Osisko GOLD Royalties Reports First Quarter 2017 Results
OSISKO GOLD ROYALTIES REPORTS
FIRST QUARTER 2017 RESULTS
(Montreal, May 4, 2017) Osisko Gold Royalties Ltd (the “Company” or “Osisko”) (OR: TSX & NYSE)
is pleased to report its results for the first quarter of 2017. Amounts are in Canadian dollars unless
otherwise noted.
Highlights – Q1 2017
• Record quarterly gold equivalent ounces (“GEO”) earned of 10,4181 (9% increase compared to
Q1 20162);
• Quarterly revenues of $17.1 million (10% increase compared to Q1 2016);
• Net cash flows provided by operating activities of $12.0 million (compared to $9.8 million in Q1
2016);
• Net earnings attributable to Osisko shareholders of $4.1 million, $ 0.04 per basic share
(compared to a net loss of $0.1 million, $0.00 per basic share in Q1 2016);
• Adjusted earnings3 of $6.6 million, $0.06 per basic share 3 (compared to 8.7 million, $0.09 per
basic share in Q1 2016);
• Cash and cash equivalents of $423.6 million as at March 31, 2017;
• Closing of a US$33.0 million silver stream agreement with Taseko Mines Limited (“Taseko”);
and
• Declaration of a tenth quarterly dividend of $0.04 per common share paid on April 17, 2017 to
shareholders of record as of the close of business on March 31, 2017.
Highlights – April/May 2017
• Acquisition of additional common shares of Barkerville Gold Mines Ltd. (“Barkerville”), an
associate of Osisko, for $28.1 million which increased Osisko’s holding to 35.2%;
• Acquisition of an additional 0.75% net smelter return (“NSR”) royalty on the Cariboo gold
project from Barkerville for cash consideration of $12.5 million, which increased the NSR
royalty held by Osisko on the Cariboo gold project to a total of 2.25% NSR; and
• On May 4, 2017, declaration of an eleventh quarterly dividend of $0.04 per common share
payable on July 17, 2017 to shareholders of record as o f the close of business on June 30,
2017.
1 Gold equivalent ounces earned incl udes NSR royalties in gold, silver and other cash royalties and the silver stream . Silver 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 per iod. Cash royalties were converted into gold
equivalent ounces by dividing the associated revenue by the average gold price for the period. Refer to the portfolio of royalty and stream interests section of the
Management and Discussion Analysis for the three months ended March 31, 2017 filed on www.sedar.com and www.sec.gov for average metal prices used.
2 Three months ended March 31, 2016 or first quarter of 2016 (“Q1 2016”).
3 “Adjusted earnings” and “Adjusted earnings per share” 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 this press release.
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Sean Roosen, Chair and Chief Executive Officer, commenting on the first quarter of 2017 performance
noted: “During the first quarter, we continued to execute our strategy that was established at the
commencement of our activities in June 2014. We continue to build a strong portfolio of royalties and
streams to complement our Canadian Malartic and Éléonore cornerstone royalty assets. We are also
very pleased with our portfolio of investments which is delivering superior returns from their successful
drilling programs.”
Record Quarterly Gold Equivalent Ounces Earned in Q1 2017
The Company’s portfolio of royalty and stream interests delivered a quarterly record 10,418 GEO in
the first quarter of 2017. Increased production at Canadian Malartic, Island Gold and Vezza as well as
our first delivery of silver from the Taseko stream were the major contributors to the record quarterly
GEO earned by the Company, while production at Éléonore decreased when compared to the fi rst
quarter of 2016.
Royalties earned (in GEO)
For the three months ended
March 31,
2017 2016
Gold
Canadian Malartic 7,483 7,122
Éléonore 1,582 2,070
Island Gold 416 212
Vezza 349 -
Other 150 27
9,980 9,431
Silver
Gibraltar (2 months) 309 -
Canadian Malartic 127 102
Vezza 2 -
438 102
Total GEO 10,418 9,533
Revenues
Three months ended March 31, 2017 Three months ended March 31, 2016
Average
selling price
per ounce
($)
Ounces
sold
Total
revenues
($000’s)
Average
selling price
per ounce
($)
Ounces
sold
Total
revenues
($000’s)
Gold sold 1,620 9,970 16,148 1,636 9,417 15,402
Silver sold 24 30,928 736 20 8,100 160
Royalties (paid in cash) - - 242 - - 44
17,126 15,606
For the first quarters of 2017 and 2016, 100% of revenues were earned from precious metals and from
Canada.
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Overview of Financial Results
• Revenues of $17.1 million compared to $15.6 million in Q1 2016;
• Gross profit of $13.7 million compared to $12.6 million in Q1 2016;
• Operating income of $6.2 million compared to $7.1 million in Q1 2016;
• Net earnings attributable to Osisko shareholders of $4.1 million or $ 0.04 per basic share and
diluted share, compared to a net loss of $0.1 million or $0.00 per basic and diluted share in
Q1 2016;
• Adjusted earnings4 of $6.6 million or $0.06 per basic share4 compared to $8.7 million or $0.09
per basic share in Q1 2016;
• Net cash flows provided by operating activities of $12.0 million compared to $9.8 million in Q1
2016.
Revenues increased in the first quarter of 2017 as a result of higher in- kind royalties earned and sold.
Gold royalties earned from the Canadian Malartic mine increased by 5% or 361 ounces (sales
increased by 388 ounces), gold royalties earned and sold from the Island Gold mine increased by 204
ounces and gold royalties earned from the Vezza mine totalled 349 ounces (none earned in the first
quarter of 2016; 449 ounces were sold in the first quarter of 2017). In addition, Osisko received and
sold its first delivery of 21,616 ounces of silver (representing two months of production) with respect to
its new Gibraltar silver stream. These increases were partially offset by a decrease of 24% or 488
ounces of gold delivered and sold from the Eleonore mine. The average selling price of gold per ounce
in Canadian dollars was slightly lower in the first quarter of 2017 at $1,620 compared to $1,636 in the
first quarter of 2016.
Gross profit reached $13.7 million in the first quarter of 2017 compared to $12.6 million in the first
quarter of 2016 as a result of higher sales.
During the first quarter of 2017, operating income amounted to $6.2 million compared to $7.1 million in
the corresponding period of 2016. The decrease in operating income in 2017 is mainly the result of
higher general and administrative expenses (“G&A”), partially offset by lower exploration and
evaluation expenses, a higher gross profit and higher cost recoveries from associates. The increase in
G&A expenses is mai nly due to higher share -based compensation expenses related to the deferred
and restricted share units (higher number of units outstanding and higher closing share price) and
higher general and legal costs due to the Company being now listed on the New Yor k Stock
Exchange.
The increase in net earnings in the first quarter of 2017 is mainly the result of a lower foreign
exchange loss and higher interest income, partially offset by a lower operating income, lower dividend
income, lower net gain on investments and higher finance costs and share of loss of associates.
The decrease of $ 2.1 million in adjusted earnings in the first quarter of 2017 compared to the first
quarter of 2016 is mainly due to a decrease in operating income of $0.9 million, a decrease in dividend
income of $1.6 million and an increase of $0.4 million in finance costs, partially offset by an increase in
interest revenues of $0.7 million.
Net cash flows provided by operating activities increased in the first quarter of 2017 as a result of
higher revenues and a lower negative impact of changes in non- cash working capital items when
compared to the first quarter of 2016.
4 “Adjusted earnings” and “Adjusted earnings per share” are non-IFRS financial performance measure s which have no standard definition under IFRS. Refer to the non -
IFRS measures provided under the Non-IFRS Financial Performance Measures section of this press release.
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Producing Royalty and Stream Interests Update
Canadian Malartic Mine
One of t he Company’s cornerstone assets is a 5% NSR royalty on the Canadian Malartic property
which is located in Malartic, Québec, and operated by the Canadian Malartic General Partnership
(“Partnership”) created by Agnico Eagle Mines Limited and Yamana Gold Inc. (the “Partners”). At
Canadian Malartic, guidance for 2017 and 2018 has been slightly increased due to a change in the
life-of-mine plan. T he Partners indicated that t he updated plan provides for earlier access to higher
grade zones that are located deeper in the Canadian Malartic pit . The Partner ship is currently
forecasting 600,000 ounces, 650,000 ounce s and 640,000 ounces of gold production for 2017, 2018
and 2019 respectively5.
The Québec government recently announced the approval of the Canadian Malartic expansion
project. The expansion project will allow the mine to access the Barnat zone, which has softer ore and
could allow for higher throughputs. Production activities at Barnat are currently forecast to begin in late
2018, depending on the timing of the start of construction of the road deviation 5. As part of the
approval, certain operating parameters were modified and clarified which are expected to enhance the
operating efficiencies of Canadian Malartic.
Canadian Malartic (Odyssey Zones)5
In the first quarter of 2017, the Partnership announced an initial inferred mineral resource on the
Odyssey zones at the Canadian Malartic mine. The Odyssey property lies on the east side of the
Canadian Malartic property, approximately 1.5 kilometre east of the current limit of the Canadian
Malartic open pit. Initial inferred mineral resources of 1.43 million ounces (20.7 million tonnes grading
2.15 grams per t onne “g/t” gold) for North and South Odyssey Zones were defined. The Partnership
announced near-term production potential (2018-2020) from the Odyssey South underground. Osisko
holds a 5% NSR royalty on the Odyssey South zone and a 3% NSR royalty on the Odyssey North
zone.
Éléonore Mine
Osisko’s other cornerstone asset is a sliding-scale 2.0% to 3.5% NSR royalty in the Éléonore gold
property located in the James Bay region in Québec and operated by Goldcorp Inc. (“Goldcorp”). Gold
production in 2017 is expected to total 315,000 ounces (+/ -5%)6. The increase compared to 2016 is
due to the continued ramp up of the mine. A life of mine study is underway to determine the
sustainable mining rate from the Roberto deposit.
Goldcorp has reported 7 that gold production at Éléonore for the first quarter of 2017 was 16% higher
than the first quarter of 2016, consistent with the ongoing ramp -up schedule. The royalty ounces
received by Osisko is lower for the first quarter of 2017 compared to the same period in 2016 due to
the one month delay in production deliveries. Goldcorp reported an increase of 23% in tonnes mined
in the first quarter of 2017 compared to the first quarter of 2016, reflecting the increased ore
development rate and the utilization of additional mining equipment, as well as an increase in the gold
process recovery rate to 92%, approaching the expected rate of 93% to 94% that is contemplated in
5 Refer to Agnico Eagle’s press release dated February 15, 2017, titled: “Agnico Eagle Reports Fourth Quarter and Full Year 2016 Results”
6 Refer to Goldcorp’s press release dated February 15, 2017, titled: “Goldcorp Reports Fourth Quarter and Full Year 2016 Results”
7 Refer to Goldcorp’s Management Discussion and Analysis for the three months ended March 31, 2017.
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the Éléonore’s latest NI 43-101 Technical Report8. Goldcorp expects the production ramp- up to 7,000
tonnes per day to continue into 2018 with the addition of a fifth production horizon.
Osisko congratulates the Éléonore mine team for being awarded the prestigious John T. Ryan award
received during the 2017 Canadian Institute of Mining annual convention for its exceptional safety
record.
Gibraltar Mine
In the first quarter of 2017, Osisko acquired from Gibraltar Mines Ltd. (“Gibco”), a wholly -owned
subsidiary of Taseko having a 75% interest in the Gibraltar copper mine (“Gibraltar”), a silver stream
with ref erence to silver produced at Gibraltar , located in British Columbia, Canada. Osisko paid
Taseko a cash consideration of US$33.0 million ($44.3 million) for the silver stream. In addition,
Osisko will make ongoing payments of US$2.75 per ounce of silver delivered.
Osisko will receive from Taseko an amount equal to 100% of Gibco’s share of silver production until
the delivery to Osisko of 5.9 million ounces of silver, and 35% of Gibco’s share of silver production
thereafter. Gibraltar is the second largest open pit copper mine in Canada and fourth largest in North
America. The life of mine yearly average production from Gibraltar is approximately 140 million
pounds (“lbs”) of copper and 2.6 million lbs of molybdenum. With a large mineral reserve of 3.2 billion
lbs of recoverable copper and 58 million lbs of molybdenum, the estimated mine life of the project is
23 years (proven and probable mineral reserves as of January 1, 2016). The acquisition is expected to
increase Osisko’s production by approximately 200,000 ounces of silver for the next 14 years,
increasing to an average of 350,000 ounces of silver for the remainder of the 23- year reserve life o f
Gibraltar. Any silver in respect of which a delivery is made after January 1, 2017, is subject to the
stream. Osisko received its first delivery of 21,616 ounces of silver in March (which accounted for the
months of January and February) and a second del ivery of 20,982 ounces of silver for the month of
March was received subsequent to quarter end.
Island Gold Mine 9
In the first quarter of 2017, Richmont Mines Inc. (“Richmont”) announced that the Island Gold Mine is
expected to deliver production growth that exceeds the record production levels achieved by Richmont
in 2016 by up to 12%, driven by increased underground mine and mill productivity of 900 tonnes per
day at an average head grade of 8.9 g/t gold. Annual production at Island Gold for 2017 is expected to
increase to between 87,000 and 93,000 ounces.
Investment Portfolio Update
During the three months ended March 31, 2017, Osi sko acquired investments for $62.8 million and
sold investments for $22.5 million with a gain of $1.4 million ($1.2 million net of income taxes)
recorded in accumulated other comprehensive income (loss).
8 Refer to Goldcorp’s NI 43-101 Technical Report dated December 31, 2015, titled: “Éléonore Operations, Quebec, Canada, NI 43-101 Technical Report”
9 Refer to Richmont’s press release dated February 2, 2017, titled: “Richmont Announces 2017 Guidance with Island Gold Mine Positioned…”
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The following table presents the carrying value and fair value of the investments in marketable
securities as at March 31, 2017 (in thousands of dollars):
Marketable
securities
Carrying
value(i)
Fair
value(ii)
$ $
Associates 111,223 234,331
Other 106,887 106,887
218,110 341,218
(i) The carrying value corresponds to the amount recorded on the balance sheet, which is the equity method
for the investments in marketable securities of associates and the fair value for the other investments in
marketable securities, as per IFRS 9, Financial Instruments.
(ii) The fair value corresponds to the quoted price of the investments in a recognized stock exchange as at
March 31, 2017.
As at March 31, 2017, the fair value of Osisko’s marketable securities exceeds its acquired cash price
by $132.0 million. At the end of the first quarter of 2017, the Company has realized a gain of $17.3
million ($15.9 million net of income taxes).
Osisko Mining Inc.
As at May 4, 2017, the Company holds 28,372,709 common shares representing a 15.3% interest in
Osisko Mining. Osisko owns a total 1.5% NSR royalty on the Windfall Lake gold project (“Winfall”).
Osisko Mining is curren tly pursuing a 400,000 meter drilling program on Windfall . In 2016, the
Company acquired common shares in Osisko Mining for $6.8 million and during the first quarter of
2017, acquired additional common shares for $17.7 million.
Falco Resources Ltd. 10
As at May 4, 2017, the Company holds 20,826,005 common shares representing a 13.3% interest in
Falco Resources Ltd. (“Falco”). In 2016, Falco published an initial PEA on the Horne 5 Project. Falco
is currently working on a feasibility study, which is expected to be released in late second quarter or
early third quarter of 2017, and an environmental impact assessment for the Horne 5 Project , which
expected to be released by the end of 2017. In February 2017, Falco also announced it had initiated a
40,000 metre exploration drill campaign on its large 668 square kilometre land package in the Rouyn-
Noranda Camp, which surrounds its 100% owned Horne 5 Project.
In May 2016, Osisko provided a $10.0 million loan to Falco with an 18 month maturity and bearing
interest at 7%. Under the terms of the loan, Falco and Osisko shall negotiate, by the end of October
2017, the terms, conditions and form of a silver and/or gold stream agreement (“Stream Agreement”)
whereby Osisko may provide Falco with a portion of the development capital required to build the
Horne 5 Project. In this case, the principal amount of the loan and any accrued interest will be applied
against the stream deposit. At the maturity date, if Falco and Osisko have not concluded a Stream
Agreement, the principal amount of the loan will be converted into a 1% NSR royalty on the Horne 5
Project and accrued interests will be paid in cash.
10 Refer to Falco’s press release dated February 20, 2017, titled: “Falco Commences 40,000 Metre Drill Program”
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Barkerville Gold Mines Ltd. 11
As at May 4, 2017, the Company holds 61,090,863 common shares representing a 35.2% interest in
Barkerville. Barkerville is focused on exploring and developing an extensive land package in the
historical Cariboo Mining District of Central British Columbia. Barkerville is currently carrying out a
130,000 meter exploration drilling program and reported that the company has received all permits to
initiate production from its Bonanza Ledge underground project at an initial rate of 150,000 tonnes per
year. In April 2017, Barkerville announced a new discovery from their ongoing 130,000 metre Phase II
Island Mountain and Valley Zone exploration drilling program at the Company’s Cariboo Gold Project.
In April, 2017, Osisko acquired an additional 0.75% NSR royalty on the Cariboo gold project for cash
consideration of $12.5 million, increasing the total NS R royalty held by Osisko to 2.25% NSR. The
grant of the additional royalty cancelled Osisko’s royalty acquisition right which was granted pursuant
to an investment agreement between Osisko and Barkerville dated February 5, 2016, however, Osisko
will retain a right of first refusal relating to any gold stream offer received by Barkerville with respect to
the Cariboo gold project.
Labrador Iron Ore Royalty Corporation
Over the course of the fourth quarter of 2016 and January 2017, Osisko sold its 9.8% int erest in
LIORC. The Company received $113.4 million in proceeds (including $98.2 million in 2016). Since the
initial investment in LIORC, the Company received $10.7 million in dividends (including $6.3 million in
2016 and $0.2 million in 2017). A 17.4% 12 return w as realized on the investment in LIORC. As
Osisko’s interest has now been completely liquidated, the Company will not be receiving dividend
income going forward.
Exploration and Evaluation Activities
Effective October 4, 2016, Osisko entered into a n earn-in agreement with Osisko Mining, which was
amended in 2017 to create two separate earn -in agreements. The amendment was necessitated by
the optioning of the Kan Project to Barrick Gold Corporation.
As a result of this transaction, the exploration and evaluation activities have been significantly reduced
and will be concentrated on the Coulon project (James Bay area). The total number of employees was
32 as at March 31, 2017, a reduction of 51% from the corresponding period in 2016, mainly as a result
of the earn -in agreement. During the first quarter of 2017, Osisko invested $0.9 million, net of tax
credits, in exploration and evaluation activities on the Coulon project.
On the Coulon project, a diamond drill program was conducted from January through spring 2016. For
the year 2016, 30 new holes were drilled and one hole was extended for a total of 23,075 metres. A
10,000 meter drilling program and a preliminary economic assessment was initiated in the first quarter
of 2017.
11 Refer to Barkerville’s press release dated April 17, 2017, titled “BGM intersects 19.20 g/t AU over 54.40 meters and 11.42 g/t AU over 28.55 meters at shaft zone” and
Barkerville’s website at www.barkervillegold.com and on SEDAR for additional information.
12 Total return on investment is a non -IFRS financial performance measure, which has no standard definition under IFRS. Total return calculation is the sum of the c apital
gains and dividends divided by the cost of the investment and represents the return earned through the life of the investment.
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Dividends
Osisko has declared dividends for the last 11th consecutive quarters.
On April 17, 2017, Osisko paid a tenth quarterly dividend of $0.04 per common share to shareholders
of record as of the close of business on March 31, 2017.
On May 4, 2017, Osisko declared an eleventh quarterly dividend of $0.04 per common share payable
on July 17, 2017 to shareholders of record as of the close of business on June 30, 2017.
2017 Guidance
Osisko’s 2017 outlook on its royalties and its stream is based on the publicly available f orecasts, in
particular the forecasts for the Canadian Malartic mine published by Yamana and Agnico Eagle, for
the Éléonore mine published by Goldcorp and for the Island Gold mine published by Richmont Mines.
When publicly available forecasts on properties where no public information is available are not
available, Osisko obtains internal forecasts from the producers or uses management’s best estimate.
Attributable gold equivalent ounces for 2017 remains unchanged compared to the previous guidance
and are estimated between 43,300 and 46,100 as follows:
2017
Canadian Malartic 30,500 – 31,500
Éléonore 6,800 – 7,000
Island Gold 1,400 – 1,600
Gibraltar stream 2,600 – 3,000
Others 2,000 – 3,000
Gold equivalent ounces 43,300 – 46,100
For our 2017 guidance, silver and cash royalties have been converted to GEOs using commodity
prices of US$1,250 per ounce of gold and US$18 per ounce of silver and an exchange rate (US$/C$)
of 1.30.
Non-IFRS Financial Performance Measures
The Company has i ncluded certain non- IFRS measures including “Adjusted Earnings”, “Adjusted
Earnings per share” and “Gold Equivalent Ounces” 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
International Financial Reporting Standards (“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.
To determine its method of calculation, the Company has reviewed, during the first quarter of 2016,
similar adjusted earnings calculations by its peers. Following this review, the Company has decided to
exclude the gains and losses on foreign exchange from its adjusted earnings and adjusted earnings
per share as they do not reflect the operating performance of the Company.
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