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Osisko Reports 2019 Results and Provides 2020 Guidance

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Osisko Reports 2019 Results and Provides 2020 Guidance

 

 

 

 

 

Record Annual Cash Flows from Operating Activities of $91.6 Million

 

Osisko Gold Royalties Ltd (TSX:OR)  (NYSE:OR) announced its consolidated financial results for the fourth quarter and full year ended December 31, 2019 and provides guidance for 2020.

 

Highlights

 

  • Generated cash flows from operating activities of $17.2 million in the fourth quarter of 2019 for a record of $91.6 million for the year 2019, an increase of 11% compared to the year 2018;
  • Record revenues from royalties and streams of $38.9 million for the fourth quarter of 2019 for a record of $140.1 million for the year 2019, compared to $127.6 million for the year 2018;
  • Earned 20,479 gold equivalent ounces1 (“GEOs”) in the fourth quarter of 2019, for a total of 78,006 GEOs for the year 2019 which met the Company’s revised guidance, compared to 80,553 for the year 2018, reflecting the sale of the Brucejack gold offtake in September 2019 and weakness in diamond prices for the Renard mine;
  • Cash on hand of $108.2 million and up to $480 million availability under its credit facility as at December 31, 2019;
  • Incurred non-cash impairment charges in the fourth quarter of 2019 on stream and offtake interests of $93.9 million ($86.7 million, net of income taxes), $50.0 million on the Coulon zinc project ($37.6 million, net of income taxes) and other impairment charges of $4.7 million on other assets;
  • Net loss of $155.2 million in the fourth quarter of 2019, $1.04 per basic share ($113.9 million in the fourth quarter of 2018, $0.73 per basic share) for a net loss of $234.2 million for the year 2019, $1.55 per basic share ($105.6 million for the year 2018, $0.67 per basic share);
  • Adjusted earnings2 of $10.3 million, $0.07 per basic share2, for the fourth quarter of 2019 and $41.9 million for the year 2019, $0.28 per basic share, compared to $13.0 million, $0.08 per basic share in the fourth quarter of 2018 and $31.4 million for the year 2018, $0.20 per basic share;
  • Recorded cash operating margins3 of 90% in 2019 from royalty and stream interests, generating $126.4 million in operating cash flow, in addition to a cash operating margin of $3.3 million from offtake interests;
  • Closed the acquisition of Barkervile Gold Mines Ltd. (“Barkerville”), owner of the Cariboo gold project, and created the North Spirit Discovery Group;
  • Completed a credit bid transaction for Stornoway Diamond Corporation alongside other secured creditors, allowing Osisko to maintain its 9.6% diamond stream on the Renard mine. Osisko became a 35.1% shareholder of the company now holding the Renard diamond mine, which will continue to operate in the normal course;
  • The Canadian Malartic Partnership announced the expansion of underground mineral resources at Canadian Malartic with an initial inferred mineral resource on the East Gouldie Zone, which was discovered in late 2018. Osisko holds a 5% NSR royalty on East Gouldie, a 3% NSR royalty on North Odyssey and East Malartic and a 5% NSR royalty on South Odyssey; and
  • Declared a quarterly dividend of $0.05 per common share paid on January 15, 2020 to shareholders of record as of the close of business on December 31, 2019.

 

Recent Performance

 

Sean Roosen, Chair and Chief Executive Officer, commented on the activities of the fourth quarter of 2019: “Our royalty and stream business continues to be strong with record cash flows from operating activities of $91.6 million for the year 2019. Going forward in 2020, we welcome the addition of royalty production from the newly commissioned Eagle mine operated by Victoria Gold Corp. 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. Our goal is to create significant value at Cariboo within the North Spirit Discovery Group.”

 

Impairment of Assets

 

The non-cash impairment charges in the fourth quarter of 2019 on stream and offtake interests of $93.9 million ($86.7 million, net of income taxes) included $66.7 million on the Amulsar gold/silver stream and offtake (Lydian International Ltd. applied for protection under the Companies’ Creditors Arrangement Act in December 2019) and $27.2 million ($20.0 million net of income taxes) on the Éléonore royalty (Newmont Corporation released a decrease in reserves and resources of approximately 50% in February 2020). In addition, the Company incurred a non-cash impairment charge of $50.0 million on the Coulon zinc project ($37.6 million, net of income taxes) (the Company has decided not to pursue the development of the project in the near term).

 

Board Appointment

 

Osisko is pleased to announce the appointment of Mr. Murray John to its Board of Directors. Mr. John currently serves as a director of O3 Mining Inc. and has been a director of Osisko Mining Inc. from August 2015 to June 2018. Prior to his retirement in December 2015, Mr. John was the President and Chief Executive Officer of Dundee Resources Limited, a private resource-focused investment company, and Managing Director and a Portfolio Manager with Goodman & Company, Investment Counsel Inc. Mr. John was also the former President and Chief Executive Officer of Corona Gold Corporation and Ryan Gold Corporation up to 2015. He has been involved with the resource investment industry since 1992 and has worked as an investment banker, buy-side mining analyst, sell-side mining analyst, and portfolio manager. Mr. John graduated from the Camborne School of Mines in 1980. He also received a Master of Business Administration from the University of Toronto in 1992. Sean Roosen commented: “We are pleased to welcome Murray to the Board of Directors and we look forward to benefiting from his extensive experience in the global resource sector.”

 

Outlook

 

Osisko’s 2020 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 and for the Éléonore mine published by Newmont Corporation. When publicly available forecasts on properties are not available, Osisko obtains internal forecasts from the producers, which is the case for the Renard mine and the Mantos Blancos mine, or uses management’s best estimate.

 

GEOs and cash margin by interest are estimated as follows for 2020:    

    

 

 

Low   High   Cash margin
  (GEOs)   (GEOs)   (%)
           
Royalty interests 57,500   61,700   100
Stream interests 23,800   25,500   68
Offtake interests 700   800   3
  82,000   88,000   90*
           
* Excluding the offtake interests          

 

For the 2020 guidance, silver, diamonds and cash royalties have been converted to GEOs using commodity prices of US$1,450 per ounce of gold, US$17.00 per ounce of silver and US$70 per carat for diamonds from the Renard mine (blended sales price) and an exchange rate (US$/C$) of 1.30.

 

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 its cornerstone asset, a 5% net smelter return royalty on the Canadian Malartic mine, which is the largest gold mine in Canada. Osisko also owns the Cariboo gold project in Canada as well as a portfolio of publicly held resource companies, including a 15.9% interest in Osisko Mining Inc., 17.9% interest in Osisko Metals Incorporated and a 19.9% interest in Falco Resources Ltd.

 

Posted February 20, 2020

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