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

8/5, 11:00 PM (Source: GlobeNewswire)

MONTRÉAL, Aug. 05, 2020 (GLOBE NEWSWIRE) -- Osisko Gold Royalties Ltd (the “Company” or “Osisko”) (OR: TSX & NYSE) today 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 (“GEOs”);
  • 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.

Q2 2020 Results Conference Call

Osisko will host a conference call on Thursday, August 6, 2020 at 10:00 am EDT to review and discuss its second quarter 2020 results. Participants to the call must register using one of the methods below:

  • Online pre-registration: http://www.directeventreg.com/registration/event/7026109

    Once you register, you will receive a confirmation which will have the dial in number and both the Direct Event Passcode and your unique Registrant ID to join this call. For security reasons, please do NOT share this information with anyone else.
     
  • You can alternatively, pre-register by phone:

    Pre-phone registration: 1-(888) 869-1189 and provide the Conference ID which is 7026109 to the Live Agent who will take the details from you live. Please pre-register in advance of the call.

The conference call replay will be available from 1:00 pm EDT on August 6, 2020 until 11:59 pm EDT on August 13, 2020 with the following dial in numbers: 1-(800) 585-8367 (North American toll free) or 1-(416) 621-4642, access code 7026109. The replay will also be available on our website at www.osiskogr.com.

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.

Osisko’s 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:  

Sandeep Singh
President
Tel. (514) 940-0670
ssingh@osiskogr.com

 
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,
 20202019 20202019
      
Gold (i)$1,711$1,309 $1,645$1,307
Silver(ii)$16$15 $17$15
      
Exchange rate (US$/Can$)(iii)1.38531.3377 1.36511.3336

 

(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 assets3,117 -  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 associates1,458 8,780  3,174 10,542 
Deferred income tax expense (recovery)1,489 216  (2,025)(9,266)
          
Adjusted earnings5,733 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 share0.03 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 
 $ $  $ $ 
      
Revenues40,758 131,606  93,363 232,332 
Less: Revenues from offtake interests(12,025)(97,825) (26,796)(165,051)
Revenues from royalty and stream interests28,733 33,781  66,567 67,281 
      
Cost of sales(12,945)(100,093) (30,228)(170,197)
Less: Cost of sales of offtake interests11,454 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 interests28,733 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 interests27,242 30,330  61,715 60,236 
      
 95%90% 93%90%
      
Revenues from offtake interests12,025 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%
          

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 management’s expectations regarding Osisko’s 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, that sufficient funding will be available to fund work at the Cariboo Project, that significant value will be created within the accelerator group of companies and Osisko’s 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 Osisko’s royalties, streams and other interests to differ materially from those in forward-looking statements include, without limitation: the uncertainties related to the COVID-19 impacts, the 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; Osisko’s 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 Osisko’s 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)
   
 June 30,  December 31, 
   2020    2019 
  $  $
      
    
Assets   
    
Current assets   
    
Cash201,971  108,223 
Short-term investments21,105  20,704 
Amounts receivable8,355  6,330 
Other assets5,878  5,172 
 237,309  140,429 
    
Non-current assets   
    
Investments in associates123,907  103,640 
Other investments107,954  67,886 
Royalty, stream and other interests1,128,673  1,130,512 
Mining interests and plant and equipment369,536  343,693 
Exploration and evaluation43,065  42,949 
Goodwill111,204  111,204 
Other assets6,940  6,940 
 2,128,588  1,947,253 
    
Liabilities   
    
Current liabilities   
    
Accounts payable and accrued liabilities14,379  18,772 
Dividends payable8,259  7,874 
Current portion of long-term debt49,298  - 
Provisions and other liabilities2,377  1,289 
 74,313  27,935 
    
Non-current liabilities   
    
Provisions and other liabilities28,918  29,365 
Long-term debt372,354  349,042 
Deferred income taxes48,327  47,465 
 523,912  453,807 
    
Equity    
    
Share capital1,742,111  1,656,350 
Warrants18,072  18,072 
Contributed surplus38,220  37,642 
Equity component of convertible debentures17,601  17,601 
Accumulated other comprehensive income60,712  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 
 $  $  $  $ 
         
         
Revenues40,758  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 profit19,121  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 income1,075  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), net10,806  (5,298) 11,435  (5,333)
Earnings (loss) before income taxes14,814   (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 diluted0.08  (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 compensation1,682  1,520  4,365  4,221 
Depletion and amortization8,981  12,166  23,113  24,826 
Impairment of assets3,117  -  30,323  38,900 
Finance costs2,126  1,791  4,750  3,474 
Share of loss of associates1,458  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)
Other33  (245) 75  (493)
Net cash flows provided by operating activities before changes in non-cash working capital items18,556  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 activities15,422  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 investments3,115  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 shares85,000  -  85,000  - 
Exercise of share options and shares issued under the share purchase plan773  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 activities76,546  (64,989) 136,913  (107,679)
        
Increase (decrease) in cash before effects of exchange rate changes on cash48,294  (23,832) 93,813  (88,166)
Effects of exchange rate changes on cash(4,648) (1,076) (65) (2,510)
Increase (decrease) in cash43,646  (24,908) 93,748  (90,676)
Cash  – beginning of period158,325  108,497  108,223  174,265 
Cash  – end of period201,971  83,589  201,971  83,589 

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