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Osisko Reports Q3 2023 Results

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Osisko Reports Q3 2023 Results

 

 

 

 

 

Osisko Gold Royalties Ltd (TSX:OR) (NYSE:OR) announced its consolidated financial results for the third quarter of 2023. Amounts presented are in Canadian dollars, except where otherwise noted.

 

Highlights – Third Quarter of 2023

  • 23,292 gold equivalent ounces earned (23,850 GEOs in Q3 2022);
  • Revenues from royalties and streams of $62.1 million ($53.7 million in Q3 2022);
  • Cash flows generated by operating activities2 of $43.5 million ($51.1 million in Q3 2022);
  • Net loss2 of $20.0 million, $0.11 per basic share (net earnings of $28.0 million, $0.15 per basic share in Q3 2022), mostly as a result of a non-cash impairment charge and a write-off on assets related to the Renard diamond mine, together totaling $32.4 million ($26.2 million, net of income taxes);
  • Adjusted earnings3 of $22.4 million, $0.12 per basic share3 (of $25.8 million, $0.14 per basic share in Q3 2022);
  • Acquisition of a 3% gold net smelter return (“NSR”) royalty and 1% copper NSR royalty on the Costa Fuego copper-gold project held by Hot Chili Limited for US$15.0 million ($19.9 million);
  • Patriot Battery Metals Inc. published its maiden mineral resource estimate for the CV5 Spodumene Pegmatite at its wholly-owned Corvette Property, located in the Eeyou Istchee James Bay region of Québec, on which Osisko holds a sliding scale 1.5 – 3.5% on precious metals, and 2.0% on all other products, including Lithium, on most (estimated at approximately 80% – 95% by Osisko) of the mineral resource estimate;
  • Appointment of Mr. Paul Martin as Interim Chief Executive Officer; and
  • Quarterly dividend of $0.06 per common share paid on October 16, 2023 to shareholders of record as of the close of business on September 29, 2023.

 

Paul Martin, Interim CEO of Osisko commented: “When factoring in the variety of challenges faced by some of our key operating partners during the third quarter, we are coming away satisfied with our overall performance. As we head into the final three months of the year, and as previously noted, we are now trending towards the lower end of our 2023 GEO guidance range. Of particular note is the Renard diamond stream, where the situation remains fluid. As such, in contrast to what was previously expected, Osisko might now actually expect a GEO contribution from the mine during the fourth quarter, however this will depend largely on rough diamond prices, and will come in materially lower than what was originally budgeted for the period. Finally, Osisko remained very active on the corporate development front both during the third quarter and after it, having first closed the Costa Fuego transaction, and then, just last week, having announced the acquisition of a 1.0% NSR royalty on Shandong Gold’s Namdini project in Ghana, where first gold production is expected in late 2024.”

 

Subsequent to September 30, 2023

  • On October 27, 2023, Stornoway Diamonds (Canada) Inc. announced the suspension of operations at the Renard mine due to the growing uncertainty of diamond prices and the placement of Stornoway under the protection of the Companies’ Creditors Arrangement Act.
  • On October 30, 2023, Osisko announced the acquisition of a 1.0% NSR royalty covering the Namdini Gold Project in Ghana. Osisko has closed the transaction with Savannah Mining Limited, acquiring a direct interest in 50% of Savannah’s 2.0% NSR royalty for total consideration of US$35.0 million (excluding applicable taxes and levies).
  • Declaration of a quarterly dividend of $0.06 per common share payable on January 15, 2024 to shareholders of record as of the close of business on December 29, 2023.

 

Qualified Person

 

The scientific and technical content of this news release has been reviewed and approved by Guy Desharnais, Ph.D., P.Geo., Vice President, Project Evaluation at Osisko Gold Royalties Ltd, who is a “qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects

 

About Osisko Gold Royalties Ltd

 

Osisko Gold Royalties Ltd is an intermediate precious metal royalty company which holds a North American focused portfolio of over 180 royalties, streams and precious metal offtakes, including 23 producing assets. Osisko’s portfolio is anchored by its cornerstone asset, a 5% net smelter return royalty on the Canadian Malartic mine, one of Canada’s largest gold mines.

 

Notes:

(1)   Gold Equivalent Ounces

 

GEOs are calculated on a quarterly basis and include royalties, streams and offtakes. Silver earned from royalty and stream agreements are converted to gold equivalent ounces by multiplying the silver ounces earned by the average silver price for the period and dividing by the average gold price for the period. Diamonds, other metals and cash royalties are converted into gold equivalent ounces by dividing the associated revenue earned by the average gold price for the period.

 

Average Metal Prices and Exchange Rate

  Three months ended
September 30,
  Nine months ended
September 30,
  2023 2022   2023 2022
           
Gold(i) $1,928 $1,729   $1,932 $1,824
Silver(ii) $23.57 $19.23   $23.31 $21.92
           
Exchange rate (US$/Can$)(iii) 1.3414 1.3056   1.3477 1.2892

(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.

(2)   From continuing operations

(3)   Non-IFRS Measures

 

The Corporation has included certain performance measures in this press release that do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS) including (i) cash margin (in dollars and in percentage), (ii) adjusted earnings and (iii) adjusted earnings per share. The presentation of these non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. As Osisko’s operations are primarily focused on precious metals, the Corporation presents cash margins and adjusted earnings as it believes that certain investors use this information, together with measures determined in accordance with IFRS, to evaluate the Corporation’s performance in comparison to other companies in the precious metals mining industry who present results on a similar basis. However, other companies may calculate these non-IFRS measures differently.

 

Cash Margin (in dollars and in percentage of revenues)

 

Cash margin (in dollars) represents revenues from continuing operations less cost of sales (excluding depletion). Cash margin (in percentage of revenues) represents the cash margin (in dollars) divided by revenues from continuing operations.

  Three months ended
September 30,
    Nine months ended 
September 30, 
 
  2023      2022      2023      2022   
  $     $     $     $  
               
Royalty interests              
Revenues 37,410     34,456     115,911     104,028  
Less: cost of sales (excluding depletion) (193 )   (490 )   (533 )   (772 )
Cash margin (in dollars) 37,217     33,966     115,378     103,256  
               
Depletion (5,972 )   (7,312 )   (18,430 )   (20,369 )
Gross profit 31,245     26,654     96,948     82,887  
               
Stream interests              
Revenues 24,659     19,205     66,245     51,867  
Less: cost of sales (excluding depletion) (4,144 )   (3,917 )   (12,105 )   (10,572 )
Cash margin (in dollars) 20,515     15,288     54,140     41,295  
               
Depletion (10,922 )   (6,849 )   (24,926 )   (16,941 )
Gross profit 9,593     8,439     29,214     24,354  
               
Royalty and stream interests
Total cash margin (in dollars)
57,732     49,254     169,518     144,551  
Divided by: total revenues 62,069     53,661     182,156     155,895  
Cash margin (in percentage of revenues) 93.0 %   91.8 %   93.1 %   92.7 %
               
Total – Gross profit 40,838     35,093     126,162     107,241  

Adjusted earnings and adjusted earnings per basic share

 

Adjusted earnings is defined as: net earnings (loss) adjusted for certain items: foreign exchange gain (loss), impairment of assets (including impairment on financial assets and investments in associates), gains (losses) on disposal of assets, unrealized gain (loss) on investments, share of income (loss) of associates, deferred income tax expense (recovery), transaction costs and other items such as non-cash gains (losses).

 

Adjusted earnings per basic share is obtained from the adjusted earnings divided by the weighted average number of common shares outstanding for the period.

 

  Three months ended 
September 30,
  Nine months ended 
September 30,
 
  2023   2022   2023   2022  
(in thousands of dollars, except per share amounts) $   $   $   $  
         
Net (loss) earnings from continuing operations (19,999 ) 28,014   18,810   62,877  
         
Adjustments:        
Impairment of royalty and stream interests 17,490     24,119    
Expected credit loss and write-off of other investments 17,349   276   37,480   1,180  
Foreign exchange loss (gain) 3,399   (14,260 ) 3,424   (22,729 )
Unrealized net loss on investments 2,513   758   4,482   12,172  
Share of loss (income) of associates 4,754   1,143   (8,268 ) (383 )
Deferred income tax expense (3,146 ) 9,888   7,584   23,261  
         
Adjusted earnings 22,360   25,819   87,631   76,378  
         
Weighted average number of common shares outstanding (000’s) 185,516   184,839   185,159   179,101  
         
Adjusted earnings per basic share 0.12   0.14   0.47   0.43  

 

 

 
Osisko Gold Royalties Ltd
Consolidated Balance Sheets
As at September 30, 2023 and December 31, 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
 
  September 30,     December 31,  
  2023     2022  
  $     $  
       
Assets      
       
Current assets      
       
Cash 70,754     90,548  
Short-term investments 6,509      
Amounts receivable 7,315     11,700  
Other assets 4,047     2,546  
  88,625     104,794  
       
Non-current assets      
       
Investments in associates 314,633     319,763  
Other investments 99,454     73,504  
Royalty, stream and other interests 1,553,282     1,378,253  
Goodwill 111,204     111,204  
Other assets 8,920     8,783  
  2,176,118     1,996,301  
       
Liabilities      
       
Current liabilities      
       
Accounts payable and accrued liabilities 7,557     6,825  
Dividends payable 11,108     10,121  
Lease liabilities 1,141     921  
  19,806     17,867  
       
Non-current liabilities      
       
Lease liabilities 7,127     6,701  
Long-term debt 315,390     147,950  
Deferred income taxes 96,235     86,572  
  438,558     259,090  
       
Equity      
       
Share capital 2,094,048     2,076,070  
Contributed surplus 78,661     77,295  
Accumulated other comprehensive income 43,658     47,435  
Deficit (478,807 )   (463,589 )
  1,737,560     1,737,211  
  2,176,118     1,996,301  

 

 

 
 

 

Osisko Gold Royalties Ltd

Consolidated Statements of Income
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
 
  Three months ended
September 30,
    Nine months ended
September 30,
 
  2023     2022     2023     2022  
  $     $     $     $  
               
               
Revenues 62,069     53,661     182,156     155,895  
               
Cost of sales (4,337 )   (4,407 )   (12,638 )   (11,344 )
Depletion (16,894 )   (14,161 )   (43,356 )   (37,310 )
Gross profit 40,838     35,093     126,162     107,241  
               
Other operating expenses              
General and administrative (11,697 )   (5,186 )   (25,214 )   (14,962 )
Business development (1,337 )   (1,203 )   (4,130 )   (3,884 )
Impairment of royalty and stream interests (17,490 )       (24,119 )    
Operating income 10,314     28,704     72,699     88,395  
Interest income 1,115     3,054     5,348     6,020  
Finance costs (6,086 )   (5,480 )   (12,401 )   (16,949 )
Foreign exchange (loss) gain (3,390 )   14,482     (3,543 )   23,011  
Share of (loss) income of associates (4,754 )   (1,143 )   8,268     383  
Other losses, net (19,862 )   (1,034 )   (41,962 )   (13,352 )
(Loss) earnings before income taxes (22,663 )   38,583     28,409     87,508  
Income tax recovery (expense) 2,664     (10,569 )   (9,599 )   (24,631 )
Net (loss) earnings from continuing operations (19,999 )   28,014     18,810     62,877  
Net loss from discontinued operations     (244,655 )       (268,475 )
Net (loss) earnings (19,999 )   (216,641 )   18,810     (205,598 )
               
Net (loss) earnings attributable to:              
Osisko Gold Royalties Ltd’s shareholders (19,999 )   (158,647 )   18,810     (141,162 )
Non-controlling interests     (57,994 )       (64,436 )
               
Net (loss) earnings per share from continuing operations attributable to Osisko Gold Royalties Ltd’s shareholders              
Basic and diluted (0.11 )   0.15     0.10     0.35  
               
Net (loss) earnings per share attributable to Osisko Gold Royalties Ltd’s shareholders              
Basic and diluted (0.11 )   (0.86 )   0.10     (0.79 )

 

 

 
 

Osisko Gold Royalties Ltd

Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
 
  Three months ended
September 30,
    Nine months ended
September 30,
 
  2023     2022     2023     2022  
  $     $     $     $  
                       
Operating activities                      
Net (loss) earnings from continuing operations (19,999 )   28,014     18,810     62,877  
Adjustments for:                      
Share-based compensation 3,967     2,052     9,124     5,010  
Depletion and amortization 17,223     14,423     44,248     38,108  
Impairment of royalty and stream interests 17,490         24,119      
Expected credit loss and write-off of other investments 17,349     276     37,480     1,180  
Finance costs 122     1,831     369     5,333  
Share of loss (income) of associates 4,754     1,143     (8,268 )   (383 )
Change in fair value of financial assets at fair value through profit and loss 2,513     758     6,267     15,824  
Net gain on dilution of investments         (4,842 )   (3,604 )
Loss on the deemed disposal of an associate         3,057      
Foreign exchange loss (gain) 3,399     (14,260 )   3,424     (22,729 )
Deferred income tax (recovery) expense (3,146 )   9,888     7,584     23,261  
Other 108     26     344     36  
Net cash flows provided by operating activities
before changes in non-cash working capital items
43,780     44,151     141,716     124,913  
Changes in non-cash working capital items (316 )   6,916     (5,410 )   1,626  
Net operating cash flows provided by continuing operations 43,464     51,067     136,306     126,539  
Net operating cash flows used by discontinued operations     (13,030 )       (65,116 )
Net cash flows provided by operating activities 43,464     38,037     136,306     61,423  
                       
Investing activities                      
Acquisitions of short-term investments (2,676 )       (6,473 )    
Acquisitions of investments     (1,494 )   (53,279 )   (8,174 )
Proceeds on disposal of investments 5,022         5,028     2,960  
Acquisitions of royalty and stream interests (26,768 )   (23,073 )   (239,530 )   (32,363 )
Cash outflow from deconsolidation of Osisko Development     (133,138 )       (133,138 )
Other (37 )   (15 )   (43 )   (18 )
Net investing cash flows used by continuing operations (24,459 )   (157,720 )   (294,297 )   (170,733 )
Net investing cash flows used by discontinued operations     (20,539 )       (114,984 )
Net cash flows used in investing activities (24,459 )   (178,259 )   (294,297 )   (285,717 )
                       
Financing activities                      
Bought deal equity financing             311,962  
Share issue costs             (13,941 )
Increase in long-term debt, net of discount on banker’s acceptances 19,802         206,711      
Repayment of long-term debt, net of discount on banker’s acceptances (28,151 )       (41,614 )   (113,120 )
Exercise of share options and shares issued under the share purchase plan 57     123     10,619     1,057  
Normal course issuer bid purchase of common shares     (16,451 )       (21,330 )
Dividends paid (10,321 )   (9,770 )   (29,366 )   (28,248 )
Withholding taxes on settlement of restricted and deferred share units         (4,349 )   (2,224 )
Other (265 )   (776 )   (711 )   (1,207 )
Net financing cash flows (used) provided by continuing operations (18,878 )   (26,874 )   141,290     132,949  
Net financing cash flows (used) provided by discontinued operations     (1,529 )       245,833  
Net cash flows (used) provided by financing activities (18,878 )   (28,403 )   141,290     378,782  
                       
Increase (decrease) in cash before effects of exchange rate changes on cash 127     (168,625 )   (16,701 )   154,488  
Effects of exchange rate changes on cash                      
Continuing operations 594     15,529     (3,093 )   23,837  
Discontinued operations     4,355         6,519  
Increase (decrease) in cash 721     (148,741 )   (19,794 )   184,844  
Cash – beginning of period 70,033     449,283     90,548     115,698  
Cash – end of period 70,754     300,542     70,754     300,542  

 

Posted November 9, 2023

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