Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
Presented in Canadian dollars
March 6, 2019
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Osisko Mining Inc. (“Osisko” or the “Corporation”)
were prepared by management in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”). Management is responsible for ensuring
that these consolidated financial statements, which include amounts based upon estimates and judgments,
are consistent with other information and operating data contained in the annual financial review and reflect
Osisko’s business transactions and financial position.
Management is also responsible for the information disclosed in Osisko’s management’s discussion and
analysis including responsibility for the existence of appropriate information systems, procedures and
controls to ensure that the information used internally by management and disclosed externally is complete
and reliable in all material respects.
In addition, management is responsible for establishing and maintaining an adequate system of internal
control over financial reporting. The internal control system includes a code of conduct and ethics, which is
communicated to all levels in the organization and requires all employees to maintain high standards in their
conduct of the corporation's affairs. Such systems are designed to provide reasonable assurance that the
financial information is relevant, reliable and accurate and that Osisko’s assets are appropriately accounted
for and adequately safeguarded.
The Board of Directors is responsible for reviewing and approving the consolidated financial statements and
for ensuring that management fulfills its financial reporting responsibilities. The Board of Directors meets with
management as well as with the independent auditors to review the internal controls over the financial
reporting process, the consolidated financial statements and the auditors’ report. An Audit Committee assists
the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review
the internal controls over the financial reporting process, the consolidated financial statements and the
auditors’ report. The Audit Committee also reviews Osisko’s management’s discussion and analysis to
ensure that the financial information reported therein is consistent with the information presented in the
consolidated financial statements. The Audit Committee reports its findings to the Board of Directors for its
consideration in approving the consolidated financial statements for issuance to the shareholders.
Management recognizes its responsibility for conducting Osisko’s affairs in compliance with established
financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct
for its activities.
(Signed) “John Burzynski” (Signed) “Blair Zaritsky”
President and Chief Executive Officer Chief Financial Officer
Independent auditor’s report
To the Shareholders of Osisko Mining Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Osisko Mining Inc. and its subsidiaries (together, the Company) as at
December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2018 and 2017;
the consolidated statements of loss and comprehensive loss for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2
T: +1 416 863 1133, F: +1 416 365 8215
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is James Lusby.
(Signed) “PricewaterhouseCoopers LLP”
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
March 6, 2019
Table of Contents
STATEMENTS OF FINANCIAL POSITION .................................................................................................... 6
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS ........................................................................... 7
STATEMENTS OF CHANGES IN EQUITY .................................................................................................... 8
STATEMENTS OF CASH FLOWS ................................................................................................................. 9
NOTES TO FINANCIAL STATEMENTS ....................................................................................................... 10
1) Reporting entity .......................................................................................................................................... 10
2) Basis of presentation ................................................................................................................................. 10
3) Significant accounting policies. .................................................................................................................. 12
4) Changes in IFRS accounting policies and future accounting pronouncements ......................................... 19
5) Acquisition of Beaufield Resources Inc ...................................................................................................... 21
6) Reclamation deposit .................................................................................................................................. 22
7) Taxes recoverable ..................................................................................................................................... 23
8) Marketable securities ................................................................................................................................. 23
9) Long-term investment ................................................................................................................................ 23
10) Expenses ................................................................................................................................................. 24
11) Investment in associate ........................................................................................................................... 24
12) Plant and equipment ................................................................................................................................ 26
13) Exploration and evaluation assets ........................................................................................................... 27
14) Asset retirement obligation ...................................................................................................................... 33
15) Capital and other components of equity .................................................................................................. 34
16) Deferred Share Unit and Restricted Unit Plans ....................................................................................... 42
17) Related party transactions ....................................................................................................................... 43
18) Capital risk factors ................................................................................................................................... 44
19) Financial instruments ............................................................................................................................... 44
20) Income taxes ............................................................................................................................................ 46
21) Commitments ........................................................................................................................................... 47
22) Subsequent events .................................................................................................................................. 48
Consolidated Statements of Financial Position
(Tabular amounts express in thousands of Canadian dollars)
As at
Assets
Current assets
Cas h and cas h equivalents
Other receivables
Advances and prepaid expens e
Tax recoverable (note 7)
Marketable s ecurities (note 8)
Total current assets
Non-current assets
Reclam ation depos it (note 6)
Long-term inves tm ent (note 9)
Inves tm ent in as s ociate (note 11)
Plant and equipm ent (note 12)
Exploration and evaluation as s ets (note 13)
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Total current liabilities
Non-current liabilities
Flow-through prem ium liability (note 15(a))
Share-bas ed paym ent liability (note 16)
As s et retirem ent obligation (note 14)
Deferred tax liability (note 20)
Total non-current liabilities
Total liabilities
December 31,
2018
December 31,
2017
$
88,280
582
507
34,873
14,200
138,442
$
111,504
573
669
20,486
22,076
155,308
404
150
56,998
7,972
368,902
434,426
572,868
$
973
180
56,438
6,570
261,920
326,081
481,389
$
$
10,260
10,260
$
21,084
21,084
2,560
874
3,628
24,523
31,585
41,845
11,566
-
2,892
17,422
31,880
52,964
Equity
Share capital (note 15(a))
Contributed s urplus (note 15(d))
Warrants (note 15(e))
Accum ulated deficit
Total equity attributed to equity holders of the Corporation
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
$
580,616
55,606
2,568
(107,767)
531,023
572,868
456,231
28,761
17,204
(73,771)
428,425
481,389
$
Commitments (note 21)
Subsequent events (note 22)
On behalf of the Board:
(Signed) “Keith McKay” (Signed) “Sean Roosen”
Keith McKay, Director Sean Roosen, Chairman
6
Consolidated Statements of Loss and Comprehensive Loss
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
For the year ended
Expenses
Compensation expenses (note 10)
General and administration expenses (note 10)
General exploration expenses
Exploration and evaluation assets written off (note 13)
Flow-through premium income (note 15(a))
Loss/(gain) from marketable securities (note 8)
Impairment on long-term investment (note 9)
Realized gain from sale of equipment
Foreign currency exchange gain
Other income
Operating loss
Finance income
Finance costs
Net finance income
Share of gain of associates (note 11)
Gain on revaluation of investment in associate (note 11)
Loss/(income) for before tax
Deferred income tax expense (note 20)
December 31,
2018
December 31,
2017
$
20,011
5,414
60
6,763
(13,076)
7,059
30
(6)
-
(760)
25,495
(1,381)
135
(1,246)
(1,251)
(1,796)
21,202
12,794
$
20,486
5,935
67
2,662
(25,991)
(649)
-
-
(638)
(330)
1,542
(1,507)
166
(1,341)
(608)
-
(407)
18,443
Loss and comprehensive loss
$
33,996
$
18,036
Basic and diluted loss per share (note 15(b) and (c))
$
0.15
$
0.10
Weighted average number of shares (note 15(b) and (c))
220,448,965
188,055,245
The accompanying notes are an integral part of these consolidated financial statements.
7
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E
Consolidated Statements of Cash Flows
(Tabular amounts express in thousands of Canadian dollars)
For the year ended
Cash flows used in operating activities
Loss for the year
Adjustments for:
Marketable securities loss/(gain) (note 8)
Share of income of associates (note 11)
Gain on revaluation of investment in associate (note 11)
Exploration and evaluation assets written off (note 13)
Depreciation
Accretion on asset retirement obligation (note 14)
Impairment on long-term investment (note 9)
Realized gain from sale of equipment
Flow-through premium income (note 15(a))
Foreign currency translation adjustment
Stock-based compensation (note 15(d))
Deferred income tax expense (note 20)
Interest income
Change in items of working capital:
Change in other receivables
Change in advances and prepaid expenses
Change in accounts payable and accrued liabilities
Change in taxes recoverable
Net cash used in operating activities
Cash flows used in investing activities
Interest received
Acquisition of marketable securities (note 8)
Proceeds on disposition of marketable securities (note 8)
Acquisition of Beaufield equity investment (note 11)
Acquisition of Barkerville equity investment (note 11)
Net cash and cash equivalents received from acqusition of Beaufield Resources Inc (note 5)
Acquistion of plant and equipment (note 12)
Proceeds on disposition of plant and equipment (note 12)
Proceeds on refund of reclamation deposit (note 6)
Addition to exploration and evaluation assets (note 13)
Net cash used in investing activities
Cash flows provided by financing activities
Net cash received from private placements (note 15(a))
Cash received from exercise of warrants (note 15(e))
Cash received from exercise of stock options (note 15(d))
Net cash provided by financing activities
(Decrease)/increase in cash and cash equivalents
Year ended
December 31,
2018
December 31,
2017
$ (33,996) $ (18,036)
7,059 (649)
(1,251) (608)
(1,796) -
6,763 2,662
144 83
33
11
30
-
(6) -
(13,076) (25,991)
- (608)
11,630
14,141
12,794
18,443
(1,381) (1,507)
(13,053) (12,059)
(9)
184
134
(453)
(2,737) 2,030
8,108 (6,983)
(7,507) (17,331)
1,381
1,502
(5,364) (31,511)
7,768 26,203
(2,369) (4,951)
(3,800) (13,589)
2,742 -
(3,226) (6,288)
12
-
569 -
(113,089) (112,838)
(115,376) (141,472)
97,199
173,291
760 13,952
1,700 1,793
99,659
189,036
(23,224) 30,233
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
The accompanying notes are an integral part of these consolidated financial statements.
111,504
$
88,280
81,271
$
111,504
9
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
1) Reporting entity
Osisko Mining Inc. (“Osisko” or the “Corporation”) is a Canadian Corporation domiciled in Canada and was incorporated
on February 26, 2010 under the Ontario Business Corporations Act. The address of the Corporation’s registered office is
155 University Ave, Suite 1440, Toronto, Ontario, Canada. The consolidated financial statements of the Corporation at
December 31, 2018 include the Corporation and its subsidiaries, Beaufield Resources Inc. (“Beaufield”), Eagle Hill
Exploration Corporation, Ryan Gold Corp., Corona Gold Corporation, Northern Gold Mining Inc., Niogold Mining
Corporation, O3 Investments Incorporated and O3 Markets Inc. (together the “Group” and individually as “Group entities”).
Subsequent to the year ended December 31, 2018, Osisko amalgamated Beaufield, Eagle Hill Exploration Corporation,
Ryan Gold Corp., Corona Gold Corporation, and O3 Investments Incorporated. The Corporation is primarily in the business
of acquiring, exploring and developing precious mineral deposits in Canada.
The business of acquiring, exploring and developing precious mineral deposits involves a high degree of risk. Osisko is in
the exploration stage and is subject to risks and challenges similar to companies in a comparable stage. These risks include,
but are not limited to, the challenges of securing adequate capital, exploration, development and operational risks inherent
in the mining industry; changes in government policies and regulations; the ability to obtain the necessary environmental
permitting; challenges in future profitable production or, alternatively Osisko’s ability to dispose of its interest on an
advantageous basis; as well as global economic and commodity price volatility; all of which are uncertain. There is no
assurance that Osisko’s funding initiatives will continue to be successful. The underlying value of the mineral properties is
dependent upon the existence and economic recovery of mineral reserves and is subject to, but not limited to, the risks and
challenges identified above. Changes in future conditions could require material write-downs of the carrying value of mineral
properties and deferred exploration.
2) Basis of preparation
a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements were authorized for issuance by the Corporation’s Board of Directors on March 6,
2019.
b) Functional and presentation currency
These financial statements are presented in Canadian dollars (tables in thousands of Canadian dollars), which is Osisko’s
functional currency.
c) Use of critical estimates and judgements
The preparation of these consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and
expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed by management on an ongoing basis. Revisions to accounting
estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of
the revision and future year if the revision affects both current and future year.
10
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
2) Basis of preparation (continued)
c) Use of critical estimates and judgements (continued)
i) Significant judgments in applying accounting policies
The areas that require management to make significant judgments in applying the Corporation’s accounting policies in
determining carrying values include:
Income taxes:
The Corporation is subject to income taxes in various jurisdictions. Significant judgment is required in determining the
provision for income taxes, due to the complexity of legislation, including the judgments around the use of flow-through
share financing. There are many transactions and calculations for which the ultimate tax determination is uncertain during
the ordinary course of business.
Determination of significant influence over equity investments:
Judgment is needed to assess whether the Corporation's interest in a marketable security meets the definition of significant
influence and therefore would be accounted for under the equity method as opposed to fair value through profit and loss.
Management makes this determination based on its legal ownership interest, board representation and through an analysis
of the Corporation's participation in entities’ policy making process. In the years ended December 31, 2018 and 2017,
management determined it was able to exert significant influence over Barkerville Gold Mines Ltd. (“Barkerville”) and
Beaufield and started to account for these investments as associates under the equity method. In October 2018, Osisko
completed its previously announced business combination with Beaufield, pursuant to which Osisko acquired all the
common shares of Beaufield by way of a statutory plan of arrangement, resulting in removing the investment from being
accounted for as an associate, and commencing consolidating the entity.
Impairment of investments in associates:
The Corporation follows the guidance of IAS 28, Investments in Associates and Joint Ventures to assess whether there are
impairment indicators which may lead to the recognition of an impairment loss with respect to its net investment in an
associate. This determination requires significant judgement in evaluating if a decline in fair value is significant or prolonged,
which triggers a formal impairment test. In making this judgement, the Corporation’s management evaluates, among other
factors, the duration and extent to which the fair value of an investment is less than its carrying amount, the volatility of the
investment and the financial health and business outlook for the investee, including factors such as the current and expected
status of the investee’s exploration projects and changes in financing cash flows.
ii) Significant accounting estimates and assumptions
The areas that require management to make significant estimates and assumptions in determining carrying values include,
but are not limited to:
Impairment of non-financial assets:
The Corporation assesses its cash-generating units at each reporting date to determine whether any indication of
impairment exists. Where an indicator of impairment exists, an estimate of the recoverable amount is made, which is the
higher of the fair value less costs of disposal and value in use. The determination of the recoverable amount requires the
use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements,
exploration potential and future operating performance. Fair value is determined as the amount that would be obtained from
the sale of the asset in an arm's-length transaction between knowledgeable and willing parties.
11
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
2) Basis of preparation (continued)
c) Use of estimates and judgements (continued)
ii) Significant accounting estimates and assumptions (continued)
Fair value of stock options and warrants:
Determining the fair value of stock options and warrants involves estimates of interest rates, expected life of options and
warrants, expected forfeiture rate, share price volatility and the application of the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires the input of highly subjective assumptions that can materially affect the fair
value estimate. Stock options granted vest in accordance with the stock option plan. The valuation of stock-based
compensation is subjective and can impact profit and loss significantly. The Corporation has applied a forfeiture rate in
arriving at the fair value of stock-based compensation to be recognized, reflecting historical experience. Historical
experience may not be representative of actual forfeiture rates incurred.
Several other variables are used when determining the value of stock options and warrants using the Black-Scholes
valuation model:
•
•
Volatility: The Corporation uses historical information on the market price of peer companies to determine the
degree of volatility at the date when the stock options are granted. Therefore, depending on when the stock options
and warrants were granted and the year of historical information examined, the degree of volatility can be different
when calculating the value of different stock options and warrants.
Risk-free interest rate: The Corporation used the interest rate available for government securities of an equivalent
expected term as at the date of the grant of the stock options and warrants. The risk-free interest rate will vary
depending on the date of the grant of the stock options and warrants and their expected term.
3) Significant accounting policies
The accounting policies set out below are in accordance with IFRS and have been applied consistently to the 2018 and
2017 years presented in these consolidated financial statements, other than respect to IFRS 9, Financial Instruments, which
was adopted in 2018 on a retrospective basis with any changes to be recorded in the opening balance sheet as at January
1, 2018.
a) Basis of consolidation
The consolidated financial statements of Osisko consolidate the results of the Corporation and its wholly owned
subsidiaries: Beaufield, Eagle Hill Exploration Corporation, Ryan Gold Corp., Corona Gold Corporation, Northern Gold
Mining Inc., Niogold Mining Corporation, O3 Investments Incorporated and O3 Markets Inc. A subsidiary is an entity
controlled by the Corporation.
Control exists when an investor is exposed or has rights to variable returns from its involvement with an investee and has
the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date on which
the Corporation obtains control and are de-consolidated from the date that control ceases to exist. All intercompany
transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.
12
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
b) Foreign currency
i) Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Corporation’s entities using the exchange
rates prevailing at the dates of the transactions or an appropriate average exchange rate. Generally, foreign exchange
gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in currencies other than the Corporation’s functional
currency are recognized in the statement of loss.
ii) Functional and presentational currency
Items included in the financial statements of each consolidated entity of the Corporation are measured using the currency
of the primary economic environment in which the entity operates (the “functional currency”). The financial statements of
entities that have a functional currency different from that of the Corporation are translated into Canadian dollars as follows:
assets and liabilities are translated at the closing rate at the date of the statement of financial position, and income and
expenses are translated at the average rate during an appropriate year. Equity transactions are translated using the
exchange rate at the date of the transaction and all resulting changes are recognized in other comprehensive income as
cumulative translation adjustments.
c) Financial instruments
The Corporation adopted IFRS 9 effective January 1, 2018. The Corporation has applied IFRS 9 on a retrospective basis
and was not required to restate prior periods. There was no difference between the previous carrying amount and the
carrying amount at the date of initial application of IFRS 9.
Financial instruments are recognized on the consolidated statements of financial position on the trade date, the date on
which the Corporation becomes a party to the contractual provisions of the financial instrument. The Corporation classifies
its financial instruments in the categories below.
Financial Assets at Amortized Cost – Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortized cost. The Corporation’s other receivables
and reclamation deposit consist of fixed or determined cash flows related solely to principal and interest amounts. The
Corporation’s intent is to hold these financial assets until the related cash flows are collected. Other receivables and
reclamation deposit are recognized initially at fair value, net of any transaction costs incurred, and subsequently measured
at amortized cost, using the effective interest method. The Corporation recognizes a loss allowance for expected credit
losses on a financial asset that is measured at amortized cost.
Financial Assets at Fair Value through Profit or Loss (“FVTPL”) – Financial assets measured at FVTPL are assets
which do not qualify as financial assets at amortized cost or at fair value through other comprehensive income. Cash and
cash equivalents, marketable securities and long-term investments are classified as FVTPL. These financial assets are
initially recognized at their fair value with changes to fair values recognized in profit or loss.
Financial Liabilities at Amortized Cost – Financial liabilities are measured at amortized cost using the effective interest
method, unless they are required to be measured at FVTPL, or the Corporation has opted to measure them at FVTPL.
Accounts payable and accrued liabilities are recognized initially at fair value, net of any transaction costs incurred, and
subsequently at amortized cost, using the effective interest method.
13
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
c) Financial instruments (continued)
The Corporation derecognizes financial assets only when the contractual rights to cash flows from the financial assets
expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership. Gains
and losses on derecognition are generally recognized in the consolidated statements of loss. The Corporation derecognizes
financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expelled. The
difference between the carrying amount of the financial liability derecognized and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
i) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting year-end. Financial
assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
The criteria that the Corporation uses to determine if there is objective evidence of an impairment loss includes:
significant financial difficulty of the issuer or counterparty;
default or delinquency in interest or principal payments; or
it has become probable that the borrower will enter bankruptcy or financial reorganization.
At each statement of financial position date, on a forward looking basis, the Corporation assesses the expected credit
losses associated with its financial assets carried at amortized cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
d) Exploration and evaluation assets
Exploration and evaluation costs, including the cost of acquiring licenses, are capitalized as exploration and evaluation
assets on a project-by-project basis pending determination of the technical feasibility and the commercial viability of the
project.
Capitalized costs include costs directly related to exploration and evaluation activities in the area of interest. General and
administrative costs are only allocated to the asset to the extent that those costs can be directly related to operational
activities in the relevant area of interest. When a license is relinquished or a project is abandoned, the related costs are
recognized in profit and loss immediately. Costs incurred before the consolidated entity has obtained the legal rights to
explore an area are recognized in the statement of loss.
Option-out agreements are accounted for as farm-out arrangements. The Corporation, as the farmor, does not record any
expenditures made by the optionee on its behalf, does not recognize any gain or loss on the option-out arrangement, but
rather re-designates any costs previously capitalized in relation to the whole interest as relating to the partial interest
retained, any cash consideration received is credited against costs previously capitalized in relation to the whole interest
with any excess accounted for by the Corporation as a gain on disposal.
Exploration and evaluation assets are assessed for impairment if (i) the period for which the entity has the right to explore
in the specific area has expired during the period or will expire in the near future, (ii) substantive expenditure on further
exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned, (iii) sufficient data
exists to determine technical feasibility and commercial viability, and (iv) facts and circumstances suggest that the carrying
amount exceeds the recoverable amount (see impairment of non-financial assets).
14
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
d) Exploration and evaluation assets (continued)
The technical feasibility and commercial viability of extracting a mineral resource is considered to be determinable when
proven reserves are determined to exist, the rights of tenure are current and it is considered probable that the costs will be
recouped through successful development and exploitation of the area, or alternatively by sale of the property. Upon
determination of proven reserves, exploration and evaluation assets attributable to those reserves are first tested for
impairment and then reclassified from exploration and evaluation assets to a separate category within tangible assets.
Expenditures deemed to be unsuccessful are recognized in profit or loss immediately.
e) Equipment
Equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures
that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or
recognized as separate assets, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Corporation and the cost can be measured reliably. The carrying amount of a replaced asset is
derecognized when replaced. Repairs and maintenance costs are charged to the statement of loss during the year in which
they are incurred.
The major categories of equipment are depreciated on a declining or straight-line basis as follows:
Office equipment
Computer equipment
Exploration equipment
Automobiles
Leasehold Improvements
20%
30%
20%
30%
Term of the lease
The Corporation allocates the amount initially recognized in respect of an item of equipment to its material significant parts
and depreciates each separately. Residual values, method of depreciation and useful lives of the asset are reviewed
annually and adjusted if appropriate.
Gains and losses on disposals of equipment are determined by comparing the proceeds with the carrying value of the asset
and are included as part of other gains and losses in the statement of loss.
f) Impairment of non-financial assets
The carrying amounts of the Corporation’s non-financial assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of
disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset.
For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the “cash generating unit” or “CGU”).
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.
Impairment losses are recognized in profit or loss. Impairment losses recognized in prior years are assessed at each
reporting year for any indications that the loss decreased or no longer exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the recoverable amount. An impairment loss is only reversed to the
extent that the asset’s carrying value amount does not exceed the carrying amount that would have been determined, net
of depreciation of amortization, if no impairment loss had been recognized.
15
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
g) Financial liabilities and equity
Debt and equity instruments are classified either as financial liabilities or as equity in accordance with the substance of the
contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by the Corporation are recorded at the proceeds received, net
of direct issue costs. Financial liabilities are classified as either financial liabilities at FVTPL or financial liabilities at amortized
cost.
h) Financial liabilities at amortized cost
Financial liabilities at amortized cost are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortized cost using the effective interest rate method, with interest expense recognized on an effective yield
basis.
The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating
interest expenses over the corresponding year. The effective interest rate is the rate that exactly discounts estimated future
cash payments over the expected life of the financial liability, or, where appropriate, a shorter year, to the net carrying
amount on initial recognition.
i) Current and deferred income tax
Income tax expense comprises current and deferred tax. Current and deferred taxes are recognized in profit or loss except
to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive
income.
Mining taxes represent Canadian provincial tax levied on mining operations and are classified as income tax since such
taxes are based on a percentage of mining profits.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using the tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect to the previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following
temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred
tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured
at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have
been enacted or substantially enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent
that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will
be realized.
16
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
j) Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share
options are recognized as a deduction from equity, net of any tax effects.
k) Related party transactions
A related party is a person or entity that is related to the Corporation; that has control or joint control over the Corporation;
that has significant influence over the Corporation; or is a member of the key management personnel of the Corporation.
An entity is related to a Corporation if the entity and the reporting entity are members of the same group (which means that
each parent, subsidiary and fellow subsidiary is related to the others).
A related party transaction is a transfer of resources, services or obligations between a Corporation, and a related party,
regardless of whether a price is charged. All transactions with related parties are in the normal course of business and are
measured at fair value.
l) Basic and diluted loss per share
The Corporation presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic earnings per
share are calculated by dividing the profit or loss attributable to common shareholders of the Corporation by the weighted
average number of common shares outstanding during the year.
Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments.
The number of shares with respect to options, warrants and restricted shares is computed using the treasury stock method.
As at December 31, 2018 and 2017, the Corporation did not have any dilutive instruments that would dilute the EPS.
m) Provisions
A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that
can be estimated reliably and it is probable that an outflow will be required to settle the obligation. Provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the liability. The Corporation performs evaluations each reporting year to identify potential
obligations.
n) Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognized as it accrues in profit or loss.
Finance costs comprise interest expense on borrowing, changes in the fair value of financial assets at FVTPL, impairment
losses recognized on financial assets. Foreign currency gains and losses are reported on a net basis.
o) Asset retirement obligation
An asset retirement obligation is recognized for the expected costs of reclamation at mineral properties where the
Corporation is legally or contractually responsible for such costs. Asset retirement obligations arise from the Corporation’s
obligation to undertake site reclamation and remediation in connection with the exploration of mineral properties. The
Corporation recognizes the estimated reclamation costs when environmental disturbance occurs but only when a
reasonable estimate can be made.
17
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
p) Asset retirement obligation (continued)
The asset retirement obligation recognized is estimated on the risk adjusted costs required to settle present obligations,
discounted using a pre-tax risk free discount rate consistent with the expected timing of expected cash flows. Changes in
the estimated undiscounted cash flows and risk-free discount rate used in calculating the present value of the asset
retirement obligation are offset to the reclamation cost asset previously recognized for the specific property. Actual
reclamation expenditures incurred reduce the carrying value of the reclamation provision.
q) Flow-through shares
Resource expenditure deductions for income tax purposes related to exploration activities funded by flow-through share
arrangements are renounced to investors under Canadian income tax legislation. On issuance, the Corporation separates
the flow-through share into i) a flow-through share premium, equal to the difference between the current market price of the
Corporation’s common shares and the issue price of the flow through share and ii) share capital. Upon expenses being
incurred, the Corporation recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders.
The premium is recognized as other income and the related deferred tax is recognized as a tax provision.
Proceeds received from the issuance of flow-through shares must be expended on Canadian resource property exploration
within a period of two years.
r) Stock based compensation
The Corporation maintains a share option plan, a deferred share unit (“DSU”) plan, and a restricted share unit (“RSU”) plan
for its officers, directors, employees and consultants. The maximum number of shares reserved for issuance under all
security-based compensation arrangements of the Corporation is 10% of the issued and outstanding common shares of
the Corporation.
i) Share option plan
Share options are settled in equity. The fair value of share options granted is recognized as an expense over the vesting
period using the graded vesting method with a corresponding increase in contributed surplus.
The fair value is measured at the grant date and recognized over the period during which the options vest. The fair value
of the options granted is measured using an appropriate option pricing model, taking into account the terms and conditions
upon which the options were granted. At each reporting date, the amount recognized as an expense is adjusted to reflect
the actual number of share options that are expected to vest based on an estimate of the forfeiture rate.
Cancelled options are accounted for as an acceleration of vesting and the amount that otherwise would have been
recognized for services received over the vesting period is recognized immediately.
ii) Restricted Share Unit plan
Each RSU represents an entitlement to one common share of the Corporation, upon vesting. RSUs provide the option of
being settled in cash. The fair value of RSUs granted is recognized as an expense over the vesting period using the graded
vesting method with a corresponding increase in share-based payment liability. The liability is re-measured to fair value at
each reporting date and, upon redemption, at the Corporation’s closing share price, with any changes in the fair value
recognized in profit or loss. At each reporting date, the amount recognized as an expense is adjusted to reflect the actual
number of RSUs that are expected to vest based on an estimate of the forfeiture rate. Upon redemption of the RSU, the
liability is transferred to share capital.
18
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
3) Significant accounting policies (continued)
r) Stock based compensation (continued)
iii) Deferred Share Unit plan
Each DSU represents an entitlement to one common share of the Corporation and vests immediately on the date of grant.
DSUs provide the option of being settled in cash. The fair value of DSUs granted is recognized as an expense on the date
of grant with a corresponding increase in share-based payment liability. The liability is re-measured to fair value at each
reporting date and, upon redemption, at the Corporation’s closing share price, with any changes in the fair value recognized
in profit or loss. Upon redemption of the DSU, the liability is transferred to share capital.
s) Investment in associate
Associates are entities over which the Corporation has significant influence, but not control. The financial results of the
Corporation’s investments in its associates are included in the Corporation’s results according to the equity method. Under
the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to
recognize the Corporation’s share of profits or losses of associates after the date of acquisition. The Corporation’s share of
profits or losses is recognized in the statement of loss and its share of other comprehensive loss or loss of associates is
included in other comprehensive loss.
Unrealized gains on transactions between the Corporation and an associate are eliminated to the extent of the Corporation’s
interest in the associate. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Dilution gains and losses arising from changes in interests in investments in associates are
recognized in the statement of loss.
The Corporation assesses at each period end whether there is any objective evidence that its investments in associates
are impaired. If impaired, the carrying value of the Corporation’s shares of the underlying assets of associates is written
down to its estimated recoverable amount (being the higher of fair value less costs of disposal and value in use) and charged
to the statement of loss.
t) Refundable tax credits for mining exploration and evaluation assets
The Corporation is entitled to a refundable tax credit on qualified mining exploration and evaluation expenditures incurred
in the Province of Québec. The credit is accounted for against the exploration and evaluation expenditures incurred.
4) Changes in IFRS accounting policies and future accounting pronouncements
Certain pronouncements were issued by the IASB or the International Financial Reporting Interpretations Committee that
are mandatory for accounting years ending after December 31, 2018. Many are not applicable or do not have a significant
impact to the Corporation and have been excluded from the summary below.
19
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
4) Changes in IFRS accounting policies and future accounting pronouncements (continued)
a) Future Accounting Pronouncements
IFRS 16, “Leases” (“IFRS 16”)
In January 2016, the IASB issued IFRS 16. The new standard brings most leases on-balance sheet for lessees under a
single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely
unchanged and the distinction between operating and finance leases is retained. This standard is effective for annual
reporting periods on or after January 1, 2019. A lessee can choose to apply IFRS 16 using either a full retrospective or a
modified retrospective approach. The Corporation plans to apply IFRS 16 at the date it becomes effective and has selected
the modified retrospective transition approach which does not require restatement of comparative periods. The Corporation
will recognize a lease liability on January 1, 2019 and measure the lease liability at the present value of the remaining lease
payments, discounted using the Corporation's incremental borrowing rate. The Corporation will also elect to measure right-
of-use assets at the same value as the lease liability. IFRS 16 includes recognition exemptions available for short-term
leases and leases of low-value items. The Corporation will elect to apply the exemptions whereby the Corporation will
recognize the lease payment as an expense over the lease term.
During the year ended December 31, 2018, the Corporation has substantially completed the identification and assessment
of arrangements that may contain leases that qualify for recognition under IFRS 16. In addition, the Corporation has
substantially completed work to value the right-of-use assets and lease liabilities in arrangements determined to be or
contained leases.
Upon the adoption of IFRS 16, the Corporation anticipates it will recognize approximately $3,000,000 of right-of-use assets
and approximately $3,000,000 of associated lease liabilities related to the leases on the consolidated statements of financial
position on January 1, 2019. Due to the recognition of lease assets and liabilities, a higher amount of interest expense and
depreciation will be recognized under IFRS 16 as compared to the current standard. Additionally, a reduction in general
and administration expenses is expected. Lastly, the Corporation expects a reduction in operating cash outflows and
investing cash outflows with a corresponding increase in financing cash outflows under IFRS 16.
IFRIC 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
In June 2017, the IASB issued IFRIC 23. IFRIC 23 clarifies the determination of taxable profit (tax loss), tax bases, unused
tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12 and requires
an entity to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax
treatments, that it uses or plans to use in its income tax filing. IFRIC 23 is effective for annual periods beginning on or after
January 1, 2019, and permits early adoption. It is expected that the adoption of IFRIC 23 will not have a material impact on
the consolidated financial statements.
b) New Accounting Standards Issued and Effective
IFRS 2, “Share-based Payments” (“IFRS 2”)
In June 2016, the IASB issued amendments to IFRS 2, clarifying how to account for certain types of share-based payment
transactions, including the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-
settled share-based payments, accounting for share-based payment transactions with a net settlement feature for
withholding tax obligations, and accounting for modifications to the terms and conditions of a share-based payment that
changes the classification of the share-based payment transaction from cash-settled to equity-settled. The IFRS 2
amendments are effective for fiscal year beginning on or after January 1, 2018. The adoption of the amendments did not
have a material impact on the consolidated financial statements.
20
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
4) Changes in IFRS accounting policies and future accounting pronouncements (continued)
b) New Accounting Standards Issued and Effective (continued)
IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”)
In May 2015, the IASB issued IFRS 15. The core principle of the new standard is for companies to recognize revenue to
depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which
the company expects to be entitled in exchange for those goods or services. The new standard results in enhanced
disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for
example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. This
standard was adopted on January 1, 2018 using the modified retrospective approach. The adoption of IFRS 15 did not have
a material impact on the consolidated financial statements and there was no transitional adjustment recorded on adoption.
IFRS 9, “Financial Instruments” (“IFRS 9”)
In July 2015, the IASB issued IFRS 9 to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ (“IAS 39”).
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing
the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the
context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements
in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new
standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. A new
hedge accounting model was introduced and represents a substantial overhaul of hedge accounting which allows entities
to better reflect their risk management activities in the financial statements.
This standard was adopted on January 1, 2018 on a retrospective basis without restating comparatives so any cumulative
adjustments would be recorded in the opening retained earnings on adoption. The adoption of IFRS 9 did not have a
material impact on the consolidated financial statements and there was no transitional adjustment recorded on adoption.
5) Acquisition of Beaufield
On October 19, 2018, the Corporation completed the acquisition (the "Beaufield Arrangement") of Beaufield by way of a
court approved plan of arrangement.
Under the terms of the Beaufield Arrangement, each former shareholder of Beaufield became entitled to receive 0.0482 of
a common share of Osisko in exchange for each common share of Beaufield held immediately prior to the effective time of
the Beaufield Arrangement. In addition, holders of options and warrants to acquire common shares of Beaufield received
replacement options and warrants, respectively, entitling the holders thereof to acquire common shares of Osisko.
The Beaufield Agreement has been accounted for as an acquisition of assets and liabilities as Beaufield does not meet the
definition of a business under IFRS 3. The acquisition of the net assets of Beaufield were recorded at the fair value of the
consideration transferred of $34,004,000 as detailed in the table below.
21
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
5) Acquisition of Beaufield (continued)
Consideration Paid
Share consideration
Cancellation of previously held BFD common shares (note 11)
Transaction costs
Stock Options
Warrants
Net assets acquired
Cash
Current assets
Marketable securities (note 8)
Exploration and evaluation assets
Current liabilities
Total net assets acquired
6) Reclamation deposit
$
24,267
8,656
698
226
157
34,004
3,440
546
1,587
28,478
(47)
34,004
$
$
$
Reclamation deposits are held as security for the estimated cost of reclamation of the Corporation’s land and unproven
mineral interests. Once reclamation of the properties is complete, the deposits will be returned to the Corporation.
The following table summarizes information regarding the Corporation’s reclamation deposits as at December 31, 2018 and
2017:
As at
Windfall Lake (a)
Garrison (b)
Buffonta (b)
Total Reclamation deposits
a) Windfall Lake
December 31,
December 31,
2018
2017
$
-
$
570
244
160
244
159
$
404
$
973
The Corporation had a reclamation deposit of $570,000 with the Québec Ministry of Energy and Natural Resources as a
financial guarantee covering the cost of mine reclamation related to the Corporation’s Windfall Lake Property which was
acquired as a result of the acquisition of Eagle Hill. During the year ended December 31, 2018, an updated rehabilitation
plan was completed for the Windfall Project and, upon acceptance of this plan by the Ministère de l'Énergie et des
Ressources naturelles, the deposit of $570,000 was returned to Osisko in exchange for a bond in the amount of the updated
rehabilitation plan.
b) Garrison and Buffonta
The Corporation has two reclamation deposits of $244,000 and $160,000 with the Ministry of Northern Development and
Mines as a financial guarantee covering the cost of mine reclamation related to the Corporation’s Garrison and Buffonta
Properties, respectively, which were acquired as a result of the acquisition of Northern Gold. Interest is earned on these
deposits at a rate of 0.3%.
22
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
7) Tax recoverable
As at December 31, 2018 and 2017, tax recoverable consists of sales tax recoverable and refundable tax credits for mining
exploration and evaluation expenditures. Sales tax recoverable consist of harmonized sales taxes (“HST”), goods and
services tax (“GST”), Québec sales tax (“QST”) and income tax receivable from Canadian taxation authorities. The
refundable tax credits relate to eligible exploration and evaluation expenditures incurred in the Province of Québec.
8) Marketable securities
The Corporation holds shares and warrants in various public and private companies throughout the mining industry. During
the year ended December 31, 2018, these shares and warrants were fair valued and this resulted in an unrealized loss of
$6,365,000 (2017 – loss of $2,037,000). The Corporation sold shares during the year ended December 31, 2018 which
resulted in a realized loss of $694,000 (2017 – gain of $2,686,000).
The shares in the various public companies are classified as FVTPL and are recorded at fair value using the quoted market
price as at December 31, 2018 and are therefore classified as level 1 within the fair value hierarchy.
The warrants in the various public companies are classified as FVTPL and are recorded at fair value using a Black-Scholes
option pricing model using observable inputs and are therefore classified as level 2 within the fair value hierarchy.
The following table summarizes information regarding the Corporation’s marketable securities as at December 31, 2018
and 2017:
As at
Balance, beginning of year
Additions
Acquisitions (note 5)
Disposals
Realized (loss)/gain
Unrealized loss
Balance, end of year
9) Long-term investment
December 31,
2018
December 31,
2017
$
$
22,076
5,364
1,587
(7,768)
(694)
(6,365)
14,200
15,020
32,610
-
(26,203)
2,686
(2,037)
22,076
$
$
As of December 31, 2018, the investment consists of 3,000,000 shares of Northstar Gold Corporation (“Northstar”), acquired
on March 3, 2015, in connection with an option agreement entered for the Miller property. The 3,000,000 shares were
acquired at a value of $0.10 per common share. During the year ended December 31, 2018, Northstar announced the
approval of a financing at $0.05 per common share and as such the Corporation recorded an impairment on this long-term
investment of $30,000 (2017 - $120,000).
23
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
10) Expenses
The following table summarizes information regarding the Corporation’s expenses for the year ended December 31, 2018
and 2017:
For the year ended
Compensation expenses
Stock-based compensation (note 15(d))
Salaries and benefits
Total compensation expenses
General and administration expenses
Shareholder and regulatory expense
Administrative services
Travel expense
Professional fees
Office expense
Total general and administration expenses
Marketable securities
Realized loss/(gain) from marketable securities (note 8)
Unrealized loss from marketable securities (note 8)
Total marketable securities loss/(gain)
11) Investment in associates
December 31,
2018
December 31,
2017
$
$
$
$
11,630
8,381
20,011
667
$
-
452
1,288
3,007
5,414
$
$
$
$
$
$
$
694
6,365
7,059
14,141
6,345
20,486
494
252
675
1,498
3,016
5,935
(2,686)
2,037
(649)
On August 8, 2016, Osisko announced its acquisition of 50,000,000 shares in Barkerville, or a 17% stake, from 2176423
Ontario Ltd. for $20,000,000 cash and 8,097,166 common shares of Osisko valued at $17,000,000. Subsequent to this
initial investment, Osisko has acquired a further 32,401,741 shares in Barkerville for $20,274,000 cash and has dropped its
stake down to 16%. Through the extent of its share ownership interest and sharing a common board member, management
has determined that Osisko has significant influence over the decision-making process of Barkerville and accordingly, is
using the equity method to account for this investment.
Barkerville is a mineral resource company focused on the exploration and development of its gold properties located in the
Cariboo Mining District of central British Columbia. Barkerville’s head office is located in Canada and is a public company
listed on the TSX Venture Exchange. The trading price of Barkerville on December 31, 2018 was $0.40 per share which
corresponds to a quoted market value of $32,961,000 for the Corporation’s investment in Barkerville.
The equity accounting for Barkerville is based on the results to September 30, 2018, adjusted for significant transaction
between September 30, 2018 and December 31, 2018.
The following table is a summary of the consolidated financial information of Barkerville on a 100% basis taking into account
adjustments made by the Corporation for equity accounting purposes for fair value adjustments and differences in
accounting policy. A reconciliation of Barkerville’s summarized financial information to the Corporation’s investment carrying
value is also included.
24
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
11) Investment in associates (continued)
As at
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total net assets
For the year ended December 31,
Revenue
Net gain
Reconciliation of Barkerville’s net asset to the Corporation's investment carrying value:
As at
Net assets of Barkerville
Osisko Mining ownership interest
Osisko Mining share of net asset
Carrying value of investment in Barkerville
December 31,
2018
$
61,069
324,658
(17,196)
(18,186)
$
350,345
2018
$
-
$
9,413
December 31,
2018
$
350,345
16.27%
56,998
56,998
On February 21, 2017, Osisko announced its acquisition of 31,700,000 shares in Beaufield, or a 16% stake, by way of a
brokered private placement for $3,170,000. Subsequent to its initial investment, Osisko has acquired a further 24,420,800
shares in Beaufield for $4,154,000 increasing its stake to 26%.
On October 19, 2018, Osisko completed the Beaufield Arrangement, pursuant to which Osisko acquired all the outstanding
common shares of Beaufield (note 5). Under the terms of the Beaufield Arrangement, each former shareholder of Beaufield
received 0.0482 common shares of Osisko in exchange for each common share of Beaufield held. At the time of the
Beaufield Arrangement, Osisko held 56,120,800 common shares of Beaufield with a carrying value of $6,860,000. Taking
into account the Beaufield Arrangement’s exchange ratio, the Corporation received 2,705,023 common shares of Osisko in
exchange for its previously held common shares of Beaufield. The fair value of the newly acquired common shares of Osisko
was $8,656,000, which resulted in a gain on revaluation of $1,796,000. The newly acquired common shares of Osisko were
subsequently cancelled and the entire investment removed from Investment in Associates.
The Corporation’s investments relating to its associates as of December 31, 2018 and 2017 are detailed as follows:
Balance, beginning of year
Cash investment in associates
Share of (loss)/gain for the year
Gain on revaluation of shares
Cancellation of shares upon acqusition (note 5)
Balance, end of year
December 31, 2018
Beaufield
Barkerville
Total
$
4,740
$
51,698
$
56,438
2,369
(249)
1,796
(8,656)
3,800
1,500
-
-
6,169
1,251
1,796
(8,656)
$
-
$
56,998
$
56,998
25
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
12) Plant and equipment
The following table summarizes information regarding the Corporation’s plant and equipment as at December 31, 2018 and
2017:
Class
Computer Equipment
Office Equipment
Exploration Equipment
Automobiles
Total
Class
Computer Equipment
Office Equipment
Exploration Equipment
Automobiles
Total
December 31, 2018
Cost
Accumulated depreciation
Opening balance
Additions/
transfers
Write-off /
disposals Closing balance Opening balance
Depreciation
Write-off /
disposals Closing balance
Net book value
$
$
$
$
(4)
$
$
1,309
207
5,678
189
7,383
238
$
-
3,002
(14)
3,226
$
(10)
$
-
-
-
$
(10)
$
$
$
$
(4)
$
$
December 31, 2017
Cost
Accumulated depreciation
Opening balance
$
Additions
$
Write-off /
disposals Closing Balance Opening balance
Write-off /
disposals Closing balance
Net book value
$
$
$
$
1,537
207
8,680
175
10,599
1,309
207
5,678
189
7,383
221
23
522
47
813
357
37
1,379
45
1,818
$
-
-
-
$
$
Depreciation
198
20
456
24
698
$
23
3
66
23
115
-
-
-
-
-
574
60
1,901
92
2,627
221
23
522
47
813
261
19
737
78
1,095
1,048
188
4,941
111
6,288
-
-
-
-
-
$
$
$
$
$
$
963
147
6,779
83
7,972
1,088
184
5,156
142
6,570
26
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets
December 31,
2017
Acquisitions
in the year
(note 5)
Additions in
the year
Deferred income
tax asset on
investment tax
credits (note 20)
Write offs in
the year
December 31,
2018
$
$
$
Windfall Lake
Quévillon Osborne
Urban Barry
Urban Barry Base Metals
Quévillon Osborne Base Metals
Kan - James Bay
Éléonore – James Bay
Éléonore JV – James Bay
Other – James Bay
FCI - Corvette Lithium
Urban Duke
Éléonore Opinaca
Tortigny
Luanay
Marban Block
Garrison Block
Hemlo
Total exploration and evaluation assets
150,772
4,526
11,881
-
-
423
532
214
2,088
-
-
-
-
-
65,292
26,192
-
261,920
$
-
-
5,787
-
-
-
-
-
-
-
2,142
5,680
12,102
2,273
-
-
494
28,478
$
$
71,797
9,162
2,785
30
10
78
53
332
415
(57)
-
4
7
-
74
3,004
-
87,694
$
(332)
-
-
-
-
-
-
-
-
-
-
-
(291)
-
(227)
(1,577)
-
(2,427)
$
-
-
-
-
-
-
(585)
-
-
-
-
(5,684)
-
-
-
-
(494)
(6,763)
$
$
$
$
December 31,
2016
Additions in
the year
Write offs in
the year
Disposals in the
year
December 31,
2017
$
$
$
Windfall Lake
Quévillon Osborne
Urban Barry
Kan - James Bay
Éléonore – James Bay
Éléonore JV – James Bay
Other – James Bay
Ogima - Catharine Fault
Marban Block
Garrison Block
DeSantis Property
Swayze Property
Total exploration and evaluation assets
56,199
-
5,376
284
274
104
160
1,548
64,619
14,231
1,324
466
144,585
94,573
4,526
6,505
139
258
110
1,928
10
673
11,961
20
393
121,096
$
-
-
-
-
-
-
-
(1,458)
-
-
(944)
(260)
(2,662)
$
$
-
-
-
-
-
-
-
(100)
-
-
(400)
(599)
(1,099)
$
$
$
$
222,237
13,688
20,453
30
10
501
-
546
2,503
(57)
2,142
-
11,818
2,273
65,139
27,619
-
368,902
150,772
4,526
11,881
423
532
214
2,088
-
65,292
26,192
-
-
261,920
27
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets (continued)
a) Windfall Lake Property
The Windfall Lake Property is 100% owned by the Corporation and is located in the Abitibi Greenstone Belt in Québec,
Canada. The majority of the property is subject to the following residual net smelter royalties (“NSR”).
Location
NSR
Buyback option
Centre of property, hosting the majority of the
mineral resource
North of the majority of the mineral resource,
hosting small portion of the mineral resource
Northern part of property
Southeast of the mineral resource
Eastern edge of property
2.5%
Buyback 1% NSR for $1,000,000
1%
2%
2%
2%
Buyback 1% NSR for $500,000
Buyback 1% NSR for $1,000,000, right of first
refusal for remaining 1% NSR
In 2015, Osisko Gold Royalties Ltd (“Osisko GR”), a related party, was granted a right to acquire 1% NSR royalty on all
properties held by the Corporation as of August 25, 2015. On October 5, 2016, Osisko GR exercised its option to acquire
1% NSR royalty on the Corporation’s Windfall Lake and Urban Barry Properties for $5,000,000. This exercise brings the
total NSR royalty held by Osisko GR on the Windfall Lake Property to 1.5%, including the 0.5% NSR royalty acquired in
2015. The sale of the royalty has been recorded as a reduction in the carrying value of the exploration and evaluation asset.
In 2018, Osisko GR acquired the 1% NSR on part of the property located north of the majority of the mineral resource,
hosting small portion of the mineral resource, and the 2% NRS on the northern part of the property.
b) Quévillon Osborne Project
On April 27, 2017, the Corporation acquired ownership over a property package in consideration of $1,000,000 and the
issuance of 100,000 common shares of Osisko (note 15(a)). The Quévillon Osborne Project is located in in the Lebel-sur-
Quévillon area of Québec, west of the Windfall Lake gold deposit.
c) Urban Barry Property
The Urban Barry Property is 100% owned by the Corporation. The exploration expenditures on the property were for
prospecting, till surveys follow-up and for staking claims. In order to maintain the claims, the Corporation was required to
spend $1,505,000 within two years from the date of staking which has been spent as of December 31, 2018.
i) Black Dog (formerly “Souart”) Property
The Corporation acquired 100% of the Black Dog Property on February 3, 2016, located in the Urban Barry greenstone
belt, in Souart and Barry Townships, Québec. The Corporation issued 500,000 common shares of Osisko (note 15(a)) and
a cash payment of $200,000 for 100% of the property. The Black Dog Property is subject to a 2% NSR which can be
purchased at any time for $2,000,000.
28
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets (continued)
d) Urban Barry Base Metals
The Urban Barry Base Metals Project is a select package of claims located within the Urban Barry Project. On March 28,
2018, Osisko entered into an option agreement with Osisko Metals Incorporated (“Osisko Metals”), which sets forth the
terms of an exploration earn-in on the project. Under the terms of the option agreement, Osisko Metals shall incur
$5,000,000 of exploration expenditures over the four-year term of the option agreement in order to earn a 50% interest on
the project. This commitment is subject to certain annual work expenditure thresholds, including a guaranteed expenditure
threshold of $500,000 in the first year from the date of signing the agreement.
Following the completion of the exploration earn-in, the project will be transferred to a new joint venture entity to be owned
50% by Osisko and 50% by Osisko Metals. Osisko and Osisko Metals will then enter into a joint venture agreement in
respect of the project. Osisko will own a 100% interest over any precious metals discoveries on the project.
e) Quévillon Osborne Base Metals
The Quévillon Osborne Base Metals Project is a select package of claims located within the Quévillon Osborne Project. On
November 12, 2018, Osisko entered into an option agreement with Osisko Metals, which sets forth the terms of an
exploration earn-in on the project. Under the terms of the option agreement, Osisko Metals shall incur $8,000,000 of
exploration expenditures over the four-year term of the option agreement in order to earn a 50% interest on the project.
This commitment is subject to certain annual work expenditure thresholds, including a guaranteed expenditure threshold of
$2,000,000 in the first year from the date of signing the agreement.
Following the completion of the exploration earn-in, the project will be transferred to a new joint venture entity to be owned
50% by Osisko and 50% by Osisko Metals. Osisko and Osisko Metals will then enter into a joint venture agreement in
respect of the project. Osisko will own a 100% interest over any precious metals discoveries on the project.
f) James Bay Properties
On October 5, 2016, Osisko completed the earn-in transaction with Osisko GR. Under the terms of the earn-in agreement,
the Corporation may earn a 100% interest in 28 exploration properties held by Osisko GR, which are located in the James
Bay area, Québec and the Labrador Trough area (the “Properties”) upon incurring exploration expenditures totaling $32
million over the 7-year term of the earn-in agreement; the Corporation will earn a 50% interest upon completing expenditures
totaling $19.2 million. Osisko GR will retain an escalating NSR royalty ranging from 1.5% to a maximum of 3.5% on precious
metals and a 2% NSR royalty on other metals and minerals produced from the Properties.
Additionally, any new properties acquired by the Corporation in the designated area during the 7-year term of the earn-in
agreement may also be subject to a royalty agreement in favour of Osisko GR with similar terms and subject to certain
conditions. On February 16, 2017, Osisko and Osisko GR amended and restated the initial earn-in agreement, pursuant to
which the Kan Project was carved-out into a separate earn-in agreement (the “Kan Agreement”). Under the terms of the
Kan Agreement, Osisko shall incur $6 million over the 7-year term of the earn-in agreement; the Corporation will earn a
50% interest upon completing expenditures of $3.6 million over 4-year term. The entire commitment on the rest of the
properties was reduced by the same amount and terms as the Kan Agreement. Subject to the Kan Agreement, Osisko had
a firm commitment to spend $4,062,000 of exploration expenditures on all the Properties by December 31, 2017. The Kan
Agreement was amended again on December 15, 2017 to state that the $4,062,000 spend must be completed prior to
December 31, 2018. As of December 31, 2018, all required amounts have been spent.
29
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets (continued)
f) James Bay Properties (continued)
i) Kan Project
The Kan Project is located within the Labrador Trough in Québec, Canada. The Kan Project is subject to an NSR of 2%.
On March 27, 2017, Osisko entered into a binding agreement with Barrick Gold Corporation (“Barrick”), which sets forth the
terms of an Exploration Earn-In on the Property. Under the Exploration Earn-In, Barrick must commit $15,000,000 in work
expenditures over a four-year period to earn a 70% interest on Kan, subject to certain annual work expenditure thresholds,
including a guaranteed expenditure threshold of $6,000,000 in the first two years. As of December 31, 2018, the guaranteed
expenditure has been spent and Barrick has chosen not to continue with the Exploration Earn-In.
ii) Élénore Project
The Éléonore Project is located within the Opinaca Reservoir area in Québec, Canada. The Corporation does not have
plans to explore this property further. Due to this triggering event, the Corporation determined that the carrying amount of
the exploration assets of the Éléonore Project exceeded its recoverable amount and as such recorded an impairment of
$585,000.
iii) Élénore-JV Project
The Éléonore-JV Project is located within the Opinaca Reservoir area in Québec, Canada. Approximately 50% is owned
by Midland Exploration Inc. The property is subject to two 0.5% NSRs.
g) FCI – Corvette Lithium Project
The FCI – Corvette Lithium Project is located within the James Bay Greenstone Belt in Northern Québec, Canada. The FCI
– Corvette Lithium Project is subject to a NSR of 1.5-3.5%. On August 27, 2018, Osisko entered into a binding agreement
with 92 Resources Corp (“92 Resources”), which sets forth the terms of an Exploration Earn-In on the Property. Under the
Exploration Earn-In, 92 Resources must commit $2,250,000 in work expenditures over a three-year period to earn a 50%
interest on the FCI-Corvette Lithium Project, subject to certain annual work expenditure thresholds, including a guaranteed
expenditure threshold of $250,000 in the first year. Upon signing on August 27, 2018, and as further consideration for the
granting of the Exploration Earn-In, 92 Resources issued 1,000,000 common shares of 92 Resources to the Corporation at
a fair value of $60,000. An additional 1,000,000 common shares of 92 Resources will be issued to the Corporation on the
first anniversary.
Following the completion of the Exploration Earn-In, the Project will be transferred to a new joint venture entity to be owned
50% by Osisko and 50% by 92 Resources. Osisko and 92 Resources will then enter into a joint venture agreement in
respect of the Property. In addition, 92 Resources may earn a further 25% interest in the joint venture entity (for a total
interest of 75%) by electing to fund an additional $2,000,000 of project level expenditures (such as a preliminary economic
assessment or pre-feasibility study).
30
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets (continued)
h) Urban Duke Property
The Corporation acquired the Urban Duke Property through the acquisition of Beaufield, which was completed on October
19, 2018 (note 5). The Urban Duke Property is 100% owned by the Corporation and is located within the Urban Barry
Greenstone Belt, Québec. On July 6, 2018, Beaufield entered into a binding agreement with Bonterra Resources Inc.
(“Bonterra”) which sets forth the terms of an Exploration Earn-In on the Property. In order to earn a 70% interest on the
Urban Duke Property, Bonterra must commit a) $4,500,000 in work expenditures over a three-year period, subject to certain
annual work expenditure thresholds, including a guaranteed expenditure threshold of $1,500,000 in the first year and b)
$750,000 in cash payments over a two-year period, with $250,000 due upon signing, $250,000 due in the first year, and
the remaining $250,000 due in the second year. Upon signing on July 6, 2018, and as further consideration for the granting
of the Exploration Earn-In, Bonterra issued 4,000,000 common shares of Bonterra to Beaufield.
Following the completion of the Exploration Earn-In, Osisko and Bonterra will enter into a joint venture agreement in respect
of the Property with Bonterra maintaining a 70% interest and Beaufield maintaining a 30% interest.
i) Élénore Opinaca Property
The Corporation acquired the Élénore Opinaca Property through the acquisition of Beaufield, which was completed on
October 19, 2018 (note 5). The Élénore Opinaca Property is 100% owned by the Corporation and is located approximately
320 kilometres north of the town of Matagami in the James Bay area, northern Québec and is subject to a NSR of 0.5%.
The Corporation does not have plans to explore this property further. Due to this triggering event, the Corporation
determined that the carrying amount of the exploration assets of the Éléonore Opinaca Project exceeded its recoverable
amount and as such recorded an impairment of $5,684,000.
j) Tortigny Property
The Corporation acquired the Tortigny Property through the acquisition of Beaufield, which was completed on October 19,
2018 (note 5). The Tortigny Property is 100% owned by the Corporation and is located approximately 100 kilometres north
of the town of Chibougamau, Québec and is subject to a NSR of 1-2%.
k) Launay Property
The Corporation acquired the Launay Property through the acquisition of Beaufield, which was completed on October 19,
2018 (note 5). The Launay Property is 100% owned by the Corporation and is located in the Abitibi Greenstone Belt, Québec
and is subject to a NSR of 1.5%.
l) Marban Block Properties
i) Marban Project
The Marban Block property is 100% owned by the Corporation and is located about 15 kilometers west of the town of Val-
d’Or in the Abitibi region of Québec, Canada. The Marban claims are subject to a NSR of 1% to 1.5%. The First Canadian
claims are subject to a 10% net profits interest. The vendor retained a 0.5% NSR on the Marban claims, a 1% NSR on
the First Canadian claims and a 2% NSR on the Norlartic claims. The property also has two mining claims known as the
Gold Hawk claims which are subject to a 2% NSR.
31
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets (continued)
l) Marban Block Properties (continued)
ii) Malarctic Project
The Malartic Project includes the Camflo West, the Malartic Hygrade, the Malartic Hygrade-NSM and the Malartic H
properties. The Corporation owns a100% interest in the claims of the Camflo West, the Malartic Hygrade, the Malartic
Hygrade-NSM properties. The Malartic H claims are 85% owned and the remaining 15% can be purchased by paying
$25,000. The Camflo West claims are subject to various NSR’s ranging from 1.5% to 3.0%, certain of which, or portions
thereof, can be repurchased for payments ranging from $200,000 to $1,500,000.
iii) Siscoe East Project
The Corporation owns a 50% interest in the claims covering the Siscoe East property, the remaining 50% interest being
held by another company. Some claims are subject to NSR’s of 2.0%. Half of the NSR’s may be repurchase for a total of
$2,750,000.
iv) Héva Project
Some of the claims of the Héva property are subject to a 1.5% NSR of which half may be repurchased for $200,000. On
August 7, 2018, Osisko entered into an agreement with Kintavar Exploration Inc (“Kintavar”) whereby Osisko sold its NSR
interests in 21 claims in exchange for 131,578 common shares of Kintavar with a fair value of $50,000.
m) Garrison Block Properties
i) Garrcon Project
The Garrcon Project is 100% owned by the Corporation and is located in the Abitibi Greenstone Belt in Québec, Canada.
The Garrcon Project is subject to NSR’s ranging from 1% to 2%. On certain mining claims, the vendor retains a back-in-
right for up to 51% interest in these claims should a resource totaling 4 million ounces be identified on the claims. Such a
back-in-right would trigger a cash reimbursement to the Corporation equal to double the exploration costs incurred since
the date of the arrangement.
ii) Jonpol Project
The Jonpol Project is 100% owned by the Corporation and is located on the same property as the Garcon Project in the
Abitibi Greenstone Belt in Ontario, Canada.
iii) Buffonta Project
The Buffonta Project is 87.5-100% owned by the Corporation and is located on the same property as the Garcon Project in
the Abitibi Greenstone Belt in Ontario, Canada. The Buffonta Project is subject to a 3% NSR of which 0.5% can be
purchased for $1,000,000.
iv) Gold Pike Project
The Gold Pike Project is 40-60% owned by the Corporation and is located on the same property as the Garcon Project in
the Abitibi Greenstone Belt in Ontario, Canada. The Gold Pike Project has claims under two separate agreements in which
each are subject to a 2% NSR of which 1% can be purchased for $1,000,000. The property has an annual $25,000 advance
royalty payment.
32
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
13) Exploration and evaluation assets (continued)
n) Hemlo Property
The Corporation acquired the Hemlo Property through the acquisition of Beaufield, which was completed on October 19,
2018 (note 5). The Hemlo Property is 100% owned by the Corporation and is located in the Neoarchean Hemlo Greenstone
Belt, Ontario and is subject to a NSR of 0.5-2%. The Corporation does not have plans to explore this property further. Due
to this triggering event, the Corporation determined that the carrying amount of the exploration assets of the Hemlo Property
exceeded its recoverable amount and as such recorded an impairment of $494,000.
o) Ogima – Catharine Fault Project
On November 24, 2017, the Corporation completed a transaction with Canadian Gold Miner Corp. (“CGM”) and Transition
Metals Corp. (“TM”), under which the Corporation transferred its ownership interest in the Ogima – Catharine Fault Project
in exchange for common shares of CGM with a fair value of $100,000. Due to this triggering event, the Corporation
determined that the carrying amount of the exploration assets of the Ogima – Catharine Fault Project exceeded its
recoverable amount and as such recorded an impairment of $1,458,000 for the year ended December 31, 2017.
p) DeSantis Property
The Corporation acquired the DeSantis Property in the Porcupine Mining Division in Ogden Township, Ontario, from
Excellon Resources Inc., in exchange for common shares of Osisko. On November 24, 2017, the Corporation completed a
transaction with CGM and TM, under which the Corporation transferred its ownership interest in the DeSantis Property in
exchange for common shares of CGM with a fair value of $400,000. Due to this triggering event, the Corporation determined
that the carrying amount of the exploration assets of the DeSantis Property exceeded its recoverable amount and as such
recorded an impairment of $944,000 for the year ended December 31, 2017.
q) Swayze Property
The Corporation acquired the Swayze Property located in the Greenstone Belt of Ontario on August 2, 2016. The claims
were purchased for an initial payment of $250,000. On December 21, 2017, the Corporation completed the sale of the
property with GFG Resources Inc., whereby, the Corporation sold its ownership interest in the Swayze Property in exchange
for 1,110,494 common shares of GFG Resources, representing an implied sale price of $599,000 based on the 20-day
volume weighted average price of such shares on the closing date. Due to this triggering event, the Corporation determined
that the carrying amount of the exploration assets of the Swayze Property exceeded its recoverable amount and as such
recorded an impairment of $260,000 for the year ended December 31, 2017.
14) Asset retirement obligation
The Corporation’s asset retirement obligation is estimated based on the Corporation’s site remediation and restoration plan
and the estimated timing of the costs to be paid in future years. The total undiscounted amount of cash flows required to
settle the Company’s asset retirement obligation is approximately $4,533,000.
During the year ended December 31, 2018, an updated rehabilitation plan was completed for the Windfall Project and, as
such, a change in estimate of $701,000 (2017 - $2,042,000) has been recognized to the Windfall Property. These increased
estimates were due to the Corporation’s advancement of the underground exploration ramp.
33
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
14) Asset retirement obligation (continued)
The following table summarizes the Corporation’s asset retirement obligation:
Balance January 1, 2017
Accretion
Change in estimate
Balance December 31, 2017
Accretion
Change in estimate
Balance December 31, 2018
The following are the assumptions used to estimate the provision for asset retirement obligation:
For the year ended December 31,
Total undiscounted value of payments
Weighted average discount rate
Weighted average expected life
Inflation rate
15) Capital and other components of equity
a) Share capital – authorized
Balance, January 1, 2017
Issuance of shares upon exercise of warrants
Issuance of shares upon exercise of stock options
Private placement (net of transaction costs $992,000)
Private placement (net of transaction costs $2,927,000)
Private placement (net of transaction costs $297,000)
Issuance of shares on acquisition of Quevillion property (net of transaction costs $7,000)
Private placement (net of transaction costs $2,084,000)
Private placement (net of transaction costs $2,086,000)
Private placement (net of transaction costs $192,000)
Deferred tax asset on share issue cost
Balance December 31, 2017
Issuance of shares upon exercise of warrants (note 15(e))
Issuance of shares upon exercise of stock options (note 15(d))
Deferred tax asset on share issue cost (note 20)
Private placement (net of transaction costs $360,000)
Private placement (net of transaction costs $3,707,000)
Private placement (net of transaction costs $157,000)
Issuance of shares on acqusition of Beaufield Resources Inc (note 5)
Balance December 31, 2018
Amount
$
839
11
2,042
2,892
$
33
703
3,628
$
$
2018
4,533
1.95%
11 years
1.70%
Number of Common
Shares
Amount
$
161,990,656
5,629,449
1,346,335
5,450,000
15,327,000
700,000
100,000
8,487,800
8,334,450
479,550
-
207,845,240
524,235
1,119,984
-
3,823,000
27,046,031
9,259,260
7,583,581
303,100
17,472
3,228
18,846
39,552
3,189
491
35,008
32,919
1,405
1,021
456,231
1,128
2,594
3,267
6,139
62,147
24,843
24,267
$
257,201,331
$
580,616
34
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
a) Share capital – authorized (continued)
The authorized capital of Osisko consists of an unlimited number of common shares having no par value. The holders of
common shares are entitled to one vote per share at shareholder meetings of the Corporation. All shares rank equally with
regard to the Corporation’s residual assets.
On February 28, 2017, the Corporation completed a private placement of 5,450,000 common shares of the Corporation at
a price of $5.52 per common share issued as flow-through shares for aggregate gross proceeds of $30,084,000. The flow-
through shares were issued at an average premium of $1.88 to the current market price of the Corporation’s shares at the
day of issue. The premium was recognized as a long-term liability for $10,246,000 with a subsequent pro-rata reduction of
the liability recognized as flow-through premium income as the required expenditures are incurred. Flow-through premium
income of $nil was recognized for the year ended December 31, 2018 relating to this transaction (2017 - $10,246,000). The
transaction costs amounted to $992,000 and have been netted against the gross proceeds on closing.
On February 28, 2017, the Corporation completed a private placement of 15,327,000 units of the Corporation at a price of
$3.40 per unit for gross proceeds of $52,112,000. The transaction costs amounted to $2,927,000 and were netted against
the gross proceeds on closing. Each unit is comprised of one common share of Osisko and one common share purchase
warrant. Each common share purchase warrant is exercisable into one common share of Osisko until August 28, 2018, at
an exercise price of $5.00. The fair value of the common share purchase warrant upon conversion was $9,633,000 and this
fair value was netted against the gross proceeds on closing. The common share purchase warrant expired on August 28
28, 2018.
On April 27, 2017, the Corporation completed a private placement of 700,000 common shares of the corporation at a price
of $7.15 per common share issued as flow-through shares for gross proceeds of $5,005,000. The flow-through shares were
issued at an average premium of $2.17 to the current market price of the Corporation’s shares at the day of issue. The
premium was recognized as a long-term liability for $1,519,000 with a subsequent pro-rata reduction of the liability
recognized as flow-through premium income as the required expenditures are incurred. Flow-through premium income of
$nil was recognized for the year ended December 31, 2018 relating to this transaction (2017 - $1,519,000). The transaction
costs amounted to $297,000 and have been netted against the gross proceeds on closing.
On April 27, 2017, the Corporation acquired the Quévillon Osborne Project in exchange for a cash payment of $1,000,000
as well as the issuance of 100,000 common shares of Osisko (note 13(b)).
On October 5, 2017, the Corporation completed a private placement of 8,487,000 common shares of the Corporation at an
average price of $6.76 per common share issued as flow-through shares for aggregate gross proceeds of $57,360,000.
The flow-through shares were issued at an average premium of $2.39 to the current market price of the Corporation’s shares
at the day of issue. The premium was recognized as a long-term liability for $20,268,000 with a subsequent pro-rata
reduction of the liability recognized as flow-through premium income as the required expenditures are incurred. Flow-
through premium income of $10,968,000 was recognized for the year ended December 31, 2018 relating to this transaction
(2017 - $9,300,000). The transaction costs amounted to $2,084,000 and have been netted against the gross proceeds on
closing.
On October 5, 2017, the Corporation completed a private placement of 8,334,450 common shares of the Corporation at a
price of $4.20 per share for gross proceeds of $35,005,000. The transaction costs amounted to $2,086,000 and were netted
against the gross proceeds on closing.
35
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
a) Share capital – authorized (continued)
On December 12, 2017, the Corporation completed a private placement of 479,550 common shares of the Corporation at
a price of $4.80 per common share issued as flow-through shares for aggregate gross proceeds of $2,302,000. The flow-
through shares were issued at a premium of $1.47 to the current market price of the Corporation’s shares at the day of
issue. The premium was recognized as a long-term liability for $705,000 with a subsequent pro-rata reduction of the liability
recognized as flow-through premium income as the required expenditures are incurred. Flow-through premium income of
$597,000 was recognized for the year ended December 31, 2018 relating to this transaction (2017 - $108,000). The
transaction costs amounted to $192,000 and have been netted against the gross proceeds on closing.
During the year ended December 31, 2017, a total of 12,825,835 warrants were exercised for gross proceeds of
$13,952,000 in exchange for the issuance of 5,629,449 common shares of Osisko.
During the year ended December 31, 2017, a total of 1,346,335 stock options were exercised for gross proceeds of
$1,793,000 in exchange for the issuance of 1,346,335 common shares of Osisko.
On September 18, 2018, the Corporation completed a private placement of 27,046,031 common shares of the Corporation
at an average price of $2.59 per common share issued as flow-through shares for aggregate gross proceeds of $69,925,000.
The private placement was completed in two Tranches. The Tranche One flow-through shares were issued at a premium
of $0.29 to the current market price of the Corporation’s shares at the day of issue. The premium was recognized as a long-
term liability for $3,769,000 with a subsequent pro-rata reduction of the liability recognized as flow-through premium income
as the required expenditures are incurred. Flow-through premium income of $1,511,000 was recognized for year ended
December 31, 2018 relating to this transaction (2017 - $nil). The transaction costs amounted to $3,707,000 and have been
netted against the gross proceeds on closing.
On September 18, 2018, the Corporation completed a private placement of 3,823,000 common shares of the Corporation
at a price of $1.70 per common share for gross proceeds of $6,499,000. The transaction costs amounted to $360,000 and
were netted against the gross proceeds on closing.
On October 19, 2018, as described in note 5, the Corporation acquired Beaufield. In consideration for the acquisition of
Beaufield, the Corporation issued 0.0482 common shares of the Corporation for each common share of Beaufield so held,
for an aggregate of 7,583,581 common shares of the Corporation.
On November 5, 2018, the Corporation completed a private placement of 9,529,260 common shares of the Corporation at
a price of $2.70 per common share for gross proceeds of $25,000,000. The transaction costs amounted to $157,000 and
were netted against the gross proceeds on closing.
During the year ended December 31, 2018, a total of 589,500 warrants were exercised for gross proceeds of $760,000 in
exchange for the issuance of 524,235 common shares of Osisko.
During the year ended December 31, 2018, a total of 874,332 stock options were exercised for gross proceeds of $1,700,000
in exchange for the issuance of 1,119,984 common shares of Osisko.
36
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
b) Basic loss per share
The calculation of basic loss per share for the year ended December 31, 2018 and 2017 was based on the loss attributable
to common shareholders and a basic weighted average number of common shares outstanding, calculated as follows:
For the year ended
Common shares outstanding, at beginning of the year
Common shares issued during the year
Basic weighted average number of Common Shares
Loss
Basic loss per share
c) Diluted loss per share
December 31,
2018
207,845,240
12,603,725
220,448,965
December 31,
2017
161,990,656
26,064,589
188,055,245
$
33,996
$
18,036
$
0.15
$
0.10
The Corporation incurred net losses for each of the years ended December 31, 2018 and 2017, therefore all outstanding
stock options and warrants have been excluded from the calculation of diluted loss per share since the effect would be anti-
dilutive. These options and warrants could potentially dilute basic earnings per share in the future.
d) Contributed surplus
In June 2017, the Corporation established an Employee Share Purchase plan. Under the terms of the plan, the Company
contributes an amount equal to 60% of the eligible employee’s contribution towards the acquisition of common shares from
treasury on a quarterly basis. A maximum of 5,000,000 of the issued and outstanding common shares are reserved for
issuance under the current plan. As of December 31, 2018, no issuances have occurred under this plan.
In June 29, 2018, the Board of Directors re-issued an incentive stock-option plan to provide additional incentive to its
directors, officers, employees and consultants. The maximum number of shares reserved for issuance under the incentive
stock option plan is 10% of the issued and outstanding common shares of the Corporation. The options issued under the
Plan may vest at the discretion of the board of directors and are exercisable for a year of up to 5 years from the date of
grant.
37
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
d) Contributed surplus (continued)
The following table summarizes the stock option transactions for the years ended December 31, 2018 and 2017:
Oustanding at January 1, 2017
Granted
Exercised
Forfeited
Number of stock
options
Weighted-average
exercise price
12,196,623
$
1.51
6,155,000
(1,346,335)
(307,504)
3.90
1.33
3.10
Oustanding at December 31, 2017
16,697,784
$
2.37
Granted
Exercised
Forfeited
4,911,000
(874,332)
(720,004)
3.27
1.30
3.20
Oustanding at December 31, 2018
20,014,448
$
2.61
On January 27, 2017, 3,915,000 stock options were issued to directors, management and employees, at an exercise price
of $3.41 for a period of 5 years. The options have been fair valued at $2.75 per option using the Black-Scholes option-
pricing model. One third of these options vest immediately with the remaining thirds each vesting on the first and second
anniversaries from the date of grant.
On February 3, 2017, 20,000 stock options were issued to an employee, at an exercise price of $3.57 for a period of 5
years. The options have been fair valued at $2.88 per option using the Black-Scholes option-pricing model. One third of
these options vest immediately with the remaining thirds each vesting on the first and second anniversaries from the date
of grant.
On March 28, 2017, 200,000 stock options were issued to a director, at an exercise price of $4.76 for a period of 5 years.
The options have been fair valued at $3.86 per option using the Black-Scholes option-pricing model. One third of these
options vest immediately with the remaining thirds each vesting on the first and second anniversaries from the date of grant.
On June 8, 2017, 1,920,000 stock options were issued to management and employees, at an exercise price of $4.79 for a
period of 5 years. The options have been fair valued at $3.90 per option using the Black-Scholes option-pricing model. One
third of these options vest immediately with the remaining thirds each vesting on the first and second anniversaries from
the date of grant.
On August 10, 2017, 50,000 stock options were issued to employees, at an exercise price of $4.75 for a period of 5 years.
The options have been fair valued at $3.87 per option using the Black-Scholes option-pricing model. One third of these
options vest immediately with the remaining thirds each vesting on the first and second anniversaries from the date of grant.
On November 14, 2017, 50,000 stock options were issued to employees, at an exercise price of $3.78 for a period of 5
years. The options have been fair valued at $3.09 per option using the Black-Scholes option-pricing model. One third of
these options vest immediately with the remaining thirds each vesting on the first and second anniversaries from the date
of grant.
During the year ended December 31, 2017, a total of 1,346,335 stock options were exercised for gross proceeds of
$1,793,000 in exchange for the issuance of 1,346,335 common shares of Osisko.
38
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
d) Contributed surplus (continued)
On January 11, 2018, 3,740,000 stock options were issued to directors, management and employees, at an exercise price
of $3.46 for a period of 5 years. The options have been fair valued at $2.84 per option using the Black-Scholes option-
pricing model. One third of these options vest immediately with the remaining thirds each vesting on the first and second
anniversaries from the date of grant.
On June 22, 2018, the 500,000 options issued on January 11, 2018, awarded to Mr. John Burzynski, President and Chief
Executive Officer of the Corporation, had been amended to vest in equal tranches over a five-year period. The amendment
had no impact on the fair value of options granted and the Corporation continued to recognize the expense over the original
2-year vesting period.
On July 27, 2018, 700,000 stock options were issued to management and employees, at an exercise price of $2.56 for a
period of 5 years. The options have been fair valued at $1.49 per option using the Black-Scholes option-pricing model. One
third of these options vest immediately with the remaining thirds each vesting on the first and second anniversaries from
the date of grant.
On October 15, 2018, 200,000 stock options were issued to a consultant, at an exercise price of $2.23 for a period of 5
years. The options have been fair valued at $1.68 per option using the Black-Scholes option-pricing model. One third of
these options vest immediately with the remaining thirds each vesting on the first and second anniversaries from the date
of grant.
In connection with the Beaufield Arrangement (note 5), consent was received from each Beaufield stock option holder that,
subsequent to the Beaufield Arrangement, each Beaufield stock option will be exercisable into 0.0482 common share of the
Corporation for each common share of Beaufield the holder would have otherwise been entitled to acquire. On October 19,
2018, a total of 241,000 stock options were issued in connection with the Beaufield Arrangement.
On November 9, 2018, 30,000 stock options were issued to employees, at an exercise price of $2.73 for a period of 5 years.
The options have been fair valued at $1.80 per option using the Black-Scholes option-pricing model. One third of these
options vest immediately with the remaining thirds each vesting on the first and second anniversaries from the date of grant.
The total recognized expense for stock options for the year ended December 31, 2018 was $13,088,000 (2017 -
$14,141,000) from which $2,294,000 (2017 - $2,611,000) was capitalized to the Canadian projects.
The following table summarizes the weighted average assumptions used for the valuation of the stock options issued during
the year ended December 31, 2018 and 2017:
For the year ended
Fair value at grant date
Forfeiture rate
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Option life (weighted average life)
Risk-free interest rate (based on government bonds)
December 31, 2018 December 31, 2017
$
2.50
$
3.16
1.0%
0.0%
$
3.27
$
3.90
$
3.27
$
3.90
113%
0.0%
4.5 years
2.00%
116%
0.0%
5 years
1.08%
39
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
d) Contributed surplus (continued)
The following table summarizes information regarding the Corporation’s outstanding and exercisable stock options as at
December 31, 2018:
Weighted-average
remaining years of
contractual Life
Options outstanding
Number of
stock options
outstanding
Weighted average
exercise price ($)
Weighted-average
remaining years of
contractual life
Options exercisable
Number of
stock options
exercisable
Weighted
average exercise
price ($)
2.1
1.7
3.5
3.1
3.6
1.8
2.8
4,266,993
3,551,823
2,372,121
3,731,666
5,976,165
115,680
20,014,448
$1.04
$1.20
$2.63
$3.41
$3.98
$6.23
$2.61
2.1
1.7
3.0
3.1
3.3
1.8
2.5
4,266,993
3,551,823
1,695,439
2,593,328
2,884,483
115,680
15,107,746
$1.04
$1.20
$2.75
$3.41
$4.23
$6.23
$2.32
Range of
exercise prices
per share ($)
0.60 to 1.12
1.13 to 1.71
1.72 to 3.21
3.22 to 3.45
3.45 to 4.79
4.80 to 6.23
0.48 to 6.23
e) Warrants
i. One-for-one warrants
The following table summarizes the transactions pertaining to the Corporation’s outstanding standard warrants for the years
ended December 31, 2018 and 2017. These warrants are exercisable at one warrant for one common share of the
Corporation (the “one-for-one warrants”).
Outstanding as at January 1, 2017
Granted
Exercised
Outstanding at December 31, 2017
Issuance of warrants on acquisition of Beaufield Resources (note 5)
Exercised
Expired (note 15(a))
Number of
warrants
Weighted-average
exercise price
7,240,854
$
1.62
15,327,000
(3,355,955)
5.00
1.53
19,211,899
$
4.33
154,240
(520,800)
(15,197,540)
2.39
1.44
5.00
Outstanding at December 31, 2018
3,647,799
$
1.89
On February 3, 2016, the Corporation completed an offering of subscription receipts pursuant to which it issued and sold
10,521,700 subscription receipts. In conjunction with the completion of the Arrangement Agreement on March 11, 2016,
each subscription receipt was converted into one common share of the Corporation and one common share purchase
warrant. Each common share purchase warrant is exercisable into one common share of the Corporation until February 3,
2019, at an exercise price of $1.44.
40
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
e) Warrants (continued)
i. One-for-one warrants (continued)
In connection with the Beaufield Arrangement (note 5), consent was received from each Beaufield warrant holder that,
subsequent to the Beaufield Arrangement, each Beaufield warrant will be exercisable into 0.0482 common share of the
Corporation for each common share of Beaufield the holder would have otherwise been entitled to acquire. On October 19,
2018, a total of 154,242 warrants were issued in connection with the Beaufield Arrangement.
The following table summarizes the weighted average assumptions used for the valuation of the one-for-one warrants issued
during the years ended December 31, 2018 and 2017:
For the year ended December 31,
Fair value at grant date
Forfeiture rate
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Warrant life (weighted average life)
Risk-free interest rate (based on government bonds)
2018
2017
$
1.02
$
0.63
0.0%
0.0%
$
3.20
$
3.64
$
2.39
$
5.00
77%
0.0%
0.35
0.0%
57%
0.0%
1.5 years
0.7%
As at December 31, 2018, the weighted average remaining contractual life for one-for-one warrants outstanding was 44
days.
During the year ended December 31, 2017, a total of 4,746,039 one-for-one warrants were exercised for gross proceeds of
$6,714,000 in exchange for the issuance of 4,746,039 common shares of the Corporation.
During the year ended December 31, 2018, a total of 520,800 one-for-one warrants were exercised for gross proceeds of
$750,000 in exchange for the issuance of 520,800 common shares of the Corporation.
ii.
Publicly traded warrants (twenty-for-one)
The following table summarizes the transactions pertaining to the Corporation’s outstanding publicly traded warrants for the
years ended December 31, 2018 and 2017. These warrants are exercisable at twenty warrants for one common share of
the Corporation (the “publicly traded warrants”).
41
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
15) Capital and other components of equity (continued)
e) Warrants (continued)
ii.
Publicly traded warrants (twenty-for-one) (continued)
Outstanding as at January 1, 2017
Exercised
Outstanding at December 31, 2017
Exercised
Expired
Outstanding at December 31, 2018
Number of
warrants
Weighted-average
exercise price
130,631,300
$
0.15
(5,469,880)
0.15
125,161,420
$
0.15
(68,700)
(125,092,720)
0.15
0.15
-
$
-
130,636,320 publicly traded warrants were issued to Eagle Hill shareholders pursuant to acquisition of Eagle Hill by Osisko
on August 25, 2015. The publicly traded warrants are governed by the terms of a warrant indenture dated August 24, 2015
between Osisko and Equity Financial Trust Company, as warrant agent, which warrant indenture is available under Osisko's
issuer profile on SEDAR at www.sedar.com. The publicly traded warrants are listed and posted for trading on the Toronto
Stock Exchange under the symbol "OSK.WT". As a result of a share consolidation by Osisko after the effective time of the
acquisition, upon exercise of 20 publicly traded warrants and the payment of $3.00, a holder of publicly traded warrants is
entitled to receive one common share of Osisko. The publicly traded warrants expired on August 25, 2018.
During the year ended December 31, 2017, a total of 5,469,880 publicly traded warrants were exercised for gross proceeds
of $820,000 in exchange for the issuance of 273,494 common shares of the Corporation.
During the year ended December 31, 2018, a total of 68,700 publicly traded warrants were exercised for gross proceeds of
$10,000 in exchange for the issuance of 3,435 common share of the Corporation.
16) Deferred Share Unit and Restricted Share Unit Plans
In April 2017, Osisko established a DSU Plan and a RSU Plan. Under the plans, the DSUs can be granted to non-executive
directors and the RSUs can be granted to executive officers and key employees, as part of their long-term compensation
package, entitling them to receive payout in cash or shares, or a combination of both. Should the payout be in cash, the
cash value of the payout would be determined by multiplying the number of DSUs and the RSUs vested at the payout date
by the five-day volume weighted average price from closing price of the Corporation's shares on the day prior to the payout
date. Should the payout be in shares, each RSU and each DSU represents an entitlement to one common share of the
Corporation.
The following table summarizes information regarding the Corporation’s outstanding and exercisable DSUs and RSUs as
at December 31, 2018:
Oustanding at December 31, 2017
Granted
Oustanding at December 31, 2018
Number of DSUs
Number of RSUs
-
250,000
250,000
-
450,000
450,000
42
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
16) Deferred Share Unit and Restricted Share Unit Plans (continued)
On June 22, 2018, 25,000 RSUs were issued to management. Each RSU has been fair valued at $1.94 initially at the
Corporation’s closing share price on the date of grant. The RSUs vest on the third anniversary date from the date of grant.
On October 15, 2018, 250,000 DSUs were issued to directors. Each DSU has been fair valued at $2.63 initially at the
Corporation’s closing share price on the date of grant. The DSUs vest immediately on the date of grant.
On October 15, 2018, 425,000 RSUs were issued to management. Each RSU has been fair valued at $2.63 initially at the
Corporation’s closing share price on the date of grant. The RSUs vest on the third anniversary date from the date of grant.
The total recognized expense for RSUs and DSUs for the year ended December 31, 2018 was $842,000 (2017 - $nil) from
which $38,000 (2017 - $nil) were capitalized to the Canadian projects.
As at December 31, 2018, the share-based payment liability related to each DSU and RSU was re-measured to fair value
at the Corporation’s closing share price of $3.07.
17) Related party transactions
Balances and transactions between the Corporation and its subsidiaries have been eliminated on consolidation and are not
disclosed in this note. Details of the transactions between the Corporation and other related parties are disclosed below.
During the year ended December 31, 2018, management fees, geological services, rent and administration fees of
$1,849,000 (2017 - $1,487,000) were incurred with Osisko Gold Royalties Ltd (“Osisko GR”), a related company of the
Corporation by virtue of Osisko GR owning or controlling, directly or indirectly, greater than 10% of the issued and
outstanding common shares of the Corporation. Also, Mr. John Burzynski, President and Chief Executive Officer of the
Corporation, as well as Mr. Sean Roosen, Chairman of the board of directors of the Corporation, serve as directors and/or
senior officers of Osisko GR. Accounts payable to Osisko GR as at December 31, 2018 were $134,000 (2017 - $276,000).
During the year ended December 31, 2018, management fees, geological services, rent and administration fees of $132,000
(2017 - $879,000) were charged to Osisko GR by the Corporation. Accounts receivable from Osisko GR as at December
31, 2018 were $79,000 (2017 - $195,000).
The following table summarizes remuneration attributable to key management personnel for the years ended December
31, 2018 and 2017:
For the year ended
Salaries expense of key management
Directors' fees
Stock-based compensation
Total
December 31,
2018
December 31,
2017
$
$
1,915
349
7,904
10,168
2,289
381
8,072
10,742
$
$
During the year ended December 31, 2018, management fees, geological services, rent and administration fees of $140,000
(2017 - $22,000) were charged to the Corporation’s associate, Barkerville (note 11), by the Corporation. Accounts receivable
from Barkerville as at December 31, 2018 was $9,000 (2017 - $nil). During the year ended December 31, 2018, geological
services, and administration fees of $128,000 (2017 - $90,000) were incurred with Barkerville. Accounts payable from
Barkerville as at December 31, 2018 was $nil (2017 - $nil).
43
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
18) Capital risk factors
The Corporation manages its capital structure and makes adjustment to it, based on the funds available to the Corporation,
in order to support the acquisition, exploration and development of mineral properties. The Corporation defines capital as
its cash, cash equivalents and marketable securities. The Board of Directors does not establish a quantitative return on
capital criteria for management, but rather relies on the expertise of the Corporation’s management to sustain future
The properties in which the Corporation currently has an interest are in the exploration stage; as such the Corporation is
dependent on external financing to fund its activities. In order to carry out planned exploration and pay for administrative
costs, the Corporation will spend its working capital and raise additional amounts as needed.
The Corporation will continue to assess new properties and seek to acquire an interest in additional properties if it is deemed
there is sufficient geological or economic potential and if adequate financial resources are available. Management reviews
its capital management approach on an ongoing basis and believes this approach, given the size of the Corporation, is
reasonable. Neither the Corporation nor its subsidiaries are subject to externally imposed capital requirements.
As at December 31, 2018, the Corporation has cash, cash equivalents and marketable securities totaling $102,480,000
(December 31, 2017 - $133,580,000) which were available for growing the Corporation.
19) Financial instruments
Fair market value represents the amount that would be exchanged in an arm’s length transaction between willing parties
that is best evidenced by a quoted market price, if one exists.
The Corporation values instruments carried at fair value using quoted market prices, where applicable. Quoted market
prices represent a Level 1 valuation. When quoted market prices are not available, the Corporation maximizes the use of
observable inputs within valuation models. When all significant inputs are observable the valuation is classified as Level 2.
Valuations that require the significant use of unobservable inputs are considered Level 3.
As at December 31, 2018 and 2017 the Corporation classified cash and cash equivalents and publicly traded securities
included in marketable securities as Level 1, and warrants included in marketable securities, other receivables and
reclamation deposit as Level 2.
Cash and cash equivalents
$
88,280
$
-
$
-
$
111,504
$
-
$
-
December 31, 2018
December 31, 2017
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Marketable securities
Other receivables
Tax recoverable
Reclamation deposit
13,598
-
-
-
602
582
16,452
404
-
-
-
-
20,347
-
-
-
1,729
573
20,486
973
-
-
-
-
As at December 31, 2018 and 2017, there were no non-recurring financial assets or liabilities that were valued at fair value.
There were no transfers between levels 1 and 2 and there were no changes in valuation techniques during 2018.
Financial risk factors
The Corporation’s financial instruments are exposed to certain financial risks, including currency risk, interest rate risk,
commodity price risk, credit risk and liquidity risk. The Corporation’s exposure to these risks and its methods of managing
the risks remain consistent. There have been no changes in the risks, objectives, policies and procedures from the previous
year.
44
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
19) Financial instruments (continued)
a) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet contractual
obligations, and arises principally from the Corporation’s other receivables. The carrying value of the financial assets
represents the maximum credit exposure.
The Corporation's credit risk is primarily attributable to receivables included in other receivables. The Corporation has no
significant concentration of credit risk. Financial instruments included in other receivables consist of receivables from other
companies. Management believes that the credit risk receivables concentration with respect to financial instruments
included in other receivables is remote.
b) Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation
has a planning and budgeting process in place to help determine the funds required to support the Corporation’s normal
operating requirements on an ongoing basis and its expansionary plans.
The Corporation ensures that there are sufficient funds to meet its short-term requirements, taking into account its
anticipated cash flows from operations and its holdings of cash. As at December 31, 2018, the Corporation had a cash
balance of $88,280,000 (2017 - $111,504,000) to settle current liabilities of $10,260,000 (2017 - $21,084,000). The majority
of the Corporation's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade
terms. The Corporation has financial commitments outstanding as at December 31, 2018 (note 21).
c) Commodity price risk
Commodity price risk arises from the possible adverse effect on current and future earnings due to fluctuations in commodity
prices. The ability of the Corporation to develop its properties and the future profitability of the Corporation is directly related
to these prices. The Corporation does not enter into any derivative financial instruments to manage exposures to price
fluctuations.
d) Market risk
i) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Corporation monitors its exposure to interest rate and has not entered into any derivative
financial instruments to manage this risk. The Corporation has a cash balance and no interest-bearing debt. The Corporation
holds cash and cash equivalents in deposit form in a major Chartered Canadian bank.
If market interest rates for the year ended December 31, 2018, had increased or decreased by 0.1%, with all variables held
constant, the loss for the year ended December 31, 2018, would have been approximately $88,000 lower/higher, as a result
of higher/lower interest income from cash and cash equivalents. Similarly, as at December 31, 2017, shareholders’ equity
would have been approximately $112,000 lower/higher because of higher/lower interest income from cash and cash
equivalents due to a 0.1% increase/decrease in interest rates.
45
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
20) Income taxes
The reconciliation of the effective tax expense or recovery to the tax recovery computed using the Canadian statutory rate
of 26.5% is as follows:
For the years ended
Income / (loss) from continuing operations before income taxes
Income tax expense / (recovery) computed at Canadian statutory tax rate
Permanent items
Change in unrecognized deferred tax assets
Deferred mining taxes
Total deferred income and mining tax expense
$
December 31,
2018
(21,202)
(5,619)
(403)
11,717
7,100
12,795
$
$
December 31,
2017
407
108
(3,134)
4,047
17,422
18,443
$
The composition of the deferred income tax expense between income and mining tax is as follows:
For the years ended
Deferred income tax expense
Deferred mining tax expense
Total deferred income and mining tax expense
December 31,
2018
December 31,
2017
$
$
5,694
7,100
12,794
1,021
17,422
18,443
$
$
Deferred tax assets and deferred tax liabilities have been offset where they relate to income taxes levied by the same
taxation authority and where the Corporation has the legal right and intent to offset. Deferred tax assets are recognized
when the Corporation concludes that sufficient positive evidence exists to demonstrate that it is probable that a deferred
tax asset will be realized. The components of the deferred income and mining tax assets and liabilities are as follows:
As at
Deferred tax assets
Deferred income tax asset on share issue costs
Deferred income tax asset on investment tax credits
Total deferred tax assets
Deferred tax liability
Deferred income tax liability on net taxable temporary differences
Deferred mining tax liability on net taxable temporary differences
Total deferred tax liability
December 31,
2018
December 31,
2017
$
$
$
$
5,874
2,427
8,301
(8,302)
(24,522)
(32,824)
$
$
$
$
2,607
-
2,607
(2,607)
(17,422)
(20,029)
Net deferred tax liability
$
(24,523)
$
(17,422)
During the year ended December 31, 2018, the Corporation recognized a deferred tax asset of $5,694,000 (2017 -
$1,021,000) in relation to share issue costs with the associated deferred tax recovery recorded on share capital.
46
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
20) Income taxes (continued)
Deferred tax assets have not been recognized in respect of the following gross net deductible temporary differences,
because it is not probable that future taxable profit will be available against which the Corporation can use the benefits
therefrom:
For the years ended
Non-capital losses
Capital losses
Exploration and evaluation
Marketable securities
Equity investments
Share issue costs
Investment tax credits
Deferred mining taxes
Unrecognized gross net deductible temporary differences
$
December 31,
2018
6,997
241
26,248
4,487
(8,090)
-
217
146
30,246
$
$
December 31,
2017
20,985
-
2,615
3,483
(6,398)
11,028
724
4,007
36,444
$
As of December 31, 2018, the Corporation has non-capital losses totaling $113,857,000 (2017 - $88,962,000).
A deferred tax asset was not recognized with respect to non-capital losses of $6,997,000 (2017 - $20,985,000), which, if
not utilized, will expire between the years of 2033 and 2038. The Corporation has also not recognized net deductible
temporary differences with respect to investment tax credits of $217,000 (2017 - $724,000), which, if not utilized, will expire
between the years of 2031 and 2034.
21) Commitments
The Corporation has the following exploration commitments as at December 31, 2018:
Office leases
Camp trailers and equipment leases
Total
Total
2020
2019
1,127 484
290
3,293 2,349 881
2021
273
63
2023
2022
80
-
- -
$
4,420
$
2,833
$
1,171
$
336
$
80
$
-
* Québec Prospects minimum exploration commitment of $1,200 per claim (1,254) to be made within two periods from the date of grant
On October 5, 2016, the Corporation closed an earn-in agreement with Osisko GR whereby the Corporation may earn a
100% interest in 28 of in Osisko GR’s exploration properties upon incurring exploration expenditures totaling $32,000,000
over a 7-year period, of which $5,000,000 must be completed within one year. The earn-in agreement was amended on
February 16, 2017, to carve out the Kan Project (note 13(i)), and instead of $5,000,000, $4,062,000 must be completed
prior to December 31, 2017. The earn-in agreement was amended again on December 15, 2017 to extend the deadline of
spending $4,062,000 to December 31, 2018. As of December 31, 2018, the Corporation has completed all required
spending.
As of December 31, 2018, the Corporation has the following flow-through funds to be spent by December 31, 2019:
Closing Date of Financing
September 18, 2018
Total
Province
Québec
Remaining Flow-through Funds
$
55,084
55,084
The Corporation is also committed to an annual $25,000 advanced royalty payment on the Gold Pike Project.
47
Notes to Consolidated Financial Statements
For the year ended December 31, 2018 and 2017
(Tabular amounts express in thousands of Canadian dollars, except per share and share amounts)
22) Subsequent events
On January 17, 2019, 1,755,000 stock options were issued to management, at an exercise price of $2.76 for a period of 5
years. The options have been fair valued at $1.83 per option on average using the Black-Scholes option pricing model. One
third of these options vest on the first anniversary from the date of grant, with the remaining thirds each vesting on the
second and third anniversaries from the date of grant.
On January 17, 2019, 400,000 DSU were issued to directors. Each DSU has been fair valued at $2.76 at the Corporation’s
closing share price before the date of grant. The DSUs vest immediately on the date of grant.
On January 17, 2019, 1,125,000 RSUs were issued to management. Each RSU has been fair valued at $2.76 at the
Corporation’s closing share price before the date of grant. The RSUs vest on the third anniversary date from the date of
grant.
On February 20, 2019, Osisko announced it had entered into a binding letter agreement with Chantrell Ventures Corp
(“Chantrell”) whereby Osisko will transfer certain non-core assets to Chantrell in exchange for shares of Chantrell. The
business combination will result in a reverse takeover of Chantrell by Osisko and the common shares of Chantrell will be
subject to a consolidation on a 40:1 basis.
48
OSISKO MINING INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
This discussion and analysis (this "MD&A") is management's assessment of the results and financial condition of Osisko Mining
Inc. ("Osisko" or the "Corporation") and should be read in conjunction with the Corporation's audited financial statements for
the years ended December 31, 2018 and 2017 and the notes thereto. The financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards
Board (the "IASB"). This MD&A and the related financial statements are available under Osisko's issuer profile on SEDAR
(www.sedar.com) and on Osisko's website (www.osiskomining.com).
Management is responsible for the preparation of the financial statements and this MD&A. All dollar figures in this MD&A are
expressed in Canadian dollars, unless stated otherwise.
This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in the "Risks
and Uncertainties" and the "Cautionary Note Regarding Forward-Looking Information" sections at the end of this MD&A.
This MD&A has been prepared as of March 6, 2019.
Technical Information
Information relating to the updated mineral resource estimate for Lynx is supported by the press release titled "Osisko releases
Mineral Resource Update for Lynx" dated of November 27, 2018 with an effective date of November 27, 2018 (the "Lynx Zone
Resource Estimate"). The Lynx Zone Resource Estimate was (i) prepared by Judith St-Laurent, P.Geo (OGQ #1023)., B.Sc.,
of Osisko Mining and (ii) reviewed and approved by Charley Murahwi, M.Sc, P.Geo., FAusIMM, each of whom is a "qualified
person" within the meaning of National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101"). Mr.
Murahwi is an employee of Micon International Limited and is considered to be "independent" of Osisko for purposes of section
1.5 of NI 43-101. The interim update used the same methodology (key assumptions, parameters and methods) as the Technical
Report and Mineral Resource Estimate – Windfall Lake Project, Windfall Lake and Urban-Barry Properties, which is available
on SEDAR (www.sedar.com) under Osisko's issuer profile.
Information relating to the preliminary economic assessment for the Windfall Project and the Quévillon Osborne-Bell Project is
supported by the technical report titled "NI 43-101 Technical Report Preliminary Economic Assessment for the Windfall Project"
dated of August 1, 2018 with an effective date of July 12, 2018 (the "Windfall PEA") prepared by BBA Inc., which included
contributions from the geological and engineering teams at InnvoExplo Inc., Golder Asssociates Ltd, BBA Inc., WSP Canada
Inc. and SNC-Lavalin Inc. Reference should be made to the full text of the Windfall PEA, which has been filed with Canadian
securities regulatory authorities pursuant to NI 43-101 and is available for review on SEDAR (www.sedar.com) under Osisko’s
issuer profile.
Information relating to the Windfall Project mineral resource estimate is supported by the technical report titled "Technical
Report and Mineral Resource Estimate – Windfall Lake Project, Windfall Lake and Urban-Barry Properties" dated of June 12,
2018 with an effective date of May 14, 2018 (the "Windfall Resource Estimate") prepared under the supervision of Judith St-
Laurent, P.Geo. B.Sc., (OGQ No. 1023, APGO No. 1174), Stéphane Faure, P.Geo, PhD. (OGQ No. 306, APGO No. 2662,
NAPEG No. L3536) from InnovExplo Inc. and Jorge Torrealba, P.Eng., Ph.D. (APEGNB No. M7957) from BBA Inc (the
"Windfall Technical Report"). Reference should be made to the full text of the Windfall Lake Project Technical Report, which
has been filed with Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review on SEDAR
(www.sedar.com) under Osisko’s issuer profile.
Information relating to the Quévillon Osborne-Bell Project is supported by the technical report titled "Technical Report and
Mineral Resource Estimate – Osborne-Bell Gold Deposit, Quévillon Property" dated of April 23, 2018 with an effective date of
March 2, 2018 (the "Quévillon Resource Estimate") prepared under the supervision of Pierre-Luc Richard, M.Sc., P.Geo (OGQ
No. 1119, APGO No. 1174) and Stéphane Faure, PhD, P.Geo (OGQ No. 306, APGO No. 2662, NAPEG No. L3536) from
InnovExplo Inc. (the "Osborne-Bell Technical Report"). Reference should be made to the full text of the Osborne-Bell Technical
Report, which has been filed with Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review
on SEDAR (www.sedar.com) under Osisko’s issuer profile.
2
Information relating to the Garrison Project is supported by the Garrison mineral resource estimate with an effective date of
February 19, 2019 (the "Garrison Resource Estimate"), which has been prepared by RockRidge, from Vancouver, British
Columbia, and has been reviewed and audited by Micon International Limited, Toronto, Ontario. The Garrison Resource
Estimate was prepared under the direction of B. Terrence Hennessey, P.Geo. (APGO No. 0038), who is a “qualified person”
within the meaning of NI 43-101. Mr. Hennessey is an employee of Micon International Limited and is considered to be
“independent” of Osisko for purposes of section 1.5 of NI 43-101. Reference should be made to the full text of the technical
report, which is being prepared in accordance with NI 43-101 and will be available for review on SEDAR (www.sedar.com)
under Osisko’s issuer profile within 45 days of the effective date.
This MD&A uses the terms measured, indicated and inferred resources as a relative measure of the level of confidence in the
resource estimate. Readers are cautioned that mineral resources are not economic mineral reserves and that the economic
viability of resources that are not mineral reserves has not been demonstrated. The estimate of mineral resources may be
materially affected by geology, environmental, permitting, legal, title, socio-political, marketing or other relevant issues. It cannot
be assumed that all or any part of an inferred mineral resource will ever be upgraded to an indicated or measured mineral
resource category. The mineral resource estimate is classified in accordance with the Canadian Institute of Mining, Metallurgy
and Petroleum's "CIM Definition Standards on Mineral Resources and Mineral Reserves" incorporated by reference into NI 43-
101. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies
or economic studies except for a preliminary economic assessment as defined under NI 43-101. Readers are cautioned not to
assume that further work on the stated resources will lead to mineral reserves that can be mined economically.
Mr. Mathieu Savard, P.Geo. B.Sc., Vice President of Exploration Québec of Osisko, is a "qualified person" (as defined in NI
43-101) and has reviewed and approved the technical information in this MD&A with respect to all the Corporation's properties
in Québec, including the Windfall Property, Quévillon Osborne-Bell Property, James Bay Properties and the Marban Block
Project.
Ms. Alexandria Marcotte, P.Geo., Vice President of Project Co-ordination of Osisko, is a "qualified person" (as defined in NI
43-101) and has reviewed and approved the technical information in this MD&A with respect to all the Corporation's properties
in Ontario, including the Garrison Project.
DESCRIPTION OF BUSINESS
The Corporation was incorporated on February 26, 2010, under the Business Corporations Act (Ontario). The Corporation's
focus is the exploration and development of precious metals resource properties in Canada. Currently, the Corporation is
exploring in Ontario and Québec, and looking for new opportunities to enhance shareholder value.
UPDATES DURING THE YEAR AND SUBSEQUENT TO THE YEAR
Corporate Development and Acquisitions:
On February 20, 2019, Osisko announced it had entered into a binding letter agreement with Chantrell Ventures Corp
(“Chantrell”) whereby Osisko will transfer certain non-core assets to Chantrell in exchange for shares of Chantrell. The
business combination will result in a reverse takeover of Chantrell by Osisko and the common shares of Chantrell will
be subject to a consolidation on a 40:1 basis.
On February 19, Osisko announced the Garrision Resource Estimate for its 100% owned Garrison Project, located in
the Abitibi greenstone belt, Garrison Township, Ontario. The technical report is being prepared in accordance with NI
43-101 and will be available for review on SEDAR (www.sedar.com) under Osisko’s issuer profile and on Osisko’s
website (www.osiskomining.com) within 45 days of the effective date.
On January 1, 2019, Osisko amalgamated the Corporation with five wholly owned subsidiaries of Osisko, which
included Beaufield Resources Inc. ("Beaufield"), Eagle Hill Exploration Corporation, Ryan Gold Corp., Corona Gold
Corporation, and O3 Investments Incorporated.
3
On December 18, 2018, Osisko announced the preliminary results from its Zone 27 bulk sampling at its 100% owned
Windfall Project located in the Abitibi greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec.
On November 27, 2018, Osisko announced the results from its mineral resource update on the Lynx Zone at its 100%
owned Windfall Project located in the Abitibi greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec.
The updated Lynx Zone Resource Estimate was filed on November 27, 2018.
On October 19, 2018, the Corporation completed its previously announced acquisition of Beaufield, pursuant to which
Osisko acquired all the common shares of Beaufield that it did not already own by way of a court approved plan of
arrangement under the provision of the Canada Business Corporations Act (the "Beaufield Arrangement"). Under the
terms of the Beaufield Arrangement, each former shareholder of Beaufield became entitled to receive 0.0482 of a
common share of Osisko in exchange for each common share of Beaufield held immediate prior to the effective time
of the Beaufield Arrangement. In addition, under the Beaufield Arrangement, holders of options and warrants to acquire
common shares of Beaufield received replacement options and warrants, respectively, entitling the holders thereof to
acquire common shares of Osisko, based on, and subject to, the terms of such options and warrants of Beaufield, as
adjusted by the plan of arrangement.
On October 10, 2018, Osisko announced, together with Osisko Gold Royalties Ltd. ("Osisko GR") and Osisko Metals
Incorporated ("Osisko Metals"), the creation of the "Osisko Field Education Fund" in collaboration with the Earth
Sciences Department at the University of New Brunswick. Together the three companies have committed to donate a
total of $250,000 to the program over the next five years.
On July 17, 2018, Osisko announced positive results from the Windfall PEA on its 100% owned Windfall Project located
in the Abitibi greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec, and its 100% owned Quévillon
Osborne-Bell Project, located 17 kilometres northwest of the town of Lebel-sur-Quévillon, Québec. The Windfall PEA
was filed on August 1, 2018.
On May 14, 2018, Osisko announced a mineral resource estimate for its 100% owned Windfall gold deposit, located
in the Abitibi greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec. The related Windfall Resource
Estimate was filed on June 12, 2018.
On March 28, 2018, Osisko signed an option agreement with Osisko Metals pursuant to which Osisko Metals can earn
a 50% interest in the Urban-Barry Base Metals Project by funding an aggregate of $5 million in exploration expenditures
over a four-year period. Osisko would retain a 100% interest in all precious metals on the claims covered in the
agreement.
On March 15, 2018, Osisko provided the Quévillon Resource Estimate for its 100% owned Quévillon Osborne-Bell
Gold Deposit, located 15 kilometres northwest of the town of Lebel-sur-Quévillon, Québec. This estimate is the result
of 927 drill holes (279,925 metres of drilling) completed by previous operators of the project since 1994, including 50
drill holes that were completed after the last resource estimate published in 2012, and four new drill holes completed
by Osisko in December 2017. The related Osborne-Bell Resource Estimate was filed on April 23, 2018.
On February 26, 2018, Osisko purchased, from Globex Mining Enterprises Inc. ("Globex"), the Certac Property at Le
Tac township, Québec for $250,000 and a gross metal royalty payable to Globex on all metal production from the
property. The gross metal royalty payable will be 2.5% at a gold price below USD $1,000 per ounce or 3% at a gold
price equal to or greater than USD$1,000 per ounce. Osisko has retained a first right of refusal should Globex decide
to sell its gross metal royalty as well as a right to buy back 1.5% of the gross metal royalty for $1.5 million.
On February 8, 2018, Osisko provided an update on the progress of exploration at its 100% owned Windfall, Urban
Barry and Quévillon Osborne-Bell projects located in the Abitibi greenstone belt, Eeyou Istchee James Bay, Québec.
4
Financings:
On November 5, 2018, Osisko announced, further to its announcement on October 30, 2018, the completion of a
private placement with la Caisse de dépôt et placement du Québec pursuant to which la Caisse de dépôt et placement
du Québec acquired 9,259,260 common shares of the Corporation at a price of $2.70 per share for aggregate gross
proceeds of approximately $25 million.
On September 18, 2018, Osisko announced, further to its announcements on August 15, 2018 and August 16, 2018,
the completion of a "bought deal" brokered private placement of (i) an aggregate of 27,046,031 common shares of the
Corporation that will qualify as "flow-through shares" ("Flow-Through Shares") for aggregate gross proceeds of
approximately $69.9 million, and (ii) an aggregate of 3,823,000 common shares of the Corporation at an issue price of
$1.70 per common share for aggregate gross proceeds of approximately $6.5 million, including the exercise in full of
the underwriters' option. The Flow-Through Shares were issued in two tranches, whereby the first tranche consisted
of 14,035,088 Flow-Through Shares at an issue price of $2.85 per "tranche one" Flow-Through Share and the second
tranche consisted of 13,010,943 "tranche two" Flow-Through Shares at an issue price of $2.30 per Flow-Through
Share. The total proceeds of the offering were approximately $76.4 million.
Exploration Highlights:
Overall Performance
During the year ended December 31, 2018, the Corporation spent approximately $113 million on exploration and evaluation
assets, mostly on the Windfall, Quévillon Osborne-Bell and Urban Barry properties and $13.8 million on general and
administration expenses including salaries, benefits and severances. As at December 31, 2018, the Corporation had drilled
approximately 179,870 metres on the Windfall Property, 7,302 metres on the Urban Barry Property and 33,976 metres on the
Quévillon Osborne-Bell Property.
Based on current technical reports, the Corporation has four main deposits that contain an aggregate of 3.91 million ounces of
global resources in the measured and indicated mineral resource categories and an aggregate of 3.50 million ounces of global
resources in the inferred mineral resource category. On April 23, 2018, the Corporation filed the Osborne-Bell Resource
Estimate, which added 510,000 ounces of gold to the inferred mineral resource category. On June 12, 2018, the Corporation
filed the Windfall Resource Estimate, which added 601,000 ounces of gold to the indicated mineral resource category and
2,284,000 ounces of gold to the inferred mineral resource category on the Windfall Project. On August 1, 2018, the Corporation
filed the Windfall PEA with an after-tax internal rate of return ("IRR") of 33% and after-tax net present value ("NPV") of $413
million, based only on the conservative grade estimates used in the preliminary mineral resource estimate at Windfall.
According to the Windfall PEA, the project will commence with a 3,200 tonne per day long hole mining approach, focused on
extracting large panels with minimum widths varying from 3.5 metres to 4.0 metres and minimum height of 20 metres. While
this study focuses only on the larger zones of mineralization, further detailed modelling will be applied to subsequent studies
to capture the bulk of the mineral resource contained in the Windfall Resource Estimate and Osborne-Bell Resource Estimate.
The down plunge extensions of Underdog, Lynx Zone, Zone 27, Bobcat Zone, and Triple 8 discoveries were not included in
this study, as resource definition drilling in these areas are still in progress. These areas are expected to be included in the
feasibility work in 2019. On November 27, 2018, the Corporation released the Lynx Zone Resource Estimate which increased
the Windfall indicated mineral resource category to 754,000 ounces of gold and the Windfall inferred mineral resource category
to 2,366,000 ounces of gold. On December 18, 2018, the Corporation released preliminary results from its Zone 27 bulk
sampling. 2,078 tonnes of the planned 5,000 tonnes have been mined and an average head grade of 9.7 g/t Au and 5.5 g/t Ag
was obtained. On February 19, 2019, the Corporation released the Garrison Resource Estimate, which added approximately
370,000 ounces of gold to the measured and indicated mineral resource categories.
The Corporation has active ongoing drill programs, which began in 2015 and have continued and evolved in scope in 2017
and 2018, consisting of approximately 800,000 metres of drilling on the Windfall Property and 90,000 metres of drilling on the
Garrison Properties for a combined total drilling campaign of 890,000 metres. In addition, 36,700 metres of drilling was
completed on the Quévillon Osborne-Bell Project in 2018. The drilling campaign is expected to resume in 2019 with an
additional 21,000 metres. Management believes these fundamental elements provide a solid base necessary to build a mining
5
company that will provide growing value to its shareholders over time. See the table in Section 2 – "Mineral Resources" of this
MD&A for the grade and quantity of each category of mineral resources included in the foregoing disclosure.
a)
Windfall, Urban Barry and Quévillon Osborne-Bell Properties
The Windfall gold deposit is located between Val-d'Or and Chibougamau in the Abitibi greenstone belt, Urban Township, Eeyou
Istchee James Bay, Québec. The Windfall gold deposit is currently one of the highest-grade resource-stage gold projects in
Canada. The bulk of the mineralization occurs in several southwest/northeast trending zone measuring approximately 600
metres wide and at least 2,500 metres long. The deposit has been traced from surface to a depth of 1,200 metres and remains
open along strike and at depth.
On October 11, 2018, Osisko announced that the Windfall exploration ramp achieved access to Zone 27, wireframe 115,
selected for the initial 5,000 tonne bulk sample. The mineralized zone is strongly silicified with sulfides and contains local visible
gold. The geology observed compares very well with the anticipated zone predicted by drilling and geological models. The
exploration ramp also encountered a mineralized section containing local visible gold in wireframe 101 immediately prior to
achieving the targeted 115 wireframe bulk sample area.
In May 2018, Osisko commenced two deep exploration drill holes ("Deep Underdog" and "Deep Lynx") to investigate the
potential for depth extensions of the Lynx and Underdog mineralized zones, as well as to further test the intrusion-related
geological model for the Windfall deposit at depths of approximately 2,000 metres to 2,500 metres from surface.
New drilling has confirmed and expanded management's understanding of the Triple 8 discovery. Wedge hole OSK-W-18-
1603-W2 intersected a zone of sericite and silica alteration over 85 metres containing sulfides and zones of gold mineralization
from approximately 1,485 metres to approximately 1,570 metres downhole. This alteration zone includes two significant gold
bearing intervals located between approximately 1,510 to 1,554 metres downhole. The new wedge extends the Triple 8 Zone
by 50 metres to the south from the discovery hole OSK-W18-1603. Triple 8 geometry is still being interpreted, however the
zone appears to remain open in all directions. Previously drilled wedge OSK-W-18-1603-W1 intersected a fault zone and
porphyritic intrusive in the anticipated Triple 8 area.
On January 16, 2019, Osisko announced new drill results which confirmed and expanded on the initial discovery of the Triple
8 Zone (see Osisko news releases dated July 11, 2018 and September 13, 2018). Drill hole OSK-W-18-1783 tested the
continuity at the mid-point between OSK-W-18-1603 (Triple 8 discovery hole) and gold mineralization intersected in a similar
setting in OSK-W-18-1616-W1 (see Osisko news release dated August 7, 2018).
OSK-W-18-1783 encountered three distinct altered intervals between 1,819 metres and 1,945 metres downhole, each
averaging approximately 10 metres in width. Significant results from the three gold bearing intervals include 38.4 g/t Au over
2.0 metres and 16.0 g/t Au over 2.3 metres. Geometry is still being interpreted, although management believes that
mineralization is open in all directions. Sericite and silica alteration are hosted within an andesite and gabbro package,
surrounded by peripheral chlorite – biotite +/- garnet alteration (identical to that encountered in the Triple 8 discovery hole 350
metres to the north, and in hole OSK-W-1616-W1, 400 metres to the south). The mineralized intervals contain disseminated
and stringer pyrite with local visible gold, and trace pyrrhotite and chalcopyrite.
On June 12, 2018, Osisko filed the Windfall Resource Estimate, which is a mineral resource estimate for its 100% owned
Windfall gold deposit, located in the Abitibi greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec. This mineral
resource estimate is the result of 1,453 drill holes (596,733 metres) in the resource area completed by previous operators on
the project since 1997 and includes 812 new drill holes (413,692 metres) completed by Osisko from October 2015 to March 5,
2018. Drilling continues at the Windfall gold deposit, and results disclosed by Osisko since March 5, 2018 (representing 131
drill holes and approximately 40,000 metres of infill and extension holes principally in the Lynx Zone and the Underdog Zone)
were not incorporated in this mineral resource estimate. Mineral resource estimate for the Windfall Lake Project, Windfall Lake
and Urban Barry Properties has been prepared by Ms. Judith St-Laurent, P.Geo, B.Sc., and Stéphane Faure, P.Geo, Ph.D.
both from Innov-Explo Inc. from Val-d'Or, Québec and Jorge Torrealba, P.Eng., Ph.D. from BBA Inc. The technical report, filed
in accordance with NI 43-101, is available on SEDAR (www.sedar.com) under Osisko's issuer profile.
6
On April 23, 2018, Osisko filed the Quévillon Resource Estimate, which is a mineral resource estimate for its 100% owned
Osborne-Bell Gold Deposit, located 15 kilometres northwest of the town of Lebel-sur-Quévillon, Québec. This mineral resource
estimate is the result of 927 drill holes (279,925 metres of drilling) completed by previous operators of the project since 1994,
including 50 drill holes that were completed after the last resource estimate was published in 2012, and 4 new drill holes that
were completed by Osisko in December 2017. The Osborne-Bell mineral resource estimates has been prepared by Mr. Pierre-
Luc Richard, P.Geo., M.Sc, and the related technical reports were prepared in accordance with NI 43-101 and are available
on SEDAR (www.sedar.com) under Osisko's issuer profile.
Following the release of the Windfall Resource Estimate and Osborne-Bell Resource Estimate, the Windfall PEA was
summarized in a press release, which outlined the strong potential base-case for significant and profitable new gold production
in Québec combining the Windfall Lake Gold Deposit and the Osborne-Bell Gold deposit all process in a facility located near
Lebel-sur-Quévillon.
Highlights of the Windfall PEA*
Base case: Gold price US$1,300/oz, Silver price US$17.00/oz, Exchange rate C$1.00 = US$0.78
IRR after taxes and mining duties
NPV after taxes and mining duties
Pre-Production Construction costs (including C$51.8 M contingency)
Peak-year payable production
Average LOM payable production
Net gold recovery
Average diluted gold grade
Life of mine (LOM)
Total ore material mined
Contained gold in mined resource
Payable gold LOM
Payable silver LOM
All-in Sustaining Costs net of by-product credits and royalties over LOM
Estimated All-in cost (CAPEX plus OPEX)
Total unit operating cost
Gross revenue
Operating cash flow
Mine start-up/Full production
NPV before taxes and mining duties
IRR before taxes and mining duties
32.7%
C$413.2 million
C$397.3 million
248,000 oz
218,000 oz
92.4%
6.7 g/t Au
8.1 years
8,914,000 tonnes
1,915,000 oz
1,769,000 oz
577,000 oz
US$704.00/oz
US$879.00/oz
C$126.47/ tonne milled
C$2.96 billion
C$1.12 billion
Q2 2022/Q3 2022
C$625.4 million
39.7%
*Cautionary Statement: The reader is advised that the Windfall PEA highlights is intended to provide only an initial, high-level review of the project potential and design
options. The Windfall PEA mine plan and economic model include numerous assumptions and the use of inferred mineral resources. Inferred mineral resources are considered
to be too speculative to be used in an economic analysis except as allowed for by NI 43-101 in preliminary economic assessment studies. There is no guarantee that inferred
mineral resources can be converted to indicated mineral resources or measured mineral resources, and as such, there is no guarantee the project economics described herein
will be achieved.
The realized project is expected to have a significant impact in the James Bay region, with the potential of generating over C$3
billion of gross revenue and contributing approximately 350 permanent jobs during the production phase and an additional 480
during the construction period.
On November 27, 2018, Osisko released the Lynx Zone Resource Estimate at its 100% owned Windfall gold deposit, located
in the Abitibi greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec. This updated mineral resource estimate
includes 138 infill drill holes (107,366 metres) completed in the Lynx Zone between March 6, 2018 and October 27, 2018.
Results from Lynx since October 28, 2018 are not incorporated in this updated mineral resource estimate. Drilling continues at
the Windfall gold deposit with results continuing to be disclosed by Osisko.
7
The Lynx Zone Resource Estimate has been prepared by Ms. Judith St-Laurent, P.Geo, B.Sc., from Innov-Explo Inc. from
Val-d'Or, Québec and Charley Murahwi, P.Geo, M. Sc, FAusIMM from Micon International Limited from Toronto, Ontario. No
technical report was filed since it was not considered as a material change for the Windfall Resource Estimate in accordance
with NI 43-101.
Mineral Resource Estimates
Windfall Resource Estimate and Lynx Zone Resource Estimate
On June 12, 2018, the Corporation filed the Windfall Resource Estimate which included results disclosed by Osisko up to
March 5, 2018. On November 27, 2018, the Corporation filed the Lynx Zone Resource Estimate which included results
disclosed by Osisko between March 6, 2018 and October 28, 2018. Both the original Windfall Resource Estimate as well as
the Lynx Zone Resource Estimate are included in the table below.
Indicated
Inferred
Tonnes
(000 t) (12)
Grade
(g/t)
Ounces Au
(12)
(000 oz)
Tonnes (12)
(000 t)
Grade
(g/t)
1,746
628
318
147
34
2,874
8.13
8.69
7.12
9.00
6.58
8.17
456
175
73
43
7
754
2,005
852
2,767
4,381
348
10,352
9.70
7.28
5.80
6.77
6.37
7.11
Ounces Au
(12)
(000 oz)
625
199
516
955
71
2,366
Zone (2)
Lynx
Zone 27
Caribou
Underdog
Other
Total
Lynx Zone Resource Estimate notes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
The independent "qualified person", as defined by NI 43 101, are Judith St-Laurent, P. Geo, of InnovExplo Inc. and Charley Murahwi, P.Geo, M. Sc, FAusIMM
of Micon International Limited. The effective date of the Windfall Resource Estimate is May 14, 2018. The effective date of the updated Lynx Zone Estimate is
November 27, 2018.
The Windfall Resource Estimate and the Lynx Zone Resource Estimate are compliant with CIM standards and guidelines for reporting mineral resources and
reserves.
Resources are presented undiluted and in situ and are considered to have reasonable prospects for eventual economic extraction.
The mineral resource estimates encompass a total of 126 tabular, subvertical gold-bearing domains each defined by individual wireframes with a minimum true
thickness of 2.0 m.
Samples were composited within the mineralization domains into 2.0 m length composites. A value of zero grade was applied in cases of core not assayed.
High grade capping was done on composite data, and established using a statistical analysis on a per-zone basis for gold. Capping varied from 15 g/t Au to 75 g/t
Au and was applied using a four-step capping strategy where capping values decreased as interpolation distances increased.
Density values were applied on the following lithological basis (t/m3): mafic volcanic host rocks varied from 2.78 to 2.86; felsic volcanic host rocks varied from
2.76 to 2.77; porphyries varied from 2.70 to 2.83.
Ordinary Kriging (OK) based interpolation was used for the estimation of all zones of the Windfall Lake gold deposit except for the Underdog zone where an
Inverse Distance Squared (ID2) interpolation was preferred due to the larger drill spacing and smaller density of drill holes informing the mineralization
wireframes. All estimates are based on a block dimension of 5 m NE, 2 m NW and 5 m height and estimation parameters determined by variography.
Estimates use metric units (metres, tonnes and g/t). Metal contents are presented in troy ounces (metric tonne x grade / 31.10348).
Neither InnovExplo Inc. nor Micon International Limited are aware of any known environmental, permitting, legal, title-related, taxation, socio-political or
marketing issues, or any other relevant issue not reported in the technical report that could materially affect the mineral resource estimate.
These mineral resources are not mineral reserves as they do not have demonstrated economic viability. The quantity and grade of reported Inferred resources in
this mineral resource estimate are uncertain in nature and there has been insufficient exploration to define these Inferred resources as Indicated or Measured, and
it is uncertain if further exploration will result in upgrading them to these categories.
The number of metric tonnes and ounces was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding effects; rounding followed the
recommendations in Form 43 101F1.
Windfall Resource Estimate Note:
1.
2.
3.
4.
The independent "qualified person" of the 2018 MRE, as defined by NI 43 101, is Judith St-Laurent, P. Geo, of InnovExplo Inc. The effective date of the estimate
is May 14, 2018.
The Windfall Lake mineral resource estimate is compliant with CIM standards and guidelines for reporting mineral resources and reserves.
Resources are presented undiluted and in situ and are considered to have reasonable prospects for eventual economic extraction.
The mineral resource estimate encompasses a total of 124 tabular, subvertical gold-bearing domains each defined by individual wireframes with a minimum true
thickness of 2.0 m.
8
5.
6.
7.
8.
9.
10.
11.
12.
Samples were composited within the mineralization domains into 2.0 m length composites. A value of zero grade was applied in cases of core not assayed.
High grade capping was done on composite data, and established using a statistical analysis on a per-zone basis for gold. Capping varied from 15 g/t Au to 75 g/t
Au and was applied using a four-step capping strategy where capping values decreased as interpolation distances increased.
Density values were applied on the following lithological basis (t/m3): mafic volcanic host rocks varied from 2.78 to 2.86; felsic volcanic host rocks varied from
2.76 to 2.77; porphyries varied from 2.70 to 2.83.
Ordinary Kriging (OK) based interpolation was used for the estimation of all zones of the Windfall Lake gold deposit except for the Underdog Zone where an
Inverse Distance Squared (ID2) interpolation was preferred due to the larger drill spacing and smaller density of drill holes informing the mineralization
wireframes. All estimates are based on a block dimension of 5 m NE, 2 m NW and 5 m height and estimation parameters determined by variography.
Estimates use metric units (metres, tonnes and g/t). Metal contents are presented in troy ounces (metric tonne x grade / 31.10348).
InnovExplo is not aware of any known environmental, permitting, legal, title-related, taxation, socio-political or marketing issues, or any other relevant issue not
reported in the technical report,that could materially affect the mineral resource estimate.
These mineral resources are not mineral reserves as they do not have demonstrated economic viability. The quantity and grade of reported Inferred resources in
this mineral resource estimate are uncertain in nature and there has been insufficient exploration to define these Inferred resources as Indicated or Measured, and
it is uncertain if further exploration will result in upgrading them to these categories.
The number of metric tonnes and ounces was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding effects; rounding
followed the recommendations in Form 43 101F1.
Quévillon Resource Estimate
Cut-off grade
Tonnes (T)(9)
Grade (g/t)
Ounces Au(12)
> 6.00 g/t Au
> 5.00 g/t Au
> 4.00 g/t Au
> 3.50 g/t Au
> 3.00 g/t Au
> 2.50 g/t Au
883,000
1,273,000
1,816,000
2,156,000
2,587,000
3,166,000
9.77
8.44
7.26
6.70
6.13
5.51
277,000
346,000
424,000
465,000
510,000
560,000
Quévillon Resource Estimate notes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Resources are presented undiluted and in situ and are considered to have reasonable prospects for economic extraction.
The estimate encompasses nine tabular gold-bearing zones each defined by individual wireframes with a minimum true thickness of 2 metres.
High grade capping was done on composite data and established on a per zone basis for gold. It varies from 25 g/t Au to 55 g/t Au.
Density values were applied on the following lithological basis (g/cm3): volcanic host rocks = 2.80; late barren dykes and Beehler stock = 2.78; Zebra felsic unit
= 2.72.
Grade model resource estimation was evaluated from drill hole data using an Ordinary Kriging interpolation method on a block model using a block size of 2.5
metres x 2.5 metres x 2.5 metres.
The mineral resources presented herein are categorized as inferred. The inferred category is only defined within the areas where drill spacing is less than 100
metres and shows reasonable geological and grade continuity.
The resource was estimated using Geovia GEMS 6.8. The estimate is based on 931 surface diamond drill holes. A minimum true thickness of 2.0 metres was
applied, using the grade of the adjacent material when assayed, or a value of zero when not assayed.
Estimates use metric units (metres, tonnes and g/t). Metal contents are presented in troy ounces (metric tonne x grade / 31.10348).
The number of metric tonnes was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding errors.
InnovExplo is not aware of any known environmental, permitting, legal, title-related, taxation, socio-political or marketing issues, or any other relevant issue not
reported in the Technical Report that could materially affect the Mineral Resource Estimate.
These mineral resources are not mineral reserves as they do not have demonstrated economic viability. The quantity and grade of reported Inferred resources in
this Mineral Resource Estimate are uncertain in nature and there has been insufficient exploration to define these Inferred resources as Indicated or Measured,
and it is uncertain if further exploration will result in upgrading them to these categories.
The number of ounces was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding errors.
Garrison Resource Estimate
Cut-off grade
Tonnes (T)(15)
Grade (g/t)
Ounces Au(15)
Measured & Indicated
> 0.2 g/t Au
> 0.3 g/t Au
> 0.4 g/t Au
> 0.5 g/t Au
> 0.6 g/t Au
53,951,000
50,085,000
43,382,000
36,365,000
30,275,000
0.95
1.00
1.10
1.23
1.37
1,648,000
1,617,000
1,541,000
1,439,000
1,332,000
Tonnes (T)(15)
10,388,000
10,011,000
9,190,000
8,072,000
6,421,000
Inferred
Grade (g/t)
0.88
0.91
0.96
1.03
1.15
Ounces Au(15)
295,000
292,000
283,000
266,000
237,000
9
Garrison Resource Estimate notes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
The Garrison Resource Estimate has been prepared pursuant to CIM standards and guidelines for reporting mineral resources and reserves.
Resources are presented undiluted and in situ and are considered to have reasonable prospects for economic extraction.
The database comprised a total of 1,115 drill holes for 342,873.7 metres of drilling in the extent of the mineral resource, of which 197 drill holes (87,250.8 metres)
were completed and assayed by Osisko as of July 31, 2018.
All NQ core assays reported by Osisko were obtained by analytical methods described below under “Quality Control and Reporting Protocols”.
Geological interpretation of the deposits was based on the Garrison deposit (Garrcon, Jonpol, and 903) as lying at the confluence of the Destor Porcupine Fault
and the Munro fault (a splay structure of the Destor Porcupine) and mineralization hosted in structurally controlled domains. Interpretation was initially made
from cross-sections at 25 or 50 metre intervals, and then completed in Leapfrog Software, where selections of mineralization intervals were combined to generate
mineralization wireframes.
The mineralized domains used for the mineral resource estimate were constructed in Leapfrog Software using 0.2 g/t Au interpolant grade shells with 0.5 ISO
values limited by hard boundaries to modeled lithological and structural zones.
Samples were composited within the mineralization domains into 2.0 metre length composites for all areas except the Garrcon Main Metasedimentary zone, where
2.5 metre composites were more appropriate.
High grade capping was done on composite data and established using a statistical analysis on a per-zone basis for gold. Capping values of between 10 g/t to 40
g/t were used depending on mineralized domain.
Density values were applied on the following lithological basis (t/m3): 2.79 for all metasedimentary units and 2.82 for all igneous units.
OK based interpolation was used for the estimation of all zones of the Garrison gold deposit. Estimates are based on a block dimension of 10 metres North East,,
2 metres North West and 10 metres height for all zones except the Garrcon Main Metasedimentary unit where 5 metre x 5 metre x 5 metre blocks were used.
Estimation parameters were based on variography. Strong anisotropies were observed in all cases, and variograms were rotated to reflect the best major, semi-
major and minor ranges. Spherical models were fitted to pairwise relative semi-variograms. Search radii reflected the orientations of the variography. Search
distances were used in three passes, where the first pass equaled two thirds of the variogram range, the second pass was equal to full variogram range and the
third pass was double the respective range.
The Garrison Resource Estimate is categorized as measured, indicated and inferred mineral resource as follows:
o The measured mineral resource category is generally based on a minimum number of six informing composites using a minimum of three drill holes located
within the first estimation pass (two thirds variogram range)
o The indicated mineral resource category is largely based on using a minimum of four composites from two drill holes located in the second estimation pass
o The inferred mineral resource category is based on a minimum of four composites from two drill holes located in the third pass.
o After initial coding of each pass, results were further refined in Leapfrog Software to establish continuous volumes for each resource category.
Estimates use metric units (metres, tonnes and g/t). Metal contents are presented in troy ounces (metric tonne x grade / 31.10348).
Micon International Limited is not aware of any known environmental, permitting, legal, title-related, taxation, socio-political or marketing issues, or any other
relevant issue not reported in the technical report, that could materially affect the mineral resource estimate.
These mineral resources are not mineral reserves as they have not demonstrated economic viability. The quantity and grade of reported Inferred resources in this
mineral resource estimate are uncertain in nature and there has been insufficient exploration to define these inferred resources as indicated or measured. It is
reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration though not
guaranteed.
The number of metric tonnes and ounces was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding effects.
Exploration
Exploration Strategy
Osisko is a mineral exploration company focused on the acquisition, exploration, and development of precious metal resource
properties in Canada. Osisko's flagship project is the high-grade Windfall gold deposit located between Val-d'Or and
Chibougamau in Québec, Canada. Osisko also holds a 100% undivided interest in a large area of claims in the Urban Barry
area (330,000 hectares) of Québec, a 100% interest in large claim package in the Quévillon area that includes the Quévillon
Osborne-Bell Gold Deposit, a 100% interest in the Garrison Project east of Matheson, Ontario, as well as additional projects in
the Timmins area of Ontario, the James Bay Labrador area of Québec and the Marban Block Properties, which are located 15
kilometres west of the town of Val-d'Or in the Abitibi region of Québec, Canada.
The Corporation announced the following results from the ongoing drill program at the Windfall Property located in the Urban
Township, Québec in the map below:
10
Above is a map of the material drill holes that were completed during the year ended December 31, 2018, as well as the current holes to the
date of this MD&A on the Windfall Property.
The Corporation began the year continuing its ongoing drill program at Windfall with 18 drill rigs focused on the main and Lynx
deposits and two rigs working on regional targets. The current drill count is 20 rigs (15 at the Windfall Property, 3 at Urban
Barry and 2 at the Quévillon Osborne-Bell Property). The main focus of the drilling activities is infill drilling in the upper portion
of Lynx and Zone 27. Two drills are allocated to brownfield exploration (South West exploration program). One underground
drill rig is focusing on Zone 27. At Quévillon Osborne-Bell Property, the main focus is infill drilling of Osborne-Bell Gold Deposit
with one drill while the second rig is testing the regional targets.
Drill highlights have included the following:
38.4 g/t Au over 2 metres at Windfall announced January 16, 2019
2,223.0 g/t Au over 2 metres at Windfall announced January 7, 2019
38.9 g/t Au over 13.7 metres at Windfall announced December 5, 2018
83.9 g/t Au over 5.3 metres at Windfall announced November 21, 2018
1,026.0 g/t Au over 2.7 metres at Lynx announced October 23, 2018
49.1 g/t Au over 6.6 metres at Lynx announced October 2, 2018
11
37.0 g/t Au over 5.4 metres at Osborne-Bell announced September 28, 2018
17.4 g/t Au over 13.7 metres at Triple 8 announced September 13, 2018
510.0 g/t Au over 5.2 metres at Lynx and 742.0 g/t Au Over 2.2 Metres at Windfall announced August 22, 2018
34.8 g/t Au over 4.3 metres at Windfall announced August 8, 2018
22.4 g/t Au over 3.4 metres at Deep Lynx announced August 7, 2018
68.5 g/t Au over 9.8 metres at Windfall and 494 g/t Over 2.8 Metres at Lynx announced July 25, 2018
20.4 g/t Au over 28.3 metres at Windfall (Triple 8 Zone) announced July 11, 2018
20.0 g/t Au over 8.7 metres at Windfall announced June 12, 2018
97.6 g/t Au over 3.3 metres at Lynx announced June 7, 2018
34.3 g/t Au over 4.5 metres at Windfall announced May 1, 2018
115 g/t Au over 8.4 metres at Lynx announced April 26, 2018
41.2 g/t Au over 3.5 metres at Windfall announced April 19, 2018
68.5 g/t Au over 2.9 metres at Lynx announced April 17, 2018
40.8 g/t Au over 4.1 metres at Windfall announced April 10, 2018
403.0 g/t Au over 2.7 metres at Lynx announced April 4, 2018
265 g/t Au over 2.4 metres at Windfall announced March 2, 2018
71.9 g/t Au over 2.9 metres at Lynx announced February 27, 2018
56.1 g/t Au over 8.9 metres at Windfall announced January 25, 2018
415 g/t Au over 5.9 metres at Lynx announced January 23, 2018
86.7 g/t Au over 4.3 metres at Windfall announced January 18, 2018
76.5 g/t Au over 5.0 metres at Windfall announced January 16, 2018
140 g/t Au over 5.0 metres at Lynx announced January 9, 2018
True width determinations are estimated at 65-80 of the reported core length intervals for most of the zones. The full set of drill
results are available under the Corporation's issuer profile on SEDAR (www.sedar.com) and on Osisko's website
(www.osiskomining.com).
Exploration Ramp Advancement:
In 2007, construction of an underground exploration ramp was commenced at the Windfall Property by a previous operator,
which attained a vertical depth of approximately 110 metres and length of approximately 1.2 kilometres, with an additional 230
metres of exploration drifts. The exploration ramp was terminated by the previous operator prior to completion of the bulk
sample collection and was flooded with water. All permits required to dewater the ramp and proceed with collection of a bulk
sample from Zone 27 and Caribou were granted to Osisko in 2017 and dewatering of the ramp was completed. Following
exploration ramp rehabilitation, advancement continued at a rate of approximately 150 metres per month towards the
mineralized zones. During the year ended December 31, 2018 the exploration ramp was advanced by 2,330 metres. In 2018,
all permits required to obtain two additional bulk samples were requested and received. Underground work includes bulk
sampling (for metallurgical testing and grade confirmation), underground mapping and underground exploration drilling.
12
1.
SUMMARY OF MINERAL PROPERTIES
The Corporation's various gold mineral properties in Canada are summarized below:
Continuing Exploration Properties
Location
Windfall Lake Project
Quévillon Osborne-Bell
Urban Barry Project
Urban Barry Base Metals Project
Quévillon Osborne Base Metals
James Bay Properties
Kan Project – James Bay
Éléonore Regional – James Bay
Éléonore JV – James Bay
FCI – Corvette Lithium Project
Urban Duke Property
Éléonore-Opinaca
Tortigny Property
Launay Property
Marban Block Project
Garrison Block Properties
Hemlo
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Québec
Ontario
Ontario
Status
Owned 100%
Owned 100%
Owned 100%
Owned 100%(1)
Owned 100%(1)
Earn-in (2)
Earn-in (2)
Earn-in (2)
Earn-in (2)(4)
Earn-in (7)
Earn-in (5)(6)
Owned 100%(5)
Owned 100%(5)
Owned 100%(5)
Owned 100%(8)
Owned 100%(9)
Owned 100%(5)
(1) Subject to a 50% earn-in in favour of Osisko Metals.
(2) Osisko holds an earn-in right in respect of these properties, which are currently owned by Osisko GR.
(3) Midland Exploration Inc. owns 50% of the project.
(4) All properties acquired upon the acquisition of Beaufield on October 19, 2018.
(5) Bonterra Resources Inc. has an earn-in right of up to 70% of the property.
(6) Subject to a 50% earn-in in favour of 92 Resources Inc. ("92 Resources").
(7) Owned 100% except for Siscoe East Project which is owned 50%.
(8) Owned 100% except for Gold Pike Project which is owned 60%.
13
2.
MINERAL RESOURCES
The Corporation's global mineral resources are summarized below:
CATEGORY
MEASURED
MARBAN(3)
GARRISON(5)
INDICATED
MARBAN(3)
WINDFALL(4)
GARRISON(5)
TOTAL M&I
MARBAN(3)
WINDFALL(4)
GARRISON(5)
TOTAL INFERRED(2)
MARBAN(3)
WINDFALL(4)
GARRISON(5)
OSBORNE-BELL(6)
TONNES (MT)
AU GRADE (G/T) AU (M OZ)
7.7
22.2
29.9
30.5
2.9
21.4
54.8
38.2
2.9
43.6
84.6
4.1
10.4
10.3
2.6
27.4
1.48
1.12
1.22
1.25
8.17
1.12
1.56
1.29
8.17
1.12
1.44
1.47
7.11
1.27
6.13
3.98
0.37
0.80
1.17
1.22
0.75
0.77
2.74
1.59
0.75
1.57
3.91
0.20
2.37
0.42
0.51
3.50
1. Global mineral inventories are not pit-constrained.
2. Inferred mineral resources have a great amount of uncertainty as to their existence and as to whether they can
be mined legally or economically. It cannot be assumed that all or any part of the inferred resources will ever be
upgraded to a higher category. Mineral resources are not mineral reserves and do not have demonstrated
economic viability.
3. Information relating to the Marban Block Project is supported by the Updated Mineral Resource Technical Report,
Marban Block Property, Québec, Canada dated August 15, 2013 with an effective date of June 1, 2013.
4. Information relating to the Windfall Lake Project is supported by the Windfall Resource Estimate and the Lynx
Zone Resource Estimate.
5. Information relating to the Garrison Block Properties is supported by the Garrison Resource Estimate.
6. Information relating to the Quévillon Osborne-Bell Gold Deposit is supported by the Quévillon Resource Estimate.
14
3.
MINERAL PROPERTY ACTIVITIES
a) Urban Barry District
As of December 31, 2018, the Corporation held a significant claims position in the Urban Barry area of Québec. The Windfall
Project contains 285 claims covering 12,467 hectares and includes the Windfall deposit. Adjacent to the Windfall Property,
the Urban Barry Project contains 1,760 claims, including the Black Dog Property (formerly Souart Property) and covers more
than 97,964 hectares (980 square kilometres). Both projects are located within the Urban Barry volcano-sedimentary belt.
The exploration expenditures on the properties were for drilling, prospecting, till surveys follow-up, IP geophysical surveys
and for staking claims. During the year ended December 31, 2018, drilling at Windfall was performed using 8 rigs while
regional surface exploration work was performed using one drill rig. As of December 31, 2018, a total of 680,074 metres have
been realized on the 800,000 metres program at Windfall. As of December 31, 2018, a total of 7,302 metres have been
completed on the ongoing 12,000 metres drill program at the Urban Barry Project.
i)
Windfall Property
The Windfall Property is 100% owned by the Corporation and covers approximately 12,400 hectares located in the Abitibi
greenstone belt, Urban Township, Eeyou Istchee James Bay, Québec, Canada. The property consists of 285 contiguous mining
claims.
The majority of the Windfall Property is subject to the following residual net smelter returns ("NSR"):
Location
Approximate Area
NSR Buyback Option
Centre of property, hosting the majority of the
mineral resource
North of the majority of the mineral resource,
hosting small portion of the mineral resource
Northern part of property
Southeast of the mineral resource
Eastern edge of property
3,151 acres
(1,275 ha)
2,342 acres
(948 ha)
19,531 acres
(7,904 ha)
706 acres
(286 ha)
2,507 acres
(1,015 ha)
2.5%(1) Buyback 1% NSR for $1 million
1%(2)
2%(2)
2%
Buyback 1% NSR for $500,000
2%
Buyback 1% NSR for $1 million right
of first refusal for remaining 1% NSR
(1) In 2015, Osisko GR was granted a right to acquire a 1% NSR royalty on all properties held by the Corporation as of August 25,
2015. This right was exercised by Osisko GR in October 2016 for $5 million and includes a 1% NSR royalty on the Windfall Property.
This exercise brings the total NSR royalty held by Osisko GR on the Windfall Property to 1.5%, including the 0.5% NSR royalty
acquired in 2015.
(2) In 2018, Osisko GR acquired the 1% NSR on part of the property located north of the majority of the mineral resource, hosting a
small portion of the mineral resource, and the 2% NRS on the northern part of the property.
Exploration Activities
The current 800,000 metre drilling program has been designed to assist the Corporation in further exploring and defining the
known mineralization within the main deposit area, the Lynx Zone, the North East Extension and the newly discovered Triple
8 Zone. Osisko continues to work towards extending the exploration ramp into the mineralized zones and continues with the
underground drill program with one rig. The 5,000 tonne bulk sample excavation began on October 11, 2018 and was
completed on January 30th, 2019. Ore was being transferred to the Mill site in Timmins, Ontario where it is expected to be
15
processed during the first quarter of 2019. Preliminary results of 2,078 tonnes mined were released in the fourth quarter 2018.
The results of the remaining 2,922 tonnes is expected to be released in the first quarter of 2019.
The Windfall Property camp is permitted for the capacity of 300 workers with accommodations, core logging areas and other
facilities. Results to date have provided verification and correlation with historic drilling performed by previous operators on the
property. The deposit remains open at depth below the Red Dog intrusion and down plunge to the northeast. In May 2018,
Osisko commenced two deep exploration drill holes ("Deep Underdog" and "Deep Lynx") to investigate the potential for depth
extensions of the Lynx and Underdog mineralized zones, as well as to further test the intrusion-related geological model for
the Windfall deposit. The newly discovered Triple 8 Zone, open in all directions, was discovered in the Deep Underdog hole,
DDH OSK-W-18-1603. Triple 8 is an unanticipated zone of mineralization intersected at approximately 1,500 metres downhole,
in the planned 2,500 metre deep hole. Triple 8 does not correlate with any known zone and is approximately 660 metres east
from the closest known mineralized intercept in the Underdog Zone. Maps and sections showing the location of the drill hole
and the new mineralized zone are provided on Osisko's website (www.osiskomining.com). The new discovery zone falls outside
the area of the recently announced mineral resource estimate for the Windfall gold deposit (see the Windfall Resource
Estimate).
Drilling
The Corporation continues to obtain drill results from its 800,000 metre drill program at Windfall. The Corporation's drill plan
map is presented below:
16
Quality Control
True width determinations are estimated at 65-80% of the reported core length intervals for most of the zones. Assays are
uncut except where indicated. Intercepts occur within geological confines of major zones but have not been correlated to
individual vein domains at this time. Reported intervals include minimum weighted averages of 3.0 g/t Au diluted over core
lengths of at least 2.0 metres. All assays reported were obtained by either 1 kilogram screen fire assay or standard 50 gram
fire-assaying-AA finish or gravimetric finish by (i) ALS Laboratories in Val d'Or, Québec, Thunder Bay and Sudbury, Ontario,
and Vancouver, British Columbia; or (ii) by Bureau Veritas in Timmins, Ontario. The 1 kilogram screen assay method is selected
by the geologist when samples contain coarse gold or present a higher percentage of pyrite than surrounding intervals. Selected
samples are also analyzed for multi-elements, including silver, using an Aqua Regia-ICP-AES method at ALS Laboratories.
Drill program design, Quality Assurance/Quality Control ("QA/QC") and interpretation of results is performed by a "qualified
person" employing a QA/QC program consistent with NI 43-101 and industry best practices. Standards and blanks are included
with every 20 samples for QA/QC purposes by the Corporation as well as the lab. Approximately 5% of sample pulps are sent
to secondary laboratories for assay checks.
ii)
Urban-Barry Property
The Urban-Barry Property is 100% owned by the Corporation. As of December 31, 2018, the property comprises 1,760
individual claims covering an aggregate area of approximately 97,964 ha. The actual property is mostly constituted by claims
that were acquired at different periods from 2015 to 2017, and are subject to various NSRs.
Exploration Activity
During the year ended December 31, 2018, the Corporation decreased from two to zero drill rigs on the Urban-Barry Project
and drilled approximately 7,302 metres out of the 12,000 metres planned drill program. Up to date, no significant results were
obtained. A surface exploration program including prospecting, till sampling, lithogeochemistry and datation was initiated during
the second quarter of 2018 and is expected to continue during the first quarter of 2019.
iii)
Black Dog Property (formerly Souart Property)
The Corporation acquired 100% of the Black Dog Property on February 3, 2016. The property is located in the Urban Barry
greenstone belt, in Souart and Barry Townships, Québec. Osisko issued 500,000 common shares of the Corporation and a
cash payment of $200,000 in exchange for 100% of the property. The property consists of 34 claims comprising of 1,343
hectares. The Black Dog Property is subject to a 2% NSR which can be repurchased by the Corporation at any time for $2
million.
iv)
Urban Barry Base Metals Project
The Urban Barry Base Metals Project is a select package of claims located within the Urban Barry Project. On March 28, 2018,
Osisko entered into an option agreement with Osisko Metals, which sets forth the terms of an exploration earn-in on the project.
Under the terms of the option agreement, Osisko Metals shall incur $5 million of exploration expenditures over the four-year
term of the option agreement in order to earn a 50% interest on the project. This commitment is subject to certain annual work
expenditure thresholds, including a guaranteed expenditure threshold of $500,000 in the first year from the date of signing the
agreement.
Following the completion of the exploration earn-in, the project will be transferred to a new joint venture entity to be owned
50% by Osisko and 50% by Osisko Metals. Osisko and Osisko Metals will then enter into a joint venture agreement in respect
of the project. Osisko will own a 100% interest over any precious metals discoveries on the project.
Exploration Activity
During the year ended December 31, 2018, the Corporation allocated one drill rig to perform regional exploration program over
base metals targets. A total of 1,742 metres of drilling was performed on the Urban-Barry Base Metals Project. No significant
results were obtained from the drilling campaign.
17
v)
Urban Duke Property
The Corporation acquired the Urban Duke Property through the acquisition of Beaufield, which was completed on October 19,
2018. The Urban Duke Property is 100% owned by the Corporation and is located within the Urban Barry Greenstone Belt,
Québec. On July 6, 2018, Beaufield entered into a binding agreement with Bonterra Resources Inc. ("Bonterra") which sets
forth the terms of an Exploration Earn-In on the property. In order to earn a 70% interest on the Urban Duke Property, Bonterra
must commit i) $4.5 million in work expenditures over a three-year period, subject to certain annual work expenditure
thresholds, including a guaranteed expenditure threshold of $1.5 million in the first year; and ii) $750,000 in cash payments
over a two-year period, with $250,000 due upon signing, $250,000 due in the first year, and the remaining $250,000 due in the
second year. Upon signing on July 6, 2018, and as further consideration for the granting of the exploration earn-in, Bonterra
issued 4 million common shares of Bonterra to Beaufield.
Following the completion of the Exploration Earn-In, Beaufield and Bonterra will enter into a joint venture agreement in respect
of the property with Bonterra maintaining a 70% interest and Beaufield maintaining a 30% interest.
b) Quévillon Osborne-Bell Project
On April 27, 2017, the Corporation acquired ownership over a property package in the Lebel-sur-Quévillon area of Québec in
consideration of a cash payment of $1 million and the issuance of 100,000 common shares of the Corporation. The Quévillon
Osborne-Bell Project includes approximately 30 known gold showings as well as the historical Quévillon Osborne-Bell Gold
Deposit, which is located 17 kilometres northwest of the town of Lebel-sur-Quévillon and 112 kilometres west of the Windfall
gold deposit. The Quévillon Osborne-Bell Gold Deposit has been the object of significant historical drilling over the past 30
years, and will be the focus of new drilling and resource re-evaluation by Osisko. In addition, the Corporation staked 2,942
claims of a large land package covering 157,000 hectares (157 square kilometres). The Corporation also acquired additional
claims from different owners during the year ended December 31, 2018.
On February 26, 2018, Osisko purchased from Globex, the Certac Property at Le Tac township, Québec for $250,000 and
gross metal royalty payable to Globex on all metal production. The gross metal royalty payable will be 2.5% at a gold price
below USD $1,000 per ounce or 3% at a gold price equal to or greater than USD $1,000 per ounce. Osisko has retained a first
right of refusal should Globex sell its gross metal royalty as well as a right to buy back 1.5% of the gross metal royalty for $1.5
million. The Certac Property has been included in the Quévillon Osborne-Bell Project.
The Quévillon Osborne-Bell Project now covers more than 227,188 hectares (2,272 square kilometres) and is constituted by
4,263 claims. The land position of the Quévillon area covers volcano-sedimentary Archean greenstones that host a number of
known gold showings and porphyry igneous intrusions that are of strong exploration interest to the Corporation.
Exploration Activity
During the year ended December 31, 2018, a total of 22,594 metres were drilled on the Osborne-Bell, and 11,382 metres were
drilled on different regional targets. This totals 33,976 metres for the 2018 campaign. Highlights from the new results provided
by the infill drilling campaign on Osborne-Bell deposit include: 37.0 g/t Au over 5.4 metres (uncut) in OSK-OB-18-051; 38.6 g/t
Au over 2.5 metres (uncut) in OSK-OB-18-011; 41.1 g/t Au over 2.4 metres (uncut) in OSK-OB-18-086 and 26.6 g/t Au over
4.6 metres in OSK-OB-18-010.
i)
Quévillon Base Metals Project
The Quévillon Osborne Base Metals Project is a select package of claims located within the Quévillon Osborne Project. On
November 12, 2018, Osisko entered into an option agreement with Osisko Metals, which will sets forth the terms of an
exploration earn-in on the project. Under the terms of the option agreement, Osisko Metals shall incur $8 million of exploration
expenditures over the four-year term of the option agreement in order to earn a 50% interest on the project. This commitment
is subject to certain annual work expenditure thresholds, including a guaranteed expenditure threshold of $2 million in the first
year from the date of signing the agreement.
18
Following the completion of the exploration earn-in, the project will be transferred to a new joint venture entity to be owned
50% by Osisko and 50% by Osisko Metals. Osisko and Osisko Metals will then enter into a joint venture agreement in respect
of the project. Osisko will own a 100% interest over any precious metals discoveries on the project.
Exploration Activity
During the year ended December 31, 2018, the Corporation allocated one drill rig to perform a regional exploration program
over base metals targets. A total of 799 metres of drilling was performed on the Quévillon Base Metals Project. No significant
results were obtained from the ongoing drilling campaign.
c)
Garrison Block Properties
i) Garrcon Project
The Garrcon Project is 100% owned by the Corporation and covers approximately 788 hectares in the prolific Abitibi
Greenstone Belt in Ontario, Canada. The property consists of 66 contiguous mining claims. Of the 66 claims, 35 patented
mining claims are subject to a 2% NSR. In addition, 12 of the 35 patented claims acquired are subject to a prior NSR of 1.5%
from mineralized material mined above 400 feet vertically, and a 2% NSR from mineralized material mined below that elevation.
In addition, two of the unpatented mining claims are subject to a 1% NSR, which the Corporation shall have the right to for
$250,000. A further single unpatented mining claim is subject to a 1% NSR, 0.5% of which the Corporation shall have the right
to acquire for $250,000. An additional 20 patented claims to the south of the known resource are subject to a 2% NSR, 0.5%
of which the Corporation shall have the right to repurchase for $1 million. The vendor retains a back-in right for up to 51%
interest in the claims should a resource totaling 4 million ounces be identified on the claims. Such back-in right would trigger a
cash reimbursement to the Corporation equal to double the exploration costs incurred since the date of the arrangement. Some
of the claims are subject to an additional 1.5% NSR under previous option agreements entered into by the vendor. The
remaining eight patented claims are subject to a 1% NSR.
ii) Jonpol Project
The Jonpol Project is 100% owned by the Corporation and is located on the same property as the Garrcon Project in the prolific
Abitibi Greenstone Belt in Ontario, Canada.
iii) Buffonta Project
The Buffonta Project is 87.5-100% owned by the Corporation and covers approximately 2,359 hectares in the prolific Abitibi
Greenstone Belt in Ontario, Canada. The property consists of 120 contiguous mining claims. The Buffonta Project is subject
to a 3% NSR, 0.5% of which the Corporate shall have the right to repurchase for $1 million.
iv) Gold Pike Project
The Gold Pike Project is 40-60% owned by the Corporation and covers approximately 468 hectares in the prolific Abitibi
Greenstone Belt in Ontario, Canada. The property consists of 26 contiguous mining claims. The Gold Pike Project has 10
claims under two separate agreements in which each are subject to a 2% NSR, 1% of which the Corporation has the right to
repurchase for $1 million. The property has an annual $25,000 advance royalty payment.
Exploration Activity
As of December 31, 2018, the Corporation continues with the data migration and reinterpretation of the geological plans for
the Garrcon, Jonpol and 903 zones at the Garrison Property. On February 19, 2019, Osisko released the Garrison Resource
Estimate, which added approximately 370,000 ounces of gold to the measured and indicated mineral resource categories and
provided the first mineral resource estimate for the 903 Zone.
19
d) Marban Block Properties
i)
Marban Project
The Marban Project is 100% owned by the Corporation and is the result of an amalgamation of the former Marban, First
Canadian, Norlartic and Gold Hawk claims. The Marban Block Properties are located about 15 kilometres west of the town of
Val-d'Or in the Abitibi region of Québec, Canada and consist of 30 mining claims and three mining concessions covering
1,023 hectares.
The Marban claims are subject to a 1% to 1.5% NSR. The First Canadian claims are subject to a 10% net profits interest. The
vendor retained a 0.5% NSR on the Marban claims, a 1% NSR on the First Canadian claims and a 2% NSR on the Norlartic
claims. The project also has two mining claims known as the Gold Hawk claims which are subject to a 2% NSR.
ii)
Malartic Project
The Malartic Project includes the Camflo West, the Malartic Hygrade, the Malartic Hygrade-NSM and the Malartic H
Properties. The properties are located to the northeast of the town of Malartic, in the Abitibi region of Québec, Canada. The
Malartic Project consists of 139 mining claims and one mining concession covering 6,263 hectares. The Camflo West claims
are subject to various NSR's ranging from 1.5% to 3.0%, certain of which, or portions thereof, can be repurchased by the
Corporation for payments ranging from $200,000 to $1.5 million. The Malartic H claims are 85% owned by the Corporation
and the remaining 15% of the Marlartic H claims can be purchased by the Corporation for $25,000.
iii)
Siscoe East Project
The Siscoe East Property is located in the Vassan Township in the Abitibi region of Québec, Canada. The Corporation owns
a 50% interest in the claims covering the Siscoe East Property, with the remaining 50% interest being held by another company.
Some claims are subject to a 2% NSRs, 50% of which may be repurchased by the Corporation for a total of $2.8 million.
iv)
Héva Project
The Héva Property, located 42 kilometres northwest of the city of Val-d'Or, and the Val-d'Or Property, located south of the limit
of the town of Val-d'Or, in the Abitibi region of Québec, Canada. Some of the claims of the Héva Property are subject to a 1.5%
NSR, 50% of which may be repurchased for $200,000. On August 7, 2018, Osisko entered into an agreement with Kintavar
Exploration Inc. ("Kintavar") whereby Osisko sold its NSR interests in 21 claims in exchange for 131,578 common shares of
Kintavar with a fair value of $50,000.
e)
James Bay Properties
On October 5, 2016, Osisko announced that it had entered into an earn-in transaction with Osisko GR. Under the terms of
the earn-in agreement ("Osisko GR Earn-In Agreement"), the Corporation may earn a 100% interest in 28 exploration
properties held by Osisko GR, which are located in the James Bay area, Québec and the Labrador Trough area (the "Earn-
In Properties") upon incurring exploration expenditures totaling $32 million over the seven-year term of the Osisko GR Earn-
In Agreement; the Corporation will earn a 50% interest upon completing expenditures totaling $19.2 million. Osisko GR will
retain an escalating NSR royalty ranging from 1.5% to a maximum of 3.5% on precious metals and a 2% NSR royalty on
other metals and minerals produced from the Earn-In Properties. Additionally, any new properties acquired by the Corporation
in the designated area during the seven-year term of the Osisko GR Earn-In Agreement may also be subject to a royalty
agreement in favour of Osisko GR with similar terms and subject to certain conditions. On February 16, 2017, Osisko and
Osisko GR amended and restated the initial Osisko GR Earn-In Agreement, pursuant to which the Kan Project was carved-
out into a separate earn-in agreement (the "Kan Earn-In Agreement"). Under the terms of the Kan Earn-In Agreement, Osisko
shall incur $6 million over the seven-year term of the Kan Earn-In Agreement; the Corporation will earn a 50% interest upon
completing expenditures of $3.6 million over a four-year term. The entire commitment on the remainder of the Earn-In
Properties has been reduced by the same amount and terms as the Kan Earn-In Agreement. On December 15, 2017, Osisko
20
and Osisko GR entered into an amendment to the Osisko GR Earn-In Agreement to extend until December 31, 2018 the
Corporation's firm commitment to spend $4.1 million of exploration expenditures on all the properties. As of December 31,
2018, all required amounts have been spent.
i)
Kan Project
The Kan Project is located within the Labrador Trough, approximately 80 kilometres southwest of Kuujuuaq, Québec. It covers
approximately 40 kilometres of favorable stratigraphy that includes silicate-carbonate iron formations, thick metal- rich black
shales units, gabbros and turbidites. The Kan Project consists of 2,243 claims (104,078 hectares). 209 claims of the total claims
are subject to a 2% NSR in favour of Les Ressources Tectonic Inc., 0.5% of which may be purchased for $750,000 at any time
by Osisko GR and an additional, 0.5% of which may be purchased for $750,000 by Altius Resources Inc. In addition, Osisko
GR holds a royalty over the total 2,276 claims on the production of precious metals for a minimum of a 1.5% NSR royalty and
a maximum of a 3.5% NSR royalty and a 2.0% NSR royalty on all other metals provided. However, if there is an existing royalty
applicable on any portion of the claims, the royalty percentages shall, as applicable, be adjusted so that the aggregate
maximum royalty percentage on such portion shall not exceed a 3.5% NSR royalty at any time.
In 2017, Osisko entered into an earn-in agreement with Barrick, which sets forth the terms of an exploration earn-in on the Kan
Project. Under the exploration earn-in with Barrick in relation to the Kan Project, Barrick must commit $15 million in work
expenditures over a four year period to earn a 70% interest on the Kan Project, subject to certain annual work expenditure
thresholds, including a guaranteed expenditure threshold of $6 million in the first two years.
Following the completion of the exploration earn-in with Barrick, the property will be transferred to a new joint venture entity to
be owned 30% by Osisko and 70% by Barrick. Osisko and Barrick will then enter into a joint venture agreement in respect of
the property. In addition, Barrick may earn a further 5% interest in the joint venture entity (for a total interest of 75%) by electing
to fund an additional $5 million of project level expenditures (such as a preliminary economic assessment or pre-feasibility
study). On November 13th, 2018, Osisko receive a writing notice where Barrick has elected to terminate the Earn-in Right and
that Barrick has elected not to proceed with further exploration expenditures and therefore terminated the agreement.
Exploration Activity
A total of 5,639 metres of drilling were performed during the year ended December 31, 2018 on the Kan Project. The main
objective was to test gold bearing carbonate and silicate-rich iron formation. Best results from the 2018 campaign were
obtained from hole OSK-KAN-18-007 which yielded 3.90 g/t Au over 2 metres and from OSK-KAN-018-016 that yielded 3.05
g/t Au over 11.5 metres.
ii)
Éléonore Regional Project
The Éléonore Regional Project consists of 460 claims (24,033 hectares) located 15 kilometres west of the Éléonore Gold Mine
in the Opinaca Reservoir area of the James Bay territory. The Corporation does not have plans to explore this property further.
Due to this triggering event, the Corporation determined that the carrying amount of the exploration assets of the Éléonore
Project exceeded its recoverable amount and as such recorded an impairment of $585,000.
iii)
Éléonore-JV Project
The Éléonore-JV Project was significantly reduced to 588 claims (30,802 hectares), which is 50%, owned by Midland
Exploration Inc., and is located 25 kilometres southeast and 20 kilometres northwest of the Éléonore Gold Mine in the Opinaca
Reservoir area of the James Bay territory. The project is subject to a 0.5% NSR royalty in favour of Osisko GR and to a 0.5%
NSR royalty in favor of Midland Exploration Inc. No exploration work is planned on the project in 2019.
Exploration Activity
Ground induced polarization geophysics followed by a small trenching program were completed during 2018.
21
iv)
Other – James Bay
a. Trieste Project
The Trieste Project consists of 304 claims (>15,688 hectares) and is located 60 kilometres north-north-west of the Renard
Diamond Mine of the James Bay territory.
b. Escale Project
The Escale Project consists of 129 claims (6,497 hectares) and is located 75 kilometres southeast of the LG-4 Power Dam in
the James Bay region. The project is subject to a 0.5% NSR royalty to Sirios Resources Inc., which may be repurchased by
the Corporation for $500,000. 11 claims are subject to a 1% NSR royalty in favour of Newmont Mining Corp. without a buyback
option.
c. Eastmain East Project
The Eastmain East Project consists of 66 claims (2,363 hectares) and is located 100 kilometres east of the Renard deposit in
the James Bay region.
f)
FCI – Corvette Lithium Project
The FCI – Corvette Lithium Project covers 28 claims covering 1,434 hectares and is located within the James Bay Greenstone
Belt in Northern Québec, Canada. The FCI – Corvette Lithium Project is subject to a 1.5 to 3.5% NSR. On August 27, 2018,
Osisko entered into a binding agreement with 92 Resources, which sets forth the terms of an exploration earn-in on the
property. Under the Exploration Earn-In, 92 Resources must commit $2,250,000 in work expenditures over a three-year period
to earn a 50% interest on the FCI-Corvette Lithium Project, subject to certain annual work expenditure thresholds, including a
guaranteed expenditure threshold of $250,000 in the first year. Upon signing on August 27, 2018, and as further consideration
for the granting of the Exploration Earn-In, 92 Resources issued 1 million common shares of 92 Resources to the Corporation
at a fair value of $60,000. An additional 1 million common shares of 92 Resources will be issued to the Corporation on the first
anniversary.
Following the completion of the Exploration Earn-In, the Project will be transferred to a new joint venture entity to be owned
50% by Osisko and 50% by 92 Resources. Osisko and 92 Resources will then enter into a joint venture agreement in respect
of the project. In addition, 92 Resources may earn a further 25% interest in the joint venture entity (for a total interest of 75%)
by electing to fund an additional $2 million of project level expenditures (such as a preliminary economic assessment or pre-
feasibility study).
g)
Élénore Opinaca Property
The Corporation acquired the Élénore Opinaca Property through the acquisition of Beaufield, which was completed on October
19, 2018. The Élénore Opinaca Property is 100% owned by the Corporation and is located approximately 320 kilometres north
of the town of Matagami in the James Bay area, northern Québec and is subject to a NSR of 0.5%. The Corporation does not
have plans to explore this property further. Due to this triggering event, the Corporation determined that the carrying amount
of the exploration assets of the Éléonore Opinaca Project exceeded its recoverable amount and as such recorded an
impairment of $5,684,000.
h)
Tortigny Property
The Corporation acquired the Tortigny Property through the acquisition of Beaufield, which was completed on October 19,
2018. The Tortigny Property is 100% owned by the Corporation and is located approximately 100 kilometres north of the town
of Chibougamau, Québec and is subject to a 1 to 2% NSR.
22
i)
Launay Property
The Corporation acquired the Launay Property through the acquisition of Beaufield, which was completed on October 19,
2018. The Launay Property is 100% owned by the Corporation and is located in the Abitibi Greenstone Belt, Québec and is
subject to a 1.5% NSR.
j)
Hemlo Property
The Corporation acquired the Hemlo Property through the acquisition of Beaufield, which was completed on October 19, 2018.
The Hemlo Property is 100% owned by the Corporation and is located in the Neoarchean Hemlo Greenstone Belt, Ontario and
is subject to a 0.5 to 2% NSR. The Corporation does not have plans to explore this property further. Due to this triggering
event, the Corporation determined that the carrying amount of the exploration assets of the Hemlo Property exceeded its
recoverable amount and as such recorded an impairment of $494,000.
4.
EXPLORATION AND EVALUATION ASSETS EXPENDITURES
4.1
Exploration and Evaluation Assets Expenditures
The Corporation's expenditures on exploration and evaluation assets for the year ended December 31, 2018, were as follows
(in thousands of Canadian dollars):
December 31,
2017
Acquisitions
in the year
Additions in
the year
Deferred income
tax asset on
investment tax
credits
Write offs in
the year
December 31,
2018
$
$
$
Windfall Lake
Quévillon Osborne
Urban Barry
Urban Barry Base Metals
Quévillon Osborne Base Metals
Kan - James Bay
Éléonore – James Bay
Éléonore JV – James Bay
Other – James Bay
FCI - Corvette Lithium
Urban Duke
Éléonore Opinaca
Tortigny
Luanay
Marban Block
Garrison Block
Hemlo
Total exploration and evaluation assets
150,772
4,526
11,881
-
-
423
532
214
2,088
-
-
-
-
-
65,292
26,192
-
261,920
-
$
-
5,787
-
-
-
-
-
-
-
2,142
5,680
12,102
2,273
-
-
494
28,478
$
$
71,797
9,162
2,785
30
10
78
53
332
415
(57)
-
4
7
-
74
3,004
-
87,694
$
(332)
-
-
-
-
-
-
-
-
-
-
-
(291)
-
(227)
(1,577)
-
(2,427)
-
$
-
-
-
-
-
(585)
-
-
-
-
(5,684)
-
-
-
-
(494)
(6,763)
$
$
$
$
222,237
13,688
20,453
30
10
501
-
546
2,503
(57)
2,142
-
11,818
2,273
65,139
27,619
-
368,902
23
Significant additions during the year ended December 31, 2018 are described by category in the following table (in thousands
of Canadian dollars):
For the year ended December 31, 2018
Property costs
Camp costs
Office costs
Project management
Drilling
Geochemical survey
Permitting
Geophysical survey
Geology
assessment
Ramp rehabilitation
Community relations
Environmental
Health and safety
Windfall Lake
$
41
17,402
63
3,215
38,483
7
789
37
679
3,543
23,067
686
2,163
1,840
Quévillon
Osborne
$
835
49
11
205
7,219
52
-
909
1,014
-
-
2
74
15
Urban
Barry
$
202
2
4
80
1,738
228
-
219
812
-
-
-
1
6
Urban
Barry Base
Metals
$
-
-
8
-
22
-
-
-
-
-
-
-
-
-
Quévillon
Osborne
Base
Metals
$
-
Kan -
James Bay
$
-
1
9
-
-
-
-
-
-
-
-
-
-
-
6
-
56
-
-
-
-
-
-
-
16
-
-
Éléonore –
James Bay
$
49
-
-
-
-
-
-
-
8
-
-
-
-
-
Éléonore
JV –
James Bay
$
47
-
2
4
2
-
-
110
177
-
-
-
-
-
Other –
James Bay
$
297
8
19
3
59
-
-
-
-
-
-
-
39
6
Québec exploration mining duties
Total additions
(20,218)
71,797
$
(1,223)
9,162
$
(507)
2,785
$
-
$
30
-
$
10
-
$
78
(4)
53
$
(10)
332
$
(16)
415
$
For the year ended December 31, 2018
Property costs
Camp costs
Office costs
Project management
Drilling
Geochemical survey
Permitting
Geophysical survey
Geology
assessment
Ramp rehabilitation
Community relations
Environmental
Health and safety
Quebéc exploration mining duties
Total additions
FCI - Corvette
Lithium
(60)
$
-
-
-
-
-
-
-
-
3
Urban
Duke
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
(57)
-
-
-
-
-
$
-
Éléonore
Opinaca
$
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Tortigny
-
$
-
-
-
-
-
-
-
-
7
-
-
-
-
-
$
4
$
7
Luanay
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
Marban
Block
$
(33)
8
25
-
49
-
-
-
-
-
-
-
18
-
Garrison
Block
$
12
214
2
371
1,439
2
-
-
749
41
-
46
124
4
7
74
$
-
3,004
$
Hemlo
Total
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
$
1,394
17,690
134
3,943
49,009
291
789
1,275
3,478
3,594
23,067
751
2,379
1,871
(21,971)
87,694
$
During the year ended December 31, 2018, the majority of spending took place on the Windfall Property which is the subject
of an ongoing drill program of 800,000 metres. As of the date of this MD&A, the Corporation had drilled approximately
680,074 metres on the Windfall Property (including 179,565 meters in 2018), 35,868 metres on the Quévillon Osborne-Bell
Property (including 33,976 in 2018), 38,771 metres on the Urban Barry area (including 7,302 metres in 2018), 1,742 metres
on the Urban Barry Base Metals Project, 799 meters on the Quévillon Base Metals Project and 5,639 metres on the Kan
Project. As well, the Corporation advanced 2,329 metres in the Windfall exploration ramp. Management expects the
exploration ramp to be advanced at the rate of approximately 170 metres per month. Underground mapping continues on
the ramp.
24
5.
OUTLOOK
The operational outlook below and described herein reflects the Corporation's current operations.
The Corporation is planning to spend approximately $8 million per month on exploration activities on all of Osisko's properties,
$418,000 per month on general and administration expenses and $366,000 a month on salaries and benefits, excluding non-
cash items, for the remainder of 2019. The Corporation has raised approximately $283 million since January 1, 2017. The
proceeds from these financings have been or will be used, directly or indirectly, to fund "Canadian exploration expenditures"
on the Corporation's Québec and Ontario properties and general working capital. An 800,000-metre drill campaign continues
with approximately 15 drill rigs on the Windfall Property, three at the Urban-Barry Property and two at the Quévillon Osborne-
Bell Properties. The Corporation is planning to begin its pre-feasibility study work on the Windfall Property in 2019 and has
begun advancement of the existing exploration ramp with a single heading towards the Lynx Zone in order to complete the
second bulk sample and will continue to perform underground drilling through-out the 2019 year. The goal of the program is to
increase the confidence in the existing resources as well as to expand all existing resources. Due to current market conditions
the Corporation reduced its exploration spending and general and administrative costs in order to conserve cash and continue
to advance the main deposits toward pre-feasibility. The Corporation has reduced general and administrative costs in 2018 by
reducing head count at head office and reducing expenses relating to travel and marketing initiatives.
6.
INVESTMENTS
The Corporation's assets include a portfolio of investments in public and private companies. The Corporation invests in various
companies within the mining industry for investment purposes and strategic decisions. In addition to investment objectives, in
some cases, the Corporation may decide to take a more active role in the investee, including providing management personnel,
technical and/or administrative support, as well as nominating individuals to the investee's board of directors.
The Corporation's position in Barkerville Gold Mines Ltd. ("Barkerville") is reflected as "Investment in Associates" in the financial
statements of the Corporation as of December 31, 2018. On August 8, 2016, the Corporation acquired 50 million common
shares of Barkerville and immediately classified this investment as an Investment in Associate. Subsequent to this initial
investment, Osisko has acquired a further 32,401,741 shares in Barkerville for $20,274,000 cash which now represents
approximately 16% ownership in Barkerville. The Corporation's Chairman, Sean Roosen, acts as Chairman of the board of
directors of Barkerville and Mr. John Burzynski acts as a member of board of directors of Barkerville.
On February 21, 2017, the Corporation acquired 31.7 million common shares of Beaufield and immediately classified this
investment as an "Investment in Associate". Subsequent to its initial investment, Osisko acquired a further 24,420,800 shares
in Beaufield for $4,154,000 increasing its ownership to approximately 26%. The Corporation's Executive Vice President of
Exploration and Resource Development, Robert Wares, was a member of Beaufield's board of directors. On October 19, 2018,
Osisko completed the Beaufield Arrangement, pursuant to which Osisko acquired all the outstanding common shares of
Beaufield that it did not already hold. Under the terms of the Beaufield Arrangement, each former shareholder of Beaufield
received 0.0482 common shares of Osisko in exchange for each common share of Beaufield held. At the time of the Beaufield
Arrangement, Osisko held 56,120,800 common shares of Beaufield with a carrying value of $6,860,000. The fair value of the
newly acquired Osisko common shares was $8,656,000, which resulted in a gain on revaluation of $1,796,000. The newly
acquired Osisko common shares were subsequently cancelled and the entire investment removed from Investment in
Associates.
25
6.1 Marketable Securities
The following table summarizes information regarding the Corporation's marketable securities as at December 31, 2018 and
December 31, 2017 (in thousands of Canadian dollars):
As at
Balance, beginning of year
Additions
Disposals
Realized (loss)/gain
Unrealized loss
Balance, end of year
December 31,
2018
December 31,
2017
$
$
22,076
5,364
(7,768)
(694)
(6,365)
12,613
15,020
32,610
(26,203)
2,686
(2,037)
22,076
$
$
During the year ended December 31, 2018, these shares and warrants were fair valued and this resulted in an unrealized loss
of $6,365,000 (2017 – loss of $2,037,000). The Corporation sold shares during the year ended December 31, 2018 which
resulted in a realized loss of $694,000 (2017 – gain of $2,686,000).
6.2
Investments in Associates
The Corporation's investments relating to its interests in Beaufield and Barkerville are detailed as follows (in thousands of
Canadian dollars):
Balance, beginning of year
Cash investment in associates
Share of (loss)/gain for the year
Gain on revaluation of shares
Cancellation of shares upon acqusition (note 5)
Balance, end of year
$
4,740
2,369
(249)
1,796
(8,656)
$
-
51,698
3,800
1,500
-
-
56,998
56,438
6,169
1,251
1,796
(8,656)
56,998
$
$
Beaufield
December 31, 2018
Barkerville
$
Total
$
The fair market value of the Barkerville investment as at December 31, 2018 was $32.9 million. If the Corporation were to have
sold the Barkerville investment on December 31, 2018, the Corporation would have triggered a realized loss of $24 million.
6.3
Long-term Investments
During the year ended December 31, 2018, the Corporation held a $150,000 long-term investment in a non-publicly traded
entity.
26
7.
RESULTS OF OPERATIONS
The following table summarizes the Corporation's Statement of Loss and Comprehensive Loss for the years ended December
31, 2018 and 2017 (in thousands of Canadian dollars):
Expenses
Compensation
General and administration expenses
General exploration
Exploration and evaluation assets written off
Flow-through premium income
Unrealized loss from marketable securities
Impairment on long-term investment
Realized loss/(gain) from marketable securities
Realized gain from sale of equipment
Foreign currency exchange gain
Other income
Operating loss
Finance income
Finance costs
Net finance income
Share of (gain)/loss of associate
Gain on revaluation of investment in associate
Loss/(income) before tax
Deferred income tax expense
Loss and comprehensive loss
Three months ended
Year ended
December 31,
2018
December 31,
2017
December 31,
2018
December 31,
2017
$
3,909
1,122
-
6,763
(1,209)
1,132
30
1,289
-
-
(165)
12,871
(512)
34
(478)
(1,192)
(1,796)
9,405
2,208
11,613
$
3,825
1,424
15
262
(9,908)
4,129
-
(924)
-
$
20,011
5,414
60
6,763
(13,076)
6,365
30
694
(6)
(1)
(38)
(1,216)
(532)
24
(508)
342
-
(1,382)
5,864
4,482
-
(760)
25,495
(1,381)
135
(1,246)
(1,251)
(1,796)
21,202
12,794
33,996
$
20,486
5,935
67
2,662
(25,991)
2,037
-
(2,686)
-
(638)
(330)
1,542
(1,507)
166
(1,341)
(608)
-
(407)
18,443
18,036
7.1
Three Month Period Ended December 31, 2018 as Compared to Three Month Period Ended December 31, 2017
Loss and comprehensive loss increased by $7.1 million from $4.5 million for the three-month period ended December 31, 2017
to $11.6 million for the three-month period ended December 31, 2018, due to an increase in exploration and evaluation assets
written off of $6.5 million (non-cash write off), a decrease in deferred income tax expense of $3.7 million (non-cash expense),
a decrease in flow-through premium income of $8.7 million (non-cash expense), a change in realized gain/loss from marketable
securities of $2.2 million. This was partially offset by, a decrease in unrealized loss from marketable securities of $3 million
(non-cash expense), a change in share of gain/loss of associate of $1.5 million (non-cash gain/loss) and a gain on revaluation
of investment in associate of $1.8 million.
General and administration expenses decreased by $302,000 to $1.1 million for the three-month period ended December 31,
2018, compared with $1.4 million for the same period in 2017. This decrease was mostly due to a decrease in office expenses
of $460,000 due to cost-cutting measures implemented by management.
Flow-through premium income was $1.2 million during the three-month period ended December 31, 2018, compared to $9.9
million during the same period in 2017. This income was derived from the increased number of flow-through offerings that took
place during 2017 compared to 2018, combined with the amount of "Canadian exploration expenditures" that were spent during
such period. On the issuance of flow-through shares, a flow-through share premium liability is recognized. Upon the
Corporation incurring flow-through eligible expenditures, the Corporation recognizes flow-through premium income and
decreases the flow-through premium liability.
27
During the three-month period ended December 31, 2018, the Corporation maintained a portfolio of securities that were
strategically invested in the marketable securities of exploration and development companies. As a result, the Corporation
recognized a realized and unrealized loss in the period of $1.3 million and $1.1 million, respectively. The realized loss was
from the sale of several investments and the unrealized loss was a result of the Corporation marking to market its investments
at period end. The Corporation had a fair market value of $14.2 million in marketable securities as at December 31, 2018,
compared to $22.1 million as at December 31, 2017.
Net finance income during the three-month period ended December 31, 2018 decreased by $30,000 to $478,000, compared
with $508,000 for the same period in 2017. The main reason was the decreased cash balance of the Corporation compared
to the prior period. The Corporation had $88.3 million of cash and cash equivalents as at December 31, 2018.
Share of gain of associates recognized during the three-month period ended December 31, 2018 was $1.1 million compared
to a loss of $342,000 for the same period in 2017. Management determined that, for accounting purpose, the Corporation held
significant influence over the decision-making process of Beaufield and Barkerville during the three-month period ended
December 31, 2018, and as such recognized its share of these entities' net losses and net incomes. In October 2018, Osisko
completed its previously announced business combination with Beaufield, pursuant to which Osisko acquired all the common
shares of Beaufield by way of a statutory plan of arrangement, resulting in removing the investment from being accounted for
as an associate, and commencing consolidating the entity.
7.2
Year Ended December 31, 2018 as Compared to Year Ended December 31, 2017
Loss and comprehensive loss increased by $15.9 million from a loss of $18 million for the year ended December 31, 2017 to
a loss of $34 million for the year ended December 31, 2018, due to a decrease in flow-through premium income of $12.9 million
(non-cash income), a decrease in deferred income tax expense of $5.6 million (non-cash expense), an increase in unrealized
loss from marketable securities of $4.3 million (non-cash gain/loss), a change in realized gain/loss from marketable securities
of $3.4 million, an increase in exploration and evaluation assets written off of $4.1 million (non-cash write off) and a decrease
in foreign currency exchange gain of $638,000 (non-cash gain). This was partially offset by a decrease in deferred income tax
expense of $7.9 million (non-cash expense), an increase in share of gain of associates of $643,000, a decrease in general
and administrative expenses of $521,000 due to cost-cutting measures implemented by management, a decrease in
compensation expense of $475,000 and a gain on revaluation of investment in associate of $1.8 million.
Compensation expenses decreased in the year ended December 31, 2018 by $475,000 to $20 million, compared with $20.5
million in 2017. This decrease was mainly due to the decrease in stock-based compensation of $2.5 million partially offset by
an increase in salaries and benefits of $2 million due to severance payments.
General and administration expenses decreased by $521,000 to $5.4 million for the year ended December 31, 2018, compared
with $5.9 million in 2017. This decrease was mostly due to a decrease in professional expenses of $210,000, travel expenses
of $223,000 and administration services of $252,000 due to cost cutting measures implemented by management. This was
partially offset by an increase in office expenses of $173,000.
Flow-through premium income was $13 million during the year ended December 31, 2018, compared to $26 million in 2017.
This income was derived from the increased number of flow-through offerings that took place during 2017 compared to 2018,
combined with the amount of "Canadian exploration expenditures" that were spent during such period. On the issuance of
flow-through shares, a flow-through share premium liability is recognized. Upon the Corporation incurring flow-through eligible
expenditures, the Corporation recognizes flow-through premium income and decreases the flow-through premium liability.
During the year ended December 31, 2018, the Corporation maintained a portfolio of securities that were strategically invested
in the marketable securities of exploration and development companies. As a result, the Corporation recognized a realized
and unrealized loss in the period of $694,000 and $6.4 million, respectively. The realized loss was from the sale of several
investments and the unrealized loss was a result of the Corporation marking to market its investments at year end.
Net finance income during the year ended December 31, 2018 decreased by $95,000 to $1,246,000, compared with $1.3
million in 2017. The main reason was the decreased cash balance of the Corporation compared to the prior period.
Share of gain of associates recognized during the year ended December 31, 2018 was $1.3 million compared to $608,000 in
2017. Management determined that, for accounting purpose, the Corporation held significant influence over the decision-
28
making process of Beaufield and Barkerville during the year ended December 31, 2018, and as such recognized its share of
these entities' net losses and net incomes. In October 2018, Osisko completed its previously announced business combination
with Beaufield, pursuant to which Osisko acquired all the common shares of Beaufield by way of a statutory plan of
arrangement, resulting in removing the investment from being accounted for as an associate, and commencing consolidating
the entity.
7.3
Cash Flow
The Corporation is dependent upon raising funds in order to fund future exploration programs. See "Liquidity and Capital
Resources" and "Risks and Uncertainties".
Operating Activities
Cash used in operating activities for the year ended December 31, 2018 totaled $7.5 million, compared to $17.3 million in
2017. The decreased outflows were primarily attributable to the net loss of $34 million for the year ended December 31, 2018,
with adjustments for flow-through premium income of $13.1 million, interest income of $1.4 million, stock-based compensation
of $11.6 million, marketable securities loss of $7 million, deferred income tax expense of $12.8 million, exploration and
evaluation assets written off of $6.8 million and changes in items of working capital of $5.5 million.
Financing Activities
Cash provided by financing activities was $99.7 million for the year ended December 31, 2018, compared with $189 million in
2017. In the year ended December 31, 2017, a total of $173.3 million was raised through private placements, net of transaction
costs, and the exercise of stock options and warrants resulted in inflows of $1.8 million and $13.9 million, respectively. For the
year ended December 31, 2018, a total of $97.2 million was raised through private placements, net of transaction costs, and
the exercise of stock options and warrants resulted in inflows of $1.7 million and $760,000, respectively.
Investing Activities
Cash used by investing activities for the year ended December 31, 2018 totaled $115.4 million, compared with $141.5 million
in 2017. In the year ended December 31, 2017, this outflow is primarily attributable to exploration and evaluation expenditures
of $113 million, acquisition of plant and equipment of $6.3 million, acquisition of equity investments of $18.5 million, acquisition
of marketable securities of $31.5 million and partially offset by proceeds on the disposition of marketable securities of $26.2
million. In the year ended December 31, 2018, this outflow is primarily attributable to exploration and evaluation expenditures
of $113 million, acquisition of plant and equipment of $3.2 million, acquisition of equity investments of $6.2 million, acquisition
of marketable securities of $5.4 million and partially offset by proceeds on the disposition of marketable securities of $7.8
million and cash received form the Beaufield Arrangement of $2.7 million.
In management's view, the Corporation has sufficient financial resources to fund current planned exploration programs and
ongoing operating expenses. As at December 31, 2018, the Corporation had cash of $88.3 million, compared to $111.5 million
as at December 31, 2017. The Corporation will continue to be dependent on raising equity or other capital as required unless
and until it reaches the production stage and generates cash flow from operations. See "Cautionary Note Regarding Forward-
Looking Information" and "Risks and Uncertainties".
29
8.
SUMMARY OF QUARTERLY RESULTS
(in thousands of Canadian dollars)
For the period ended
Financial results:
Interest income
Loss
Loss per share*:
Basic and diluted
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
$
$
(512)
11,613
$
$
(199)
4,822
$
$
(278)
6,334
$
$
(392)
11,227
$
0.05
$
0.02
$
0.03
$
0.05
Financial position:
Working capital (non-IFRS measurement)**
Exploration and evaluation assets
Total assets
Share capital
Deficit
Number of shares issued and outstanding
* Basic and diluted loss per share is calculated based on the weighted-average number of common shares of the Corporation outstanding.
** Working Capital is a non-IFRS measurement with no standardized meaning under IFRS. For further information and a detailed
reconciliation, please see section 18.
(in thousands of Canadian dollars)
63,601
$
317,877
$
463,862
$
460,615
$
$
(91,332)
208,887,322
128,182
368,902
572,868
580,616
(107,767)
257,201,331
91,802
294,733
471,735
458,611
(84,998)
207,920,322
107,884
344,032
532,972
530,204
(96,154)
239,867,438
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
For the period ended
Financial results:
Interest income
Loss
Loss per share*:
Basic and diluted
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
$
$
(532)
4,482
$
$
(359)
12,575
$
$
(347)
401
$
$
(269)
578
$
0.02
$
0.07
$
-
$
-
Financial position:
Working capital (non-IFRS measurement)**
Exploration and evaluation assets
Total assets
Share capital
Deficit
Number of shares issued and outstanding
* Basic and diluted loss/(earnings) per share is calculated based on the weighted-average number of common shares of the Corporation
outstanding.
** Working Capital is a non-IFRS measurement with no standardized meaning under IFRS. For further information and a detailed
reconciliation, please see section 18.
129,108
188,016
378,599
375,754
(56,714)
187,667,158
134,224
261,920
481,389
456,231
(73,771)
207,845,240
84,782
228,560
398,771
384,771
(69,289)
190,032,897
154,078
163,807
369,016
365,258
(56,313)
184,476,725
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
9.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2018, the Corporation had a cash balance of $88.3 million (December 31, 2017 - $111.5 million) and
working capital of $128.2 million (December 31, 2017 - $134.2 million). Cash and working capital decreased from December
31, 2017, due to spending on the Windfall Property and the expenditures incurred in connection with other exploration activities
in Canada. The majority of the Corporation's financial liabilities have contractual maturities of less than 30 days, and are subject
to normal trade terms.
30
The Corporation has no history of revenues from its operating activities. The Corporation is not in commercial production on
any of its mineral properties and accordingly does not generate cash from operations. During the year ended December 31,
2018, the Corporation had negative cash flow from operating activities, and the Corporation anticipates it will have negative
cash flow from operating activities in future periods.
The Corporation has, in the past, financed its activities by raising capital through equity issuances. Until Osisko can generate
a positive cash flow position, in order to finance its exploration programs, the Corporation will remain reliant on the equity
markets for raising capital, in addition to adjusting spending, disposing of assets and obtaining other non-equity sources of
financing.
The Corporation believes it has sufficient cash resources and the ability to raise funds to meet its exploration and administrative
overhead expenses and maintain its planned exploration activities for the next 12 months. However, there is no guarantee that
the Corporation will be able to maintain sufficient working capital in the future due to market, economic and commodity price
fluctuations. See "Risks and Uncertainties".
10.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Corporation has the following commitments as at December 31, 2018 (in thousands of Canadian dollars):
Office leases
Camp trailers and equipment leases
Total
2023
1,127 484 290 273 80 -
-
3,293 2,349 881 63 -
2021
2019
2020
2022
Total
$
* Québec Prospects minimum exploration commitment of $1,200 per claim (1,254) to be made within two periods from the date of grant
$
$
$
4,420
2,833
1,171
336
$
80
$
-
On October 5, 2016, the Corporation entered into the Osisko GR Earn-In Agreement pursuant to which the Corporation may
earn a 100% interest in 28 exploration properties held by Osisko GR upon incurring exploration expenditures totaling $32
million over the seven-year terms of the Osisko GR Earn-In Agreement, of which $5 million must be completed within one year.
The Osisko GR Earn-In Agreement was amended on February 16, 2017 to carve out the Kan Project, and instead of $5 million,
$4.1 million must be completed prior to December 31, 2017. The earn-in agreement was amended again on December 15,
2017 to extend the deadline of spending $4.1 million to December 31, 2018. As of December 31, 2018, all required amounts
have been spent.
The Corporation is also committed to an annual $25,000 advanced royalty payment on the Gold Pike Project.
As of December 31, 2018, the Corporation has the following flow-through funds to be spent by December 31, 2019 (in
thousands of Canadian dollars):
Closing Date of Financing
September 18, 2018
Total
Province
Québec
Remaining Flow-through Funds
$
55,084
55,084
11.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation does not have any off-balance sheet arrangements.
12.
TRANSACTIONS WITH RELATED PARTIES
Balances and transactions between the Corporation and its subsidiaries have been eliminated on consolidation and are not
disclosed in this note. Details of the transactions between the Corporation and other related parties are disclosed below.
During the year ended December 31, 2018, management fees, geological services, rent and administration fees of $1,849,000
(2017 - $1,487,000) were incurred with Osisko GR, a related company of the Corporation by virtue of Osisko GR owning or
31
controlling, directly or indirectly, greater than 10% of the issued and outstanding common shares of the Corporation. Also, Mr.
John Burzynski, President and Chief Executive Officer of the Corporation, as well as Mr. Sean Roosen, Chairman of the board
of directors of the Corporation, serve as directors and/or senior officers of Osisko GR. Accounts payable to Osisko GR as at
December 31, 2018 were $134,000 (2017 - $276,000). During the year ended December 31, 2018, management fees,
geological services, rent and administration fees of $132,000 (2017 - $879,000) were charged to Osisko GR by the
Corporation. Accounts receivable from Osisko GR as at December 31, 2018 were $79,000 (2017 - $195,000).
The following table summarizes remuneration attributable to key management personnel for the years ended December 31,
2017 and 2018:
For the year ended
Salaries expense of key management
Directors' fees
Stock-based compensation
Total
December 31,
2018
December 31,
2017
$
$
1,915
349
7,904
10,168
2,289
381
8,072
10,742
$
$
During the year ended December 31, 2018, management fees, geological services, rent and administration fees of $140,000
(2017 - $22,000) were charged to the Corporation's associate, Barkerville (note 11), by the Corporation. Accounts receivable
from Barkerville as at December 31, 2018 were $9,000 (2017 - $nil). During the year ended December 31, 2018, geological
services, and administration fees of $128,000 (2017 - $90,000) were incurred with Barkerville. Accounts payable from
Barkerville as at December 31, 2018 were $nil (2017 - $nil).
13
OUTSTANDING SHARE DATA
As at March 6, 2019 the Corporation had the following securities outstanding: (i) 260,916,588 common shares of the
Corporation; (ii) 21,156,087 stock options to purchase common shares of the Corporation at a weighted average exercise price
of $2.64 per option; (iii) 360,724 common share purchase warrants outstanding at a weighted average exercise price of $3.94
per warrant, on a one-for-one basis; (iv) 1,575,000 restricted share units (the "RSU") and (v) 650,000 deferred share units (the
"DSU"). On a fully diluted basis, the Corporation would have 284,658,399 common shares of the Corporation issued and
outstanding, after giving effect to the exercise of the options, warrants, RSUs and DSUs of the Corporation that are outstanding.
The following table summarizes the options outstanding and exercisable as at December 31, 2018:
Range of exercise
prices per share
($)
Weighted-average
remaining years of
contractual Life
Options outstanding
Number of stock
options
outstanding
Weighted average
exercise price ($)
Weighted-average
remaining years of
contractual life
Options exercisable
Number of stock
options
exercisable
Weighted average
exercise price ($)
0.60 to 1.12
1.13 to 1.71
1.72 to 3.21
3.22 to 3.45
3.45 to 4.79
4.80 to 6.23
0.48 to 6.23
2.1
1.7
3.5
3.1
3.6
1.8
2.8
4,266,993
3,551,823
2,372,121
3,731,666
5,976,165
115,680
20,014,448
$1.04
$1.20
$2.63
$3.41
$3.98
$6.23
$2.61
2.1
1.7
3.0
3.1
3.3
1.8
2.5
4,266,993
3,551,823
1,695,439
2,593,328
2,884,483
115,680
15,107,746
$1.04
$1.20
$2.75
$3.41
$4.23
$6.23
$2.32
32
The following table summarizes the DSU and RSU outstanding and exercisable as at December 31, 2018:
Oustanding at December 31, 2017
Granted
Oustanding at December 31, 2018
Number of DSUs
Number of RSUs
-
250,000
250,000
-
450,000
450,000
In April 2017, Osisko established a DSU Plan and a RSU Plan. Under the plans, the DSUs can be granted to non-executive
directors and the RSUs can be granted to executive officers and key employees, as part of their long-term compensation
package, entitling them to receive payout in cash or shares, or a combination of both. Should the payout be in cash, the cash
value of the payout would be determined by multiplying the number of DSUs and the RSUs vested at the payout date by the
five-day volume weighted average price from closing price of the Corporation's shares on the day prior to the payout date.
Should the payout be in shares, each RSU and each DSU represents an entitlement to one common share of the Corporation.
The following tables summarize the warrants issued and outstanding as at December 31, 2018:
13.1
Publicly Traded Warrants
Outstanding as at January 1, 2017
Exercised
Outstanding at December 31, 2017
Exercised
Expired
Outstanding at December 31, 2018
Number of
warrants
130,631,300
(5,469,880)
125,161,420
(68,700)
(125,092,720)
-
$
Weighted-average
exercise price
0.15
0.15
0.15
0.15
0.15
$
-
$
On August 25, 2015, 130,636,320 common share purchase warrants of the Corporation (the "EH Consideration Warrants")
were issued to Eagle Hill shareholders in connection with the acquisition by the Corporation of Eagle Hill. The EH Consideration
Warrants were governed by the terms of a warrant indenture dated August 24, 2015 between Osisko and Equity Financial
Trust Company, as warrant agent, which warrant indenture is available under Osisko's issuer profile on SEDAR
(www.sedar.com). The EH Consideration Warrants were listed and posted for trading on the Toronto Stock Exchange under
the symbol "OSK.WT". As a result of a share consolidation by Osisko, which was affected on August 25, 2015 after the effective
time of the acquisition of Eagle Hill, each EH Consideration Warrants was exercisable until August 25, 2018 and, upon exercise
of 20 EH Consideration Warrants at $0.15 per warrant for a total payment of $3.00, a holder of such warrant was entitled to
receive one common share of the Corporation. As of December 31, 2018, all unexercised EH Consideration Warrants have
expired.
13.2 One-for-one Warrants
Outstanding as at January 1, 2017
Granted
Exercised
Outstanding at December 31, 2017
Issuance of warrants on acquisition of Beaufield Resources
Exercised
Expired
Outstanding at December 31, 2018
Number of
warrants
Weighted-
average
exercise price
7,240,854
$
1.62
15,327,000
(3,355,955)
5.00
1.53
19,211,899
$
4.33
154,240
(520,800)
(15,197,540)
2.39
1.44
5.00
3,647,799
$
1.89
33
On February 3, 2016, the Corporation completed a private placement offering of subscription receipts pursuant to which it
issued and sold 10,521,700 subscription receipts of the Corporation. In conjunction with the completion of an arrangement with
Niogold on March 11, 2016, each subscription receipt was converted into one common share of the Corporation and one
common share purchase warrant. All of common share purchase warrants issued on February 3, 2016 expired on February 3,
2019.
On February 28, 2017, the Corporation completed a private placement offering pursuant to which it issued and sold 15,327,000
units of the Corporation. Each unit is comprised of one common share and one common share purchase warrant of the
Corporation. As of December 31, 2018, all unexercised common share purchase warrants issued on February 28, 2017 have
expired.
14.
CRITICAL ACCOUNTING ESTIMATES
The preparation of these consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and
expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed by management on an ongoing basis. Revisions to accounting
estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or in the year of the
revision and future year if the revision affects both current and future year.
i) Significant judgments in applying accounting policies
The areas that require management to make significant judgments in applying the Corporation's accounting policies in
determining carrying values include, but are not limited to:
Income taxes:
The Corporation is subject to income taxes in various jurisdictions. Significant judgment is required in determining the provision
for income taxes, due to the complexity of legislation, including the judgments around the use of flow-through share financing.
There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course
of business.
Determination of significant influence over equity investments:
Judgment is needed to assess whether the Corporation's interest in a marketable security meets the definition of significant
influence and therefore would be accounted for under the equity method as opposed to fair value through profit and loss.
Management makes this determination based on its legal ownership interest, board representation and through an analysis of
the Corporation's participation in entities’ policy making process. In the years ended December 31, 2018 and 2017,
management determined it was able to exert significant influence over Barkerville Gold Mines Ltd. (“Barkerville”) and Beaufield
and started to account for these investments as associates under the equity method. In October 2018, Osisko completed its
previously announced business combination with Beaufield, pursuant to which Osisko acquired all the common shares of
Beaufield by way of a statutory plan of arrangement, resulting in removing the investment from being accounted for as an
associate, and commencing consolidating the entity.
Impairment of investments in associates:
The Corporation follows the guidance of IAS 28, Investments in Associates and Joint Ventures to assess whether there are
impairment indicators which may lead to the recognition of an impairment loss with respect to its net investment in an
associate. This determination requires significant judgement in evaluating if a decline in fair value is significant or prolonged,
which triggers a formal impairment test. In making this judgement, the Corporation’s management evaluates, among other
factors, the duration and extent to which the fair value of an investment is less than its carrying amount, the volatility of the
34
investment and the financial health and business outlook for the investee, including factors such as the current and expected
status of the investee’s exploration projects and changes in financing cash flows.
ii) Significant accounting estimates and assumptions
The areas that require management to make significant estimates and assumptions in determining carrying values include, but
are not limited to:
Impairment of non-financial assets:
The Corporation assesses its cash-generating units at each reporting date to determine whether any indication of impairment
exists. Where an indicator of impairment exists, an estimate of the recoverable amount is made, which is the higher of the
fair value less costs of disposal and value in use. The determination of the recoverable amount requires the use of estimates
and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and
future operating performance. Fair value is determined as the amount that would be obtained from the sale of the asset in an
arm's-length transaction between knowledgeable and willing parties.
Fair value of stock options and warrants:
Determining the fair value of stock options and warrants involves estimates of interest rates, expected life of options and
warrants, expected forfeiture rate, share price volatility and the application of the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires the input of highly subjective assumptions that can materially affect the fair value
estimate. Stock options granted vest in accordance with the stock option plan. The valuation of stock-based compensation is
subjective and can impact profit and loss significantly. The Corporation has applied a forfeiture rate in arriving at the fair value
of stock-based compensation to be recognized, reflecting historical experience. Historical experience may not be
representative of actual forfeiture rates incurred.
Several other variables are used when determining the value of stock options and warrants using the Black-Scholes valuation
model:
•
•
Volatility: The Corporation uses historical information on the market price of peer companies to determine the
degree of volatility at the date when the stock options are granted. Therefore, depending on when the stock options
and warrants were granted and the year of historical information examined, the degree of volatility can be different
when calculating the value of different stock options and warrants.
Risk-free interest rate: The Corporation used the interest rate available for government securities of an equivalent
expected term as at the date of the grant of the stock options and warrants. The risk-free interest rate will vary
depending on the date of the grant of the stock options and warrants and their expected term.
15.
CHANGES IN IFRS ACCOUNTING POLICIES AND FUTURE ACCOUNTING PRONOUNCEMENTS
Certain pronouncements were issued by the IASB or the International Financial Reporting Interpretations Committee that are
mandatory for accounting years ended after December 31, 2018. Many are not applicable or do not have a significant impact
to the Corporation and have been excluded from the summary below.
a) Future Accounting Pronouncements
IFRS 16, "Leases" ("IFRS 16")
In January 2016, the IASB issued IFRS 16. The new standard brings most leases on-balance sheet for lessees under a single
model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely
unchanged and the distinction between operating and finance leases is retained. This standard is effective for annual reporting
periods on or after January 1, 2019. Early adoption is permitted if IFRS 15 has also been adopted. A lessee can choose to
apply IFRS 16 using either a full retrospective or a modified retrospective approach. The Corporation plans to apply IFRS 16
at the date it becomes effective and has selected the modified retrospective transition approach which does not require
restatement of comparative periods. The Corporation will recognize a lease liability on January 1, 2019 and measure the lease
liability at the present value of the remaining lease payments, discounted using the Corporation's incremental borrowing rate.
The Corporation will also elect to measure right-of-use assets at the same value as the lease liability. IFRS 16 includes
35
recognition exemptions available for short-term leases and leases of low-value items. The Corporation will elect to apply the
exemptions whereby the Corporation will recognize the lease payment as an expense over the lease term.
During the year ended December 31, 2018, the Corporation has substantially completed the identification and assessment of
arrangements that may contain leases that qualify for recognition under IFRS 16. In addition, the Corporation has substantially
completed work to value the right-of-use assets and lease liabilities in arrangements determined to be or contained leases.
Upon the adoption of IFRS 16, the Corporation anticipates it will recognize approximately $3,000,000 of right-of-use assets
and approximately $3,000,000 of associated lease liabilities related to the leases on the consolidated statements of financial
position on January 1, 2019. Due to the recognition of lease assets and liabilities, a higher amount of interest expense and
depreciation will be recognized under IFRS 16 as compared to the current standard. Additionally, a reduction in general and
administration expenses is expected. Lastly, the Corporation expects a reduction in operating cash outflows and investing cash
outflows with a corresponding increase in financing cash outflows under IFRS 16.
IFRIC 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
In June 2017, the IASB issued IFRIC 23. IFRIC 23 clarifies the determination of taxable profit (tax loss), tax bases, unused tax
losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12 and requires an
entity to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments,
that it uses or plans to use in its income tax filing. IFRIC 23 is effective for annual periods beginning on or after January 1,
2019, and permits early adoption. It is expected that the adoption of IFRIC 23 will not have a material impact on the
consolidated financial statements.
b) New Accounting Standards Issued and Effective
IFRS 2, "Share-based Payments" ("IFRS 2")
In June 2016, the IASB issued amendments to IFRS 2, clarifying how to account for certain types of share-based payment
transactions, including the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled
share-based payments, accounting for share-based payment transactions with a net settlement feature for withholding tax
obligations, and accounting for modifications to the terms and conditions of a share-based payment that changes the
classification of the share-based payment transaction from cash-settled to equity-settled. The IFRS 2 amendments are effective
for fiscal year beginning on or after January 1, 2018. The adoption of the amendments did not have a material impact on the
consolidated financial statements.
IFRS 15, "Revenue from Contracts with Customers" ("IFRS 15")
In May 2015, the IASB issued IFRS 15. The core principle of the new standard is for companies to recognize revenue to depict
the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company
expects to be entitled in exchange for those goods or services. The new standard results in enhanced disclosures about
revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue
and contract modifications) and improve guidance for multiple-element arrangements. This standard was adopted on January
1, 2018 using the modified retrospective approach. The adoption of IFRS 15 did not have a material impact on the consolidated
financial statements and there was no transitional adjustment recorded on adoption.
IFRS 9, "Financial Instruments" ("IFRS 9")
In July 2015, the IASB issued IFRS 9 to replace IAS 39 'Financial Instruments: Recognition and Measurement' ("IAS 39").
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing
the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context
of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39
for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also
requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. A new hedge accounting
model was introduced and represents a substantial overhaul of hedge accounting which allows entities to better reflect their
risk management activities in the financial statements.
36
This standard was adopted on January 1, 2018 on a retrospective basis without restating comparatives so any cumulative
adjustments would be recorded in the opening retained earnings on adoption. The adoption of IFRS 9 did not have a material
impact on the consolidated financial statements and there was no transitional adjustment recorded on adoption.
16.
CORPORATE GOVERNANCE
Management and the Board recognizes the value of good corporate governance and the need to adopt best practices. The
Corporation is committed to continuing to improve its corporate governance practices in light of its stage of development and
evolving best practices and regulatory guidance.
The Board has adopted a board mandate outlining its responsibilities and defining its duties. The Board has four committees:
the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, and the
Sustainable Development Committee. Each Committee has a committee charter, which outlines the committee's mandate,
procedures for calling a meeting, and provides access to outside resources.
The Board has also adopted a code of ethics, which governs the ethical behavior of all employees, management and directors.
Separate trading blackout and disclosure policies are also in place. For more details on the Corporation's corporate governance
practices, please refer to Osisko's website (www.osiskomining.com) and the statement of Corporate Governance contained in
Osisko's Management Information Circular dated May 8, 2018.
The Corporation's directors have expertise in exploration, metallurgy, mining, accounting, legal, banking, financing and the
securities industry. The Board and each Committee meets at least four times per year.
17.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure controls and procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by the Corporation in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is
recorded, processed, summarized and reported within the time periods specified in the securities legislation and include
controls and procedures designed to ensure that information required to be disclosed by the Corporation in its annual filings,
interim filings or other reports filed or submitted under securities legislation is accumulated and communicated to the
Corporation's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
Internal controls over financial reporting
Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with IFRS. Management is also responsible for the design
of the Corporation's internal control over financial reporting in order to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
The Corporation's internal controls over financial reporting include policies and procedures that: pertain to the maintenance of
records that, in reasonable detail accurately and fairly reflect the transactions and disposition of assets; provide reasonable
assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with
IFRS and that receipts and expenditures are being made only in accordance with authorization of management and directors
of the Corporation; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of assets that could have a material effect on the financial statements.
As at December 31, 2018 there has not been any material change to internal controls over financial reporting for the year.
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design
and operation of the Corporation's internal controls over financial reporting. As of December 31, 2018, the Chief Executive
Officer and Chief Financial Officer have each concluded that the Corporation's internal controls over financial reporting, as
defined in National Instrument 52-109 - Certification of Disclosure in Issuer's Annual and Interim Filings, are effective to achieve
the purpose for which they have been designed. Because of their inherent limitations, internal controls over financial reporting
can provide only reasonable assurance and may not prevent or detect misstatements. Furthermore, projections of any
37
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
18.
Non-IFRS MEASURES
The Corporation has included a non-IFRS measure for "working capital" in this MD&A to supplement its financial statements,
which are presented in accordance with IFRS. The Corporation believes that this measure provides investors with an improved
ability to evaluate the performance of the Corporation. Non-IFRS measures do not have any standardized meaning prescribed
under IFRS. Therefore, such measures may not be comparable to similar measures employed by other companies. The data
is intended to provide additional information and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
The Corporation determines working capital as follows (in thousands of Canadian dollars):
Reconciliation for the period ended
Current assets
Less current liabilities
Working capital
Reconciliation for the period ended
Current assets
Less current liabilities
Working capital
19.
RISKS AND UNCERTAINTIES
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
138,442
10,260
128,182
121,424
21,084
107,884
December 31,
2017
September 30,
2017
155,308
21,084
134,224
108,439
23,657
84,782
78,374
14,773
63,601
June 30,
2017
138,965
9,857
129,108
110,292
18,490
91,802
March 31,
2017
162,250
8,172
154,078
The Corporation's business, being the acquisition, exploration, and development of mineral properties in Canada, is speculative
and involves a high degree of risk. Certain factors, including but not limited to the ones below, could materially affect the
Corporation's financial condition and/or future operating results, and could cause actual events to differ materially from those
described in forward-looking statements made by or relating to the Corporation. See "Cautionary Note Regarding Forward-
Looking Information". The reader should carefully consider these risks as well as the information disclosed in the Corporation's
financial statements, the Corporation's annual information form dated March 6, 2019, and other publicly filed disclosure
regarding the Corporation, available under Osisko's issuer profile on SEDAR (www.sedar.com).
Nature of Mineral Exploration and Mining
The Corporation's future is dependent on its exploration and development programs. The exploration and development of
mineral deposits involves significant financial risks over a prolonged period of time, which may not be eliminated even through
a combination of careful evaluation, experience and knowledge. Few properties that are explored are ultimately developed into
economically viable operating mines. Major expenditures on the Corporation's exploration properties may be required to
construct mining and processing facilities at a site, and it is possible that even preliminary due diligence will show adverse
results, leading to the abandonment of projects. It is impossible to ensure that preliminary or full feasibility studies on the
Corporation's projects, or the current or proposed exploration programs on any of the properties in which the Corporation has
exploration rights, will result in any profitable commercial mining operations. The Corporation cannot give any assurance that
its current and future exploration activities will result in a discovery of mineral deposits containing mineral reserves.
Estimates of mineral resources and any potential determination as to whether a mineral deposit will be commercially viable
can also be affected by such factors as: the particular attributes of the deposit, such as its size and grade; unusual or
unexpected geological formations and metallurgy; proximity to infrastructure; financing costs; precious metal prices, which are
highly volatile; and governmental regulations, including those relating to prices, taxes, royalties, infrastructure, land use,
importing and exporting of metal concentrates, exchange controls and environmental protection. The effect of these factors
cannot be accurately predicted, but the combination of any or all of these factors may result in the Corporation not receiving
an adequate return on its invested capital or suffering material adverse effects to its business and financial condition.
Exploration and development projects also face significant operational risks including but not limited to an inability to obtain
38
access rights to properties, accidents, equipment breakdowns, labour disputes (including work stoppages and strikes), and
other unanticipated interruptions.
Exploration, Development and Operations
The long term profitability of the Corporation's operations will be in part directly related to the cost and success of its exploration
programs, which may be affected by a number of factors, including the Corporation's ability to extend the permitted term of
exploration granted by the underlying concession contracts. Substantial expenditures are required to establish reserves
through drilling, to develop processes to extract the resources and, in the case of new properties, to develop the extraction
and processing facilities and infrastructure at any site chosen for extraction. Although substantial benefits may be derived from
the discovery of a major deposit, no assurance can be given that any such deposit will be commercially viable or that the funds
required for development can be obtained on a timely basis.
Liquidity and Additional Financing
The Corporation's ability to continue its business operations is dependent on management's ability to secure additional
financing. The Corporation's only source of liquidity is its cash and cash equivalent balances. Liquidity requirements are
managed based upon forecasted cash flows to ensure that there is sufficient working capital to meet the Corporation's
obligations.
The advancement, exploration and development of the Corporation's properties, including continuing exploration and
development projects, and, if warranted, construction of mining facilities and the commencement of mining operations, will
require substantial additional financing. As a result, the Corporation may be required to seek additional sources of equity
financing in the near future. While the Corporation has been successful in raising such financing in the past, its ability to raise
additional equity financing may be affected by numerous factors beyond its control including, but not limited to, adverse market
conditions, commodity price changes and economic downturns. There can be no assurance that the Corporation will be
successful in obtaining any additional financing required to continue its business operations and/or to maintain its property
interests, or that such financing will be sufficient to meet the Corporation's objectives or obtained on terms favourable to the
Corporation. Failure to obtain sufficient financing as and when required may result in the delay or indefinite postponement of
exploration and/or development on any or all of the Corporation's properties, or even a loss of property interest, which would
have a material adverse effect on the Corporation's business, financial condition and results of operations.
No Earnings and History of Losses
The business of developing and exploring resource properties involves a high degree of risk and, therefore, there is no
assurance that current exploration programs will result in profitable operations. The Corporation has not determined whether
any of its properties contains economically recoverable reserves of mineralized material and currently has not earned any
revenue from its projects; therefore, the Corporation does not generate cash flow from its operations. There can be no
assurance that significant additional losses will not occur in the future. The Corporation's operating expenses and capital
expenditures may increase in future years with advancing exploration, development and/or production from the Corporation's
properties. The Corporation does not expect to receive revenues from operations in the foreseeable future and expects to incur
losses until such time as one or more of its properties enters into commercial production and generates sufficient revenue to
fund continuing operations. There is no assurance that any of the Corporation's properties will eventually enter commercial
operation. There is also no assurance that new capital will become available, and if it is not, the Corporation may be forced to
substantially curtail or cease operations.
Market Price of the Common Shares
The common shares trade on the TSX under the symbol "OSK". The market price of securities of many companies, particularly
exploration and development stage mining companies, experience wide fluctuations that are not necessarily related to the
operating performance, underlying asset values or prospects of such companies. There can be no assurance that an active
market for the common shares will be sustained, or that fluctuations in the price of the common shares will not occur. The
market price of the common shares at any given point in time may not accurately reflect the Corporation's long-term value.
Securities class action litigation has often been brought against companies following periods of volatility in the market price of
their securities. The Corporation may in the future be the target of similar litigation. Securities litigation could result in substantial
costs and damages and divert management's attention and resources.
39
Volatility of Commodity Prices
The development of the Corporation's properties is dependent on the future prices of minerals and metals. As well, should any
of the Corporation's properties eventually enter commercial production, the Corporation's profitability will be significantly
affected by changes in the market prices of minerals and metals.
Precious metals prices are subject to volatile price movements, which can be material and occur over short periods of time
and which are affected by numerous factors, all of which are beyond the Corporation's control. Such factors include, but are
not limited to, interest and exchange rates, inflation or deflation, fluctuations in the value of the U.S. dollar and foreign
currencies, global and regional supply and demand, speculative trading, the costs of and levels of precious metals production,
and political and economic conditions. Such external economic factors are in turn influenced by changes in international
investment patterns, monetary systems, the strength of and confidence in the U.S. dollar (the currency in which the prices of
precious metals are generally quoted), and political developments.
The effect of these factors on the prices of precious metals, and therefore the economic viability of any of the Corporation's
exploration projects, cannot be accurately determined. The prices of commodities have historically fluctuated widely, and future
price declines could cause the development of (and any future commercial production from) the Corporation's properties to be
impracticable or uneconomical. As such, the Corporation may determine that it is not economically feasible to commence
commercial production at some or all of its properties, which could have a material adverse impact on the Corporation's
financial performance and results of operations. In such a circumstance, the Corporation may also curtail or suspend some or
all of its exploration activities.
Acquiring Title
The acquisition of title to mineral properties is a very detailed and time-consuming process. The Corporation may not be the
registered holder of some or all of the claims and concessions comprising the Windfall Lake Project, the Marban Block Project
or any of the mineral projects of the Corporation. These claims or concessions may currently be registered in the names of
other individuals or entities, which may make it difficult for the Corporation to enforce its rights with respect to such claims or
concessions. There can be no assurance that proposed or pending transfers will be effected as contemplated. Failure to
acquire title to any of the claims or concessions at one or more of the Corporation's projects may have a material adverse
impact on the financial condition and results of operation of the Corporation.
Title Matters
Once acquired, title to, and the area of, mineral properties may be disputed. There is no guarantee that title to one or more
claims or concessions at the Corporation's projects will not be challenged or impugned. There may be challenges to any of the
Corporation's titles which, if successful, could result in the loss or reduction of the Corporation's interest in such titles. The
Corporation's properties may be subject to prior unregistered liens, agreements, transfers or claims, and title may be affected
by, among other things, undetected defects. In addition, the Corporation may be unable to operate its properties as permitted
or to enforce its rights with respect to its properties. The failure to comply with all applicable laws and regulations, including a
failure to pay taxes or to carry out and file assessment work, can lead to the unilateral termination of concessions by mining
authorities or other governmental entities.
Uncertainty and Inherent Sample Variability
Although the Corporation believes that the estimated mineral resources and mineral reserves at the Windfall Lake Project and
the Marban Block Project have been delineated with appropriately spaced drilling, there exists inherent variability between
duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. There
also may be unknown geologic details that have not been identified or correctly appreciated at the current level of delineation.
This results in uncertainties that cannot be reasonably eliminated from the estimation process. Some of the resulting variances
can have a positive effect and others can have a negative effect on mining and processing operations.
40
Reliability of Mineral Resources Estimates
Mineral resources are estimates only, and no assurance can be given that the anticipated tonnages and grades will be achieved
or that the indicated level of recovery will be realized. Mineral resource estimates may be materially affected by environmental,
permitting, legal, title, taxation, socio-political, marketing and other relevant issues. There are numerous uncertainties inherent
in estimating mineral resources, including many factors beyond the Corporation's control. Such estimation is a subjective
process, and the accuracy of any mineral resource estimate is a function of the quantity and quality of available data, the
nature of the mineralized body and of the assumptions made and judgments used in engineering and geological interpretation.
These estimates may require adjustments or downward revisions based upon further exploration or development work or actual
production experience.
Fluctuations in gold or silver prices, results of drilling, metallurgical testing and production, the evaluation of mine plans after
the date of any estimate, permitting requirements or unforeseen technical or operational difficulties, may require revision of
mineral resource estimates. Should reductions in mineral resources occur, the Corporation may be required to take a material
write-down of its investment in mining properties, reduce the carrying value of one or more of its assets or delay or discontinue
production or the development of new projects, resulting in increased net losses and reduced cash flow. Mineral resources
should not be interpreted as assurances of mine life or of the profitability of current or future operations. Any material reductions
in estimates of mineral resources could have a material adverse effect on the Corporation's results of operations and financial
condition.
Mineral resources are not mineral reserves and have a greater degree of uncertainty as to their existence and feasibility. There
is no assurance that mineral resources will be upgraded to proven or probable mineral reserves.
Uncertainty Relating to Inferred Mineral Resources
Inferred mineral resources are not mineral reserves and do not have demonstrated economic viability. Due to the uncertainty
which may attach to inferred mineral resources, there is no assurance that inferred mineral resources will be upgraded to
proven and probable mineral reserves as a result of continued exploration.
Term and Extension of Concession Contracts
Non-compliance with concession contracts may lead to their early termination by the relevant mining authorities or other
governmental entities. A company whose concession contracts were subject to termination could be prevented from being
issued new concessions or from keeping the concessions that it already held. The Corporation is not aware of any cause for
termination or any investigation or procedure aimed at the termination of any of its concession contracts.
Governmental Regulation
The mineral exploration and development activities of the Corporation are subject to various laws governing prospecting,
development, production, taxes, labour standards and occupational health, mine safety, toxic substances, land use, water use,
land claims of local people and other matters in local areas of operation. Although the Corporation's exploration and
development activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be
given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner
which could limit or curtail exploration, development or production. Amendments to current laws and regulations governing the
Corporation's operations, or more stringent implementation thereof, could have an adverse impact on the Corporation's
business and financial condition.
The Corporation's operations may be subject to environmental regulations promulgated by government agencies from time to
time. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances
produced in association with certain mining operations, such as seepage from tailings disposal areas, which would result in
environmental pollution. A breach of such legislation may result in the imposition of fines and penalties. In addition, certain
types of operations require the submission and approval of environmental impact assessments. Environmental legislation is
evolving in a manner that means standards are stricter, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and
their directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to
reduce the profitability of the Corporation's future operations.
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Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including
orders issued by regulatory or judicial authorities that could cause operations to cease or be curtailed. Other enforcement
actions may include corrective measures requiring capital expenditures, the installation of additional equipment or remedial
actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of
such mining activities and may have civil or criminal fines or penalties imposed upon them for violations of applicable laws or
regulations.
Permitting
The operations of the Corporation require licenses and permits from various governmental authorities. The Corporation will
use its best efforts to obtain all necessary licenses and permits to carry on the activities which it intends to conduct, and it
intends to comply in all material respects with the terms of such licenses and permits. However, there can be no guarantee
that the Corporation will be able to obtain and maintain, at all times, all necessary licenses and permits required to undertake
its proposed exploration and development, or to place its properties into commercial production and to operate mining facilities
thereon. In the event of commercial production, the cost of compliance with changes in governmental regulations has the
potential to reduce the profitability of operations or preclude the economic development of the Corporation's properties.
With respect to environmental permitting, the development, construction, exploitation and operation of mines at the
Corporation's projects may require the granting of environmental licenses and other environmental permits or concessions by
the competent environmental authorities. Required environmental permits, licenses or concessions may take time and/or be
difficult to obtain, and may not be issued on the terms required by the Corporation. Operating without the required
environmental permits may result in the imposition of fines or penalties as well as criminal charges against the Corporation for
violations of applicable laws or regulations.
Surface Rights
The Corporation does not own all of the surface rights at its properties and there is no assurance that surface rights owned by
the government or third parties will be granted, nor that they will be on reasonable terms if granted. Failure to acquire surface
rights may impact the Corporation's ability to access its properties, as well as its ability to commence and/or complete
construction or production, any of which would have a material adverse effect on the profitability of the Corporation's future
operations.
Dependence on Key Personnel
The Corporation's future growth and its ability to develop depend, to a significant extent, on its ability to attract and retain highly
qualified personnel. The Corporation relies on a limited number of key employees, consultants and members of senior
management, and there is no assurance that the Corporation will be able to retain such personnel. The loss of one or more
key employees, consultants or members of senior management, if such persons are not replaced, could have a material
adverse effect on the Corporation's business, financial condition and prospects.
To operate successfully and manage its potential future growth, the Corporation must attract and retain highly qualified
engineering, managerial and financial personnel. The Corporation faces intense competition for qualified personnel in these
areas, and there can be no certainty that the Corporation will be able to attract and retain qualified personnel. If the Corporation
is unable to hire and retain additional qualified personnel in the future to develop its properties, its business, financial condition
and operating results could be adversely affected.
Uninsurable Risks
Mining operations generally involve a high degree of risk. Exploration, development and production operations on mineral
properties involve numerous risks, including but not limited to unexpected or unusual geological operating conditions, seismic
activity, rock bursts, cave-ins, fires, floods, landslides, earthquakes and other environmental occurrences, risks relating to the
shipment of precious metal concentrates or ore bars, and political and social instability, any of which could result in damage
to, or destruction of, the mine and other producing facilities, damage to life or property, environmental damage and possible
legal liability. Although the Corporation believes that appropriate precautions to mitigate these risks are being taken, operations
are subject to hazards such as equipment failure or failure of structures, which may result in environmental pollution and
consequent liability. It is not always possible to obtain insurance against all such risks and the Corporation may decide not to
insure against certain risks because of high premiums or other reasons. Should such liabilities arise, they could reduce or
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eliminate the Corporation's future profitability and result in increasing costs and a decline in the value of the Common Shares.
The Corporation does not maintain insurance against title, political or environmental risks.
While the Corporation may obtain insurance against certain risks in such amounts as it considers adequate, the nature of these
risks is such that liabilities could exceed policy limits or be excluded from coverage. The potential costs that could be associated
with any liabilities not covered by insurance or in excess of insurance coverage may cause substantial delays and require
significant capital outlays, thereby adversely affecting the Corporation's business and financial condition.
Global Financial Conditions
Current global financial conditions have been subject to increased volatility, and access to public financing, particularly for
junior resource companies, has been negatively impacted. These factors may impact the ability of the Corporation to obtain
equity or debt financing in the future and, if obtained, such financing may not be on terms favourable to the Corporation. If
increased levels of volatility and market turmoil continue, the Corporation's operations could be adversely impacted and the
value and price of the Common Shares could be adversely affected.
Information Systems Security Threats
The Corporation's operations depend upon information technology systems which may be subject to disruption, damage or
failure from different sources, including, without limitation, installation of malicious software, computer viruses, security
breaches, cyber-attacks and defects in design.
Although to date the Corporation has not experienced any material losses relating to cyber attacks or other information security
breaches, there can be no assurance that the Corporation will not incur such losses in the future. The Corporation's risk and
exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As
a result, cyber security and the continued development and enhancement of controls, processes and practices designed to
protect systems, computers, software, data and networks from attach, damage or unauthorized access remain a priority. As
cyber threats continue to evolve, the Corporation may be required to expend additional resources to continue to modify or
enhance protective measures or to investigate and remediate any security vulnerabilities.
Competition
The mineral exploration and mining business is competitive in all of its phases. In the search for and acquisition of attractive
mineral properties, the Corporation competes with numerous other companies and individuals, including competitors with
greater financial, technical and other resources. The Corporation's ability to acquire properties in the future will depend on its
ability to select and acquire suitable producing properties or prospects for mineral exploration. There is no assurance that the
Corporation will continue to be able to compete successfully with its competitors in acquiring such properties or prospects, nor
that it will be able to develop any market for the raw materials that may be produced from its properties. Any such inability
could have a material adverse effect on the Corporation's business and financial condition.
Option and Joint Venture Agreements
The Corporation has and may continue to enter into option agreements and/or joint ventures as a means of gaining property
interests and raising funds. Any failure of any partner to meet its obligations to the Corporation or other third parties, or any
disputes with respect to third parties' respective rights and obligations, could have a negative impact on the Corporation.
Pursuant to the terms of certain of the Corporation's existing option agreements, the Corporation is required to comply with
exploration and community relations obligations, among others, any of which may adversely affect the Corporation's business,
financial results and condition.
Under the terms of such option agreements the Corporation may be required to comply with applicable laws, which may require
the payment of maintenance fees and corresponding royalties in the event of exploitation/production. The costs of complying
with option agreements are difficult to predict with any degree of certainty; however, were the Corporation forced to suspend
operations on any of its concessions or pay any material fees, royalties or taxes, it could result in a material adverse effect to
the Corporation's business, financial results and condition.
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The Corporation may be unable to exert direct influence over strategic decisions made in respect of properties that are subject
to the terms of these agreements, and the result may be a materially adverse impact on the strategic value of the underlying
concessions.
Mergers and Amalgamations
The ability to realize the benefits of any merger or amalgamation completed by the Corporation will depend in part on
successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner.
This integration will require the dedication of substantial management effort, time and resources which may divert
management's focus and resources from other strategic opportunities of the Corporation following completion of any such
arrangement, and from operational matters during such a process.
Community Relationships
The Corporation's relationships with the communities in which it operates are critical to ensure the future success of its existing
operations and the construction and development of its projects.
Osisko understands that First Nations people have protected constitutional rights and can offer a unique understanding of the
environment based on their special connection to the land. The Windfall Lake Project is located on Category III lands as
described in the James Bay and Northern Québec Agreement (JBNQA). The Windfall Project site falls within the Traditional
Territory of the Waswanipi Cree First Nation. The Corporation is honouring the existing Advanced Exploration Agreement in
place with the Cree First Nation of Waswanipi, the Grand Council of the Crees Eeyou Istchee, and the Cree Regional Authority.
Upon receipt of the Windfall Lake Project description, the Crown identified two other Aboriginal communities that may have an
interest in the project: the Algonquin Anishinabeg Nation of Lac Simon and the Obedjiwan community of the Atikamekw Nation.
Numerous information sessions have been held throughout 2018 and 2017 to inform and consult the three First Nation
communities and the public on the Windfall Lake Project activities and to address their concerns and to collect their comments.
As the Windfall Project progresses, agreements may have to be negotiated with the First Nations.
While the Corporation is committed to operating in a socially responsible manner and working towards entering into agreements
in satisfaction of such requirements, there is no guarantee that its efforts will be successful, in which case interventions by third
parties could have a material adverse effect on the Corporation's business, financial position and operations.
Conflicts of Interest
Certain of the directors and officers of the Corporation also serve as directors and/or officers of other companies involved in
natural resource exploration, development and mining operations. Consequently, there exists the possibility for such directors
and officers to be in a position of conflict. The directors of the Corporation are required by law to act honestly and in good faith
with a view to the best interests of the Corporation, and to disclose any interest they may have in any project or opportunity of
the Corporation. In addition, each of the directors is required by law to declare his or her interest in and refrain from voting on
any matter in which he or she may have a conflict of interest, in accordance with applicable laws.
Infrastructure
Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure.
Reliable roads, bridges, power sources and water supplies, as well as the location of population centres and pools of labour,
are important determinants which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage,
government or other interference in the maintenance or provision of such infrastructure could impact the Corporation's ability
to explore its properties, thereby adversely affecting its business and financial condition.
The Outstanding Common Shares Could be Subject to Dilution
The exercise of stock options, warrants, the DSUs and the RSUs already issued by the Corporation and the issuance of
additional equity securities in the future could result in dilution in the equity interests of holders of common shares.
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No Dividends Policy
The Corporation has not declared a dividend since incorporation and does not anticipate doing so in the foreseeable future.
Any future determination as to the payment of dividends will be at the discretion of the Board and will depend on the availability
of profit, operating results, the financial position of the Corporation, future capital requirements and general business and other
factors considered relevant by the directors of the Corporation. No assurances in relation to the payment of dividends can be
given.
20.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This MD&A may contain forward-looking statements and forward-looking information within the meaning of applicable
Canadian securities legislation (collectively, "forward-looking information"), including, but not limited to, statements relating to
the future financial or operating performance of the Corporation, the Corporation's mineral projects, the future price of metals,
the estimation of mineral resources, the realization of mineral resource estimates, the timing and amount of estimated future
production (if any), capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs
and timing of future exploration, use of proceeds from financings, requirements for additional capital, government regulation of
mining operations and mineral exploration activities, environmental risks, reclamation expenses, title disputes or claims,
limitations of insurance coverage, development of the Windfall Project, timing (if at all) to complete a pre-feasibility study on
the Windfall Project, advancement of the exploration ramp, underground drilling, timing (if at all) to complete a resource update
on the Urban Barry Property and the Windfall Property, progress towards a feasibility study in 2019 (if at all), areas to be
included in a feasibility study (if any), as well as exploration activities with drill rigs being reduced. Often, but not always,
forward-looking information can be identified by the use of words and phrases such as "plans", "expects", "is expected",
"budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative
variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will"
be taken, occur or be achieved.
Forward-looking information reflects the Corporation's beliefs and assumptions based on information available at the time such
statements were made. Actual results or events may differ from those predicted in forward-looking information. All of the
Corporation's forward-looking information is qualified by (i) the assumptions that are stated or inherent in such forward-looking
information, including the assumptions listed below, and (ii) the risks described in the section entitled "Risks and Uncertainties"
in this MD&A, the financial statements of the Corporation, and the sections entitled "Risk Factors" and "Cautionary Statement
Regarding Forward-Looking Information" in the annual information form of the Corporation for the fiscal year ended December
31, 2018, dated March 6, 2019, which are available on SEDAR (www.sedar.com) under the Osisko's issuer profile.
Although the Corporation believes that the assumptions underlying the forward-looking information contained in this MD&A are
reasonable, this list is not exhaustive of the factors that may affect any forward-looking information. The key assumptions that
have been made in connection with forward-looking information include the following: the significance of drill results and
ongoing exploration activities; timing to obtain assay results from labs; ability of exploration activities (including drill results) to
accurately predict mineralization; the predictability of geological modelling; the accuracy of the Corporation's records of its
property interests; the global economic climate; metal prices; environmental risks; community and non- governmental actions;
that permits required for the Corporation's operations will be obtained on a timely basis in order to permit the Corporation to
proceed on schedule with its planned drilling programs; that skilled personnel and contractors will be available as the
Corporation's operations continue to grow; that the price of gold will exceed levels that will render the project of the Corporation
economical; the relevance of the assumptions, estimates and projections in the Windfall PEA; the timing and results of a
feasibility study on the Windfall Project; and that the Corporation will be able to continue raising the necessary capital to finance
its operations and realize on its mineral resource estimates.
Forward-looking information involves known and unknown risks, future events, conditions, uncertainties and other factors which
may cause the actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by forward-looking information. Such factors include, among others, general business,
economic, competitive, political and social uncertainties; the actual results of current exploration activities; errors in geological
modelling; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices
of metals; possible variations of grade or recovery rates; failure of plant and equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry; political instability; and delays in obtaining governmental
approvals or financing or in the completion of development or construction activities.
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Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking information, there may be other factors that cause actions, events or results
to differ from those anticipated, estimated or intended. Forward-looking information contained herein is given as of the date of
this MD&A and the Corporation disclaims any obligation to update any forward-looking information, whether as a result of new
information, future events or results, except as may be required by applicable securities laws. There can be no assurance that
forward-looking information will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue reliance on forward- looking information.
21.
ADDITIONAL INFORMATION
Additional information regarding the Corporation can be found in the annual information form of the Corporation dated March
6, 2019 for the financial year ended December 31, 2018, which is available under Osisko's issuer profile on SEDAR
(www.sedar.com).
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