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Osisko Reports Record 2022 Results and Provides 2023 Guidance and 5-Year Outlook

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Osisko Reports Record 2022 Results and Provides 2023 Guidance and 5-Year Outlook

 

 

 

 

 

Record cash margin of $201.7 million

 

Record operating cash flows from continuing operations of $175.1 million

 

Osisko Gold Royalties Ltd (TSX:OR)  (NYSE:OR) announced its consolidated financial results for the fourth quarter and full year 2022, and provided guidance for 2023 as well as its updated 5-year growth outlook. Amounts presented are in Canadian dollars, except where otherwise noted.

 

2022 Financial Highlights

  • Deconsolidation of Osisko Development Corp. as of September 30, 2022 and presentation of its results as discontinued operations on the consolidated statements of loss and the consolidated statements of cash flows;
  • 89,367 GEOs1 earned, an annual record and an increase of 12% over 2021 (80,000 GEOs);
  • Record revenues from royalties and streams of $217.8 million (2021 – $199.6 million; $224.9 million including offtakes); Record cash flows generated by operating activities from continuing operations of $175.1 million (2021 – $153.2 million);
  • Record cash margin2 from royalties and streams of $201.7 million or 93% (2021 – $186.3 million or 93%; $187.2 million including offtakes);
  • Net earnings from continuing operations of $85.3 million, or $0.47 per share (2021 – $76.6 million or $0.46 per basic share); and
  • Record adjusted earnings2 of $111.3 million, or $0.62 per basic share (2021 – $94.4 million, $0.56 per basic share).

 

Q4 2022 Financial Highlights

  • 25,023 GEOs1 earned, a quarterly record (Q4 2021 – 19,830 GEOs);
  • Record quarterly revenues from royalties and streams of $61.9 million (Q4 2021 – $50.7 million);
  • Cash flows generated by operating activities from continuing operations of $48.5 million (Q4 2021 – $35.1 million);
  • Record quarterly cash margin2 from royalties and streams of $57.2 million or 92% (Q4 2021 – $47.0 million or 93%);
  • Net earnings from continuing operations of $22.4 million, or $0.12 per share (Q4 2021 – $21.2 million or $0.13 per basic share); and
  • Record quarterly adjusted earnings2 of $34.9 million, or $0.19 per basic share (Q4 2021 – $23.8 million, $0.14 per basic share).

 

Sandeep Singh, President and CEO of Osisko commented: “As discussed in our Q4 2022 preliminary results release, Osisko had an exceptional year in 2022. We had successive quarters of record GEO deliveries, revenues and cash margins, we were active on several high-quality transactions, and returned capital to shareholders via dividends and share buy-backs. We continue to benefit from a sustained period of organic growth and we have simplified the business positioning Osisko to unlock significant value in 2023 for shareholders.”

 

Other Highlights

  • Bought deal public offering of 18,600,000 common shares at a price of US$13.45 per common share for total gross proceeds of US$250.2 million;
  • Osisko Bermuda Limited, a wholly-owned subsidiary of Osisko, entered into a revised binding agreement with Metals Acquisition Corp. with respect to a US$75.0 million silver stream to facilitate MAC’s acquisition of the producing CSA mine in New South Wales, Australia). Osisko Bermuda also entered into a backstop financing agreement with respect to an up to US$75.0 million copper stream;
  • Osisko Bermuda entered into an agreement with Osisko Development, with respect to a metals stream on the Trixie property, as well as mineral claims covering more than 17,000 acres in Central Utah’s historic Tintic Mining District;
  • Acquired a 1.0% net smelter return (“NSR”) royalty covering the currently known mineralization and prospective exploration areas that constitute the Marimaca copper project located in Antofagasta, Chile, for US$15.5 million ($20.3 million);
  • Acquired a 0.6% NSR royalty for US$50.0 million ($67.2 million) covering the entire 4,979 hectare Cascabel property, including the Alpala project, located in northeastern Ecuador and operated by SolGold plc;
  • Took up a 20% participation right in Carbon Streaming Corporation’s Magdalena Bay Blue carbon project, expected to be one of the largest blue carbon conservation projects in the world. Osisko has funded US$1.2 million towards the development of the project and will receive a stream of approximately 40,000 carbon credits annually or 4% of annual production;
  • Increased the accordion feature of the revolving credit facility from $100.0 million to $200.0 million and extended the maturity date to September 29, 2026;
  • Repaid the $300 million convertible debentures that came to maturity, using $150.0 million from the cash balance and drew the credit facility for the same amount;
  • Repurchased 1.7 million common shares for $22.1 million under the normal course issuer bid (average acquisition price of $13.06);
  • Added Ms. Edie Hofmeister and Mr. Rob Krcmarov to the Board as independent directors; and
  • Declared quarterly dividends totaling $0.22 per common share in 2022 compared to $0.21 per common share in 2021.

 

Subsequent to December 31, 2022

  • Declared a quarterly dividend of $0.055 per common share payable on April 14, 2023 to shareholders of record as of the close of business on March 31, 2023.

 

2023 Guidance and 5-Year Outlook

 

2023 Guidance

 

Osisko expects GEOs earned to range between 95,000 to 105,000 GEOs in 2023 at an average cash margin of 93%.

 

Osisko’s 2023 guidance on royalty and stream interests is largely based on publicly available forecasts from our operating partners. When publicly available forecasts on properties are not available, Osisko obtains internal forecasts from the producers or uses management’s best estimate.

 

For the 2023 guidance, deliveries of silver, diamond, copper, and cash royalties have been converted to GEOs using commodity prices based on consensus prices and a gold/silver price ratio of 80:1. The 2023 guidance also forecasts the closing of the CSA Silver Stream in the second quarter of 2023, with an effective date of February 1, 2023.

 

5-Year Outlook3

 

Osisko expects its portfolio to generate between 130,000 and 140,000 GEOs in 2027. The outlook assumes the commencement of production at the San Antonio, Cariboo, Windfall and Back Forty projects. It also assumes that Mantos Blancos will have reached its nameplate capacity following the recent expansion of its activities, as well as increased production from certain other operators that have announced planned expansions. Further, the outlook assumes that production from the Renard diamond stream will have ceased by 2027 (while there remain opportunities for mine life extensions under study by the operator), but such GEOs are expected to be largely replaced by initial production from other assets.

 

Beyond this growth profile, Osisko owns several other growth assets, which have not been factored in the 5-year outlook, as their timelines are either later, or less clear. As the operators provide further clarity on these assets, Osisko will seek to include them in its long-term outlook.

 

This 5-year outlook is based on publicly available forecasts and other disclosure by the third-party owners and operators of the Company’s assets, and could differ materially from actual results. When publicly available forecasts on properties are not available, Osisko obtains internal forecasts from the producers or uses management’s best estimate. The commodity price assumptions that were used in the 5-year outlook are based on current long-term consensus and a gold/silver price ratio of 75:1.

 

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. 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.

 

Notes:

  • 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. Offtake agreements are converted using the financial settlement equivalent divided by the average gold price for the period.

 

Average Metal Prices and Exchange Rate

  Three months ended
December 31,
  Years ended
December 31,
    2022   2021     2022   2021
           
Gold(i) $1,727 $1,796   $1,800 $1,799
Silver(ii) $21 $23   $22 $25
           
Exchange rate (US$/Can$)(iii)   1.3578   1.2603     1.3013   1.2535

 

  (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) 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 (loss) and (iii) adjusted earnings (loss) 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
December 31,
    Years ended
December 31,
 
  2022     2021     2022     2021  
  $     $     $     $  
               
Royalty interests              
Revenues 40,038     34,502     144,066     140,279  
Less: cost of sales (excluding depletion) (283 )   (233 )   (1,055 )   (551 )
Cash margin (in dollars) 39,755     34,269     143,011     139,728  
               
Depletion (6,993 )   (7,324 )   (27,362 )   (28,958 )
Gross profit 32,762     26,945     115,649     110,770  
               
Stream interests              
Revenues 21,876     16,171     73,743     59,333  
Less: cost of sales (excluding depletion) (4,449 )   (3,413 )   (15,021 )   (12,752 )
Cash margin (in dollars) 17,427     12,758     58,722     46,581  
               
Depletion (7,052 )   (4,940 )   (23,993 )   (19,135 )
Gross profit 10,375     7,818     34,729     27,446  
               
Royalty and stream interests
Total cash margin (in dollars)
57,182     47,027     201,733     186,309  
Divided by: total revenues 61,914     50,673     217,809     199,612  
Cash margin (in percentage of revenues) 92.4 %   92.8 %   92.6 %   93.3 %
               
Offtake interests              
Revenues             25,265  
Less: cost of sales (excluding depletion)             (24,343 )
Cash margin (in dollars)             922  
Cash margin (in percentage of revenues) %   %   %   3.6 %
               
Depletion             (268 )
Gross profit –      –      –      654  
               
Total – Gross profit 43,137     34,763     150,378     138,870  

Adjusted earnings (loss) and adjusted earnings (loss) per basic share

 

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

 

    Three months ended 
December 31,
  Years ended 
December 31,
 
      2022 2021   2022   2021  
(in thousands of dollars, except per share amounts)     $ $   $   $  
             
Net earnings from continuing operations     22,408 21,233   85,285   76,627  
             
Adjustments:            
Impairment of royalty, stream and other interests     1,818 650   1,818   2,938  
Impairment of investments   1,181   2,361   2,112  
Foreign exchange loss (gain)     2,822 4   (19,907 ) 186  
Unrealized net loss (gain) on investments     1,024 (6,143 ) 13,196   (14,403 )
Share of loss of associates     2,246 883   1,863   2,246  
Deferred income tax expense   3,427 7,181   26,688   24,695  
             
Adjusted earnings     34,926 23,808   111,304   94,401  
             
Weighted average number of common shares outstanding (000’s)     184,265 167,924   180,398   167,786  
             
Adjusted earnings per basic share     0.19 0.14   0.62   0.56  

 

(3) 5-year Outlook

The 5-year outlook presented in this press release replaces the 5-year outlook previously released in 2022. Investors should not use this 5-year outlook to extrapolate forecast results to any year within the 5-year period (2023-2027).

 

 

 

 

Osisko Gold Royalties Ltd
Consolidated Balance Sheets
As at December 31, 2022 and 2021
(tabular amounts expressed in thousands of Canadian dollars)

 

      December 31,     December 31,  
      2022     2021  
      $     $  
           
Assets          
           
Current assets          
           
Cash     90,548     115,698  
Amounts receivable     11,700     14,691  
Inventories         18,596  
Other assets     2,546     3,941  
      104,794     152,926  
           
Non-current assets          
           
Investments in associates     319,763     125,354  
Other investments     73,504     169,010  
Royalty, stream and other interests     1,378,253     1,154,801  
Mining interests and plant and equipment     6,947     635,655  
Exploration and evaluation         3,635  
Goodwill     111,204     111,204  
Other assets     1,836     18,037  
      1,996,301     2,370,622  
           
Liabilities          
           
Current liabilities          
           
Accounts payable and accrued liabilities     6,825     30,049  
Dividends payable     10,121     9,157  
Provisions and other liabilities     921     12,179  
Current portion of long-term debt         294,891  
      17,867     346,276  
           
Non-current liabilities          
           
Provisions and other liabilities     6,701     60,334  
Long-term debt     147,950     115,544  
Deferred income taxes     86,572     68,407  
      259,090     590,561  
           
Equity          
           
Share capital     2,076,070     1,783,689  
Warrants         18,072  
Contributed surplus     77,295     42,525  
Equity component of convertible debentures         14,510  
Accumulated other comprehensive income     47,435     58,851  
Deficit     (463,589 )   (283,042 )
Equity attributable to Osisko Gold Royalties Ltd’s shareholders     1,737,211     1,634,605  
Non-controlling interests         145,456  
Total equity     1,737,211     1,780,061  
      1,996,301     2,370,622  

 

 

 

 

Osisko Gold Royalties Ltd
Consolidated Statements of Loss
For the three months and the years ended December 31, 2022 and 2021

(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

 

      Three months ended
December 31,
    Years ended
December 31,
 
      2022     2021     2022     2021  
      $     $     $     $  
                   
                   
Revenues     61,914     50,673     217,809     224,877  
                   
Cost of sales     (4,732 )   (3,646 )   (16,076 )   (37,646 )
Depletion     (14,045 )   (12,264 )   (51,355 )   (48,361 )
Gross profit     43,137      34,763      150,378     138,870  
                   
Other operating expenses                  
General and administrative     (5,254 )   (4,704 )   (20,216 )   (19,610 )
Business development     (1,491 )   (1,130 )   (5,375 )   (4,168 )
Impairment of royalty interests     (1,818 )   (650 )   (1,818 )   (2,938 )
Operating income     34,574     28,279     122,969     112,154  
Interest income     3,747     1,098     9,767     4,292  
Finance costs     (5,390 )   (5,989 )   (22,339 )   (23,838 )
Foreign exchange (loss) gain     (2,865 )   59     20,146     (133 )
Share of loss of associates     (2,246 )   (883 )   (1,863 )   (2,246 )
Other (losses) gains, net     (2,205 )   6,176     (15,557 )   12,324  
Earnings before income taxes     25,615     28,740     113,123     102,553  
Income tax expense     (3,207 )   (7,507 )   (27,838 )   (25,926 )
Net earnings from continuing operations   22,408      21,233     85,285     76,627   
Net loss from discontinued operations         (56,456 )   (268,475 )   (133,302 )
Net earnings (loss)     22,408     (35,223 )   (183,190 )   (56,675 )
                   
Net earnings (loss) attributable to:                  
Osisko Gold Royalties Ltd’s shareholders     22,408     (21,184 )   (118,754 )   (23,554 )
Non-controlling interests         (14,039 )   (64,436 )   (33,121 )
                   
Net earnings per share from continuing operations                  
Basic and diluted     0.12     0.13     0.47     0.46  
                   
Net earnings (loss) per share attributable to Osisko Gold Royalties Ltd’s shareholders                  
Basic and diluted     0.12     (0.13 )   (0.66 )   (0.14 )

 

 

 

 

Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three months and the years ended December 31, 2022 and 2021

(tabular amounts expressed in thousands of Canadian dollars)

 

      Three months ended
December 31,
    Years ended
December 31,
 
           
      2022     2021     2022     2021  
      $     $     $     $  
                   
Operating activities                  
Net earnings from continuing operations     22,408     21,233     85,285     76,627  
Adjustments for:                  
Share-based compensation     2,109     2,096     7,119     7,729  
Depletion and amortization     14,307     12,553     52,415     49,422  
Impairment of assets     2,999     650     4,179     5,050  
Finance costs     2,007     1,807     7,340     6,973  
Share of loss of associates     2,246     883     1,863     2,246  
Net gain on acquisition of investments             (48 )   (7,416 )
Change in fair value of financial assets and liabilities at fair value through profit and loss     1,024     (6,143 )   16,848     (6,987 )
Net gain on dilution of investments             (3,604 )    
Foreign exchange loss (gain)     2,822     4     (19,907 )   186  
Deferred income tax expense     3,427     7,180     26,688     24,695  
Other     32     13     116     107  
Net cash flows provided by operating activities before changes in non-cash working capital items   53,381     40,276     178,294     158,632  
Changes in non-cash working capital items     (4,857 )   (5,157 )   (3,231 )   (5,413 )
Net operating cash flows provided by continuing operations   48,524     35,119     175,063     153,219  
Net operating cash flows used by discontinued operations         (22,348 )   (65,116 )   (47,124 )
Net cash flows provided by operating activities   48,524     12,771     109,947     106,095  
                   
Investing activities                  
Net disposal of short-term investments             2,960     3,501  
Acquisition of investments     (4,298 )   (4,610 )   (12,472 )   (35,419 )
Proceeds from disposal of investments         3,007         7,882  
Acquisitions of royalty and stream interests     (91,846 )   (22,249 )   (124,209 )   (90,980 )
Cash balance of Osisko Development Corp. at the time of deconsolidation             (133,138 )    
Other         80     (18 )   (40 )
Net investing cash flows used by continuing operations   (96,144 )   (23,772 )   (266,877 )   (115,056 )
Net investing cash flows used by discontinued
operations
        (18,655 )   (114,984 )   (156,982 )
Net cash flows used in investing activities   (96,144 )   (42,427 )   (381,861 )   (272,038 )
                   
Financing activities                  
Bought deal equity financing             311,962      
Share issue costs             (13,941 )    
Increase in long-term debt     147,833         147,833     50,000  
Repayment of long-term debt     (300,000 )       (413,120 )   (50,000 )
Exercise of share options and shares issued under the share purchase plan     3,330     1,353     4,387     14,544  
Normal course issuer bid purchase of common shares   (805 )   (290 )   (22,135 )   (30,791 )
Dividends paid     (9,681 )   (8,719 )   (37,929 )   (32,464 )
Capital payments on lease liabilities     (222 )   (212 )   (874 )   (834 )
Withholding taxes on settlement of restricted and deferred share units         (133 )   (2,224 )   (3,715 )
Other         3     (555 )   (1,079 )
Net financing cash flows used by continuing operations   (159,545 )   (7,998 )   (26,596 )   (54,339 )
Net financing cash flows provided by
discontinued operations
        2,431     245,833     34,738  
Net cash flows (used in) provided by financing activities   (159,545 )   (5,567 )   219,237     (19,601 )
                   
Decrease in cash before effects of exchange rate changes   (207,165 )   (35,233 )   (52,677 )   (185,544 )
Effects of exchange rate changes on cash                  
Continuing operations     (2,829 )   (852 )   21,008     (920 )
Discontinued operations         (172 )   6,519     (362 )
Net decrease in cash     (209,994 )   (36,247 )   (25,150 )   (186,826 )
Cash – beginning of period   300,542     151,945     115,698     302,524  
Cash – end of period     90,548     115,698     90,548     115,698  

 

Posted February 26, 2023

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