Osisko Reports Second Quarter 2020 Results and Updated Guidance for Second Half of 2020

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

Highlights

Updated guidance for the second half of the year of 33,000 to 35,000 gold equivalent ounces¹;
Revenues from royalties and streams of $28.7 million (Q2 2019 – $33.8 million);
Cash flows from operating activities of $15.4 million (Q2 2019 – $21.4 million); $18.6 million before changes in non-cash working capital items (Q2 2019 – $23.5 million);
Earned 12,386 GEOs (Q2 2019 – 19,651 GEOs);
Net earnings of $13.0 million, $0.08 per basic share (Q2 2019 – net loss of $6.5 million, $0.04 per basic share);
Adjusted earnings² of $5.7 million or $0.03 per basic share (Q2 2019 – $8.2 million, $0.05 per basic share);
Cash operating margin³ of 95% from royalty and stream interests, generating $27.2 million in operating cash flow, in addition to a cash operating margin of $0.6 million from offtake interests;
Cash on hand of $202.0 million and up to $400.0 million further available under the credit facility as at June 30, 2020;
Closed a non-brokered private placement of $85.0 million with Investissement Québec on April 1, 2020;
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;
Commercial production was declared by the operator of the Eagle Gold mine on July 1, 2020, on which the Company holds a 5% NSR royalty;
As a result of the COVID-19 pandemic, several of Osisko’s assets were temporarily placed on care and maintenance by our operating partners during the second quarter, but the affected assets have now largely resumed operations; and
Declared a quarterly dividend of $0.05 per common share paid on July 15, 2020 to shareholders of record as of the close of business on June 30, 2020.

Performance

Sean Roosen, Chair and Chief Executive Officer, commented on the activities of the second quarter of 2020: “Even though our results for the second quarter have been affected by the impacts of the COVID‑19 pandemic, our business model remains extremely strong and the rising gold price helped to partially offset the closures. We look forward to benefiting from the gold price environment and our assets being at full capacity for the rest of the year.”

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 until further notice.

As the main mining assets on which Osisko holds a royalty, stream or other interest have mostly returned to operations, Osisko has updated its guidance for the six months and the year ending December 31, 2020. This guidance excludes any potential impact on GEOs and cash margins if the Renard diamond mine would restart its operations in 2020 or if additional periods of care and maintenance were announced in light of the development of the COVID-19 pandemic.


	Six months ending December 31, 2020 ⁽ⁱ⁾			Year ending December 31, 2020 ⁽ⁱ⁾
	Low	High	Cash margin	Low	High	Cash margin
	(GEOs)	(GEOs)	(%)	(GEOs)	(GEOs)	(%)

Royalty interests	24,800	26,250	100	45,500	46,950	100
Stream interests	8,000	8,450	87	17,150	17,650	81
Offtake interests	200	300	2	850	900	3
	33,000	35,000		63,500	65,500

(i) Excluding any potential revenues from the Renard diamond mine for the six months ending December 31, 2020.

For the full year 2020 guidance, actual results were used for the first semester and added to the forecast for the second semester of the year. For the outlook of the last 6 months of 2020, silver and cash royalties have been converted to GEOs using commodity prices of US$1,900 per ounce of gold, US$22 per ounce of silver and an exchange rate (US$/C$) of 1.33.

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 138 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 14.7% interest in Osisko Mining Inc., 18.6% interest in Osisko Metals Incorporated and an 18.3% interest in Falco Resources Ltd.

Notes:
	(1)	GEOs are calculated on a quarterly basis and include royalties, streams and offtakes. Silver earned from royalty and stream agreements was converted to gold equivalent ounces by multiplying the silver ounces by the average silver price for the period and dividing by the average gold price for the period. Diamonds, other metals and cash royalties were converted into gold equivalent ounces by dividing the associated revenue by the average gold price for the period. Offtake agreements were converted using the financial settlement equivalent divided by the average gold price for the period.

Average Metal Prices and Exchange Rate

	Three months ended June 30,		Six months ended June 30,
	2020	2019	2020	2019

Gold ⁽ⁱ⁾	$1,711	$1,309	$1,645	$1,307
Silver⁽ⁱⁱ⁾	$16	$15	$17	$15

Exchange rate (US$/Can$)⁽ⁱⁱⁱ⁾	1.3853	1.3377	1.3651	1.3336

(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)

The Company has included certain non-IFRS measures including “Adjusted Earnings” and “Adjusted Earnings per basic share” to supplement its consolidated financial statements, which are presented in accordance with IFRS.

The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data 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.

“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 exploration and evaluation assets”, “Unrealized gain (loss) on investments”, “”, “Share of loss of associates”, “Deferred income tax expense (recovery)” and other unusual items such as transaction costs.

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 June 30,				Six months ended June 30,
	2020		2019		2020		2019

(in thousands of dollars, except per share amounts)	$		$		$		$

Net earnings (loss)	13,048		(6,547	)	(270	)	(33,096	)

Adjustments:
Impairment of assets	3,117		–		30,323		38,900
Foreign exchange loss (gain)	544		484		(1,557	)	1,643
Unrealized (gain) loss on investments	(13,923	)	5,298		(15,458	)	5,333
Share of loss of associates	1,458		8,780		3,174		10,542
Deferred income tax expense (recovery)	1,489		216		(2,025	)	(9,266	)

Adjusted earnings	5,733		8,231		14,187		14,056

Weighted average number of common shares outstanding (000’s)	164,733		154,988		160,067		155,023

Adjusted earnings per basic share	0.03		0.05		0.09		0.09

(3)

Cash operating margin, which represents revenues less cost of sales, is a non-IFRS measure. The Company believes that this non-IFRS generally accepted industry measure provides a realistic indication of operating performance and provides a useful comparison with its peers. The following table reconciles the cash margin to the revenues and cost of sales presented in the consolidated statements of income (loss) and related notes (In thousands of dollars):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	$		$		$		$

Revenues	40,758		131,606		93,363		232,332
Less: Revenues from offtake interests	(12,025	)	(97,825	)	(26,796	)	(165,051	)
Revenues from royalty and stream interests	28,733		33,781		66,567		67,281

Cost of sales	(12,945	)	(100,093	)	(30,228	)	(170,197	)
Less: Cost of sales of offtake interests	11,454		96,642		25,376		163,152
Cost of sales of royalty and stream interests	(1,491	)	(3,451	)	(4,852	)	(7,045	)




Revenues from royalty and stream interests	28,733		33,781		66,567		67,281
Less: Cost of sales of royalty and stream interests	(1,491	)	(3,451	)	(4,852	)	(7,045	)
Cash margin from royalty and stream interests	27,242		30,330		61,715		60,236

	95	%	90	%	93	%	90	%

Revenues from offtake interests	12,025		97,825		26,796		165,051
Less: Cost of sales of offtake interests	(11,454	)	(96,642	)	(25,376	)	(163,152	)
Cash margin from offtake interests	571		1,183		1,420		1,899

	5	%	1	%	5	%	1	%

Osisko Gold Royalties Ltd
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

	June 30,		December 31,
	2020		2019
		$		$


Assets

Current assets

Cash	201,971		108,223
Short-term investments	21,105		20,704
Amounts receivable	8,355		6,330
Other assets	5,878		5,172
	237,309		140,429

Non-current assets

Investments in associates	123,907		103,640
Other investments	107,954		67,886
Royalty, stream and other interests	1,128,673		1,130,512
Mining interests and plant and equipment	369,536		343,693
Exploration and evaluation	43,065		42,949
Goodwill	111,204		111,204
Other assets	6,940		6,940
	2,128,588		1,947,253

Liabilities

Current liabilities

Accounts payable and accrued liabilities	14,379		18,772
Dividends payable	8,259		7,874
Current portion of long-term debt	49,298		–
Provisions and other liabilities	2,377		1,289
	74,313		27,935

Non-current liabilities

Provisions and other liabilities	28,918		29,365
Long-term debt	372,354		349,042
Deferred income taxes	48,327		47,465
	523,912		453,807

Equity

Share capital	1,742,111		1,656,350
Warrants	18,072		18,072
Contributed surplus	38,220		37,642
Equity component of convertible debentures	17,601		17,601
Accumulated other comprehensive income	60,712		13,469
Deficit	(272,040	)	(249,688	)
	1,604,676		1,493,446
	2,128,588		1,947,253

Osisko Gold Royalties Ltd
Consolidated Statements of Income (Loss)
For the three and six months ended June 30, 2020 and 2019
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	$		$		$		$


Revenues	40,758		131,606		93,363		232,332

Cost of sales	(12,945	)	(100,093	)	(30,228	)	(170,197	)
Depletion of royalty, stream and other interests	(8,692	)	(11,825	)	(22,392	)	(24,201	)
Gross profit	19,121		19,688		40,743		37,934

Other operating expenses
General and administrative	(5,818	)	(4,574	)	(12,102	)	(10,475	)
Business development	(1,634	)	(1,786	)	(2,772	)	(3,524	)
Exploration and evaluation	(34	)	(58	)	(76	)	(91	)
Impairment of assets	–		–		(26,300	)	(38,900	)
Operating income (loss)	11,635		13,270		(507	)	(15,056	)
Interest and dividend income	1,075		920		2,196		2,092
Finance costs	(6,636	)	(5,792	)	(13,498	)	(11,539	)
Foreign exchange (loss) gain	(608	)	(491	)	1,718		(1,612	)
Share of loss of associates	(1,458	)	(8,780	)	(3,174	)	(10,542	)
Other gains (losses), net	10,806		(5,298	)	11,435		(5,333	)
Earnings (loss) before income taxes	14,814		(6,171	)	(1,830	)	(41,990	)
Income tax (expense) recovery	(1,766	)	(376	)	1,560		8,894
Net earnings (loss)	13,048		(6,547	)	(270	)	(33,096	)

Net earnings (loss) per share
Basic and diluted	0.08		(0.04	)	–		(0.21	)

Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three and six months ended June 30, 2020 and 2019
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	$		$		$		$

Operating activities
Net earnings (loss)	13,048		(6,547	)	(270	)	(33,096	)
Adjustments for:
Share-based compensation	1,682		1,520		4,365		4,221
Depletion and amortization	8,981		12,166		23,113		24,826
Impairment of assets	3,117		–		30,323		38,900
Finance costs	2,126		1,791		4,750		3,474
Share of loss of associates	1,458		8,780		3,174		10,542
Net gain on acquisition of investments	–		(263	)	(2,845	)	(88	)
Change in fair value of financial assets at fair value through profit and loss	(2,316	)	665		(1,006	)	1,194
Net gain on dilution of investments	(10,381	)	–		(10,381	)	–
Net gain (loss) on disposal of investments	(1,226	)	4,896		(1,226	)	4,227
Foreign exchange loss (gain)	544		484		(1,557	)	1,643
Deferred income tax expense (recovery)	1,490		216		(2,025	)	(9,266	)
Other	33		(245	)	75		(493	)
Net cash flows provided by operating activities before changes in non-cash working capital items	18,556		23,463		46,490		46,084
Changes in non-cash working capital items	(3,134	)	(2,113	)	(7,268	)	16
Net cash flows provided by operating activities	15,422		21,350		39,222		46,100

Investing activities
Short-term investments	–		(3,111	)	(1,069	)	(16,230	)
Acquisition of investments	(18,356	)	(34,778	)	(33,943	)	(40,537	)
Proceeds on disposal of investments	3,115		58,052		3,437		58,474
Acquisition of royalty and stream interests	(16,867	)	–		(24,367	)	(27,969	)
Exploration and evaluation (expenses) tax credits, net	–		(36	)	(116	)	150
Mining assets and plant and equipment	(11,561	)	32		(26,415	)	588
Other	(5	)	(352	)	151		(1,063	)
Net cash flows (used in) provided by investing activities	(43,674	)	19,807		(82,322	)	(26,587	)

Financing activities
Private placement of common shares	85,000		–		85,000		–
Exercise of share options and shares issued under the share purchase plan	773		585		1,133		6,268
Increase in long-term debt	–		–		71,660		–
Repayment of long-term debt	–		–		–		(30,000	)
Common shares acquired and cancelled through a share repurchase	–		(58,052	)	–		(58,052	)
Normal course issuer bid purchase of common shares	(977	)	–		(3,933	)	(11,901	)
Dividends paid	(6,639	)	(7,504	)	(14,181	)	(13,802	)
Other	(1,611	)	(18	)	(2,766	)	(192	)
Net cash flows provided by (used in) financing activities	76,546		(64,989	)	136,913		(107,679	)

Increase (decrease) in cash before effects of exchange rate changes on cash	48,294		(23,832	)	93,813		(88,166	)
Effects of exchange rate changes on cash	(4,648	)	(1,076	)	(65	)	(2,510	)
Increase (decrease) in cash	43,646		(24,908	)	93,748		(90,676	)
Cash – beginning of period	158,325		108,497		108,223		174,265
Cash – end of period	201,971		83,589		201,971		83,589

Posted August 5, 2020

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