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Osisko Gold Royalties Ltd (OR 2.09%)
Q4Â 2019 Earnings Call
Feb 20, 2020, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, ladies and gentlemen, and welcome to the Osisko Gold Royalties Q4 and Year 2019 Results Conference Call. After the presentation, we will conduct a question-and-answer session [Operator Instructions] Please note that this call is being recorded today, February 20, '20 at 10 AM Eastern time.
Today on the call, we have Mr. Sean Roosen, Chair of the Board of Directors and Chief Executive Officer of Osisko Gold Royalties; Mr. Sandeep Singh, President of Osisko Gold Royalties; and Ms. Elif Lvesque, Chief Financial Officer and Vice President of Finance. I would now like to now turn the meeting over to our host for todays call, Mr. Sean Roosen. [Foreign Speech]
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
[Foreign Speech] We'll be talking about the future, so I'd like everybody to observe that forward-looking statements and we are following the PowerPoint that is on our website titled Q4 and Year-End 2019 Results.
2019, big year for Osisko and lots of things going on within the portfolio and at the management level. Q4 started as a great end [Phonetic] of the year with over 20,000 GEOs earned in the fourth year -- fourth quarter for a total of 78,006 GEOs earned into the 2019 period, which has actually met our guidance for 2019. Exceptional revenues of CAD38.9 million, obviously a lot by gold price with record revenues for the year of CAD140 million compared to CAD127 million in 2018. Net cash flows from operating activities of CAD17.2 million in the fourth quarter and cash flows for the year at CAD91.6 million compared to CAD82 million for 2018.
So, all in all, a pretty solid operating year. However, we did incur some non-cash writedowns within the portfolio related to some of the acquisitions that we did in 2017 from our partner Orion and also from the Virginia acquisition in 2015 related to lonore for the most part and we have a net loss based on non-cash items of CAD155 million in the fourth -- with the net loss of CAD234 million for the year, reflecting impairment of the stream and offtake interests that we are taking on through the auditors' reports under our accounting process over the year.
However, our continued guidance meets what we have set out as we move forward. Adjusted earnings right now for the fourth quarter stood at CAD10.3 million and CAD41.1 million for the entire year compared with CAD31 million last year. 2019 also saw the evolution of our portfolio, a lot of things going on both in our Accelerator Model and also in the asset base that we've created. We have created a pretty high torque [Phonetic] gross portfolio over the last five years. As well as you know, we started at 2015 and we created the new business model for royalty and streaming companies by introducing the Accelerator Model as some of the activities to be carried out in Q4 were almost all related to the accelerator companies with the purchase of the Santana royalty from Minera Alamos in Mexico. The Pipe Point royalty of 1.5% on Osisko Metals, which is one of the most promising zinc projects in the world right now. We also had 1.2% royalty on the Bralorne deposit in British Columbia being led by Talisker, and we completed the acquisition of Barkerville Gold Mines in November of 2019.
We also saw some of the investments from 2018 come to fruitation with first gold pour at the Eagle Mine owned by Virginia and we like to congratulate Virginia by having executed -- sorry, Victoria Gold, my bad, to lonore to get that mine under construction and completed ahead of time, and we have a 5% top line royalty there, which I think is probably the most significant royalty that has been done in the last 24 months in the royalty and streaming space. And as they march forward, they were supposed to have nine months to a year of loading onto their pad, they have been able to work through this winter and achieve better than that, so I congratulate that team for the extreme effort that they've put forward, and we look forward to seeing the results as they move through their commissioning year ahead for commercial production hopefully sometime in the second and third quarter of this year.
Last year, in Q3, we also saw the Pretivm offtake agreement which created some confusion on our balance sheet as to how the accounting works. So that should clear up some of the misconceptions about our margins. We do had 91% gross margin on our royalty and streaming portfolio as we stand today. Other items that we work through with the Renard credit bid on the acquisition, the mine here in Quebec, the Renard mine with our partners from La Caisse depot, Investissement Quebec and Triple Flag. We've all had exceptional results from Mantos Blancos run by our friends at Orion, and Sable Resources we made a
Strategic investment to a 2% royalty by the portfolio of assets that they run between British Columbia, Mexico and Argentina.
Q2, we did one of the biggest share repurchase buyback in the entire mining sector at $175 million. We repurchased about 8% of our outstanding shares giving us a pretty big buyback in Orion's ownership and the company now sits between 5.2% to 5.4% of the outstanding equity. In Q1, we also closed the silver financing on stream to the Falco's Home 5 project, which is moving ahead quite nicely, had long mine life of over 17 years and located in Rouyn-Noranda, Quebec, one of the biggest underground development projects left in North America with 6.1 million ounces of gold equivalent resources and 9.1 million ounces of overall resources remains a strategic asset that's valued within the Osisko family of accelerator companies and things that we see is bringing value in the future.
Over to Page 5, production of GEOs. As you can see, we've had pretty good growth in our portfolio since 2014 when we IPO'ed this company ending this year at 78,000 GEOs, equivalent by the [Phonetic] 90% cash operating margin, quite spectacular margin because most of our assets are actually royalties and obviously anchored by the big cornerstone asset [Indecipherable] which continues to deliver value with the new resources having been published by Yamana and Agnico, a quite big significance that we will talk about later, and we've seen our market cap go from $500 million at the IPO to $2.1 million, which I think is exceptional given that we've bought back well in excess of $300 million of our stock over the last five years.
For revenue breakdown, I'm going to pass it over to Elif Lvesque, our CFO, and I want to congratulate Elif on her celebrating her 10th year with us, but she will be leaving us to pursue her own interest as we go forward. And I take this occasion to thank Elif on behalf of Osisko management and shareholders for her
Contribution in creating not only Osisko one but also what is now Osisko Gold Royalties, which we believe is a distinct business in the royalty and streaming space, and she has been key to the development of our financial plans and strategy throughout the last five years.
Elif?
Elif Levesque -- Chief Financial Officer and Vice President Finance
Thank you so much, Sean. It's an amazing privilege and a lot of time working with you in past years. So, going back to the presentation on Slide 6, as you mentioned, we had a very strong quarter in terms of revenues and cash margins.
On Slide 6, we see the breakdown on the revenues by type of interest. On our royalty and stream interests, we finished the year with a 90% cash margin. In 2019, we sold the Brucejack mine offtake to Pretium for a gain of $7.6 million, and effectively reduced our low margin offtake instruments to just one as of today.
On the next Slide 7, revenues from royalties and streams increased by 10% to $120.1 million compared to the last year, mainly due to the increase of streams as well as the addition of ounces from Eagle gold mine. We started at the end of last year and high metal prices. We also recognize record operating cash flow of $91.6 million compared to $82.2 million, mainly reflecting the increased cash margins and elimination of cash settled share based payments.
The slide on impairments that we have to do some valuations and assessments during the year, coming from the information that we received from the operators, in December, Lydian, the owner of the Amulsar project announced that it applied CCAA, and this was considered [Indecipherable] evaluate assets to its recoverable value of $22.3 million, resulting impairment charge of $51.3 million on the Amulsar stream and offtake for the fourth quarter of 2019, but Osisko's stream interest is secured and we're working closely with Lydian to be a part of the restructuring solution and to reflect RHS going forward.
Also in February 2020, recently numerous operators of the Eleonore mine announced updated mineral resource and resources decreasing in total amounts by approximately 50%, which resulted in an impairment of $27.2 million and $20 million net of income taxes, bringing the recoverable value of the Eleonore royalty to $101.3 million. We've also incurred an impairment on Coulon project by project, which we had acquired with the Virginia market position in 2016 basically on the fact that we no longer plan on putting further exploration evaluation expenditures into that project. So we brought down the recoverable value to $10 million. And including these impairments, total impairments for the quarter stand at $148.6 million and $260.8 million for the year.
Next slide, on financial performance, reflecting all of these non-cash impairments and adjustments. Losses excluding the impairments stood at $26.2 million compared to earnings of $18.1 million last year. Variance is really related to the loss on deemed disposal of parking shares that we already held at the acquisition for $24 million, which is another non-cash item. We have completed the acquisition of Barkerville during the quarter and the transaction has been recorded as an acquisition of assets. You will find details on the transaction and the purchase price allocation in the notes to our financial statements. And if you look at on an adjusted earnings basis, you will see the nice increase compared to last year, 33% up year-over-year basis, mainly related to higher gross profit that we've seen during the year.
So, Slide 10, basically just kind of a summary of the different production from different metals that we have received. You will see that the realized gold price this year compared to 2018 was at CAN 1,945 per ounce compared to CAN 1,817, which had a very positive impact on the results. And currently as we speak, gold is actually trading at over CAN 2,100 per ounce
So with that, Sean, back to you.
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Thank you very much, Elif. Obviously with the non-tax losses as a statement, it's a little bit of a confusing year-end and quarter, given the way that the accounting is worked here, but with regards to the first principles, we've made about $2.6 million a week in the last few weeks in a row with a gross margin of 90%. So that's probably my summary of what we should take away from today's presentation.
As we look at Page 11, you can see obviously our cornerstone asset, Canadian Malartic, continues to deliver with over 33,000 ounces for the year and an overall contribution of 78,000 ounces with 68% coming from gold, 17% coming from silver, 13% from diamonds and 2% from other small metal groups. We continue to be one of the more dominantly precious metals based assets in the private space. Currently by market cap, we're the fourth largest precious metal premium company in the world with a dominant focus on Canadian Brownfield with 65% of our assets producing assets located in Canada and as geopolitical issues continue to exasperate and create pressure on the rest of the world in terms of investability. We think that Osisko Gold Royalties and our focus on ESG in the past and in our current life just the table for Osisko Gold Royalties to be one of the most investable companies in the precious metal space.
If you look at our cornerstone asset on Page 12, over 670,000 ounces produced in 2019, making it, I believe, the 10th or 11th largest gold mine in the world and by far the largest gold producer here in Canada, one of the best margins. And we wanted to take this moment to congratulate our partners Yamana and Agnico for their exploration success at depth as we get further into it with 33 million -- 33 ounces -- 33,000 ounces delivered to us in Q4.
If we look to Page 13, we have a bit of a long section showing the way that the development has come off on Malartic as the partnership there has evolved. And we continue to see Malartic as being one of the most fantastic things that we've ever been involved with 8 million ounces of historic production before we've got there and over 30 million ounces booked when we were drilling there a 0.4 of it was in the open pit and now we see a conglomerate rated resource here and continues to grow with East these mark and Odyssey having made major contributions to the ounces, measured and indicated at 694,000 ounces, 5.1 million ounces [Indecipherable] another 2.7 million ounces, any of these would have been exceptional discoveries on their own. But the fact that they're sitting next to the lowest cost operating mill in Canada, 55,000 ton a day, same large mill that operates on tariff electricity from Hydro-Quebec makes us an exceptional discovery and evolution, and our friends at [Indecipherable] have a significant amount of expertise and low-grade underground development with their success of and you can work at Laurent.
So we think that this is a generational asset that continues to deliver value to the Osisko Gold Royalties shareholders far into the future. Well, over and above what we've seen in the past and add significant amount of mine life that has not really been included in our valuation in the marketplace with a lot of the -- a lot of the analysis that's been published public, so we look forward to seeing that come in this year as one of the big catalyst to drive for future prices here in the near to mid-term as we see that project starting to evolve.
Page 14, again a shout out to our friends at Victoria Gold for their contribution of having evolved the Eagle line in the Yukon now, the largest gold mine in the Yukon and operating quite well and having gone through a fairly cold winter this year and having been execute the construction last year during the winter, very proud to be partners with the Victorian team and celebrate their success. We actually have a model, the vertical bar that is quite accomplishments to Canada's most recent gold mine into production. And one of the toughest environments around, they are located 64.5 degrees latitude, which is just off the Arctic Circle, and they're on road and on time and on budget.
In terms of things that we've done with our shareholder base, I think that the evolution of Osisko Gold Royalties, if we look at it as an IPO of 2014, quite exceptional outcome. If you look at page 15, you'll see that we've -- between dividends and share repurchases, we've returned $336 million to shareholders in quite a short time both through dividends and share buybacks. So we continue to be, what we think, as one of the leaders of returning capital to shareholders in this space, and we remain focused on the ability for us to generate opportunities that allow us to give significant return back to shareholders. We have created a business model that has higher torque in a lot of the vanilla envelope, sort of royalty and streaming companies that are out there. We believe this is a superior model, and as we go forward, obviously today is a big day in terms of our accelerator model with our friends at Osisko Mining having put out there resource update, and I would like to congratulate John Burzynski and the Osisko Mining team at this point for having published their updated resource at Windfall Lake, one of the biggest exploration projects in the world right now with over 23 drills turning this morning and almost $500 million invested and 1 million meters of drilling for our American friends, that's over 3 million feet of drilling has been executed on this project in the last four years.
John took on the task of this company at an $8 billion market cap in 2016 with Bob Wares and a few of the other founders of the Osisko Group, and they now formed -- processed project world-class standard with an inferred resource, which is 3.94 million ounces averaging 8.4 grams and another 1.2 million ounces of indicated at 9.1 grams, making it one the most significant discoveries at recent times here in Quebec, located just inside the footprint of the planned ore [Phonetic] in Quebec. And they've also been announced by the Quebec government yesterday that there will be a power line for over $100 million investment going into that project. So it's been a pretty big win for Osisko Mining this week.
Actually John and all of the Osisko Mining people that have led that charge, it's been a very intense project. But it goes the character on the Osisko Group and the Osisko platform. We are a little bit biased here at some of our competitors in this space, but we're also delivering significantly higher return with us having upgraded our royalty on that project by existing contractual rates that we earned at the conception of the company because we were there incubated. So we've been delivering significantly better returns than most of the other royalty and streaming deals have been done in the space through the accelerator model. And these things are just coming into their fruition right now.
So, I think you should look forward to Osisko Gold Royalties to accelerator model leading the charge in terms of innovation in the royalty and streaming space. We were there first and we carved the space for our shareholders. And I think you're going to see the delivery of those goods as we go forward and on to the future.
In terms of our balance sheet, $480 million available on our credit line, $108 million of cash, net debt sits at $349 million. Our investments in equity portfolio sits at $277 million with $157 million share and paying a quarterly dividend of $0.05 a share or $0.20 per year. In terms of our royalty interest, obviously we have royalty streams and some offtakes. So, the one thing that does for our results a bit is we got 100% margin on all of our royalties, with zero cost gold 60% on our streams. Our offtakes however is smaller margin and they too kind of biased at the P&L sheet looks at times. So, it's worth taking into consideration. It is a small part of our business, but those markets are small because basically a look back at the system where we have a time period to look back on those royalties and realized sale price, but it's essentially zero risk money because we always look back and pick the share prices most favorable to us.
Onto Page 18, over 135 royalties and streams, up from five when we IPO-ed the company in 2014. Canadian brownfield exposure were over 25,000 square kilometers of brownfield camps are covered by our royalty footprint, making us one of the biggest royalty footprints in the world in terms of number of kilometers that we cover. NPD sits at 76% in North America and our assets is 64% Canadian. We did report record cash flow this year at CAD91 million, CAD277 million in cash on the balance sheet, CAD100 million of cash. We've got a balance sheet with CAD850 million of firepower and that leaves us today where we can compete with the -- both with the larger private equity groups and the larger royalty companies in terms of an opportunity that reduces the royalty and streaming space, and we can easily reach to do a $500 million deal.
2019 saw a fairly big change in how the succession planning at Osisko has worked out with Sandeep Singh having joined us. Sandeep is taking over as President of Osisko. Sandeep is 40 years old and has been an investment banker close to us since -- it's actually at the beginning of 2007, 2008 when he was at BMO, subsequently at Dundee and then as a Founder of Maxit Capital, one of the most successful boutique advisory firms in the world. In the mining space, he joins us to take up the hunt for the evolution as we evolve Osisko into the most investable royalty and streaming company in the world with a dominate Canadian portfolio. [Technical Issues] Sandeep to help us lead that fight.
Fredric Ruel has moved up. He's worked for five years with Elif, who has done a great job in putting us in a solid financial position. With the listing on the New York Stock Exchange in 2016, Elif was one of the first CFOs in Quebec to lead a mining company, a resource company on the NYSE with us. Fred, picks up where she left off and gives us a great foundation with the team that she and Fred had to put in place here in Montreal.
We also have Iain Farmer, who has stepped up to VP of Corporate Dev, who has been working with us and doing a lot of the hard work along the way. Iain's been with us for five years as well. So very happy to see him evolve into the space.
A new addition to our team will be Benoit Brunet, who joins us. He has a CA from -- and was an auditor at PWC and subsequently he went on to work at the Caisse de depot. He is joining us as a new VP to take on the challenges with Sandeep and Iain and Fred as we move forward with the new model. And he has quite a bit of experience both in private equity and with ESG, so we're looking for Benoit to help lead us through that project. And I'd like congratulate Kevin Connan, who is sitting to my right on his new appointment as Director of Communications as we move forward. The team is refreshed and ready to go.
And just before I go to Q&A, I'm going to pass it over to Sandeep for just a couple of words. A lot of you in the industry already know him. So I don't think he's going to surprise you too much.
Sandeep Singh -- President
Sure. Thanks, Sean. I won't take too much other than I'm very pleased to be part of the team. Also very pleased that a number of the right pieces were already in the Company and ready to take over from what I'm lacking [Phonetic] before. And with the new additions, you mentioned Benoit and the promotions internally, we feel like we are set to take things to next step and our next phases of growth.
Thanks to you as well. Feeling there's a lot of value to a lot with our existing portfolio and that's going to be the key focus. Obviously, we'll continue to look for growth but there's a lot of interesting things to do in-house already. So excited about what comes next.
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
All right. And on that note, we'll turn it over for questions. If anybody has anything, sorry, my oversight. Before we pass over to questions, I'd like to mention that Murray John, a long-standing member of the resource and mining community previously at Dundee Wealth Management as both a geological and mining engineer of some record with a lot of portfolio management experience under the Dundee has joined us as a member of the Board. So congratulations and welcome to Murray John for joining the Board to fill out some of our space that has been created by departures over the last couple of years by people who either retired or moved on.
So with that note, we'll go to our first question.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Lawson Winder. Your line is now open.
Lawson Winder -- Bank of America Merrill Lynch -- Analyst
Hello, Sean and team, thank you for taking my call. Just a question on the Canadian Malartic royalty. One of the two partners in that partnership had commented on a call that they were in discussions with you guys on the economics of the underground with respect to the royalty. I'm just curious what -- I mean, to the extent that you can. How flexible you might be on those and what your current thoughts might be on those discussions? Thank you.
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Well, I believe the discussions and the negotiations between the three parties of this asset should remain -- which is at discussions and negotiations. However, I will comment that at the current gold price, this project is a slam dunk and the anxiety I believe that's been expressed has been around $1,000 to $1,100 gold price and we've seen some publications on that level. Obviously, life is a negotiation and some of our friends have chosen to negotiate through the shareholder base and through the advisory base. That's their choice to do so, it's not the way we would do business. But we'll take that as we get it. We're really more interested in the information to come. We feel the deposit has been 100 drilled so far and we'd like to see a larger commitment from the partnership to executing a more significant drill program there, taking up the pace. By context, we've drilled a million meters in five years at Windfall and we have drilled 350,000 meters at Barkerville. And we would like to see our partnership at Canadian Malartic to pick up the pace and intensify the drilling for us to make a financial decision on our most significant asset. Our shareholders need to know what that project represents. So, we would go with the Osisko model, which is called SUDS, which stands for Shut Up and Drill.
Lawson Winder -- Bank of America Merrill Lynch -- Analyst
Thank you for that perspective. And then just maybe one more for me. How do you guys think about the dividend going forward? It would certainly seem at current gold prices, you would have the capacity to increase that? But what are your thoughts? Thanks.
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
We always look at the dividend. And obviously we're mostly, fairly big shareholders ourselves, so it's close to our heart. However, where we sit today, there's a lot of opportunity on our screen and we've been focusing off on share buybacks. So I think right now at the current share price level, we'd probably focus more on share buybacks than dividend increases as the stock is extremely undervalued in the current marketplace.
Lawson Winder -- Bank of America Merrill Lynch -- Analyst
Great. Thank you.
Operator
Your next question comes from the line of Don Blyth from Paradigm Capital. Your line is now open.
Don Blyth -- Paradigm Capital -- Analyst
Thanks, guys. [Technical Issues] first few minutes of the call, so excuse me if any of these have already been addressed. But on Barkerville, do you have any estimate of how much you'll be spending in 2020 to continue advancing Cariboo?
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Yeah. Don, so where we stand right now, obviously, there has been significant success drill results. There are some pending updates both on [Technical Issues] and on some exploration discoveries that have been made both on the major trend and on the parallel trend. So that will be an update coming out under the title of North Spirit as we evolve that right now. And we're looking at a couple of different decision points both based on the resource update in terms of further budget commitments as to how we move forward. However, we are intent and very proud of our Barkerville acquisition, and we believe that we're going to drive a lot of value on that project as we set the table for the North Spirit financing hopefully in the first half of this year. So stay tuned. There will be some updates coming.
But in terms of budget commitments right now, we know we have some work to do. And some of that's going to be delivered -- some of that budget decision will be driven by permitting requirements and line of sight. As you know, there has been some changes to the Canadian permitting process that are quite favorable to Barkerville and that from a federal level, we only need to work on a provincial permit right now as they've increased the test for federal level from 600 tons a day to 5,000 tons a day. And we had put a bit of PA study on Barkerville at 4,000 tons a day.
So we're looking to take advantage of some of the things that have occurred in our favor at Barkerville and had to take into account the exploration success and expertise that we've gained and the knowledge of that -- not only that portion of the project, but also the deep geological knowledge that we gained in the last 18 months of that project. So, as we get forward, we will come forth with a more precise budget.
Don Blyth -- Paradigm Capital -- Analyst
Okay. And with regards to taxes, can you give a sense of the tax pools and how long you think you can defer being into a cash taxable payable position?
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Well, I'll hand this question over to Elif. She's the knower of all things tax.
Elif Levesque -- Chief Financial Officer and Vice President Finance
Yeah. So sure. So in terms of our taxable, actually, we're sitting in a very good position that we've done quite a few investments in terms of the royalties that actually end with base that we started off in 2014. We've built some pretty interesting taxable. So we're not actually foreseeing to pay any cash taxes for the next quite four to five years actually. We're going to be paying withholding taxes from some of the international royalties there, but it's going to be limited to that our tax-affected tax pools are at a pretty good level right now.
Don Blyth -- Paradigm Capital -- Analyst
Okay. And assuming you continue to invest in similar rates you expect that to sort of just keep moving forward.
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Maybe I would just add a couple of comments on the tax pool for those who may not be that familiar with the Canadian charity flow-through and flow-through tax regime. As long as we invest in Canadian projects, especially here in Quebec, DC and Ontario, using flow-through shares or charity flow-through share investments into places like Canadian Malartic -- or into projects like Osisko Mining and also into Barkerville. Those investments, as long as you're of an equity nature, can be used to deduct from our royalty revenue. So it's a rather unique advantage that we have with our accelerator model that by investing in those equities we can actually increase our taxable pools. And it provides roughly a 22% advantage for us when we invest in those equities.
It is unique to the Canadian companies and you have to have brownfield projects and big drill programs to do that. But our friend Mr. Burzynski and our friends at Pine Point, the Horn 5 project, Barkerville and Victoria have done extremely well at taking advantage of that business and providing significant value to the Osisko shareholders. And especially, if you look at Windfall Lake, there has been over CAD400 million of flow-through and charity flow-through raised to advance that project and nobody else in the world could have ever executed that drill program without that tax program and also Osisko shareholders have been a major benefactor from that.
Don Blyth -- Paradigm Capital -- Analyst
Excellent. Thanks very much.
Operator
Your next question comes from the line of Kerry Smith from Haywood Securities. Your line is now open.
Kerry Smith -- Haywood Securities -- Analyst
Thanks, operator. Sean, I had a couple of questions. What is the rough timing now to complete the feasibility for Barkerville?
And the second question was, what are you seeing on the diamond price trends? It seems like diamond pricing is improving but I'm just wondering what you're seeing at Renard generally. If you're seeing any favorable trends there?
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Yeah. We've been seeing an increase. I'll start with the diamonds first. We're seeing an increase of between 5% to 7% sale on sales. There's a couple of contributing factors so that, obviously, supply and demand is fairly developing with the premature [Phonetic] of the Victor in Ontario and Argo. And some of the diamond market has been changing as the millennials come more into the space. However, there has been some discussion about whether the coronavirus would affect the diamond prices as we move forward. But we do think that there's a supply and demand story that's pretty solid in the diamond space and that was -- when we went forward with our partnerships with Triple Flag and Caisse de depot et placement du Quebec on the credit bid for Renard, that was one of the things we did take into consideration as a lot of people are quite bullish about diamonds, including some of the bigger groups like BHP and Rio Tinto having made significant exploration commitment to the diamond space as we move forward.
And just a general comment, in this pursuit -- in this world there's a lot of wells around. And the pursuit of purchasing genuine articles and luxury articles continues to grow as we've seen across the board, with all the LVMH products, with Tesla, and especially in the gem space and also the appreciative gold and platinum and palladium. There's a lot of pursuit for valuable so-called precious metals, precious stones, as we go forward and I think that growth increases as the rarity goes up. And Canadian diamonds, from an ESG standpoint, are pretty popular as we speak today.
Your other question in terms of Barkerville feasibility, we'll announce that once we finish up with the current drill program, that will be driven by the resource update and also some of the aspects that we're quite excited about in terms of the permitting opportunities that we have there. But we feel that in terms of where we wanted to be with North Spirit, we closed the acquisition in November. We wanted to take the time to do a lot of this work. We've been pleasantly surprised by a lot of things that have gone on with that project, especially from the drilling side. Some of the things that we've identified within the mining process in terms of being able to use roadheaders, force orders and some of the new technology that we believe is going to drive Barkerville to be one of the more valuable projects.
As you saw, the PA study calls for CAD310 million or about $225 million of capex, so 185,000 ounce a year mine for five years. It uses about half of the existing reserve. So on a capex intensity level, Barkerville still remains probably the most interesting project in the world right now in terms of being able to put almost 200,000 ounces of production on the table for $225 million. So that's the basis from where we start and then everything else from here just an optimization. And we have quite a few drill plans on the go with a CAD12 million exploration budget [Technical Issues] and exploration drilling on the go for that product, so some of those assets will be driven by those resources.
Kerry Smith -- Haywood Securities -- Analyst
Okay. And the reserves I think would be when and when should we expect that?
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Well, the resource updates are freckle thing these days. I would guide you to somewhere in early Q2 or late Q3.
Kerry Smith -- Haywood Securities -- Analyst
Okay. Okay. That's helpful. Thank you.
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
All right. If there are no further questions, I'll thank everybody for participating today. It's exciting time here at Osisko Gold Royalties with obviously big things happening at Osisko Mining, further success at the Barkerville program, advancements on the Horn 5 Project and our friends at Victoria Gold heading into commercial production and the gold price sitting at a seven-year high of $1,615. But I would remind everybody that at CAD2,137 this morning, which is an all-time high in Canadian dollar, and it's an all-time high in Australian dollars. So it's a great time to have a Canadian portfolio, especially Brownfield assets where other people are spending their money to drill on our royalty land as we speak.
And we thank everybody for their participation. I look forward to the 2020 evolution as we think this is our time. We did create a very high-growth portfolio over the last five years and now it's starting to mature and should start to drive and deliver results to shareholders as we evolve through the next phase of this Company. Thank you very much.
Operator
[Operator Closing Remarks]
Duration: 42 minutes
Call participants:
Sean Roosen -- Chair of the Board of Directors and Chief Executive Officer
Elif Levesque -- Chief Financial Officer and Vice President Finance
Sandeep Singh -- President
Lawson Winder -- Bank of America Merrill Lynch -- Analyst
Don Blyth -- Paradigm Capital -- Analyst
Kerry Smith -- Haywood Securities -- Analyst
