Osisko Royalties (OR) completed the spin-off of its development assets in a new company Osisko Development (Vancouver: ODV), explains resource sector expert Adrian Day, editor of Global Analyst.

The links between the companies remain strong, with Sean Roosen chairman of both companies, and OR holding 88% of the shares of ODV. However, it is clear that Mr. Roosen will be focused on ODV, building assets and getting mines into production.

OR intends reducing its interest in ODV but will continue to benefit from ODV’s assets through royalty interests. A new resource study on the Cariboo Gold Project is expected in the first quarter, with a small satellite deposit starting production in the first quarter, and full operations by mid-2022.

It is also expecting a first quarter resource update on the Malartic underground, which the company expects to extend the life of the mine by another one to two decades. Osisko holds a very valuable net smelter royalty on the underground, of between 3% and 5%, with 5% on the high-grade portion of the deposit.

Largely because of the relatively small reduction in Osisko’s position in ODV, the market is a little skeptical and the stock has not reacted in a strong way, though it has held up better than the other large royalty companies since the late July peak in the market. It also has a better valuation.

The price-to-NAV at 1.5x is the lowest by far of the companies, and Osisko has just launched another share buyback program, of up to about 9% of the shares outstanding.

As Osisko executes on its goal to reduce its exposure to ODV, and as we receive resource reports on various projects, the market will begin to appreciate what the company is doing. There is some skepticism, but that is why the stock price is low and gives us our opportunity to buy.

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