Mr. Sean Roosen reports
OSISKO REPORTS THIRD QUARTER 2018 RESULTS
Osisko Gold Royalties Ltd. has released its consolidated financial results for the third quarter ended Sept. 30, 2018, and provided an update on matters following quarter-end.
Highlights
Earned 20,006 gold equivalent ounces1 ("GEOs"), for year to date total GEOs of 60,548. Total 2018 annual GEOs is forecast to be in-line with the previously announced guidance of 77,500 to 82,500 GEOs. Osisko expects its peer-leading growth profile to continue to deliver significant growth in annual GEO production over the next 5 years;
Generated cash flows from operating activities of $20.6 million, which represents a 177% increase compared to the third quarter of 2017 (132% increase when the impact of the transaction costs related to the acquisition of the Orion portfolio of assets in Q3 2017 is removed);
Recorded adjusted earnings2 of $5.7 million, $0.04 per basic share2, compared to $8.0 million, $0.06 per basic share in the third quarter of 2017;
Recorded cash operating margins3 of 90% from royalty and stream interests, maintaining the highest margin in the metals and mining sector, generating $28.1 million in addition to a cash operating margin of $0.8 million from offtake interests;
Acquired an additional 1.75% net smelter return ("NSR") royalty for $20.0 million on the Cariboo property held by Barkerville Gold Mines Ltd. ("Barkerville"), increasing Osisko's NSR royalty to a total of 4% (Barkerville has the option to sell an additional 1% NSR royalty to Osisko for $13.0 million prior to December 31, 2018);
Receipt, by Osisko Bermuda Limited, a wholly owned subsidiary of Osisko, of a notice from Pretium Exploration Inc., a subsidiary of Pretium Resources Inc., in regards to its election to exercise its option to fully repurchase on December 31, 2018, the Brucejack gold and silver stream for US$118.5 million ($153.4 million). The proceeds will be used for debt repayment and for general corporate purposes;
In October, entered into an amended and restated purchase and sale agreement with Stornoway Diamond Corporation ("Stornoway") by providing an additional up-front deposit of $21.6 million to improve the terms of the agreement, including the reduction of the transfer payment to the lesser of 40% of achieved sales price and US$40 per carat with no price escalation (previously US$50 per carat escalating at 1% per annum);
Held $137.2 million in cash and cash equivalents and $364.5 million in equity investments4 as at September 30, 2018;
Distributed $7.8 million in dividends to shareholders, bringing the total to $78.5 million since inception in 2014;
In October, repaid US$10.0 million ($12.9 million) on the revolving credit facility and extended the maturity date by one year to November 2022. The Company currently has up to $364 million in available credit; and
Declared a quarterly dividend of $0.05 per common share payable on January 15, 2019 to shareholders of record as at December 31, 2018.
For more details, please refer to the Management's Discussion and Analysis for the three and nine months ended September 30, 2018.
Recent Performance
Sean Roosen, Chair and Chief Executive Officer commented on the 2018 activities: "Osisko's performance during the first nine months of 2018 demonstrates its unique approach to investing in all areas of the mine development cycle and its dedication to creating its own high-return and high-margin investment opportunities, adding near, medium and long-term cash flow to its growth pipeline.
Our amendment of the Renard stream will add immediate cash flow starting in Q4 of 2018, our investment in Victoria Gold Corp. and the Eagle royalty will add significant cash flow starting in 2020, while our investment in the Horne 5 stream brings in a new generation of assets that will become anchor assets within Osisko's portfolio.
During the first nine months of 2018, Osisko continued to increase its royalty and overall exposure to the most prospective exploration camps in Canada, being the Cariboo gold camp and the Urban Barry camp (hosting the Windfall Lake project). Osisko strongly believes that acquiring royalties on mining camps will deliver strong returns to its shareholders.
All of these investments have increased Osisko's Canadian footprint, confirming Osisko as the leading Canadian royalty company."
Q3 2018 Results Conference Call
Osisko will host a conference call on Wednesday, November 7, 2018 at 10:00 am EST to review and discuss its Q3 2018 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, 2018 until 11:59 pm EST on November 14, 2018 with the following dial in numbers: 1-(800) 585-8367 (North American toll free) or 1-(416) 621-4642, access code 1043979.
About Osisko Gold Royalties Ltd
Osisko Gold Royalties Ltd is an intermediate precious metal royalty company that holds a North American focused portfolio of over 130 royalties, streams and precious metal offtakes. Osisko's portfolio is anchored by its 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 32.4% interest in Barkerville Gold Mines Ltd., a 17.9% interest in Osisko Mining Inc., a 15.5% interest in Victoria Gold Corp., a 12.6% interest in Falco Resources Ltd and an 11.4% interest in Osisko Metals Incorporated.
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 RateThree months endedSeptember 30, Nine months ended September 30, 2018 2017 2018 2017 Gold(1)$1,213 $1,278 $1,282 $1,251Silver(2)$15$17$16$17 Exchange rate (US$/Can$)(3)1.3070 1.2528 1.2876 1.3075
(1)The London Bullion Market Association's pm price in U.S. dollars
(2)The London Bullion Market Association's price in U.S. dollars
(3)Bank of Canada daily rate
(2)"Adjusted earnings" and "Adjusted earnings per basic share" are not recognized measures under the International Financial Reporting Standards ("IFRS").Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Management's Discussion and Analysis for the three and nine months ended September 30, 2018.
(3)Cash operating margin, which represents revenues less cost of sales, is a non-IFRS measure. The Company believes that this non-IFRS generally accepted industry measure provides a realistic indication of operating performance and provides a useful comparison with its peers. The following table reconciles the cash margin to the revenues and cost of sales presented in the consolidated statements of income and related notes:
(In thousands of dollars)Three months ended September 30,Nine months endedSeptember 30,201820172018 2017$ $ $$ Revenues 111,702 68,179375,135103,664Less: Revenues from offtake interests(80,309)(42,086 ) (278,306 ) (42,086)Revenues from royalty and stream interests 31,39326,09396,829 61,578Cost of sales(82,748)(44,214 ) (284,705 ) (44,587)Less: Cost of sales of offtake interests 79,49841,424274,22041,424Cost of sales of royalty and stream interests(3,250 )(2,790) (10,485) (3,163 )Revenues from royalty and stream interests 31,39326,09396,829 61,578Less: Cost of sales of royalty and stream interests(3,250 )(2,790) (10,485) (3,163 )Cash margin from royalty and stream interests28,14323,30386,344 58,415 90 %89% 89 % 95 %Revenues from offtake interests80,30942,086278,30642,086Less: Cost of sales of offtake interests (79,498)(41,424 ) (274,220 ) (41,424)Cash margin from offtake interests 811 662 4,0866621%2 % 1% 2%
(4)Represents the estimated fair value based on the quoted prices of the investments in a recognized stock exchange as at September 30, 2018. For private investments, an internal or external evaluation is prepared.
Consolidated Statements of IncomeFor the three and nine months ended September 30, 2018 and 2017(Unaudited)(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)Three months endedSeptember 30, Nine months endedSeptember 30,201820172018 2017$ $ $ $ Revenues111,702 68,179375,135 103,664 Cost of sales (82,748 ) (44,214 ) (284,705 )(44,587)Depletion of royalty, stream and other interests(13,136 ) (8,324) (39,637)(15,318)Gross profit15,81815,64150,79343,759Other operating expensesGeneral and administrative(3,646) (5,552) (13,214)(17,548)Business development(1,077) (9,106) (3,750 )(13,073)Exploration and evaluation, net of tax credits(46 ) (57 ) (128 )(121 )Operating income11,049926 33,70113,017Interest income 1,041 751 3,581 3,157 Dividend income 228 - 278 - Finance costs (6,396) (1,626) (19,291)(3,559 )Foreign exchange gain (loss)(160) (7,906) 92(15,451)Share of income (loss) of associates(4,139) 329 (6,558 )(2,632 )Other gains, net5,781 14,7141,580 31,336Earnings before income taxes7,404 7,188 13,38325,868Income tax expense(1,930) (559) (5,088 )(4,303 )Net earnings5,474 6,629 8,295 21,565Net earnings (loss) attributable to:Osisko Gold Royalties Ltd's shareholders5,474 6,728 8,295 21,847Non-controlling interests - (99 ) - (282 )Net earnings per shareBasic 0.040.050.050.19Diluted 0.040.050.050.18
We seek Safe Harbor.
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