OSISKO GOLD ROYALTIES REPORTS THIRD QUARTER 2016 RESULTS Record Gold Ounces and Revenues $15 Million in Cash Flows from Operating Activities Declares Ninth Consecutive Quarterly Dividend of $0.04/share
(Montreal, November 9, 2016) Osisko Gold Royalties Ltd (the “Company” or “Osisko”) (OR: TSX & NYSE) reports today third quarter net earnings of $17.7 million ($0.17 per basic share).
Third Quarter 2016 Highlights
- Record 9,902 gold ounces earned, a 20% increase compared to Q3 2015;
- Record revenues of $17.6 million, a 50% increase compared to Q3 2015;
- Net cash flows from operating activities of $15.0 million;
- Net earnings of $17.7 million, $0.17 per basic and diluted share;
- Cash and cash equivalents of $392.7 million as at September 30, 2016;
- Began trading on the New York Stock Exchange under the ticker “OR”, on July 6, 2016;
- Announced an exploration earn-in agreement with Osisko Mining Inc. to streamline its operations;
- Declaration of ninth quarterly dividend of $0.04/share; and
- On October 17, 2016, announced the Toronto Stock Exchange (“TSX”) approval for a Normal Course Issuer Bid to acquire up to 5.3 million common shares.
Sean Roosen, Chair and Chief Executive Officer, commenting on the third quarter results:
“Our team continues to focus on increasing its exposure to cash-flowing assets to complement our flagship gold royalties on the Canadian Malartic and Éléonore mines. We are also supporting the development of large projects held by associated companies with the expectation that our investment will provide our shareholders with solid returns through increased portfolio value and cash flows from streams and royalties on these assets. During the quarter, we continued to focus on activities in the royalty/streaming sector as we negotiated an earn-in agreement for our exploration properties in the James Bay and Labrador Trough areas. Our efforts in streamlining our operations should increase cash flows in the near-term.”
Third Quarter 2016 Results
Revenues increased in the third quarter of 2016 as a result of higher in-kind royalties earned and sold. Gold royalties earned from the Canadian Malartic mine decreased by 629 ounces or 8% (sales decreased by 178 ounces in comparison to Q3 2015), but the decrease from the Canadian Malartic mine was more than offset by the gold royalties earned from the Éléonore, Island Gold and Vezza net smelter return (“NSR”) royalties. The Company earned and sold 1,570 ounces of gold from the Éléonore mine compared to nil in the third quarter of 2015. The Company received and sold 430 ounces of gold from its Island Gold mine NSR royalty and 267 ounces of gold from its Vezza NSR royalty in the third quarter of 2016 compared to nil in the third quarter of 2015. These royalties were acquired in the fourth quarter of 2015. The average selling price of gold in Canadian dollars was also higher in the third quarter of 2016 at $1,743 compared to $1,485 in the third quarter of 2015.
In the third quarter of 2016, operating income amounted to $10.4 million compared to $7.1 million in the third quarter of 2015. The increase in net operating income in the third quarter of 2016 is mainly the result of higher revenues generated from the sale of gold and silver and lower business development expenses, partially offset by the depletion of royalty interests and higher general and administrative (“G&A”) expenses. The increase in G&A expenses is mainly due to higher legal costs and costs related to the listing on the NYSE, partially offset by lower share-based compensation expenses. The decrease in the closing share price between the second and third quarter of 2016 (from $16.89 to $14.36) generated a lower share-based compensation expense on the deferred share units and the restricted share units in the third quarter of 2016. The decrease in business development expenses is mainly the result of lower share-based compensation.
The increase in net earnings in the third quarter of 2016 is mainly the result of the increase in operating income and net gain on investments of $10.0 million (compared to a net loss on investments of $0.9 million in the third quarter of 2015), partially offset by a decrease in the foreign exchange gain, a higher share of loss of associates, higher finance costs and an increase in deferred income tax expense.
Net cash flows provided by operating activities before change in working capital items increased in the third quarter of 2016 mainly as a result of higher revenues when compared to the same period in 2015.
Focusing on the Royalty and Streaming Business
On October 5, 2016, Osisko announced the closing of its earn-in agreement transaction with Osisko Mining Inc. (“Osisko Mining”). Under the terms of the agreement, Osisko Mining may earn a 100% interest in Osisko’s in 28 exploration properties located in the James Bay area (excluding the Coulon copper-zinc project and four other exploration properties) and Labrador Trough (the “Properties”) upon completing expenditures of $32.0 million over a 7-year period; Osisko Mining will earn a 50% interest upon completing expenditures totaling $19.2 million over a 4-year period. These Properties were acquired as part of the Virginia transaction in 2015.
Osisko will retain an escalating NSR royalty ranging from 1.5% to a maximum of 3.5% on precious metals and a 2.0% NSR royalty on other metals and minerals produced from the Properties. Additionally, new properties acquired by Osisko Mining in the designated area during a 7-year term will be subject to a royalty agreement in favour of Osisko with similar terms.
Osisko undertakes not to participate in any exploration activity and is bound not to compete with Osisko Mining in areas covered by the agreement, except for the continuation of activities on its Coulon copper-zinc project held by Osisko and other Québec institutional shareholders and on four other exploration properties.
As part of the transaction, Osisko’s Québec based exploration team and Québec office lease were transferred to Osisko Mining. The transaction in respect of the Properties is subject to third parties’ approval, as applicable.
Following this transaction, the Company expects an annual reduction of approximately $3.0 million on its exploration and evaluation expenditures, which were capitalized in exploration and evaluation assets in accordance with the Company’s accounting policy, and $4.0 million to $5.0 million on its expenses on the statement of income.
The Company will continue to review its strategic alternatives in respect to its Guerrero exploration properties and the Coulon project.
Royalty Interests
The following table details the ounces of gold and silver earned from Osisko’s producing royalty interests:
Royalties earned (in ounces)
For the three months ended For the nine months ended September 30, September 30, 2016 2015 2016 2015
Gold
| Canadian Malartic | 7,635 | 8,264 | 21,999 | 22,136 | ||
| Éléonore | 1,570 | - | 5,225 | - | ||
| Island Gold | 430 | - | 1,081 | - | ||
| Vezza | 267 | - | 488 | - | ||
| 9,902 | 8,264 | 28,793 | 22,136 |
Silver
| Canadian Malartic | 9,153 | 7,780 | 25,129 | 22,744 |
| Vezza | 81 | - | 81 | - |
| 9,234 | 7,780 | 25,210 | 22,744 |
In addition to the in-kind royalties, the Company also earned cash royalties of $0.1 million in the third quarter of 2016 and $0.3 million for the first nine months of 2016 (compared to nil in the corresponding periods of 2015), and dividend income from its investment in Labrador Iron Ore Royalty Company (“LIORC”) of $1.6 million in the third quarter of 2016 and $4.7 million for the first nine months of 2016 (compared respectively to $1.6 million and $4.3 million for 2015).
Canadian Malartic
Osisko owns a 5% NSR royalty interest in the Canadian Malartic mine, which is owned and operated by Agnico Eagle Mines Limited (“Agnico”) and Yamana Gold Inc. (“Yamana”), (together referred to as the “Partners”).
For the third quarter of 2016, the Partners indicated that production at the Canadian Malartic mine was 152,855 ounces of gold compared to 153,206 ounces of gold for the third quarter of 2015. In the first nine months of 2016, production at the Canadian Malartic mine was 445,086 ounces of gold compared to 425,874 ounces of gold in the corresponding period of 2015.
During the third quarter of 2016, the Partners indicated that the Canadian Malartic mill processed an average of 53,989 tonnes per day (“tpd”), compared to an average of 53,703 tpd in the corresponding period of 2015. For the first nine months of 2016, the Canadian Malartic mill processed an average of 53,928 tpd compared to an average of 52,139 tpd in the corresponding period of 2015.
Annual production forecast
In February 2016, the Partners indicated the following forecast of annual gold production for the Canadian Malartic mine: 560,000 – 580,000 ounces in 2016, 590,000 – 600,000 ounces in 2017 and 610,000 ounces in 2018. The Partners indicated that the 2016 guidance has been slightly reduced as throughput levels are forecast to be approximately 53,000 tpd.
Pit extension
The Partners indicated that following the Québec Bureau des Audiences Publiques sur l’Environnement (“BAPE”) public hearings in June and July 2016, permitting of the Canadian Malartic extension project and Highway 117 deviation reached an important milestone with the issue of the BAPE report on October 5, 2016. The report concluded that the project is acceptable and provides several recommendations intended to enhance social acceptability. The next step is for the Ministre du Développement durable, de l’Environnement et de la Lutte contre les changements climatiques to review the report and present his decision to Cabinet for approval. No date for the approval has been set, but the Partners anticipate that this may occur in the first half of 2017. Osisko expects that the Canadian Malartic extension would provide access to higher grade ore and would add more than 2.0 million ounces of gold over the life of the Canadian Malartic mine.
Odyssey zones
The Odyssey zones lie on the east side of the Canadian Malartic property, approximately 1.5 kilometres east of the current limit of the Canadian Malartic open pit. The Odyssey prospect is composed of multiple mineralized bodies grouped into two elongated zones — the Odyssey North and Odyssey South zones — that strike east-southeast and dip steeply south. Odyssey North has been traced from a depth of 600 to 1,300 metres below surface along a strike length of approximately 1.5 kilometres. Odyssey South currently has a strike length of 0.5 kilometre and has been located between approximately 200 and 550 metres below surface.
The Partners indicated that in the third quarter of 2016, a total of 56 drill holes (40,019 metres) were completed at Odyssey, bringing the year-to-date total to 113 holes (89,774 metres). Drilling will continue through year-end, at which time an inferred mineral resource for the Odyssey North deposit is expected in early 2017.
The Partners have increased the 2016 exploration budget on Odyssey to 95,000 metres of drilling for a total budget of $13.5 million.
Osisko holds a 3% NSR royalty on the Odyssey North zone and a 5% NSR royalty on the Odyssey South zone.
For more information, please refer to the press releases of Agnico Eagle and Yamana filed on SEDAR (www.sedar.com) and EDGAR (www.sec.gov).
Éléonore
Osisko owns a 2.0 – 3.5% NSR sliding-scale royalty interest in the Éléonore mine, which is operated by Goldcorp Inc. (“Goldcorp”).
Goldcorp indicated that third quarter gold production totaled 68,000 ounces compared to 87,000 ounces in the third quarter of 2015. Gold production decreased compared to the third quarter of 2015 as a result of lower tonnes and lower grades. Lower tonnage milled in the third quarter of 2016 (458,000 tonnes compared to 536,000 tonnes in the third quarter of 2015) was the result of mill feed consisting of only mine material while the comparative period in 2015 included significant feed from surface stockpiles. The lower grade for the third quarter of 2016 (5.22 g/t Au compared to 5.78 g/t Au in the third quarter of 2015) was consistent with the mine plan.
Goldcorp indicated that gold production for the nine months ended September 30, 2016 reached 209,000 ounces compared to 163,000 ounces for the nine months ended September 30, 2015 as Éléonore continues to ramp up production and productivity improvements are realized. A total of 1,289,000 tonnes were milled in the first nine months of 2016 compared to 1,190,000 tonnes in the corresponding period of 2015. Average mill grade for the first nine months of 2016 were 5.48 g/t Au compared to 5.19 g/t Au for the first nine months of 2015.
Goldcorp indicated that at the end of the third quarter of 2016, the production shaft construction, including the ore handling system on the 690 metre level, was completed and commissioned and hoisting commenced in early October 2016. Increased production levels, development efficiencies and reduced operating costs are anticipated as a result of the production shaft completion.
Goldcorp indicated that mine production for the nine months ended September 30, 2016 was in line with the planned annual average of between 4,700 to 5,000 tpd of ore from four production horizons. With the completion of the production shaft, the mine will continue to ramp up ore production in line with the mine plan as a further two production horizons are brought on line by 2018. The production ramp-up to 7,000 tpd is expected to be completed in the first half of 2018.
Annual production forecast
In February 2016, Goldcorp indicated that a conservative ramp-up schedule at Éléonore is expected to lead to gold production of between 250,000 and 280,000 ounces for 2016.
Exploration and evaluation
Goldcorp indicated that the focus of exploration at Éléonore since the acquisition of the project has been on the extensions of known mineralization, which has now been traced to a vertical depth of 1,500 metres and is still open down plunge. Mine exploration continues to test opportunities within the mine footprint, utilizing the increased understanding of orebody geometry gained during the first years of mining. In addition, three priority exploration areas have been defined within a 10 kilometre radius of the current mine. A north-east south-west glacial float train contains visibly mineralized boulders, several of which have returned anomalous high grade gold from grab samples. Ground geophysics is underway to provide better definition of the possible bedrock source, and to site future trenches and/or scout drill holes, planned for first quarter of 2017. The Old Camp and Mayappo targets represent a style of diorite-hosted gold-copper mineralization similar to that exploited at the Troilus open pit mine. Locally significant values of gold have been returned by bedrock grab samples at both sites and at the Old Camp continuity of alteration and mineralization is reported in historical mapping and trenching data. The information from these targets is being reviewed and reinterpreted to guide a field program in 2017.
Reserves and resources
Goldcorp published in October 2016 updated mineral reserve and resource estimates as at June 30, 2016 for the Éléonore mine. Proven and probable gold mineral reserves totaled 4.57 million ounces as of June 30, 2016, compared to 5.35 million ounces as of December 31, 2015. The decrease was primarily due to depletion and reserve ounces from 2015 being reclassified into resources. During the year, efforts were focused on increasing drill density and optimizing the mine plan and stope design. The additional information has allowed Éléonore to design smaller, higher grade stopes, although faster sequencing and additional ore development will be required. The updated mine plan associated with the June 30, 2016 reserves is expected to provide lower dilution, and higher grade feed, and increase average annual production compared to the previous reserve mine plan. Further drilling and mine design updates will concentrate on converting the resources back into reserves. Osisko expects the updated mine plan to increase royalties in the short-term as the updated mine plan would accelerate the gold production.
The reserve and resources estimate at June 30, 2016 is presented in the table below:
Reserve and resource estimates
Tonnes Grade Au Category (M) (g/t Au) (M oz)
Proven and Probable Reserves 23.44 6.07 4.57 Measured and Indicated 5.14 5.66 0.93 Resources(1)
Inferred Resources 9.73 7.52 2.35
(1) Excludes proven & probable reserves.
For more information, refer to the press releases of Goldcorp and the Management Discussion and Analysis for the year ended December 31, 2015 and for the three and nine months ended September 30, 2016, all filed on SEDAR (www.sedar.com) and EDGAR (www.sec.gov).
Island Gold
Osisko owns a 1.7% - 2.55% NSR royalty on the Island Gold mine, which is operated by Richmont Mines Inc. (“Richmont Mines”).
Richmont Mines reported that Island Gold produced 14,031 ounces of gold during the third quarter, inline with the plan, as slower production was forecasted due to required downtime related to the scheduled mine and mill electrical upgrade. The mine and mill electrical upgrade would support the potential production growth scenarios that are currently under review. During the third quarter, the mine reported higher than the planned mill head grade of 7.70 g/t Au. Richmont Mines also reported that underground productivity averaged 890 tpd in the third quarter, excluding 16 days of downtime related to the electrical upgrade, and mill processing averaged 878 tpd, excluding 25 days of downtime related to the electrical upgrade. Richmont Mines expects to deliver improved performance and higher grades during the fourth quarter as it begins to develop in ore in the higher-grade third mining horizon.
Richmont Mines indicated that gold production for the nine months ended September 30, 2016 reached 59,237 ounces.
Annual production forecast
On September 12, 2016, Richmont Mines indicated that the 2016 production guidance for the Island Gold mine was increased to between 75,000 to 80,000 ounces of gold from the original guidance of between 62,000 to 67,000 ounces of gold as a result of strong performance during the first six months of the year and following the completion of a 25-day shutdown for an electrical upgrade in August 2016. On October 13, 2016, Richmont Mines reported to remain on track to meet, or exceed, revised guidance for the year for the Island Gold mine.
Expansion Preliminary Economic Assessment Underway
On November 1st 2016, Richmont Mines provided a status update on its advancement of an expansion case preliminary economic assessment (“PEA”) for the Island Gold mine. The PEA is expected to be released in the first half of 2017 and will incorporate the company’s 2016 year-end resource estimates and will consider a potential ore mining and mill processing rate increase to 1,100 tpd beginning in 2018, with minimal capital investment required. For the purposes of this Expansion Case PEA, only the most contiguous portion of the resources located between the 450 metre and 1,000 metre levels will be incorporated.
Exploration and evaluation
On July 7, 2016, Richmont Mines announced that based on the positive results reported from the Phase 1 exploration drilling program, a strategic Phase 2 exploration drilling program has been launched at the Island Gold mine. Richmont Mines indicated that the Phase 1 exploration drilling program that commenced in September 2015 has met its objectives, which has supported the launch of an aggressive Phase 2 exploration program of up to 142,000 metres that will be completed over the next 18 to 24 months. The primary objective of the Phase 2 program is to expand the existing resource inventory laterally along strike, mainly to the east of the main deposit, with a goal of extending mine life above the 1,000 metre level that could support the potential expansion scenarios currently under review, as well as to identify the next million-plus ounces of high-grade inferred resource at depth, between the 1,000 and 1,500 metre levels.
On September 12, 2016, Richmont Mines announced an increase in the exploration expenditure guidance estimates for 2016 to $16.0 million from $14.4 million, which includes an additional 22,000 metres of drilling that will focus on defining new resources in the fourth mining horizon located between the 860 and 1,000 metre levels, which could be incorporated into the short to medium term mine plan.
For more information, refer to the press releases of Richmont Mines filed on SEDAR (www.sedar.com).
Lamaque Project
Osisko holds a 1.7% royalty on the Lamaque property located in Abitibi and owned by Integra Gold Corp. (“Integra”).
On July 27, 2016, Integra announced that it has awarded the contract to construct the Triangle Deposit exploration ramp on the Lamaque-South Gold Project in Val-d'Or, Québec. Integra indicated that the objective of the underground exploration program is to conduct close-spaced drilling from within the upper portions of the Triangle Deposit (C1 and C2 zones) as well as exploration drilling in order to continue growing the resource base. The proposed underground exploration program will also include a bulk sample of more than 20,000 tonnes of gold mineralized rock required for the purposes of reconciling gold content versus resource estimates as well as to allow for detailed metallurgical test work to be conducted. Integra indicated that work is estimated to take between 12 months and 15 months. The company is fully funded to see this work through to completion and all necessary permits are currently in place.
On October 13, 2016, Integra announced additional assay results from its 2016 drill program on the Triangle Deposit and indicated that the results continue to support gold zone continuity with infill drilling generally intersecting significantly higher grades and wider intervals than anticipate.
On August 3, 2016, Integra announced the initiation of a 2,000 metre pilot hole on its Lamaque Deep target, situated on the Lamaque property. Once the pilot hole has been completed (estimated completion in the fourth quarter of 2016), the target will be tested with a minimum of 15 wedged holes originating from the pilot hole at various intervals. The Company is anticipating the entire program including wedges will total 10,000 metres of drilling.
For more information, refer to the press releases of Integra filed on SEDAR (www.sedar.com).
Cariboo Gold Project
The Company holds a 1.5% NSR royalty on the Cariboo Gold Project, which is owned by Barkerville Gold Mines Ltd. (“Barkerville”), an associate of Osisko, and located in British Columbia, Canada.
The Cariboo Gold Project consists of 2,119 square kilometres of land along a strike length of 60 kilometres which includes several past producing mines in the Cariboo Gold District, a historically profitable yet still underexplored area of south-central British Columbia. Based upon historic estimates, historical gold production in the Cariboo area is approximately 4.5 million ounces. Barkerville is carrying out a 20,000 metre drilling program at Island Mountain and has made applications to amend current mining permits to allow the resumption of mining in early 2017.
Osisko and Barkerville have also agreed to negotiate a gold stream agreement (“Gold Stream Agreement”) following the completion by Barkerville of a feasibility study on the Cariboo Gold Project. Following a 60 day negotiation period, if Osisko and Barkerville have not entered into a Gold Stream Agreement, Barkerville shall either grant a right to Osisko to purchase an additional 0.75% NSR royalty for consideration of $12.5 million, or make a payment of $12.5 million to Osisko.
For more information, refer to the press releases of Barkerville filed on SEDAR (www.sedar.com).
Hermosa Project
The Company acquired a 1% NSR royalty on any lead/zinc/silver sulfide ores mined from the Hermosa Project owned by Arizona Mining Inc. (“Arizona Mining”) for $10.0 million. The Hermosa Project is located in Santa Cruz County, Arizona.
On October 31, 2016, Arizona Mining released a mineral resource update for the Taylor deposit located on its 100%-owned Hermosa Project. The Taylor deposit now comprises 31.1 million tonnes in the Indicated Mineral Resource category grading 10.9% zinc equivalent ("ZnEq") plus 82.7 million tonnes of Inferred Mineral Resource grading 11.1% ZnEq, both reported in accordance with NI 43-101 guidelines utilizing a 4% ZnEq cutoff grade. The Taylor Deposit remains open to the north, west and south over land controlled by Arizona Mining and drilling has commenced to test the limits of the resource. Arizona Mining completed metallurgical test work on drill core from the Taylor Deposit that projects overall recoveries of 92.9% Pb; 85.5% Zn and 91% Ag using industry standard froth flotation processing technology.
For more information on resources, refer to the press releases of Arizona Mining filed on SEDAR (www.sedar.com).
Horne 5 Project
The Company has provided a $10.0 million loan to Falco Resources Ltd. (“Falco”) with an 18 month maturity and bearing interest at 7%. Under the terms of the loan, Falco and Osisko shall negotiate, by the end of October 2017, the terms, conditions and form of a silver and/or gold stream agreement ("Stream Agreement") whereby Osisko may provide Falco with a portion of the development capital required to build the Horne 5 Project. In this case, the principal amount of the loan and any accrued interest will be applied against the stream deposit. At the maturity date, if Falco and Osisko have not concluded a Stream Agreement, the principal amount of the loan will be converted into a 1% NSR royalty on the Horne 5 Project and accrued interests will be paid in cash.
On September 6, 2016, Falco announced that it has retained full ownership of the Horne 5 Project as Glencore Canada Corporation has elected not to exercise its back-in right. Glencore Canada Corporation retains a 2% NSR royalty on all metals produced and has rights of first refusal with respect to purchase or toll process all or any portion of the concentrates and other mineral products.
On October 3, 2016, Falco reported an updated mineral resource estimate for its wholly-owned Horne 5 Project. The updated resource estimate now includes and combines the newly assembled historical underground channel sample database, new economic parameters as per Falco's recently published PEA, including lowering of the NSR cut-off, additional 2016 drilling results and revised commodity pricing assumptions. New measured, indicated and inferred resources have been updated for the Horne 5 Deposit, which now contains 6 high grade zones. Falco reported that this updated resource estimate increases gold equivalent measured and indicated resources by 32%.
At a $55/tonne NSR cut-off, Horne 5 is now estimated to host:
- A measured resource of 736,000 gold equivalent ounces ("oz AuEq"), including 475,410 oz Au contained in 9.4 million tonnes averaging 2.45 g/t AuEq (1.58 g/t Au; 16.33 g/t Ag; 0.18% Cu; 0.81% Zn);
- An indicated resource of 6,336,000 oz AuEq, including 4,088,383 oz Au contained in 81.7 million tonnes averaging 2.41 g/t AuEq (1.56 g/t Au; 14.19 g/t Ag; 0.18% Cu; 0.86% Zn);
- An inferred resource of 1,710,000 oz AuEq, including 1,053,061 oz Au contained in 22.3 million tonnes averaging 2.39 g/t AuEq (1.47 g/t Au; 22.98 g/t Ag; 0.2% Cu; 0.68% Zn).
- The measured and indicated resources represents 81% of the total resources in AuEq content (oz) and the measured resources represent 10% of the measured & indicated resources in AuEq content (oz).
A 43-101 technical report was filed on SEDAR on November 7 2016. Falco also reported that the company plans to drill 20,000 metres at the Horne 5 West and Quemont Extension exploration targets in 2016.
On November 2nd, 2016, Falco announced an upsized bought deal offering of $32.5 million and concurrent private placement for up to an additional $25.0 million with strategic investors. Osisko will acquire up to $3.0 million in flow-through shares as part of the bought deal transactions.
For more information, refer to the press releases of Falco filed on SEDAR (www.sedar.com). For more information on the PEA, refer to the NI 43-101 Technical Report of Falco titled Preliminary Economic Assessment of the Horne 5 Project dated April 28, 2016 and filed on SEDAR.
Windfall Project
The Company holds a 1.5% NSR royalty on the Windfall property owned by Osisko Mining.
On October 5, 2016, Osisko exercised its option to acquire a 1% NSR royalty on the Windfall property for $5.0 million. Osisko was already the holder of a 0.5% NSR royalty on Windfall. Therefore, the royalty on the Windfall property increased to a total of 1.5%.
In April 2016, Osisko Mining indicated that, at Windfall, a 55,000 metre drill program commenced in October 2015. This program was subsequently increased to 100,000 meters in June and to 150,000 meters in September 2016. On September 19, 2016, Osisko Mining indicated that in recent weeks, the corporate and exploration focus has turned solidly to the Windfall project. The exploration team is having increasing success at intersecting new extensions of the currently known zones, and have also successfully begun to define new parallel mineralized zones like the previously announced Wolf Zone within the primary mineralized corridors. Osisko Mining reported that all indications at this point are leading to believe that Osisko Mining will continue to expand the main deposit as they advance drilling, particularly to the east-north-east and at depth.
For more information, refer to the press releases of Osisko Mining filed on SEDAR (www.sedar.com).
Marban Project
Osisko is the holder of a 0.425% NSR royalty on the Marban gold project, owned by Osisko Mining, and is entitled to receive a payment of $4.25 million on a production decision.
Osisko Mining provided in June 2016 an updated resource estimate for its 100%-owned Marban gold project, located near the town of Malartic, Québec. This update is the result of 92,900 metres of infill drilling and historical core re-sampling executed since the last published resource estimates on the Marban and Norlartic deposits. The new estimate has produced an increase in the overall gold resource and an upgrading of the bulk of the resources to measured and indicated (“M&I”), pitconstrained categories.
Osisko Mining provided the following highlights for its updated resource estimate on Marban:
- In-pit M&I resource (total of both Marban and Norlartic) now stands at 1.48 million ounces of gold in 37.0 million tonnes at an undiluted grade of 1.24 g/t Au, with in-pit inferred resource adding 0.13 million ounces of gold in 3.6 million tonnes at an undiluted grade of 1.15 g/t Au. Pit-constrained resources are based on a Whittle-optimized pit shell using a gold price of US$1,250 per ounce and a calculated external lower cut-off of 0.4 g/t Au.
- At a higher cut-off grade of 1.0 g/t Au, the in-pit M&I resources stand at 1.04 million ounces of gold in 16.5 million tonnes at an undiluted grade of 1.97 g/t Au, representing 70% of the overall pit-constrained M&I ounces.
- The new global M&I mineral inventory currently stands at 1.83 million ounces of gold in 47.6 million tonnes with an average grade of 1.20 g/t Au and the global inferred mineral inventory stands at 0.41 million ounces of gold in 12.2 million tonnes at an average grade of 1.03 g/t Au (based on 0.40 g/t Au lower cut-off).
- Both Marban and Norlartic are open at depth and further drilling is planned to establish the potential for additional resources that may be mined by underground methods.
For more information, refer to the press releases of Osisko Mining filed on SEDAR (www.sedar.com).
Royalties - Summary of Producing and Advanced Non-producing
The following table describes the Company’s key royalty interests in producing and advanced-stage exploration projects:
Asset Operator Interest(1) Commodities Jurisdiction Stage
Canadian Malartic Agnico/Yamana 5.0% NSR royalty Au Québec Production 2.0-3.5% NSR Éléonore Goldcorp Au Québec Production royalty 1.7-2.55% NSR Island Gold(2) Richmont Mines Au Ontario Production royalty Metanor Hewfran Block(2) 1.7% NSR royalty Au Québec Production Resources Ressources 5% NSR royalty & Vezza Au Québec Production Nottaway Inc. 40% NPI royalty Gold/silver stream Horne 5 Falco Au, Ag, Cu Québec Exploration or 1% NSR royalty Lamaque(2) Integra Gold 1.7% NSR royalty Au Québec Exploration British Cariboo Barkerville 1.5% NSR royalty Au Exploration Columbia Windfall Osisko Mining 1.5% NSR Royalty Au Québec Exploration 0.425% NSR Marban Osisko Mining Au Québec Exploration royalty Hermosa Arizona Mining 1% NSR royalty Zn, Pb, Ag Arizona, USA Exploration Pandora Agnico/Yamana 2% NSR royalty Au Québec Exploration
| Malartic – Odyssey North | Agnico/Yamana | 3% NSR royalty | Au | Québec | Exploration |
| Malartic – Odyssey South | Agnico/Yamana | 5% NSR royalty | Au | Québec | Exploration |
| Upper Beaver | Agnico/Yamana | 2% NSR royalty | Au, Cu | Ontario | Exploration |
| Hammond Reef | Agnico/Yamana | 2% NSR royalty | Au | Ontario | Exploration |
| Kirkland Lake Camp | Agnico/Yamana | 2% NSR royalty | Au, Cu | Ontario | Exploration |
| Copperwood | Highland Copper | 3% NSR royalty(3) | Ag, Cu | Michigan, USA | Exploration |
| James Bay properties | Osisko Mining | 1.5-3.5% NSR royalty(4) | Au, Ag | Québec | Exploration |
| James Bay properties | Osisko Mining | 2.0 NSR royalty(4) | Other than Au, Ag | Québec | Exploration |
Options on royalties - Summary of Advanced Non-producing
| Asset | Operator | Interest | Commodities | Jurisdiction | Stage | |
|---|---|---|---|---|---|---|
| Price to Exercise | ||||||
| Neita | Unigold | 2% NSR Royalty | $2.0 million | Au | Dominican Republic | Exploration |
| Yellowknife City Gold | TerraX | 3% NSR Royalty | $4.0 million | Au | Northwest Territories | Exploration |
(1) In 2015, the Company acquired a portfolio of 28 Canadian royalties held by Teck Resources Limited (“Teck”). for a cash consideration of $24.2 million.
(2) After the sale of a 15% interest in the royalties acquired from Teck to Caisse de dépôt et placement du Québec.
(3) 3.0% NSR royalty on the Copperwood project. Upon closing of the acquisition of the White Pine project, Highland Copper will grant Osisko a 1.5% NSR royalty on all metals produced from the White Pine project, and Osisko's royalty on Copperwood will be reduced to 1.5%.
(4) Effective October 4, 2016, Osisko entered into an earn-in agreement with Osisko Mining where Osisko Mining may earn a 100% interest in Osisko’s 28 exploration properties located in the James Bay area and Labrador Through (excluding the Coulon copperzinc project and four other exploration properties) upon completing expenditures of $32.0 million over a 7-year period; Osisko Mining may earn a 50% interest upon completing expenditures totaling $19.2 million over a 4-year period. Osisko will retain an excalating NSR royalty ranging from 1.5% to 3.5% on precious metals and a 2.0% NSR royalty on other metals and minerals produced from the properties. New properties acquired by Osisko Mining in a designated area during the 7-year term will be subject to a royalty agreement in favour of Osisko with similar terms. The transaction in respect of the properties is subject to third parties’ approval, as applicable.
Portfolio of Investments
The Company’s assets include a portfolio of shares of publicly traded companies. Osisko invests, and intends to continue from time to time investing, in various companies within the mining industry for investment purposes, and with the objective of improving its ability to acquire interests in exploration assets, future royalties or revenue streams. In addition to investment objectives, in some cases, the Company may decide to take a more active role, including providing management personnel, technical and/or administrative support, as well as nominating individuals to the investee’s board of directors.
Osisko may, from time to time and without further notice except as required by law, increase or decrease its investments at its discretion.
Osisko Mining Inc.
As at September 30, 2016, Osisko holds an interest of 13.9% in Osisko Mining.
In July 2016, Osisko Mining completed a $25.0 million private placement of flow-through shares and in September 2016, Osisko Mining completed a $32.3 million private placement of common shares.
For more information, please refer to the press releases of Osisko Mining and Osisko Mining’s profile on SEDAR (www.sedar.com).
Labrador Iron Ore Royalty Corporation
Osisko holds a 9.8% interest in the shares of LIORC. The Company views this investment as an opportunity to provide asset/commodity diversification to its current portfolio of royalties. LIORC is entirely focused on the Iron Ore Company of Canada (“IOC”) operations through:
- A 7% gross royalty on the IOC iron ore operations;
- A $0.10 per tonne marketing fee on all products sold by IOC; and
- A 15% direct interest in IOC.
IOC is a major Canadian iron ore producer held by Rio Tinto (59%), Mitsubishi Corporation (26%) and LIORC. The mine, located in the Newfoundland and Labrador Province in Canada, has been producing and processing iron ore concentrate and pellets since 1954.