Osisko Gold Royalties Ltd.
TSX : OR

Osisko Gold Royalties Ltd.

November 05, 2014 16:15 ET

Osisko Reports Third Quarter Results

MONTREAL, QUEBEC--(Marketwired - Nov. 5, 2014) - Osisko Gold Royalties (the "Company" or "Osisko") (TSX:OR) reported today the third quarter net earnings of $5.8 million ($0.12 per share). For the first nine months of 2014, the Company generated net earnings from continuing operations of $0.1 million ($0.00 per share) and $1,675 million net earnings, including net earnings from discontinued operations of $1,675 million ($36.76 per share).

Highlights for the third quarter

  • Revenues of $9.6 million (2013 - nil);
  • 6,359 gold ounces earned (2013 - nil) and 6,843 ounces sold;
  • 6,051 silver ounces earned (2013 - nil) and 6,523 ounces sold;
  • Net earnings(1) of $5.8 million, $0.12 per share (2013 - net loss of $3.9 million, $0.09 per share);
  • Adjusted EBITDA(2) of $8.1 million, $0.17 per share2 (2013 - adjusted EBITDA2 and adjusted EBTDA per share2 of nil);
  • Strong EBITDA margin2 of 84%;
  • Net cash flows provided by operating activities(3) of $6.1 million (2013 - negative $1.6 million);
  • $100 million revolving credit facility obtained with possibility to increase by $50 million(4).
1 From continuing operations
2 "Adjusted EBITDA", "Adjusted EBITDA per share" and "EBITDA margin" are non-IFRS financial performance measures which have no standard definition under IFRS. Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Management and Discussion Analysis.
3 Before change in non-cash working capital items
4 Subject to the execution and delivery of final documentation and the satisfaction of all conditions precedent.

Sean Roosen, Chair and CEO, commenting on the quarter activities: "Osisko is very pleased to provide our first full quarter results as a royalty company. Our core team has worked diligently over the summer to get our new corporation operating at full speed. Our considerable starting cash balance and our steadily increasing gold and silver deliveries from the Canadian Malartic mine provide a strong and stable platform for the forward-going business of the company. Recently we were also able to secure an important credit line which gives the company additional financial flexibility. Together with our cash and bullion deliveries, this will allow us to evaluate and competitively participate in opportunities that are presenting themselves in the current market."

Royalty Interests

Canadian Malartic

The Company's cornerstone asset is a 5% Net Smelter Return ("NSR") royalty on the Canadian Malartic property which is located in Malartic, Québec, and which is now operated by the Canadian Malartic General Partnership ("the CM Partnership") created by Agnico Eagle Mines Limited ("Agnico Eagle") and Yamana Gold Inc. ("Yamana").

The CM Partnership has announced that they are looking at various ways to optimize operations at the Canadian Malartic mine. The current crushing circuit has a nameplate capacity of 55,000 tonnes per day. Although this rate has been exceeded on a daily basis and monthly basis, throughput levels are forecast by the CM Partnership to be 51,000 to 52,000 tonnes per day for the next six to twelve months, with a ramp up to full capacity of 55,000 tonnes per day over a one to two year timeframe. Various options are being evaluated by the CM Partnership to reach the design capacity.

Ounce reconciliation with the block model continues to be positive (3% to 4% higher), and could have a favourable impact on the quantity of gold produced going forward.

For more information, refer to the press releases of Yamana and Agnico Eagle dated October 29, 2014 filed on www.sedar.com.

In August 2014 Agnico Eagle and Yamana released updated mineral reserve and resource estimates as at June 15, 2014 for the Canadian Malartic mine. Proven and probable in-pit mineral reserves were estimated at 8.9 million ounces of gold based on a US$1,300 per ounce engineered pit design, a cut-off grade between 0.28 g/t and 0.35 g/t gold, and C$/US$ exchange rate of 1.10.

The reserve base is presented in the table below:

Reserve and resource estimates
with cut-off grade between 0.28 to 0.35 g/t Au
Category Tonnes
(M)
Grade
(g/t Au)
Au
(M oz)
Proven Reserves 57.6 0.91 1.69
Probable Reserves 205.6 1.10 7.26
Proven & Probable Reserves 263.2 1.06 8.94
Measured and Indicated Resources1 314.2 1.07 10.80
Inferred Resources 46.5 0.77 1.14
1 Includes proven & probable reserves

For more information, please refer to Agnico Eagle and Yamana NI-43-101 Technical Reports filed on www.sedar.com on August 13 and 14, 2014 respectively.

Upper Beaver and Kirkland Lake Properties

Osisko owns a 2% NSR royalty on the Upper Beaver project and on the Kirkland Lake properties, which are currently being jointly operated by Agnico Eagle and Yamana.

The CM Partnership announced that they have reviewed the exploration work carried out earlier in 2014 and allocated approximately $8.0 million towards exploration through the balance of 2014, with a focus on the Upper Beaver project in Kirkland Lake, and the Pandora property. Activities will include the compilation of historical work at the various Kirkland Lake properties and the initiation of a technical report on the Upper Beaver project.

A technical report is expected to be completed by the end of 2014 that will evaluate the mineral potential and form the basis for a Preliminary Economic Assessment, which is expected to be completed in 2015.

For more information, refer to the press releases of Yamana and Agnico Eagle date October 29 and 30, 2014 filed on www.sedar.com respectively.

Other

The Company owns a 2% NSR royalty on the Hammond Reef Project, which is located near Atikokan in Ontario. The Company also owns royalty interests on various other Canadian properties that were held by Osisko Mining Corporation including a 2% NSR royalty on the Pandora property, which is located near Agnico Eagle's Lapa Mine near Cadillac, Québec.

The CM Partnership announced that at Pandora, drilling will evaluate the near surface North Branch zone, and several drill holes will also be drilled from the 101-W Exploration drift at the adjacent Lapa mine to test for mineralization at the South Branch target.

Underground drilling to test the South Branch target on the jointly owned Pandora property is currently underway from the 101-W drift. This drift may be extended onto the Pandora property depending on the success of the drill program.

For more information, refer to the press releases of Yamana and Agnico Eagle date October 29 and 30, 2014 filed on www.sedar.com respectively.

Other Investments

The Company has completed a non-brokered private placement of 14,000,000 flow-through common shares of NioGold Mining Corporation ("NioGold") for a total of $4.9 million. Osisko now owns approximately 19.5% of NioGold's issued and outstanding common shares. NioGold has appointed two representatives from the senior management of the Company as Directors of their Board of Directors.

In addition, Osisko has purchased rights held by NioGold to repurchase half of the existing net smelter return royalties on the Marban block and Malartic Hygrade-NSM block for an aggregate purchase price of $150,000. The acquisition of these royalties would necessitate an outlay of $2.0 million.

The Company also acquired a total of 2.7 million common shares of Falco Resources Ltd. ("Falco") for an aggregate purchase price of $1.0 million. Falco has appointed Sean Roosen as Director and Chairman of their Board of Directors. Osisko now owns approximately 15.0% of the total issued and outstanding common shares of Falco. Osisko insiders also hold 2% of the issued and outstanding common shares of Falco.

Revolving Credit Facility

During the third quarter of 2014, the Company entered into an agreement with the National Bank of Canada for a $100 million Revolving Credit Facility to be used for investments in the mineral industry, including the acquisition of royalties and the funding of precious metal streams. The facility may be increased by $50 million at Osisko's request.

The Revolving Credit Facility is subject to the execution and delivery of final documentation and the satisfaction of all conditions precedent.

Financial Position

The Company completed the quarter with a strong balance sheet. Cash resources totaled $156.8 million and net working capital stood at $156.1 million. The Company is debt-free, totally unhedged and with the closing of its recently announced revolving credit facility in November, has the financial flexibility to enhance its royalty portfolio.

Discontinued Operations

Discontinued operations reflect results of the Canadian mining, exploration and evaluation activities until June 15, 2014 of Osisko Mining Corporation that are deemed to have been disposed, and includes the gain on the deemed disposal of net assets for $1,744,115,000 realized on June 16, 2014.

About Osisko Gold Royalties Ltd

Osisko is a gold-focused royalty and stream company whose cornerstone asset is a 5% NSR royalty on the Canadian Malartic Gold Mine, located in Malartic, Quebec. The Company also holds a 2% NSR royalty on the Upper Beaver, Kirkland Lake and Hammond Reef gold exploration projects in Northern Ontario.

Osisko's head office is located at 1100 Avenue des Canadiens-de-Montréal, Suite 300, Montréal, Québec, H3B 2S2.

Forward-looking statements

Certain statements contained in this press release may be deemed "forward-looking statements". 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 revenues, requirements for additional capital, mineral reserve and mineral resource estimates, production estimates, production costs and revenue, future demand for and prices of commodities, business prospects and opportunities are forward looking statements. In addition, statements (including data in tables) relating to reserves and resources and gold equivalent ounces are forward looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the estimates will be realized. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions or variations (Including negative variations), or that events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, the performance of the assets of Osisko, the satisfaction of conditions to the execution and delivery of the Revolving Credit Facility, and the realization of the anticipated benefits deriving therefrom. 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 to differ materially from those in forward-looking statements include, without limitation: fluctuations in the prices of the commodities that drive royalties held by Osisko (gold and silver); fluctuations in the value of the Canadian dollar relative to the U.S. dollar; regulatory changes in national and local government, including permitting and licensing regimes and taxation policies; regulations and political or economic developments in any of the countries where properties in which Osisko holds a royalty or other interest are located or through which they are held; risks related to the operators of the properties in which Osisko holds a royalty; business opportunities that become available to, or are pursued by Osisko; continued availability of capital and financing and general economic, market or business conditions; litigation; title, permit or license disputes related to interests on any of the properties in which Osisko holds a royalty or other interest; development, permitting, infrastructure, operating or technical difficulties on any of the properties in which Osisko holds a royalty or other interest; rate and timing of production differences from resource estimates or production forecasts by operators of properties in which Osisko holds a royalty or other interest ; risks and hazards associated with the business of exploring, development and mining on any of the properties in which Osisko holds a royalty or other interest, including, but not limited to unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters or civil unrest or other uninsured risks.

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 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; 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. For additional information on risks, uncertainties and assumptions, please refer to Schedule I to the management information circular of Osisko Mining Corporation which created Osisko and which is filed on SEDAR and also provide additional general assumptions in connection with these statements. Osisko cautions that the foregoing list of risk and uncertainties is not exhaustive. Investors and others who base themselves on the forward looking statements contained herein should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Osisko believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release. Osisko undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.

Osisko Gold Royalties Ltd
Consolidated Statements of Income (Loss)
For the three and nine months ended September 30, 2014 and 2013
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2014 2013 2014 2013
$ $ $ $
Revenues9,571 - 9,571 -
Expenses
Refinery and transportation costs(34)- (34)-
General and administrative(1,508)(220)(2,156)(711)
Business development(607)- (633)-
Exploration and evaluation(1,526)(1,369)(5,260)(5,784)
Write-off of property, plant and equipment- (953)(2,831)(7,172)
Operating income (loss)5,896 (2,542)(1,343)(13,667)
Interest income479 275 1,555 933
Foreign exchange gain (loss)182 (5)185 14
Share of loss of associates(486)(52)(582)(796)
Other gains (losses)1,837 (1,533)2,117 (6,634)
Earnings (loss) before income taxes7,908 (3,857)1,932 (20,150)
Income tax expense(2,075)(20)(1,845)(66)
Net earnings (loss) from continuing operations5,833 (3,877)87 (20,216)
Net earnings (loss) from discontinued operations- 13,632 1,675,263 (445,375)
Net earnings (loss)5,833 9,755 1,675,350 (465,591)
Net earnings (loss) per share from continuing operations
Basic and diluted0.12 (0.09)0.00 (0.46)
Net earnings (loss) per share
Basic and diluted0.12 0.22 36.76 (10.66)
Weighted average number of common shares outstanding (in thousands)
Basic and diluted47,900 43,719 45,581 43,680
Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2014 and 2013
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
Three months ended Nine months ended
September 30, September 30,
2014 2013 2014 2013
$ $ $ $
Operating activities
Net earnings (loss) from continuing operations5,833 (3,877)87 (20,216)
Adjustments for:
Interest income(479)(275)(1,555)(933)
Share-based compensation126 - 126 -
Write-off of property, plant and equipment- 953 2,831 7,172
Share of loss of associates486 52 582 796
Net loss (gain) on available-for-sale financial assets(3,422)161 (2,996)1,012
Net loss (gain) on financial assets at fair value through profit and loss(27)24 (61)1,129
Impairment of associates and other financial assets1,612 1,348 1,612 4,632
Provisions and other liabilities120 - 120 -
Deferred income tax expense2,075 20 1,845 66
Other non-cash gain(179)- (851)-
6,145 (1,594)1,740 (6,342)
Change in non-cash working capital items(459)(163)763 248
Net cash flows used in operating activities from continuing operations5,686 (1,757)2,503 (6,094)
Net cash flows provided by operating activities from discontinued operations- 72,422 116,066 195,184
Net cash flows provided by operating activities5,686 70,665 118,569 189,090
Investing activities
Acquisition of investments(5,899)- (6,899)-
Proceeds on disposal of investments- - 50 1,045
Property, plant and equipment(204)(813)(1,035)(4,097)
Royalty interests(150)- (150)-
Interest received402 275 1,405 933
Net cash flows used in investing activities from continuing operations(5,851)(538)(6,629)(2,119)
Net cash flows used in investing activities from discontinued operations- (48,825)(77,735)(115,769)
Net cash flows used in investing activities(5,851)(49,363)(84,364)(117,888)
Financing activities
Issuance of common shares, net of share issue expenses- 1,713 158,267 3,096
Net cash flows provided by financing activities from continuing operations- 1,713 158,267 3,096
Net cash flows used in financing activities from discontinued operations- (16,731)(197,301)(45,757)
Net cash flows used in financing activities- (15,018)(39,034)(42,661)
Effects of exchange rate changes on cash and cash equivalents181 - 181 -
Increase (decrease) in cash and cash equivalents16 6,284 (4,648)28,541
Cash and cash equivalents - beginning of period156,741 115,486 161,405 93,229
Cash and cash equivalents - end of period156,757 121,770 156,757 121,770
Osisko Gold Royalties Ltd
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
September 30, December 31,
2014 2013
$ $
Assets
Current assets
Cash and cash equivalents156,757 161,405
Restricted cash- 560
Accounts receivable404 24,552
Inventories2 79,247
Prepaid expenses and other assets267 24,260
157,430 290,024
Non-current assets
Restricted cash- 48,490
Investments in associates14,196 3,557
Other investments6,049 8,998
Property, plant and equipment2,508 1,870,932
Deferred income taxes12,734 -
192,917 2,222,001
Liabilities
Current liabilities
Accounts payable and accrued liabilities1,290 78,967
Current portion of long-term debt- 71,794
Provisions and other liabilities58 6,913
1,348 157,674
Non-current liabilities
Long-term debt- 245,157
Provisions and other liabilities62 18,499
Deferred income and mining taxes311 69,603
1,721 490,933
Equity attributable to Osisko Gold Royalties shareholders
Share capital1 2,060,810
Warrants- 20,575
Contributed surplus126 75,626
Equity component of convertible debentures- 8,005
Accumulated other comprehensive income56 16
Retained earnings (deficit)191,013 (433,964)
191,196 1,731,068
192,917 2,222,001

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