Osisko Gold Royalties shares sink on Q4 impairment news despite record revenues

Goldcorp’s Éléonore gold mine in Quebec in which Osisko Gold Royalties has a royalty. Source: Goldcorp Inc.

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Osisko Gold Royalties Ltd. [OR-TSX, NYSE] shares tumbled Tuesday February 20 after the company released year-end results that featured a sizeable fourth quarter loss. The stock was down 9.65% or $1.29 to $12.09 at noon on Tuesday. The shares trade in a 52-week range of $17.58 and $12.

Goldcorp’s Éléonore gold mine in Quebec in which Osisko Gold Royalties has a royalty. Source: Goldcorp Inc.

The fourth quarter loss attributable to Osisko shareholders of $64.3 million or $0.41 per share reflects an impairment charge of $89 million on a royalty interest in the Éléonore gold mine, located in the James Bay region of Quebec.

By comparison, Osisko posted a net profit of $8.7 million or $0.08 per share in the fourth quarter of 2006.

The impairment charge follows Goldcorp Inc.’s [G-TSX, GG-NYSE] lower long-term production forecast for Éléonore of about 400,000 ounces versus 600,000 ounces originally.

Osisko shares have been under pressure since Goldcorp made the announcement at its own Investor Day back on January 16, 2018. So some of the write-down my already be priced into the shares, analysts say.

Still, Osisko Gold remains in strong financial shape with $333 million in cash at the end of 2017, not counting a further $25 million from the sale of AuRico Metals Inc. shares to Centerra Gold Inc. [CG-TSX] in January 2018.

Osisko emerged as a world-class gold-focused royalty and streaming company in July, 2017, after the company completed the acquisition of a high-quality precious metals portfolio of assets from Orion Mine Finance Group.

The portfolio consists of 74 royalties, streams and precious metal offtakes for a total consideration of $1.125 billion.

Following the acquisition, Osisko held 131 royalties and precious metal offtakes, including its cornerstone 5% net smelter return royalty on the Malartic gold mine in Quebec, which ranks as Canada’s largest producing gold mine, and a 2% to 3.5% net smelter royalty on the Éléonore gold mine.

In addition, the company acquired a 9.6% diamond stream on the Stornoway Diamond Corp. [SWY-TSX; SWYDF-OTC] Renard diamond mine in Quebec and a 4% gold and silver stream on the Pretium Resources Inc. [PVG-TSX; NYSE] Brucejack gold and silver mine in northwestern British Columbia, all of which are new, high-quality mines in Canada. Osisko also holds a 100% silver stream on the Mantos Blancos copper mine in Chile.

Meanwhile, the company posted record gold equivalent ounces in the fourth quarter of 20,990, an increase of 134% from the fourth quarter of 2016.

Osisko also recorded record revenues from royalties and streams of $32.2 million, an increase of 135% from year ago levels.

The company declared a quarterly dividend of $0.18 per share for 2017.

“Today, not only does Osisko have the greatest growth profile amongst its peers, it has a uniquely positioned itself with a quality pipeline for growth projects that will derive benefits for Osisko’s shareholders for year to come,” said Osisko Chairman and CEO Sean Rosen.


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