Osisko Gold Royalties: Down, But Not Out

seekingalpha09-13

Osisko Gold Royalties Ltd had a decent Q2-24 from a financial standpoint, with lower attributable GEO production being offset by record gold prices.Unfortunately, this did mark the fifth consecutive ...

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Claude Laprise All figures are in United States Dollars unless otherwise noted with a C$ in front of the figure. G/T = grams per tonne (of gold or silver). GEOs = gold-equivalent ounces. AISC refers to all-in sustaining costs. Osisko Gold Royalties Q2 Results Osisko Gold Royalties Ltd (NYSE:OR) (“Osisko Royalties”) released its Q2-24 results last month, reporting quarterly gold-equivalent ounces [GEOs] earned of ~20,100 GEOs. This translated to quarterly revenue of C$64.8 million (Q2-23: C$60.5 million), and operating cash flow of C$52.3 million, a ~10% increase from the year-ago period. Finally, adjusted earnings came in at C$33.2 million or C$0.18 (Q2-24: C$0.15), while the company reported a net loss of C$21.1 million, mostly related to the C$67.8 million impairment on its Eagle Mine royalty. The solid performance allowed the company to pay down C$44.2 million of debt, ending the quarter with just C$43.3 million in net debt, a significant improvement from C$124.2 million heading into the year.   Osisko Gold Royalties - Quarterly GEOs Earned - Company Filings, Author's Chart As the above chart highlights, Osisko Royalties saw its fifth consecutive decline in quarterly GEOs to just ~20,100 GEOs, a significant decline from peak quarterly GEO production of ~25,000 GEOs in Q3-22. This was disappointing given how the portfolio has matured over the past couple of years with the addition of the CSA Mine silver & copper streams and key assets inching towards organic growth (Mantos Blancos stream, Island Gold royalty), but can be tied to a few unfortunate events. These included limited contribution from the Renard Mine which is now offline, a significant decline in contribution from Eagle which had another weak Q2-24 ahead of the heap-leach failure in June (also offline) and a much slower than planned ramp-up to date for Mantos Blancos. Finally, Seabee has seen a return to more normalized grades relative to 2022 levels, another impact on attributable production. On a positive note, higher realized metals prices more than picked up the slack with near-record revenue of C$64.8 million and cash margins of 97%, a 400 basis point improvement in margins year-over-year based on selling prices of US$2,338/oz and US$28.46/oz for gold and silver, respectively.   Osisko Gold Royalties Quarterly Attributable GEOs by Asset - Company Filings, Author's Chart Given the unfortunate developments at the Eagle Mine in the Yukon which is likely to remain offline for at least a year, Osisko had to adjust annual guidance from 82,000 to 92,000 GEOs in 2024 to 77,000 to 83,000 GEOs. And while this might seem like a poor reflection on management to have to cut guidance, the company came into the year with very reasonable guidance and royalty/streaming companies have an extremely difficult time forecasting given that they are not running these assets. Hence, I do not see any reason to penalize management for this miss on guidance which was unable to forecast a major negative event at Eagle, continued delays at Mantos Blancos in ramping to full capacity and another tough wildfire season in Saskatchewan that will impact Seabee's Q3-24 production.   Royalty/Streaming Companies With Highest Exposure to Tier-1 Ranked Jurisdictions - Company Filings, Canaccord Genuity Precious Metals Research, Author's Estimates & Comparison Drawing [Vox Royalty] It's easy to be negative about the miss on guidance and lower than expected sales in Q2-24 given the record gold price, but more important than any set of quarterly or annual results is the long-term outlook for cash flow generated by its assets and how it stacks up vs. peers. And even with the Eagle Mine setback, Osisko Royalties continues to have a near-unrivaled portfolio from a jurisdictional risk standpoint, second only to Vox Royalty (VOXR) which has ~85% of its NAV tied to Tier-1 ranked jurisdictions (*), and a far superior jurisdictional profile relative to the big three royalty/streaming companies, with Osisko having over 75% of NAV tied to the best-ranked jurisdictions vs. an average of ~35% for the big three. (*) Tier-1 ranked jurisdictions are defined as Australia, Canada, and the United States. (*)  However, perhaps more important, Osisko Royalties arguably has unrivaled portfolio depth relative to its mid-tier peers with its current portfolio having the potential to grow to ~160,000 GEOs per annum post-2030 assuming several key advanced development projects come online. Meanwhile, there's upside to ~200,000 GEOs depending on the outcome for a handful of 'optionality' assets that are looking more likely to be developed with the tailwind from record gold prices and a favorable supply/demand outlook for silver/copper. Let's take a closer look at recent development below: Recent Developments Eagle Starting with the negatives, Osisko Royalties saw a significant dip in contribution from its Eagle royalty (5.0% NSR royalty) in Q2-24, with just ~1,200 GEOs earned. This represented a material decline from Q2-23 levels (~2,000 GEOs) and was related to what was already a very weak Q2-24 performance from the operator, with a further impact from the suspension of operations in late June following the slope failure of its heap leach facility in the Yukon. Osisko Royalties' CEO Jason Attew stating the following in the Q2-24 Conference Call when discussing Eagle: \"On June 24, Victoria Gold announced that the heap leach facility at its Eagle Gold Mine in the Yukon Territory had experienced a failure. Production remains suspended, and absent new information, Osisko's assumption is the mine will not resume production in 2024. Osisko has now taken the appropriately conservative step to recognize a full noncash impairment loss of CAD 67.8 million, or CAD 49.9 million net of income taxes, based on our management team's assessment of the current facts and circumstances. If there is any key takeaway from this slide, it's that Osisko has various protections with respect to its royalty, including security over the property, registered interest in land recorded with the Yukon Territory and an intercreditor agreement with a senior lending syndicate.\" — Osisko Gold Royalties, Q2-24 Conference Call. While the Eagle Mine full impairment loss and hit to near-term attributable production is certainly negative, this negative event is a testament to the strength of the royalty/streaming model and why these businesses are so resilient vs. their operator peers. In fact, despite Eagle and Renard being two of Osisko Royalties' chunkiest contributors with the former having expected contribution of ~10,000 GEOs per annum per its LOMP (though it never delivered at this rate), Osisko has still been able to grow NAV/share materially and weather the storm. In addition, there appears to be some reason for longer-term optimism related to this royalty and based on recent comments from Yukon Justice Minister Tracy-Anne McPhee on August 16th. According to Yukon News, McPhee said that it was the territorial government's intention to launch the receivership in a way that would allow the mine to re-open and resume mining once work cleaning up from the landslide was completed under the receiver's direction. This suggests that there might still be a future for this asset longer-term, and while it has resulted in an average ~9,000 GEO decline vs. my previous attributable production estimates (2025, 2026) there's certainly the possibility that Eagle could re-open by H2 2026 under a new operator with limited long-term impact for Osisko Royalties. On a positive note from an environmental standpoint, the site is in better hands with Parsons Inc. appointed as Lead Environmental Consultant to provide technical oversight and expertise during the cleanup. According to the most recent update, Victoria Gold failed to follow directions following the incident, which called for building a safety berm across the slide area to allow for groundwater monitoring wells to be installed. It also stated that a programming error by Victoria in early August resulted in the unplanned release of two cubic meters of treated water, and had to subsequently install a mechanical gate to prevent this from occurring again. “We have no confidence that Victoria Gold is in a financially stable enough position to repair the environmental damages its failures have caused, and Na-Cho Nyäk Dun has lost confidence in their ability to manage the response to this disaster.” — Yukon Minister of Justice & Attorney General, Tracy-Anne McPhee. The overall impact from the Eagle Mine incident to Osisko Royalties was a ~10% decline in expected FY2025 attributable production and a ~5% decline in estimated net asset value and not catastrophic by any means to the Osisko Royalties' investment thesis, but certainly a medium-term drag from an attributable production and cash flow standpoint. Upper Beaver While the news out of Eagle was certainly unwelcome, Agnico Eagle's (AEM) update from its Upper Beaver Project in the Kirkland Lake Camp (east of its Macassa Mine) was quite positive. For those that missed it, Agnico Eagle shared that it has approved a $200 million investment over three years for an exploration ramp and shaft (sized to also accommodate production if approved) that it plans to develop to a depth of 250 meters and 760 meters, respectively, providing for more effective drilling and the collection of bulk samples. This is a significant investment and twice the pre-FID investment that it's approved for the growth project (Detour UG) at its largest mine (Detour Lake), suggesting that Upper Beaver is certainly a priority project in its stable. As for Upper Beaver's potential contribution, an internal evaluation was completed in Q2-24 that envisioned a stand-alone mine and mill capable of producing ~225,000 GEOs (over 92% gold) per annum over a 13-year mine life. The plan is for a small open-pit with lower production in the early years (starting as early as 2030) followed by underground production and a ramp-up to ~4,500 tonnes per day by 2035 (ramp & shaft), with a plant capable of processing 5,000 tonnes per day. Upfront capex is estimated at ~$900 million including early development work, making this a very manageable project for Agnico Eagle when it's generating over $2.1 billion in annual free cash flow at spot gold prices (~$2,550/oz).   Upper Beaver Long Section & Previous Timeline - Agnico Eagle Upper Beaver Information/Discussion Session - 2021  Upper Beaver 2024 Resource Base & Planned Shaft/Ramp & Bulk Sample Locations - Agnico Eagle Website As for project economics, Upper Beaver expects to produce gold at industry-leading costs of sub $900/oz after copper by-product credits (recent study estimated $733/oz AISC) even adjusting for inflationary pressures and the project boasts an after-tax NPV (5%) of ~$1.01 billion or an 18% IRR at a $2,300/oz gold price. While this is a little low given the metal's price assumptions used, I would argue that a $2,300/oz gold price is extremely conservative for a mine that will operate from 2031-2044 if approved. In addition, it's worth noting that economics may have room to be improved upon if it chooses to forego building a mill and instead transporting ore east to its LaRonde Complex. So, how does this help Osisko Royalties? While Upper Beaver's timeline has been pushed a little from the late 2028 start date I expected previously, this is an asset that could contribute an average of ~4,500 GEOs per annum in the 2032-2041 period or upwards of $10 million in annual revenue even using conservative metals price assumptions. And if we compare this to its updated guidance mid-point of 80,000 GEOs in 2024, Upper Beaver offers just shy of ~6% growth in attributable GEOs and is already bought and paid for, giving Osisko full upside to this asset at no additional cost. While this is certainly a positive development, it's worth noting that the deposit remains open at depth with higher-grade gold and copper intercepts in drill-hole KLUB19-452W1 hitting 7.6 G/T of gold and 0.36% copper over 3.4 meters in the porphyry zone. Meanwhile, from a bigger picture standpoint, Agnico stated that it continues to look at “developing the full potential of the Kirkland Lake Camp.” Other opportunities include Upper Canada (~2.59 million ounces of gold resources in all categories) and Anoki-McBean (~0.46 million ounces of gold resources in all categories), as well as the currently producing AK deposit which complement significant reserves/resources in the camp at its Macassa Mine and Upper Beaver. And as highlighted in past updates, Osisko Royalties has a 2% NSR royalty on the full camp (excluding Macassa*), suggesting the potential for longer-term upside to this 4,500 GEO attributable production figures. (*) While Osisko Royalties' royalty does not cover Macassa, it does have a royalty covering the Teck-Hughes portion of the Macassa Mine which contributed ~$100,000 in 2023 (*)   Kirkland Lake Camp Deposits & Mine (Macassa) - Agnico Eagle Website Odyssey Moving to the Odyssey Mine at the massive Canadian Malartic Complex, Agnico Eagle noted that shaft sinking was ahead of target at 2.5 meters/day in Q2-24 and the shaft has now reached a depth of 680 meters at the end of June. It also stated that it enjoyed record development rates in Q2 at 3,870 meters, and gold production was above budget at ~22,300 ounces of gold. Lastly, stope reconciliation at Odyssey South continues to be very encouraging, with 13% more ounces produced than planned in the quarter from the contribution of bonus ore from the internal zones. During the quarter, Canadian Malartic processed ~5.18 million tonnes at 1.17 G/T of gold for ~180,900 ounces, a slight increase over the year-ago period. Meanwhile, exploration drilling at Odyssey came in at ~50,400 meters in H1-24 alone, with results continuing to be quite encouraging, including highlight intercepts of 3.8 meters at 8.7 G/T of gold (1,687 meter depth), 15.3 meters at 2.3 G/T of gold (1,694 meter depth, 410 meters east of reserves), and 6.5 meters at 4.5 G/T of gold at 1,571 meter depths over 700 meters east of East Gouldie reserves. This points to significant expansion potential and lies on Osisko Royalties' 5.0% NSR royalty ground (west of Rand Malartic property line).   Odyssey Mine Drilling/Exploration - Agnico Eagle Website Meanwhile, Agnico intersected impressive intercepts both near surface and west of East Gouldie that included 30.0 meters at 2.5 G/T of gold, 10.5 meters at 2.2 G/T of gold (260 meters west of East Gouldie reserves), and 11.4 meters at 2.8 G/T of gold in a possible extension of East Malartic closer to surface. Overall, these results should contribute to further resource growth at Odyssey at what is already a massive underground deposit, with ~5.5 million ounces of reserves backed up by ~10.3 million ounces of resources. Additionally, Agnico stated the following: \"The objective is to further expand the East Gouldie deposit footprint laterally and add inferred mineral resources in support of a potential future Shaft #2 and the broader \"Fill the Mill\" strategy at the Canadian Malartic Complex.\" - Agnico Eagle Mines, Q2-24 Results As stated in past updates, the Canadian Malartic Complex is unique in that it is ramping down from a processing rate of over 60,000 tonnes per day to ~20,000 tonnes per day to accommodate the shift to underground mines (lower tonnage, but higher grade). This will leave ~40,000 tonnes of excess capacity at the mill and given Agnico Eagle's acquisition of the other 50% of Canadian Malartic and laser-focus on risk-adjusted returns, there's certainly reason to believe that it would look to exploit this growing resource base and excess capacity to bring forward ounces and take advantage of excess capacity. Fortunately, Osisko Royalties has a 5.0% NSR royalty on the deposit (East Gouldie) is the highest-grade and growing the quickest and also has a C$0.40/tonne royalty on any material outside its royalty ground that goes through the Malartic Mill — giving it exposure, no matter how Agnico chooses to grow production at this complex. The ideal scenario for Osisko Royalties would obviously be a second shaft as collecting on a 5.0% NSR royalty is far more appealing than a C$0.40/tonne royalty, and this looks to be how things are progressing with “potential second shaft” making it into Agnico's medium-term outlook while a Canadian Malartic fill-the-mill strategy has moved into its long-term outlook. As it stands, Odyssey is expected to produce ~560,000 ounces from 2029 to 2041, but a second shaft would be incremental to this and could provide another ~290,000 ounces per annum assuming an extra 10,000 tonnes per day of ore, an average grade of 2.6 G/T of gold and ~96% recoveries. So, while some have avoided Osisko Royalties over the past few years fearing the production cliff in the transition from open-pit to underground at its top-producing royalty, we could actually see record production at Canadian Malartic at the end of this decade if Agnico chose to sink a second shaft, with the potential for production to increase closer to 900,000 ounces per annum or over 41,000 attributable ounces assuming a ~4.6% blended royalty rate. However, a second shaft if developed would still leave ~30,000 tonnes per day of excess capacity at the Canadian Malartic Mill, pointing to 1.0+ million ounce per annum potential for this asset. And while it's possible that the bulk of this comes from other ore sources off Malartic ground (Wasamac? Toll-milling?), it could still contribute an additional 1,000 GEOs per annum to Osisko assuming 20,000 tonnes per day off royalty ground at a C$0.40/tonne royalty rate or upwards of $2.0 million in additional revenue to Osisko per year. To summarize, the outlook for the Canadian Malartic Complex continues to get more impressive each quarter under Agnico's ownership and Osisko Royalties is by far the biggest beneficiary in the royalty/streaming sector when it comes to the asset's organic growth potential. So, with this having the potential to contribute into the 2050s on what looks to be the potential for a 22+ million ounce resource base, I certainly wouldn't rule out an attempted takeover of the company by a much larger royalty/streaming company to nab this asset and the rest of its portfolio, with OR providing an upgrade to margins and jurisdictional profile for any of the big-3 royalty/streaming companies. Cascabel  Digging into the most significant news announced by Osisko Royalties over the past year, the company has added to its 0.6% NSR royalty at the massive Cascabel Project in Ecuador, scooping up a 6.0% gold stream (until deliveries of 225,000 ounces of gold, with 3.6% thereafter) at 20% of the spot gold price. This deal was syndicated to reduce overall risk to Osisko Royalties from a concentration standpoint ($225 million total paid by Osisko if milestones met), with it being 30% of a total 20% gold stream for $750 million. Importantly, the deal is low-risk given that Osisko's initial deposit will be just $10 million, with the remaining $215 million available as certain milestones are met.    Cascabel Progress On De-Risking & Payment Schedule (Gold Stream) - SolGold Presentation Digging into the Cascabel Project, the asset is one of a kind and truly a Tier-1 scale asset, with one of the largest copper and gold resources not controlled by a major, with ~31.3 million ounces of gold resources and ~12.4 million tonnes of copper. Putting this side by side vs. other major mines/projects, Solgold has more gold than two of Barrick Gold's (GOLD) key assets (Pueblo Viejo and Reko Diq), and more gold than Cadia East, one of the key assets that prompted the acquisition of Newcrest. Meanwhile, Cascabel's operator has strong backers including BHP and Jiangxi Copper and the envisioned 28-year mine life covers only ~540 million tonnes of reserves, or less than one-fifth of total project resources.   Cascabel Project vs. Other Major Projects/Mines (Gold Endowment) - SolGold Presentation As for economics, this is an asset that any operator would salivate over with the potential to produce an average of ~123,000 tonnes of copper and ~277,000 ounces of gold with peak production of ~216,000 tonnes of copper and ~734,000 ounces of gold with an impressive 24% after-tax IRR using very conservative metals price assumptions ($3.85/lb copper, $1,750/oz gold, $22.50/oz silver). And while a 6% gold stream may not seem that significant, it is when it comes to an asset of this scale for a company of Osisko Royalties' size. In fact, the below conceptual attributable production profile highlights that Osisko Royalties could just shy of 25,000 GEOs in its first 10 years from this asset, with the potential for it to start contributing post-2030 under a more conservative timeline. Meanwhile, peak attributable production to Osisko Royalties could come in closer to 50,000 GEOs, eclipsing its #1 royalty Malartic in its best years.    Cascabel Illustrative Potential Contributions to Osisko Gold Royalties - Company Filings, Author's Chart & Estimates Overall, I see this as phenomenal for Osisko Royalties given the low-risk way that it was structured, with Osisko Royalties paying ~0.90x NAV even using conservative metals price assumptions. And to put the significance of this asset in perspective, we can see what Cascabel could look like in its first two years of production vs. other producing and development assets. As we can see, Cascabel could become Osisko Royalties' #2 next to Canadian Malartic, with these two assets providing a solid base of ~60,000 GEOs per annum from Tier-1 scale and world-class assets with a boost to Osisko Royalties' weighted average mine life. Importantly, Osisko Royalties didn't sacrifice on its commodity mix to get the deal done or bet the farm like some juniors, sticking to its focus on precious metals with this gold stream vs. others venturing into copper and other commodities.   Cascabel First 10 Years Illustrative Purposes Assuming In 5-Year Outlook - Company Filings, Author's Chart & Estimates Other Developments 1. G Mining Ventures (OTCPK:GMINF) has acquired the CentroGold Project from BHP Group (BHP), giving life to an asset that was difficult to model previously. The CentroGold Project is in Brazil where G Mining operates Tocantinzinho where Osisko Royalties also holds a 0.75% NSR royalty, and Osisko Royalties' NSR royalty on CentroGold is 0.75% as well. Assuming a 130,000 ounce average production profile, this asset could contribute ~1,000 GEOs per annum for Osisko or just over 1% growth, but from an asset I was not modeling previously, providing minor upside to NAV. 2. Gold Fields (GFI) announced that it would be acquiring the other 50% of the world-class Windfall Project in Quebec, where Osisko Royalties holds a 2-3% NSR royalty. While Gold Fields coming into the big picture over a year ago was already a major upgrade from a technical and financial backing standpoint, the full takeover of the asset is a further upgrade given that this could be Gold Fields' new company-maker asset with Salares Norte to pull attention away from its less attractive jurisdictions (South Africa, Ghana). Given the potential multiple expansion for the stock if it can grow Canadian gold production to a larger portion of overall production later this decade, I would not be surprised to see Gold Fields be quite aggressive on this asset and aim to bring the production profile closer to 400,000 ounces vs. the ~306,000 ounces envisioned in the 2022 FS. Assuming a 2.15% blended royalty rate and if Gold Fields could push production closer to 400,000 ounces, this could be an 8,000+ GEO per annum contributor or 10% growth later this decade vs. Osisko Royalties 2024 guidance midpoint that's not currently contributing to cash flow. A Better Way To Add Precious Metals Exposure While producers undoubtedly offer leverage and there are a few like Agnico Eagle that make excellent investments, the royalty/streaming space offers a far superior way to invest in precious metals. This is because it provides insulation from inflation (no exposure to operating cost increases or capex blowouts, nor cash calls), it allows for unrivaled diversification (Osisko has 20 producing assets), and it ultimately allows for these companies to consistently return capital to shareholders due to their low-risk and high-margin business model while still investing heavily in growth. In fact, while most producers have little left to pay out dividends or buy back shares, Osisko has continued to grow its dividend while opportunistically buying back shares, with ~27% of every gold-equivalent ounce earned over the past five years going towards dividends and buybacks. And with Osisko Royalties' having a massive runway for growth, there's certainly a path to consistent increases in shareholder returns over the coming years if the company is not acquired in the interim.   Osisko Royalties Shareholder Returns - Company Website Meanwhile, looking at Osisko's track record of attributable GEO growth and cash flow/NAV share, we can also see all of its metrics trending in the right direction, a rarity in the sector. In fact, as highlighted in the below tables provided by Seabridge Gold (SA), the largest producers have struggled immensely with holding the line on per share metrics. Hence, for investors interested in maintaining and seeing growth in their exposure to gold/silver production and resources/reserves in the ground, companies like Osisko Gold Royalties are one way to increase the likelihood that their share of future growth won't be diluted away.   History Of Per Share Growth & Attributable GEO Production Growth - Company Presentation  Major Gold Producers Per Share Growth (2007 to Current) - Seabridge Gold Website It's also worth noting that Osisko Royalties' above per share growth was achieved despite significant self-inflicted wounds by previous management in the 2014-2019 period (before Sandeep Singh coming in) with Osisko Gold Royalties' previous CEO Sandeep Singh eventually appointed CEO in late 2020 to help clean up the mess. So, with much of the mistakes in the 2014-2019 period cleaned up and a strong team in place focused on remaining disciplined and staying true to the pure-play royalty/streaming model, Osisko Gold Royalties' is arguably in the best position it's ever been. This is because while Osisko Gold Royalties under Sandeep Singh was a far better company than the 2015-2020 period, effort had to be spent on turning the business around. Today, Osisko's new CEO Jason Attew and his team can focus on growing the business, with seeds planted during Sandeep's tenure beginning to harvest and the company in excellent financial shape to go hunting for its next leg of growth to hopefully support a portfolio capable of producing 200,000+ GEOs post-2032 (~150% growth). (*) Some of the many missteps before Sandeep Singh was brought in as CEO of Osisko Royalties' in November 2020 included: 1. the ~$300 million acquisition of the Cariboo gold project in British Columbia — a slight departure from the royalty/streaming model that investors signed up for with Osisko funding exploration/early development work at Caribou post-acquisition 2. the combination with Virginia Mines in 2014 at a significant premium (~40%) for the Eleonore Mine royalty and its land package in the Kirkland Lake Camp, which would dilute its much higher-quality Canadian Malartic royalty. The operator reported a significant impairment at Eleonore in 2019 following the Goldcorp acquisition.  3. doubling down on Back Forty with an additional gold stream and equity investment in Aquila Resources Valuation Based on ~187 million shares and a share price of US$17.80, Osisko Royalties trades at a market cap of ~$3.33 billion and an enterprise value of ~$3.36 billion. This leaves the stock trading at roughly ~1.1x P/NAV, a significant discount to the top-3 royalty/streaming companies. And while a discount is certainly justified given OR's lower scale and the higher proportion of its NAV tied to development assets, the company stands out with the best jurisdictional profile among $500+ million market cap royalty/streaming companies and a phenomenal growth profile looking out to the end of the decade. And for a portfolio of this quality with significant organic growth, I believe the stock should trade at 1.4x - 1.5x P/NAV, with upside to 1.7x - 1.8x P/NAV if it can reach the 200,000 GEO mark at some point in the next decade. So, what's a fair value for the stock? Using what I believe to be conservative multiples of 1.4x P/NAV and 20x FY2025 cash flow estimates and a 65/35 weighting to P/NAV vs. P/CF, I see a fair value for Osisko Royalties of US$20.50. This points to a 16% upside from current levels and would translate to new all-time highs for the stock if it were to trade up to its fair value estimate. However, this fair value estimate assumes no new deals are done and uses conservative metals price assumptions, and given OR's quality score relative to its sector peers (explorers, developers, producers, other royalty companies) and the fact that many investors want a better vehicle for gaining gold/silver exposure after several shocks the past couple of years between capex blowouts and mines being taken offline, I would not be surprised to see it overshoot this fair value estimate at some point in the next two years. That said, I am looking for a minimum 25% discount to fair value to justify starting new positions which implies a low-risk buy zone of US$15.35 or lower, so I continue to focus on other names currently where I see a more attractive reward/risk profile today. Summary Osisko Royalties put together decent Q2 24 results, which were unfortunately overshadowed by the major incident at the Eagle Mine. This temporary suspension of production has certainly created added uncertainty, but investors do not have to worry about future impacts with a full impairment taken during the quarter. That said, it has put a dent in Osisko's 2025 cash flow outlook and could impact its 2028 growth outlook if we do not see this asset restarted. As it stands, I think it makes sense to be conservative and assume no production in 2025, which has pushed up OR's FY25 P/CF multiple vs. peers, but I think it's early to write this asset off and am optimistic it will be restarted at some point later this decade.  On a positive note, the impact from Eagle is much less significant from a NAV standpoint, even if it is a meaningful dent in the 2025 outlook. Plus, the impact is even less material following the company's ability to lock down a piece of the 20% gold stream at Cascabel and other developments across the portfolio continue to be overwhelmingly positive for the company. To summarize, I continue to see Osisko Gold Royalties Ltd stock as one of the sector's better buy-the-dip candidates, and I would view sharp pullbacks as buying opportunities.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.4","shortVersion":"4.26.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2467777872"}