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Franco-Nevada Corporation (NYSE:FNV)
Q1 2020 Earnings Call
May 9, 2020, 10:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Franco-Nevada Corporation Q1 2020 Results Conference Call. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on May 7, 2020.

I would now like to turn the conference over to Candida Hayden. Please go ahead.

Candida Hayden -- Investor Relations

Thank you, Chris. Good morning, everyone. Thank you for joining us today to discuss Franco Nevada's first quarter 2020 results. Accompanying this call is a presentation which is available on our website at Franco-Nevada.com where you will also find our full financial results. Paul Brink, our new President and CEO of Franco-Nevada will provide a company update and Sandy Brenna, CFO of Franco-Nevada will provide a brief review of our results and Eaun Gray, VP Business Development of Franco-Nevada will comment on business development. This will be followed by Q&A period. Representatives to my executive team are present in our boardroom to answer any questions.

We would like to remind participants that some of today's commentary may contain forward-looking information and we refer you to our detailed cautionary note on Slide 2 of this presentation. I will now turn over the call to Paul Brink President and CEO of Franco-Nevada.

Paul Brink -- President and Chief Executive Officer

Thank you Candida and welcome to all on the line. Our succession planning has been well signaled and a number of the role changes took effect at our AGM yesterday. Today is the first day with Pierre as Chair Emeritus; David as Chair and myself as CEO. David and Pierre set a very high bar at Franco. I'm looking forward to the challenge of the new role, I'm delighted to have David's guidance as Chair and I'm confident the next chapter in the Franco-Nevada story will be a good one.

We're also pleased yesterday to welcome Maureen Jensen to the Board. Maureen's experienced both leading Ontario Securities Commission and working as a geo-scientist in the industry will be great assets to the Board. Franco-Nevada has been fortunate not to have any COVID-19 cases among our staff and they've been able to remain fully productive working from home.

We do have temporary closures at two of our core assets: Cobre Panama and Antamina. Candelaria and Antapaccay have continued to operate normally. First Quantum is placed Cobre Panama to care and maintenance until the health ministry satisfied with the quarantine conditions are appropriate. Antamina also been temporarily suspended to support Peruvian COVID response efforts and and facilitate the change in the workforce. They've safely demobilized the workforce, and while they are working toward a restart, the timing is still uncertain.

Of our other 52 cash flowing assets,11 have announced temporary reduced to curtail production although five of those have since resumed activities. Franco doesn't have any fixed cost related to these investments. So any temporary closures are effectively only a deferral of revenue. The energy side of our business has been impacted by a sharp downturn in oil prices, operators reduce capex plans and production curtailments. We have reviewed the carrying value for our energy assets and have a Quarter's impairments this quarter primarily related to the SCOOP STACK and waiver.

On a positive note, I'm pleased to announce our Board has declared a quarterly dividend of $0.26 per share. It's a 4% increase from the previous $0.25 per share and the 13th consecutive annual dividend increase. Canadian investors and Franco Nevada's 2017 IPO are now receiving more than a 9% effective yield.

Lastly, a brief reminder, in April, we released our 2020 asset Handbook and ESG report. The handbook books are annual staple with descriptions of our main assets. The ESG report details ISG efforts including new commitments to the World Gold Council's responsible gold mining principles and the UN Global Compact both reports are available on our website and also as hard copies by request.

With that, I'll hand it to Sandip for Q1 financials.

Sandip Rana -- Chief Financial Officer

Thanks, Paul. Good morning, everyone. As you will have seen from the press release issued yesterday, the Company reported strong results for our key financial metrics for the quarter ended March 31, 2020. Those metrics being gold equivalent ounces, revenue, adjusted EBITDA and adjusted net income. The Company did report a net loss of $98.8 million for the quarter. This was a result of recording impairments on some of our energy assets.

These are non-cash impairments and reflective of the current uncertainty within the energy market and impairment of $207.4 million after-tax was recorded on our STACK SCOOP and waiver investments. Revenue from our energy assets is forecast to be less than 10% of revenue for 2020.

Looking at the performance of our mining assets, during the quarter which is best reflected by the number of gold equivalent ounces sold, Slide 3 highlights the GEO sold for the last five quarters, Year-over-year the Company had a 10.6% increase in GEO sold. Company sold 134,941 GEOs in first quarter compared to 122,049 GEOs in first quarter 2019.

The main source of the increase was from Cobre Panama. This asset began delivering gold and silver ounces to Franco-Nevada in third quarter of 2019. The company sold approximately 25,000 GEOs from the mine during the quarter. First quantum has done a great job ramping up the mine but as Paul mentioned due to COVID-19 the mine is currently shut down but we look forward to continued ramp up once it restarts.

Hemlo and in particular the 50% NPI was also a strong contributor during the quarter. One of the benefits of net profit interest is the leverage it provides to rising commodity prices. Revenue generated from Hemlo was 11.6 million in Q1 2020. The company did recognized last year Sold from our silver PGM and other mining assets during the quarter compared to first quarter of 2018. This was in line with expectations.

Slide 4 highlights our gold and gold equivalent revenue for the last five quarters. The company's GEOs revenue has seen a sharp increase year-over-year as the company has benefited from the increase in gold equivalent ounces delivered in sold but also the rising commodity prices. When combining the higher GEO sold in Q1, 2020 with the higher average precious metals prices, the gold and gold equivalent revenue in first quarter was $214 million compared to $159 million last year, a 35% increase.

Energy revenue had a significant increase year-over-year, increasing from $20.8 million to $26.5 million due to increased production. However, with the decrease in oil prices, revenue was lower than Q4, 2019 and we expect it to be lower going forward.

As you turn to Slide 5, you will see the key financial results for the company. I won't get into the detailed numbers, but as mentioned previously, it was a strong quarter for the company. We have recorded significant increases in GEOs revenue, adjusted EBITDA and adjusted net income year-over-year.

For first quarter, adjusted EBITDA was $192.7 million, a 37% increase over Q1, 2019. As mentioned, we did record impairments on some of the energy assets resulting in a net loss for the quarter. When adjusting for this along with other unusual items, adjusted net income was 67% higher in first quarter compared to Q1, 2019 at $109.2 million compared to $65.2 million a year ago.

On Slide 6, we illustrate the diversification of our portfolio revenue generation. As shown 89% of our quarterly revenue was generated by gold and gold equivalents in the quarter with gold being 69%, silver 9%, PGMs 9% and other mining 2%. From a geographic revenue profile, revenue was sourced 87% from the Americas with Latin America being the largest.

The third chart highlights the asset diversification of the company. Cobre Panama is our largest revenue generator at 17% for the quarter, our top four core assets Cobre Panama, Candelaria, Antapaccay and Antamina generated 40% of the revenue for the company.

One area that our Board and management is very proud of is our focus on cost management. We like to stress the strength of our business model and the scalability. The chart on Slide 7 clearly illustrates our focus on being as cost efficient as possible in managing this business. Here we have highlighted our quarterly revenues and our quarterly G&A expenses since our IPO. Since 2008, our revenues have grown from approximately $1 million to just over $240 million this quarter. That is approximately a 10-fold increase. This while our G&A has remained fairly stable over this time period.

General and administrative costs have averaged $5 million to $8 million per quarter for the last 12-plus years. For first quarter of 2020, G&A was less than 3% of revenue at $6.2 million. Management believes we can continue to add to our portfolio and grow our business without adding significant overhead to the company.

And now, I'll pass it over to Eaun who will provide an update on available capital and business development.

Eaun Gray -- Vice President-Business Development

Thank you. Sandeep, and good morning to those on the line. Looking at Slide 8, we would like to highlight the Franco-Nevada is debt free, having repaid the drawn portion of the RCF. The RCF combined with marketable securities and working capital provides $1.5 billion of liquidity at the moment. This positions us very well in combination with cash flows which we expect to continue to be strong over the coming quarters to finance growth.

In terms of the pipeline, the pipeline is very healthy at the moment. The team is very busy. looking at precious metals opportunities. Some small, some large and some modest size. In addition to precious metals, there are some opportunities in non-precious findings. And in terms of size, we expect that perhaps some of the smart, more modest-sized deals are actionable in the near term.

With that I will turn it over to the operator for any questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from Fahad Tariq, Credit Suisse. Fahad, please go ahead.

Fahad Tariq -- Credit Suisse -- Analyst

Hi, good morning. Thanks for taking my question. And just on the last thing you mentioned on deal pipeline, can you talk a little bit about in this commodity environment, whether you're seeing base metal producers more willing to engage in precious metal streams royalties? And also can you talk a bit about maybe any constraints you're seeing in terms of just being able to do due diligence in this environment. Thanks.

Paul Brink -- President and Chief Executive Officer

Thank you, Fahad. You're right. One of the themes that we've seen emerged recently is base metals producers looking to monetize precious metals. In the current commodity price environment, you can see why this would be appealing. So much for our pipeline is comprised of that type of transaction.

In terms of actionability, you're right COVID-19 does impose some restrictions and so we're actively looking at various alternative to be creative and how we do due diligence to keep our team safe. So we're hopeful that we'll still be able to execute on transactions in this environment and as things improve with COVID-19, things will become increasingly more actionable.

Operator

Thank you. Your next question comes from Cosmos Chiu, CIBC. Cosmos, please go ahead.

Cosmos Chiu -- CIBC -- Analyst

Thanks. Thanks, Paul. Sandy, Ben, Eaun and congrats once again, Paul. Maybe my first question is on the impairment charge taken on the energy portfolio. I see that it is the oil assets being written down, not so much the gassy--more gassy assets. On that front, I'm just wondering, I'm sure you have scrubbed the entire portfolio to come out of this impairment charge but what assumptions have you made for gas and can you talk a bit more about those gas assets and where they stand today given the current commodity prices?

Jason O'Connell -- Vice President, Oil and Gas

Hi Cosmos it's Jason O'Connell here.

Cosmos Chiu -- CIBC -- Analyst

Hi, Jason.

Jason O'Connell -- Vice President, Oil and Gas

Hi there. You're right, we did conducting our impairment analysis we looked across all of our energy assets including the gas assets. The Marcellus royalty that we bought last year is highly dependent on gas and also natural gas liquids. We didn't conducted impairment analysis on that asset but it didn't result in us having to incur an impairment. And the reason there is the production levels at that asset are more stable than some of the oil assets in this environment where operators are cutting a lot of their capital costs. Range is the operator of the asset came out with their budget and in the most recent quarter maintain their production guidance and so volumes will continue to be fairly consistent in the near term.

And then with regard to gas prices, they are low at the moment and have been lower than at the time that we did that transaction, but we expect those prices will recover over the coming quarters and over the coming years. So we did look at it, but it did not result in us having to take an impairment.

Cosmos Chiu -- CIBC -- Analyst

For sure and maybe as a follow-up Jason, as we talked about there has been cutbacks in capex but I just want to confirm once again, it's got a bit of a lagging effect to us. So even if they cut the oil and gas producers even if they cut capex now the impact doesn't come later on right?

Jason O'Connell -- Vice President, Oil and Gas

Yeah, that's correct. So the nature of our royalties are that there is a deferral between when drilling happens when wells are completed, when production comes online and then we actually receive our check. And so we expect that drilling levels were reasonably strong in the latter half of 2019 and even into early 2020 So we will continue to receive the benefit of that drilling into Q2 here even into potentially early Q3, so the majority of the impact that we think we will see from the reduction in capital spend will occur in the latter half of this year and then into 2021.

Cosmos Chiu -- CIBC -- Analyst

And then maybe switching gears a little bit, touching on the Island Gold Royalty Interest that you acquired in Q1, I just want to make sure like where is the royalty? My understanding is that you know Ireland gold is currently undertaking a study for an expansion plan, is a royalty going to encompass, that potential expansion?

Jason O'Connell -- Vice President, Oil and Gas

Thanks Cosmos. Yes, and we're quite happy to add that royalty. That royalty covers the Boudreaux claims, so you can have a look at the disclosure by Alamos, and you should be able to see from that, that is the core of the mine. And so the preponderance of cash flow should be from those claims and accrue to the royalty.

Cosmos Chiu -- CIBC -- Analyst

And you know Eaun a follow-up here, as you mentioned given other travel restrictions, these days, it's hard to do due diligence. But clearly, you know the [Indecipherable] and gold royalty is a bit smaller. So I'm just trying to understand in terms of your due diligence process here of course, is going to be a lot more stringent when you're doing bigger deals, but would you still do due diligence on some of these smaller deals. And what's the magnitude of difference in terms of due diligence, when we're talking about $1 billion deal versus '18 today?

Eaun Gray -- Vice President-Business Development

So the level of due diligence obviously varies depending on the transaction. When you're buying a royalty like that on island from a third party, your access to information is inherently more limited. The larger deals we do tend to benefit from thorough due diligence, and one of the things we pride ourselves on is the strength of the technical team. There is a lot you can do these days evaluating and interrogating the data remotely. But we do like to put boots on the ground, whenever we can. And so we're thinking creatively about how we get people to site, and to the extent that we have resources already in some jurisdictions, how we may be able to leverage those. So we're working hard to continue to execute, despite the travel restrictions as best we can.

Cosmos Chiu -- CIBC -- Analyst

Of course. And then maybe one last question here, great to see that Franco-Nevada has increased the dividend once again, but that came along with the fact that, share price has been very good year-to-date. So far, as you mentioned, if someone that bought during the IPO would have a 9% effective yield. However, based on current share price today, it's more like a 0.7% dividend yield. I guess my question is in the past when you and I have talked, certain points in time Franco-Nevada had targeted a plus 1% sort of dividend yield. You're not there right now. Is there still a target that you look at?

Eaun Gray -- Vice President-Business Development

It's still is an important factor in that many of our shareholders are generalists and some of those funds 1% is the dividend yield that they're looking to include in their funds, so it is a level that we'd like to be at. But we've got also balance that in the board's minds with ensuring that the dividend is sustainable and progressive. So we can put all those things and setting the dividend.

Cosmos Chiu -- CIBC -- Analyst

Of course. Thanks once again, those are the questions I have.

Operator

Thank you. Your next question comes from Greg Barnes, TD Securities. Greg, please go ahead.

Greg Barnes -- TD Securities -- Analyst

Thank you. Sandy, can you give us some sense of what the energy revenue look like in April, for example, just to get some ideas at the lower oil prices, what we can expect from that business?

Sandip Rana -- Chief Financial Officer

And it was lower as I said on the call and off top my head, I don't know if I mean at that position to provide that number at this time.

Greg Barnes -- TD Securities -- Analyst

Okay. And the Hemlo revenue for Q1 was impressive. What kind of run rate can we expect obviously at a equal gold price going forward?

Sandip Rana -- Chief Financial Officer

So obviously, beacause it is an NPI, there is capital cost that get deducted against the amount. So it fluctuates quarter to quarter. We have seen positive growth in the NPI over the last number of quarters as the gold price has risen. But again it's all dependent on just in terms of how capital spending occurs going forward. I think at these commodity prices, Hemlo should be able to generate between $5 million to 10 million a quarter an NPI revenue. But again, it could change based upon what they decide to do with their capital spend.

Greg Barnes -- TD Securities -- Analyst

Sure. That's great. Thanks, Sandip.

Operator

Thank you. Your next question comes from Josh Wolfson, RBC Capital. Josh, please go ahead.

Josh Wolfson -- RBC Capital -- Analyst

I think you just back on the oil and gas assets, you mention having completed some of the impairment testing on the Marcellus assets? Was that testing also completed on I guess some of the other assets Midland and Delaware or the Orion project?

Jason O'Connell -- Vice President, Oil and Gas

Yeah, thanks Josh. This is Jason. Jason here again, we did do impairment testing across all of our energy assets and so we looked at the Texas assets, the Marcellus and are Canadian assets. As I talked about for the Marcellus, because production volumes are not at risk there at least at this point there wasn't an impairment. Given the prices we were using but when we looked at our Texas assets they had actually been outperforming up until the end of last year. They had had a significant amount of drilling activity on the land. And so while we expect we'll see reductions in those activity levels that we're starting from a higher base. And then with respect to Orion we looked at that asset up as well and we expect that in the near term, we will see a reduction in revenue. But over the long term because it is such a long life asset, we expect that the value is still there over the longer term and therefore an impairment wasn't required.

Josh Wolfson -- RBC Capital -- Analyst

Okay. And I'm not sure if this question's better suited for Paul or Sandip, when you look at the ATM program that's in place and I guess the increase going forward either the current rate of equity issuances is pretty similar to what the dividend is which from my perspective, kind of offsets, what the current shareholders are receiving. How do you see, obviously the dividend in something which will continue going forward, how do you see the ATM going forward, now the company is in the net sort of cash position and growing obviously on a steady state basis?

Sandip Rana -- Chief Financial Officer

Sure. So, the objective of the ATM when we did put it in place, middle of last year, was to be able to pay off the credit facility as we had debt on the balance sheet and we achieved that objective. But at the time, we also said that we look at the ATM as a tool for raising money just as having a credit facility, which is why we are putting in a new one slightly higher $300 million versus $200 million before, it is there as a tool, as we see fit for when we need to do to sell under it, but there is no mandate to sell the full $300 million. It's opportunistic for us.

Josh Wolfson -- RBC Capital -- Analyst

Okay. Thank you.

Operator

Thank you. Your next question comes from George Topping, Industrial Alliance. George, please go ahead.

George Topping -- Industrial Alliance -- Analyst

Great, thank you operator. Hello everyone. See on Cobre Panama, if it's shut down for a while and if you need it as they needed more money which would you be amenable to increasing your exposure there, or is that bumping up against the limits ship to have a single asset exposure?

Paul Brink -- President and Chief Executive Officer

George, this is Paul. It's obviously an asset that we really like and have been so impressed with What First Quantum has done in building the asset. More the issue is the, the streaming that has been done relates to most of the precious metal that already comes out of the property. So there is not much more room that you could do in terms of precious metal streaming there.

George Topping -- Industrial Alliance -- Analyst

Got it. And just a follow-up on the oil. I see the forecast prices going up to $58, is $58 per barrel WTI given that, would you be willing to expand your royalties into the oil and gas sector?

Jason O'Connell -- Vice President, Oil and Gas

Thanks, George. It's Jason here again the pricing that we used in conducting our impairment analysis was an average blend of the engineering price decks, so it's not necessarily a call that we're making. It's just what we thought the most accurate way of looking at future value, given the uncertainty around the commodity price environment currently. We do expect there will be a rebound in prices and so for that purpose, if there are acquisitions that are very attractive in today's environment, we would certainly look at them. We're not seeing at this point a full sort of capitulation on the seller side, I think people are sort of waiting to see where prices settle out over the coming months. And so there are likely to be good opportunities toward the back half of the year but at this point, it's a bit early for sellers to kind of come to terms with the new price environment.

George Topping -- Industrial Alliance -- Analyst

Got it. Thank you.

Operator

[Operator Instructions] Your next question comes from Tanya Jakusconek of Scotiabank. Tanya, please go ahead.

Tanya Jakusconek -- Scotiabank -- Analyst

I think that's me and congratulations, Paul, on the new role.

Paul Brink -- President and Chief Executive Officer

Thank you, Tanya.

Tanya Jakusconek -- Scotiabank -- Analyst

Yeah. You're welcome. I came in a bit late on the call, so I apologize, maybe you address that some. I know you talked a little bit about the, on your M&A front on looking at the precious metal side and I think you said there were some small, modest deals and large deals to be done and modest to small more in the near term, would you classify modest to small under $500 million, would that be a fair assumption?

Paul Brink -- President and Chief Executive Officer

Yes, Tanya, that's what I would classify as kind of moderate-to-smaller transaction and as you know, we like to find optionality. Sometimes we get good optionality in smaller assets. So we'll continue to look at those and we believe that there are some good actionable opportunities there in the near term.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. And I think you. I think you mentioned most of your opportunities are on base metal companies stream from the precious -- precious. I just wanted to make sure I understood that that to be correct.

Paul Brink -- President and Chief Executive Officer

Right there. It's definitely the theme that's emerged as you can imagine, in the first base metals price environment. So those are the assets that we like on duration precious metals cash flow.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. and just on the non-precious side, I think you said you saw some opportunities there, with the non-precious metal side be mainly on base metals?

Paul Brink -- President and Chief Executive Officer

I think there are opportunities emerging in based and bulks.

Tanya Jakusconek -- Scotiabank -- Analyst

And bulk OK. Thank you on that. And then on your due diligence, I came on when you were talking about your due diligence, you're are looking at alternative ways of doing due diligence. I understand bit easier when you have an operating asset, you know, you've got the numbers behind that development are a bit different, but what are some of the innovative ways you're looking at due diligence or are we going to be looking at deals where you announced that pending due diligence maybe a little bit on that.

Paul Brink -- President and Chief Executive Officer

So Tanya it's Paul. A bit of both is the answer, I don't want to get into the details of how we're doing it but we are trying to be creative, looking at the individual risks related to assets and say, how do we can reach of those off individually so that we can be sure that we have done a good job before [Indecipherable].

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. Okay, all right, thank you so much on that.

Operator

Thank you. Your next question comes from Brian MacArthur, Raymond James. Brian, please go ahead.

Brian MacArthur -- Raymond James -- Analyst

Good morning. My part question has to do with the counter party risk, because I know you spend a lot of time on this, but just in the oil and gas and not quite as familiar with it, have the cutbacks on the election to drilling with your partner has been more just price related or is there any counter party in there that sort of had lines pulled and therefore at great risk and that's why you know the, the production been cut back. Can you give me sort of a percentage just mostly elective as opposed to force does that a fair statement?

Jason O'Connell -- Vice President, Oil and Gas

Yeah, thanks for the question Brian. I think at this point, the vast majority of what we're seeing is cutbacks in capital spending, its elective cutback. There have been some insistence of bankruptcy but they've been minimal at this point. We'll see if that, if that increases down the road, but I think keep in mind the one of the reasons we were attracted to the asset class in the first place is that what we're buying here, for the most part is mineral title, which is effectively a perpetual interest in the land base and so to the extent that there are operators that do go into bankruptcy. We'll keep our interest in the land, it will survive that bankruptcy. And so it's a very secure form of title that we've invested in.

Brian MacArthur -- Raymond James -- Analyst

Great, thanks very much. Thank you.

Operator

Your next question comes from John Tumazos, Very Independent Research. John, please go ahead.

John Tumazos -- Very Independent Research -- Analyst

Thank you. Congratulations again. Thank you. Look, at the oil market is though it's an extreme temporary aberration reduction is going to shut down and maybe people drive when gas is free price is rebound to 50 or $100 in a couple of years and this epic buying opportunity or do you want to be conservative. I was concerned there is a longer structural adverse change electric cars and people stay at home and drive less?

Paul Brink -- President and Chief Executive Officer

John, it's Paul, I guess, first thing is the investing both in the gold and in other Resource Industries. The only thing we know for certain is they are highly cyclical industries. It's not to say that there isn't structural changes going on and they oil and gas markets are certainly are, but what, that's what we're very aware of is is prices and set by absolute demand prices set by the demand for the balance of supply and demand and what you're seeing in the oil space is a lot of capital that's been pulled out of the space and everybody impact supply. So we're price settles out like all cyclical markets we don't know. In the future. So we are obviously looking at what the changes are, but expect that there may still be opportunities down the line.

John Tumazos -- Very Independent Research -- Analyst

Thank you.

Operator

Thank you. Your next question comes from Ralph Profiti fom Eight Capital. Ralph?

Ralph Profiti -- Eight Capital -- Analyst

Good morning everyone, thanks for taking my question. And Paul, congratulations on the formal appointment. With respect to the good decision with Continental Resources to take that contribution down by 50%, I was wondering what was driving that particular number? Is that sort of on the ordinance of the capex budget that you're seeing in the industry across the board? Would that be a fair kind of relationship on how that spending profile was determined?

Paul Brink -- President and Chief Executive Officer

Yeah. Thanks for the question. I think what's determining the level of spending for that partnership is what we tried to do there is acquire acreage that is essentially in front of the drill program for Continental the benefit of keeping up with Continental there is that they have a drill program that goes out 12 months or 18 months and we're trying to acquire acreage that sits directly in front of it, so that we get the benefit of near-term cash flow, what's happened in recent months as the oil prices kind of collapsed here is that Continental is reducing their capital spending and pulling back on the like activity and so at least in the near term. There are less areas to buy acreage is because their drill program has been reduced and so our pullback in capital spend for the joint venture vehicle is basically just related to how much acreage sits in front of their drill program that we can buy.

Ralph Profiti -- Eight Capital -- Analyst

I see, OK. Yeah, thanks for the clarity on that. I have a question on Cobre Panama, the precious metals deliveries are based on a ratio of gold to copper and I'm wondering if those ratios are fixed and thinking just about the relative performance between gold and copper, we've seen some other triggers and other streams and royalties that change with the price profile, but just wondering if that is fixed ratios?

Jason O'Connell -- Vice President, Oil and Gas

The ratios are fixed. There is a schedule that you are going to have a look at in our disclosure there, how those changed over time but the referenced off per million pounds of copper, you get tax ounces.

Ralph Profiti -- Eight Capital -- Analyst

Yeah.

Jason O'Connell -- Vice President, Oil and Gas

So I don't think you have the issue with that stream that perhaps you're worried about.

Ralph Profiti -- Eight Capital -- Analyst

Okay and in should maybe last one I'll come back to Continental, how does the performance thresholds work that we're to take you up to 75%. you know, we have a lower energy prices, we have an impairment. And we have a new spending profile there. has that changed at all? Can you tell me a little bit how that works?

Jason O'Connell -- Vice President, Oil and Gas

Yeah. What happens is we have volume performance targets the Continental has to hit in order for them to achieve their full sort of financial carry. At the front end of the those sort of volume targets go up sort of a decade in time, so it's a long-term target and what happens is in the early years, they have outperformed at least to date ahead of the volume targets and so there is a period of time here where even though activity levels are reduced and volumes are starting to fall short, there is a bit of a catch-up period. So we don't expect that they will actually fall short of the volume target until probably sometime in 2021 or so although even that is uncertain, it will depend heavily on levels of activity and the volumes that they actually achieve. So it will be a benefit to us. But again, it's sort of a period of then catching up right now.

Ralph Profiti -- Eight Capital -- Analyst

Yeah, understood. That's good clarity. Thank you so much.

Operator

Thank you. Your next question comes from Kip Keen, S&P Global. Kip, please go ahead.

Kip Keen -- S&P Global -- Analyst

Hi, thanks for taking my question. I had two. Just curious, given that you energy sector on the cost fuel side, was there any interest in battery related metals volume. Any other kinds of streams like that and also was there any update on the low line issue over COVID Panama, or has that been resolved? Thank you.

Paul Brink -- President and Chief Executive Officer

Kip, it's Paul. It is two things. In terms of commodities outside of gold, we're open to various commodities. With those base of bulk or battery metals or oil and gas, really what it's driven by is our ultimate objective is just to invest in good deposits. So that's the number one criteria and happy to have diversified exposure outside of precious metals, be in a multiple of commodities. So we are open. It's just finding deposits that we think will will be great deposits with good upside. Sorry, what you repeat the second of your questions there?

Kip Keen -- S&P Global -- Analyst

Yeah, no, I just wondered if there is any update on the lot number nine issue related to COVID Panama and its contract which came up in 2018, haven't seen any news flow about it and just curious, has that been put to bed or is that an ongoing conversation between First Quantum and the Panamanian government?

Paul Brink -- President and Chief Executive Officer

It still is ongoing. And I think you got to expect that in the current environment. I don't expect that it's at the front of the agenda, so it will take a bit more time. I think before it is resolved.

Kip Keen -- S&P Global -- Analyst

Okay. Thanks Paul.

Operator

Thank you. Your next question comes from Carey MacRury, Canaccord Genuity. Carey, please go ahead.

Carey MacRury -- Canaccord Genuity -- Analyst

Good morning, guys. Just a question on Cobare and Antamina now given their offline, just wondering if you have a sense on what you're revenue would look like in Q2, just given the timing differences between concentrate shipments and and when you get paid?

Sandip Rana -- Chief Financial Officer

Carey. It's very difficult to say. Obviously Cobre on a quarterly basis would provide us about 25,000 GEOs and and to Antamina anywhere between eight

To 10. And so we just based upon how long shutdowns will last, it's very difficult to determine at this time.

Carey MacRury -- Canaccord Genuity -- Analyst

And do you get paid quarterly or is a month later?

Sandip Rana -- Chief Financial Officer

Sorry Antamina makes a payment once a quarter and we will sell that silver during the quarter and Cobre Panama typically does two to three deliveries a month. So there is anywhere from four to six-week lag in terms of receiving ounces from when they were shipped.

Carey MacRury -- Canaccord Genuity -- Analyst

Okay, great. Thank you.

Operator

Thank you. There are no further questions at this time. Please proceed.

Candida Hayden -- Investor Relations

Thank you, Chris. We expect to release our second quarter 2020 results after market close on August 5 with the conference call held the following morning. Thank you for your interest in Franco-Nevada.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Candida Hayden -- Investor Relations

Paul Brink -- President and Chief Executive Officer

Sandip Rana -- Chief Financial Officer

Eaun Gray -- Vice President-Business Development

Jason O'Connell -- Vice President, Oil and Gas

Fahad Tariq -- Credit Suisse -- Analyst

Cosmos Chiu -- CIBC -- Analyst

Greg Barnes -- TD Securities -- Analyst

Josh Wolfson -- RBC Capital -- Analyst

George Topping -- Industrial Alliance -- Analyst

Tanya Jakusconek -- Scotiabank -- Analyst

Brian MacArthur -- Raymond James -- Analyst

John Tumazos -- Very Independent Research -- Analyst

Ralph Profiti -- Eight Capital -- Analyst

Kip Keen -- S&P Global -- Analyst

Carey MacRury -- Canaccord Genuity -- Analyst

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