Osisko Gold Royalties is a precious metals licensing company focused on a North American portfolio of over 144 royalty, streams and precious metals purchases and 38 royalty options. The company acquires and manages precious metals and other royalties, streams, and similar interests in Canada and worldwide. The company also has stakes in Osisko Mining (14.5%) and Osisko Metals (17.4%).
Osisko holds 17 producing assets including net yield on smelting for Canada’s Malartic gold mine and royalty for the Eleonore gold mine in James Bay, Quebec. The company also has a strong portfolio of royalties under development and promising exploration projects in Quebec and North America. It is heavily represented in Canada’s most productive mining camps with decades of exploration potential.
Osisko generates ~ 80% of its sales in North America, ~ 10% in South America and 10% in Australia, Africa and Europe. About 50% of the company’s revenue comes from royalties, ~ 20% from streams, and ~ 30% from purchases. The license fees and stream payments are based on the production level. Sales of precious metals and diamonds accounted for 94% and 4% of total sales, respectively.
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Sales growth and market presence
The Company’s portfolio is anchored by a 5% NSR royalty for Canada’s Malartic Mine, the largest gold mine in Canada, and Eagle Gold. Osisko also holds a 5% NSR royalty for the East Gouldie and Odyssey South deposits, a 3% NSR royalty for the Odyssey North deposit and a 3-5% NSR for the East Malartic deposits.
Canadian Malartic and Eleanor are two of the most valuable royalties in the sector. They have a long mine life and offer strong growth potential. Osisko has a low geopolitical risk profile and 75% of its business comes from traditional royalties and flows. In addition, the company continues to invest in stocks of exploration, development and licensing companies.
The company was founded in 2014 and has in-depth expertise in the areas of exploration, engineering, construction and financing. The market cap value has increased from $ 500 million in 2014 to over $ 2 billion. In November 2020, Osisko completed the spin-off transaction of its mining assets and certain interests in Osisko Development, which will be engaged in exploration, evaluation and development of mining projects in Canada and Mexico.
Added 5% NSR for the Cariboo Camp and 15% for the San Antonio Project which is a high quality Mexican good. Osisko Development aims to produce gold in excess of 75,000 ounces per year in the short term.
The gold company is expanding its asset base both organically and through acquisitions. Osisko has royalties or streams covering 25,000 km2 in some of the most famous Candian mines. Some of its growth resources include Cariboo, San Antonia, Windfall, Horne 5, Hermosa, and Pine Point.
The company has a successful track record with strong technical skills that help create its own pipeline of organic growth opportunities. Osisko expects annual gold equivalent production to double to over 140,000 ounces over the next three years.
Osisko Gold has returned more than $ 370 million in dividends and share buybacks to shareholders since its inception in 2014. The company has a modest dividend yield of 1.35% but a high payout ratio. The last dividend increase was 25% in 2017 and the dividend CAGR was 9% over the past five years. However, Osisko’s EPS has historically seen a negative growth rate (-21% 5-year CAGR) which is cause for concern.
It offers its shareholders a unique combination of stability in the core business with license fees and competitive advantages for the acceleration business. It offers higher exposure to gold prices and a better risk / reward profile backed by high quality, long-lasting precious metals investments in good locations.
The company has 150 royalties, flows, and takings of precious metals and has diversified cash flow from 17 producing assets, primarily gold mines. All assets are very resourceful and offer solid production prospects for the future. The company has a strong balance sheet and the ability to deploy capital.
It does not have high cost of capital requirements and is highly diversified in terms of assets and cash flow. A high gold weighting and high cash margins, as well as partnering with highly skilled operators, should support future dividend growth.
A diversified portfolio of high quality royalty, experienced operators and mining areas, production growth and a strong asset development pipeline are some of Osisko’s compelling competitive advantages.
The mineral exploration business is competitive at all stages. Osisko Gold competes with the likes of Royal Gold, Franco Nevada, Wheaton Precious Metals and Sandstorm. Because the company is exposed to an accelerator model, its mining can involve significant risks and huge expenses in developing metallurgical processes and building mining and processing facilities. This can lead to depreciation and lower future income.
Gold is considered a safe haven for investors in times of uncertainty like this one, and the price of the yellow metal has risen this year. With the coronavirus pandemic showing no signs of slowing, gold will continue to be an attractive investment opportunity for investors.
Given that much of Osisko’s revenue comes from gold, the rally in gold prices bodes well for the company. The company is also well positioned to leverage its streaming expertise for new sectors, decarbonization projects, and potential synergies with mining partners. The restructuring of Osisko Development further consolidates the identity of Osisko Gold as a pure licensing company.
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