Osisko Gold Royalties(OR) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Osisko Gold Royalties recorded revenues of $51.5 million in Q2 2022, up from $50.7 million in Q1 2022 and $49.9 million in Q2 2021 [44] - Consolidated net earnings to Osisko shareholders were $17.2 million or $0.09 per share, compared to a net loss of $14.8 million or $0.09 per share in Q2 2021 [45] - Adjusted earnings for the royalty business amounted to CAD 25.7 million or CAD 0.14 per share, while an adjusted loss of $30 million from Osisko Development resulted in a consolidated adjusted loss of $4.7 million or $0.03 per share [46] Business Line Data and Key Metrics Changes - The company delivered 22,200 GEOs in Q2 2022, an increase from 20,000 GEOs in Q2 2021, contributing to a gross profit of $35.9 million [47] - Cash margin from royalties reached $34.4 million, while cash margin from streams amounted to $13.4 million, resulting in a quarterly record of $47.8 million or 93% [48] Market Data and Key Metrics Changes - The company expects a significant uptick in GEO deliveries in the second half of the year, driven by core assets that continue to perform well despite some assets not being at full capacity [5][12] - The diamond market has seen a step change, with average prices reaching $124 per carat in Q2 2022, compared to pre-COVID levels of around $70 [27] Company Strategy and Development Direction - The company aims to focus on organic growth and is not looking to stretch for growth through acquisitions that would dilute existing shareholder value [59] - Osisko Gold Royalties is optimistic about the second half of the year, with expectations of strong cash margins and operating cash flows from royalty and stream interests [51] Management's Comments on Operating Environment and Future Outlook - Management noted that the backdrop for gold remains strong despite market volatility, and they expect to benefit from opportunities in a tightening capital market [10][60] - The company is focused on improving its financial reporting clarity by reducing the noise from the consolidation with Osisko Development [67] Other Important Information - The company repaid its credit facility in full, leaving it with $650 million available under its credit facility [50] - Osisko Gold Royalties has returned over $204 million to shareholders since its inception, with a dividend yield of approximately 1.7% [48] Q&A Session Summary Question: What were the drivers behind the $20 million investment at Tintic? - The investment was based on the financing success of Osisko Development, which raised approximately CAD 230 million, leading to a lower funding requirement from Osisko Gold Royalties [55][56] Question: Is there increased competition in the streaming market affecting valuations? - Management acknowledged the competitive nature of the market but emphasized that they do not need to stretch for growth and have a strong pipeline of organic growth opportunities [58][60] Question: How should investors think about tax bills going forward? - Most taxes for 2022 are deferred taxes, with cash taxes expected to start in 2023 and more significantly in 2024 [65][66] Question: What is the status of consolidation with Osisko Development? - Management is focused on reducing the noise from consolidation and is in discussions with auditors to clarify financial reporting [67] Question: When should production start at San Antonio? - A trickle of ounces is expected to come from stockpiles, with more meaningful production dependent on permitting for the larger oxide project [70][72] Question: What is the expected mine life for Renard? - The mine life is still being assessed, but there are opportunities for extension through further development [90][91] Question: How much does Osisko Gold Royalties hold in other spin-offs? - The company holds significant shares in Osisko Development and Osisko Mining, with smaller positions in other early-stage companies [96] Question: When is the largest year-to-year growth expected? - The company projects a growth from 80,000 ounces last year to 130,000 to 140,000 ounces by 2026, with significant contributions expected from various assets [98]