Osisko Gold Royalties Ltd (OR), a precious metals royalties company, reported a strong first half of 2024 during its second quarter earnings call. The company announced that it had earned 20,068 gold equivalent ounces (GEO) in the second quarter, keeping it on track to meet its full-year guidance, despite adjustments due to operational challenges at Victoria Gold’s Eagle Mine.
Revenue for the quarter was strong at $64.8 million, and Osisko ended the period with $65.7 million in cash. The company has reduced its net debt to just over $40 million and paid a quarterly dividend of six and a half cents per share, with another dividend scheduled for Oct. 15, 2024. Osisko also highlighted its strong pipeline of opportunities and its first delivery under the CSA copper stream.
Key aspects
- Osisko Gold Royalties earned 20,068 GEOs in Q2 2024, targeting 82,000 to 92,000 GEOs for the year.
- Revenues were $64.8 million, with a high cash margin of 97%.
- Net debt was reduced to just over $40 million, with $65.7 million in cash on hand.
- A quarterly dividend of six and a half cents was paid, with another scheduled for the third quarter.
- The company expects to close at least one major transaction this year and remains focused on responsible capital allocation.
- Osisko made its first delivery of copper under the CSA copper stream in July, amounting to approximately 300 GEO.
- The suspension of operations at Victoria Gold’s Eagle Mine resulted in a non-cash impairment loss and adjusted GEO guidance of 77,000 to 83,000 for 2024.
- Osisko is actively seeking transactions and may consider share repurchases or dividends, depending on market conditions.
Company Outlook
- Osisko expects to close a significant transaction later this year.
- The company’s investment in the Cascabel Gold Stream deposit is expected to provide approximately 23,000 GEOs annually once it enters production.
- Growth is also expected from Agnico Eagle’s Odyssey underground mine and Upper Beaver project, as well as the CSA copper stream.
- Osisko is considering share buybacks or dividends as part of its capital allocation strategy, with potential for single-digit shareholder returns based on SolGold’s pre-feasibility study.
Bearish Highlights
- The failure of the heap leach plant at Victoria Gold’s Eagle Mine resulted in a non-cash impairment of CAD 67.8 million (CAD 49.9 million net of tax).
- Production at the Eagle mine is likely to remain suspended throughout 2024, impacting Osisko’s GEO delivery guidance.
Highlights on the rise
- Canada’s Malartic mine posted impressive results in the first half of the year.
- Osisko’s strong cash margin and low debt level provide financial flexibility.
- The Company relies on its security and protection as a secured creditor in connection with the Eagle Property.
Lack
- Adjusted GEO’s 2024 delivery guidance to 77,000-83,000 due to poor results from the Eagle mine.
Highlights from the Q&A
- Management expressed confidence in the company’s financial flexibility and prospects for returning capital to shareholders through dividends and buybacks.
- The specific terms of the intercreditor agreement relating to the Eagle property remain confidential.
- The management team will respond offline to other questions raised during the earnings call.
InvestingPro Reviews
Osisko Gold Royalties Ltd (OR) has shown resilience in its Q2 2024 performance despite challenges. Here is a closer look at the company through the lens of InvestingPro data and advice:
InvestingPro Data:
- Market capitalization (adjusted): 3.08B USD
- Dividend yield as of June 2024: 1.19
- Price, previous close: 16.53 USD
InvestingPro Tips:
- Osisko has demonstrated its commitment to shareholder returns by increasing its dividend for 3 consecutive years, indicating confidence in its financial health and future prospects.
- The company’s shares have taken a hit over the past week, with a total price return in one week of -9.01%. This could represent a buying opportunity for investors who believe in the company’s fundamentals and long-term strategy.
Investors looking to dig deeper can check out InvestingPro’s other tips that offer in-depth analysis to help them make informed decisions.
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