"Osisko Gold Royalties has 17 different producing assets of different scale, size and importance. That means 17 different contributors to cash flow, with more set to come online every year going forward."
What motivated you to join Osisko Gold Royalties (OR) management team in 2020?
Sean Roosen, the founder of the Osisko Group was looking to revamp Osisko Gold Royalties’ management team and set the company up for its next phase of growth. They had done a tremendous job building up a portfolio to that point, and I was behind the scenes assisting them on much of it. I supported the hostile defense from Goldcorp in 2014, and OR was a spin out of the M&A transaction with Agnico Eagle and Yamana Gold. What I saw was a great opportunity with a portfolio of assets that are meaningful in the sector. We believe we have a senior company set of royalty assets in an intermediate company, and it was not being valued the way it should be. OR has 17 different producing assets of different scale, size and importance. That means 17 different contributors to cash flow, with more set to come online every year going forward. It is an important and potent business model.
Can you provide an overview of OR’s royalty portfolio and the overall strategy of the business?
Our portfolio has been constructed by design to focus on the right jurisdictions. 75% of our value is in Canada, and when you add the US, Mexico, and the right parts of South America, that constitutes the bulk of our value. Geopolitical risk is always something you want to be cognizant of in the mining sector and we constructed our portfolio with that in mind. We are also partnered with some of the best operators in the business on some tier one assets that have meaningful longevity. That starts with our flagship asset, which is a 5% royalty on the Canadian Malartic mine. It is a mine that our team found, built, and then subsequently sold to Agnico and Yamana in 2014. We retained a 5% royalty on the open pit, which is our most valuable royalty in the gold sector. Most recently it doubled in value with the operators making the investment decision to spend US$1.3 billion to build the underground deposit. That will take our flagship asset out to two decades of mine life today, with the expectation that it will continue to grow significantly beyond that.
What role does OR play in supporting the mining ecosystem in Québec?
In addition to Canadian Malartic, we have other examples such as Eldorado's Lamaque, where we have a royalty.
On the development side, through our accelerator business, we have helped to relaunch, some important projects in Québec. Osisko Mining's Windfall project is one example. Similarly, for Falco Resources in Rouyn-Noranda; we looked at it with a different lens through our technical skill set and saw something others did not. It is now on the cusp of doing interesting things working on sorting out a path forward with Glencore who have the Horne smelter on surface. These are meaningful assets that we have helped resurrect activity in the province.
How does the royalty model benefit mining companies?
We are coming into a period now where there is more capital available and equity markets are more open, but there are always periods of time when that is not the case. We just exited a long stretch where equity markets were relatively closed to most companies, especially the companies that needed money the most. The royalty sector has played an important role in terms of advancing assets and providing capital that only gets repaid when the mine does well. Unlike debt, which can be a burden as you are starting up an asset, a royalty or stream is leveraged over the life of mine.
What makes OR’s partnership with Carbon Streaming Corp promising from an ESG perspective?
In the royalty business we cannot offset our footprint directly. We rely on our operators to do so and thankfully we are partnered with like-minded operators who take ESG to heart. But we asked ourselves what can we do beyond just picking the right partners and the right assets? What can we do actively to be part of the solution for reducing carbon emissions? That is what led us to Carbon Streaming Corp, who are applying the streaming business model to funding projects in the carbon credit market. That means funding carbon sequestration projects, carbon offset projects, biodiversity projects, and then taking back the carbon credits that are generated. We are an equity holder, but we also have the right to participate in 20% of their deals. We put ourselves in the front row of a brand new sector, one that we think is going to grow materially moving forward and have a positive environmental and social impact.