CA - Osisko Gold Royalties: The Stock Is Overbought
2023-04-10 10:21:42 ET
Summary
- Montreal-based Osisko Gold Royalties Ltd released its fourth quarter and full-year 2022 results on February 23, 2023.
- On April 6, 2023, Osisko Gold Royalties Ltd provided an update on its first quarter 2023 deliveries, revenues, cash margin, and recent asset advancements.
- I recommend buying Osisko Gold Royalties between $16.3 and $15.5 to accumulate again, with potential lower support at $13.8.
Introduction
Montreal-based Osisko Gold Royalties Ltd ( OR ) released its fourth quarter and full-year 2022 results on February 23, 2023. Furthermore, on April 6, 2023, the company provided an update on its first quarter 2023 deliveries, revenues, cash margin, and recent asset advancements.
Important Note: I have followed OR quarterly since 2018. This new article is a quarterly update of my article published on December 15, 2022. All numbers indicated in this article are converted into US$.
Also, Osisko Gold Royalties Ltd. owns 70% of Osisko Development Corp. As a result, the assets, liabilities, results of operations, and cash flows of the Company consolidate the activities of Osisko Development and its subsidiaries. However, the company indicated it will de-consolidate Osisko Development Corp. as of September 30, 2022, and the presentation of its results will be marked as discontinued operations on the statements of loss and the statements of cash flows.
CEO Sandeep Singh said in the conference call:
2022 was a very important -- I'd say frankly pivotal year for us. We made significant strides on a number of fronts, that may have listed on this page. If we start with the simplification, the ongoing simplification of our business, 2022 in particular, the third quarter took a massive leap forward with the deconsolidation of our financials with Osisko Development Corp.
1 - 4Q22 and Full-year 2022 Results snapshot
Net income attributable to Osisko's shareholders was US$16.49 million or US$0.10 per share, compared to a loss of US$16.55 or US$0.10. The quarterly dividend was US$0.041 per share or a yield of 1.33%.
For 2022, produced 89,367 GEOs, an annual record and an increase of 12% over 2021 (80,000 GEOs). Also, the company posted record revenues from royalties and streams of US$182.68 million.
OR 2022 Highlights (OR Presentation)
Also, Osisko Gold Royalties released its first quarter 2023 deliveries, revenues, cash margin, and recent asset advancements.
Production was 23,111 GEOs with a cost of sales of US$2.96 million and a Cash margin of C$55.6 million. Royalties and stream revenues were .07 million.
The company sold its gold at US$1,890 per ounce and silver at US$22.55.
Net Debt is now US$11.76 as of March 31, 2023.
2 - Stock performance
Osisko Gold Royalties belongs to the five streamers I regularly cover on Seeking Alpha. However, my long-term streamers of choice are Wheaton Precious Metals ( WPM ) and Franco-Nevada ( FNV ).
I consider Osisko Gold Royalties Ltd a good alternative in the streamer segment, especially for those who want to trade the sector short term. We can compare OR to Sandstorm Gold ( SAND ).
OR has outperformed the group significantly and is now up 21% yearly,
Osisko Gold Royalties - Financials And Production history ending in 4Q22 (In US$). A Few data points for 1Q23.
Note: Values can differ slightly due to the conversion from CAD to USD. Osisko Gold Royalties indicates CAD$ results with an exchange rate (CAD vs. USD) of 0.737 in 4Q22.
| Osisko Gold Royalties |
| 4Q21 |
| 1Q22 |
| 2Q22 |
| 3Q22 |
| 4Q22 |
| 1Q23 |
| Total Revenues (including off-take interest) in US$ Million |
| 39.59 |
| 46.92 |
| 49.95 |
| 40.23 |
| 45.58 |
| 44.07 |
| Net Income in US$ Million |
| -16.55 |
| 0.26 |
| 13.40 |
| -118.93 |
| 16.49 |
| - |
| EBITDA US$ Million |
| -9.95 |
| 16.76 |
| 39.09 |
| 43.85 |
| 33.35 |
| - |
| EPS diluted in US$/share |
| -0.10 |
| 0.00 |
| 0.07 |
| -0.65 |
| 0.10 |
| - |
| Operating cash flow in US$ Million |
| 9.98 |
| 18.65 |
| -0.17 |
| 28.52 |
| 35.72 |
| - |
| Capital Expenditure in US$ Million |
| 49.22 |
| 17.63 |
| 16.38 |
| 17.30 |
| 67.61 |
| - |
| Free Cash Flow in US$ Million |
| -39.24 |
| 1.02 |
| -16.55 |
| 11.22 |
| -31.89 |
| - |
| Total Cash Million |
| 90.39 |
| 357.35 |
| 350.89 |
| 225.31 |
| 66.65 |
| 88.06 |
| Long-term Debt in US$ Million |
| 320.65 |
| 327.30 |
| 238.39 |
| 223.58 |
| 108.91 |
| - |
| Dividends per share are US$ |
| 0.044 |
| 0.044 |
| 0.044 |
| 0.043 |
| 0.041 |
| 0.041 |
| Shares outstanding (diluted) in Million |
| 167.15 |
| 167.28 |
| 185.63 |
| 184.85 |
| 184.71 |
| - |
| GEOs |
| 4Q21 |
| 1Q22 |
| 2Q22 |
| 3Q22 |
| 4Q22 |
| 1Q23 |
| Estimated Production gold equivalent Oz Eq. |
| 19,830 |
| 18,251 |
| 22,243 |
| 23,850 |
| 25,023 |
| 23,111 |
| Gold price realized in US$ per ounce |
| 1,798 |
| 1,877 |
| 1,871 |
| 1,729 |
| 1,727 |
| 1,890 |
| Silver price realized in per ounce |
| 23.51 |
| 24.01 |
| 23.00 |
| 19.23 |
| 21.00 |
| 22.55 |
Source: Company release . More data are available to subscribers only.
Analysis: Revenues, Earnings Details, Free Cash Flow, Debt, And Production Details (In US$)
1 - Revenues were US$44.07 million in 1Q23.
OR Quarterly Revenues history (Fun Trading)
Osisko Gold Royalties posted revenues of US$45.58 million in the fourth quarter of 2022, down from US$39.59 million in the same quarter a year ago.
On a consolidated basis, the net income for the fourth quarter was US$16.49 million, compared to a loss of US$16.55 million in 4Q21. The Cash flow generated by operating activities from continuing operations was $35.72 million.
Furthermore, Osisko Gold Royalties announced on April 6, 2023, that it had a revenue of $44.07 million in 1Q23.
In the first quarter of 2023, the operating cash margin was 93% from royalty and stream interests. The company owns over 175 royalties, streams, and offtakes. Canadian Malartic is the cornerstone royalty for Osisko, with the Odyssey underground on schedule, which will be transferred to Agnico Eagle ( AEM ) soon. Most of the assets are located in North America.
OR Assets portfolio Map (PR Presentation)
CEO Sandeep Singh said in the conference call :
In terms of the portfolio of assets, our asset base continues to strengthen. We had three consecutive record quarters on most of the things that matter to us from a royalty company perspective and we'll talk about what the outlook looks for -- looks like for us as we move forward. We also reset the balance sheet. And in spring of last year, I think we reset the balance sheets for our next wave of growth and delevered at the right time.
2 - Free cash flow was a loss of US$31.89 million in 4Q22
OR Quarterly Free cash flow history (Fun Trading)
Note: The generic free cash flow is the cash from operating activity minus Capex.
Free cash flow for the fourth quarter of 2022 was a loss of US$31.89 million, with a trailing 12-month free cash flow loss of $36.2 million.
3 - No Net debt in 4Q22 and total cash of US$66.65 million.
OR Quarterly Cash versus Debt history (Fun Trading)
No Net debt in 4Q22, with a total cash position of US$66.65 million and total debt of US$108.91 million in 4Q22. Liquidity is approximately CAN$600 million.
During 1Q23, Osisko Gold Royalties repaid an amount of CAN$15.0 million under its revolving credit facility. The cash balance increased to CAN$119.1 million ( US$88.06 million ), resulting in a net debt position of CAN$15.9 million as of March 31, 2023.
Below are the details as of December 31, 2022 (in CAN$):
OR Balance sheet in CAN$ (OR Presentation)
4 - Production in gold equivalent ounce and details
OR Quarterly GEO Production history (Fun Trading)
Osisko Gold Royalties produced a record of 25,023 GEOs in the fourth quarter of 2022, up from 19,830 in 4Q21. Osisko Gold produced 89,367 GEOs in 2022.
Also, Osisko produced 23,111 GEOs during the first quarter of 2023.
OR 2022 Production details (OR Presentation)
Gold price increased in 1Q23 to $1,890 per oz, and silver was $22.55 per ounce.
OR Quarterly Gold price history (Fun Trading)
The company offers excellent growth potential, with an estimated production of 130K to 140K GEOs by 2027.
OR 2027 Outlook (OR Presentation)
Technical Analysis And Commentary
OR TA Chart short-term (Fun Trading StockCharts)
Note: The chart is adjusted from the dividend.
The stock OR forms an ascending wedge pattern with resistance at $17.10 and support at $16. The RSI is now 80, flashing a strong sell signal.
A rising wedge is a bearish stock pattern that begins wide at the bottom and contracts as the trading range narrows and the prices increase.
A rising wedge marks the exhaustion of the buying trend. The convergence of the two lines in the same direction (a decrease in price magnitude) tells us that prices continue to rise with lower and lower movement magnitude. Buyers find it increasingly difficult to get the price to rise above the support line.
The Osisko Gold Royalties Ltd short-term trading strategy is to trade LIFO about 60%-65% of your position. I suggest selling Osisko between $17.1 and $17.35, with possible higher resistance at $18, and waiting for a retracement between $16.3 and $15.5 to accumulate again, with potential lower support at $13.8.
Watch gold like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
For further details see:
Osisko Gold Royalties: The Stock Is Overbought