Osisko GOLD Royalties Reports Third Quarter 2017 Results
1
OSISKO GOLD ROYALTIES REPORTS
THIRD QUARTER 2017 RESULTS
(Montreal, November 8, 2017) Osisko Gold Royalties Ltd (the “Company” or “Osisko”) (OR: TSX &
NYSE) is pleased to report its results for the third quarter of 2017. Amounts are in Canadian dollars
unless otherwise noted.
Highlights – Q3 2017
Acquisition of a precious metals portfolio of assets from Orion Mine Finance Group (“Orion”) for
$1.1 billion consisting of 74 royalties, streams and precious metal offtakes, including a 9.6%
diamond stream on the Renard diamond mine and a 4% gold and silver stream on the
Brucejack gold and silver mine, all of which are new mines in Canada, in addition to a 100%
silver stream on the Mantos Blancos copper mine in Chile;
Record quarterly gold equivalent ounces (“GEOs”) earned of 16,6641 (65% increase compared
to Q3 20162);
Record quarterly revenues from royalties and streams of $26.1 million ($68.2 million including
offtakes) (48% increase compared to Q3 2016; 288% increase including offtakes);
Net cash flows provided by operating activities of $1.1 million (compared to $15.0 million in Q3
2016);
Net earnings attributable to Osisko’s shareholders of $6.7 million, $0.05 per basic share
(compared to $17.7 million, $0.17 per basic share in Q3 2016);
Adjusted earnings 3 of $8.0 million, $0.06 per basic share 3 (compared to $12.0 million, $0.11
per basic share in Q3 2016); and
Declaration of a quarterly dividend of $0.05 per common share payable on October 16, 2017 to
shareholders of record as of the close of business on September 30, 2017, representing a 25%
increase from the previous quarter.
Highlights – October/November 2017
Entered into a private subscription agreement with Dalradian Resources Inc. (“Dalradian”)
where Osisko will invest $28.2 million in common shares of Dalradian;
Completed a bought deal offering of convertible senior unsecured debentures of $300 million;
and
Declared a quarterly dividend of $0.05 per common share payable on January 15, 2018 to
shareholders of record as of the close of business on December 29, 2017.
1 GEOs include royalties, streams and offtakes. Silver was converted to gold equivalent ounces by multiplying the silver ounces b y 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 equ ivalent 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. Refer to the portfolio of royalty, stream and other interests section for average metal prices used .
2 Three months ended September 30, 2016 or third quarter of 2016 (“Q3 2016”).
3 “Adjusted earnings” and “Adjusted earnings per basic 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.
2
Sean Roosen, Chair of the Board and Chief Executive Officer, comment ing on the third quarter
activities: “During the quarter we have closed the $1. 1 billion transformational acquisition of the Orion
portfolio of royalties, streams and o fftakes. We are also excited about the potential of our accelerator
model and the pipeline of projects and opportunities we have which provides our Company with a
unique growth profile. In line with this strategy, we completed a $300 million convertible de benture
financing in November.”
Acquisition of Orion’s Portfolio
On July 31, 2017, Osisko acquired a precious metals portfolio of assets from Orion consisting of
61 royalties, 6 streams and 7 precious metal offtakes for $1.1 billion. The acquisition pric e was
comprised of US$505.6 million ($631.1 million) in cash consideration, which includes a n estimate of
US$5.0 million ($6.1 million) adjustment for the acquired working capital, and 30,906,594 common
shares of Osisko issued to Orion (the “Purchase Price ”) (the “Transaction”). Any sale of the shares
issued to Orion is subject to certain restrictions, including a 12 -month hold period and a broad
distribution requirement.
The combination of Osisko and Orion’s portfolios results in Osisko holding a total of 131 royalties,
streams and offtakes, including 16 revenue-generating assets. Through the Transaction, the Company
gained a 9.6% diamond stream on the Renard diamond mine and a 4% gold and silver stream on the
Brucejack gold and silver mine, both of which are new mines in Canada, in addition to a 100% silver
stream on the Mantos Blancos copper mine in Chile. Osisko also acquired an international structure
and has established presence in Bermuda through the Transaction . On September 1, 2017,
Mr. Michael Spencer was hired as Managing Director of Osisko Bermuda Limited (“OBL”), a wholly
owned subsidiary of Osisko . Mr. Spencer was previously Vice President, Investment and Merchant
Banking at Maxit Capital where he worked from 2014 to 2017.
As part of the Transa ction, CDP Investissements Inc., an affiliate of Caisse de dépôt et pl acement du
Québec (“Caisse”) and the Fonds de solidarité des travailleurs du Québec (F.T.Q.) (“Fonds F.T.Q.”)
subscribed for $200 million and $75 million in common shares of Osisko, resp ectively, as part of a
concurrent private placement (“Private Placement”) to fund a portion of the cash consideration and to
support the Transaction. A total of 18,887,363 common shares were issued at a price of $14.56 per
share under the Private Placement . The Private Placement was subject to a 7% capital commitment
payment payable partially in shares (2% representing 385,457 common shares) and in cash (5%
representing $13.8 million). Additional fees of $190,000 ($139,000 net of income taxes) were incurred
for the financing.
Following the Transaction, Orion, Caisse and its affiliates and Fonds F.T.Q. held respectively
approximately 19.7%, 12.1% and 5.5% of Osisko’s issued and outstanding common shares, based on
the number of common shares of Osisko outstanding on July 31, 2017.
The Company agreed to pay the cash portion of the acquisition in U.S. dollars for a fixed pre -
determined amount of US$500.6 million at a rate of 1.3484 (representing $675.0 million at the signing
of the agreement). Therefore, the C ompany entered in June 2017 into foreign exchange forward
contracts for $275 million to acquire US$204 million and designated these contracts as cash flow
hedges for accounting purposes. The balance of the cash portion of the acquisition price was paid
from current cash and cash equivalent balances denominated in U.S. dollars for US $183.6 million
($229.9 million) and the available revolving credit facility, which was drawn by US$118 million
($147.3 million).
The acquisition of Orion’s Portfolio has been re corded as a business combination with Osisko as the
acquirer. The assets acquired and the liabilities assumed were recorded at their preliminary estimated
3
fair market values at the time of the closing of the acquisition, being July 31, 2017. The transactio n
costs related to the acquisition were expensed under business development expenses and amounted
to $8.9 million, of which $7.8 million are included in the consolidated statement of income for the three
months ended September 30, 2017.
As of the reporti ng date, the Company has not completed the purchase price allocation over the
identifiable net assets of Orion’s Portfolio. Some information to confirm fair value of certain assets,
mainly the royalty, stream and other interests, are still to be confirmed. The allocation is expected to
be completed by December 31, 2017.
The table below presents the preliminary purchase price allocation:
Consideration paid $
Cash(i) 649,375
Issuance of 30,906,594 common shares 445,333
1,094,708
Net assets acquired $
Cash and cash equivalents 8,707
Other current assets 1,217
Royalty, stream and other interests 1,116,204
Current liabilities (435)
Deferred income tax liability (30,985)
1,094,708
(i) Including the net loss on settlement of derivative financial instruments (cash flow hedges) of $18.2 million.
Summary of Significant Royalty, Stream and Other Interests Acquired
Asset Operator Interest Commodities Jurisdiction Stage
Renard Stornoway Diamonds
Corporation 9.6% Stream Dia Canada Production
Mantos Blancos Mantos Copper S.A. Stream Ag Chile Production
Brucejack Pretium Resources Inc. 4% Stream / Offtake Au, Ag Canada Production
Sasa Central Asia Metals plc Stream Ag Macedonia Production
Matilda Blackham Resources Limited Offtake Au Australia Production
Parral GoGold Resources Inc. Offtake Au Mexico Production
San Ramon Red Eagle Mining Corp. Offtake Au Colombia Production
Seabee SSR Mining Inc. 3% NSR Royalty Au Canada Production
Bald Mtn. Alligator Ridge Kinross Gold Corporation 1% NSR Royalty Au USA Production
Bald Mtn. Duke/ Trapper Kinross Gold Corporation 4% NSR Royalty Au USA Production
Brauna Lipari Mineração 1% GRR(1) Royalty Dia Brazil Production
Kwale Base Resources Limited 1.5% GRR Royalty Il, Ru, Zi Kenya Production
Pan Fiore Gold Ltd. 4% NSR Royalty Au USA Production
Amulsar Lydian International Ltd. 4.22% Au Stream, 62.5%
Ag Stream / Offtake Au, Ag Armenia Development
Back Forty Aquila Resources Inc. 75% Stream Ag USA Development
Casino Western Copper & Gold
Corporation 2.75% NSR Royalty Au, Ag, Cu Canada Exploration
Spring Valley Waterton Global Resource
Management 0.5% NSR Royalty Au USA Exploration
Yenipazar Aldridge Minerals Inc. Offtake Au Turkey Exploration
(1) Gross revenue royalty (“GRR”)
4
Renard (Stornoway Diamond Corporation)
The Renard diamond mine is operated by Stornoway Diamond Corporation and is Québec's first and
Canada's sixth producing diamond mine. Construction on the mine commenced on July 10, 2014, and
commercial production was declared on January 1, 2017. Under the terms of the Renard streaming
agreement, Osisko is entitled to 9.6% of the Renard diamond mine production in exchange for
payments of US$50 per carat, subject to an increase of 1% annually after January 1, 2020.
Mantos Blancos (Mantos Copper S.A.)
Mantos Copper S.A. (“Mantos”) is a private mining company focused on the extraction and sale of
copper. The company owns and operates two mines in northern Chile, Mantos Blancos and
Mantoverde, located in the Antofagasta and Atacama regions. The Mantos stream agreement is for
the life of mine and is based on 100% of the payable silver from the Mantos Blancos copper mine until
19,300,000 ounces have been delivered, a fter which the stream percentage will be 30%. The
purchase price for silver under the Mantos stream is 25% of the average silver market price for each
ounce of refined silver sold and delivered and/or credited by Mantos to OBL. Mantos may elect to
reduce the amount of refined silver to be delivered and sold to OBL by 50% in 2018, 2019 or 2020,
provided that Mantos has delivered no less than 1.99 million ounces of silver to OBL under the stream
agreement, in which case Mantos shall make a cash payment of US$70 million to OBL.
OBL has a right of first refusal in respect of a financing by Mantos of any royalty, stream, participation
or production interest in gold at the Mantos Blancos copper mine or the Mantoverde mine prior to
June 30, 2018.
Brucejack Stream (Pretium Resources Inc.)
Pretium Resources In c.’s (“Pretium”) Brucejack gold mine (“Brucejack”) is located in northwestern
British Columbia, approximately 65 kilometres north of Stewart, British Columbia and consists of
122,133 hectares (301,798 acres ). Pretium declared commercial production at Brucejack on July 3,
2017. The Brucejack stream agreement has a delivery start date of January 1, 2020 and provides for
an 8% gold and silver stream payable to OBL and BTO Midas L.P. (together referred to as the
“Brucejack Stream Partners”) (4% attributable to OBL). The term of the Brucejack stream is the date
on which Pretium has sold to the Brucejack Stream Partners 7,067,000 ounces of gold and
26,297,000 ounces of silver, including deliveries under the offtake agreement.
The buy-back and buy-down rights held by Pretium are as follows:
Right Description Election Date Cost to Exercise
(attributable to OBL)
Buy-back (2018) Right to repurchase the
entire stream
December 31, 2018 US$119 million
Buy-down (2018) Right to reduce the
attributable stream
percentage from 4% to
1.5%
December 31, 2018 US$75 million
Buy-back (2019) Right to repurchase the
entire stream
December 31, 2019 US$136 million
Buy-down (2019) Right to reduce the
attributable stream
percentage from 4% to 2%
December 31, 2019 US$75 million
The Brucejack stream agreement is subject to certain change of control provisions.
5
If Pretium does not exercise the right to reduce or repurchase the refined precious metals under the
stream by December 31, 2019, US$20 million will be payable (US$10 million attributable to OBL) and
an 8% stream (4% attributable to OBL) will apply beginning January 1, 2020, with ongoing transfer
payments of US$400 per ounce of gold and US$4.00 per ounce of silver.
SASA Stream (Lynx Resources Ltd)
The SASA mine is located in Macedonia and is one of the largest zinc, lead and silver mines in
Europe, producing approximately 30,000 tonnes of lead, 22,000 tonnes of zinc and 400,000 ounces of
silver in concentrates per annum. OBL’s entitlement under the SASA stream applies to 100% of
payable silver production in exchange for US$5 per ounce of refined silver increased annually from
2017 based on inflation. On September 22, 2017, Central Asia Metals plc announced that it has
conditionally agreed to purchase a 100% interest in Lynx Resources Ltd for US$402.5 million.
Bought Deal of Convertible Senior Unsecured Debentures
On November 3, 2017, Osisko closed a bought deal offering of convertible senior unsecured
debentures (the “Debentures”) of $300 million (the “Offering”) with a syndicate of underwriters co -led
by National Bank Financial Inc., BMO Capital Markets and Desjardins Capital Markets (the
“Underwriters“). The Offering was comprised of a $184 million public offering of Debent ures (the
“Public Offering“) and a $116 million private placement of Debentures (the “Private Offering“). In
connection with the Offering, the Public Sector Pension Investment Board and Ressources
Québec inc., a wholly -owned subsidiary of Investissement Qu ébec, purchased respectively $100
million and $16 million of Debentures through the Private Offering on the same terms and conditions
as the Public Offering. The Underwriters have received a commission of 3.55% related to the Offering.
Net proceeds amounted to $289.2 million.
The Debentures bear interest at a rate of 4.00% per annum, payable semi -annually on June 30 and
December 31 of each year, commencing on June 30, 2018. The Debentures are convertible at the
holder’s option into Osisko common shares at a conversion price of $22.89 per share. The Debentures
will mature on December 31, 2022 and may be redeemed by Osisko, in certain circumstances, on or
after December 31, 2020.
The net proceeds from the Offering will be used to fund the acquisition of prec ious metal royalties and
streams, working capital, and general corporate purposes.
6
Record Gold Equivalent Ounces Earned in Q3 and for the First Nine Months of 2017
The Company’s portfolio of producing royalty, stream and offtake interests delivered a quarterly record
16,664 GEOs in the third quarter of 2017 for a total of 37,943 GEOs for the first nine months of 2017.
The assets acquired from Orion were the major contributors to the record quarterly GEOs earned by
the Company, while Canadian Malartic continued to generate strong results.
Royalties Earned (in GEOs)
Three months ended
September 30,
Nine months ended
September 30,
2017 2016 2017 2016
Gold
Canadian Malartic 8,069 7,635 22,959 21,999
Éléonore 1,529 1,570 4,858 5,225
Seabee (1) 692 - 692 -
Island Gold 517 429 1,327 1,081
Vezza 304 267 979 488
Other(1) 526 65 753 170
11,637 9,966 31,568 28,963
Silver
Mantos(1) 1,150 - 1,150
SASA(1) 845 - 845
Gibraltar (3 and 8 months) 529 - 1,638 -
Canadian Malartic 103 136 341 343
Other(1) 50 - 51 -
2,677 136 4,025 343
Diamonds
Renard(1) 1,847 - 1,847 -
Other(1) 113 - 113 -
1,960 - 1,960 -
Other metals
Kwale(1) 390 - 390 -
Total GEOs 16,664 10,102 37,943 29,306
(1) The effective date of the acquisition of Orion’s Portfolio was June 1, 2017. However, r evenues of royalties, streams and
offtakes acquired from Orion are only included in revenues from July 31, 2017 onward, the acquisition date for accounting
purposes.
GEOs by Product
70% 99% 83% 99%
7
Revenues
Three months ended September 30,
2017 2016
Average
selling price
per ounce /
carat ($)
Ounces
/ Carats
sold
Total
revenues
($000’s)
Average
selling price
per ounce
($)
Ounces
/ Carats
sold
Total
revenues
($000’s)
Gold sold 1,616 34,950 56,489 1,743 9,883 17,226
Silver sold 21 306,959 6,551 26 8,800 230
Diamonds sold 107 27,600 2,957 - - -
Other (paid in cash) - - 2,182 - - 114
68,179 17,570
Nine months ended September 30,
2017 2016
Average
selling price
per ounce /
carat ($)
Ounces
/ Carats
sold
Total
revenues
($000’s)
Average
selling price
per ounce
($)
Ounces
/ Carats
sold
Total
revenues
($000’s)
Gold sold 1,631 54,795 89,346 1,671 28,795 48,116
Silver sold 22 404,569 8,806 23 24,483 568
Diamond sold 107 27,600 2,957 - - -
Other (paid in cash) - - 2,554 - - 284
103,663 48,968
The effective date of the acquisition of Orion’s Portfolio was June 1, 2017. However, revenues of royalties, streams and offt akes acquired
from Orion are only included in revenues from July 31, 2017 onward, the acquisition date for accounting purposes.
Gross Profit ($000)
Three months ended
September 30,
Nine months ended
September 30,
2017 2016 2017 2016
$ $ $ $
Royalties
Revenues 19,045 17,570 52,682 48,968
Cost of sales (78) 45 (156) (121)
Depletion (4,758) (2,629) (11,173) (8,463)
14,209 14,986 41,353 40,384
Streams
Revenues 7,048 - 8,896 -
Cost of sales (2,712) - (3,007)
-
Depletion (3,239) - (3,818)
-
1,097 - 2,071 -
Offtakes
Revenues 42,086 - 42,086 -
Cost of sales (41,424) - (41,424)
-
Depletion (327) - (327)
-
335 - 335 -
Total – Gross profit 15,641 14,986 43,759
40,384
8
Overview of Financial Results
Quarterly revenues of $68.2 million compared to $17.6 million in the third quarter of 2016;
Gross profit of $15.6 million compared to $15.0 million in the third quarter of 2016;
Operating income of $0.9 million compared to $10.4 million in the third quarter of 2016;
Net earnings attributable to Osisko’s shareholders of $6.7 million or $0.05 per basic and diluted
share, compared to $17.8 million or $0.17 per basic and diluted share in the third quarter of
2016;
Adjusted earnings4 of $8.0 million or $0.06 per basic share4 compared to $12.0 million or $0.11
per basic share in the third quarter of 2016;
Net cash flows provided by operating activities of $1.1 million compared to $15.0 million in the
third quarter of 2016.
Revenues increased in the third quarter of 2017 mainly as a result of the acquisition of Orion’s
Portfolio.
Gross profit reached $15.6 million in the third quarter of 2017 compared to $15.0 million in the third
quarter of 2016 as a result of higher revenues. Cost of sales increased from nil to $44.2 million in the
third quarter of 2017 compared to the third quarter of 2016 mainly as a result of the offtake
agreements acquired through the acquisition of the Orion’s Portfolio. Under the offtake agreements,
the metal is acquired from the producers at the lowest market price over a certain period of time
(quotational period), and is subsequently sold by Osisko, resulting in a net profit that will usually vary
from 0% to 5% of the sales proceeds.
During the third quarter of 2017, operating income amounted to $0.9 million compared to $10.4 million
in the corresponding period of 2016. The decrease in operating income in 2017 is mainly the result of
the transaction costs related to the acquisition of Orion’s Portfolio, which amounted to $7.8 million and
higher general and administrative expenses (“G&A”), partially offset by higher gross profit. The
increase in G&A expenses is mainly due to higher share-based compensation expenses related to the
deferred and restricted share units (higher number of units outstanding and increase in the objectives
achievements related to the 2014 RSUs which vested and were paid in September 2017). Business
development expenses increased by $8.1 million mainly as a result of the transaction costs related to
the acquisition of Orion’s Portfolio, which amounted to $7.8 million for the quarter.
The decrease in net earnings attributable to Osisko’s shareholders in the third quarter of 2017 is
mainly the result of a lower operating income, a foreign exchange loss, higher finance costs, the
absence of dividend income following the sale of the shares of Labrador Iron Ore Royalty Company in
2016 and early 2017 and a lower increase in fair value of warrants held, partially offset by a higher net
gain on dilution of investments in associates.
Adjusted earnings decreased to $8.0 million compared to $12.0 million in the third quarter of 2016 as a
result of higher G&A, lower dividend income and higher finance costs, partial ly offset by higher gross
profit.
Net cash flows provided by operating activities decreased in the third quarter of 2017 as a result of the
transaction costs of $7.8 million related to the acquisition of Orion’s Portfolio, the settlement of
restricted share units for $5.5 million and a higher negative impact of changes in non -cash working
4 “Adjusted earnings” and “Adjusted earnings per basic 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.