Question-and-Answer Session
Operator
(Operator instructions) First question comes from Andy Cophid [ph]. Your line is open.
Andy Cophid
The first thing I wanted to ask, Tony, is how the company goes about calculating returns on deals such as the pending Barrick deal and what types of returns it typically looks to achieve? For example, last year these properties generated $12 million in royalties, it's going to cost you $150 million to acquire. It’s like on the surface about an 8% return. But I really would like to know a little bit more about how you go through the process of evaluating something like this transaction?
Tony Jensen
Fair enough, Andy. What we usually do when look at value in royalties is we'll take a good look at the production profile and use our assumptions for gold and a discount rate that might be single-digit when it goes into the initial calculation. But the differentiation for us is that we are engineers and geologists and the like, and we very much take a position on the long-term value of properties. And so, we’ll look into resources as well and have an expectation of what we think will come about there. Well, I won't go into detail as to exactly what our hurdle rates are and the like. I will say that we're always looking for double-digit returns in every investment that we make.
Andy Cophid
Okay. Secondly, I just wanted to ask if the company has any strong preference going forward between gross smelter return, revenue base royalties, and say profit base royalties, what are the advantages and disadvantages from those two basic approaches?
Tony Jensen
We always – wherever we can, Andy, we want to be at the gross smelter return line. We want to be as high in the cash flow stream as possible. And that just leaves us less exposed than any operating cost inflation or anything like that. When you look at the profits base then all of a sudden you're kind of tied to the inflation that there might be in the business. So, we like to stay up on the highest level that we can. Whenever we write our own royalty agreements, that's where we want to be.
Now, you do realize that many of the royalties that we do have on our portfolio were written by other folks. And so, at times, we do get exposed to a net smelter or a profits base royalty. But the vast majority of our royalties are GSR, the least of the vast majority of value-driven royalties or GSR.
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