Osisko Gold Royalties(OR) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Osisko Gold Royalties earned 20,068 gold equivalent ounces (GEOs) in Q2 2024, positioning the company to meet its full-year guidance of 82,000 to 92,000 GEOs [3] - Revenues for Q2 2024 were CAD 64.8 million, supported by improving precious metal prices, with cash margins remaining high at 97% [3] - The net loss for the period was CAD 0.11 per basic common share, primarily due to a non-cash impairment charge of CAD 67.8 million on the Eagle NSR royalty [5] - Cash flow per share improved to CAD 0.28 from CAD 0.26 year-over-year, and adjusted earnings rose to CAD 0.18 from CAD 0.15 [6] - Net debt was reduced to just over CAD 40 million, down from nearly CAD 250 million in the same quarter of 2023 [18] Business Line Data and Key Metrics Changes - The company had 20 producing assets, with over 98% of GEOs derived from precious metals, including gold (71%) and silver (28%) [6] - Canadian Malartic continued to be the most significant contributor to GEOs earned [6] - Victoria Gold's Eagle Mine underperformed by approximately 33% against budget expectations, leading to an assumption that it will not provide GEO deliveries in 2024 [7] - Capstone's Mantos Blancos operation saw lower production year-over-year due to lower grades and recoveries, with plant upgrades delayed by two months [7] Market Data and Key Metrics Changes - Osisko's jurisdictional exposure remains strong, with a focus on Tier 1 mining jurisdictions, including Canada, the U.S., and Australia, accounting for over 95% of its GEOs earned [10] - The company expects to benefit from increased throughput in silver deliveries starting in early 2025 [8] Company Strategy and Development Direction - The company aims to maintain a robust pipeline of opportunities, with expectations of at least one meaningful deal by year-end, in addition to the recently announced Cascabel gold stream [4] - Osisko's Board of Directors approved a quarterly dividend of CAD 0.065 per share, marking the 39th consecutive dividend [4] - The company is focused on disciplined capital allocation and pursuing high-quality precious metal streams and royalties to enhance cash flows and shareholder value [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for a restart of the Eagle Mine, although visibility on timelines remains limited [28] - The company adjusted its 2024 GEO delivery guidance to 77,000 to 83,000 GEOs due to the suspension of operations at the Eagle Mine [16] - Management highlighted the importance of maintaining a strong balance sheet and financial flexibility to capitalize on new opportunities [19] Other Important Information - The company has made significant strides in debt reduction, with total debt at just under CAD 110 million and net debt at approximately CAD 43 million [18] - Osisko's corporate development team is actively seeking new transactions, with a focus on maintaining a balance in jurisdictional exposure [21] Q&A Session Summary Question: What was the rationale behind the 30% syndication at Cascabel? - Management indicated that the 30% level was a negotiated figure, balancing proportional interest and the desire for financial flexibility in a pro-mining jurisdiction [21][22] Question: What is the potential recoverability of the Eagle royalty? - Management noted that the impairment was a conservative accounting decision due to the lack of visibility on the restart timeline, but protections are in place to safeguard the royalty [27][28] Question: How does the company view future transactions? - Management emphasized a preference for transactions within the five-year outlook but remains open to high-quality opportunities outside this timeframe [25] Question: What is the company's stance on capital allocation? - Management stated that while they have regulatory approval for share buybacks, their preference is to redeploy capital into meaningful transactions [48][50]