Osisko Gold Royalties Ltd (TSX:OR) (NYSE:OR) announced its consolidated financial results for the first quarter of 2020.

Highlights

• Cash flows from operating activities of $23.8 million (Q1 2019 – $24.8 million); $27.9 million before changes in non-cash working capital items (Q1 2019 – $22.6 million), an increase of 23%;
• Revenues from royalties and streams of $37.8 million (Q1 2019 – $33.5 million), an increase of 13%;
• Earned 18,159 gold equivalent ounces¹ (“GEOs”) (Q1 2019 – 19,753 GEOs);
• Cash on hand of $158.3 million and up to $400.0 million further available under the credit facility as at March 31, 2020, excluding the $85.0 million equity financing completed on April 1, 2020;
• Closed a non-brokered private placement of $85.0 million with Investissement Québec on April 1, 2020;
• Drew down US$50.0 million on our revolving credit facility as a cautionary measure given the current uncertainty to ensure adequate financial capacity during our asset shutdowns;
• Incurred a non-cash impairment charge on the Renard diamond stream of $26.3 million ($19.3 million, net of income taxes);
• Net loss of $13.3 million, $0.09 per basic share (Q1 2019 – net loss of $26.5 million, $0.17 per basic share), as a result of the non-cash impairment charge;
• Adjusted earnings² of $7.5 million or $0.05 per basic share (Q1 2019 – $5.8 million, $0.04 per basic share);
• Cash operating margin³ of 91% from royalty and stream interests, generating $34.5 million in operating cash flow, in addition to a cash operating margin of $0.8 million from offtake interests;
• Withdrew the 2020 production guidance as a result of the uncertainties related to the COVID-19 pandemic impact;
• Mining activities were affected by the COVID-19 pandemic, including our cornerstone asset, the Canadian Malartic mine, which was placed on care and maintenance from March 25 to April 15;
• Acquired for cancellation 429,722 common shares for $3.9 million (average acquisition cost of $9.15 per share);
• Declared a quarterly dividend of $0.05 per common share paid on April 15, 2020 to shareholders of record as of the close of business on March 31, 2020; and
• Improved the silver stream on the Gibraltar mine by investing $8.5 million to reduce the transfer price from US$2.75 per ounce of silver to nil in April 2020.

Recent Performance

Sean Roosen, Chair and Chief Executive Officer, commented on the activities of the first quarter of 2020: “We are living through an unprecedented period and we continue to strongly support the initiatives and efforts of the mine operators to put the health and safety of their workforce and communities first.  Even though our business has been impacted by the measures taken to contain the spread of COVID-19, the revenue deferral is manageable given our efficient business model. We further believe that our opportunity set will grow in the coming quarters, and we are well positioned to deploy capital toward royalty and streaming transactions and create value for our stakeholders.”

Impairment of Assets

In March 2020, the selling price of diamonds decreased significantly as a result of the impact of the COVID-19 pandemic on the diamond market. On March 24, 2020, activities at the Renard diamond mine were suspended following the announcement of the Government of Québec to shutdown all non essential services, and on April 14, 2020, despite the announcement by the Government of Québec to include mining activities as an essential service, the operator of the Renard diamond mine announced the extension of the care and maintenance period of its operations due to depressed diamond market conditions as well as major structural impediments to sell finished products. These were considered indicators of impairment among other facts and circumstances and, accordingly, management performed an impairment assessment as at March 31, 2020. The Company recorded an impairment charge of $26.3 million ($19.3 million, net of income taxes) on the Renard diamond stream.

Outlook

On March 23, 2020, given the uncertainties with respect to future developments related to the COVID-19 pandemic, including the duration, severity and scope of the outbreak, the actions taken to contain or treat the COVID‑19 outbreak, and impacts on mining operations, Osisko announced the withdrawal of its 2020 production guidance and expects to provide new guidance once operations in the mining industry stabilize. The Company will continue to monitor the situation closely and expects its results for the second quarter of 2020 to be affected by the impacts of the COVID-19 pandemic on several mining activities on which it holds a royalty, stream or other interest.

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 15.8% interest in Osisko Mining Inc., 17.9% interest in Osisko Metals Incorporated and an 18.3% interest in Falco Resources Ltd.

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