It's time to get back into select gold stock; indeed, Osisko Gold Royalties (OR) remains the most undervalued and prospective of the royalty companies on our list, asserts resources expert Adrian Day, money manager and editor of Global Analyst.

Of course, the valuation gap to its large royalty peers is partly justified, since Osisko is the newest of the “Big Four”, with fewer assets and less diversification.

Its assets, however, particularly its cash-flowing assets, are high-quality in a safe jurisdiction (Canada), and it is working hard to add more royalties and close the gap.

At the end of February, it acquired a cash-flowing stream, on the long-life Gibraltar Mine. A copper mine in British Columbia, Gibraltar has a 23-year plus life.

With a US$33 million upfront payment, Osisko has the right to buy silver production for future payments of $2.75 per ounce.

This is Osisko’s first silver stream. It maintains the company’s precious metals profile (with 94% of revenue from gold) and politically safe profile (100% of cash-flowing assets are in Canada).

Mildly accretive on an asset basis, the stream will boost cash flow by almost 10% through 2019. We believe the stream was acquired at a very good price.

After this transaction, the company has about C$450 million in cash, which with its undrawn line of credit, gives it about C$650 million in funding capacity. (This also follows the sale of its nearly 10% interest in Labrador Iron Ore Royalty, for C$113 million.)

There is no secret that Osisko is looking for a large cash-flowing stream. Such streams however are subject to intense competition, and the returns—given the long lives—tend to be relatively modest, certainly at the prevailing commodity price.

But such an acquisition, in my view, would give the company a greater profile, moving it clearer to the “big boys’ league”, and help close the valuation gap.

In the meantime, Osisko is building its strong pipeline with high optionality from its unique business model investing in smaller exploration companies. Osisko is a buy up to $10.75.

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