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Osisko Reports Third Quarter 2019 Results

/EIN News/ -- Record Cash Flows from Operating Activities of $28.3 Million
First Gold Pour at the Eagle Gold Mine

MONTRÉAL, Nov. 06, 2019 (GLOBE NEWSWIRE) -- Osisko Gold Royalties Ltd (the “Company” or “Osisko”) (OR: TSX & NYSE) today announced its consolidated financial results for the third quarter of 2019.

Highlights

  • Cash on hand of $123.7 million, $293.0 million in equity investments1 and up to $480 million availability under its credit facility as at September 30, 2019;

  • Increased its credit facility from $350.0 million to $400.0 million, with an additional uncommitted accordion of up to $100.0 million (for a total availability of up to $500.0 million) and extended the maturity date by one year to November 14, 2023;

  • Revenues from royalties and streams of $33.9 million compared to $31.4 million in Q3 2018;

  • Generated record cash flows from operating activities of $28.3 million compared to $20.6 million in Q3 2018;

  • Earned 18,123 gold equivalent ounces2 (“GEOs”) compared to 20,006 in Q3 2018;
  • Incurred non-cash impairment charges stream and offtake interests of $60.8 million ($48.1 million, net of income taxes), mainly on the Renard diamond stream ($47.2 million and $34.6 million, net of income taxes) and Amulsar gold/silver stream and gold offtake ($13.1 million) and non-cash impairment of net investment in an associate of $12.5 million for total non-cash impairment charges of $73.3 million ($59.0 million, net of income taxes);

  • Net loss of $45.9 million, $0.32 per basic share compared to net earnings of $5.5 million, $0.04 per basic share in Q3 2018. Net earnings of $13.0 million, $0.09 per basic share excluding the above non-cash impairment charges;

  • Adjusted earnings3 of $17.5 million, $0.12 per basic share3 compared to $5.7 million, $0.04 per basic share in Q3 2018;
  • Recorded cash operating margins4 of 91% from royalty and stream interests, generating $30.8 million in operating cash flow in the third quarter, in addition to a quarterly cash operating margin of $1.0 million from offtake interests;

  • Closed the second tranche of the share repurchase with Betelgeuse LLC ("Orion") (5,066,218 common shares acquired for $71.4 million, for a total of 12,385,717 common shares acquired from Orion for $174.6 million and subsequently cancelled), reducing Orion’s ownership of Osisko’s issued and outstanding common shares to 6.2%;

  • Enhanced its silver stream on the Mantos Blancos mine by investing US$25.0 million and reducing the ongoing transfer price payments per ounce from 25% to 8% of the spot silver price, cancelling the buy-down option and increasing the tail stream from 30% to 40% of payable silver after 19.3 million ounces of refined silver have been delivered;

  • Sold the Brucejack gold offtake to Pretium Exploration Inc. for US$41.3 million;

  • The Eagle Gold mine operated by Victoria Gold Corp. and on which Osisko holds a 5% net smelter return ("NSR") royalty announced its first gold pour in September;

  • Announced a definitive agreement with Barkerville Gold Mines Ltd. ("Barkerville"), owner of the Cariboo gold project, pursuant to which Osisko has agreed to acquire all of the issued and outstanding common shares of Barkerville that it does not currently own, representing 67.4%;
  • In November, completed a credit bid transaction with Stornoway Diamond Corporation alongside other secured creditors, allowing Osisko to maintain its 9.6% diamond stream on the Renard mine. In connection with the completion of the credit bid, the secured creditors acquired substantially all of the assets and properties of Stornoway, and assumed the debts and liabilities owing to Stornoway’s secured creditors as well as the ongoing obligations relating to the operation of the Renard mine, subject to certain limited exceptions. Osisko became a 35.1% shareholder of the company now holding the Renard diamond mine, which will continue to operate in the normal course; and

  • Declared a quarterly dividend of $0.05 per common share paid on October 15, 2019 to shareholders of record as of the close of business on September 30, 2019.

For more details, please refer to the Management’s Discussion and Analysis for the three and nine months ended September 30, 2019.

Recent Performance

Sean Roosen, Chair and Chief Executive Officer, commented on the activities of the third quarter of 2019: “Our royalty and stream business continues to be strong with record cash flows from operating activities of $28.3 million. On September 23, 2019, we entered into an agreement to acquire all of the issued and outstanding common shares of Barkerville. The addition of the Cariboo Gold project to our portfolio adds a potentially world-class asset in Canada in an impacted brownfield site with significant infrastructure in place. Osisko expects to fund planned work through its own capital as well as outside private equity and joint venture capital through the newly created North Spirit Discovery Group. Our goal is to create significant value within the accelerator group as these assets advance from incubation/exploration to development and production.”

Outlook

Osisko’s 2019 outlook on royalty, stream and offtake interests is based on publicly available forecasts, in particular the forecasts for the Canadian Malartic mine published by Yamana Gold Inc. and Agnico Eagle Mines Limited, for the Éléonore mine published by Newmont Goldcorp Corporation, and for the Renard mine published by Stornoway Diamond Corporation. When publicly available forecasts on properties are not available, Osisko obtains internal forecasts from the producers, which is the case for the Mantos Blancos mine, or uses management’s best estimate.

Attributable GEOs for 2019 has been reduced from previous guidance, mainly as a result of weak diamond prices at the Renard mine and the sale of the Brucejack gold offtake. However, cash operating margins and operating cash flow are expected to be in line with guidance, as a result of strong gold prices.

Due to the sale of the Brucejack gold offtake, revenues from offtake interests will decrease considerably, about $75 to 80 million per quarter. As these offtake interests have a historical cash margin of 1%, the impact on cash flows from operating activities will not be material.

GEOs and cash margin by interest are estimated as follows:

        Original Guidance     Revised Guidance  
 

 
  Low High Mid
cash margin
Cash margin       Cash margin Cash margin  
    (GEOs) (GEOs) (million $) (%)     (GEOs) (million $) (%)  
                       
Royalty interests   54,700 61,100 98 99.9     53,100 97 99.7  
Stream interests   28,000 31,300 33 65.5     23,100 29 67.4  
Offtake interests   2,300 2,600 4 1.2     1,800 3 1.3  
    85,000 95,000 135       78,000 129    

For the 2019 original guidance, silver, diamonds and cash royalties have been converted to GEOs using commodity prices of US$1,300 per ounce of gold, US$15.50 per ounce of silver and US$95 per carat for diamonds from the Renard mine (blended sales price) and an exchange rate (US$/C$) of 1.30.

For the 2019 revised guidance, silver, diamonds and cash royalties have been converted to GEOs using average commodity prices of US$1,380 per ounce of gold, US$16.15 per ounce of silver and US$76 per carat for diamonds from the Renard mine (blended sales price) and an exchange rate (US$/C$) of 1.32.

Q3 2019 Results Conference Call

Osisko will host a conference call on Thursday, November 7, 2019 at 10:00 am EST to review and discuss its Q3 2019 results.

Those interested in participating in the conference call should dial in at 1 (877) 223-4471 (North American toll free), or 1 (647) 788-4922 (international). An operator will direct participants to the call.

The conference call replay will be available from 1:00 pm EST on November 7, 2019 until 11:59 pm EST on November 14, 2019 with the following dial in numbers: 1 (800) 585-8367 (North American toll free) or 1 (416) 621-4642, access code 4994211.

About Osisko Gold Royalties Ltd

Osisko Gold Royalties Ltd is an intermediate precious metal royalty company focused on the Americas that commenced activities in June 2014. Osisko holds a North American focused portfolio of over 135 royalties, streams and precious metal offtakes. Osisko’s portfolio is anchored by four cornerstone assets, including a 5% NSR royalty on the Canadian Malartic mine, which is the largest gold mine in Canada. Osisko also owns a portfolio of publicly held resource companies, including a 32.6% interest in Barkerville Gold Mines Ltd. and a 4% NSR royalty on the Cariboo Gold project, a 19.9% interest in Falco Resources Ltd and a 16.3% interest in Osisko Mining Inc.

Osisko’s head office is located at 1100 Avenue des Canadiens-de Montréal, Suite 300, Montréal, Québec, H3B 2S2.

For further information, please contact Osisko Gold Royalties Ltd:

Joseph de la Plante
Vice President, Corporate Development
Tel. (514) 940-0670
jdelaplante@osiskogr.com

Notes:

  (1) Represents the estimated fair value based on the quoted prices of the investments in a recognized stock exchange as at September 30, 2019.
     
  (2) GEOs are calculated on a quarterly basis and include royalties, streams and offtakes. Silver earned from royalty and stream agreements was converted to gold equivalent ounces by multiplying the silver ounces by the average silver price for the period and dividing by the average gold price for the period. Diamonds, other metals and cash royalties were converted into gold equivalent ounces by dividing the associated revenue by the average gold price for the period. Offtake agreements were converted using the financial settlement equivalent divided by the average gold price for the period.

 

 Average Metal Prices and Exchange Rate

  Three months ended
September 30,
  Nine months ended
September 30,
 
    2019   2018     2019   2018  
               
Gold(i) $ 1,472 $ 1,213   $ 1,364 $ 1,282  
Silver(ii) $ 16.98 $ 15.02   $ 15.83 $ 16.10  
               
Exchange rate (US$/Can$)(iii)   1.3204   1.3070     1.3292   1.2876  

 

  (i) The London Bullion Market Association’s pm price in U.S. dollars  
  (ii) The London Bullion Market Association’s price in U.S. dollars  
  (iii) Bank of Canada daily rate  
       
  (3) “Adjusted earnings” and “Adjusted earnings per basic share” are not recognized measures under the International Financial Reporting Standards (“IFRS”). Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Management’s Discussion and Analysis for the three and nine months ended September 30, 2019.  
       
  (4) Cash operating margin, which represents revenues less cost of sales, is a non-IFRS measure. The Company believes that this non-IFRS generally accepted industry measure provides a realistic indication of operating performance and provides a useful comparison with its peers. The following table reconciles the cash margin to the revenues and cost of sales presented in the consolidated statements of income and related notes:  

 

  (In thousands of dollars) Three months ended
 September 30,
    Nine months ended
September 30,
 
    2019    2018      2019    2018  
    $   $     $   $  
               
  Revenues 109,235   111,702     341,567   375,135  
  Less: Revenues from offtake interests (75,314 ) (80,309 )   (240,365 ) (278,306 )
  Revenues from royalty and stream interests 33,921   31,393     101,202   96,829  
               
  Cost of sales (77,419 ) (82,748 )   (247,616 ) (284,705 )
  Less: Cost of sales of offtake interests 74,300   79,498     237,452   274,220  
  Cost of sales of royalty and stream interests (3,119 ) (3,250 )   (10,164 ) (10,485 )
               
               
               
               
  Revenues from royalty and stream interests 33,921   31,393     101,202   96,829  
  Less: Cost of sales of royalty and stream interests (3,119 ) (3,250 )   (10,164 ) (10,485 )
  Cash margin from royalty and stream interests 30,802   28,143     91,038   86,344  
               
    90.8 % 89.6 %   90.0 % 89.2 %
               
  Revenues from offtake interests 75,314   80,309     240,365   278,306  
  Less: Cost of sales of offtake interests (74,300 ) (79,498 )   (237,452 ) (274,220 )
  Cash margin from offtake interests 1,014   811     2,913   4,086  
               
    1.3 % 1.0 %   1.2 % 1.5 %

Forward-looking Statements

This news release contains forward-looking information and forward-looking statements (together, "forward‑looking statements") within the meaning of applicable Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical fact, that address future events, developments or performance that Osisko expects to occur including management’s expectations regarding Osisko’s growth, results of operations, estimated future revenue, requirements for additional capital, production estimates, production costs and revenue, business prospects and opportunities are forward-looking statements. In addition, statements relating to gold equivalent ounces ("GEOs") are forward‑looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the GEOs will be realized. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "is expected" "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions or variations (including negative variations of such words and phrases), or may be identified by statements to the effect that certain actions, events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, the performance of the assets of Osisko, the estimate of GEOs to be received in 2019, that the required regulatory and shareholders approvals will be obtained in connection with the proposed transaction with Barkerville, that sufficient funding will be available to fund work at Barkerville, that significant value will be created within the accelerator group of companies and Osisko’s ability to seize future opportunities. Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors and are not guarantees of future performance and actual results may accordingly differ materially from those in forward-looking statements. Factors that could cause the actual results deriving from Osisko’s royalties, streams and other interests to differ materially from those in forward-looking statements include, without limitation: influence of political or economic factors including fluctuations in the prices of the commodities and in value of the Canadian dollar relative to the U.S. dollar, continued availability of capital and financing and general economic, market or business conditions; regulations and regulatory changes in national and local government, including permitting and licensing regimes and taxation policies; whether or not Osisko is determined to have “passive foreign investment company” (“PFIC”) status as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended; potential changes in Canadian tax treatments of offshore streams or other interests, litigation, title, permit or license disputes; risks and hazards associated with the business of exploring, development and mining on the properties in which Osisko holds a royalty, stream or other interest including, but not limited to development, permitting, infrastructure, operating or technical difficulties, unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters or civil unrest, rate, grade and timing of production differences from mineral resource estimates or production forecasts or other uninsured risks; risk related to business opportunities that become available to, or are pursued by Osisko and exercise of third party rights affecting proposed investments. The forward-looking statements contained in this press release are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which Osisko holds a royalty, stream or other interest by the owners or operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the owners or operators of such underlying properties; no material adverse change in the market price of the commodities that underlie the asset portfolio; Osisko’s ongoing income and assets relating to the determination of its PFIC status, no material changes to existing tax treatments; no adverse development in respect of any significant property in which Osisko holds a royalty, stream or other interest; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance. Osisko cannot assure investors that actual results will be consistent with these forward-looking statements and investors should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.

For additional information with respect to these and other factors and assumptions underlying the forward-looking statements made in this press release, see the section entitled "Risk Factors" in the most recent Annual Information Form of Osisko which is filed with the Canadian securities commissions and available electronically under Osisko's issuer profile on SEDAR at www.sedar.com and with the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov. The forward-looking information set forth herein reflects Osisko’s expectations as at the date of this press release and is subject to change after such date. Osisko disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.

 

Osisko Gold Royalties Ltd
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
 
      September 30,     December 31,  
      2019     2018  
      $     $  
               
Assets              
               
Current assets              
Cash     123,702     174,265  
Short-term investments     25,844     10,000  
Amounts receivable     18,241     12,321  
Other assets     1,289     1,015  
      169,076     197,601  
               
Non-current assets              
Investments in associates     212,668     304,911  
Other investments     53,813     109,603  
Royalty, stream and other interests     1,296,798     1,414,668  
Exploration and evaluation     92,909     95,002  
Goodwill     111,204     111,204  
Other assets     11,887     1,657  
      1,948,355     2,234,646  
               
Liabilities              
               
Current liabilities              
Accounts payable and accrued liabilities     10,245     11,732  
Dividends payable     7,200     7,779  
Provisions     -     3,494  
Lease liabilities     786     -  
      18,231     23,005  
               
Non-current liabilities              
Long-term debt     347,638     352,769  
Lease liabilities     9,533     -  
Deferred income taxes     66,666     87,277  
      442,068     463,051  
               
Equity              
Share capital     1,502,978     1,609,162  
Warrants     18,072     30,901  
Contributed surplus     34,041     21,230  
Equity component of convertible debentures     17,601     17,601  
Accumulated other comprehensive income     19,998     23,499  
Retained earnings (deficit)     (86,403 )   69,202  
      1,506,287     1,771,595  
      1,948,355     2,234,646  

 

 

Osisko Gold Royalties Ltd
Consolidated Statements of Income (Loss)
For the three and nine months ended September 30, 2019 and 2018
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
 
  Three months ended
September 30,
    Nine months ended
September 30,
 
  2019     2018     2019     2018  
  $     $     $     $  
                       
                       
Revenues 109,235      111,702      341,567      375,135   
                       
Cost of sales (77,419 )   (82,748 )   (247,616 )   (284,705 )
Depletion of royalty, stream and other interests (10,965 )   (13,136 )   (35,166  )   (39,637  )
Gross profit 20,851      15,818      58,785      50,793   
                       
Other operating expenses                      
General and administrative (4,607 )   (3,692 )   (15,173 )   (13,342  )
Business development (1,375 )   (1,077 )   (4,899 )   (3,750  )
Gain on disposal of an offtake interest 7,636      -     7,636      -  
Impairment of assets (60,800 )   -     (99,700 )   -  
Operating income (loss) (38,295 )   11,049      (53,351 )   33,701   
Interest income 1,041      1,041      3,033      3,581   
Dividend income 50      228      150     278  
Finance costs (5,843 )   (6,396 )   (17,382 )   (19,291 )
Foreign exchange gain (loss) 508      (160 )   (1,104 )   92   
Share of loss of associates (4,146 )   (4,139 )   (14,688 )   (6,558 )
Other gains (losses), net (10,971 )   5,781      (16,304 )   1,580  
Earnings (loss) before income taxes (57,656 )   7,404      (99,646 )   13,383   
Income tax recovery (expense) 11,732      (1,930 )   20,626      (5,088 )
Net earnings (loss) (45,924 )   5,474      (79,020 )   8,295   
                       
Net earnings (loss) per share                      
Basic and diluted (0.32 )   0.04     (0.52 )   0.05  

 

Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2019 and 2018
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts) 
  
  Three months ended
September 30,
    Nine months ended
September 30,
 
  2019     2018     2019     2018  
  $     $     $     $  
                       
Operating activities                      
Net earnings (loss) (45,924 )   5,474     (79,020 )   8,295  
Adjustments for:                      
Share-based compensation 2,052     521     6,273     3,550  
Depletion and amortization 11,287     13,181     36,113     39,766  
Net gain on disposal of an offtake interest (7,636 )   -     (7,636 )   -  
Impairment of assets 60,800     -     99,700     -  
Finance costs 1,817     1,727     5,291     5,071  
Share of loss of associates 4,146     4,139     14,688     6,558  
Net gain on acquisition of investments (540 )   -     (628 )   (1,908 )
Net loss (gain) on disposal of investments (1,091 )   (6,956 )   3,136     (6,956 )
Change in fair value of financial assets at fair value through profit and loss 205     1,175     1,399     7,031  
Impairment of an investment in an associate 12,500     -     12,500     -  
Deferred income tax expense (recovery) (12,001 )   1,742     (21,267 )   4,484  
Foreign exchange loss (gain) (498 )   153     1,145     564  
  Settlement of restricted and deferred share units -     (2,588 )   (589 )   (3,087 )
Other (66 )   50     30     395  
Net cash flows provided by operating activities before changes in non-cash working capital items 25,051     18,618     71,135     63,763  
Changes in non-cash working capital items 3,243     2,018     3,259     (164 )
Net cash flows provided by operating activities 28,294     20,636     74,394     63,599  
                       
Investing activities                      
Short-term investments (9,614 )   (9,000 )   (25,844 )   (10,000 )
Acquisition of investments (7,359 )   (22,317 )   (47,896 )   (94,757 )
Proceeds on disposal of investments 71,434     -     129,908     27,043  
Acquisition of royalty and stream interests (43,501 )   (33,859 )   (71,470 )   (92,970 )
Proceeds on disposal of royalty and offtake interests 43,182     -     43,182     -  
Exploration and evaluation tax credits (expenses), net (69 )   2,010     81     3,203  
Other assets (128 )   (9 )   (603 )   (92 )
Net cash flows provided by (used in) investing activities 53,945     (63,175 )   27,358     (167,573 )
                       
Financing activities                      
Exercise of share options and shares issued under the share purchase plan 15,446     82     21,714     272  
Increase in long-term debt 19,772     -     19,772     -  
Financing fees (490 )   -     (490 )   (379 )
Repayment of long-term debt -     -     (30,000 )   (51,820 )
Common shares acquired and cancelled through a share repurchase (71,434 )   -     (129,486 )   -  
Normal course issuer bid purchase of common shares -     -     (11,901 )   (21,986 )
Dividends paid (6,736 )   (7,406 )   (20,538 )   (21,399 )
Other 278     -     86     (186 )
Net cash flows used in financing activities (43,164 )   (7,324 )   (150,843 )   (95,498 )
Effects of exchange rate changes on cash and cash equivalents 1,038     (1,580 )   (1,472 )   2,955  
Increase (decrease) in cash and cash equivalents 40,113     (51,443 )   (50,563 )   (196,517 )
Cash and cash equivalents – beginning of period 83,589     188,631     174,265     333,705  
Cash and cash equivalents – end of period 123,702     137,188     123,702     137,188  

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