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Osisko Reports Record 2023 Results and Provides 2024 Guidance and New 5-Year Outlook

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Osisko Reports Record 2023 Results and Provides 2024 Guidance and New 5-Year Outlook

 

 

 

 

 

Osisko Gold Royalties Ltd (TSX:OR) (NYSE:OR) is pleased to announce its consolidated financial results for the year-end 2023. Amounts presented are unaudited and in Canadian dollars, except where otherwise noted.

 

2023 Financial Highlights

  • 94,323 gold equivalent ounces (“GEOs1“) earned (89,367 GEOs in 2022);
  • Record revenues from royalties and streams of $247.3 million ($217.8 million in 2022);
  • Record cash flows generated by operating activities2 of $187.0 million ($175.1 million in 2022);
  • Net loss2 of $48.3 million, $0.26 per basic share2 (net earnings of $85.3 million, $0.47 per basic share in 2022), mostly due to non-cash impairment charges largely as a result of a fair value assessment of investments and royalty and stream interests of $149.6 million; and
  • Adjusted earnings4 of $100.1 million, $0.54 per basic share ($87.3 million, $0.48 per basic share in 2022)

 

Other Highlights

  • Total capital deployed of over $290.0 million across 5 new transactions:
    • Closing of the silver and copper streams on Metals Acquisitions Limited’s CSA mine in Australia by Osisko Bermuda Limited for US$150.0 million ($198.8 million);
    • Amendment to increase its effective silver stream from 12.5% to 87.5% on Taseko Mines Ltd.’s Gibraltar mine in BC for US$10.3 million ($13.6 million);
    • Acquisition of a 3% gold net smelter return royalty and 1% copper NSR royalty on Hot Chili Ltd.’s Costa Fuego copper-gold project in Chile for US$15.0 million ($19.9 million);
    • Acquisition of a 1% NSR royalty covering Cardinal Namdini Mining Ltd.’s Namdini gold project in Ghana for US$35.0 million ($48.4 million); and
    • Acquisition of a 1% NSR royalty on Cabral Gold Inc.’s Cuiú Cuiú gold project in Brazil for US$5.0 million ($6.8 million);
  • Publication of the 2023 Asset Handbook and third edition of the Corporation’s sustainability report, Growing Responsibly;
  • Appointment of Mr. Jason Attew as President and Chief Executive Officer (“CEO“) of the Corporation and Mr. Norman MacDonald as Chair of the Board of Directors;
  • Sale of the equity investment in Osisko Mining Inc. for gross proceeds of $131.6 million, which were used to reduce the revolving credit facility to a drawn balance of $191.9 million; and
  • Declaration of quarterly dividends totaling $0.235 per common share in 2023 ($0.22 per common share in 2022).

 

Subsequent to December 31, 2023

  • Additional repayments of $30.2 million on the revolving credit facility to a drawn balance of approximately $164.5 million;
  • Declaration of a quarterly dividend of $0.06 per common share payable on April 15, 2024 to shareholders of record as of the close of business on March 28, 2024; and
  • Announcement of Mr. David Smith joining the Corporation’s Board of Directors as an Independent Director.

 

Guidance for 2024 and 5-Year Outlook

 

2024 Guidance3

 

Osisko expects GEOs earned to range between 82,000 to 92,000 in 2024 at an average cash margin of 97%. The 2024 guidance assumes the commencement of GEOs earned from the CSA Copper Stream from June 15, as well as the commencement of production from G Mining Ventures Corp.’s Tocantinzinho project and Cardinal Namdini Mining Limited’s project later in the year.

 

Osisko’s 2024 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.

 

5-Year Outlook3

 

Osisko expects its portfolio to generate between 120,000 and 135,000 GEOs in 2028. The outlook assumes the commencement of production at The Windfall Mining Group’s Windfall and South32 Ltd’s Hermosa, amongst others. It also assumes that Capstone Copper Corp’s 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, including Alamos Gold Inc.’s Phase 3+ Expansion at Island Gold.

 

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 internal judgements of publicly available forecasts and other disclosures by the third-party owners and operators of the Corporation’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.

 

This 5-year outlook replaces the 5-year outlook previously released in 2023, which should be considered withdrawn. Investors should not use this 5-year outlook to extrapolate forecast results to any year within the 5-year period (2024-2028).

 

Management Commentary

 

Jason Attew, President & CEO of Osisko commented: “2023 was a banner year for Osisko marked by new annual records achieved with respect to GEOs earned, revenues, cash flows and margins, in addition to the closing of several key transactions which will positively contribute to Osisko’s cash flow and GEOs earned. The Corporation is now well-positioned with a materially improved balance sheet, and also with having completed recent changes as it relates to both management and the Board.

 

After working through a full portfolio review as it relates to Osisko’s growth trajectory and associated timelines, the Corporation’s 2024 guidance and updated 5-year outlook together provide what management believes to be achievable ranges. Concerning the 2024 guidance, it is worth noting that the lack of GEO deliveries resulting from the stoppage of operations at the Renard diamond mine will be partially offset by expected improvements at certain other operating assets within our portfolio, in addition to some new assets moving out of development and into production throughout the year. Furthermore, the Corporation’s expected growth trajectory over the next five years remains very much intact as mine expansions and new projects are completed by our partners between now and 2028.

 

Osisko enters 2024 with a continued focus on simplifying its story to further re-establish itself as a ‘pure-play’ precious metals royalty and streaming company. We possess an unmatched asset base as defined by exposure to Tier 1 mining jurisdictions and this unique aspect of our portfolio, when combined with our robust organic growth outlook, results in the Corporation being well-positioned to deliver long-term value to our current and future shareholders.”

 

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 19 producing assets. Osisko’s portfolio is anchored by its cornerstone asset, a 3-5% net smelter return royalty on the Canadian Malartic Complex, one of Canada’s largest gold operations.

 

Notes:

(1)   Gold Equivalent Ounces

 

GEOs are calculated on a quarterly basis and include royalties and streams. 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
December 31,
    Years ended
December 31,
 
  2023   2022     2023   2022  
                   
Gold(i) $1,971   $1,727     $1,940   $1,800  
Silver(ii) $23.20   $21     $23.35   $22  
                   
Exchange rate (US$/Can$)(iii) 1.3624   1.3578     1.3497   1.3013  

 

(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)   For the 2024 guidance, deliveries of silver, copper, and cash royalties have been converted to GEOs using commodity prices based on consensus prices and a gold/silver price ratio of 83:1. 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 76:1.

 

(4)   Non-IFRS Measures

 

The Corporation has included certain performance measures in this press release and in the annual Management and Discussion Analysis for the year ended December 31, 2023 that do not have any standardized meaning prescribed by IFRS Accounting Standards including (i) cash margin (in dollars and in percentage of revenues), (ii) adjusted earnings and (iii) adjusted earnings per basic 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 Accounting Standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS Accounting Standards. 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 Accounting Standards, 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.

 

In 2023, the following changes were made to the composition of adjusted earnings:

  (i) total gains and losses on investments on the statement of income (loss) are now excluded from net earnings (loss) from continuing operations; prior to this change, only the unrealized gains and losses on investments were excluded from net earnings (loss) from continuing operations;
  (ii) total foreign exchange gains and losses on the statement of income (loss) are now excluded from net earnings (loss) from continuing operations; prior to this change, only the foreign exchange gains and losses adjustments from operation activities on the statement of cash flows were excluded from net earnings (loss) from continuing operations;
  (iii) the tax impact of all adjustments in the calculation of adjusted earnings is now considered; prior to this change, the total deferred income taxes on the statement of earnings (loss) was excluded from net earnings (loss) from continuing operations.
     

 

These changes in the manner in which the Corporation calculates adjusted earnings were made to align the calculations with its peers and facilitate the comparison with these companies. These changes also affect indirectly adjusted earnings per basic share, because they are calculated from adjusted earnings. Comparative figures for 2022 have been restated to reflect the current composition of adjusted earnings.

 

Cash Margin (in dollars and in percentage of revenues)

 

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

 

           
  Three months ended
December 31,
    Years ended
December 31,
 
  2023     2022     2023      2022   
  ($’000)     ($’000)     ($’000)     ($’000)  
               
Royalty interests              
Revenues 44,519     40,038     160,430     144,066  
Less: cost of sales (excluding depletion) 22     (283 )   (511 )   (1,055 )
Cash margin (in dollars) 44,541     39,755     159,919     143,011  
               
Depletion (5,587 )   (6,993 )   (24,017 )   (27,362 )
Gross profit 38,954     32,762     135,902     115,649  
               
Stream interests              
Revenues 20,645     21,876     86,890     73,743  
Less: cost of sales (excluding depletion) (4,030 )   (4,449 )   (16,135 )   (15,021 )
Cash margin (in dollars) 16,615     17,427     70,755     58,722  
               
Depletion (7,450 )   (7,052 )   (32,376 )   (23,993 )
Gross profit 9,165     10,375     38,379     34,729  
               
Royalty and stream interests
Total cash margin (in dollars)
61,156     57,182     230,674     201,733  
Divided by: total revenues 65,164     61,914     247,320     217,809  
Cash margin (in percentage of revenues) 93.8 %   92.4 %   93.3 %   92.6 %
               
Total – Gross profit 48,119     43,137     174,281     150,378  
                       

 

Adjusted earnings and adjusted earnings per basic share

 

Adjusted earnings is defined as: net earnings (loss) from continuing operations, adjusted for certain items: foreign exchange gains (losses), impairment charges and reversal related to royalty, stream and other interests, expected credit losses and impairment of investments, gains (losses) on disposal of assets, gains (losses) on investments, share of income (loss) of associates, transaction costs and other items such as non-cash gains (losses), as well as the impact of income taxes on these items. 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 
December 31,
  Years ended 
December 31,
 
  2023   2022   2023   2022  
(in thousands of dollars, except per share amounts) $   $   $   $  
         
Net (loss) earnings from continuing operations (67,153 ) 22,408   (48,343 ) 85,285  
         
Adjustments:        
Impairment of royalty and stream interests 23,500   1,818   47,619   1,818  
Foreign exchange (gain) loss (5,146 ) 2,865   (1,603 ) (20,146 )
Share of loss (income) of associates 343   2,246   (7,925 ) 1,863  
Expected credit losses, write-offs and impairment of investments 64,500   1,181   101,980   2,361  
Loss on investments 14,326   1,024   18,808   13,196  
Other non-cash gains (635 )   (635 )  
Tax impact of adjustments (346 ) (1,456 ) (9,828 ) 2,951  
         
Adjusted earnings 29,389   30,086   100,073   87,328  
         
Weighted average number of common shares outstanding (000’s) 185,543   184,265   185,226   180,398  
         
Adjusted earnings per basic share 0.16   0.16   0.54   0.48  
 

 

 

 

Osisko Gold Royalties Ltd
Condensed Consolidated Balance Sheets
As at December 31, 2023 and 2022
(tabular amounts expressed in thousands of Canadian dollars)
 
  December 31,     December 31,  
  2023     2022  
  $     $  
       
Assets      
       
Current assets      
       
Cash 67,721     90,548  
Short-term investments 8,200      
Amounts receivable 6,282     11,700  
Other assets 1,842     2,546  
  84,045     104,794  
       
Non-current assets      
       
Investments in associates 115,651     319,763  
Other investments 93,025     73,504  
Royalty, stream and other interests 1,553,111     1,378,253  
Goodwill 111,204     111,204  
Other assets 8,951     8,783  
  1,965,987     1,996,301  
       
Liabilities      
       
Current liabilities      
       
Accounts payable and accrued liabilities 8,209     6,825  
Dividends payable 11,121     10,121  
Lease liabilities 1,122     921  
  20,452     17,867  
       
Non-current liabilities      
       
Lease liabilities 6,879     6,701  
Long-term debt 191,879     147,950  
Deferred income taxes 96,279     86,572  
  315,489     259,090  
       
Equity      
       
Share capital 2,097,691     2,076,070  
Contributed surplus 79,446     77,295  
Accumulated other comprehensive income 28,058     47,435  
Deficit (554,697 )   (463,589 )
  1,650,498     1,737,211  
  1,965,987     1,996,301  
           

 

 

 

Osisko Gold Royalties Ltd
Condensed Consolidated Statements of Income (Loss)
For the three months and the years ended December 31, 2023 and 2022
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
 
  Three months ended
December 31,
    Years ended
December 31,
 
  2023     2022     2023     2022  
  $     $     $     $  
               
               
Revenues 65,164     61,914     247,320     217,809  
               
Cost of sales (4,008 )   (4,732 )   (16,646 )   (16,076 )
Depletion (13,037 )   (14,045 )   (56,393 )   (51,355 )
Gross profit 48,119     43,137     174,281     150,378  
               
Other operating expenses              
General and administrative (7,615 )   (5,254 )   (32,829 )   (20,216 )
Business development (2,049 )   (1,491 )   (6,179 )   (5,375 )
Impairment of royalty interests (23,500 )   (1,818 )   (47,619 )   (1,818 )
Operating income 14,955     34,574      87,654     122,969  
Interest income 1,483     3,747     6,831     9,767  
Finance costs (6,545 )   (5,390 )   (18,946 )   (22,339 )
Foreign exchange gain (loss) 5,146     (2,865 )   1,603     20,146  
Share of (loss) gain of associates (343 )   (2,246 )   7,925     (1,863 )
Other losses, net (78,191 )   (2,205 )   (120,153 )   (15,557 )
(Loss) earnings before income taxes (63,495 )   25,615     (35,086 )   113,123  
Income tax expense (3,658 )   (3,207 )   (13,257 )   (27,838 )
Net (loss) earnings from continuing operations (67,153 )   22,408     (48,343 )   85,285   
Net loss from discontinued operations             (268,475 )
Net (loss) earnings (67,153 )   22,408     (48,343 )   (183,190 )
               
Net (loss) earnings attributable to:              
Osisko Gold Royalties Ltd’s shareholders (67,153 )   22,408     (48,343 )   (118,754 )
Non-controlling interests             (64,436 )
               
Net (loss) earnings per share from continuing operations              
Basic and diluted (0.36 )   0.12     (0.26 )   0.47  
               
Net (loss) earnings per share attributable to Osisko Gold Royalties Ltd’s shareholders              
Basic and diluted (0.36 )   0.12     (0.26 )   (0.66 )
                       

 

 

 

Osisko Gold Royalties Ltd
Condensed Consolidated Statements of Cash Flows
For the three months and the years ended December 31, 2023 and 2022

(tabular amounts expressed in thousands of Canadian dollars)
 
  Three months ended
December 31,
    Years ended
December 31,
 
  2023     2022     2023     2022  
  $     $     $     $  
               
Operating activities              
Net (loss) earnings from continuing operations (67,153 )   22,408     (48,343 )   85,285  
Adjustments for:              
Share-based compensation 1,283     2,109     10,407     7,119  
Depletion and amortization 13,367     14,307     57,615     52,415  
Impairment of royalty and stream interests 23,500         47,619     1,818  
Expected credit loss and write-off of other investments         37,209      
Impairment of investments in associates 64,500     2,999     64,771     2,361  
Finance costs 123     2,007     492     7,340  
Share of loss (income) of associates 343     2,246     (7,925 )   1,863  
Net gain on acquisition of investments 7,437             (48 )
Change in fair value of financial assets and liabilities at fair value through profit and loss 6,889     1,024     13,156     16,848  
Net gain on dilution of investments in associates         (4,842 )   (3,604 )
Loss on disposal and deemed disposal of associates         10,494      
Foreign exchange (gain) loss (5,205 )   2,822     (1,781 )   (19,907 )
Deferred income tax expense 3,088     3,427     10,672     26,688  
Other (976 )   32     (632 )   116  
Net cash flows provided by operating activities before changes in non-cash working capital items 47,196     53,381     188,912     178,294  
Changes in non-cash working capital items 3,525     (4,857 )   (1,885 )   (3,231 )
Net operating cash flows provided by continuing operations 50,721     48,524     187,027     175,063  
Net operating cash flows used by discontinued operations             (65,116 )
Net cash flows provided by operating activities 50,721     48,524     187,027     109,947  
               
Investing activities              
Acquisitions of short-term investments (1,889 )       (8,362 )    
Acquisitions of investments     (4,298 )   (53,279 )   (12,472 )
Proceeds from disposal of investments 127,931         132,959     2,960  
Acquisitions of royalty and stream interests (51,578 )   (91,846 )   (291,108 )   (124,209 )
Cash balance of Osisko Development Corp. at the time of deconsolidation             (133,138 )
Other (3 )       (46 )   (18 )
Net investing cash flows provided (used) by continuing operations 74,461     (96,144 )   (219,836 )   (266,877 )
Net investing cash flows used by discontinued Operations             (114,984 )
Net cash flows provided (used) by investing activities 74,461     (96,144 )   (219,836 )   (381,861 )
               
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 48,499     147,833     255,210     147,833  
Repayment of long-term debt, net of discount on banker’s acceptances (165,914 )   (300,000 )   (207,528 )   (413,120 )
Exercise of share options and shares issued under the share purchase plan 2,226     3,330     12,845     4,387  
Normal course issuer bid purchase of common shares     (805 )       (22,135 )
Dividends paid (10,537 )   (9,681 )   (39,903 )   (37,929 )
Capital payments on lease liabilities (973 )   (222 )   (973 )   (874 )
Withholding taxes on settlement of restricted and deferred share units (501 )       (4,850 )   (2,224 )
Other 220         (491 )   (555 )
Net financing cash flows (used) provided by continuing operations (126,980 )   (159,545 )   14,310     (26,596 )
Net financing cash flows provided by discontinued operations             245,833  
Net cash flows (used in) provided by financing activities (126,980 )   (159,545 )   14,310     219,237  
               
Decrease in cash before effects of exchange rate changes (1,798 )   (207,165 )   (18,499 )   (52,677 )
Effects of exchange rate changes on cash              
Continuing operations (1,235 )   (2,829 )   (4,328 )   21,008  
Discontinued operations             6,519  
Net decrease in cash (3,033 )   (209,994 )   (22,827 )   (25,150 )
Cash – beginning of period 70,754     300,542     90,548     115,698  
Cash – end of period 67,721     90,548     67,721     90,548  

 

Posted February 21, 2024

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