Osisko Gold Royalties Ltd (NYSE:OR) Q2 2024 Earnings Call Transcript

Osisko Gold Royalties Ltd (NYSE:OR) Q2 2024 Earnings Call Transcript August 7, 2024

Operator: Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q2 2024 Results Conference Call. After the presentation, we will conduct a question-and-answer section. [Operator Instruction] Please note, that this call is being recorded today, August 7, 2024 at 10:00 AM Eastern time. Today on the call we have Mr. Jason Attew, President and Chief Executive Officer; and Mr. Frederic Ruel, Chief Financial Officer and Vice President of Finance. I would now like to turn the meeting over to our host for today’s call, Mr. Jason Attew.

Jason Attew: Thank you, Joelle. Good morning, everybody, and thanks for being on today’s call on this beautiful summer’s day. I’m Jason Attew, President and CEO of the Osisko Gold Royalties. Procedurally, I will run through the presentation and then we will sub subsequently open up a line for questions. For those participating online via the webcast, you can submit your questions in advance through the webcast platform. Today’s presentation will also be available and downloadable online through our corporate website. Please note, that there are forward-looking statements in this presentation for which actual results may differ. Also, please note the basis of presentation will be in Canadian dollars, unless otherwise noted.

I’m joined on the call this morning by Fred Ruel, the company’s VP Finance and Chief Financial Officer, amongst the others as indicated on slide three. When looking at Osisko second quarter and first six-months of 2024, we have had a solid first half as it relates to gold equivalent ounces earned, cash margin, cash flows, as well as overall debt reduction. Osisko earned 20,068 gold equivalent ounces in the second quarter of 2024, which had put us in a good position on June 30th to achieve our previously published full-year guidance of 82,000 to 92,000 GEOs. Revenues for the period were strong in Q2 at 64.8 million, buttress mainly by improving precious metal prices throughout the period. In addition, the Osisko’s cash margins remained high at 97% during the quarter.

Osisko ended the first quarter with 65.7 million in cash and net debt has now been reduced to just over 40 million after the company continued to pay down its revolving credit facility during the period. So far, in Q3, the company has repaid an additional 13.8 on the facility, further increasing our financial flexibility in order to be able to transact on new accretive opportunities as they present themselves. With respect to our ongoing commitment to return capital shareholders, the company declared and paid its quarterly dividend of six and a half cents per share in Q2, marking as 39th consecutive dividend with over 290 million return to shareholders to-date from these distributions. Subsequent to the quarter, Osisko’s Board of Directors approved a Q3 dividend of six and a half cents per common share payable on October 15, 2024 to shareholders of record as of the close of business on September 20th.

With respect to our opportunity set, the company’s pipeline continues to remain robust with our corporate development team busier than they have ever been. We remain optimistic that we will get at least one meaningful deal across the line this year over and above a recently announced Cascabel gold stream. Moving on to the company’s financial performance for Q2 quarterly revenues effectively tracked higher year-over-year due to strong commodity prices when comparing to Q2 of 2023, which is also partially offset by fewer GEOs versus the same period last year. The net loss of $0.11 per basic common share for the period was due entirely to our decision to take a full non-cash impairment charge of 67.8 million or 49.9 million net of income taxes on the Eagle NSR royalty, based on our own internal assessment of the current facts and circumstances.

And of course, as more information continues to surface as, especially as it relates to timelines associated with a potential restart of the operation and resumption of precious metal deliveries to Osisko under its royalty agreement, a reassessment of the recoverable amount of the eagle royalty will be performed at that time, which may lead to reversal of part or all of the impairment loss that has been recognized. Most importantly, Q2 2024 saw a year-over-year improvement in both cash flow per share at $0.28 versus $0.26 last year, as well as quarterly adjusted earnings of $0.18 per basic common share versus $0.15 in the comparative quarter of 2023. During the second quarter of 2024, company had 20 producing assets including the Eagle Mine, which was producing up until the suspension of operations on June 24, 2024.

Our GEOs earned come predominantly from Canada and we derived over 98% of our GEOs from precious metals, gold just under 71% and silver at 28% with the remainder coming from other metals. Some comments on some specific mine performances during the quarter before speaking about a couple of our more material assets in greater detail, Canadian Malartic had yet another extremely impressive first half of 2024 with Agnico booking strong quarterly production from the mine in the second quarter. The asset remains the Osisko’s most significant contributor to GEOs earned by a solid margin. Performance for Victoria Gold’s Eagle Mine during the second quarter of 2024 fell significantly short of budgeted expectations to the tune of about 33%. In other words, even prior to the Heap Leach facility failure on June 24th, Eagle was already underperforming through the first half of the year.

It is our understanding that Victoria Gold Corp reporting is Q2 2024 on August 8th. So in the absence of additional information, it is our assumption that the mine will not provide us any GEO deliveries in 2024. At Capstone’s Mantels Blancos Operation, Q2 production was lower year-over-year due to lower grades and recoveries. Plant upgrades to reach 20,000 ton per day on a sustainable basis are progressing despite an approximate two-month delay relative to Capstone’s prior plan due to longer equipment lead times. Osisko expects to see the benefit of the increased throughput in its silver deliveries starting in the beginning of 2025. As I mentioned earlier, the number of currently producing assets in our portfolio stands at 20. Changes to the list include the removal of Eagle, partially offset by the additions of G Mining ventures, Tocantinzinho mine in Brazil, which announced its first gold pour in early July, as well as Agnico Eagles, Akasaba West satellite operation at its gold ex mine.

On the ladder, Osisko received its first payment from Agnico in July, whereas on Tocantinzinho first payment from G Mining is expected in November based on a two-month lag associated with the royalty payments as structured in the contract. This current list of 20 assets also count CSA as only one single operating asset. However, as you all know, we have two instruments associated with a mine, 100% silver stream in addition to our now economically effective copper stream, with a copper stream having provided its first deliveries to Osisko in early July of this year. Moving on to Slide 8. Our company continues to distinguish itself from the rest of its relevant peers as it relates to jurisdictional exposure. Osisko is the leader when it comes to both NAV and GEOs earned from what Osisko defines as Tier 1 mining jurisdictions, which include Canada, United States, and Australia.

Of note is that if we were to add Chile to that list of countries, we would be at over 95%. This brings me to Slide 9, which provides highlights on the recently announced Cascabel Gold Stream transaction with so gold in partnership with Franco Nevada. As noted in her July 15th press release, Osisko believes that Cascabel is a world class copper gold project that has the potential to become a multi-generational mine. This new stream investment, which complements the Osisko’s existing royalty on Cascabel, further enhances the Osisko’s peer leading growth profile at a very attractive rate of return. In terms of when we expect to receive GEOs from this investment, SolGold has guided to production in the 2030s, which falls outside our five-year outlook.

However, once in production, the Cascabel stream is expected to contribute approximately 23,000 gold equivalent ounces per year for the first 10-years of the initial 28-year life of mine. It should be additionally pointed out that this mine life is based on only 18% of the measured and indicated mineral resource of the Alpala deposit. We are very encouraged to see that SolGold recently signed an exploitation contract with the government of Ecuador. This served as another indicator that the current administration is pro mining and Cascabel remains a top priority project within the country. As noted previously, on a GEO’s earned basis, it was yet another stellar first half of the year for our most important asset as impressive progress continues to be made on the Odyssey underground project.

While I won’t spend too much time in the following two slides, I wanted to flag some language on Slide 11. As evidenced by its second quarter report and subsequent conference call, Agnico Eagle continues to talk more and more comfortably with the potential for a future shaft number two for the Odyssey underground mine. Factoring in some basic assumptions and based on publicly released information from Agnico, Osisko estimates that a potential second shaft could add approximately 15,000 gold equivalent ounces to Osisko Gold royalties annually over and above what is expected from the most recently published mine plan, all from the early 2030s onwards and at no additional cost to Osisko or its shareholders. With 40,000 tones of Latin mill capacity still expected in the Canadian Malartic Complex from 2028 onwards, Agnico has now officially made reference to a fill the mill strategy with additional information on this likely to follow in the coming years.

Next slide please, Slide 12. And as if the Malartic story for Osisko wasn’t exciting enough, just last week Agnico Eagle provided a comprehensive update on its Upper Beaver project in Ontario. Our operating partner announced a positive internal valuation for a standalone mine and mill scenario at the project. Agnico Eagle believes that Upper Beaver has the potential to produce an annual average of approximately 210,000 gold ounces and 3,600 tons of copper with initial production possible as early as 2030. What does this mean for Osisko? Again based on the information provided, we estimate that Upper Beaver could result in an average of approximately 4,500 gold equivalent ounces earned based on our 2% NSR royalty on the projects. We were also delighted to hear that Agnico has now committed over $200 million over the next three-years to further de-risk the project and collect the necessary bulk samples prior to final project approval.

Now on Slide 13 and touching briefly on CSA. First delivery under the CSA copper stream to Osisko was made in the first week of July for a total of 74 tons of copper or approximately 300 GEOs. Further to this, just last week, Metals Acquisition Limited announced some very impressive drill results, which served to underpin Osisko’s original thesis, a significant exploration potential exists across their land package. Moving on to Slide 14. As you all know and as I stated earlier, on June 24, Victoria Gold announced that the Heap Leach facility at its Eagle Gold Mine in the Yukon Territory had experienced a failure. Production remained suspended, and as stated previously, absent new information, Osisko’s assumption is the mine will not resume production in 2024.

Osisko has now taken the appropriately conservative step to recognize a full non-cash impairment loss of 67.8 million or 49.9 million net of income taxes based on our management team’s assessment of the current facts and circumstances. There is any key take away from this slide is that a Osisko has various protections with respect to its royalty, including security over the property, a registered interest in land recorded within the Yukon Territory, and an Inter-creditor agreement with the senior lending syndicate. At this time, these various layers of protection provide a Osisko with confidence that our rights will continue upon a restart of the Eagle Mine. As a secured creditor will continue to monitor the situation closely and provide further updates to the market as warranted.

Prior to the Heap Leach facility failure at Victoria Gold’s Eagle mine, Osisko was tracking well with regard to its previously published 2024 GEO delivery guidance range of 82,000 to 92,000 gold equivalent ounces. However, under our assumption that production and Eagle will remain suspended through to the end of 2024, company has decided to adjust its 2024 GEO delivery guidance77,000 to 83,000 gold equivalent ounces and already provided additional context on this call as it relates to Eagle’s underperformance versus our budget expectations for the first half of the year. And this should also help further explain why we made this adjustment. Additionally with surge capacity equipment at Capstone’s, Mantos Blancos having been installed two-months later than originally scheduled; we took a further step in making some cautionary adjustments to our budget.

As it relates to the second half deliveries we are expecting from Capstone Copper. Our investing companies continue to make great strides in de-risking their assets that will accrue to our shareholders. Highlights of some of these efforts are provided on slide 16 and 17. We have already discussed many of these already on previous slides of this presentation, so no need for me to add anything here today. That said, I would still suggest you take the time to go through the impressive list yourself, and if you have any questions or would like to further discuss any of the remaining line items highlighted on these two pages, I encourage you to reach out to my colleagues here at Osisko for more information. Moving to slide 18, which outlines the current state of Osisko’s balance sheet.

At quarter end, we had total debt of just under a 110 million net debt of only 43 million, which compares the net debt of just under 250 million in the comparative quarter of 2023. Our focus on being responsible capital allocators is using our cash flow from operating activities and redeploying it in the form of paying down a revolving debt facility, which year-to-date is over 101 million, 87.8 million in Q1 and Q2 and 13.8 million subsequent to quarter ends. Also, subsequent to quarter end, we made a US$10 million payment to SolGold as a first installment under the Gold Stream agreement further advance the Cascabel project in Ecuador. In addition, as mentioned in last quarter’s conference call, commodity prices, specifically gold and silver remain above the US$2,400 and US$27 respectively.

We forecast to end up in a net cash position by the end of the year. That of course, is absent of any material acquisitions of royalties or streams we make during that period. This is important as even though we have already made an announcement on a key transaction regarding Cascabel, Osisko corporate development team remains busier than ever with the hope of getting more deals across the line before year-end. And our much improved balance sheet provides the company with the financial capacity and flexibility to continue its strategy of disciplined allocation in the pursuit of high quality, creative, precious metal streams and royalties that will bolster the company’s current and near-term gold equivalent ounce deliveries and cash flows that should accrue to our shareholders benefit.

Finally, I would like to take the opportunity to welcome our newest board member, Ms. Wendy Louie, who we believe will be a tremendous contributor to our company go-forward. Wendy brings a wealth of experience in resources in commercial and accounting matters from her impressive career credentials from Duke Energy, Ernst and Young, Hecla, Goldcorp and most recently Sabina. And with that, I would like to thank everyone for listening today. We will now open up the line for questions as well as questions posted on the webcast. If we don’t get to all the questions on the line, we will make sure to respond offline to those we don’t get to cover on this webcast. Thank you for your time. Operator.

Q&A Session

Operator: Your first question comes from Ralph Profiti with Eight Capital. Your line is now open.

Ralph Profiti: Thanks operator and thanks for taking my questions. Jason, the syndication at Cascabel at 30%, was there a desire to do more? How much of that sort of discretion was driven by the desire for things like dry powder or balancing country exposure. Just wondering how you tackled some of those thresholds and criteria?

Jason Attew: Yes. Thanks for the question, Ralph. Look, obviously, doing a syndicated deal with a partner like Franco Nevada, a lot of people including myself going back to my banking days has talked about having syndicated deals and why they make the most amount of sense. So look, the 30% level, we can tell you was a negotiated level. We do think the Cascabel project is a world-class asset. In fact, it is also as you know Franco Nevada has a royalty as we do, a higher royalty than we do. And so it really came down to proportional interest both in the royalty as well as in our interest working with Franco to give the Osisko team the amount of proceeds at they were looking for a obviously 750 million which to bulk of this will be provided to them on the construction decision or construction decision by either themselves or if they are not the operator at the time, whoever is operating at the time.

So look, obviously, it was a negotiation. We have got a relationship clearly with Osisko. We have got our renegade relationship with Franco. We are quite comfortable with Ecuador as a jurisdiction. The fact is that as you know, the way that the deal was structured with Franco is we have a number of off ramps here. So if the country, which we do believe is very pro mining with President Noboa right now. And we do think he likely will be quite successful in the elections 2025. But for whatever reason that does not happen and we see Ecuador not being as good as a jurisdiction for mining the development of Cascabel. We have a number of off ramps as you are very well aware. That is how we have staged and structured the transaction. So right now, we are obviously quite comfortable with the direction, very pro mining in the particular province.

We think SolGold is doing a very good job in terms of ensuring they have a social license and doing all the right things from a community level. But as I said, we still very much value our as I keep saying our Tier1 jurisdictions. So we are actually looking to do more transactions that will actually have a bit more of a balance in Canada, the U.S. and Australia go forward. But we are very, very pleased with the transaction that we are able to do with SolGold and obviously the partnership that we have with Franco.

Ralph Profiti: Yes, I appreciate that clarity. It does make sense. Keeping on the theme of transactions, you mentioned that Cascabel in the 2030s puts it beyond the five-year guidance. Just wondering if you look at sort of this deal pipeline that you had talked about before your end and perhaps beyond, are you at liberty to talk about how much of those opportunities are within the five-year guidance or is the majority outside of it?

Jason Attew: That is a great question, Ralph. Look, obviously, there are a lot of opportunities and every one of our peers, as you have probably heard, are very, very busy from full corporate development and the technical services that they basically employ to go look at these opportunities. I would say that again, our preference in terms of our strategy is obviously have transactions that fit within our five-year outlook. That said, there are some very quality assets, development assets in particular that there is a long gestation to actually get into production and ramp up that would sit outside of it. But strategically, I talked to my board with and what the corporate development team is doing. Really the focus is doing transactions within that five-year outlook.

But we are not going to ignore, again, a high-quality opportunity that sits outside five-year outlook, because that obviously sets the company up for the future to go forward. But we are very, very busy and so as I mentioned on the call, we are hoping we can get one of these opportunities done before year end that would fit within the five-year outlook.

Operator: Your next question comes from Josh Wilson with RBC Capital Markets.

Josh Wilson: First question I have is on the Eagle impairment to zero. I’m wondering is there any read through here on the potential recoverability of any value to the company and is there any risk that the royalty would not survive a solvency related event for the operator?

Jason Attew: Yes, look obviously, and I will let Fred comment in a second. Obviously, we took the decision specifically, because we just don’t have the visibility right now as to when a restarts going to happen. There is obviously a lot of work that Victoria Gold team is doing specifically around containment, specifically around the water quality with respect to the Sinai sampling that they are doing and specifically with respect to the remediation. Any sort of restart obviously will require a permit from the government plus that you can appreciate. There is an element with respect to the First Nations groups that they will have to get an approval and get a license there. We thought it was prudent at this point to write down the CAD 67 million that I mentioned and change that I mentioned just because we don’t have that visibility as of yet.

We do think obviously the big resorts up there is very important for the Yukon territory in terms of employment and other things that depending on the situation that there is a strong possibility that the mine is up and running in a reset. We just don’t have visibility as of yet. With respect to the question in an insolvency situation, I think as I mentioned on the call, fact that again we have got security with the asset, the fact that we are registered in the Yukon as well as we have got strong inter creditor support within those agreements. We think there is obviously a very strong case when this is up and going if it goes through insolvency that again our rights will be affected. Our rights and the royalty and the geological equivalent ounce deliveries, if it does take some time here that again, we certainly have all the protections necessary.

Maybe I will ask Fred if he wants to comment further.

Frederic Ruel: No. Thank you, Josh for the question. It is purely an accounting. It is purely related to accounting and applying accounting rules and regulations here based on information that we have as of today. So that is and depending on how things go in the future months quarters, we’ll reassess on a quarterly basis if a reversal of impairment might be possible based on new information that might be provided by the company.

Josh Wilson: Got it. And then extending this sort of uncertainty to what the future impact could be, I understand the company updated 2024 guidance. There was no comment on what the long-term guidance implications were. Is there any sensitivity you can provide us with what the impact is of, the loss of Eagle to the five-year guide?

Jason Attew: Yes. Look, it is a great question. We first also received the question via webcast similarly. I think obviously, Josh, it is early days. Obviously, the facility failed on June 24. Pretoria is doing everything he can to essentially again contain what is happened to ensure that from an environment perspective there is no long-term damage. So I guess certainly in the early innings of what is going to happen here. As stated before, we just don’t have the visibility on the restart plan. According to Victorian and I encourage you to listen to their call this week, there are a number of weeks away from being able to provide a concrete plan that could or could not get regulatory approval and that is a social license that I talked about.

There is lots of work to be done in the remediation training front. I just think it is too early at this point to suggest that would come out of our five-year outlook. We do think that obviously they have got significant goals that they have proved up through the various indications, mineral reserves, and resources. There is also, if you know the story reasons well, they have identified secondary heat leach facilities that what is going to come in line later in the mine life. There is a lot of positive attributes that could suggest that this mine will be restarted. We just have no concept or visibility or clarity of direction at this point, as to the timing. Really, we can only get that from Victoria Gold taking their direction.

Josh Wilson: One final question on the long-term guide. I can’t recall if this was included or not, but for [Odev] (Ph) and their financial status was Caribou included in the existing five-year guidance or was that something that was incorporated after that period?

Jason Attew: That is great question. It was not included in our five-year outlook.

Operator: Your next question comes from [John Tommaso with Brooks Group] (Ph).

Unidentified Analyst: Thank you. Sometimes the big royalty streaming companies say the first dollar is the last. Jason, could you give us your views of the pros and cons of that. Before you came on board as Osisko had a lot of efforts trying to fix Renard Diamonds and [Amulsar and Armenia] (Ph) and the different things in, ODV, and would you contribute good money after bad when something blows up? Would you fire the guy that originated the deal? Just what is your attitude toward trying to fix things or when to move on?

Frederic Ruel: Look, John, obviously I think you are probably talking through some of the issues now, obviously heightened with the Victoria Gold, facility failure. Obviously, the team works very, very hard to identify opportunities that we think will accrue to shareholders. We didn’t anticipate this happening, and there is obviously been some other assets that haven’t proven up to, again, expectations, with respect to going forward, I mean, we have got a very, very strong technical team. We have upgraded our technical team since I joined. And so, we are going to be making investments go forward. We are going to be making investments based on, again, the information that we have that we think is going to be accretive to shareholders go forward.

In terms of looking at, some of the historical legacy assets, yes, we did a full portfolio review. Yes, we have come to views as to which ones we should fund and which ones we should not fund go forward. I think I have conveyed that the opportunity set on new opportunities far outweighs the opportunities that we see currently in terms of investing in the current portfolio that require additional capital a lot of our portfolio, the 185 assets, as require no additional costs. There is no contingent costs associated with it. Our preference for all the companies out there, if we have made an investment through a royalty or a stream, is they should be going out and sourcing other financing and not relying on an incremental royalty or stream that could burden the asset to the point where again their set of equity holders if they are public is disadvantaged.

So I will answer that question long winded way, but we do think that there is a really good opportunity set on a case by case basis. We have additionally, from a governance perspective set up, as I think we have talked about, an investment committee, which is some commercial and technical folks on our board that we have to obviously pass that date before we are allowed to deploy any further capital. So there is an additional level of governance with respect to again our investments into assets at Osisko Gold Royalties.

Unidentified Analyst: Jason, if I could follow-up. There is a hedge fund or two friend of mine that, whenever someone in the team originates an idea, they give them a quarter of the performance fee from that idea, and the idea is tagged to a specific person. Do you think having a bunch of committees dilutes responsibility? And is it better what are the pros and cons of committee responsibility versus originator responsibility on your team?

Jason Attew: The way I would answer that John is the committee is really set up for oversight from an oversight perspective. Plus as you can appreciate, we have got technical folks that can really pull apart or to take a look at through a lens that maybe some of our technical folks haven’t looked at. But really to assure us as again, we are as I like to say, we are effectively pricing risk for our shareholders or risk managers on behalf of our shareholders. With respect to compensation as it relates to origination of opportunities, we can say we don’t have that philosophy here at Osisko. As I have talked through with yourself and many others, we have tweaked our compensation for the senior executives which is really in a long-term our long-term incentive base very much driven by per share metrics, specifically cash flow per share, growth in cash flow per share and growth in net asset value per share.

So as we move forward and we continue to make investments, we are hoping we are making investments that increase our cash flow per share, increase our NAV per share because as you know there is a very strong correlation if we can do this to shareholder performance so to answer the question, there is no specific origination fees that are payable for our team. We are very much a team and we are very much driven and top of mind for anything that we do from an investment perspective is will this increase our cash flow per share as well as our net asset value share. And again, these are quantitative metrics that our comp committee will determine when they are compensating the executive team.

Operator: Your next question comes from Tanya Jakusconek with Scotiabank. Your line is now open.

Tanya Jakusconek: Okay, great. Thank you so much for taking my questions. Good morning, everybody. Just wanted to circle back on that 2028 guidance and not to beat this to, but would it be fair to have assumed that within that 120,000 to 135,000 GEOs at about 9,000 would have been equal gold and we would more likely be towards the lower end of the range than the upper, just so that we can benchmark ourselves?

Frederic Ruel: So it is a great question, Tanya. Thanks for participating this morning. So yes, 9,000 was approximately what we were budgeting and again, you can get it from Victoria Gold’s obviously for production guides for 2024 per year. And so, if you actually forecast that forward, it would be somewhere around that number. All that said though, as I mentioned, we give our five-year outlook and our five-year guidance in February, I think it is far too early at this stage. The information is still coming in specifically with that asset to know whether or not almost four and a half years out, whether it be contributions from the Eagle mine in particular. And so, we haven’t changed our five-year outlook. We just don’t have the information to make that adjustment. And when if we do get that information, obviously we’ll let the market know, but very likely in February when we put out our annual guidance for 2025 as well as their updated five-year outlook.

Tanya Jakusconek: Fair enough. Maybe just moving off then on to, just to finish off on the transaction front, I know the last conference call you had talked about one or two meaningful transactions, and now Jason, you mentioned that there is one more meaningful for 2024, you hope to get done by year end. Are we still talking that 50 million to 300 million range and are we still talking as syndicated transaction or is it, are you still looking at just a stream deal?

Frederic Ruel: It would be great question, Tanya. Look, I think we have, just on the syndication front, we have a very good blueprint now of what we can do as Osisko Gold Royalties working with partners like Franco and some of the other senior royalty and stream players. So yes, I’m still a big believer in syndicated deals. Yes, we are looking at large chunky acquisitions in the magnitude that you have mentioned. We are also looking at obviously some smaller ones that we do think will be accretive to our shareholders go forward. And nothing is guaranteed. Obviously, the team is working very hard to close some of the business issues that we may have on again, a very important meaningful transaction, that will really set the company up go forward. But yes, we, we are looking at transactions anywhere from US$50 million all the way up to US$300 million and some of them syndicated and some not.

Tanya Jakusconek: That is helpful. And that just comes to my next question with respect to, I mean, if this is the case and we are looking for this sort of size deal coming towards the end of the year, can I assume like, you know, we are getting this debt down quite quickly. Can I assume then return to shareholders capital allocation? We had thought perhaps, looking at maybe share buybacks, would that be out of the – out of your range in terms of being able to also take that on in addition to a sign a larger deal. So look, I think we have got ourselves to a position, as I mentioned on the call, where we have tremendous financial flexibility and capability now that we have got our net debt down to approximately $40 million, we have given a net cash position very, very soon here.

And so we obviously go through the capital allocation decision tree that you are quite familiar with. We do, as you are aware, have regulatory approval on a normal course issuer bid for buyback. We view that as a tool, Otenga. Obviously, our preference is to redeploy our capital into meaningful accretive transactions. However, again, if we can’t get things complete or if we get things complete that are cash flowing, that does give us the comfort that we should be essentially lowering our share count really also is predicated on our share price at the time. Not surprisingly, you are going to hear that management myself think we are undervalued. And I know your research suggests in terms of our peers as well. So it is a tool that we certainly are contemplating using.

And it really will be we are really trying to be opportunistic around again, if we do see some pressure with respect to our stock price in the following months and moving into the year end, understanding that we have some capital we may deploy right into projects and deals that I talked earlier.

Tanya Jakusconek: Okay. So would you have a preference then if you have excess capital then for dividend or would you prefer I know it is share dependent, but allocation to share buyback?

Jason Attew: So I think that is the discussion that we continue to have both management and Board. I think they both have very good uses. As you know, we increased our dividend by 8% this year. We want to again seeing the predictability, consistency of business. A lot of it is underpinned by the commodity price in particular. We do think the dividends are a meaningful way to return capital to shareholders. But in the same sense, as I said, we want to be opportunistic or we, the company, bigger share price not being reflective of our fundamental value, we will certainly be looking to use the buyback process.

Tanya Jakusconek: Okay. And then just my final question is just on benchmarking myself. When I look at Cascabel and I took into account, the SolGold study, So based on their study and I think we looked at it in the $1900 gold price environment or thereabout an internal rate of 6% to 7%. Is that a fair return in terms of what you would have seen?

Jason Attew: Look, I think there is a lot of moving pieces here. Based on the pre feasibility study that SolGold put out, we would say that the return for our shareholders at that price is high single digits. And obviously anything beyond those commodity prices is more incremental. There are a number of components to the deal as you are aware around the condition precedents in terms of funding. There is obviously, as you are aware, buyback rights for the operator in the first three-years, buyback rate, lesser amount on 33%. It is within five-years that give us a guaranteed rate of return. So there is just a few nuances, Tanya then depending on what happened in door with Cascabel and who is actually building and operating the mine at the time will impact the return.

Tanya Jakusconek: We could take that offline. Thank you so much for taking my questions.

Operator: [Operator Instruction] Your next question comes from Brian MacArthur with Raymond James.

Brian MacArthur: Jason, I just want to go back to the security on Eagle, and I appreciate there is a lot of moving parts and you don’t have all the information, but when you say you have an Inter-creditor agreement and security over the property, is that Perry Pass due with the senior lending syndicate? I’m just trying to figure out, this may come down to relative negotiating power to the extent you can or are willing to comment on that.

Jason Attew: Yes, look, Brian, thank you for that question. Unfortunately, the inter creditor is not a public document at this point, so all I can say is we feel very, very confident in our protections through that agreement. And as I said earlier, we have security over the property. We have a registered interest in land recording with the Yukon Territory. If the company does go through [CCAA] (Ph) process, we are quite confident that our rights will continue in any sort of restart of the evil mind. And so, we are a secured creditor. But the specifics, unfortunately, because it is a confidential document, I can’t give you all the details that are on the inter-creditor, but we have got the appropriate protections.

Brian MacArthur: Fair enough. Thanks very much that still helps with the caller.

Operator: There are no further questions at this time. I will now turn the call over to management for closing remarks.

Jason Attew: Thank you very much for joining us this morning. With respect to some of the questions that have come in the webcast. We will answer them offline. Thank you for your participation. In that regard and I hope everyone has a very good week. Thank you for your time this morning.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.