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Good morning, ladies and gentlemen. And welcome to the Osisko Gold Royalties Q1 2020 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, May 13, 2020, at 10:00 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 Mr. Frédéric Ruel, Chief Financial Officer and Vice President, Finance.[Foreign Language]
[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 defer everybody to look and read the forward-looking statement, 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 a revenue from royalties and streams of CAD 37.8 million. And cash flow from operating activities of $23.8 million with a noncash net loss of $13.3 million, mostly relating to the impairment of $26.3 million, of which $19.3 million was to the Renard diamond stream net of taxes.We had adjusted earnings of $7.5 million or $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 Also due to the pandemic, we've withdrawn the 2020 production guidance as many of our associate companies and projects that we are invested in have also withdrawn theirs. And we will come back to guidance as our partners continue to update their guidance as we get further into the year and this pandemic crisis becomes more evident as to what the effects are 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 ramping back up, and we look forward to seeing that mine back in full production.I want to be specific on our cash operating margins. Net of some offtake agreements, we are operating at 91% gross royalties. There's been some misinformation in the market about what our royalties are, but we have a small offtake agreement left in our portfolio that does skew that a bit, but our real royalty 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 CAD 3.9 million. And the average price per share that we purchased under the NCIB was at $9.15 a share, with the stock currently trading about $13.30.We also declared a dividend of $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 the space on a yield basis 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 $85 million to bring in a great cornerstone shareholders that now brings Investissement Québec to about 5.5 -- north of 5.5% of the overall company and 6.2% of -- on a full point -- fully diluted basis. And we're 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 $8.5 million to reduce the transfer price on a silver per ounce down by $2.75 so that we no longer have a transfer price there. So it's really become more like a royalty. We also declared our dividend, as we said, of $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 safe today. Obviously, here in Québec and in Montreal, 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 communities safe. And as we advance through this crisis, we look to honor those people as this unfolds and evolves into what we hope will be a manageable situation shortly.The transition for us involved shutting down the day-to-day office here in Montreal. Everybody has been equipped with printers and laptops, some communication equipment that they need. And we're fully active, and we're working seamlessly from home. And we will continue to keep nonessential office people at home throughout the crisis. And we've limited our exposure as 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 a Québec-wide shutdown for mining, which has subsequently been lifted in part, and hopefully, in full soon. And we'll see most of the Québec mines go back to work. And we'll have better guidance as those regulations evolve and people are able to go back to some of the remote fly-in, fly-out sites safely.One thing to note, that for us in the mining industry, we didn't miss any business. It's a deferral of revenue. The resources are still in the ground. On the social front, we've done a fundraising with our employees where Osisko has notched up to $50,000 for Moisson Montréal, one of 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, [ Gîte de Charme ] is shown here in the photo, has joined the revolution of 3D printing and is printing protective head visors with a couple of printers on the go 24/7. And also, we're contributing to some other efforts on an ongoing basis as the crisis evolves.Page 5 is a summary of what we just covered. The $85 million private placement really goes to bolster the balance sheet in a time of crisis. This $85 million brings our cash balances up to about $230 million, so -- on hand, and that allows us some flexibility in these times. And also on Page 5, you can see a little bit of a summary on the Taseko offtake agreement. This is a great mine with a 17-year mine life located in the British Columbia, not that far away from the Barkerville project. And it continues to be a great mine. It's operated for a long time. It's primarily a copper producer, open pit of 85,000 tonne per day mine that we think has a lot of potential. And Taseko as a group has an awful lot of good projects. And we're very admirative of that management team's ability to operate that mine in the cost cycle that they have, and they continue to have robust operations even at these lower copper prices.On Page 6, I wanted to go through our assets, dominantly gold exposure. We have the most amount of gold revenues of all the royalty and streaming companies in the space. We've shown you here the Q1 GEOs by asset base. Obviously, Canadian Malartic is still our biggest cornerstone shareholder, followed up by Éléonore, Seabee and most recently Eagle and on the Island. We'll talk a little bit more about Eagle as we go on, but Eagle is the Victoria Gold's Yukon mine, the latest gold mine to go into production. They've -- they're enjoying significant success having worked through the winter at 64.5 degrees latitude and delivered the project into production. And they're pursuing commercial production as we speak and had a very good results yesterday. And we congratulate the Victoria team on being able to continue operations throughout, not only the cold winter, but also through the COVID crisis. It's a very exceptional management team that's been able to bring that project to fruition in these difficult conditions.Also, we showed you our silver production with Mantos being our most important silver asset, previously an Anglo American copper mine and operated by Orion now, 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 about 2,000 GEOs coming from Renard. Obviously, diamond sector has been a little more challenging, as we get into the piece. But it's too short a change, as we saw in 2008 and '09, diamond prices did rally after a bit of a financial crisis at that time. So hopefully we'll see that happen in the diamond space as well.Now I'd like to introduce you to Fred Ruel, who is going to take us through Pages 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 somewhat trial by fire. Fred and his team have been able to give it a reporting through and continue on even with the COVID-19 crisis. The challenge is obviously in the accounting department being somewhat significant. So Fred, over to you from Page 7.
Thank you, Sean. Good morning, everyone. Strong quarter for Osisko in terms of revenues, cash margin and operating cash flow 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 reach $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 noncash 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 a breakdown of our cash margin 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 present a 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, $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 our results for Q1. GEOs from gold production were lower this year, partly 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 on gold. Our average gold price per ounce sold amounted to CAD 2,125 compared to CAD 1,731 in Q1 2019. 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 on April 1. Our debt amounted to $423.5 million, which includes a drawdown of USD 50 million in March on our revolving credit facility as a cautionary measure. Including the $100 million accordion available, our credit -- 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, our equity investment portfolio is 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 in these increased gold prices. So all in all, things are going pretty well, and a lot of liquidity and a lot of fire power on the balance sheet to work with in this interesting market times, as I 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 1 producing royalty and 4 nonproducing 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're currently operating at the highest cash margins of anybody in the royalty and 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 Agnico Eagle, Yamana and Newmont, who are top-quality operators on the asset base that we are most exposed to. And we'd like to do a shout out to Agnico, Yamana and Newmont in this time of crisis. We really appreciate the efforts that 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 of 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/NAV trading multiples. We're trading at about 1x NAV based on consensus. And therein lies the opportunity for investors today as 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 simple catalysts in the portfolio, such as the Canadian Malartic underground resource that's evolving and also the evolution -- quick evolution we're seeing on Barkerville as that asset 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 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 and we've outlined in our catalyst 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 have a very diversified shareholder base with the Caisse de dépôt sitting at around 12% and Investissement Québec sitting at 5.6% and some other very strong portfolio we're having such as Sprott Investment Fund and some of the bigger VanEck and White Oak working to round at our top 10 shareholder list.Our business model on Page 14, obviously, this is somewhat unique to us, and I think in this increased gold price and obviously sets the stage for us to be pretty loud and proud about what we've accomplished with our business model. We are a hybrid and that we invest about 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. 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 companies to date. And we congratulate the Osisko team and John on their fine job that they've done to really take Windfall to another level at a speed that's been breathtaking to watch, over 1.2 million meters get drilled there, over 3.5 million feet drilled 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, with gold at $1,700 now, there has been significant amount of value increase in that asset.Over to Page 15, we've seen solid growth in 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 the Osisko Gold shareholders. And that would exclude things like the Horne 5 silver stream where we still have some cash investments. So that's just purely what's already been paid for as we go forward and we see these assets evolve. 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 byproduct from copper mines. This is a portfolio that's 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 Yamana and Eagle purchased it, and it's been one of the all-star assets in both those companies' portfolios. But we've also seen the underground resource here essentially double what was there before with over 10 million ounces having been identified and measured and indicated and inferred categories in this asset.We had drilled some of the stuff on the Odyssey zone during the 2014 spring, eventually taking it to a whole new level. And we congratulate the Agnico management team on the exploration success that they've generated here. And obviously, there has been some discussion around this asset in terms of the significance of this. But it's not really priced into our stock right now. But obviously, at $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, Agnico and Yamana, go further to develop that underground aspect.Page 17. Again, a quick photo of Victoria's New Eagle mine located in the Yukon. It's the 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. It was an exceptionally cold winter this year seeing temperatures of below minus 58. And they've been able to keep this mine running and is now starting to hit its stride. And we really congratulate an extraordinary effort to keep that project on its scale and wish them luck with the commissioning as they get -- as they move forward here. And congratulations on the results this week of seeing significant amount of gold production from April.Éléonore was acquired when Newmont did the acquisition of Goldcorp. So we welcome Newmont to our portfolio. I'm 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 and to push it aggressively as we move forward.We've mentioned Mantos earlier. It's a 100% silver stream in the Antofagasta, Chile belt, another long-life mine in a great jurisdiction moving forward.On Page 18, a couple of things have gone on at Windfall recently that were interesting from a science standpoint, with the team there having drilled Canada's deepest diamond drill hole ever, just under 3,500 meters. Congratulations to major drilling and to the team at OSK for that. 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 planned for 2020. Continues to be one of the most impressive drill outs in the 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 is continuing to move forward, exceptional polymetallic high-grade zinc deposit at 10.4% zinc grade -- equivalent zinc grade, multi-decade life. Really another exceptional discovery. South32 is moving that to pre-feasibility, is on track for the second half of 2020. We retain a 1% royalty on that project.Horne 5 under Falco Resources, led by our very own Luc Lessard, currently at 6 million ounces of GEOs and reserves, another 3 million ounces of reserves, has remained 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 a reserve status here, there's a lot of work that's 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 VMS deposit that goes down with another kilometer of undrilled potential at depth, and we see that as one of the big assets here in Québec that will be generational. And if we were to fast forward 10 years from now, we would see probably Windfall and Falco's Horne 5 and Canadian Malartic underground as the biggest assets here in Québec. So we are staying close to home. Québec is our premium jurisdiction. And we see there -- our other go-to jurisdiction on Page 19. I want to do a brief touch down on the Cariboo project. As you can see here in the image, the underground workings from the B.C. vein. And you can see some of the clear-cuts in the background. Work is ongoing on this project. And we have -- in less than 4 kilometers of the known trend outlining 4.4 million ounces of underground resources in our PA study that 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 time line on that with a couple of different things on the go, but we've set the stage to look at a plus 4,000 tonne a day operation, which would set the table for over 185,000 ounce a year in Phase I 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 a generational asset. What we are hoping to see is a scaled investment. One of the advantages of this project is it has existing infrastructure with a QR mill in place. And we think that it's a relatively simple ramp up to go to 4,000 tonnes a day using ore sorter and flotation technology, coupled with the existing infrastructure. We have a pretty straightforward mine with relatively low CapEx in the beginning. And we will be there with our royalty currently at 4% to 5%.So it's 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 has yielded some significant forward motion on infill drilling for the deposit. And that project continues to strengthen nicely as we move into the year. We've concluded the transaction, and we did spend some money on transaction closure. And we've also invested about $10 million between the transaction closure and pre-production environmental contact-water management systems that will 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 mines, which is somewhat unique in the space. So we're quite happy to be there, obviously, during this gold price.On Page 21, really a cycle through of our business plan. The optionality through 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 a highly talented exploration and development and mine building teams that put Canadian Malartic together and created a $4.3 billion of value in that company, of which shareholders made a profit of over $3 billion. And to take that team and to deploy them into other assets that can duplicate the success that we saw at Canadian Malartic, but hopefully do it a bit more in parallel rather than one asset at a time.We listed for you here Osisko Mining, which we own a 16% equity ownership, and we generated royalty there -- sliding-scale royalty of 2% to 3%. Osisko Metals, run by Bob Wares and currently runs the Pine Point Project. We have a 1.5% royalty there. 18% equity ownership at Falco with the Horne 5 Project that we talked about. And a new accelerated company that we've invested in headed by Terry Harbort, one of our exceptional exploration/structural geologist and his team, Talisker Resources. Currently working on the Bralorne project in Central BC, and Minera Alamos, which has been moving well with the heap leach asset, Santana in Mexico. So we see these -- this early stage opportunity as really evolving and creating our own organic world in terms of doing deals earlier on and then being there 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 margin is at 91%, the highest in the sector. Over $23 million -- $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 the subsides of that. So to simplify the story. This is a very good exposure to gold. Pays a dividend while you are invested in gold with a significant amount of upside with over 1 million meters having been drilled on the share -- on the royalty lands that the Osisko Royalty shareholders are already exposed to last year and the year before without having to invest any further money. Our royalty lands are more important exploration wise and most other things worldwide because of the flow-through share system here in Canada, which encourages exploration or R&D, if you will, which is usually the lifeblood of all 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 hard -- 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 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, if I could.
[Operator Instructions] [Foreign Language] Your first question comes from the line of Kerry Smith of Haywood Securities.
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 on timing is to have concluded that sort of an investment?
Yes, George (sic) [ Kerry ]. 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 investment that the Osisko shareholders have made into this project.In terms of time line on the permitting, we see really 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, and 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, is 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 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 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, Kerry. So obviously, COVID-19 has created challenges for a lot of different people. So I'm hesitant to put time lines on things, but I don't see why we wouldn't get a deal done in the current market conditions that we're in. BC has deemed mining as a necessary service. So it has not been shut down and the ministry there continues to work, as do we. And the team there has really moved things forward as we got going there. So we don't really see anything that would inhibit us from getting this deal done, hopefully, 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 in if you want to have the permitting done in 2022?
Well, the process has already begun, Kerry, and we have submitted project descriptions last year. So we're optimizing those on what's called IRTs, information request transmits. And we are in the process now, and hopefully, we'll 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.
[Operator Instructions] Your next question comes from the line of George Topping of Industrial Alliance.
Probably one, Sean, on the $10 million to be spent this year at Cariboo Gold, how much will be infill 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 infill as we've finished up with that geological model. So anywhere we've identified that we need a 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 for 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 vein development, but it won't be that much. The $10 million is really to go to 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 derisk 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 will be so much subject to our financial partners' view of 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 if you have another partner involved with his own though or their own thoughts?
Yes. I think where we are on that, George, is that there's probably 3 answers. If we go alone, we would probably be fairly, fairly conservative. The mid-tier is 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 drill out that partnership that we would initiate a significant drill program in 2021. So I'll come back to you a little bit later on 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 diamonds. I mean obviously, with India being shut down, now it's coming back a little bit. Have you had any industry updates on where diamond markets, how they might recover from any 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 as in 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 will see now shutdown and/or shut-in of different mines in the space, so there is a supply-demand scenario building. However, there will be a bit of an inventory clear through as diamonds go back out in the space. But we are optimistic that the diamond prices will respond like they did in 2008, '09 with that pent-up demand coming back into space.
Right. Do you think, Renard -- I mean would your budgets be maybe Q4 this year or thereabout for any restart?
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 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 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.
Your next question comes from the line of John Tumazos of Tumazos Independent.
Well, Sean, congratulations on the progress on so many fronts.
I appreciate that, John. And I hope you're keeping well and safe. I know you live in a place that has had its challenges as we have had here.
Yes. I just keep looking at my computer and work in the garden, and I discovered the wholesale fish markets, the fishermen can't sell to restaurants, and it's great fishing around here, so it is all in the Canadian North. It'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 in doing analyses, the $400 or so that the spot price has gone up, some of the majors have kept their criteria the same as a year or 2 ago? Second, have you raised your discount rate assumption because a couple of projects had charges this year or last year or the 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 that all appear promising, where some of them don't have 1 million meters of drilling like Windfall in their earlier stages?
Okay. I'll try and tackle the task laid out before me here, John. In terms of our gold price right now, we're probably somewhere around USD 1,400, which I think is bank consensus, and we'll obviously run sensitivities based on the asset and when we think the ability of that asset is to perform at lower gold prices. I'm a big believer in the ratios between cutoffs and mining grade. So that's probably a higher criteria for me on an individual basis, but we do look at internal rate of returns.And then on discount 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 in a lot of environments in a lot of countries. If you can't fly there or go there that makes it much harder to monitor things. And I do like my maple syrup and pudding. So we've been sticking to Canada with Québec 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 accelerator companies, because of the flow-through share and charity flow-through share program here in Canada and the low cost of drilling here, it's very much in our favor to continue to push on these 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 up to as 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 increasing GEOs for our balance sheet. That is the dominant allocation of capital. We do take a long-term view on exceptional assets like Windfall and Horne 5 and Barkerville, where we feel that there's a bigger prize to fight for. But normally, the criteria would be nearest production and nearest to GEOs. I don't know if I got all your questions, John, but I took a good run at it.
No. We like the emphasis on long life and near production and safe places like Canada with all the double dips on exploration incentives.
Your next question comes from the line of Carey MacRury of Canaccord Genuity.
Maybe another question on Barkerville. Is there a scenario once you get to a construction decision or you fund construction within Osisko Gold Royalties or do you think it's more regulated at that time to either sell the asset or put it another vehicle?
Well, we'll have to cross that bridge when we get there, I guess, Carey, but I mean I just want to make sure we clear Osisko Gold Royalties is a royalty streaming company. Our main business is project finance. So we've got 25% of it allocated to the incubation/accelerator strategy. But once a 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 being a dominantly royalty and streaming company, we're obviously going to take advantage of the projects we know the best and things that we've been actively involved in the evolution of would fit in that criteria. So we will be opportunistic for the Osisko Gold Royalties 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 North Spirit so as to have another platform that other capital could come and invest alongside of us in that space and to choose the proper partners to unlock the most amount of value in the most expedient manner. With that, we think that, that is a proper strategy in this market. And we see a lot of capital -- willing capital that's 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 could be 5 million ounces or more that have the ability to go 300,000 to 500,000 ounces a year of production in the long run and have the Canadian moniker on them. That's been our bread and butter. And we think that we really well positioned ourselves to take advantage of that. And with the Eagle, Victoria's mine coming online and then the 4 -- 3 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 on the longer term guidance of the 140,000 ounces. If you can just remind us what the big components of that growth is relative to where you are today?
So we would see, obviously, the Canadian Malartic underground, Back Forty in Michigan, we also see Mantos expansions working out for us, and we see Barkerville and Windfall following a development track. And hopefully -- what we did not include in that 140,000 ounces, for example, is Falco with the silver stream because we haven't finished paying for it. Yes, so we've only included the assets were 100% payment by the Osisko Gold Royalties shareholders on the asset has been made. So we have quite a bit of organic growth in those assets.
And then maybe one last one on Mantos. Can you just comment on how the expansion is going there? And when you expect to see an uptick in your accounts from Mantos?
As you know, 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 Orion is a very good operator with deep pockets. And we see them pushing hard to get that mix expansion under control management team there. He is very focused and driving hard, and we think that by 2021 -- in 2021, you should achieve their goal but it's really -- it's been an exceptional effort, and that asset is really showing its true colors and true quality.
There are no further questions at this time. I turn the call back over to the presenters.
Thank you very much, and I'd just like to thank Sandeep Singh and Fred, who both stepped up to the plate here in Q1 for a great effort as well as the rest of the members of the team who've joined us; Mike Spencer on our international side; Iain Farmer, who has taken on the role of Vice President of Corporate Development; and Benoit Brunet, 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 achieved 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]