to continue to make progress on their being Newmont’s full potential program. So hopefully this is one that they can continue to improve and add ounces to us. On Slide 17, I touched on the assets being contributed through ODV to us. So, I’ll go through this relatively quickly. At Cariboo, look, it’s a significant scarce meaningful, whatever adjective you want to use. Resource, at Cariboo, there is an aggressive drill program under way and we expect that to continue under the ODV banner. Lots of exploration success over the course of the year that the team will be following up on to turn discoveries into resources, and a meaningful reserve update as well that will feed into feasibility study in mid-2021 and an ongoing path toward permitting. Recently IBA signed with The Key First Nation, The Lhtako Dene Nation, so significant investment from that perspective as well. And from what we can see, permitting is obviously a lot of hoops to jump through, but the team is doing a great job, doing just that. And on the San Antonio side, really great starter pack with a million ounces of high-grade 1.2 gram heap leach material, large land package, really untouched and kind of forgotten. Work to do there in terms of permitting, infill drilling, expansion drilling, studies, et cetera, but a great address and a great starter pack as I mentioned in Sonora with significant upside overall, and a lot of good near-term opportunities that Sean and team will be attacking. Slide 18, just highlights – maybe Slide 18 and 19 highlight some of our other assets, I won’t go through them all in detail. Windfall, Hermosa, Horne 5, significant contributors to growth, at Osisko mining, a sizable high-grade 5 million ounce resource. Continue to – the press releases was – had a pretty funny title more of the same, but that more of the same is some of the most exceptional drill results in this sector at present. So, we look forward to that continuing to add meaningful ounces as they work towards their own feasibility study in 2021. And at Falco and Horne 5, a very important announcement, their transaction with Glencore where they provided a convertible debenture structure and offtake, which they always had the right to. And frankly got some skin on the game and as they continue to work towards the last technical diligence they’re doing and the team at Falco have done a phenomenal job getting the relationship with Glencore to the point where it is. So, we look forward to them finishing that exercise over the next short while. And then again, just to touch on Horne 5 as well, which is a stream that we fund based on success but can be a meaningful contributor depending on your gold and silver prices circa 20,000 ounces of GEOs right there. And so the recent announcements are positive one, toward that our stream, as I said it’s funded on success, but if you just look at the Monarch transaction recently congrats to those folks. But I think circa $150 million in the neighborhood, we certainly think that’s a very positive read through on value for 6 million ounces of reserves and 10 million ounces of overall gold equivalent resources. On Slide 19, again other examples of how the portfolio is doing well. I touched on Island, obviously, a ton of success there for the Alamos folks in terms of that mine in terms of production and cash flow, but also on the exploration side. And some of that drilling, especially over to the East now drifting over to our higher grade royalty portion. So, we look forward to their continued work toward expansion and obviously continued exploration success. Seabee, I touched on earlier, deliveries have restarted for us in October. So that’s behind us and we look forward to their catching up to a great high grade mine, an asset for us in Canada. Gibraltar and the Taseko folks, I think the upside of that is they did quite well through COVID, managed that exceptionally well despite a large – such a large workforce. They kept cost down and brought costs down frankly and now the copper price in a much more supportive place. So, I think that’s a good new story. We obviously improved their stream earlier in the year to assist and frankly opportunistically for us. And on Sasa, again really important contributor on the silver side, obviously, unfortunately there was a tailings issue, a tailings leak during the quarter, those remediation plans seem to have gone well and have been well accepted. They’re still finishing that exercise and hopefully that gets sorted out soon, in the meantime, production is back at full capacity. So hopefully that issue gets resolved and is behind them. And then I guess ending on Slide 20, I will just reemphasize again that we think it’s frankly an excellent quarter coming out of COVID and sets us up for a strong finish to the year. And at current gold prices even with half day factored in, we’re still making money hand over fist and hence beat the records that we saw from the cap revenue and more importantly cash flow perspective. For the course of Q3, so hopefully we can keep that trend going. There certainly are a lot of strong catalysts across the asset base over the next three, six, 12 months particularly timeframe. And what we think is fairly sector-leading organic growth that we should start to chip away at. In the process, we think we’ve simplified the story of this quarter. And as we get out and tell that story, we certainly expect to undo the meaningful trading discount that we still think our assets deserve a better a lot. So with that, I will conclude and open up for any questions you may have for myself, Fréd and Sean.

Thank you. [Operator Instructions] And your first question comes from the line of Ralph Profiti with Eight Capital. Please go ahead.

Hi there and good morning everyone. Thanks for taking my questions. Sandeep, two of them, if I may. Firstly, you talked about the transaction market, you described there’s being a heavy transaction market. Just wondering kind of what you meant by that? Are you seeing a significant pickup in activity or a more competitive environment or both? And in that context, under the new structure, how would you kind of allocate priorities how you would actually fund new transactions?

Sure. Happy to touch on that, Ralph, and good morning. Look, I think in terms of your first question in terms of the growth market, I think I’ve said heavy or I meant to say heady not heavy, but look it’s clear, there is a fair bit more competition out there. I don’t think we’ve been shy, the going rate for things at times we’ve chosen to not pay, we’ve tried to – for a variety of reasons we have significant organic growth as I mentioned earlier and we’ve tried to fashion new growth in different ways and the Osisko Development transaction is one example of that. But there is more people out there looking for royalties. So, you’ll find that at times, but there’s also more royalties and streaming opportunities coming around all the time. I think that ebbs and flows, it’s a capital-intensive market. I think through royalty and streaming we provide collectively a competitive cost of capital. So, there is still a lot to do and things popping up I think here and there all the time. I would describe our pipeline as good. We still see things that we can do that adds moderate type transactions that add meaningful growth to our size of the portfolio that we think are still good value and those are the types of things we’re focused on. So hopefully that answers your first question? And then again flowing into your second in terms of allocating priorities, again I think for us it’s given what I just described, it’s having discipline and showing discipline in terms of what we reached for. If we see good value out there, we can reach for it, we can do almost any transaction we want to, in the sector, but at times that’s been a big if. So, we’ll look – we’ll look to pick our spots. The fact is job one is to get paid for our current set of assets and then obviously have the organic growth kick in, if we can supplement that with smart transactions. We will – we’ve got – as we are, with many of you have talked about the fact we’ve got a large development portfolio that’s transitioning already and we’ll get the benefit of those ounces really as they do transition from development to producer status. So, the focus is on we have to look at things on a case-by-case basis so it’s just – you can’t be too stuck in your ways. But the focus certainly is on near-term either cash flowing or near-term opportunities. That said, when we see an attractive asset like we structured with Regulus in Peru, which is big and getting bigger all the time, we’ll reach for those as well. So hopefully that gives you a bit of – bit of color, it’s the fact, if I can distill that, those are a lot of words, but if I can distill them into two, it would be disciplined and balanced.

Fair enough. Yes. We appreciate that. If I can follow-up on Renard, can you give us sort of your views on the ramp up and milestones that you’re seeing, it’s not included in the guidance, how much upside could we see from say a materiality perspective?

Yes, look, I mean Renard is still important to us. We took it out of the guidance out of the over abundance of caution, while it was on longer care and maintenance through COVID and then obviously the luxury good market. Not – it wasn’t our expectation would be the first thing to come out of COVID, but that being said, I think we’ve been positively surprised, so the mine is back up and running. We’d ship then at least on paper right now not fully to provide a working capital facility with our partners who are quite strong there with us. Just to make sure that there wouldn’t be any fits and starts. There was a significant inventory of diamonds on the books already that they could dip into as needed. They’ve started to make some of those sales. And the prices have been good kind of back to pre-COVID type levels sooner than we expected. So, I think that’s an important asset. It can add a big chunk to our gold equivalent ounces. We’re still in the kind of work out phase now. It’s going ahead of schedule versus my own expectations at the start of the year. And it’s kind of on the cusp of meeting an extra, little push from a diamond price perspective whereby we can get back to a point where we’re making money on our screen. Now thematically, it’s the wrong word but market wise, our goal is finally kind of run out of ore and it’s on the shut down phase long phase. But I think in terms of – in their last deliveries that is 10%, I think roughly of the global market. Importantly for us in the same overlap, significantly I guess, I’d say in the smaller fraction that Renard lives and breathes in. So, we are certainly hope that there is a moderate improvement that gets us back to our stream, it’s a significant stream for us. Ultimately the logic on that transaction was it is a chunky stream for us, it’s a $1 billion, a good infrastructure for mine that runs well just need a little bit of help on the diamond side, the price side and so far so good. So, I don’t know if that answers your specific question, but we’re certainly happy with the progress there and look forward to a positive outcome eventually, hopefully sooner than later.

Yes. You answered it perfectly. Thank you, Sandeep. Thanks for the input.

No problem, Ralph.

And your next question comes from the line of Puneet Singh with Industrial Alliance. Please go ahead.

Great, thanks. You upped your exposure to Iron Lake in the quarter. Can you take us through the varying royalty rates on the mine, and which areas are higher, which carries are lower and how that works in terms of the expansion they’re planning at the mine?

Yes, hi Puneet. Thanks for your question. So, look that’s a mine that overall that we think is running exceptionally well again, kudos to the Alamos team in terms of what they’ve done there obviously some of the blueprint was already there, but they’ve done a fantastic job with it since and the grades and widths that we continue to hit at depths are improving that situation. So it’s an asset that we had 85% of that portfolio, if you will, we bought from the last 15. So adding exposure to a mine that we already knew well and liked with big upside was a bit of a no-brainer. Currently, the royalty rate, if I’m not mistaken, is 1.38% to shy of 1.4% and that will continue to be the case for some time. Importantly, as they drill to the east, they are drifting toward what is I think between 2% and 3% royalty space for us. So, I don’t have the exact answer for you in terms of win that transitions. But certainly need if you like, can follow up with you with a better answer as we post the call.

Okay, great. And that’s good. And then I guess my second question just on Mantos. Let’s see, you put out a forecast of when there’d be debottlenecking project would be completed. I guess, are you still forecasting it to go up to a million ounces of silver per annum after it’s complete? And how fast do you think the operator can get to that level?

Yes, look, I mean I think we’re pleased with the progress to date. I’d say we’re happy that the – what looks like minimal limited impact from the – from COVID essentially, both at the actual operation and then on the expansion side. So that all bodes well. I think, so that’s from a timing perspective. Will that continue to be the case? I’m not sure, but so far so good. How that affects the ramp-up will certainly want to see as well. So, I think we’re being – we’ll stay mute for the time being, but certainly we do nothing has changed, I guess, in our view of ultimately where it ends up question of how long it gets to take to get there, but really we might be talking months as opposed to anything else, but ultimately our view there has not changed and we look forward to that as a contribution.

Okay, fair enough, thanks.

Thank you, Puneet.

I’m sorry. And your next question comes from line of Mike Jalonen with Bank of America. Please go ahead.

Good Morning, Sean, Sandeep, Fréd. Just a question on Page 13 where you show a production guidance around 64,500 ounces to the midpoint this year to 140,000 GEOs by some date that’s not shown. Just wondering what would be that date and what are the key assets that basically drive about a 75,000 ounce increase more than 100%? Thanks.

Hi, Mike. Good morning. Yes, look that is intentional. We haven’t given a date for that, again mainly because it’s not – it’s not in our control. I will say this, we’re not talking about kind of often the distance, we might not be talking about the next two, three years either, but these are sort of in the next several years we certainly see the ability for the asset base to grow to that order of magnitude. In terms of the assets, look it’s – we were supposed to be – I think the range was 82,000 to 88,000 ounces for this year, 85,000 being the midpoint pre-COVID with – and that included some Renard. So look, we certainly have the ability, we are on track for growth this year with Eagle kicking in beyond that. We’ve got things like the expansion that we just talked about Mantos, we’ve got Windfall, Hermosa, Hakela [ph] being a big chunk there as well. Falco is not in that number given that we haven’t paid for it yet and then we’ve tacked on Osisko Development kind of the placeholder for about 20,000 ounces a year. So those are some of the assets in the next several years, each of those you might have a view on their respective timing. But importantly all or generally all are moving forward well, with some minor exceptions but most of those assets are getting good traction and advancing well in what is a pretty conducive equity market out there. So hopefully that continues to be the case for those folks through the development and construction trough.

Well, our analysts who cover South32 has Hermosa maybe 2026 at the earliest and what about Windfall? I read your press releases, I don’t see any production or construction decision yet, maybe Osisko oversees, what’s your view, when they could be in production, because it’s obviously a great discovery.

Yes, maybe I’ll jump in on that one.

Yes, go ahead, Sean.

I think right now we’re pounding away on the infill during the finish the reserve status there, we should be done the drilling sometime in the spring. And the question is how big is it? But we’re obviously in good shape, the company is fully funded with almost $300 million available to it. So easily takes care of the equity component required to build it. And lots of tailwind support from both First Nations and the Government of Quebec and that we’re in the planned North area. So it’s moving forward extremely quickly. And the last time I checked, there was more than 26, 27 rigs may be a little bit more than that turning on it right now. So we are in a go-fast program with Windfall and I’m not going to predict the exact date of the production. But we’re driving hard to set the stage for the final permits now and then we’ll be in permitting for 12 to 24 months.

Okay. Thanks, Sean for that and good luck for having these discoveries in Canada.

Yes, it’s good to see, and I think half the drill rigs turning right now in Quebec right now are at Windfall lake, right. So pretty active place, so it looks like a deployment zone and it does mining project right now on significant amount of infrastructure on the go and we’ve been a leader on the COVID-19 program with the first site that installed and on-site lab that delivers results in three to six hours. But we’re setting up for the big play there and John has done a exceptional job of keeping that one well financed and parallel to the metal, and Matthew stepped in as President there, definitely has the leadership capabilities to get us where we have to go on that one.

Okay. And also, sorry?

Sorry, Mike. Yes, just to finish up, I mean look you raised a good point. I mean ultimately in terms of timing, we’ll see how quickly those things move together, move forward, but certainly we’re not fussed when the operators obviously two pretty different operators in terms of the assets you mentioned there. But our – have the wind at their backs, they’re finding more with South32, they’re talking about taking longer to create their pre-feasibility study but thinking of it as a larger project. So all those things are positive, obviously we’d love them to be in production today, but we’ll settle for the fact that they’re getting bigger and better all the time and continually moving in the right direction toward production.

Okay. Well I certainly look forward to the Windfall opening event. And...

Yes, I don’t know if – if you see the picture, the quote that John put up on there on Instagram?

No, I’m blocked now by Bank of America.

No. They continue to shoot the lights out from an exploration perspective and again I think like you were looking forward to putting it all together for us.

I’ve only been doing this for 36 years, but I haven’t seen a better piece of core in that.

Sean, you’ll have the first year production just in the quarter, but that’s right.

Well, that is the kind of the underwhelming strategy here, if you run the core shack for at least 24 months.

Maybe Sandeep, just going back to OD, you mentioned bringing down your interest over time. Where would you – what would – what kind of percentage would you hold and say in three years from now on OD, would you be below 50% do you think?

Oh look, I mean, I think certainly I mean when we talked about and Sean in particular talked about OD North Spirit, which is – this is really just North Spirit we named. And public ultimately the idea was not to be a 50% shareholder, the idea was to set up the assets well, benefits from the royalties and streams and then send them on its way. There is two – potentially two significant development mine builds there that will require capital. Anyone who know Sean, knows that he is going to be active to unlock those catalyst quickly. So just, yes I think when we talked about North Spirit was meant to kind of come down to 20% some odd percent. I don’t know when that will happen, three years is a long time in my mind, Mike. So unlocking up, between now and then, but ultimately we’ve structured it well now. So we finished the structuring, part of the transaction which we said we weren’t done a year ago and eventually we do need to start taking money off the table there, but we’ll let the company take its first steps here as a public company, three years feels like an awfully long time away. I think a lot will happen between now and then.

And maybe Mike, I’ll add to it. 99% of the companies that you guys cover most of them have too much liquidity and too higher float, not a big enough shareholder ownership base in any one shareholder. We are the 1% that are actually in full control of our float. And we have a proper shareholder base to work with coming out of the shoot and we don’t have any particular hangover from previous adventures in this stock. This thing is for pristine, and the first time in my career that I’ve seen as many institutional shareholders following me to worry about the size of the float as opposed to worry about the size of the float because it is too big. So, I think we’re at a quality situation, I’m quite happy to be the 1% in this market.

Okay. Well, Sean, good luck with OD. And Sandeep good luck with OR. And that’s all my questions. Thank you.

Thanks a lot, Mike.

And your next question comes from the line of Josh Wilson with RBC. Please go ahead.

Thank you. Just wrapping this thoughts on Windfall. Is there any sort of guidance you can provide for some of the more near-term catalysts ahead of production, like the feasibility study?

Yes, I think...

We’ve been on that Josh, we’re going to let John Burzynski answer those questions. We’re 14% shareholder in the company and we will rely on John to come out with his guidance on those issues.

Okay. Got it. And from a go-forward perspective in terms of structuring transactions historically, the accelerator model had utilized equity in terms of its transactions. Now that’s been point out to ODV. When you look at these types of accelerator model transactions going forward, has there been any thought given to how you would structure these and whether or not equity would still be a meaningful component to that?

Yes. Well, thanks, Josh. I think taking a step back, and I’ll answer your question specifically. Well that accelerator model and it’s true form has been hugely beneficial. I mean we wouldn’t be talking about things like the five million ounces at Windfall and our royalty on it had it not been for that we wouldn’t be talking about the Hermosa, 1% NSR that we have and we can debate, when it comes on. But certainly appreciate having a 1% NSR on the South32 scale projects. So, I think that accelerated model in it’s true form of ceding companies taking royalties early without competition and for when you look backwards with the benefit of hindsight presents on the dollar is good business. The gating item is not our willingness to spend $10 million to try to find a 10 bagger, it’s really all those opportunities out there historically, we’ve done one a year, essentially ceded one of those companies a year. And again that’s either done in a down market than it is in a more positive equity market where there is more capital available for those types of story. So, we’ll continue to be on the lookout, we think it’s a great kicker to our model. But it is not the model, it’s the kicker. And so if it needs a little bit of equity to get the royalty, we’ll look at those on a case-by-case basis as they’ve been pretty good to us. So that accelerator model we have no issues with, we think it’s added a lot of value clearly bringing in an asset in-house fully even though we said that, that wasn’t the end result, that didn’t pan out as expected and so we’re not looking to repeat those exercises but spending 10 and try to turn it into a 100 and get a royalty that’s worth 100 at the same time, if we see them we’ll look to act. But overall I guess that’s how we’d answer that question.

Got it. Okay. And you mentioned expected cost reduction with the spin-out of ODV on the G&A side. The assumption is there or that is going to be fully consolidated just given the ownership structure. I guess what would you expect the G&A numbers to be on an annual basis going forward and will we be able to actually see that if at all consolidated?

Yes, look, we will be consolidating financials as a result of the ownership in ODV. So that’s kind of one – still relatively money piece of the equation and will sort itself out in time. That being said, the actual savings are real. So in terms of the spend, that’s no longer there on the asset, that’s real in terms of G&A having as I said, most of the team available to the staff both these companies obviously some additional public cost of running a company, but relatively minimal in our mind. So on the OR side that G&A have the technical team that’s moving over is real. I’d say we want to let the company have its first few steps as a public company before we start guiding people, but we will get back to giving you a bit more color on that. And frankly, it will shape up on its own and we will certainly do our best even during the portion that we’re consolidating Josh to within the rules that we have to live by, do a good job of segmenting as best we can what there appear OR cost and what our consolidated ODV cost? Okay, but again, sorry – no, go ahead.

Sandeep, sorry, last question on Malartic and yourself, and perhaps Sean have – may have some insight on this. With the ramp up of Barnett, if I recall, the old – and this is obviously, a long time ago old Osisko mine plan for the asset, there were some obviously, very high grades available that would have been a meaningful contributor to OR today. The mine plan, I think has shifted to some degree with the blending of Barnett over time. But is there any perspective on what you have in terms of the progression of that grade profile? I know you guys aren’t the operators today, but any thoughts on what’s our grade will transition to become.

I’ll let Sean jump in as the guy, who built the thing, if you like Sean, other than to say that I think the end of your comment is right. So maybe, Sean can add some context from when we were looking at it, he was looking at it. But we’re not the operators, ultimately there is a really nice kicker to the grade, how they phase that in will be up to them, but the good news is it’s in – they’ve gotten some production out of it in Q3, I think it’s 20 some odd thousand ounces of pre-production. So, you have access to it now and it does provide a lot of flexibility going forward, so good news when it gets phased in and how we get phased in, I guess will depend a little bit. So, we’ll be at the mercy of the operators, but I certainly expect them to do it in a way that ultimately maximizes the value of the assets. Sean, do you have any other kind of historical context on Barnett you want to provide?

Well typically, we had modeled it at around two grams earlier; a significant upside there and there is a few high grade pods within it, that will probably be blended. But the exact mine sequencing is going to be the key here, and I would expect that we will try and make up some grade to cover – to pick up for the Quebec shutdown of the mines that we experienced earlier in the year. So, I think they have the toolbox in front of them to go after that higher grade component in the near-term. So, we’ll see what happens, but we don’t have a day to day mine plan to work from.

Got it. All right, that’s all my questions. Thank you.

Thanks, Josh.

And your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Thank you for taking my questions. Concerning the Malartic underground; clearly, the shaft and the East Gouldie is under planning, and that’s the higher grade area. But there is also East and West Odyssey and East Malartic. Do you envision one underground mine by shaft into the highest grade zone or is there potential for the exploration ramp into the other zones to be a second mine with two sources of underground feed for the mill?

Just in general, John, I mean if you can have two separate working out of these rather than bottlenecking, you always take advantage of that. And in terms of Agnico, they’re very familiar with real theirs and verification that underground mining with their experience at Goldex in Laurent. I expect they’ll take full advantage of both – both entry points and they will probably try, and sort of absolute they can work in multiple development phases at the same time. The bottleneck with shaft is of course, is that even though you might do the substations when you go down on a level basis, it’s very hard to run development from a shaft that’s an active development. So, I think I just want to take advantage of that. There is some older infrastructure in the underground there that hasn’t been incorporated into the mine plan yet. I imagine there’ll be a few tests to see if any of that all underground development work that’s in there has any value to or not, but for your primary haulage ramps and jobs you want to be in fresh rock. So, we’ll see, but I think it will be a couple of – couple of tricks to turn on the way down.

Yes. And then John, just to finish the thought. I mean, look, I don’t personally, as the layman of the group. I don’t think they’re envisaging two years of underground development work through that ramp to just be for the purpose of exploration drilling and the bulk sample. I’m sure they’re expecting that if they have success, that will be longer-term infrastructure. But I think the good news is we don’t have that long to find out how they’re – just thinking about this collective and the synergies between East Gouldie and the rest of the project.

Second, the Regulus transaction is a little complex and I want to make sure my reading comprehension is up to snuff. Is it correct that you paid $12.5 million for three different things, 5.5 million warrants at Canadian or $2.25, first. Is three quarters to 1.5% revenue royalty on 75% of the indicated and 50% of the inferred, on the Mina Volare zone plus the opportunity to participate in more future royalties?

John, I’m not sure I could have said that any better myself. So yes.

So, this is not a complete transaction, but an expression of good faith, whereas they restructure things you’re going to participate in more, and you gave them a little bit of extra cash toward that.

No. look, the way I think of it is, frankly, just in terms of the initial – it is a partnership, there are a patchwork of the existing royalties there that they’ve shown an ability to go back and get – and buy back, some of them are contractual, some of them they’ve just shown the ability to negotiate those. In our minds, what we paid for the initial royalty on AntaKori, which is significant and on the bulk of the current resource as you highlighted resource, it’s only getting bigger as they drill, it’s already quite large getting bigger. That in and of itself justifies the transaction to the extent we are able to secure.

Is the warrants US or $2.25?

That would be Canadian. And so anything else that we do as part of that if they are in fact able to buyback anything else, we have the right to participate in that, that would be a bonus, we’d look at each one of those on a case-by-case basis despite if we want to play. But having that optionality is good for us. As I said, our view is that transaction already in terms of initial immediate royalty is if that’s all we end up with, we’re quite happy.

With Renard restart, how much revenue or GEOs is that worth in the fourth quarter or just – do you even get any in the fourth quarter, does it come in the first quarter?

Look, the key difference we have in our guidance this year when we came back out with guidance, John, is we excluded Renard. It was on care and maintenance first and foremost. And while we’re benefiting by anything they produce, they’ll use to repay us on our working cap facility. We’re not – we’re redeploying our stream back into the mine for the time being, as we kind of work our way through the workout plan. So that’s why we’re not adding the balances to our guidance, because we weren’t benefiting from them purely as a stream. We were redistributing them back into the asset. So, we’re not expecting any contribution from that over the course of Q4.

So, you’ve waived your revenue to reinvest in CapEx for the mine and you’ve waived your loan repayment or you haven’t waived your loan repayment?

No. We’ve not waived our loan repayment, any dollar we put into the asset, we’re expecting back.

Even the funding of the CapEx?

Yes. Reasonably well. But we’ve just done is we’re – we’ve been redistributing our stream proceeds back into the mine for the time being. So, the outcome there is we want to get back to a pure stream that we’re benefiting from without having to put that money back until or unless we do – we’re not tackling it onto our guidance or incorporating it.

With regard quote, do you get a full quarter of the quote output, excuse me, the Saskatoon mine, CB excuse me.

CB, yes, I got what you meant, John.

In the fourth quarter or the first quarter?

Sorry. When do we expect them to be forward...

Which – when do you with the time lags when do you get the revenue?

Yes. So look again, Q2 we got, we had, I think probably a record quarter even though they didn’t produce Q3 we got zero even though they were and as far as I remember delivery started back early in October. So, I would certainly hope and expect that Q4 for us is kind of back to normal activity.

Thank you for your patience with my questions.

I appreciate them, John. Thank you.

And your next question comes from the line of Greg Barnes with TD Securities. Please go ahead.

Thank you. Josh and Mike stole my questions. So, those have been taken care of. Thanks.

Okay. no problem, Greg. Thanks for your time.

And your next question comes from line of Brian MacArthur with Raymond James. Please go ahead.

Hi, good morning. You talked a bit about Falco. So I just want to make sure I understand the Falco situation now. There is a $10 million loan, I think coming due at the end of December. I just want to check first that that’s still staying in royalties, because I know the shares are going to ODV. And secondly, I mean I see Glencore is putting in $10 million for advancement. But is that $10 million to give your $10 million back or what’s – how this actually playing out?

No. they’re good questions Brian, and good morning. So first and foremost, no. The loans thing with Osisko Royalties only the share position has been moved over to ODV. So, our friend at Falco still owns the money we expected back. And you’re right, the money from Glencore is meant to advance the asset, finish the last of the technical work that’s required hopefully at the end of that to and with a buffet. But hopefully, at the end of that to give them all the comfort to center into a long-term agreement to move that asset forward to the benefit of everyone. And we do have that that’s coming due. We’ll look to refinance that with Falco. However, it makes sense. Again, our objective there is not the debt necessarily, obviously, if they can repay it. Great, that will be up to them, but we’ll be supportive, because what we’re looking to we have our eye on the prize and the prize, there is 20,000 ounces of deals in Quebec. So that’s what we’re looking to support and in our minds that loan was a small price to pay and continues to be a small price to pay to facilitate that. So, it’s still money they owe us and will – I’m sure they’ll look to sort that out when the time comes.

Great, thanks. And just very quickly on ODV, and you mentioned there I think about trade in December. I mean to the vote November 20, but that sort of looks like hits that up. What else has to mechanically happen to get us to December?

Yes. look, it’s not much; I mean really the only thing is the listing process with the TSX Venture. The vote, as you mentioned, of the shell company, Barolo is on November 20, 80 somewhat percent, I forgot the number now, of the votes have already kind of been delivered. So that’s just kind of a procedural step. And then I suppose I said the completion of the listing process with the TSX. So as you can imagine, it’s a fair bit of documentation, fair bit of paperwork and that’s getting bounced around between lawyers on a daily basis. So hopefully, that will conclude. They can go to their committee and I wouldn’t suggest that may last few days of November. We’re kind of hoping it’s first few days of December, but that’s kind of the timeframe we’re guiding towards.

Great. Thank you very much.

So, really just procedural. No problem, Brian.

Thank you.

And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

Great. Well look, thank you everyone for participating in. On behalf of Sean, Fréd, myself and the team, I think we had a very strong quarter and we look forward to more of the same in Q4 with our assets, continuing to deliver quite well. So thanks for your time and have a great rest of your day. Thank you.

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