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Osisko Gold Royalties Ltd (OR) Q2 2021 Earnings Call Transcript

By Motley Fool Transcribers – Aug 10, 2021 at 8:30PM

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OR earnings call for the period ending June 30, 2021.

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Osisko Gold Royalties Ltd (OR)
Q2 2021 Earnings Call
Aug 10, 2021, 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 Q2 2021 Results Conference Call. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that today's conference is being recorded, today, August 10, 2021 at 10:00 AM Eastern Time. Today on the call, we have Mr. Sandeep Singh, President and Chief Executive Officer and Mr. Frederic Ruel, Chief Financial Officer and Vice President, Finance.

I would now like to turn the meeting over to our host for today's call Mr. Sandeep Singh. [Foreign Speech].

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Sandeep Singh -- President, Chief Executive Officer and Director

Great, thanks very much, operator, and thanks to everyone for joining us on our Q2 conference call. This is Sandeep Singh speaking. Please note that I'm working off an IR deck that's on our website. So, you can pick it up under the presentation section. And also, please note that I'll be making forward-looking statements or we will be making forward-looking statements today. So, please be mindful of that.

Switching over to Slide 3 entitled Q2 highlights. First and foremost, a very strong quarter for us, another in a row. Frankly, the assets continue to perform exceptionally well, the producing assets and we look forward to a strong second half of the year as well as we do not expect that theme to change for us, in fact, hopefully, the opposite. So our core assets continuing to strengthen. So, really good quarter, very happy with it. We earned, as you all know, just over 20,000 ounces of GEOs gold equivalent ounces for the quarter that sets us up really nicely just above 40,000 GEOs for the half year.

You'll all know that our guidance for the year remains unchanged for the time being at 78,000 ounces to 82,000 ounces, so striving right at the midpoint for the time being. And as you've heard me say, most of you I'm sure, but we do expect a strong second half as we have at least one core asset ramping up, which is the Eagle mine, I'll talk about it later. And other small -- at least one other small asset that will kick into production and start to contribute as well. So, well set up in the first half of the year and looking forward to the second.

Also in Q2, record revenues and cash flows from the royalty and streaming business. So, again, good ounce deliveries coming alongside strong commodity prices. We had the same type of cash margin that you expect from us, 94%, 97% to exclude the Renard ounces, so akin to last quarter and a consolidated net loss, obviously CAD15 million. Some of you may have listened to the Cisco Development Conference Call just proceeding ours, but that impairment has to do with Bonanza Ledge Phase 2, which is a satellite project at the Cariboo site and I'll get into that asset, a little bit later, but important to note that really that's a bit of a secondary cleanup exercise, some old waste material, a little bit of added benefit from a training perspective and some cash flow expected, but it's not the main meal there.

Adjusted earnings for the royalty and streaming business of CAD24 million, almost CAD0.14 a share. We paid our dividend for last quarter or CAD0.05 a share. Importantly, we bumped it up a little bit by 10% going forward to CAD5.5 cents a quarter or CAD0.22 annualized for the next time around. And I think, worth pointing out that despite pretty significant volatility, especially in the last several trading sessions, the strength of our business, the high margin nature of our business and all the confidence in it. Is what allows us to increase an already peer leading dividend.

We also published our inaugural ESG report in the quarter. We announced a commitment to join the UN Global Compact, so again advancing our initiatives to be a leader in the ESG space. We've always done things in that regard. If you look at our asset base, you'll know that IT -- see that it was probably in some way built with ESG in mind, which it was, even though it didn't used to be called ESG and we're catching up on the disclosure side of things.

And then on the right hand side here, also we're pointing out that we updated and expanded our revolving credit facility. So, we thank our lending partners for their continued support. On that front, we're able to add CAD150 million to that credit facility. The drawn amounts, important to point out also, have not changed, just increased the facility, reduced the overall cost of it, so the pricing grid in portions of the grid has come down and given ourselves greater flexibility going forward. So, I'm happy to get that behind us as well.

So, just a quick snapshot, again moving to Slide 4. Just one more time on the dividend, I guess. Important to note that this company has been paying a dividend since its IPO, since the day one essentially. We returned significant capital to shareholders over those 7, 8 years now with -- by the end of this year, the dividend remained at current levels, would be CAD184 million in dividends alone to share holders. But the way we return the capital had been set up at CAD0.05 a share for some time, but obviously with the gold price or commodity price to move, our upcoming growth in GEOs, we felt it was good time even with that volatility I mentioned to increase a little bit and then watch us things going forward.

On Slide 5 here, I'll just update you on a few small transactions for us that you would have already seen, but maybe some of them we haven't talked about. Overall, I think it's worth mentioning that we've stayed true to what you've been hearing from us, which has been discipline. As of early last year, I think we saw a market that we didn't particularly like, certainly felt like a bit of a seller's market, the combination of asset quality and prices being paid did not make sense to us. We've still been able to find good value for real assets and some of these smaller transactions and importantly going forward I think that dynamic is starting to improve, frankly. Gold price volatility up and down will do that for you. Last year results pretty much straight up from the first half of the year and we're starting to see some better opportunities that fit our pipeline that we'd like. So, we'll continue to be active looking for those.

In terms of things that we closed on in April was the Spring Valley acquisition, which we quite like that was an increase mainly on the Spring Valley asset and Nevada going from 0.5% NSR that we already had to between 2.5% and 3% multimillion ounce deposit owned in private equity hands, but we think that's one of the better acquisition opportunities in this sector and happy to have a significant royalty on a significant good grade resource in Nevada. We also in April converted our Parral offtake into an equivalent stream. So, bit of a clean up transaction on that front to help our accounting going forward and good and positive for both us and the operator there.

And then on Slide 6, the most recent one, which we haven't had a chance to talk about, would be the acquisition of an NSR on the Tocantinzinho gold project projects, excuse me still mouthful, we call it TZ, as I suspect most of you go well. We acquired at 2.75% royalty there for $10 million, but important to note that there is a buyback there with proceeds going to previous operators that we do expect at the end of the day that will get exercised. So, what we've been -- what we paid for is a 0.75% NSR for a $10 million U.S., significant asset in Brazil and obviously, most people know it, it's been non-core to Eldorado, almost, so they bought it as their attention, just been elsewhere within their portfolio, almost immediately post purchase, but a real asset 2 million ounces in M&I, 1.8 million ounces of reserves and a good grade. It's permitted and construction ready importantly in Para State of Brazil where there's a long legacy of mining and so what we're lacking there we saw was a good asset, the reserve building what was lacking was the operator willing to do it.

So, we're quite happy to see, just yesterday, G Mining Ventures was acquired the asset or is in the process of acquiring the assets in Eldorado and there'll be working on a feasibility within the next six months an updated feasibility. They're a team of builders. It's a great credible team, well backed. We know them well, obviously, seen some of their builds and we expect them to be fast-tracking this asset production. So, a nice one to add to the portfolio.

Moving to Slide 7, just graphically, the production by asset for us. Again, as I said, the asset base is performing quite well. We had a strong quarter from Canadian Malartic that had to do with increased tonnage, both increased tonnage and higher grades that were expected from as more ounces come from the Renard pit. That was a nice increase. I talked about how we expect H2 to be stronger for Eagle given their seasonal effects of the mine there, as well as their ongoing ramp up. It was a good quarter from a C.V. perspective, primarily on grade as they still have some catch up to do on tonnage, but they had a really nice quarter on grade, it was just a tick above 13 grams and we'll talk a little bit about that mine as well later in terms of some exploration success or potential success that they're seeing in front of them. And overall, as I said, pretty productive quarter on all our asset base.

Switching to Slide 8 for just a little bit more on a Canadian Malartic, excuse me. I said -- I mentioned it was a strong tonnage quarter, it was also a good quarter from grade perspective. So, the open pit continues to do what it does. It just makes an awful lot of money for me going Yamana. They're on track for the 700,000 ounces of the guidance this year. It's a hugely important assets for both operators and our focus obviously remains on the ounces it delivers to us. But look -- we continue to look forward as to what the asset is becoming and continuing to evolve into the infill drilling on the underground has returned very good results as released by Agnico and Yamana, a lot of that focus is obviously on East Gouldie. We have a 5% royalty there that's where 70% of the mine plan is, so work was not unexpected, but obviously positive which you want to see that continuing to be the case.

And then in terms of upside, the eastern extension of that deposit is getting a fair bit of attention as well. You'll recall at one point there was one hole, step up hole, 4680 in the bottom right, which was a 1,000 m away that had a really nice in a roll of grade and width. This followed up on by another, which hit similar type where they expected it, but importantly also kind of had this Offset Zone 400 meters over and you see, tough to follow, but you see that on the bottom left-hand side of the picture as well. So early days in terms of trying to turn that into ounces obviously and mine allowances, but certainly hugely important I think and the upside and the potential there is certainly hugely important. So, we expect that to continue to be active on that front. They've got a big drill program this year and we expect continued infill results and potential upside results from that program as well.

On to Slide 9. Just quickly on a couple of other core assets. We haven't touched on all of them here. Certainly, we're happy to talk about all of them, but wanted to kind of give you the core changes, if you will or updates and catalysts from a Mantos perspective. That expansion is still going quite well in Chile. You would have seen that we've bumped it out, obviously, with direction from the operator from that expansion being tied in at the very end of the year to Q1. So, a pretty nominal plant into 2022 and had to do with COVID issues at one of their main contractor. So, again if those issues, which everyone is dealing with frankly means you're adding a month or two to the program that I think at the end of the day is pretty trivial. We're quite happy with where things are going at that expansion.

And then from a slight increase perspective, you would have heard us say previously that we're expecting five years of 1.2 million ounces of silver annually for the first five years. Following the expansion, we've bumped that up to 1.3 million ounces annually of silver based on guidance from the operator. On the Eagle side, H1 saw just shy of 60,000 ounces produced by Eagle. They've got a guidance for 180,000 ounces to 200,000 ounces. So work to do in the second half, but that's just the nature of the Eagle mine where they don't stack ore in the coldest three months of the year plus the ongoing ramp-up. So, we look forward to those ounces and thought we might get a little bit of an uplift in Q2, but I think we'll see that uplift in Q3 and certainly in Q4. So, we expect a stronger second half there. We also look forward to them continuing to, now that the mine is built and it's in the process of ramping up, start to put more and more focus on the exploration side of what is a very large and seemingly prospective land package. As well as the previously announced plans to, once they are ramped up, try to take it even further to 250,000 ounces.

On Slide 10, just really quickly on two small, but nice contributors that we have coming our way in Mexico, the Santana mine of Minera Alamos where we have a 3% NSR, should be producing first gold imminently from their heap leach asset and putting out more disclosure on what that asset looks like for the longer term. We expect that to be a nice catalyst for us second half of this year and then into the beginning of next year. First Majestic's Ermitano deposit is expected to come into production. They are working on some test mining now, updating resources and we're working toward a pre-feasibility study second half of this year. They are also active on the exploration side. So, those are not huge, but certainly nice contributors just starting out in terms of significant mine lives there.

On to Slide 11, focusing on the ODEV assets. So, first and foremost the Cariboo camp. Again, some of you may have heard the [Indecipherable], there is an expected 200,000 m to be drilled in Cariboo this year. They've done half of that to date, so have been catching up actually, it was a bit slower the start of the year. Again, there were COVID delays, you can't ignore them, when you need to kind of quarantine folks here and there. At times, the fresh heads of the spring start also deterred them a little bit as the ground was softer than expected. They went from 10 rigs down to 4, now they're back up to 10 rigs.

So catching up and you would have seen or maybe just before that at times the delays on assay labs were quite ridiculous. I think at the peak, it got to 3 or 4 months waiting for assays. They're now down back to regular levels. So, you've seen a catch-up of exploration news coming up from ODEV. I think they've been on a steady clip of an exploration update every two, at most three weeks and we expect that intensity to continue and lead into a new resource later this year. So that delay has pushed that resource a little bit later into the second half than we first expected and as a consequence, pushed up a feasibility into the first quarter or more cautiously the first half of next year. Important to point out that the permitting timeline remains unchanged. The final EA was submitted in late July that's the document that drives permitting timeline, so that's still anticipated the middle of next year.

Again, bouncing around a little bit, but that infill drilling is going well. It's connecting the dots as was expected. It's also pushing the resource potential down at depth, connecting some zones that we expect it will be connected. So, all that's going well and the underground bulk sample permit at Cow Mountain is also a good achievement by the team, beneficial to the timeline to be able to get underground early, allowed some testing as well roadheaders and ore sorting. So, making good progress technically and moving forward.

I did say, I'll come back to the Bonanza Ledge side of things. Worth remembering that that's a different beast. It's a satellite deposit, which is just permitted for small scale mining, has undergone infrastructure, so somewhere you can get into, but it's not the main deposit. For instance, it's in a -- close to surface, it's got poor ground conditions and a fault zone. So, it's not where you'd want to mine, but it's where they can mine today. It allows ODEV to train the staff, restart the mill if they've gone through some upgrades there that are useful for both Bonanza Ledge and obviously Cariboo and most importantly it allows the remediation of the historical PAG pile that's on surface from previous open pit mining and not material, will be used as underground backfill once the voids have been created to put it them.

So, non-cash impairment there because things have costed a little bit more than was expected. Also because some ounces have been left off the table that production has been pushed back by about six months, but the Cariboo production is still expected to start at the same time. So, the period in between, where you can mine as Bonanza Ledge portion has been reduced. So happy with the progress that's being made at Cariboo on the main asset and certainly happy with the technical achievements there.

And then on the San Antonio side as well, the team has been quite active there, who there will be drilling 45,000 meters in 2021. I think you guys know Sean likes to drill. So, he's a bit behind on that one, but they're looking to catch up. They've got four rigs turning there and if I had to guess, I'd assume there would be an update in August, September. So far the confirmation of work that was planned to convert inferred resources to higher categories and hopefully fill some gaps is going well is our understanding. So, we look forward to that update as well.

And then in terms of catalyst there, the existing stockpile that's on surface is expected to be under leach by the end of the year. And then more importantly, it's nice to do because it's sitting on surface. But more importantly, the bigger permit for the Sapuchi open pit deep leach is also expected, excuse me, by the end of this year, with construction starting in Q1. So that hopefully is a 2022 production event for us, as many of you know, the crushing plant has already been purchased, components of it, some of them are already at site, the rest are on their way. So they're also making good progress there.

At Windfall. I'm on Slide 12. Again, some of you have been following, what I think our exceptional exploration results that continue both from an infill and an expansion perspective at Windfall. We highlight a couple of gear over 2000 g over 2.5 meters, 2.2 meters over 400 grams. I think in the last press release there might have been six results of over two meters and over 200 grams. So, pretty stunning exploration results. The upside there -- the infill and the upside there continues to prove out better than expected including a new discovery a kilometer away that needs follow-up work, but I think the team there is doing an exceptional job advancing the asset into the development phases with a feasibility expected in the first half of next year, production in 2024 timeframe. But also continuing to make the asset bigger and providing some upside there.

And then at Upper Beaver, which is Agnico Eagle asset where we have a 2% NSR. They're working on fair bit of drilling of their own, conversion and then potential expansion. The grades are coming in quite nicely, both for gold, but in particular the copper grade is seemingly coming along quite nicely. Some of the new results we highlight one of them there and that should have a significant impact on the size and potential of the grade of the resource. I've heard talk about a potential other structure at depth. As all good news, which will be incorporated in the study in 2022 and hopefully prove to be the conservative decision point. Again, if you listen to some of the commentary coming out of Agnico, they're calling it a mine today and permitting is what will drive the timeline there. Last I heard from them guiding for production and this is notionally guiding I should say to around 2027.

Just quickly maybe on some assets that we haven't put in the deck. Before I pass it on to Fred to give you a little bit more color on the quarter. Again, keeping with that team of our assets working for us at C.V. as I said earlier, was a record quarter in Q2 in terms of production driven off at higher grade. They also encountered some unexpected high grade at the edge of the resource, which they were going to be following up on next year. That's still close to a 15 grams.

Island put out their best hole ever that was 20 m with 70 some odd grams per ton outside of the existing resource and onto our 2% royalty ground. They're drilling 25 million -- they've got CAD25 million exploration budget this year. So, they're hitting the asset hard and are well on their way toward their expansion to 2000 tonnes per day, permitting currently the sharp expansion, but progressing well. And on Lamaque, they continue to progress at Eldorado with the underground ramp on track that will help their mine overall in terms of reducing costs, but it also provides better access to drill some of the other resources down there.

So overall good news across the portfolio, a really good quarter. And I'll let Fred, starting on Slide 13 to walk you through some of the particulars of it.

Frederick Ruel -- Chief Financial Officer and Vice President, Finance

Thank you, Sandeep, [Foreign Speech] Good morning, everyone. Thank you for joining us today. First, I would like to remind everyone that as we consolidate the balance sheet, P&L and cash flows of Osisko Development, we are providing additional segment information in our financial statements, MD&A and press release where we split our results from our royalties and streams business and results from Osisko Development. As mentioned by Sandeep another great quarter for Osisko in Q2 with strong deliveries of gold and silver, which led to record revenues, cash margins and operating cash flows from the royalties and streams business. Our operating cash margin on our royalties and streams reached 94% or 97% if we exclude the Renard stream.

On Page 13 of the presentation, we recorded record revenues from royalties and streams of CAD49.9 million compared to CAD28.7 million in Q2 of 2020, which was of course highly impacted by the COVID pandemic at the time. Cash flows from operating activities were CAD30.9 million on a consolidated basis for the royalties and streams segment alone. Cash flows from operations reached CAD37.3 million compared to CAD16.8 million in Q2 of last year.

If we go on Page 14, we present a summary of our earnings and adjusted earnings. The consolidated net loss to Osisko shareholders was CAD14.8 million or CAD0.09 per share in Q2 this year compared to net earnings of CAD13 million in 2020 or CAD0.08 per share. The consolidated loss in 2021 was due to impairment charges recorded by Osisko Development of CAD40.5 million, including CAD36 million on the Bonanza Ledge 2 project. On a consolidated basis, adjusted earnings were CAD20.2 million or CAD0.12 per share, comprised of adjusted earnings of CAD23.9 million or CAD0.14 per share for the royalties and streams segment and an adjusted loss of CAD3.7 million from Cisco Development or CAD0.02 per share.

On Page 15, we have a summary of our quarterly results with additional details for the royalties and streams segment including revenues of CAD57.2 million compared to CAD41 million in 2020 and gross profit of CAD35.7 million compared to CAD19 million last year. On Page 16, we present a breakdown of our cash margin for Q2. The cash margin on our royalties reached CAD36.3 million and the cash margin on our streams amounted to CAD10.6 million. Our total cash margin reached a record CAD47.2 million in Q2 of this year and for the first half of 2021 we generated cash flows of close to CAD94 million.

And finally, on Page 17, you'll find a summary of our financial position. Our consolidated cash balance was CAD255 million at the end of Q2, including CAD110 million for Osisko Gold Royalties and CAD145 million for Osisko Development. Osisko Gold Royalties held investments having a value of CAD188 million in addition to our investment in the Osisko Development valued at the end of June at over CAD700 million. Our debt was stable at CAD400 million with over CAD530 million available under the credit facility, which was recently increased and extended.

I will now turn the call back to Sandeep for closing remarks and questions.

Sandeep Singh -- President, Chief Executive Officer and Director

Thanks a lot, Fred. So, look, again, the risk of repeating myself, another very good quarter, a consistent quarter from a diversified asset base that is really performing well. And frankly, our growth assets are coming along, progressing well. I think they're still largely discounted or heavily discounted, but set us up well for the coming years.

So with that, happy to operator see if there are any questions.

Questions and Answers:

Operator

[Operator Instructions] [Foreign Speech] Your first question will come from Josh Wolfson from RBC Capital Markets. Please go ahead. Your line is open.

Josh Wolfson -- RBC Capital Markets -- Analyst

Thanks, good morning. First question I had was on Mantos, the construction progress at least on a percentage completion basis seems to be tracking up still fairly significantly 92% you mentioned in this quarter. So, it would appear to be completed at least from a construction basis in the third quarter. I'm wondering what the differences between construction completion and when that ramp up actually happens? And then should we expect maybe a weaker third or fourth or first quarter perhaps that commissioning process starts?

Sandeep Singh -- President, Chief Executive Officer and Director

Yes, no, it's a good good question Josh and good morning. I think you're right. I think the difference is kind of mechanical construction completion if you will. That's the 92% level. When we talk about timelines for us that's not where we're focused on. We factor in the lag that they've related to us in terms of when ounces are supposed to start coming out or tons are supposed to start coming out more. So, I would hope that in Q1, we can start to see some increase in production, but maybe to be more conservative, hope for a Q2 that impacts that those ounces ramping up.

Either way, I think it's -- for us it's right around the corner and I would commend them for the fact that COVID anywhere has not been easy. COVID in Chile has certainly not been easy. So to keep things on track as well as they have I think is positive for us.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. And then should we expect to see lower deliveries in the second half of the year from that asset. I note obviously first half of the year, even without, let's say, potentially, a small contribution from sending San Antonio, Santana and the upside from Eagle, you're tracking toward the higher end of guidance. So, should we expect the company to be more within guidance if in fact Mantos is a bit lower?

Sandeep Singh -- President, Chief Executive Officer and Director

Look, I think Matos will, I mean, there's always variability mine-by-mine, again, especially when you're -- the by product as opposed to the main commodity, but I think overall, we've been exceptionally happy with Mantos in the first half of the year. We don't necessarily see any reason in the mine plan why that should change in the second half of the year. So, no, I think our assets, I mean barring that normal variability that I talked to you about. So, I think we're happy with that core asset, is doing exceptionally well for us and our hope is with Eagle ounces coming in maybe we can start tracking a little bit better than the midpoint, frankly.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay, another question on the credit line increase. When the convertible with IQ was due earlier this year, you guys drew down on the credit line and there's another convert that's due next year. Should we be thinking about this credit line use or maybe, obviously, there's flexibility here, but potentially use toward repayment of that facility or is this potentially for transactions that you see on the horizon materializing?

Sandeep Singh -- President, Chief Executive Officer and Director

Look, I think it can be a bit of everything. It looks -- our hope is that converted in the money come the end of next year, was probably year and a half and volatility has worked against us in the last few trading sessions. It can work for us in the future and we certainly think there's a lot of value in the asset base to unlock above and beyond that. But we don't plan that way clearly. So, yes, that's certainly a fallback in our minds. It's certainly a fallback for the convert at the end of the next year. If that happened, that would just be a shifting of debt from one place to another at a lower cost of capital. We pay a 4% coupon on those converts.

Currently, our credit facility is in the 2%, 2.5% range. So, that's certainly an option that we've kind of crafted for ourselves. A lot will depend on what happens between now and then. Josh, we've got cash, we've got cash flow, we've got significant investments and then we'll see what we choose to do on the growth side. But that's certainly something we'll continue to kind of manage depending on how we go into next year and a half, but yes, absolutely it can provide a fallback for that convert. That was one of -- that was part of the thinking there.

Josh Wolfson -- RBC Capital Markets -- Analyst

Great. And then last question, I wasn't able to dial-in for the ODEV call. Is there any more information on the timing difference for the feasibility study now at Cariboo?

Sandeep Singh -- President, Chief Executive Officer and Director

Wes, sorry. I hope I alluded to it earlier, but I'll do it again. So, timelines. I think I mentioned that the resource update into a kind of a reserve is going to be a bit delayed. They were behind on drilling. They're now catching up and more importantly the assays are catching up, obviously, you don't want to be drilling blind all the time, you'd like to be benefiting from the results that you've already spent money on. So, working toward the resource update the second half of this year that then pushes the feasibility into H1 next year conservatively. Hopefully, it can be Q1 and I think that's what Sean said this morning as well. So, feasibility into early next year, but the permitting timeline remains unchanged as the EA, the final EA was submitted in very late July and that's really what's driving the permitting timeframe at this point not the feasibility.

Josh Wolfson -- RBC Capital Markets -- Analyst

Great. Those are all my questions. Thank you.

Sandeep Singh -- President, Chief Executive Officer and Director

No problem.

Operator

Your next question comes from Ralph Profiti from Eight Capital. Please go ahead, your line is open.

Ralph Profiti -- Eight Capital -- Analyst

Good morning, Sandeep, thanks for taking my questions. Just wondering if you've had some preliminary discussions or sort of the relationship with G Mining ventures as it relates to TZ and what are sort of the next steps from them beyond the updated feasibility study? Any thoughts on when this could come into cash flow positive? On my numbers, it's kind of one of the more robust IRRs in the portfolio as it pertains to discounting it at the moment of commercial production, but just wondering if you can give me more color on actually turning that at the cash flow.

Sandeep Singh -- President, Chief Executive Officer and Director

Yes. Look, I'm not sure, I can. I certainly can't give you their view because we've not talked about it. Obviously, there aren't too many construction groups that are credible in Canada, but certainly not in Quebec. So, group we know them well, the group knows them well and we saw the formation of G Mining ventures that is earlier this year, I guess, it was. So we've been looking for them to see what they would do next, very happy, it coincides with an asset that we picked up a royalty on. I think what I'd say is, what we saw there was an asset worth building. They know exactly where, when and how, obviously it was non-core to Eldorado for reasons. They've got other things they can do that they're focused on and that's fair enough. But it was an asset worth building and that's what we saw and we're happy a group like G Mining is taking it over. We know them to be fantastic builders, not the over-promotional type, they just get down to the business and that will serve us well on this asset if we can put that down with the permitted construction ready asset. They've got backing from Sprott, another supportive shareholders. So, they're certainly capable of financing it and we do expect them to fast track that asset. So looking forward to frankly they're hearing the update for myself.

Ralph Profiti -- Eight Capital -- Analyst

Okay. Yes. And it was a small transaction, but it's interesting to see Osisko Gold Royalties do something in the carbon streaming space. I'm just wondering when you looked at that opportunity on the body of work that you've done, is that, are you taking the approach that it's sort of complementary to the ESG strategy or do you think from an say an IRR perspective, carbon streaming can actually compete with precious metal streams for investment dollars?

Sandeep Singh -- President, Chief Executive Officer and Director

It's both. Frankly, we clearly are focused on doing things in the ESG perspective. When we looked at that and we started with a small investment, still a small investment, but we bought ourselves the right to participate in 20% of any other transaction. So for us, it was a front row seat to a new business line, it's streaming, so it fits with ours. We understand it well. Obviously, the assets are different. So, we needed, we're happy to rely on that team to vet those opportunities. We're kind of learning sidecar with them as they go. But in our portfolio, Ralph, we can't reduce our carbon footprint, we're reliant on our partners to do that for us. And certainly we've chosen some phenomenal partners in great places, good assets that are doing just that. But for us, this is something proactive we could do to be part of that net zero push.

So, we think it makes a tonne of sense, but it's also financially driven. The IRRs that we're seeing that can come out of that business, our mid-teens kind of 15% type IRR deals are possible. I don't think we're seeing a lot of those in the gold space right now. So, I think there's potential there and frankly that's with flat view on carbon pricing, which I think is the easiest thing to say that. I don't know what's happening in the future, but I certainly expect the cost of emitting carbon to increase and hence the price of these carbon credits to grow as well and that could end up being exponential frankly. So, small dollars, front row seat, happy with the investment, liking the deals they're doing so far, will likely take our 20% piece. Then we have the time to decide on that, but liking what they're doing and it's both financially driven and ESG driven. If we do one or two of these, deploy a little bit of capital based on our small footprint already, we'll be net zero not at 2040 or 2050, but almost immediately. And I don't just mean the office space, I mean our indirect exposure of our partners. So, that's how we're looking at it.

Ralph Profiti -- Eight Capital -- Analyst

Excellent answers. Thanks, Sandeep. Yes.

Sandeep Singh -- President, Chief Executive Officer and Director

No problem. Thanks, Ralph.

Operator

Your next question comes from Cosmos Chiu from CIBC. Please go ahead, your line is open.

Cosmos Chiu -- CIBC World Markets -- Analyst

Thanks, Sandeep, Fred and team. Maybe my first question is on a royalty that you did not mention. Falco. I think there's been recent positive development of Falco Resources. They're raising money, CAD10 million, clearly not enough for the entire capex, but I also see that OR is advancing CAD10 million as well on the silver stream. So, maybe can you talk about how this kind of fits in to the growth profile of your portfolio and maybe talk about the recent agreement in principle at Glencore and also I think they're expecting some kind of OLIA by Q3 as well? Sandy.

Sandeep Singh -- President, Chief Executive Officer and Director

Yes, no, it's a great question, Cosmos and here you've got me in trouble. I should have talked about Falco. I run the risk of getting beaten up by Luke, and there was good progress made there, frankly. So, I'm in remiss that I didn't bring it up. So, I think first and foremost the term sheet that they got into on the OLIA, the operating license as you point out was a big catalyst, significant catalyst, something that we've been waiting for quite a while. I think a lot of people have been waiting for quite a while, certainly the Falco team. That term sheet is being turned into a full agreement and that's happening as we speak. I forget exactly when Luke said he was guiding for that, but it's pretty soon in this quarter.

So that's a huge step forward. The pathway I think then becomes clearer, happy that they tapped in a little bit of financing from an equity perspective, obviously, just to move the asset forward, to development capex, basically the permitting and development capex. We've chipped in, didn't mention it, because it was kind of a non event, I guess, in my mind. We owe them CAD20 million in the near term based on that agreement being finalized. We're very happy with the progress they've already made on it. So, pre-funded CAD10 million of it. We're happy to do the next CAD10 million when the agreement is finalized. And then the rest of our capital comes in when it's fully permitted and on financing of the full project.

So, good advancement. I know it's something that people have been waiting for quite some time. It was not easy work. Obviously, a lot of complexity there. Glencore is a massive group, to get their attention and frankly build the trust from a group like Falco because they probably didn't know what a Falco awareness Osisko was a few years ago when things got started. I think we've come miles from there and the teams are working exceptionally well.

So, I don't know if I touched on all your questions there, but really good progress, happy that they've got some funding in the bank to push the asset forward from a growth perspective. Sorry, that might have been the last piece of your question. It's a big chance for us, it's a massive stream, it's a lot of silver ounces that we get from that asset. It's 6 million ounces of reserves, gold equivalent -- 9 million to 10 million ounces of the gold equivalent resources, it matters. And so we don't exactly know the timeline, financing will be a hurdle, but I think it's one of those assets that will have significant support. In Quebec, we've got our stream components that are there to be funded and I think it's one of those things that will be tough until it's done, but it's important for us and I think it's certainly worth building, I know how hard, it's moment in the sun.

Cosmos Chiu -- CIBC World Markets -- Analyst

Of course. Thanks.

Sandeep Singh -- President, Chief Executive Officer and Director

Hope, I touched on all your questions, Cosmos.

Cosmos Chiu -- CIBC World Markets -- Analyst

Yes, you did. Maybe switching gears a little bit, as you mentioned, it's -- I'm glad to see that as well, 10% increase in the dividend. Sandeep, I'm just trying to think a step back. Are you targeting in terms of capital return, are you targeting any kind of percentage of your cash flow that you might want to return to investors? Is that how you look at potential further increases and dividend? Is that why you decided on the current increase of 10% on the current dividend.

Sandeep Singh -- President, Chief Executive Officer and Director

Mainly just throwing darts at the board. No, obviously, we have a view internally at the amount of cash flow we want to be distributed to investors. Historically, I think you've heard me say that, at times, we were in the mid 30%, got as high as 40% payout ratio. Base this year with the previous, the bump and based on commodity price assumptions and ounces for this year, we were in the low 20%. So, we've bumped it up. Importantly, there's still room to go in the future. Obviously, we are a little skittish based on the last week here, but felt it was -- the business is still really strong, even at much lower gold prices. This is a very sustainable dividend, but when anytime you change it, you want to make sure it's forever because that's how we think about these things and certainly our business is able to do that. So, hopefully, people fear us what it is significant sign of confidence in our business, one that's working exceptionally well. And as those ounces start to add to the tally, distributing cash flow back to shareholders will continue to be important for us. So, we haven't communicated a payout ratio or a mechanism for instance. But we certainly think of that way internally and that's the byproduct -- the increase yesterday was the byproduct of that.

Cosmos Chiu -- CIBC World Markets -- Analyst

Great and that leads into my last question here, Sandeep. In the broader picture of capital allocation, as you talked about, clearly it's been a bit of a seller's market; however with the recent malaise and the commodity, are you seeing better opportunities in terms of potential acquisitions? And then on that as well, I know you have different strategies, there's the incubator model. I don't think you mentioned that today, but I think it's still there and then there is also the more kind of traditional royalty acquisitions. Where are you seeing more of these opportunities?

Sandeep Singh -- President, Chief Executive Officer and Director

Look, I think there's opportunities. Good questions. There are opportunities across the board. Certainly, anyone with a royalty or royalty portfolio has then either brought it the market or been thinking to bring it to market or has been inbound by all of us most likely. So, I think positively and look I was maybe one of the first to say, it was a seller's market last year and everyone else is saying the opposite. I think that you can judge what it looked like. I think last year when the gold price was running so hard in the first half of the year, that dynamic trailed on into the end of the year. When you have gold prices more range bound and you have the risks are down as well as up.

So, I think the dynamic is a little bit better this year in terms of getting deals done for us on the royalty and streaming side or for everyone on the royalty streaming side. So I actually see the the pipeline looking better than it did last year. So, we're optimistic about it, frankly. In terms of the incubator model or the accelerator model are still part of our business and important part of our business, it's -- what it generates for us is the early stage. So, it continues to kind of -- for small dollar investments, which we think are going to be -- give us 5 and 10 baggers that continues to populate the back end of the portfolio and see those things kind of evolve and mature, and it was an important part, a more important part of the business that we're kind to starting out and leading to kind of flush out our portfolio. We now have one that's robust across the entire spectrum in terms of producing assets, near term growth assets and longer dated assets.

So, yes, I think we're continuing on that path. If we see good value there, we'll take it, but obviously, the focus is for all of us on nearer term assets, things that can hit the bottom line sooner and that's what we're out there looking for. If we don't do anything, we're fortunate, but there was a number of companies that needs to catch up on growth spending. We weren't one of them. We had done a quite a bit of it, leading up to 2020. So that growth is already embedded in the company. We can grow double-digits for several years based on not spending another CAD1, but thankfully, we are -- we have found some smart things to invest in and going forward I think that will continue to be the case.

Cosmos Chiu -- CIBC World Markets -- Analyst

Thanks, Sandeep. Those are all the questions I have. Thanks again.

Sandeep Singh -- President, Chief Executive Officer and Director

No problem, Cosmos. Thank you.

Operator

[Operator Instructions] Your next question comes from Kerry Smith from Haywood Securities. Please go ahead, your line is open.

Kerry Smith -- Haywood Securities, Inc. -- Anlayst

Good morning, Sandeep and Fred. Sandeep, could you maybe give me a bit of an update on what's happening at Renard. The diamond prices seem to have strengthened and I'm just wondering what the strategy is there now?

Sandeep Singh -- President, Chief Executive Officer and Director

Sure. Good morning. Good morning, Kerry. Look the strategy remain the same, it's an asset that we want to kind of work back our way to a positive paying stream on. That's the end goal that hasn't changed. You're right and I think you would have picked this up in our MD&A that pricing has continued to firm up, not just for Renard, but in the diamond sector overall. Renard pre-COVID in the CAD70 per carat range consistently, had dipped down even lower, obviously, in the worst of COVID, where people couldn't travel for sales, etc.

We saw that from up to kind of the CAD80 per carat level, almost immediately post-COVID and then stayed there for a little while and now we've seen another couple of bumps in the last sales, culminating in the last sale at CAD93.50 a carat U.S. So happy with that uptick in prices. That's what that mine needs to be profitable and there's still -- several streams, still some debt there, but happy that they're just trying to make some cash flow and can start to work their way out of that situation. So, positive momentum, need a little bit more, I would suspect, but happy with that so far and then thereafter it's a question of where is the right -- what is the right structure for that asset to reside in. We're not a natural owner of it, we just want to get back in getting a paid stream. So, that's something we continue to work on in terms of finding the right solution for.

Kerry Smith -- Haywood Securities, Inc. -- Anlayst

At CAD93.50 a carat for, say, call it CAD100 a carat U.S. Would that be an adequate long-term price to reinstate the stream?

Sandeep Singh -- President, Chief Executive Officer and Director

Yes, look, we're having those discussions as we speak. The good news is they're making money. Is that enough? Probably, not just yet, but they're making money at CAD93.50 and we've committed to deferring our stream proceeds into, I think it's, April 2022. So, we're having those discussions as we speak, but certainly happy with where things have gone and don't want to get too far ahead of myself because we've taken it on the chin for that asset. Rather, it be a positive when it well and truly is a positive, but really happy with the progress we made so far.

Kerry Smith -- Haywood Securities, Inc. -- Anlayst

Okay. that's great. Thank you. I appreciate it.

Sandeep Singh -- President, Chief Executive Officer and Director

No problem.

Operator

Your next question comes from Puneet Singh from IA Capital Markets. Please go ahead, your line is open.

Puneet Singh -- Industrial Alliance Securities, Inc. -- Analyst

Hi, good morning. Just a quick one from me. You're clearly still trading at a discount to your peers with the volatility in the gold market. How are you looking at the NCIB for the rest of the year? Thanks.

Sandeep Singh -- President, Chief Executive Officer and Director

Hi, Puneet, yes, no problem. Yes, look, we still think we're cheap as well. And I'll just say that I think we would simply have that view that we've made good progress and stock had done well to kind of get to the levels it was. We saw a little bit of profit taking, which is normal when you're kind of hitting your 52-week an all-time highs, but clearly the last week has been tough on all of us, especially tough on us. So, we see a ton of value in our stock. We're obviously in a blackout today and have been for a little bit of time, but we do like our stock. So, we've said we'll look at NCIB when the stock is really cheap. We didn't use it in Q2, the stock was doing quite nicely. So, we didn't chase it up. But in situations like we're in now, you might expect us to be more active on that between the NCIB and the dividend we certainly have and will continue to get cash flow back or get cash back to shareholders.

Puneet Singh -- Industrial Alliance Securities, Inc. -- Analyst

Okay, thanks, Sandeep. No problem. Thank you.

Operator

We have no further questions. I would now like to turn the call back over to Mr. Sandeep Singh for any closing remarks.

Sandeep Singh -- President, Chief Executive Officer and Director

Great. Thanks, operator. Well, look, thanks for joining us. I think we've gone through a pretty good updates. I won't keep you on for longer, but really happy with where things are going and look forward to a strong second half of the year and look forward to talking to you folks about it. So, thanks for your time and have a great rest of your day.

Operator

[Operator Closing Remarks]

Duration: 54 minutes

Call participants:

Sandeep Singh -- President, Chief Executive Officer and Director

Frederick Ruel -- Chief Financial Officer and Vice President, Finance

Josh Wolfson -- RBC Capital Markets -- Analyst

Ralph Profiti -- Eight Capital -- Analyst

Cosmos Chiu -- CIBC World Markets -- Analyst

Kerry Smith -- Haywood Securities, Inc. -- Anlayst

Puneet Singh -- Industrial Alliance Securities, Inc. -- Analyst

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