Osisko Gold Royalties Ltd

Osisko Gold Royalties Ltd (TSX: OR) is engaged in acquiring and managing precious metal and other royalties and similar interests in Canada and other parts of the world.

Key Highlights:

• Ample Liquidity: The company has ample liquidity of ~CAD 900 million including ~CAD 413.3 million available credit-facility, sufficient to withstand the current pandemic. Furthermore, the company has a cash balance of CAD 160.7 million along with investment amounting to CAD 317.7 million.         

Source: Company Presentation

• The company reported the formation of Osisko Development, a premier gold development company which is focused on becoming a prominent mid-tier gold producer. The common shares of Osisko Development will begin trading on the TSX Venture Exchange on or about December 2, 2020.
• Sandeep Singh has been elected as the President and Chief Executive Officer of Osisko Royalties, while Mr. Sean Roosen was appointed as Executive Chair of the Board of Directors of OR. 

Q3FY20 Financial Highlights:

• OR announced its quarterly results, wherein the company posted revenues from royalty and stream interests at CAD 41.243 million, higher than CAD 33.921 million in the previous corresponding period (pcp).
• During the quarter, the reported 11,739 GEOs of Gold production, 70.1% of total production and 4,566 GEOs of silver, representing 27.3% of total production.

Production Highlights (Source: Company Presentations) 

• Gross profit stood at CAD 30.806 million, as compared to CAD 20.851 million in pcp.
• Operating income was reported at CAD 22.907 million, as compared to a loss of CAD 38.295 million in pcp, due to impairement of assets amounting CAD 60.800 million in pcp.
• Net earnings were reported at CAD 12.514 million, as compared to a loss of CAD 45.924 million in Q3FY19.                    

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The company is susceptible to a variety of risks including 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 CAD relative to the USD, 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, etc.

Valuation Methodology (Illustrative): Price to CF based

(Note: All forecasted figures and peers have been taken from Thomson Reuters).

Stock Recommendations:

The company had a very strong third quarter with production rebounding well and other significant catalysts. The spin-out transaction announced on October 5 is an important strategic milestone for the Company. It greatly simplifies Osisko into a pure-play royalty and streaming company, while maintaining exposure to the company-making assets contributed to Osisko Development. For the second half of FY20, the company expect silver and cash royalties to be 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. We have valued the stock using P/CF based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Agnico Eagle Mines Ltd, Wesdome Gold Mines Ltd etc. Hence, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 14.02 on November 26, 2020.

OR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.