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Osisko Reports Strong Second Quarter 2021 Results; Increases Quarterly Dividend by 10%

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Osisko Reports Strong Second Quarter 2021 Results; Increases Quarterly Dividend by 10%

 

 

 

 

Record operating cash flows from the royalties and streams segment of $37.3 million

Record cash margin of $47.2 million

 

Osisko Gold Royalties Ltd  (TSX:OR) (NYSE:OR) announced its consolidated financial results for the second quarter of 2021. Amounts presented are in Canadian dollars, except where otherwise noted.

 

Financial Highlights

 

  • Earned 20,178 GEOs1 (Q2 2020 –12,245 GEOs)
  • Record revenues from royalties and streams of $49.9 million (Q2 2020 – $28.7 million)
  • Cash margin4 of 94% from royalty and stream interests (Q2 2020 – 95%)
  • Consolidated cash flows from operating activities of $30.9 million (Q2 2020 – $15.4 million)
    • Record operating cash flows from the royalties and streams segment2 of $37.3 million
    • Operating cash flows from the mining exploration and development segment3 (i.e. Osisko Development Corp. – TSX-V:ODV) of ($6.4) million
  • Net loss attributable to Osisko’s shareholders of $14.8 million, or $0.09 per basic share (Q2 2020 – net earnings of $13.0 million, or $0.08 per basic share), as a result of an impairment charge of $36.1 million on the Bonanza Ledge Phase 2 project, operated by Osisko Development
  • Adjusted earnings5 of $20.2 million, or $0.12 per basic share3 (Q2 2020 – $5.7 million, or $0.03 per basic share)
    • Adjusted earnings5 from the royalties and streams segment2 of $23.9 million, or $0.14 per basic share5
    • Adjusted loss5 from the mining exploration and development segment3 of $3.7 million, or $0.02 per basic share5
  • Quarterly dividend increased by 10% to $0.055 per share (annualized dividend of $0.22 per share), payable on October 15, 2021 to shareholders of record as of the close of business on September 30, 2021
  • Osisko amended its revolving credit facility and increased the amount available by $150.0 million to $550.0 million, with an additional uncommitted accordion of up to $100.0 million (for a total availability of up to $650.0 million). The maturity date of the facility was extended to July 30, 2025, which can be further extended annually. The applicable margins have also been reduced, therefore reducing the fees on the undrawn and drawn portions of the facility. The drawn portion of the facility remains unchanged.

 

Sandeep Singh, President and CEO of Osisko commented on the activities of the second quarter of 2021: “In the second quarter, our royalty and streaming business generated record revenues, cash margins and operating cash flows, as our main assets continue to deliver strong performance. The increase and extension of our credit facility, at a reduced cost of capital, also demonstrates the confidence of our lenders in our business and increases our financial flexibility and ability to pursue growth opportunities. On the back of strong first half 2021 results and our ongoing financial strength, we have prioritized returns to shareholders and increased our quarterly dividend by 10%. Our high margin business affords us the ability to continue, and increase, returns to investors despite a volatile market.”

 

Financial Highlights by Operating Segment
(in thousands of dollars, except per share amounts)

 

As a result of its 75% ownership in Osisko Development, the assets, liabilities, results of operations and cash flows of the Company consolidate the activities of Osisko Development and its subsidiaries. The table below provides some financial highlights per operating segment. More information per operating segment can be found in the consolidated financial statements and management’s discussion and analysis for the three months ended June 30, 2021.

 

  For the three months ended June 30,
  Osisko Gold Royalties (i) Osisko Development (ii) Consolidated
  2021   2020   2021   2020   2021   2020  
  $   $   $   $   $   $  
                         
Cash (As at June 30, 2021 and Dec. 31, 2020) (iii) 110,341   105,097   144,622   197,427   254,963   302,524  
                         
Revenues 57,246   40,758   775     57,246   40,758  
Cash margin (iv) 47,150   27,813       47,150   27,813  
Gross profit 35,713   19,121       35,713   19,121  
Operating expenses
(G&A, bus. dev and exploration)
(6,483 ) (6,488 ) (4,649 ) (998 ) (11,132 ) (7,486 )
Net earnings (loss) 16,341   12,781   (41,404 ) 267   (25,063 ) 13,048  
Net earnings (loss) attributable to Osisko’s shareholders n/a   n/a   n/a   n/a   (14,759 ) 13,048  
Net earnings (loss) per share (v) n/a   n/a   n/a   n/a   (0.09 ) 0.08  
Adjusted net earnings (loss) (vi) 23,877   6,614   (3,727 ) (881 ) 20,150   5,733  
Adjusted net earnings (loss) per basic share (vi) 0.14   0.04   (0.02 ) (0.01 ) 0.12   0.03  
                         
Cash flows from operating activities (vii) 37,340   16,802   (6,423 ) (1,380 ) 30,917   15,422  
Cash flows from investing activities (vii) (42,377 ) (32,215 ) (47,464 ) (11,459 ) (89,841 ) (43,674 )
Cash flows from financing activities (3,542 ) 63,733   (1,718 ) 12,813   (5,260 ) 76,546  

 

(i) Osisko Gold Royalties Ltd and its subsidiaries, excluding Osisko Development Corp. and its subsidiaries. Represents the royalty, stream and other interests segment.
(ii) Osisko Development Corp. and its subsidiaries (carve-out of the mining activities of Osisko prior to the reverse take-over transaction completed on November 25, 2020 and creating Osisko Development). Represents the mining exploration, evaluation and development segment.
(iii) As at June 30, 2021 and December 31, 2020.
(iv) Cash margin is a non-IFRS financial performance measure which has no standard definition under IFRS. It is calculated by deducting the cost of sales from the revenues. Please refer to the Notes at the end of this press release for a reconciliation.
(v) Attributable to Osisko’s shareholders.
(vi) Adjusted earnings (loss) and adjusted earnings (loss) per basic share” are non-IFRS financial performance measures which have no standard definition under IFRS. Please refer to the Notes at the end of this press release for a reconciliation.
(vii) Consolidated results are net of the intersegment transactions.

 

 

Other Highlights

 

  • Published Osisko’s inaugural ESG report and commitment to the Ten Principles of the United Nations Global Compact.
  • Acquired six royalties and one precious metals offtake, from two private sellers, for total cash consideration of US$26.0 million ($32.6 million). Four of the royalties are on claims overlying the Spring Valley project held by Waterton Global Resource Management, and increased the Company’s current net smelter return (“NSR”) royalty on Spring Valley from 0.5% to between 2.5% – 3.0% (sliding scale royalty percentages as long as gold prices are above US$700 per ounce).
  • Entered into a royalty transfer agreement to purchase a 2.75% NSR royalty on the Tocantinzinho gold project held by Eldorado Gold Corp. for cash consideration of US$10 million ($12.6 million). The operator of Tocantinzinho has a one-time buy-down option in relation to the royalty. At the time of project construction, the operator may make a payment of US$5.5 million to reduce the royalty percentage by 2% resulting in a royalty of 0.75%. Pursuant to a pre-existing agreement, the buy-down payment is payable to the original royalty owners.
  • GoGold Resources Inc. and Osisko Bermuda Limited, a subsidiary of Osisko, entered into an agreement to convert the current Parral gold and silver offtake into a life-of-mine gold and silver stream. Under the stream, Osisko Bermuda will receive, effective April 29, 2021, 2.4% of the gold and silver produced from tailings piles currently owned or acquired by GoGold, with a transfer price of 30% of the gold and silver spot prices. Osisko currently has no other offtake agreements on producing assets.
  • Declared a quarterly dividend of $0.05 per common share paid on April 15, 2021 to shareholders of record as of the close of business on March 31, 2021.

 

Osisko Development Update

 

Osisko Development is currently conducting an extensive drilling program of approximately 200,000 metres to expand and delineate the known and new vein corridors and deposits at the Cariboo gold project. This exploration is focused on the expansion of the Lowhee Zone and further delineation of the Cow, Valley, Mosquito and Shaft deposits with ten diamond drill rigs. Regional greenfield exploration will occur along the Burns, Yanks and Cariboo Hudson targets and will include geological mapping and geochemical surface sampling.

 

A total of approximately 100,000 metres have been drilled thus far in 2021 by Osisko Development as part of the exploration and category conversion program at the Cariboo gold property on Mosquito Creek, Lowhee, Valley and Shaft. The drilling confirmed down dip extensions of mineralized vein corridors and high-grade intercepts within the current mineral resource estimate. The objective of the 2021 exploration and delineation program is to convert inferred resources to indicated resources to support reserves for the ongoing feasibility study and to increase overall ounces in the inferred and indicated resource categories by exploring the depth and strike potential of the known deposits.

 

Osisko Development received the Cow Mountain Underground Bulk Sample Permit in July 2021. Design and development work has been initiated for the underground portal. Osisko Development will also continue developing the Cariboo gold deposit and is working at completing a feasibility study in the first semester of 2022.

 

Impairment – Bonanza Ledge Phase 2 project

 

In March 2021, processing of ore commenced at the Bonanza Ledge Phase 2 project and Osisko Development earned its first pre-commercial production revenues of $0.8 million since recommissioning of the Quesnel Regional Mill. This is a small underground satellite project that will help train the workforce and also serve to permanently sequester above-ground waste material from historical operations and mitigate an existing environmental liability.

 

As a result of operational challenges incurred during the second quarter for 2021, it was determined that total capital and production costs related to the Bonanza Ledge Phase 2 project would be higher than originally planned. These factors were considered indicators of impairment, among other facts and circumstances and, accordingly, management performed an impairment assessment as at June 30, 2021. As a result of the impairment assessment, Osisko Development recorded an impairment charge of $36.1 million on the Bonanza Ledge Phase 2 project during the three months ended June 30, 2021.

 

For additional information on the Osisko Development activities, please refer to the press releases and other documents filed on Sedar (www.sedar.com) under Osisko Development’s profile and on its website (www.osiskodev.com).

 

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 focused on the Americas that commenced activities in June 2014. Osisko holds a North American focused portfolio of over 150 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.

 


Three months ended

June 30,
    Six months ended
June 30,
   
  2021   2020     2021   2020  
  $   $     $   $  
           
Revenues 57,246   40,758     124,169   93,363  
Less: Revenues from offtake interests (7,339 ) (12,025 )   (25,265 ) (26,796 )
Revenues from royalty and stream interests 49,907   28,733     98,904   66,567  
           
Cost of sales (10,096 ) (12,945 )   (30,493 ) (30,228 )
Less: Cost of sales of offtake interests 7,104   11,454     24,343   25,376  
Cost of sales of royalty and stream interests (2,992 ) (1,491 )   (6,150 ) (4,852 )
           
           
           
           
Revenues from royalty and stream interests 49,907   28,733     98,904   66,567  
Less: Cost of sales of royalty and stream interests (2,992 ) (1,491 )   (6,150 ) (4,852 )
Cash margin from royalty and stream interests 46,915   27,242     92,754   61,715  
           
  94%   95%     94%   93%  
           
Revenues from offtake interests 7,339   12,025     25,265   26,796  
Less: Cost of sales of offtake interests (7,104 ) (11,454 )   (24,343 ) (25,376 )
Cash margin from offtake interests 235   571     922   1,420  
           
  3%   5%     4%   5%  

 

 

 

  For the three months ended June 30,
  2021   2020  
  Osisko Gold
Royalties (i)
  Osisko
Development 
(ii)
  Consolidated   Osisko Gold
Royalties (i)
  Osisko
Development 
(ii)
  Consolidated  
(in thousands of dollars, except
per share amounts)
$   $   $   $   $   $  
                         
Net earnings (loss) 16,341   (41,404 ) (25,063 ) 12,781   267   13,048  
                         
Adjustments:                        
Impairment of assets   40,479   40,479   3,117     3,117  
Foreign exchange (gain) loss (169 ) 791   622   544     544  
Unrealized loss (gain) on investments 1,553   13   1,566   (11,337 ) (2,586 ) (13,923 )
Share of loss of associates 1,111   750   1,861   628   830   1,458  
Deferred premium income on flow-through shares   (2,798 ) (2,798 )      
Deferred income tax expense (recovery) 5,041   (1,558 ) 3,483   881   608   1,489  
                         
Adjusted earnings (loss) 23,877   (3,727 ) 20,150   6,614   (881 ) 5,733  
                         
Weighted average number of                        
common shares outstanding (000’s) 167,895   167,895   167,895   164,733   164,733   164,733  
                         
Adjusted earnings (loss) per basic share 0.14   (0.02 ) 0.12   0.04   (0.01 ) 0.03  

 

(i) Osisko Gold Royalties Ltd and its subsidiaries, excluding Osisko Development Corp. and its subsidiaries. Represents the royalty, stream and other interests segment.
(ii) Osisko Development Corp. and its subsidiaries. Represents the mining exploration, evaluation and development segment.

 

 

 

  For the six months ended June 30,
  2021   2020  
  Osisko Gold
Royalties (i)
  Osisko
Development 
(ii)
  Consolidated   Osisko Gold
Royalties (i)
  Osisko
Development 
(ii)
  Consolidated  
(in thousands of dollars, except
per share amounts)
$   $   $   $   $   $  
                         
Net earnings (loss) 29,805   (45,105 ) (15,300 ) (213 ) (57 ) (270 )
                         
Adjustments:                        
Impairment assets 4,400   40,479   44,879   30,323     30,323  
Foreign exchange (gain) loss (140 ) 1,535   1,395   (1,557 )   (1,557 )
Unrealized loss (gain) on investments 2,942   (1,297 ) 1,645   (10,582 ) (4,876 ) (15,458 )
Share of loss of associates 736   1,157   1,893   1,785   1,389   3,174  
Deferred premium income on flow-through shares   (3,267 ) (3,267 )      
Deferred income tax expense (recovery) 9,573   (2,740 ) 6,833   (2,459 ) 434   (2,025 )
                         
Adjusted earnings (loss) 47,316   (9,238 ) 38,078   17,297   (3,110 ) 14,187  
                         
Weighted average number of                        
common shares outstanding (000’s) 167,696   167,696   167,696   160,067   160,067   160,067  
                         
Adjusted earnings (loss) per basic share 0.28   (0.06 ) 0.23   0.11   (0.02 ) 0.09  

 

(i) Osisko Gold Royalties Ltd and its subsidiaries, excluding Osisko Development Corp. and its subsidiaries. Represents the royalty, stream and other interests segment.
(ii) Osisko Development Corp. and its subsidiaries (carve-out of the mining activities of Osisko Gold Royalties prior to the reverse take-over transaction completed on November 25, 2020 and creating Osisko Development). Represents the mining exploration, evaluation and development segment.

 

 

 

 

Osisko Gold Royalties Ltd
Consolidated Balance Sheets

   
(tabular amounts expressed in thousands of Canadian dollars)    
  June 30,     December 31,  
  2021     2020  
  $     $  
       
Assets      
       
Current assets      
       
Cash 254,963     302,524  
Short-term investments 3,408     3,501  
Amounts receivable 17,364     12,894  
Inventories 25,839     10,025  
Other assets 3,490     6,244  
  305,064     335,188  
       
Non-current assets      
       
Investments in associates 124,454     119,219  
Other investments 135,428     157,514  
Royalty, stream and other interests 1,121,428     1,116,128  
Mining interests and plant and equipment 554,491     489,512  
Exploration and evaluation 45,349     42,519  
Goodwill 111,204     111,204  
Other assets 13,309     25,820  
  2,410,727     2,397,104  
       
Liabilities      
       
Current liabilities      
       
Accounts payable and accrued liabilities 38,924     46,889  
Dividends payable 8,404     8,358  
Provisions and other liabilities 21,416     4,431  
Current portion of long-term debt     49,867  
  68,744     109,545  
       
Non-current liabilities      
       
Provisions and other liabilities 40,200     41,536  
Long-term debt 401,954     350,562  
Deferred income taxes 57,599     54,429  
  568,497     556,072  
       
Equity      
       
Share capital 1,797,646     1,776,629  
Warrants 18,072     18,072  
Contributed surplus 39,759     41,570  
Equity component of convertible debentures 14,510     17,601  
Accumulated other comprehensive income 49,688     48,951  
Deficit (247,280 )   (174,458 )
Equity attributable to Osisko Gold Royalties Ltd’s shareholders 1,672,395     1,728,365  
Non-controlling interests 169,835     112,667  
Total equity 1,842,230     1,841,032  
  2,410,727     2,397,104  

 

Osisko Gold Royalties Ltd
Consolidated Statements of Income (Loss)
For the three and six months ended June 30, 2021 and 2020
                     
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)                      
  Three months ended
June 30,
    Six months ended
June 30,
 
  2021     2020     2021     2020  
  $     $     $     $  
                       
                       
Revenues 57,246     40,758     124,169     93,363  
                       
Cost of sales (10,096 )   (12,945 )   (30,493 )   (30,228 )
Depletion of royalty, stream and other interests (11,437 )   (8,692 )   (23,364 )   (22,392 )
Gross profit 35,713     19,121     70,312     40,743  
                       
Other operating expenses                      
General and administrative (9,171 )   (5,818 )   (19,077 )   (12,102 )
Business development (1,118 )   (1,634 )   (2,105 )   (2,772 )
Exploration and evaluation (843 )   (34 )   (1,180 )   (76 )
Impairments – royalty, stream and other interests         (2,288 )   (26,300 )
Impairments – mining exploration, evaluation and development (40,479 )       (40,479 )    
Operating (loss) income (15,898 )   11,635     5,183     (507 )
Interest income 1,348     1,075     2,658     2,196  
Finance costs (5,884 )   (6,636 )   (12,027 )   (13,498 )
Foreign exchange (loss) gain (406 )   (608 )   (1,535 )   1,718  
Share of loss of associates (1,861 )   (1,458 )   (1,893 )   (3,174 )
Other gains (losses), net 1,629     10,806     (281 )   11,435  
(Loss) earnings before income taxes (21,072 )   14,814     (7,895 )   (1,830 )
Income tax (expense) recovery (3,991 )   (1,766 )   (7,405 )   1,560  
Net (loss) earnings (25,063 )   13,048      (15,300  )   (270 )
                       
Net (loss) earnings attributable to:                      
Osisko Gold Royalties Ltd’s shareholders (14,759 )   13,048     (4,165 )   (270 )
Non-controlling interests (10,304 )       (11,135 )    
                       
Net (loss) earnings per share                      
Basic and diluted (0.09 )   0.08     (0.02 )    

 

 

Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three and six months ended June 30, 2021 and 2020
     
(tabular amounts expressed in thousands of Canadian dollars)      
  Three months ended
June 30,
  Six months ended
June 30,
   
  2021     2020     2021     2020  
  $     $     $     $  
               
Operating activities              
Net (loss) earnings (25,063 )   13,048     (15,300 )   (270 )
Adjustments for:              
Share-based compensation 2,090     1,682     5,390     4,365  
Depletion and amortization 11,794     8,981     24,055     23,113  
Impairment of assets 40,479     3,117     44,879     30,323  
Finance costs 1,716     2,126     3,555     4,750  
Share of loss of associates 1,861     1,458     1,893     3,174  
Net gain on acquisition of investments (211 )       (649 )   (2,845 )
Change in fair value of financial assets at fair value through profit and loss 1,777     (2,316 )   3,685     (1,006 )
Net gain on dilution of investments     (10,381 )   (1,391 )   (10,381 )
Net gain on disposal of investments     (1,226 )       (1,226 )
Foreign exchange loss (gain) 622     544     1,395     (1,557 )
Flow-through shares premium income (2,798 )       (3,268 )    
Deferred income tax expense (recovery) 3,483     1,490     6,833     (2,025 )
Other (432 )   33     493     75  
Net cash flows provided by operating activities
before changes in non-cash working capital items
35,318     18,556     71,570     46,490  
Changes in non-cash working capital items (4,401 )   (3,134 )   (19,329 )   (7,268 )
Net cash flows provided by operating activities 30,917     15,422     52,241     39,222  
               
Investing activities              
Net disposal of short-term investments             (1,069 )
Acquisition of investments (4,026 )   (18,356 )   (13,837 )   (33,943 )
Proceeds on disposal of investments 8,338     3,115     28,109     3,437  
Acquisition of royalty and stream interests (39,085 )   (16,867 )   (42,877 )   (24,367 )
Mining assets and plant and equipment (53,839 )   (11,561 )   (89,651 )   (26,415 )
Exploration and evaluation expenses, net (1,028 )       (1,163 )   (116 )
Other (201 )   (5 )   (201 )   151  
Net cash flows used in investing activities (89,841 )   (43,674 )   (119,620 )   (82,322 )
               
Financing activities              
Private placement of common shares     85,000         85,000  
Increase in long-term debt         50,000     71,660  
Repayment of long-term debt         (50,000 )    
Investments from minority shareholders         38,841      
Share issue expenses from investments from minority shareholders         (2,581 )    
Exercise of share options and shares issued under the share purchase plan 8,129     773     13,107     1,133  
Normal course issuer bid purchase of common shares     (977 )   (4,464 )   (3,933 )
Dividends paid (7,914 )   (6,639 )   (15,696 )   (14,181 )
Withholding taxes on settlement of restricted and deferred share units (3,544 )   (1,135 )   (3,582 )   (2,094 )
Other (1,931 )   (476 )   (2,783 )   (672 )
Net cash flows (used in) provided by financing activities (5,260 )   76,546     22,842     136,913  
               
(Decrease) increase in cash before effects of exchange rate changes on cash (64,184 )   48,294     (44,537 )   93,813  
Effects of exchange rate changes on cash (1,483 )   (4,648 )   (3,024 )   (65 )
(Decrease) increase in cash (65,667 )   43,646     (47,561 )   93,748  
Cash – beginning of period 320,630     158,325     302,524     108,223  
Cash – end of period 254,963     201,971     254,963     201,971  

 

Posted August 10, 2021

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