OR Royalties Inc. Q2 FY2024 Earnings Call

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

Thank you, Joelle. Good morning, everybody, and thanks for being on today’s call on this beautiful summer day. I’m Jason Attew, President and CEO of Osisko Gold Royalties. Procedurally, I will run through the presentation and then we will subsequently open up a line for questions. For those participating online via the webcast, you can submit your questions in advance through the webcast platform. Today’s presentation will also be available and downloadable online through our corporate website. Please note that there are forward-looking statements in this presentation for which actual results may differ. Also, please note the basis of presentation will be in Canadian dollars unless otherwise noted. I’m joined on the call this morning by Fred Ruel, the company’s VP Finance and Chief Financial Officer, among others as indicated on slide three. When looking at Osisko's second quarter and first six months of 2024, we have had a solid first half in terms of gold equivalent ounces earned, cash margin, cash flows, as well as overall debt reduction. Osisko earned 20,068 gold equivalent ounces in the second quarter of 2024, which puts us in a good position on June 30th to achieve our previously published full-year guidance of 82,000 to 92,000 GEOs. Revenues for the period were strong in Q2 at 64.8 million, boosted mainly by improving precious metal prices throughout the period. In addition, Osisko’s cash margins remained high at 97% during the quarter. Osisko ended the first quarter with 65.7 million in cash and net debt has now been reduced to just over 40 million after the company continued to pay down its revolving credit facility during the period. So far, in Q3, the company has repaid an additional 13.8 on the facility, further increasing our financial flexibility to be able to transact on new accretive opportunities as they present themselves. Regarding our ongoing commitment to return capital to shareholders, the company declared and paid its quarterly dividend of six and a half cents per share in Q2, marking the 39th consecutive dividend with over 290 million returned to shareholders to date from these distributions. Subsequent to the quarter, Osisko’s Board of Directors approved a Q3 dividend of six and a half cents per common share payable on October 15, 2024, to shareholders of record as of the close of business on September 20th. With respect to our opportunity set, the company’s pipeline continues to remain robust with our corporate development team busier than they have ever been. We remain optimistic that we will finalize at least one meaningful deal this year, over and above the recently announced Cascabel gold stream. Moving on to the company’s financial performance for Q2, quarterly revenues effectively tracked higher year-over-year due to strong commodity prices when compared to Q2 of 2023, which was partially offset by fewer GEOs versus the same period last year. The net loss of $0.11 per basic common share for the period was due entirely to our decision to take a full non-cash impairment charge of 67.8 million or 49.9 million net of income taxes on the Eagle NSR royalty based on our internal assessment of the current facts and circumstances. As more information continues to surface, especially related to timelines associated with a potential restart of the operation and resumption of precious metal deliveries to Osisko under its royalty agreement, a reassessment of the recoverable amount of the Eagle royalty will be performed at that time, which may lead to a reversal of part or all of the impairment loss that has been recognized. Most importantly, Q2 2024 saw a year-over-year improvement in both cash flow per share at $0.28 versus $0.26 last year, as well as quarterly adjusted earnings of $0.18 per basic common share versus $0.15 in the comparative quarter of 2023. During the second quarter of 2024, the company had 20 producing assets, including the Eagle Mine, which was producing until the suspension of operations on June 24, 2024. Our GEOs earned come predominantly from Canada, and we derive over 98% of our GEOs from precious metals, with gold just under 71% and silver at 28%, with the remainder coming from other metals. Some comments on specific mine performances during the quarter before speaking about a couple of our more material assets in greater detail: Canadian Malartic had yet another extremely impressive first half of 2024 with Agnico booking strong quarterly production from the mine in the second quarter. The asset remains Osisko’s most significant contributor to GEOs earned by a solid margin. Performance for Victoria Gold’s Eagle Mine during the second quarter of 2024 fell significantly short of budgeted expectations by about 33%. Even prior to the Heap Leach facility failure on June 24th, Eagle was already underperforming through the first half of the year. It is our understanding that Victoria Gold Corp is reporting its Q2 2024 on August 8th. So in the absence of additional information, it is our assumption that the mine will not provide us any GEO deliveries in 2024. At Capstone’s Mantos Blancos Operation, Q2 production was lower year-over-year due to lower grades and recoveries. Plant upgrades to reach a sustainable 20,000 ton per day are progressing despite an approximate two-month delay relative to Capstone’s prior plan due to longer equipment lead times. Osisko expects to see the benefit of the increased throughput in its silver deliveries starting in early 2025. As I mentioned earlier, the number of currently producing assets in our portfolio stands at 20. Changes to the list include the removal of Eagle, partially offset by the additions of G Mining ventures, Tocantinzinho mine in Brazil, which announced its first gold pour in early July, as well as Agnico Eagle's Akasaba West satellite operation at its Goldex mine. On the latter, Osisko received its first payment from Agnico in July, whereas the first payment from G Mining at Tocantinzinho is expected in November based on a two-month lag associated with the royalty payments as structured in the contract. This current list of 20 assets also counts CSA as a single operating asset. However, as you all know, we have two instruments associated with the mine: a 100% silver stream in addition to our now economically effective copper stream, with the copper stream having provided its first deliveries to Osisko in early July of this year. Moving on to Slide 8. Our company continues to distinguish itself from the rest of its relevant peers regarding jurisdictional exposure. Osisko is the leader when it comes to both NAV and GEOs earned from what Osisko defines as Tier 1 mining jurisdictions, which include Canada, the United States, and Australia. Of note is that if we were to add Chile to that list of countries, we would be at over 95%. This brings me to Slide 9, which provides highlights on the recently announced Cascabel Gold Stream transaction with SolGold in partnership with Franco Nevada. As noted in our July 15th press release, Osisko believes that Cascabel is a world-class copper-gold project with the potential to become a multi-generational mine. This new stream investment, which complements Osisko’s existing royalty on Cascabel, further enhances Osisko’s peer-leading growth profile at a very attractive rate of return. In terms of when we expect to receive GEOs from this investment, SolGold has guided to production in the 2030s, which falls outside our five-year outlook. However, once in production, the Cascabel stream is expected to contribute approximately 23,000 gold equivalent ounces per year for the first 10 years of the initial 28-year life of the mine. It should be pointed out that this mine life is based on only 18% of the measured and indicated mineral resource of the Alpala deposit. We are very encouraged to see that SolGold recently signed an exploitation contract with the government of Ecuador, which serves as another indicator that the current administration is pro-mining and that Cascabel remains a top priority project within the country. As noted previously, on a GEOs earned basis, it was yet another stellar first half of the year for our most important asset as impressive progress continues to be made on the Odyssey underground project. While I won’t spend too much time on the following two slides, I wanted to flag some language on Slide 11. As evidenced by its second quarter report and subsequent conference call, Agnico Eagle continues to speak more and more comfortably with the potential for a future second shaft for the Odyssey underground mine. Factoring in some basic assumptions and based on publicly released information from Agnico, Osisko estimates that a potential second shaft could add approximately 15,000 gold equivalent ounces to Osisko Gold Royalties annually over and above what is expected from the most recently published mine plan, all from the early 2030s onwards and at no additional cost to Osisko or its shareholders. With 40,000 tons of Latin mill capacity still expected in the Canadian Malartic Complex from 2028 onwards, Agnico has now officially made reference to a fill-the-mill strategy, with additional information likely to follow in the coming years. Next slide, please, Slide 12. As if the Malartic story for Osisko weren’t exciting enough, just last week Agnico Eagle provided a comprehensive update on its Upper Beaver project in Ontario. Our operating partner announced a positive internal valuation for a standalone mine and mill scenario at the project. Agnico Eagle believes that Upper Beaver has the potential to produce an annual average of approximately 210,000 gold ounces and 3,600 tons of copper, with initial production possible as early as 2030. What does this mean for Osisko? Based on the information provided, we estimate that Upper Beaver could result in an average of approximately 4,500 gold equivalent ounces earned based on our 2% NSR royalty on the project. We were also delighted to hear that Agnico has now committed over $200 million over the next three years to further de-risk the project and collect the necessary bulk samples prior to final project approval. Now on Slide 13, touching briefly on CSA, the first delivery under the CSA copper stream to Osisko was made in the first week of July for a total of 74 tons of copper or approximately 300 GEOs. Further, just last week, Metals Acquisition Limited announced some very impressive drill results, which served to underline Osisko’s original thesis: a significant exploration potential exists across their land package. Moving on to Slide 14. As you all know, on June 24, Victoria Gold announced that the Heap Leach facility at its Eagle Gold Mine in the Yukon Territory had experienced a failure. Production remains suspended, and as stated previously, absent new information, Osisko’s assumption is that the mine will not resume production in 2024. Osisko has now taken the prudent step to recognize a full non-cash impairment loss of 67.8 million, or 49.9 million net of income taxes, based on our management team’s assessment of the current facts and circumstances. A key takeaway from this slide is that Osisko has various protections with respect to its royalty, including security over the property, a registered interest in land recorded within the Yukon Territory, and an inter-creditor agreement with the senior lending syndicate. At this time, these various layers of protection provide Osisko with confidence that our rights will continue upon a restart of the Eagle Mine. As a secured creditor, we will continue to monitor the situation closely and provide further updates to the market as warranted. Prior to the Heap Leach facility failure at Victoria Gold’s Eagle Mine, Osisko was tracking well regarding its previously published 2024 GEO delivery guidance range of 82,000 to 92,000 gold equivalent ounces. However, under our assumption that production at Eagle will remain suspended through the end of 2024, the company has decided to adjust its 2024 GEO delivery guidance to 77,000 to 83,000 gold equivalent ounces, providing additional context on this call as it relates to Eagle’s underperformance relative to our budget expectations for the first half of the year. This should also help further explain why we made this adjustment. Additionally, with surge capacity equipment at Capstone’s Mantos Blancos having been installed two months later than originally scheduled, we took a further step in making some cautionary adjustments to our budget. Our investing companies continue to make great strides in de-risking their assets that will accrue to our shareholders. Highlights of some of these efforts are provided on slide 16 and 17. We have discussed many of these already on previous slides of this presentation, so there is no need for me to add anything here today. That said, I still suggest you take the time to go through the impressive list yourself, and if you have any questions or would like to further discuss any of the remaining line items highlighted on these two pages, I encourage you to reach out to my colleagues here at Osisko for more information. Moving to slide 18, which outlines the current state of Osisko’s balance sheet. At quarter end, we had total debt of just under 110 million and net debt of only 43 million, which compares to net debt of just under 250 million in the comparative quarter of 2023. Our focus on being responsible capital allocators is using our cash flow from operating activities and redeploying it in the form of paying down a revolving debt facility, which year-to-date is over 101 million; 87.8 million in Q1 and Q2 and 13.8 million subsequent to quarter end. Also, subsequent to quarter end, we made a US$10 million payment to SolGold as a first installment under the Gold Stream agreement to further advance the Cascabel project in Ecuador. In addition, as mentioned in last quarter’s conference call, commodity prices, specifically gold and silver, remain above US$2,400 and US$27 respectively. We forecast ending up in a net cash position by the end of the year, absent any material acquisitions of royalties or streams made during that period. This is important as, even though we have already made an announcement regarding a key transaction involving Cascabel, our corporate development team remains busier than ever with the hope of completing more deals before year-end. Our much improved balance sheet provides the company with the financial capacity and flexibility to continue its strategy of disciplined allocation in pursuit of high-quality, creative precious metal streams and royalties that will bolster the company’s current and near-term gold equivalent ounce deliveries and cash flows, accruing to our shareholders' benefit. Finally, I would like to take the opportunity to welcome our newest board member, Ms. Wendy Louie, who we believe will be a tremendous contributor to our company moving forward. Wendy brings a wealth of experience in resources in commercial and accounting matters from her impressive career credentials at Duke Energy, Ernst and Young, Hecla, Goldcorp, and most recently Sabina. With that, I would like to thank everyone for listening today. We will now open up the line for questions as well as questions posted on the webcast. If we don’t get to all the questions on the line, we will ensure to respond offline to those we don’t get to cover on this webcast. Thank you for your time.

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

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

Yes. Thanks for the question, Ralph. Look, obviously, doing a syndicated deal with a partner like Franco Nevada, a lot of people, including myself going back to my banking days, have talked about having syndicated deals and why they make the most amount of sense. So look, the 30% level we can tell you was a negotiated level. We do think the Cascabel project is a world-class asset. In fact, as you know, Franco Nevada has a royalty as we do, a higher royalty than we do. And so it really came down to proportional interest both in the royalty as well as in our interest working with Franco to give the Osisko team the amount of proceeds they were looking for, obviously, 750 million, which the bulk of this will be provided to them on the construction decision by either themselves or, if they are not the operator at the time, whoever is operating at the time. So look, obviously, it was a negotiation. We have got a relationship clearly with Osisko. We have got our renegade relationship with Franco. We are quite comfortable with Ecuador as a jurisdiction. The fact is that, as you know, the way that the deal was structured with Franco is we have a number of off ramps here. So if the country, which we do believe is very pro-mining with President Noboa right now, and we do think he likely will be quite successful in the 2025 elections— but for whatever reason that does not happen and we see Ecuador not being as good as a jurisdiction for mining the development of Cascabel, we have a number of off ramps, as you are very well aware. That is how we have staged and structured the transaction. So right now, we are obviously quite comfortable with the direction—very pro-mining in the particular province. We think SolGold is doing a very good job in terms of ensuring they have a social license and are doing all the right things from a community level. But as I said, we still very much value our Tier 1 jurisdictions. So we are actually looking to do more transactions that will have a bit more of a balance in Canada, the U.S., and Australia going forward. But we are very, very pleased with the transaction that we were able to do with SolGold and obviously the partnership that we have with Franco.

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

That is a great question, Ralph. Look, obviously, there are a lot of opportunities, and every one of our peers, as you have probably heard, are very, very busy with full corporate development and the technical services that they basically employ to go look at these opportunities. I would say that again, our preference in terms of our strategy is to have transactions that fit within our five-year outlook. That said, there are some very quality assets, development assets in particular, that take a long time to actually get into production and ramp up, which would sit outside of it. But strategically, I have talked to my board and what the corporate development team is doing. Really, the focus is on doing transactions within that five-year outlook. But we are not going to ignore, again, a high-quality opportunity that sits outside the five-year outlook, because that obviously sets the company up for the future. But we are very, very busy, and, as I mentioned on the call, we are hoping we can get one of these opportunities done before year-end that would fit within the five-year outlook.

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

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

Yes, look, obviously, and I will let Fred comment in a second. We took the decision specifically because we just don’t have the visibility right now as to when a restart is going to happen. There is a lot of work that Victoria Gold’s team is doing specifically around containment, water quality with respect to the Sinai sampling that they are doing, and specifically around remediation. Any sort of restart obviously will require a permit from the government, as you can appreciate. There is an element with respect to the First Nations groups that they will have to get approval and a license there. We thought it was prudent at this point to write down the CAD 67 million that I mentioned just because we don’t have that visibility as of yet. We do think the big resorts up there is very important for the Yukon territory in terms of employment and other things depending on the situation that there is a strong possibility that the mine is up and running again. We just don’t have visibility as of yet. Regarding the question in an insolvency situation, I think as I mentioned on the call, the fact that we have secured interests in the asset, along with strong inter-creditor support within those agreements makes us think there is a strong case that our rights will be protected in any potential insolvency scenario. Maybe I will ask Fred if he wants to comment further.

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

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

Yes. Look, it is a great question. We first also received the question via webcast similarly. I think obviously, Josh, it is early days. The facility failed on June 24. Pretoria is doing everything he can to contain what has happened to ensure that from an environmental perspective there is no long-term damage. I think it is still early days to determine what will come out of our five-year outlook. We do think they have significant goals that they have proved up through various indications, mineral reserves, and resources. There are also, if you know the story well, they have identified secondary heat leach facilities that will come online later in the mine life. There are a lot of positive attributes that could suggest that this mine will be restarted. We just have no concept or visibility or clarity of direction at this point as to the timing. Really, we can only get that from Victoria Gold taking their direction.

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

That is a great question. It was not included in our five-year outlook.

Your next question comes from John Tommaso with Brooks Group.

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

Look, John, obviously, I think you are probably talking through some of the issues now, obviously heightened with the Victoria Gold facility failure. The team works very, very hard to identify opportunities that we think will accrue to shareholders. We didn’t anticipate this happening, and there have been some other assets that haven’t lived up to our expectations. We have got a very, very strong technical team and we have upgraded our team since I joined. We are going to be making investments going forward based on the information that we have that we think is going to be accretive to shareholders. In terms of looking at some of the historical legacy assets, yes, we did a full portfolio review and we have come to views as to which ones we should fund and which ones we should not fund going forward. The opportunity set on new opportunities far outweighs what we see currently in terms of investing in the current portfolio that require additional capital. A lot of our portfolio—the 185 assets—require no additional costs. There are no contingent costs associated with it. Our preference, for all the companies out there, if we have made an investment through a royalty or a stream, is that they should be sourcing other financing and not relying on an incremental royalty or stream that could burden the asset to the point where their equity holders, if they are public, are disadvantaged. So I will answer that question in a long-winded way, but we do think that there is a really good opportunity set on a case-by-case basis. We have, additionally from a governance perspective, set up an investment committee, which consists of some commercial and technical folks on our board that has to pass the gate before we are allowed to deploy any further capital.

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

The way I would answer that, John, is the committee is really set up for oversight. Plus, as you can appreciate, we have got technical folks that can really pull apart or take a look at things through a lens that maybe some of our technical folks haven’t looked at. But really to assure us that we are effectively pricing risk for our shareholders, we are risk managers on behalf of our shareholders. Regarding compensation as it relates to origination of opportunities, we can say we don’t have that philosophy here at Osisko. As I have talked about with yourself and many others, we have tweaked our compensation for the senior executives, which is very much based on long-term incentives driven by per share metrics, specifically cash flow per share, growth in cash flow per share, and growth in net asset value per share. So as we move forward and we continue to make investments, we hope to make investments that increase our cash flow per share and increase our NAV per share because, as you know, there is a very strong correlation if we can do this to shareholder performance. So to answer the question, there are no specific origination fees that are payable for our team. We are very much a team and we are very much driven, and top of mind for anything that we do from an investment perspective is whether this will increase our cash flow per share as well as our net asset value per share. Again, these are quantitative metrics that our compensation committee will factor in when they are compensating the executive team.

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

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

So it is a great question, Tanya. Thanks for participating this morning. Yes, 9,000 was approximately what we were budgeting, and you can get that from Victoria Gold’s production guide for 2024 as well. If you forecast that forward, it would be somewhere around that number. All that said, as I mentioned, we give our five-year outlook and our five-year guidance in February. I think it is too early at this stage to know whether contributions from the Eagle mine will be included in that outlook. So, we haven’t changed our five-year outlook. We just don’t have the information to make that adjustment. When and if we do get that information, obviously we’ll let the market know, but very likely in February when we put out our annual guidance for 2025, as well as their updated five-year outlook.

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

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

That is helpful. And that just brings me to my next question with respect to, I mean, if this is the case and we are looking for this sort of size deal coming towards the end of the year, can I assume that, you know, we are getting this debt down quite quickly. Can I assume then return to shareholders will be included in capital allocation? We had thought perhaps looking at maybe share buybacks would be out of your range?

So, I think we have got ourselves to a position, as I mentioned on the call, where we have tremendous financial flexibility and capability now that we have got our net debt down to approximately $40 million. We have given a net cash position very, very soon here. As you are aware, we do have regulatory approval on a normal course issuer bid for buyback. We view that as a tool. Our preference is to redeploy our capital into meaningful accretive transactions. However, again, if we can’t get things complete or if we get things complete that are cash flowing, that does give us the comfort to lower our share count depending on our share price at that time. Not surprisingly, you are going to hear that management thinks we are undervalued. And I know your research suggests the same in terms of our peers as well. So it is a tool that we certainly are contemplating using, and it will be predicated on our share price in the following months and moving into year-end, understanding that we have some capital we may deploy right into projects and deals that I talked about earlier.

Okay. So would you have a preference then if you have excess capital for dividends or would you prefer, I know it is share dependent, capital allocation for share buybacks?

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

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

Look, I think there are a lot of moving pieces here. Based on the pre-feasibility study that SolGold put out, we would say that the return for our shareholders at that price is a high single digit. Obviously, anything beyond those commodity prices is more incremental. There are several components to the deal, as you are aware, around the conditions precedent in terms of funding. There are also buyback rights for the operator in the first three years with lesser buyback rate on 33%. It is within five years that gives us a guaranteed rate of return. So there are just a few nuances, Tanya, depending on what happens in order with Cascabel and who is actually building and operating the mine at the time will impact the return.

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

Your next question comes from Brian MacArthur with Raymond James.

Jason, I just want to go back to the security on Eagle, and I appreciate that there are a lot of moving parts and you don’t have all the information, but when you say you have an inter-creditor agreement and security over the property, is that paired with the senior lending syndicate? I’m just trying to figure out if you can or are willing to comment on that.

Yes, look, Brian, thank you for that question. Unfortunately, the inter-creditor is not a public document at this point, so all I can say is we feel very, very confident in our protections through that agreement. As I said earlier, we have security over the property and a registered interest in land recording within the Yukon Territory. If the company goes through the CCAA process, we are quite confident that our rights will continue with any restarting of the Eagle Mine. We are a secured creditor. But the specifics, unfortunately, because it is a confidential document, I can’t give you all the details regarding the inter-creditor, but we have got the appropriate protections.

Fair enough. Thanks very much; that still helps with the call.

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

Thank you very much for joining us this morning. With respect to some of the questions that have come in through the webcast, we will answer them offline. Thank you for your participation. I hope everyone has a very good week. Thank you for your time this morning.

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