Osisko Gold Royalties Ltd (OR) Q3 2020 Earnings Call Transcript

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Osisko Gold Royalties Ltd (NYSE:OR)
Q3 2020 Earnings Call
Nov 10, 2020, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen and welcome to Osisko Gold Royalties Q3 2020 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, November 10, 2020 at 10 AM Eastern Time.

Today on the call, we have Mr. Sean Roosen, Chair and CEO of Osisko Gold Royalties, Mr. Sandeep Singh, President, and Mr. Frederic Ruel, Chief Financial Officer and Vice President, Finance.

I would now like to turn the meeting over to your host for today’s call Mr. Sean Roosen. [Foreign Speech]

Sean Roosen — Chair of the Board of Directors and Chief Executive Officer

[Foreign Speech] Welcome to our third quarter conference call. We will follow format this morning with Fred Ruel, presenting our financial results as reported. And then Sandeep Singh, our President and to be CEO will be coming on and giving us the rest of the corporate presentation for today. We will be referring to some forward-looking events and we have a presentation on our website, titled Q3 2020 Results that you can follow this morning.

I will give quite a small preamble this morning and then pass it over. As you know, we are in the evolution of the Osisko story with the purification of the royalty model for Osisko Gold Royalties through the Barkerville and San Antonio assets into the new entity of ODV. That vehicle will probably start trading in early December. And some more work left to do on that as we get into it. And that should simplify the business of Osisko Gold Royalties on a forward go basis. Quite excited about the evolution there and the aspects of what’s happening with the ODV assets both at Barkerville and San Antonio as we move forward. And I think it goes well to explaining why we believe Osisko Gold Royalties has the best business model in this space with the sidecar accelerator business providing unequal opportunities to Osisko Gold Royalties as we evolve in the space and continue to execute our business plan to build the best business around the royalty model in the sector.

On that note, I will hand it over to Fred Ruel to give you the financial highlights. And then Sandeep will take over after that. Fred, over to you.

Frederic Ruel — Chief Financial Officer and Vice President, Finance

Thank you, Sean. Good morning, everyone. Thank you for joining us today. A strong quarter, a strong third quarter for Osisko, with production rebounding very well from Q2 in the COVID impact. We earned 16,739 GEOs in Q3, generated record revenues of CAD41.2 million, record operating cash flows of CAD36.1 million. And an operating margin on our royalties and streams of over 96%. Net earnings were CAD12.5 million or CAD0.08 per share, while our adjusted earnings were CAD17.5 million or CAD0.11 per share.

We also acquired during the quarter the remaining 15% ownership in a Canadian precious metal royalty portfolio, which includes royalties on the Island Gold and Lamaque mines. We also announced a strategic partnership with Regulus for $12.5 million. And of course, as you all know, we announced in October the spin-out transaction and the creation of Osisko Development.

On Page 4 of the presentation, we show our production by assets and by products, again the Canadian Malartic mine delivered strong results and Victoria continued to increase the deliveries. In Q3, 70% of our production came from gold and 27% from silver. As presented under Page 5 of the presentation, we recorded record revenues from royalties and streams of CAD41.2 million compared to CAD33.9 million in Q3 2019. Cash flows from operating activities reached a record CAD36.1 million compared to CAD28.3 million last year.

If we go to Page 6, we have a breakdown of our cash margin for Q3 and year-to-date. The cash margin on our royalties and — on our royalties increase in Q3 to reach CAD30.1 million compared to CAD23.4 million last year. For the first nine months of the year, the cash margin on royalties reached CAD76.5 million, an increase of CAD5.9 million compared to Q3 2019, despite the COVID impact on our deliveries during the second quarter. The cash margin on our streams was CAD9.6 million in Q3 compared to CAD7.4 million in 2019 and CAD25 million for the first nine months of the year, CAD4.5 million higher than 2019. This resulted in a cash margin on our royalties and streams of over 96% in Q3, in fact 96.4% compared to 91% in Q3 of last year. Our total cash margin reached…