Its flagship asset is a 5% royalty (net smelter return, or NSR) on the Canadian Malartic mine, Canada’s largest gold mine, located in Val d’Or, Quebec. But OR has a sizable and growing suite of producing and future-producing royalties mostly in gold, along with some silver and diamonds.
Its portfolio is focused on North America, holds over 165 royalties, streams and precious metals offtakes. But importantly, its gross margins are industry-leading at 93%, and its growth profile sets this company apart.
Osisko Gold Royalties sports a $2.3 billion market cap, expects to have 90-95K gold equivalent ounces of production in 2022, currently yields 1.7% dividend, and trades at just 25% above its book value per share. What’s more, the company is sitting on about CAD$ 450M in cash.
In 2021, 76% of revenues came from gold, 21% from silver and 3% from diamonds. Canadian Malartic currently contributes about 44% of revenues. The mine life is expected to last to at least 2039.
But what truly sets Osisko Gold Royalties apart from its peers is the company’s growth profile. Existing assets and the upside optionality from them could lead to nearly a double in estimated attributable gold equivalent ounces between 2021 and 2026. Growth assets are going to be big contributors over the next several years.
And the beauty is that all this upside comes at no cost to Osisko Gold. In the last 5 years, there have been on average over 1M meters drilled on properties where the company hold a royalty or stream. And this year OR expects to see a 6% growth in Proven and Probable ounces, 12% growth in Measured and Indicated ounces, and 4% growth in Inferred ounces — all for free!
Preliminary results have just been released for Q2. OR earned about 22,240 attributable gold equivalent ounces, pointing to record deliveries since the company’s 2014 inception. Revenues are expected to come in at $51.5M from royalties and streams, at a cash margin of 93% or C$47.8M.
Management is top-tier and with just 184M shares outstanding, about $400M in debt, $667M in investments, and $392M in cash, the current market cap of just CAD$2.35B looks very undervalued.
When the next upleg kicks in for precious metals, which I expect within months, OR is likely to outperform many of its peers thanks to its quality assets and outstanding growth profile.