Money manager Adrian Day profiles Osisko Gold Royalties, which has divested itself of its directly held exploration portfolio.
Osisko Gold Royalties Ltd. (OR:TSX 14.93) has decided to divest itself of most of its directly held exploration portfolio, optioning it to newly renamed Osisko Mining (formerly Oban Mining); it will retain rights to earn future royalties. The portfolio came from the acquisition of Virginia, and most of Virginia’s highly regarded exploration team will go with it. (Andre Gaumond, former CEO of Virginia, stays with Osisko Gold).
Osisko Gold Royalties (which we’ll refer to simply as “Osisko”) acquired Virginia primarily for its royalty on the Éléonore Mine, but originally talked of using its exploration projects to generate future royalties. But exploration is not a natural fit for a royalty company, which typically has low risk and low costs as hallmarks.
Renewed focus and lower costs
The move brings certain benefits. Osisko can focus on being a royalty company and likely be rewarded with better valuations; the Virginia exploration projects received very little value inside Osisko. It will reduce overhead for Osisko, making it a leaner royalty company (such as the other major royalty companies). The move rationalizes the exploration projects inside Osisko Mining where they will receive better attention; exploration was never Osisko’s focus. This will likely lead to more work earlier, and therefore—looking ahead—revenue-generating royalties for Osisko sooner.
Osisko is a strong sponsor of Osisko Mining, a 14% holder of the stock. It has also acquired significant stakes in other exploration companies, including Barkerville Gold Mines Ltd. (BGM:TSX.V) (33% owner) and Falco Resources Ltd. (FPC:TSX.V) (16%). With these sponsorships and large stakes, it typically acquires rights to future royalties.
Solid performance and lots of cash
Osisko continues to do well, with the three mines on which it holds royalties performing well; Éléonore’s ramp …read more