Osisko Reports Third Quarter 2019 Results

ID: 1553749
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(businesspress24) - Record Cash Flows from Operating Activities of $28.3 Million
First Gold Pour at the Eagle Gold Mine

Montréal, November 6, 2019 - Osisko Gold Royalties Ltd (the Company or Osisko) (OR: TSX & NYSE - https://www.commodity-tv.net/c/search_adv/?v=299178) today announced its consolidated financial results for the third quarter of 2019.

Highlights

- Cash on hand of $123.7 million, $293.0 million in equity investments1 and up to $480 million availability under its credit facility as at September 30, 2019;
- Increased its credit facility from $350.0 million to $400.0 million, with an additional uncommitted accordion of up to $100.0 million (for a total availability of up to $500.0 million) and extended the maturity date by one year to November 14, 2023;
- Revenues from royalties and streams of $33.9 million compared to $31.4 million in Q3 2018;
- Generated record cash flows from operating activities of $28.3 million compared to $20.6 million in Q3 2018;
- Earned 18,123 gold equivalent ounces2 (GEOs) compared to 20,006 in Q3 2018;
- Incurred non-cash impairment charges stream and offtake interests of $60.8 million ($48.1 million, net of income taxes), mainly on the Renard diamond stream ($47.2 million and $34.6 million, net of income taxes) and Amulsar gold/silver stream and gold offtake ($13.1 million) and non-cash impairment of net investment in an associate of $12.5 million for total non-cash impairment charges of $73.3 million ($59.0 million, net of income taxes);
- Net loss of $45.9 million, $0.32 per basic share compared to net earnings of $5.5 million, $0.04 per basic share in Q3 2018. Net earnings of $13.0 million, $0.09 per basic share excluding the above non-cash impairment charges;
- Adjusted earnings3 of $17.5 million, $0.12 per basic share3 compared to $5.7 million, $0.04 per basic share in Q3 2018;
- Recorded cash operating margins4 of 91% from royalty and stream interests, generating $30.8 million in operating cash flow in the third quarter, in addition to a quarterly cash operating margin of $1.0 million from offtake interests;


- Closed the second tranche of the share repurchase with Betelgeuse LLC ("Orion") (5,066,218 common shares acquired for $71.4 million, for a total of 12,385,717 common shares acquired from Orion for $174.6 million and subsequently cancelled), reducing Orions ownership of Osiskos issued and outstanding common shares to 6.2%;
- Enhanced its silver stream on the Mantos Blancos mine by investing US$25.0 million and reducing the ongoing transfer price payments per ounce from 25% to 8% of the spot silver price, cancelling the buy-down option and increasing the tail stream from 30% to 40% of payable silver after 19.3 million ounces of refined silver have been delivered;
- Sold the Brucejack gold offtake to Pretium Exploration Inc. for US$41.3 million;
- The Eagle Gold mine operated by Victoria Gold Corp. and on which Osisko holds a 5% net smelter return ("NSR") royalty announced its first gold pour in September;
- Announced a definitive agreement with Barkerville Gold Mines Ltd. ("Barkerville"), owner of the Cariboo gold project, pursuant to which Osisko has agreed to acquire all of the issued and outstanding common shares of Barkerville that it does not currently own, representing 67.4%;
- In November, completed a credit bid transaction with Stornoway Diamond Corporation alongside other secured creditors, allowing Osisko to maintain its 9.6% diamond stream on the Renard mine. In connection with the completion of the credit bid, the secured creditors acquired substantially all of the assets and properties of Stornoway, and assumed the debts and liabilities owing to Stornoways secured creditors as well as the ongoing obligations relating to the operation of the Renard mine, subject to certain limited exceptions. Osisko became a 35.1% shareholder of the company now holding the Renard diamond mine, which will continue to operate in the normal course; and
- Declared a quarterly dividend of $0.05 per common share paid on October 15, 2019 to shareholders of record as of the close of business on September 30, 2019.

For more details, please refer to the Managements Discussion and Analysis for the three and nine months ended September 30, 2019.

Recent Performance

Sean Roosen, Chair and Chief Executive Officer, commented on the activities of the third quarter of 2019: Our royalty and stream business continues to be strong with record cash flows from operating activities of $28.3 million. On September 23, 2019, we entered into an agreement to acquire all of the issued and outstanding common shares of Barkerville. The addition of the Cariboo Gold project to our portfolio adds a potentially world-class asset in Canada in an impacted brownfield site with significant infrastructure in place. Osisko expects to fund planned work through its own capital as well as outside private equity and joint venture capital through the newly created North Spirit Discovery Group. Our goal is to create significant value within the accelerator group as these assets advance from incubation/exploration to development and production.

Outlook

Osiskos 2019 outlook on royalty, stream and offtake interests is based on publicly available forecasts, in particular the forecasts for the Canadian Malartic mine published by Yamana Gold Inc. and Agnico Eagle Mines Limited, for the Éléonore mine published by Newmont Goldcorp Corporation, and for the Renard mine published by Stornoway Diamond Corporation. When publicly available forecasts on properties are not available, Osisko obtains internal forecasts from the producers, which is the case for the Mantos Blancos mine, or uses managements best estimate.

Attributable GEOs for 2019 has been reduced from previous guidance, mainly as a result of weak diamond prices at the Renard mine and the sale of the Brucejack gold offtake. However, cash operating margins and operating cash flow are expected to be in line with guidance, as a result of strong gold prices.

Due to the sale of the Brucejack gold offtake, revenues from offtake interests will decrease considerably, about $75 to $80 million per quarter. As these offtake interests have a historical cash margin of 1%, the impact on cash flows from operating activities will not be material.

GEOs and cash margin by interest are estimated as follows:

Original Guidance Revised Guidance
Low High Mid Cash Cash Cash
cash margi margi margi
marginn n n

(GEOs) (GEOs)(millio(%) (GEOs) (milli(%)
n on
$) $)


Royalty 54,700 61,10098 99.9 53,100 97 99.7
interests

Stream 28,000 31,30033 65.5 23,100 29 67.4
interests

Offtake 2,300 2,600 4 1.2 1,800 3 1.3
interests

85,000 95,000135 78,000 129

For the 2019 original guidance, silver, diamonds and cash royalties have been converted to GEOs using commodity prices of US$1,300 per ounce of gold, US$15.50 per ounce of silver and US$95 per carat for diamonds from the Renard mine (blended sales price) and an exchange rate (US$/C$) of 1.30.

For the 2019 revised guidance, silver, diamonds and cash royalties have been converted to GEOs using average commodity prices of US$1,380 per ounce of gold, US$16.15 per ounce of silver and US$76 per carat for diamonds from the Renard mine (blended sales price) and an exchange rate (US$/C$) of 1.32.

Q3 2019 Results Conference Call

Osisko will host a conference call on Thursday, November 7, 2019 at 10:00 am EST to review and discuss its Q3 2019 results.

Those interested in participating in the conference call should dial in at 1 (877) 223-4471 (North American toll free), or 1 (647) 788-4922 (international). An operator will direct participants to the call.

The conference call replay will be available from 1:00 pm EST on November 7, 2019 until 11:59 pm EST on November 14, 2019 with the following dial in numbers: 1 (800) 585-8367 (North American toll free) or 1 (416) 621-4642, access code 4994211.

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 135 royalties, streams and precious metal offtakes. Osiskos portfolio is anchored by four cornerstone assets, including a 5% NSR royalty on the Canadian Malartic mine, which is the largest gold mine in Canada. Osisko also owns a portfolio of publicly held resource companies, including a 32.6% interest in Barkerville Gold Mines Ltd. and a 4% NSR royalty on the Cariboo Gold project, a 19.9% interest in Falco Resources Ltd and a 16.3% interest in Osisko Mining Inc.
Osiskos head office is located at 1100 Avenue des Canadiens-de Montréal, Suite 300, Montréal, Québec, H3B 2S2.

For further information, please contact Osisko Gold Royalties Ltd:

Joseph de la Plante
Vice President, Corporate Development
Tel. (514) 940-0670
jdelaplante(at)osiskogr.com

In Europe:
Swiss Resource Capital AG
Jochen Staiger
info(at)resource-capital.ch
www.resource-capital.ch


Notes:

(1) Represents the estimated fair value based on the quoted prices of the investments in a recognized stock exchange as at September 30, 2019.

(2) 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 Nine months ended
September 30, September 30,
2019 2018 2019 2018

Gold(i) $1,472 $1,213 $1,364 $1,282
Silver(ii) $16.98 $15.02 $15.83 $16.10

Exchange rate 1.3204 1.3070 1.3292 1.2876
(US$/Can$)
(iii)

(i) The London Bullion Market Associations pm price in U.S. dollars
(ii) The London Bullion Market Associations price in U.S. dollars
(iii) Bank of Canada daily rate

(3) Adjusted earnings and Adjusted earnings per basic share are not recognized measures under the International Financial Reporting Standards (IFRS). Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Managements Discussion and Analysis for the three and nine months ended September 30, 2019.
(4) 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 and related notes:

(In thousands of dollars) Three months Nine months
ended ended

September 30, September 30,
2019 2018 2019 2018
$ $ $ $

Revenues 109,235111,702 341,567375,135


Less: Revenues from (75,314(80,309 (240,36(278,30
offtake ) ) 5) 6)
interests

Revenues from royalty and 33,921 31,393 101,20296,829
stream
interests


Cost of sales (77,419(82,748 (247,61(284,70
) ) 6) 5)

Less: Cost of sales of 74,300 79,498 237,452274,220
offtake
interests

Cost of sales of royalty (3,119)(3,250) (10,164(10,485
and stream ) )
interests





Revenues from royalty and 33,921 31,393 101,20296,829
stream
interests

Less: Cost of sales of roya(3,119)(3,250) (10,164(10,485
lty and stream ) )
interests

Cash margin from royalty 30,802 28,143 91,038 86,344
and stream
interests


90.8% 89.6% 90.0% 89.2%

Revenues from offtake 75,314 80,309 240,365278,306
interests

Less: Cost of sales of offt(74,300(79,498 (237,45(274,22
ake ) ) 2) 0)
interests

Cash margin from offtake 1,014 811 2,913 4,086
interests



1.3% 1.0% 1.2% 1.5%

Forward-looking Statements

This news release contains forward-looking information and forward-looking statements (together, "forward-looking statements") within the meaning of applicable Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical fact, that address future events, developments or performance that Osisko expects to occur including managements expectations regarding Osiskos growth, results of operations, estimated future revenue, requirements for additional capital, production estimates, production costs and revenue, business prospects and opportunities are forward-looking statements. In addition, statements relating to gold equivalent ounces ("GEOs") are forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the GEOs will be realized. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "is expected" "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions or variations (including negative variations of such words and phrases), or may be identified by statements to the effect that certain actions, events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, the performance of the assets of Osisko, the estimate of GEOs to be received in 2019, that the required regulatory and shareholders approvals will be obtained in connection with the proposed transaction with Barkerville, that sufficient funding will be available to fund work at Barkerville, that significant value will be created within the accelerator group of companies and Osiskos ability to seize future opportunities. Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors and are not guarantees of future performance and actual results may accordingly differ materially from those in forward-looking statements. Factors that could cause the actual results deriving from Osiskos royalties, streams and other interests to differ materially from those in forward-looking statements include, without limitation: influence of political or economic factors including fluctuations in the prices of the commodities and in value of the Canadian dollar relative to the U.S. dollar, continued availability of capital and financing and general economic, market or business conditions; regulations and regulatory changes in national and local government, including permitting and licensing regimes and taxation policies; whether or not Osisko is determined to have passive foreign investment company (PFIC) status as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended; potential changes in Canadian tax treatments of offshore streams or other interests, litigation, title, permit or license disputes; risks and hazards associated with the business of exploring, development and mining on the properties in which Osisko holds a royalty, stream or other interest including, but not limited to development, permitting, infrastructure, operating or technical difficulties, unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters or civil unrest, rate, grade and timing of production differences from mineral resource estimates or production forecasts or other uninsured risks; risk related to business opportunities that become available to, or are pursued by Osisko and exercise of third party rights affecting proposed investments. The forward-looking statements contained in this press release are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which Osisko holds a royalty, stream or other interest by the owners or operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the owners or operators of such underlying properties; no material adverse change in the market price of the commodities that underlie the asset portfolio; Osiskos ongoing income and assets relating to the determination of its PFIC status, no material changes to existing tax treatments; no adverse development in respect of any significant property in which Osisko holds a royalty, stream or other interest; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance. Osisko cannot assure investors that actual results will be consistent with these forward-looking statements and investors should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.

For additional information with respect to these and other factors and assumptions underlying the forward-looking statements made in this press release, see the section entitled "Risk Factors" in the most recent Annual Information Form of Osisko which is filed with the Canadian securities commissions and available electronically under Osisko''s issuer profile on SEDAR at www.sedar.com and with the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov. The forward-looking information set forth herein reflects Osiskos expectations as at the date of this press release and is subject to change after such date. Osisko disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.


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


SeptemberDecember
30, 31,

2019 2018
$ $


Assets

Current assets

Cash 123,702 174,265
Short-term investments 25,844 10,000
Amounts receivable 18,241 12,321
Other assets 1,289 1,015
169,076 197,601

Non-current assets

Investments in associates 212,668 304,911
Other investments 53,813 109,603
Royalty, stream and other interests 1,296,798 1,414,668


Exploration and evaluation 92,909 95,002
Goodwill 111,204 111,204
Other assets 11,887 1,657
1,948,355 2,234,646



Liabilities

Current liabilities

Accounts payable and accrued 10,245 11,732
liabilities

Dividends payable 7,200 7,779
Provisions - 3,494
Lease liabilities 786 -
18,231 23,005

Non-current liabilities

Long-term debt 347,638 352,769
Lease liabilities 9,533 -
Deferred income taxes 66,666 87,277
442,068 463,051

Equity

Share capital 1,502,978 1,609,162


Warrants 18,072 30,901
Contributed surplus 34,041 21,230
Equity component of convertible 17,601 17,601
debentures

Accumulated other comprehensive 19,998 23,499
income

Retained earnings (deficit) (86,403) 69,202
1,506,287 1,771,595


1,948,355 2,234,646


Osisko Gold Royalties Ltd
Consolidated Statements of Income (Loss)
For the three and nine months ended September 30, 2019 and 2018
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)


- Three months Nine months
ended ended

September 30, September 30,
2019 2018 2019 2018
$ $ $ $


Revenues 109,235 111,702 341,567 375,135



Cost of sales (77,419 (82,748 (247,61 (284,70
) ) 6) 5)

Depletion of royalty, (10,965 (13,136 (35,166 (39,637
stream and other ) ) ) )
interests

Gross profit 20,851 15,818 58,785 50,793

Other operating expenses
General and (4,607) (3,692) (15,173 (13,342
administrative ) )

Business development (1,375) (1,077) (4,899) (3,750)


Gain on disposal of an 7,636 - 7,636 -
offtake
interest

Impairment of assets (60,800 - (99,700 -
) )

Operating income (loss) (38,295 11,049 (53,351 33,701
) )

Interest income 1,041 1,041 3,033 3,581
Dividend income 50 228 150 278
Finance costs (5,843) (6,396) (17,382 (19,291
) )

Foreign exchange gain 508 (160) (1,104) 92
(loss)

Share of loss of (4,146) (4,139) (14,688 (6,558)
associates )

Other gains (losses), (10,971 5,781 (16,304 1,580
net ) )

Earnings (loss) before (57,656 7,404 (99,646 13,383
income ) )
taxes

Income tax recovery 11,732 (1,930) 20,626 (5,088)
(expense)

Net earnings (loss) (45,924 5,474 (79,020 8,295
) )


Net earnings (loss) per
share

Basic and diluted (0.32) 0.04 (0.52) 0.05

Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2019 and 2018
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
Three months Nine months
ended ended

September 30, September 30,

2019 2018 2019 2018
$ $ $ $

Operating activities
Net earnings (loss) (45,924 5,474 (79,020 8,295
) )

Adjustments for:
Share-based compensation 2,052 521 6,273 3,550
Depletion and 11,287 13,181 36,113 39,766
amortization

Net gain on disposal of (7,636) - (7,636) -
an offtake
interest

Impairment of assets 60,800 - 99,700 -
Finance costs 1,817 1,727 5,291 5,071
Share of loss of 4,146 4,139 14,688 6,558
associates

Net gain on acquisition (540) - (628) (1,908)
of
investments

Net loss (gain) on disposal (1,091) (6,956) 3,136 (6,956)
of
investments

Change in fair value of 205 1,175 1,399 7,031
financial assets at
fair value through
profit and
loss

Impairment of an 12,500 - 12,500 -
investment in an
associate

Deferred income tax (12,001 1,742 (21,267 4,484
expense ) )
(recovery)

Foreign exchange loss (498) 153 1,145 564
(gain)

Settlement of restricted - (2,588) (589) (3,087)
and deferred share
units

Other (66) 50 30 395
Net cash flows provided by 25,051 18,618 71,135 63,763
operating activities


before changes in non-cash
working capital
items

Changes in non-cash 3,243 2,018 3,259 (164)
working capital
items

Net cash flows provided 28,294 20,636 74,394 63,599
by operating activities



Investing activities
Short-term investments (9,614) (9,000) (25,844 (10,000
) )

Acquisition of (7,359) (22,317 (47,896 (94,757
investments ) ) )

Proceeds on disposal of 71,434 - 129,908 27,043
investments

Acquisition of royalty (43,501 (33,859 (71,470 (92,970
and stream ) ) ) )
interests

Proceeds on disposal of
royalty and offtake 43,182 - 43,182 -
interests

Exploration and evaluation (69) 2,010 81 3,203
tax credits (expenses),
net

Other assets (128) (9) (603) (92)
Net cash flows provided by 53,945 (63,175 27,358 (167,57
(used in) investing ) 3)
activities


Financing activities
Exercise of share
options and shares 15,446 82 21,714 272
issued under the share
purchase
plan

Increase in long-term 19,772 - 19,772 -
debt

Financing fees (490) - (490) (379)
Repayment of long-term - - (30,000 (51,820
debt ) )

Common shares acquired
and cancelled through a (71,434 - (129,48 -
share repurchase ) 6)


Normal course issuer bid - - (11,901 (21,986
purchase of common ) )
shares

Dividends paid (6,736) (7,406) (20,538 (21,399
) )

Other 278 - 86 (186)
Net cash flows used in (43,164 (7,324) (150,84 (95,498
financing ) 3) )
activities

1,038 (1,580) (1,472) 2,955
Effects of exchange rate
changes on cash and
cash
equivalents

Increase (decrease) in cash 40,113 (51,443 (50,563 (196,51
and cash ) ) 7)
equivalents

Cash and cash equivalents - 83,589 188,631 174,265 333,705
beginning of
period

Cash and cash 123,702 137,188 123,702 137,188
equivalents - end of
period




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Date: 11/07/2019 - 11:01
Language: English
News-ID 1553749
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