OSISKO GOLD ROYALTIES LTD
. . . . . . . . . . . . . . . . . .
Consolidated Financial Statements
For the years
ended
December 31, 2019 and 2018
Osisko Gold Royalties Ltd
Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting
Osisko Gold Royalties Ltd’s (the “Company’s”) management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (United
States), as amended.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as at
December 31, 2019. The Company’s management conducted an evaluation of the Company’s internal control over financial
reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on the Company’s management’s assessment, the Company’s
internal control over financial reporting is effective as at December 31, 2019.
On November 21, 2019, the Company completed its acquisition of Barkerville Gold Mines Ltd. (“Barkerville”). Accordingly, the
acquired assets and liabilities of Barkerville are included in our consolidated balance sheet as at December 31, 2019 and the
results of its operations and cash flows are reported in our consolidated statements of loss and cash flows from November 21,
2019 to December 31, 2019. We have elected to exclude Barkerville from the Company’s assessment of internal control over
financial reporting as of December 31, 2019. Barkerville represented approximately 9.9% of the consolidation total assets and
had no revenues for the year ended December 31, 2019.
The effectiveness of the Company’s internal control over financial reporting as at December 31, 2019 has been audited by
PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, as stated in their report which is located on the
next pages.
(signed) Sean Roosen, Chief Executive Officer
(signed) Elif Lévesque, Chief Financial Officer
February 19, 2020
2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Osisko Gold Royalties Ltd
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Osisko Gold Royalties Ltd and its
subsidiaries (together, the Company) as of December 31, 2019 and 2018, and the related consolidated
statements of loss, comprehensive loss, cash flows and changes in equity for the years then ended,
including the related notes (collectively referred to as the consolidated financial statements). We also have
audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial
performance and its cash flows for the years then ended in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company's internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.
Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
As described in Management's Report on Internal Control over Financial Reporting, management has
excluded Barkerville Gold Mines Ltd. from its assessment of internal control over financial reporting as of
December 31, 2019, because it was acquired by the Company during the year ended December 31, 2019.
We have also excluded Barkerville Gold Mines Ltd. from our audit of internal control over financial
reporting. Barkerville Gold Mines Ltd. is a wholly-owned subsidiary whose total assets and total revenues
excluded from management’s assessment and our audit of internal control over financial reporting
represent 9.9% and 0%, respectively, of the related consolidated financial statement amounts as of and for
the year ended December 31, 2019.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the audit
committee and that (i) relate to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgements. The
communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
Assessment of impairment indicators of royalty, stream and other interests
As described in Notes 4, 6 and 14 to the consolidated financial statements, the Company’s royalty, stream
and other interests carrying amount was $1,130.5 million as of December 31, 2019. Management assesses
at each reporting date whether there are indicators that the carrying amount may not be recoverable which
give rise to the requirement to conduct a formal impairment test. Impairment is assessed at the cash-
generating unit (CGU) level, which is usually at the individual royalty, stream and other interest level for
each property from which cash inflows are generated. Management uses judgement when assessing
whether there are indicators of impairment, including a significant reduction in mineral reserve and
resources, significant negative industry or economic trends, significantly lower production than expected,
a significant drop in current or forecast commodity prices and other relevant operator and financial
information.
The principal considerations for our determination that performing procedures relating to the assessment
of impairment indicators of royalty, stream and other interests is a critical audit matter are (i) there was
judgement by management when assessing whether there were indicators of impairment which would
require a formal impairment test to be performed; which in turn led to (ii) a high degree of auditor
judgement, subjectivity and effort in performing procedures to evaluate audit evidence relating to
management’s assessment of impairment indicators, including a significant reduction in mineral reserve
and resources, significant negative industry or economic trends, significantly lower production than
expected, a significant drop in current or forecast commodity prices and other relevant operator and
financial information.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s assessment of impairment indicators of royalty,
stream and other interests. These procedures also included, among others, evaluating the reasonableness
of management’s assessment of impairment indicators for a sample of royalty, stream and other interests,
including a significant reduction in mineral reserve and resources, significant negative industry or
economic trends, significantly lower production than expected, a significant drop in current or forecast
commodity prices and other relevant operator and financial information by considering (i) the current and
past performance of royalty, stream and other interests; (ii) the consistency with external market and
industry data; (iii) the publicly disclosed information by operators of royalty, stream and other interests;
and (iv) whether management’s assessment of impairment indicators of royalty, stream and other
interests was consistent with evidence obtained in other areas of the audit.
Impairment of royalty, stream and other interests – Renard diamond stream
As described in Notes 4, 6 and 14 to the consolidated financial statements, the Company’s royalty, stream
and other interests carrying amount was $1,130.5 million as of December 31, 2019. In March 2019, the
operator of the Renard diamond mine announced a significant impairment charge on its Renard diamond
mine reflecting an outlook of lower than expected diamond pricing. Further, in September 2019, the
operator of the Renard diamond mine announced that it had applied to the Superior Court of Québec
(Commercial Division) for protection under the Companies’ Creditors Arrangement Act (CCAA) in order
to restructure its business and financial affairs. These were considered indicators of impairment among
other facts and circumstances and, accordingly, management performed two impairment tests of the
Renard diamond stream during 2019. An impairment loss is recognized for the amount by which the
CGU’s carrying amount exceeds its recoverable amount. On September 30, 2019, the Company wrote
down the Renard diamond stream to its recoverable amount of $70.2 million which resulted in a
cumulative impairment charge of $86.1 million for the year ended December 31, 2019. For each
impairment test, management estimated the recoverable amount as fair value less cost of disposal using a
discounted cash-flows approach. Management used significant judgement and assumptions when
estimating cash flow projections for the Renard diamond stream, including expected sale of diamonds
from the Renard diamond stream over the estimated life of the Renard diamond mine, based on expected
long-term diamond prices and discount rates.
The principal considerations for our determination that performing procedures relating to the impairment
of the Company’s Renard diamond stream is a critical audit matter are (i) there was significant judgement
by management when developing the recoverable amount estimates of the Renard diamond stream; which
in turn led to (ii) a high degree of auditor judgement, subjectivity and effort in performing procedures to
evaluate the reasonability of management’s cash flow projections for the Renard diamond stream and
significant assumptions, including expected sale of diamonds from the Renard diamond stream over the
estimated life of the Renard diamond mine, based on expected long-term diamond prices and discount
rates. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to
assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s recoverable amount estimates of the Company’s
Renard diamond stream, including controls over the significant assumptions used in the recoverable
amount estimates. These procedures also included, among others, (i) testing management’s process for
developing the recoverable amount estimates of the Renard diamond stream; (ii) evaluating the
appropriateness of the discounted cash flow models; testing the completeness, accuracy and relevance of
underlying data used in the models; and evaluating the reasonableness of significant assumptions used by
management. Evaluating the reasonableness of the significant assumptions used by management related
to expected sale of diamonds from the Renard diamond stream over the estimated life of the Renard
diamond mine, based on expected long-term diamond prices involved considering the current and past
performance of the Renard diamond mine, consistency with external market and industry data,
information provided by the operator of the Renard diamond mine, whether these assumptions were
consistent with evidence obtained in other areas of the audit and by performing sensitivity analyses.
Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s
discounted cash flow models and certain significant assumptions, such as the discount rates.
Impairment of royalty, stream and other interests – Amulsar stream and offtake
As described in Notes 4, 6 and 14 to the consolidated financial statements, the Company’s royalty, stream
and other interests carrying amount was $1,130.5 million as of December 31, 2019. As of December 31,
2019, the Company wrote down the Amulsar stream and offtake to its recoverable amount of $29.0 million
which resulted in a cumulative impairment charge of $79.8 million for the year ended December 31, 2019.
In September 2019, the operator of the Amulsar mine announced a delay in the timing of the construction
activities, expected first gold pour and ramp up to full production as a result of the 15-month blockade on
construction as well as changes to the expected life of mine and annual production for the Amulsar project.
Further, in December 2019, the operator of the Amulsar mine announced that it had applied to the
Ontario Superior Court of Justice for protection under the CCAA in order to restructure its business and
financial affairs. These were considered indicators of impairment among other facts and circumstances
and, accordingly, management performed two impairment tests of the Amulsar stream and offtake during
2019. An impairment loss is recognized for the amount by which the CGU’s carrying amount exceeds its
recoverable amount. For each impairment test, management estimated the recoverable amount as fair
value less cost of disposal using a discounted cash-flows approach. Management used significant
judgement and assumptions when estimating cash flow projections for the Amulsar stream and offtake,
including expected sale of gold and silver from the Amulsar stream and offtake over the estimated life of
the Amulsar mine, based on expected long-term gold and silver prices and discount rates, and in addition
for the second impairment test, management used significant assumptions with respect to the potential
amendment of the Amulsar stream agreement resulting from probability weighted exit scenarios from the
CCAA process.
The principal considerations for our determination that performing procedures relating to the impairment
of the Company’s Amulsar stream and offtake is a critical audit matter are (i) there was significant
judgement by management, including the use of specialists, when developing the recoverable amount
estimates of the Amulsar stream and offtake; which in turn led to (ii) a high degree of auditor judgement,
subjectivity and effort in performing procedures to evaluate the reasonability of management’s cash flow
projections for the Amulsar stream and offtake and significant assumptions, including expected sale of
gold and silver from the Amulsar stream and offtake over the estimated life of the Amulsar mine, based on
expected long-term gold and silver prices, discount rates, and the potential amendment of the Amulsar
stream agreement resulting from probability weighted exit scenarios from the CCAA process. In addition,
the audit effort involved the use of professionals with specialized skill and knowledge to assist in
performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s recoverable amount estimates of the Company’s
Amulsar stream and offtake, including controls over the significant assumptions used in the recoverable
amount estimates. These procedures also included, among others, (i) testing management’s process for
developing the recoverable amount estimates of the Amulsar stream and offtake; (ii) evaluating the
appropriateness of the discounted cash flow models; testing the completeness, accuracy and relevance of
underlying data used in the models; and evaluating the reasonableness of significant assumptions used by
management. The work of management’s specialists was used in performing the procedures to evaluate
the reasonableness of the estimated life of the Amulsar mine. As a basis for using this work, the specialists’
qualifications and objectivity were understood, as well as their methods and assumptions. The procedures
performed also included an evaluation of their conclusions. Evaluating the reasonableness of the
significant assumptions used by management related to the expected sale of gold and silver from the
Amulsar stream and offtake over the estimated life of the Amulsar mine, based on expected long-term gold
and silver prices involved considering the recent developments related to the construction of the Amulsar
mine, consistency with external market and industry data, information provided by the operator of the
Amulsar mine, whether these assumptions were consistent with evidence obtained in other areas of the
audit and by performing sensitivity analyses. Evaluating the reasonableness of the significant assumption
used by management related to the potential amendment of the Amulsar stream agreement resulting from
probability weighted exit scenarios from the CCAA process involved reviewing correspondence between
the Company and the operator advisor. Professionals with specialized skill and knowledge were used to
assist in the evaluation of the Company’s discounted cash flow models and certain significant
assumptions, such as the discount rates.
Impairment of royalty, stream and other interests – Éléonore net smelter return (NSR) royalty
As described in Notes 4, 6 and 14 to the consolidated financial statements, the Company’s royalty, stream
and other interests carrying amount was $1,130.5 million as of December 31, 2019. As of December 31,
2019, the Company wrote down the Éléonore NSR royalty to its recoverable amount of $101.3 million
which resulted in an impairment charge of $27.2 million for the year ended December 31, 2019. In
February 2020, the operator of the Éléonore gold mine announced that it has updated its mineral reserves
and resources estimate for the Éléonore mine as of December 31, 2019. As a result of the update, mineral
reserves and resources decreased by 50%. This was considered an indicator of impairment among other
facts and circumstances and, accordingly, management performed an impairment test of the Éléonore
NSR royalty. An impairment loss is recognized for the amount by which the CGU’s carrying amount
exceeds its recoverable amount. For the impairment test, management estimated the recoverable amount
as fair value less cost of disposal using a discounted cash-flows approach. Management used significant
judgement and assumptions when estimating cash flow projections for the Éléonore NSR royalty,
including expected sale of gold received from the Éléonore NSR royalty, based on the long-term annual
gold production over the estimated life of the Éléonore mine, expected long-term gold price, mineral
reserves and resources and the discount rate.
The principal considerations for our determination that performing procedures relating to the impairment
of the Company’s Éléonore NSR royalty is a critical audit matter are (i) there was significant judgement by
management, including the use of specialists, when developing the recoverable amount estimate of the
Éléonore NSR royalty; which in turn led to (ii) a high degree of auditor judgement, subjectivity and effort
in performing procedures to evaluate the reasonability of management’s cash flow projections for the
Éléonore NSR royalty and significant assumptions, including expected sale of gold received from the
Éléonore NSR royalty, based on the long-term annual gold production over the estimated life of the
Éléonore mine, expected long-term gold price, mineral reserves and resources and the discount rate. In
addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in
performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s recoverable amount estimate of the Company’s
Éléonore NSR royalty, including controls over the significant assumptions used in the recoverable
amount estimate. These procedures also included, among others, (i) testing management’s process for
developing the recoverable amount estimate of the Éléonore NSR royalty; (ii) evaluating the
appropriateness of the discounted cash flow model; testing the completeness, accuracy and relevance of
underlying data used in the model; and evaluating the reasonableness of significant assumptions used by
management. The work of management’s specialists was used in performing the procedures to evaluate
the reasonableness of the mineral reserves and resources. As a basis for using this work, the specialists’
qualifications and objectivity were understood, as well as their methods and assumptions. The procedures
performed also included an evaluation of their conclusions. Evaluating the reasonableness of the
significant assumptions used by management related to the expected sale of gold received from the
Éléonore NSR royalty, based on the long-term annual gold production over the estimated life of the
Éléonore mine, expected long-term gold price and mineral reserves and resources involved considering
the current and past performance of the Éléonore mine, consistency with external market and industry
data, information provided by the operator of the Éléonore mine, whether these assumptions were
consistent with evidence obtained in other areas of the audit and by performing sensitivity analyses.
Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s
discounted cash flow model and certain significant assumptions, such as the discount rate.
Impairment of exploration and evaluation assets – Coulon zinc project
As described in Notes 4, 6 and 16 to the consolidated financial statements, the Company’s exploration and
evaluation assets carrying amount was $42.9 million as of December 31, 2019. As of December 31, 2019,
the Company wrote down the exploration and evaluation asset related to the Coulon zinc project
(Coulon zinc project) to its recoverable amount of $10.0 million which resulted in an impairment charge
of $50.0 million for the year ended December 31, 2019. In 2019, management determined that further
exploration and evaluation expenditures are no longer planned in the near term and that the carrying
amount of the asset is unlikely to be recovered in full from a sale of the project at the current time. This
was considered an indicator of impairment among other facts and circumstances and, accordingly,
management performed an impairment test of the Coulon zinc project. An impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds its recoverable amount. Management used
judgement and assumptions when estimating the recoverable amount as fair value less cost of disposal
using a market approach, based on a dollar value per thousand pounds of mineral reserve/resource of zinc
equivalent for comparable sales transactions realized.
The principal considerations for our determination that performing procedures relating to the impairment
of the Company’s Coulon zinc project is a critical audit matter are (i) there was judgement by management
when developing the recoverable amount estimate of the Coulon zinc project; which in turn led to (ii) a
high degree of auditor judgement, subjectivity and effort in performing procedures to evaluate the
reasonability of management’s recoverable amount estimate for the Coulon zinc project and assumptions,
including a dollar value per thousand pounds of mineral reserve/resource of zinc equivalent for
comparable sales transactions realized. In addition, the audit effort involved the use of professionals
with specialized skill and knowledge to assist in performing these procedures and evaluating the audit
evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s recoverable amount estimate of the Company’s
Coulon zinc project, including controls over the assumptions used in the recoverable amount estimate.
These procedures also included, among others, (i) testing management’s process for developing the
recoverable amount estimate of the Coulon zinc project; (ii) evaluating the appropriateness of the market
approach; and evaluating the reasonableness of assumptions used by management, including a dollar
value per thousand pounds of mineral reserve/resource of zinc equivalent for comparable sales
transactions realized. Professionals with specialized skill and knowledge were used to assist in evaluating
the reasonableness of the assumptions used by management related to the dollar value per thousand
pounds of mineral reserve/resource of zinc equivalent for comparable sales transactions realized by
comparing this value to external market and industry data for comparable sales transactions realized.
Montréal, Canada
February 19, 2020
We have served as the Company’s auditor since 2006.
1 CPA auditor, CA, public accountancy permit No. A123475
Osisko Gold Royalties Ltd
Consolidated Balance Sheets
As at December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars)
Assets
Current assets
Cash
Short-term investments
Amounts receivable
Other assets
Non-current assets
Investments in associates
Other investments
Royalty, stream and other interests
Mining interests and plant and equipment
Exploration and evaluation
Goodwill
Other assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Dividends payable
Provisions and other liabilities
Non-current liabilities
Long-term debt
Provisions and other liabilities
Deferred income taxes
Equity
Share capital
Warrants
Contributed surplus
Equity component of convertible debentures
Accumulated other comprehensive income
Retained earnings (deficit)
December 31,
2019
$
December 31,
2018
$
Notes
8
9
10
11
12
13
14
15
16
17
11
18
21
19
20
19
24
21
22
20
108,223
20,704
6,330
5,172
140,429
103,640
67,886
1,130,512
343,693
42,949
111,204
6,940
1,947,253
18,772
7,874
1,289
27,935
349,042
29,365
47,465
453,807
1,656,350
18,072
37,642
17,601
13,469
(249,688)
1,493,446
1,947,253
174,265
10,000
12,321
1,015
197,601
304,911
109,603
1,414,668
189
95,002
111,204
1,468
2,234,646
11,732
7,779
3,494
23,005
352,769
-
87,277
463,051
1,609,162
30,901
21,230
17,601
23,499
69,202
1,771,595
2,234,646
APPROVED ON BEHALF OF THE BOARD
(signed) Sean Roosen, Director
(signed) Joanne Ferstman, Director
The notes are an integral part of these consolidated financial statements.
11
Osisko Gold Royalties Ltd
Consolidated Statements of Loss
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
Revenues
Cost of sales
Depletion of royalty, stream and other interests
Gross profit
Other operating expenses
General and administrative
Business development
Exploration and evaluation, net of tax credits
Gain on disposal of stream and offtake interests
Impairment of assets
Operating loss
Interest and dividend income
Finance costs
Foreign exchange gain (loss)
Share of loss of associates
Other gains (losses), net
Loss before income taxes
Income tax recovery
Net loss
Net loss per share
Basic and diluted
Notes
25
25
14
25
25
25
14
14,16
12
25
24
27
2019
$
2018
$
392,599
490,472
(262,881)
(47,009)
(371,305)
(52,612)
82,709
66,555
(23,682)
(6,122)
(191)
7,636
(243,576)
(183,226)
4,632
(23,548)
(1,859)
(22,209)
(48,385)
(18,156)
(4,525)
(183)
9,094
(166,316)
(113,531)
4,756
(25,999)
454
(9,013)
2,598
(274,595)
(140,735)
40,400
35,148
(234,195)
(105,587)
(1.55)
(0.67)
The notes are an integral part of these consolidated financial statements.
12
Osisko Gold Royalties Ltd
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars)
Net loss
Other comprehensive income (loss)
Items that will not be reclassified to the consolidated statement of loss
Changes in fair value of financial assets at fair value through
comprehensive income
Income tax effect
Share of other comprehensive income (loss) of associates
Items that may be reclassified to the consolidated statement of loss
2019
$
2018
$
(234,195)
(105,587)
13,285
(1,728)
(352)
(29,773)
3,926
433
Currency translation adjustments
(29,164)
60,305
Disposal of an investment in an associate
Reclassification to the statements of loss
of the other comprehensive loss
Income tax effect
Other comprehensive income (loss)
Comprehensive loss
695
(92)
-
-
(17,356)
34,891
(251,551)
(70,696)
The notes are an integral part of these consolidated financial statements.
13
Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars)
Operating activities
Net loss
Adjustments for:
Notes
2019
$
2018
$
(234,195)
(105,587)
Share-based compensation
Depletion and amortization
Finance costs
Gain on disposal of stream and offtake interests
Impairment of assets
Impairment of an investment in associate
Share of loss of associates
Net gain on acquisition of investments
Net loss (gain) on disposal of investments
Net loss (gain) on dilution of investments in associates
Change in fair value of financial assets at fair value through profit and loss
Deferred income tax recovery
Foreign exchange loss
Settlement of deferred and restricted share units
Other
14
14,16
12
7
Net cash flows provided by operating activities
before changes in non-cash working capital items
Changes in non-cash working capital items
Net cash flows provided by operating activities
Investing activities
Acquisition of short-term investments
Cash acquired through the acquisition of Barkerville
Transaction fees paid on acquisition of Barkerville
Acquisition of investments
Proceeds on disposal of investments
Acquisition of royalty and stream interests
Proceeds on sale of royalty and stream interests
Mining interests and plant and equipment
Exploration and evaluation tax credits, net of expenses
Net cash flows provided by (used in) investing activities
Financing activities
Exercise of share options and shares issued under the share purchase plan
Increase in long-term debt
Repayment of long-term debt
Common shares acquired and cancelled through a share repurchase
Normal course issuer bid purchase of common shares
Dividends paid
Other
Net cash flows used in financing activities
Decrease in cash before effects of exchange rate changes on cash
Effects of exchange rate changes on cash
Decrease in cash
Cash – January 1
Cash – December 31
28
7
7
8
8,320
48,270
7,161
(7,636)
248,300
12,500
22,209
(1,006)
27,391
3,687
1,089
(41,197)
1,901
(589)
173
96,378
(4,780)
91,598
(39,597)
8,312
(1,513)
(62,815)
130,128
(77,814)
57,016
(6,321)
166
7,562
21,783
19,772
(30,000)
(129,486)
(13,533)
(27,455)
(2,991)
(161,910)
(62,750)
(3,292)
(66,042)
174,265
108,223
5,791
52,786
6,864
(9,094)
166,316
9,013
(1,934)
(6,956)
(1,545)
7,837
(35,970)
179
(3,117)
194
84,777
(2,619)
82,158
(10,000)
-
-
(104,746)
27,043
(141,101)
159,383
(105)
3,891
(65,635)
358
-
(123,475)
-
(31,243)
(27,809)
(977)
(183,146)
(166,623)
7,183
(159,440)
333,705
174,265
Additional information related to the consolidated statements of cash flows is presented in Note 26.
The notes are an integral part of these consolidated financial statements.
14
Osisko Gold Royalties Ltd
Consolidated Statement of Changes in Equity
For the year ended December 31, 2019
(tabular amounts expressed in thousands of Canadian dollars)
Number of
common
shares
outstanding
Notes
Share
capital
($)
Warrants
($)
Contributed
surplus
($)
Equity
component of
Accumulated
other
convertible comprehensive
income(i)
debentures
($)
($)
Balance - January 1, 2019
Adoption of IFRS 16
Net loss
Other comprehensive loss
Comprehensive loss
Acquisition of Barkerville
Deemed repurchase of shares held by an associate
Dividends declared
Shares issued – Dividends reinvestment plan
Shares issued – Employee share purchase plan
Share options:
Shared-based compensation
Exercised
Replacement share options exercised
Restricted share units to be settled in common shares:
Share-based compensation
Settlement
Income tax impact
Deferred share units to be settled in common shares:
Transfer of units from cash-settled to equity-settled
Share-based compensation
Settlement
Income tax impact
Normal course issuer bid purchase of common shares
Common shares acquired and cancelled through a share repurchase
Issue costs, net of income taxes of $0.1 million
Warrants expired
Transfer of realized gain on financial assets at fair value through other
comprehensive income
155,443,351 1,609,162
30,901
21,230
17,601
4
7
21
23
21
21
22
-
-
-
-
-
-
-
-
13,560,832
(517,409)
-
198,609
34,550
160,564
(6,100)
-
2,427
466
-
1,355,531
148,984
-
25,119
2,632
-
89,246
-
-
874
-
-
-
7,875
-
(983,900)
(12,385,717)
-
-
-
-
104
-
(10,198)
(128,516)
(184)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,829)
-
-
-
-
1,912
-
-
-
-
2,899
(5,343)
(917)
4,059
(1,872)
(57)
3,722
545
(222)
(50)
-
(1,093)
-
12,829
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance – December 31, 2019(ii)
156,951,952 1,656,350
18,072
37,642
17,601
Retained
earnings
(deficit)
($)
69,202
(383)
(234,195)
-
(234,195)
-
-
(29,977)
-
-
-
-
-
-
(346)
-
-
-
-
-
(1,633)
(45,030)
-
-
Total
($)
1,771,595
(383)
(234,195)
(17,356)
(251,551)
162,476
(6,100)
(29,977)
2,427
466
2,899
19,776
1,715
4,059
(1,344)
(57)
3,722
545
(118)
(50)
(11,831)
(174,639)
(184)
-
23,499
-
-
(17,356)
(17,356)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,326
13,469
(7,326)
(249,688)
-
1,493,446
(i) As at December 31, 2019, accumulated other comprehensive income comprises items that will not be recycled to the consolidated statement of loss amounting to ($19.2 million) and items that may be recycled to the
consolidated statement of loss amounting to $32.7 million.
(ii) As at December 31, 2019, there are 157,469,361 common shares issued, of which 517,409 are deemed to have been repurchased given that one of the Company’s associates owns some the Company’s common
shares.
The notes are an integral part of these consolidated financial statements.
15
Osisko Gold Royalties Ltd
Consolidated Statement of Changes in Equity
For the year ended December 31, 2018
(tabular amounts expressed in thousands of Canadian dollars)
Number of
common
shares
outstanding
Notes
Share
capital
($)
Warrants
($)
Contributed
surplus
($
Equity
component of
Accumulated
other
convertible comprehensive
income (loss)(i)
debentures
($)
Balance - January 1, 2018
Net loss
Other comprehensive income
Comprehensive income (loss)
Dividends declared
Shares issued – Dividends reinvestment plan
Shares issued – Employee share purchase plan
Share options:
Shared-based compensation
Replacement share options:
Fair value of options exercised
Proceeds from exercise of options
Restricted share units to be settled in common shares:
Units granted as payment of a 2017 bonus
Transfer of units from cash-settled to equity-settled
Share-based compensation
Income tax impact
Normal course issuer bid purchase of common shares
Transfer of realized gain on financial assets at fair value through other
comprehensive income (loss)
157,797,193 1,633,013
30,901
13,265
17,601
-
-
-
-
-
-
-
310,492
42,735
-
3,516
513
-
-
2,710
-
13
38
-
-
-
-
(2,709,779)
-
-
-
-
(27,931)
-
-
21
23
21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,106
(13)
-
990
2,426
1,316
140
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance – December 31, 2018
155,443,351 1,609,162
30,901
21,230
17,601
Retained
earnings
($)
202,503
(105,587)
-
(105,587)
(31,213)
-
-
-
-
-
-
-
-
-
(5,015)
8,514
69,202
Total
($)
1,894,405
(105,587)
34,891
(70,696)
(31,213)
3,516
513
3,106
-
38
990
2,426
1,316
140
(32,946)
-
1,771,595
($)
(2,878)
-
34,891
34,891
-
-
-
-
-
-
-
-
-
-
-
(8,514)
23,499
(i) As at December 31, 2018, accumulated other comprehensive income comprises items that will not be recycled to the consolidated statement of loss amounting to ($37.6 million) and items that may be recycled to the
consolidated statement of loss amounting to $61.1 million.
The notes are an integral part of these consolidated financial statements.
16
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
1. Nature of activities
Osisko Gold Royalties Ltd and its subsidiaries (together “Osisko” or the “Company”) are engaged in the business of acquiring
and managing precious metal and other high-quality royalties, streams and similar interests in Canada and worldwide. Osisko
is a public company traded on the Toronto Stock Exchange and the New York Stock Exchange constituted under the
Business Corporations Act (Québec) and is domiciled in the Province of Québec, Canada. The address of its registered
office is 1100, avenue des Canadiens-de-Montréal, Suite 300, Montréal, Québec.
The Company owns a portfolio of royalties, streams, offtakes, options on royalty/stream financings and exclusive rights to
participate in future royalty/stream financings on various projects mainly in Canada. The cornerstone asset is a 5% net
smelter return (“NSR”) royalty on the Canadian Malartic mine, located in Canada. In addition, the Company owns the Cariboo
gold project in Canada and invests in equities of exploration and development companies.
2. Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The accounting policies,
methods of computation and presentation applied in these consolidated financial statements are consistent with those of the
previous financial year, except for the adoption of new accounting standards as further described in Note 3.
The Board of Directors approved the audited consolidated financial statements for issue on February 19, 2020.
3. New accounting standards
Amendments to IFRS 3 Business Combinations
On October 22, 2018, the IASB issued amendments to the guidance in IFRS 3 Business Combinations. Under the
amendments, the definition of a business is amended and requires an acquisition to include an input and a substantive
process that together significantly contribute to the ability to create outputs. The definition of the term “outputs” is also
amended to focus on goods and services provided to customers, generating investment income and other income, and it
excludes returns in the form of lower costs and other economic benefits. IFRS 3 also introduces an optional fair value
concentration test. The amendments, which were effective at the latest for acquisitions completed by the Company after
January 1, 2020, were early adopted on January 1, 2019.
IFRS 16 Leases
On January 1, 2019, the Company adopted IFRS 16 Leases. IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract, which is the customer (“lessee”) and the
supplier (“lessor”). IFRS 16 replaces IAS 17 Leases, and related interpretations. All leases result in the lessee obtaining the
right to use an asset at the start of the lease and incurring a financing obligation corresponding to the lease payments to be
made over time. Accordingly, for lessees, IFRS 16 eliminates the classification of leases as either operating leases or finance
leases as was required by IAS 17 and, instead, introduces a single lessee accounting model.
Applying that model, a lessee is required to recognize:
i) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and
ii) amortization of lease assets separately from interest on lease liabilities in the statement of loss.
Management has reviewed all of the Company’s leasing arrangements in light of the requirements of IFRS 16. The standard
affects primarily the accounting for the Company’s operating leases.
The Company applied the simplified transition approach and, consequently, did not restate comparative figures for 2018.
Right-of-use assets and related lease liabilities were recognized on January 1, 2019 for non-cancellable operating lease
commitments that amounted to $13.0 million.
17
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
3. New accounting standards (continued)
IFRS 16 Leases (continued)
The Company applies the exceptions for short-term leases and, as such, short-term leases for which commitments amounted
to approximately $0.6 million as at December 31, 2018 continue to be recognized on a straight-line basis as general and
administrative expense in the consolidated statement of loss.
Right-of-use assets for property leases were measured on transition as if the new standard had been applied since the
respective leases’ commencement date but using the Company’s incremental borrowing rate of 4.79% as at January 1, 2019.
The Company recognized right-of-use assets of $9.4 million on January 1, 2019 (presented under mining interests and plant
and equipment on the consolidated balance sheet), lease liabilities of $10.0 million and deferred tax assets of $0.1 million.
Overall, net assets were approximately $0.4 million lower, and net current assets were $0.7 million lower due to the
presentation of a portion of the lease liability as a current liability. Since January 1, 2019, payments attributed to the principal
portion of the lease liabilities are classified as cash flows from financing activities.
The Company’s activities as a lessor are not material.
IFRIC 23 Uncertainty over Income Tax Treatments
On January 1, 2019, the Company adopted IFRIC 23 Uncertainty over Income Tax Treatments. IFRIC 23 explains how to
recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment.
In particular, it discusses how to determine the appropriate unit of account, and that each uncertain tax treatment should be
considered separately or together as a group, depending on which approach better predicts the resolution of the uncertainty,
that the entity should assume a tax authority will examine the uncertain tax treatments and have full knowledge of all related
information, ie that detection risk should be ignored, that the entity should reflect the effect of the uncertainty in its income
tax accounting when it is not probable that the tax authorities will accept the treatment, that the impact of the uncertainty
should be measured using either the most likely amount or the expected value method, depending on which method better
predicts the resolution of the uncertainty, and that the judgements and estimates made must be reassessed whenever
circumstances have changed or there is new information that affects the judgements. The adoption of IFRIC 23 had no
impact on the consolidated financial statements for the year ended December 31, 2019.
4. Significant accounting policies
The significant accounting policies applied in the preparation of the consolidated financial statements are described below.
a) Basis of measurement
The consolidated financial statements are prepared under the historical cost convention, except for the revaluation of
certain financial assets at fair value (including derivative instruments).
b) Business combinations
On the acquisition of a business, the acquisition method of accounting is used whereby the purchase consideration is
allocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) of the business on the
basis of the fair value at the date of acquisition. Provisional fair values allocated at a reporting date are finalized as soon
as the relevant information is available, which period shall not exceed twelve months from the acquisition date and are
adjusted to reflect the transaction as of the acquisition date. Any excess is treated as goodwill, and any discount is
immediately recognized in the consolidated statement of loss and comprehensive loss. If control is obtained or lost as a
result of a transaction, the identifiable net assets retained are recognized on the balance sheet at fair value and the
difference between the fair value recognized and the carrying value as at the date of the transaction is recognized in the
consolidated statement of loss. Acquisition costs are expensed as incurred.
The Company recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net
assets.
18
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
b) Business Combinations (continued)
The results of businesses acquired during the period are consolidated into the consolidated financial statements from
the date on which control commences (generally at the closing date when the acquirer legally transfers the
consideration).
c) Consolidation
The Company’s financial statements consolidate the accounts of Osisko Gold Royalties Ltd and its subsidiaries. All
intercompany transactions, balances and unrealized gains or losses from intercompany transactions are eliminated on
consolidation. Subsidiaries are all entities over which the Company has the ability to exercise control. The Company
controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to Osisko and are de-consolidated from the date that control ceases. Accounting policies
of subsidiaries are consistent with the policies adopted by Osisko.
The principal subsidiaries of the Company, all of which are wholly-owned, and their geographic locations at
December 31, 2019 and 2018 were as follows:
Entity
Osisko Bermuda Limited
Barkerville Gold Mines Ltd.(i)
Coulon Mines Inc.
General Partnership Osisko James Bay
Osisko Mining (USA) Inc.
(i) From November 21, 2019 (Note 7).
d) Foreign currency translation
(i) Functional and presentation currency
Jurisdiction
Bermuda
British Columbia
Canada
Québec
Delaware
Items included in the financial statements of each consolidated entity and associate of the Company are measured
using the currency of the primary economic environment in which the entity operates (the “functional currency”).
The consolidated financial statements are presented in Canadian dollars, which is the functional currency of the
parent Company.
Assets and liabilities of the subsidiaries that have a functional currency other than the Canadian dollar are
translated into Canadian dollars at the exchange rate in effect on the consolidated balance sheet date and
revenues and expenses are translated at the average exchange rate over the reporting period. Gains and losses
from these translations are recognized as currency translation adjustment in other comprehensive income or loss.
(ii) Transactions and balances
Foreign currency transactions, including revenues and expenses, are translated into the functional currency at the
rate of exchange prevailing on the date of each transaction or valuation when items are re-measured. Monetary
assets and liabilities denominated in currencies other than the operation’s functional currencies are translated into
the functional currency at exchange rates in effect at the balance sheet date. Foreign exchange gains and losses
resulting from the settlement of those transactions and from period-end translations are recognized in the
consolidated statement of loss.
19
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
d) Foreign currency translation (continued)
(ii) Transactions and balances (continued)
Non-monetary assets and liabilities are translated at historical rates, unless such assets and liabilities are carried
at fair value, in which case, they are translated at the exchange rate in effect at the date of the fair value
measurement. Changes in fair value attributable to currency fluctuations of non-monetary financial assets and
liabilities such as equities held at fair value through profit or loss are recognized in the consolidated statement of
loss as part of the fair value gain or loss. Such changes in fair value of non-monetary financial assets, such as
equities classified at fair value through other comprehensive income, are included in other comprehensive income
or loss.
e) Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or
have been transferred and the Company has transferred substantially all risks and rewards of ownership.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is an
unconditional and legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the asset and settle the liability simultaneously.
All financial instruments are required to be measured at fair value on initial recognition. The fair value is based on quoted
market prices, unless the financial instruments are not traded in an active market. In this case, the fair value is
determined by using valuation techniques like the Black-Scholes option pricing model or other valuation techniques.
Measurement after initial recognition depends on the classification of the financial instrument. The Company has
classified its financial instruments in the following categories depending on the purpose for which the instruments were
acquired and their characteristics.
(i) Financial assets
Debt instruments
Investments in debt instruments are subsequently measured at amortized cost when the asset is held within a
business model whose objective is to hold assets in order to collect contractual cash flows and when the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Investments in debt instruments are subsequently measured at fair value when they do not qualify for measurement
at amortized cost. Financial instruments subsequently measured at fair value, including derivatives that are assets,
are carried at fair value with changes in fair value recorded in net income or loss unless they are held within a
business model whose objective is to hold assets in order to collect contractual cash flows or sell the assets and
when the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding, in which case unrealized gains and losses are initially
recognized in other comprehensive income or loss for subsequent reclassification to net income or loss through
amortization of premiums and discounts, impairment or derecognition.
Equity instruments
Investments in equity instruments are subsequently measured at fair value with changes recorded in net income or
loss. Equity instruments that are not held for trading can be irrevocably designated at fair value through other
comprehensive income or loss on initial recognition without subsequent reclassification to net income. Cumulative
gains and losses are transferred from accumulated other comprehensive income (loss) to retained earnings upon
derecognition of the investment. Dividend income on equity instruments measured at fair value through other
comprehensive income (loss) is recognized in the statement of loss on the ex-dividend date.
20
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
e) Financial instruments (continued)
(ii) Financial liabilities
Financial liabilities are subsequently measured at amortized cost using the effective interest method, except for
financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are
subsequently measured at fair value.
The Company has classified its financial instruments as follows:
Category
Financial instrument
Financial assets at amortized cost
Financial assets at fair value
through profit or loss
Financial assets at fair value
through other comprehensive income or loss
Financial liabilities at amortized cost
Bank balances and cash on hand
Short-term debt securities
Notes and loans receivable
Trade receivables
Interest and dividend income receivable
Amounts receivable from associates and other
receivables
Reclamation deposits (term deposits)
Investments in derivatives and convertible debentures
Investments in shares and equity instruments,
other than in derivatives
Accounts payable and accrued liabilities
Liability component of convertible debentures
Borrowings under revolving credit facilities
Derivatives
Derivatives, other than warrants held in mining exploration and development companies, are only used for economic
hedging purposes and not as speculative investments. Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently measured to their fair value at the end of each reporting period.
The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
f)
Impairment of financial assets
At each reporting date, the Company assesses, on a forward-looking basis, 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 the credit risk or if a simplified approach has been selected.
The Company has two principal types of financial assets subject to the expected credit loss model:
Trade receivables; and
Investments in debt instruments measured at amortized cost.
21
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
f)
Impairment of financial assets (continued)
Amounts receivable
The Company applies the simplified approach permitted by IFRS 9 for trade receivables (including amounts receivable
from associates and other receivables), which requires lifetime expected credit losses to be recognized from initial
recognition of the receivables.
Investments in debt instruments
To the extent that a debt instrument at amortized cost is considered to have low credit risk, which corresponds to a credit
rating within the investment grade category and the credit risk has not increased significantly, the loss allowance is
determined on the basis of 12-month expected credit losses. If the credit risk has increased significantly, the lifetime
expected credit losses are recognized.
g) Cash and cash equivalents
Cash includes cash on hand and deposits held with banks. Cash equivalents include other highly liquid short-term
investments with original maturities of three months or less or that can be redeemed at any time without penalties.
h) Refundable tax credits for mining exploration expenses
The Company is entitled to refundable tax credits on qualified mining exploration and evaluation expenses incurred in
the province of Québec. The credits are accounted for against the exploration and evaluation expenses incurred.
i)
Inventories
Inventories are mainly comprised of gold and silver bullions and diamonds in saleable form that have not yet been sold.
Inventories are valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis.
j)
Investments in associates
Associates are entities over which the Company has significant influence, but not control. The financial results of the
Company’s investments in its associates are included in the Company’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 Company’s share of profits or losses of associates after the date of acquisition. The Company’s share of
profits or losses is recognized in the consolidated statement of loss and its share of other comprehensive income or loss
of associates is included in other comprehensive income or loss.
Unrealized gains on transactions between the Company and an associate are eliminated to the extent of the Company’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 consolidated statement of loss.
The Company assesses at each reporting date whether there is any objective evidence that its investments in associates
are impaired. If impaired, the carrying value of the Company’s share 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 consolidated statement of loss.
22
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
k) Royalty, stream and other interests
Royalty, stream and other interests consist of acquired royalty, stream and other interests in producing, development
and exploration and evaluation stage properties. Royalty, stream and other interests are recorded at cost and capitalized
as tangible assets. They are subsequently measured at cost less accumulated depletion and depreciation and
accumulated impairment losses. The major categories of the Company’s interests are producing, development and
exploration and evaluation. Producing assets are those that have generated revenue from steady-state operations for
the Company. Development assets are interests in projects that are under development, in permitting or feasibility stage
and that in management’s view, can be reasonably expected to generate steady-state revenue for the Company in the
near future. Exploration and evaluation assets represent properties that are not yet in development, permitting or
feasibility stage or that are speculative in nature and are expected to require several years to generate revenue, if ever,
or are currently not active.
Producing and development royalty, stream and other interests are recorded at cost and capitalized in accordance with
IAS 16 Property, Plant and Equipment. Producing royalty, stream and other interests are depleted using the units-of-
production method over the life of the property to which the interest relates, which is estimated using available estimates
of proven and probable mineral reserves specifically associated with the properties and may include a portion of
resources expected to be converted into mineral reserves. Management relies on information available to it under
contracts with the operators and / or public disclosures for information on proven and probable mineral reserves and
resources from the operators of the producing royalty, stream and other interests.
On acquisition of a producing or a development royalty, stream and other interest, an allocation of the acquisition cost
is made for the exploration potential based on its fair value. The estimated fair value of this acquired exploration potential
is recorded as an asset (non-depreciable interest) on the acquisition date. Updated mineral reserve and resource
information obtained from the operators of the properties is used to determine the amount to be converted from non-
depreciable interest to depreciable interest.
Royalty, stream and other interests for exploration and evaluation assets are recorded at cost and capitalized in
accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources. Acquisition costs of exploration and
evaluation royalty, stream and other interests are capitalized and are not depleted until such time as revenue-generating
activities begin.
Producing and development royalty, stream and other interests are reviewed for impairment at each reporting date if
there is any indication that the carrying amount may not be recoverable. Impairment is assessed at the level of Cash-
Generating Units (‘‘CGU’’) which, in accordance with IAS 36 Impairment of Assets, are identified as the smallest
identifiable group of assets that generates cash inflows, which are largely independent of the cash inflows from other
assets. This is usually at the individual royalty, stream and other interest level for each property from which cash inflows
are generated.
Royalty, stream and other interests for exploration and evaluation assets are assessed for impairment whenever
indicators of impairment exist in accordance with IFRS 6. An impairment loss is recognized for the amount by which the
asset’s carrying value exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-
in-use. An interest that has previously been classified as exploration and evaluation is also assessed for impairment
before reclassification to development or producing, and the impairment loss, if any, is recognized in net income.
23
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
l) Property and equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost
includes expenditures that are directly attributable to the acquisition of an asset. Subsequent costs are included in the
asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic
benefit associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount
of a replaced asset is derecognized when replaced.
Depreciation is calculated to amortize the cost of the property and equipment less their residual values over their
estimated useful lives using the straight-line method and following periods by major categories:
Leasehold improvements
Furniture and office equipment
Exploration equipment and facilities
Mining plant and equipment (development)
Lease term
3-5 years
3-20 years
5-20 years
Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of property and equipment are determined by comparing the proceeds with the carrying
amount of the asset and are included as part of other gains (losses), net in the consolidated statement of loss.
m) Exploration and evaluation expenditures
Exploration and evaluation assets are comprised of exploration and evaluation expenditures and mining properties
acquisition costs for exploration and evaluation assets. Expenditures incurred on activities that precede exploration and
evaluation, being all expenditures incurred prior to securing the legal rights to explore an area, are expensed
immediately. Exploration and evaluation assets include rights in mining properties, paid or acquired through a business
combination or an acquisition of assets, and costs related to the initial search for mineral deposits with economic
potential or to obtain more information about existing mineral deposits. Mining rights are recorded at acquisition cost
less accumulated impairment losses. Mining rights and options to acquire undivided interests in mining rights are
depreciated only as these properties are put into commercial production.
Exploration and evaluation expenditures for each separate area of interest are capitalized and include costs associated
with prospecting, sampling, trenching, drilling and other work involved in searching for ore like topographical, geological,
geochemical and geophysical studies. They also reflect costs related to establishing the technical and commercial
viability of extracting a mineral resource identified through exploration and evaluation or acquired through a business
combination or asset acquisition.
Exploration and evaluation expenditures include the cost of:
(i) establishing the volume and grade of deposits through drilling of core samples, trenching and sampling
activities;
(ii) determining the optimal methods of extraction and metallurgical and treatment processes;
(iii) studies related to surveying, transportation and infrastructure requirements;
(iv) permitting activities; and
(v) economic evaluations to determine whether development of the mineralized material is commercially justified,
including scoping, prefeasibility and final feasibility studies.
Exploration and evaluation expenditures include overhead expenses directly attributable to the related activities.
Cash flows attributable to capitalized exploration and evaluation costs are classified as investing activities in the
consolidated statement of cash flows under the heading exploration and evaluation.
24
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
m) Exploration and evaluation expenditures (continued)
Exploration and evaluation assets under a farm-out arrangement (where a farmee incurs certain expenditures in a
property to earn an interest in that property) are accounted as follows:
(i)
(ii)
the Company uses the carrying value of the interest before the farm-out arrangement as the carrying value for
the portion of the interest retained;
the Company credits any cash consideration received against the carrying amount of the portion of the interest
retained, with an excess included as a gain in profit or loss;
(iii) in the situation where a royalty interest is retained by the Company as a result of an interest earned by the
farmee, the Company records the royalty interest received at an amount corresponding to the carrying value
of the exploration and evaluation property at the time of the transfer in ownership; and
(iv) the Company does not record exploration expenditures made by the farmee on the property.
n) Goodwill
Goodwill is recognized in a business combination if the cost of the acquisition exceeds the fair value of the identifiable
net assets acquired. Goodwill is then allocated to the CGU or group of CGUs that are expected to benefit from the
synergies of the combination. The Company performs goodwill impairment tests on an annual basis as at December 31
of each year. In addition, the Company assesses for indicators of impairment at each reporting date and, if an indicator
of impairment is identified, goodwill is tested for impairment at that time. If the carrying value of the CGU or group of
CGUs to which goodwill is assigned exceeds its recoverable amount, an impairment loss is recognized. Goodwill
impairment losses are not reversed.
The recoverable amount of a CGU or group of CGUs is measured as the higher of value-in-use and fair value less costs
of disposal.
o) Provision for environmental rehabilitation
Provision for environmental rehabilitation, restructuring costs and legal claims, where applicable, is recognized when:
(i) The Company has a present legal or constructive obligation as a result of past events.
(ii)
It is probable that an outflow of resources will be required to settle the obligation.
(iii) The amount can be reliably estimated.
The provision is measured at management’s best estimate of the expenditure required to settle the obligation at the
end of the reporting period, and are discounted to present value where the effect is material. The increase in the
provision due to passage of time is recognized as finance costs. Changes in assumptions or estimates are reflected in
the period in which they occur.
Provision for environmental rehabilitation represents the legal and constructive obligations associated with the eventual
closure of the Company’s property, plant and equipment. These obligations consist of costs associated with reclamation
and monitoring of activities and the removal of tangible assets. The discount rate used is based on a pretax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation, excluding the
risks for which future cash flow estimates have already been adjusted.
25
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
o) Provision for environmental rehabilitation (continued)
Reclamation deposits
Reclamation deposits are term deposits held on behalf of the Government of the Province of British Columbia as
collateral for possible rehabilitation activities on the Company's mineral properties in connection with permits required
for exploration activities. Reclamation deposits are released once the property is restored to satisfactory condition, or
as released under the surety bond agreement. As they are restricted from general use, they are included under non-
current other assets on the consolidated balance sheets.
p) Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated statement of
loss, except to the extent that it relates to items recognized in other comprehensive income or loss or directly in equity.
In this case, the tax is also recognized in other comprehensive income or loss or directly in equity, respectively.
Current income taxes
The current income tax charge is the expected tax payable on the taxable income for the year, using the tax laws enacted
or substantively enacted at the balance sheet date in the jurisdictions where the Company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income
tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax assets and liabilities are measured using enacted or substantively enacted tax rates (and laws)
that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except
where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are presented as non-current and are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and when deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
q) Convertible debentures
The liability and equity components of convertible debentures are presented separately on the consolidated balance
sheet starting from initial recognition.
The liability component is recognized initially at the fair value, by discounting the stream of future payments of interest
and principal at the prevailing market rate for a similar liability of comparable credit status and providing substantially
the same cash flows that do not have an associated conversion option. Subsequent to initial recognition, the liability
component is measured at amortized cost using the effective interest method; the liability component is increased by
accretion of the discounted amounts to reach the nominal value of the debentures at maturity.
26
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
q) Convertible debentures (continued)
The carrying amount of the equity component is calculated by deducting the carrying amount of the financial liability
from the amount of the debentures and is presented in shareholders’ equity as equity component of convertible
debenture. The equity component is not re-measured subsequent to initial recognition except on conversion or expiry.
A deferred tax liability is recognized with respect to any temporary difference that arises from the initial recognition of
the equity component separately from the liability component. The deferred tax is charged directly to the carrying amount
of the equity component. Subsequent changes in the deferred tax liability are recognized through the consolidated
statement of loss.
Transaction costs are distributed between liability and equity on a pro-rata basis of their carrying amounts.
r) Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized
as a deduction from the proceeds in equity in the period where the transaction occurs.
s) Warrants
Warrants are classified as equity. Incremental costs directly attributable to the issuance of warrants are recognized as
a deduction from the proceeds in equity in the period where the transaction occurs.
t) Revenue recognition
Revenue comprises revenues from the sale of commodities received and revenues directly earned from royalty, stream
and other interests.
For royalty and stream agreements paid in-kind and for offtake agreements, the Company’s performance obligations
relate primarily to the delivery of gold, silver or other products to the customers. Revenue is recognized when control is
transferred to the customers, which is achieved when a product is delivered, the customer has full discretion over the
product and there is no unfulfilled obligation that could affect the customer’s acceptance of the product. Control over the
refined gold, silver and other products is transferred to the customers when the relevant product received (or purchased)
from the operator is physically delivered and sold by the Company (or its agent) to the third party customers. For royalty
and stream agreements paid in cash, revenue recognition will depend on the related agreement.
Revenue is measured at fair value of the consideration received or receivable when management can reliably estimate
the amount, pursuant to the terms of the royalty, stream and other interest agreements. In some instances, the Company
will not have access to sufficient information to make a reasonable estimate of revenue and, accordingly, revenue
recognition is deferred until management can make a reasonable estimate. Differences between estimates and actual
amounts are adjusted and recorded in the period that the actual amounts are known.
u) Leases
The Company is committed to long-term lease agreements, mainly for office space. Until December 31 2018, payments
made under operating lease agreements were recognized in profit or loss on a straight-line basis over the term of the
lease. Operating leases were leases in which a significant portion of the risks and rewards of ownership was retained
by the lessor.
From January 1, 2019, leases are recognized as a right-of-use asset (presented under non-current other assets on the
consolidated balance sheet) and a corresponding liability at the date at which the leased asset is available for use by
the Company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to
profit or loss over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease
term on a straight-line basis.
27
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
4. Significant accounting policies (continued)
u) Leases (continued)
Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are
discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Company’s
incremental borrowing rate is used, being the rate that the Company would have to pay to borrow the funds necessary
to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Payments associated with short-term leases (12 months or less) and leases of low-value assets are recognized on a
straight-line basis as an expense in profit or loss.
v) Share-based compensation
Share option plan
The Company offers a share option plan for its directors, officers, employees and consultants. Each tranche in an award
is considered a separate award with its own vesting period and grant date fair value. Fair value of each tranche is
measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over
the tranche’s vesting period by increasing contributed surplus based on the number of awards expected to vest. The
number of awards expected to vest is reviewed at least annually, with any impact being recognized immediately.
Any consideration paid on exercise of share options is credited to share capital. The contributed surplus resulting from
share-based compensation is transferred to share capital when the options are exercised.
Deferred and restricted share units
Deferred share units (“DSU”) may be granted to directors and restricted share units (“RSU”) may be granted to
employees, directors and officers as part of their long-term compensation package, entitling them to receive a payment
in the form of common shares, cash (based on the Company’s share price at the relevant time) or a combination of
common shares and cash, at the sole discretion of the Company. The fair value of the DSU and RSU to be settled in
common shares is measured on the grant date and is recognized over the vesting period under contributed surplus with
a corresponding charge to share-based compensation. A liability for the DSU and RSU to be settled in cash is measured
at fair value on the grant date and is subsequently adjusted at each balance sheet date for changes in fair value. The
liability is recognized over the vesting period with a corresponding charge to share-based compensation.
w) Earnings per share
The calculation of earnings per share (“EPS”) is based on the weighted average number of shares outstanding for each
period. The basic EPS is calculated by dividing the profit or loss attributable to the equity owners of Osisko by the
weighted average number of common shares outstanding during the period.
The computation of diluted EPS assumes the conversion, exercise or contingent issuance of securities only when such
conversion, exercise or issuance would have a dilutive effect on the income per share. The treasury stock method is
used to determine the dilutive effect of the warrants, share options, DSU and RSU and the if-converted method is used
for convertible debentures. When the Company reports a loss, the diluted net loss per common share is equal to the
basic net loss per common share due to the anti-dilutive effect of the outstanding warrants, share options, DSU and
RSU and convertible debentures.
x) Segment reporting
The operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive
Officer (“CEO”) who fulfills the role of the chief operating decision-maker. The CEO is responsible for allocating
resources and assessing performance of the Company’s operating segments. Following the acquisition of Barkerville
(Note 7) in November 2019, the Company manages its business under two operating segments: (i) acquiring and
managing precious metal and other royalties, streams and similar interests, and (ii) the exploration, evaluation and
development of mining projects. Prior to the acquisition of Barkerville, the Company had only one operating segment,
which was acquiring and managing precious metal and other royalties, streams and similar interests. The comparative
figures have been restated to conform to the current segments.
28
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
5. Accounting standards issued but not yet effective
The Company has not yet adopted certain standards, interpretations to existing standards and amendments which have
been issued but have an effective date of later than December 31, 2019. Many of these updates are not expected to have
any significant impact on the Company and are therefore not discussed herein.
Amendments to IAS 1 Presentation of Financial Statements
The IASB has made amendments to IAS 1 Presentation of Financial Statements which use a consistent definition of
materiality throughout IFRS and the Conceptual Framework for Financial Reporting, clarify when information is material and
incorporate some of the guidance in IAS 1 about immaterial information. In particular, the amendments clarify that information
is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users
of general purpose financial statements make on the basis of those financial statements, which provide financial information
about a specific reporting entity. Materiality depends on the nature or magnitude of information, or both. An entity assesses
whether information, either individually or in combination with other information, is material in the context of its financial
statements taken as a whole. The amendments to IAS 1 are effective for financial years beginning on or after January 1,
2020 and will not have a significant impact on the consolidated financial statements disclosures.
6. Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. The Company also
makes estimates and assumptions concerning the future. The determination of estimates requires the exercise of judgement
based on various assumptions and other factors such as historical experience and current and expected economic
conditions. Actual results could differ from those estimates.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
Mineral reserves and resources – Royalties, streams and other assets
Royalty, stream and other interests comprise a large component of the Company’s assets and as such, the mineral reserves
and resources of the properties to which the interests relate have a significant effect on the Company’s consolidated financial
statements. These estimates are applied in determining the depletion of the Company’s royalty, stream and other interests
and assessing the recoverability of the carrying value of royalty, stream and other interests. For royalty, stream and other
interests, the public disclosures of mineral reserves and resources that are released by the operators of the properties involve
assessments of geological and geophysical studies and economic data and the reliance on a number of assumptions,
including commodity prices and production costs. These assumptions are, by their very nature, subject to interpretation and
uncertainty. The estimates of mineral reserves and resources may change based on additional knowledge gained
subsequent to the initial assessment, adjusted by the Company’s internal geological specialists, as deemed necessary.
Changes in the estimates of mineral reserves and resources may materially affect the recorded amounts of depletion and
the assessed recoverability of the carrying value of royalty, stream and other interests.
Mineral reserves and resources – Exploration and development projects
Mineral reserves are estimates of the amount of ore that can be economically and legally extracted from the Company's
mining properties. The Company estimates its mineral reserve and mineral resources based on information compiled by
Qualified Persons as defined by Canadian Securities Administrators National Instrument 43-101, Standards for Disclosure
of Mineral Projects. Such information includes geological data on the size, depth and shape of the mineral deposit, and
requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors
such as estimates of commodity prices, future capital requirements, and production costs along with geological assumptions
and judgments made in estimating the size and grade that comprise the mineral reserves. Changes in the mineral reserve
or mineral resource estimates may impact the carrying value of mineral properties and deferred development costs, property,
plant and equipment, provision for site reclamation and closure, recognition of deferred income tax assets and depreciation
and amortization charges.
29
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
6. Critical accounting estimates and judgements (continued)
Critical accounting estimates and assumptions (continued)
Impairment of royalty, stream and other interests
The assessment of the fair values of royalty, stream and other interests requires the use of estimates and assumptions for
recoverable production, long-term commodity prices, discount rates, mineral reserve/resource conversion, net asset value
multiples, foreign exchange rates, future capital expansion plans and the associated production implications. In addition, the
Company may use other approaches in determining fair value which may include estimates related to (i) dollar value per
ounce of mineral reserve/resource; (ii) cash-flow multiples; and (iii) market capitalization of comparable assets. Changes in
any of the estimates used in determining the fair value of the royalty, stream and other interests could impact the impairment
analysis.
Impairment of exploration and evaluation assets, mining interests and plant and equipment
The Company’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure being
capitalized. This policy requires management to make certain estimates and assumptions as to future events and
circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates
and assumptions may change as new information becomes available. If, after having capitalized the expenditure, a
judgement is made that recovery of the expenditure is unlikely, the relevant capitalized amount will be written off to the
consolidated statement of loss.
Development activities commence after project sanctioning by senior management. Judgement is applied by management
in determining when a project has reached a stage at which economically recoverable reserves exist such that development
may be sanctioned. In exercising this judgement, management is required to make certain estimates and assumptions similar
to those described above for capitalized exploration and evaluation expenditure. Such estimates and assumptions may
change as new information becomes available. If, after having started the development activity, a judgement is made that a
development asset is impaired, the appropriate amount will be written off to the consolidated statement of loss.
The Company’s recoverability of its recorded value of its exploration and evaluation assets, mining interests and plant and
equipment is based on market conditions for metals, underlying mineral resources associated with the properties and future
costs that may be required for ultimate realization through mining operations or by sale.
At each reporting date, the Company evaluates each mining property and project on results to date to determine the nature
of exploration, other assessment and development work that is warranted in the future. If there is little prospect of future work
on a property or project being carried out within a prolonged period from completion of previous activities, the deferred
expenditures related to that property or project are written off or written down to the estimated amount recoverable unless
there is persuasive evidence that an impairment allowance is not required.
The recoverable amounts of exploration and evaluation assets, mining interests and plant and equipment are determined
using the higher of value in use or fair value less costs of disposal. Value in use consists of the net present value of future
cash flows expected to be derived from the asset in its current condition based on observable data. The calculations use
cash flow projections based on financial budgets approved by management. These cash flow projections are based on
expected recoverable ore reserves, selling prices of metals and operating costs. Fair value less costs of disposal consists of
the expected sale price (the amount that a market participant would pay for the asset) of the asset net of transaction costs.
The Company may use other approaches in determining the fair value which may include estimates related to (i) dollar value
per ounce of mineral reserve/resource; (ii) cash-flow multiples; (iii) market capitalization of comparable assets; and (iv)
comparable sales transactions. Any changes in the quality and quantity of recoverable ore reserves, expected selling prices
and operating costs could materially affect the estimated fair value of mining interests, which could result in material write-
downs or write-offs in the future.
30
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
6. Critical accounting estimates and judgements (continued)
Critical accounting estimates and assumptions (continued)
Impairment of goodwill
The Company performs goodwill impairment tests on an annual basis as at December 31 of each year. In addition, the
Company assesses for indicators of impairment at each reporting period date and, if an indicator of impairment is identified,
goodwill is tested for impairment at that time. For the purpose of impairment testing, goodwill is allocated to each CGU or
group of CGUs expected to benefit from the synergies of the combination. When completing an impairment test, the Company
calculates the estimated recoverable amount of CGU or group of CGUs, which requires management to make estimates and
assumptions with respect to items such as future production levels, long-term commodity prices, foreign exchange rates,
discount rates and exploration potential.
These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in
circumstances will have an impact on these projections, which may impact the recoverable amount of the CGU or group of
CGUs. Accordingly, it is possible that some or the entire carrying amount of the goodwill may be further impaired with the
impact recognized in the consolidated statement of loss.
The Company performs annual impairment tests using the fair value less cost of disposal of the group of CGUs supporting
the goodwill and using discounted cash flows with the most recent budgets and forecasts available, including information
from external sources. The periods to be used for the projections are based on the expected production from the mines, the
proven and probable mineral reserves and a portion of the resources. The discount rate to be used takes into consideration
the different risk factors of the Company.
Provision for environmental rehabilitation
Provision for environmental rehabilitation is based on management best estimates and assumptions, which management
believes are a reasonable basis upon which to estimate the future liability, based on the current economic environment.
These estimates take into account any material changes to the assumptions that occur when reviewed regularly by
management and are based on current regulatory requirements. Significant changes in estimates of discount rate,
contamination, rehabilitation standards and techniques will result in changes to the provision from period to period. Actual
reclamation and closure costs will ultimately depend on future market prices for the costs which will reflect the market
condition at the time the costs are actually incurred. The final cost of the rehabilitation provision may be higher or lower than
currently provided for.
Critical judgements in applying the Company’s accounting policies
Business combinations
The assessment of whether an acquisition meets the definition of a business, or whether assets are acquired is an area of
key judgement. The assumptions and estimates with respect to determining the fair value of assets acquired and liabilities
assumed, and of royalty, stream and other interests and exploration and evaluation properties in particular, generally requires
a high degree of judgement. Changes in the judgements made could impact the amounts assigned to assets and liabilities.
Investee – significant influence
The assessment of whether the Company has a significant influence over an investee requires the use of judgements when
assessing factors that could give rise to a significant influence. Factors which could lead to the conclusion of having a
significant influence over an investee include, but are not limited to, ownership percentage; representation on the board of
directors; participation in the policy-making process; material transactions between the investor and the investee; interchange
of managerial personnel; provision of essential technical information; and potential voting rights.
Changes in the judgements used in determining if the Company has a significant influence over an investee would impact
the accounting treatment of the investment in the investee.
31
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
6. Critical accounting estimates and judgements (continued)
Critical judgements in applying the Company’s accounting policies (continued)
Impairment of investments in associates
The Company 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 Company’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.
Impairment of exploration and evaluation assets and royalty, stream and other interests on exploration and evaluation
properties
Assessment of impairment of exploration and evaluation assets (including exploration and evaluation assets under a farm-
out agreement) and royalty, stream and other interests on exploration and evaluation properties requires the use of
judgements when assessing whether there are any indicators that could give rise to the requirement to conduct a formal
impairment test on the Company’s exploration and evaluation assets and royalty, stream and other interests on exploration
and evaluation properties. Factors which could trigger an impairment review include, but are not limited to, an expiry of the
right to explore in the specific area during the period or will expire in the near future and is not expected to be renewed;
substantive exploration and evaluation expenditures in a specific area, taking into consideration such expenditures to be
incurred by a farmee, is neither budgeted nor planned; exploration for and evaluation of mineral resources in a specific area
have not led to the discovery of commercially viable quantities of mineral resources and the Company has decided to
discontinue such activities in the specific area; sufficient data exists to indicate that, although a development in a specific
area is likely to proceed, the carrying amount of the assets is unlikely to be recovered in full from successful development or
by sale; significant negative industry or economic trends; interruptions in exploration and evaluation activities by the Company
or its farmee; and a significant drop in current or forecast commodity prices.
Changes in the judgements used in determining the fair value of the exploration and evaluation assets and royalty, stream
and other interests on exploration and evaluation properties could impact the impairment analysis.
Impairment of development and producing royalty, stream and other interests and goodwill
Assessment of impairment of development and producing royalty, stream and other interests and goodwill requires the use
of judgement when assessing whether there are any indicators that could give rise to the requirement to conduct a formal
impairment test on the Company’s development and producing royalty, stream and other interests or goodwill. Factors which
could trigger an impairment review include, but are not limited to, a significant market value decline; net assets higher than
the market capitalization; a significant reduction in mineral reserve and resources; significant negative industry or economic
trends; interruptions in production activities; significantly lower production than expected; and a significant drop in current or
forecast commodity prices.
Changes in the judgements used in determining the fair value of the producing royalty, stream and other interests or goodwill
could impact the impairment analysis.
Deferred income tax assets
Management continually evaluates the likelihood that it is probable that its deferred tax assets will be realized. This requires
management to assess whether it is probable that sufficient taxable income will exist in the future to utilize these losses
within the carry-forward period. By its nature, this assessment requires significant judgement.
32
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
7. Acquisition of Barkerville Gold Mines Ltd.
On November 21, 2019, the Company acquired all of the outstanding common shares of Barkerville that it did not already
own at the date of the transaction. Barkerville is a Canadian exploration and development company focused on the
development of its extensive land package located in the historical Cariboo Mining District of central British Columbia,
Canada.
For each common share of Barkerville, shareholders received 0.0357 common share of Osisko. All of Barkerville’s
outstanding common share options have been exchanged for common share options (“Barkerville replacement share
options”) of Osisko using the same share exchange ratio as for the common shares valued at $1.9 million using the Black-
Sholes option pricing model.
A total of 13,560,832 Osisko common shares were issued and valued at $160.6 million, based on the closing price of the
Company’s common shares on the transaction date. A total of 1,005,478 Barkerville replacement share options were issued
and valued at $1.9 million, based on the Black-Sholes option pricing model. The fair value of the 10,000,000 Barkerville
common share warrants already held by the Company and cancelled was estimated at $0.6 million, using the Black-Sholes
option pricing model. Transaction costs amounted to $1.5 million and cash and cash equivalents acquired amounted to $8.3
million.
Prior to the acquisition date, Osisko held an initial investment of 183,625,585 common shares in Barkerville, which was
considered as an investment in an associate, having a net book value of $101.4 million. On November 21, 2019, the date of
acquisition of Barkerville, the fair value of the initial investment was $77.1 million and has been included as part of
consideration for the transaction, resulting in a loss of $24.3 million recorded in the consolidated statements of loss under
other (gains) losses, net. Osisko also held a 4% NSR royalty on the Cariboo gold project prior to the acquisition of Barkerville
having a net book value of $56.1 million, which was transferred from royalty, stream and other interests to mining interests
and plant and equipment on the consolidated balance sheets.
In accordance with the early adoption of the amendments to IFRS 3 Business Combinations, the transaction has been
recorded as an acquisition of assets as the acquired assets and assumed liabilities did not constitute a business. IFRS 3
proposes a screening test that determines that a set of activities and assets is not a business if substantially all the fair value
of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.
The total purchase price of $241.7 million was allocated to the assets acquired and the liabilities assumed based on the fair
value of the total consideration at the closing date of the transaction. All financial assets acquired and financial liabilities
assumed were recorded at fair value.
The purchase price was calculated as follows:
Consideration paid
Issuance of 13,560,832 common shares
Fair value of 183,625,585 Barkerville common shares already held
Fair value of 1,005,478 Barkerville replacement share options issued
Fair value of 10,000,000 warrants of Barkerville already held by Osisko and cancelled
Osisko’s transaction costs
Net assets acquired
Cash and cash equivalents
Other current assets
Reclamation deposits
Plant and equipment
Mineral properties
Accounts payable and accrued liabilities
Provision and other liabilities
$
160,564
77,123
1,912
589
1,513
241,700
$
8,312
4,565
5,361
13,968
247,054
(16,320)
(21,239)
241,700
33
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
8. Cash
As at December 31, 2019 and 2018, cash held in U.S. dollars amounted respectively to US$73.5 million ($95.5 million) and
US$52.7 million ($71.9 million).
9. Short-term investments
As at December 31, 2019, short-term investments are comprised of a $15.9 million secured senior loan ($10.0 million as at
December 31, 2018) (Note 12) with Falco Resources Ltd. (“Falco”), an associate of Osisko, bearing interest at a rate of 7%,
compounded quarterly, and payable on December 31, 2020. As at December 31, 2019, short-term investments also included
three other notes receivable from exploration and development mining companies for an aggregate amount of $4.8 million,
bearing interest rates ranging from 10.5% to 12.0% and having maturity dates in May and June 2020.
10. Amounts receivable
Revenues receivable from royalty, stream and other interests
Interest income receivable
Amounts receivable from associates(i)
Sales taxes, tax credits and other receivables
December 31,
2019
$
1,257
2,133
641
2,299
6,330
December 31,
2018
$
6,643
1,991
3,225
462
12,321
(i) Amounts receivable from associates for cost recoveries are mainly related to professional services and office rent.
11. Other assets
Current
Prepaid expenses
Inventories
Non-current
Reclamation deposits
Deferred financing fees
December 31,
2019
$
3,516
1,656
5,172
5,361
1,579
6,940
December 31,
2018
$
1,015
-
1,015
-
1,468
1,468
34
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
12. Investments in associates
Balance – January 1
Acquisitions
Interests receivable paid in shares
Exercise of warrants
Transfers from other investments
Share of loss, net
Share of other comprehensive income (loss), net
Net gain (loss) on ownership dilution
Disposals (Note 22)
Loss on disposals
Deemed disposal (Note 7)
Gain (loss) on deemed disposals (i)
Impairment (ii)
Transfers to other investments
Deemed repurchase of Osisko common shares held by an associate (iii)
Balance – December 31
2019
$
304,911
37,335
1,820
2,209
-
(22,209)
(352)
(3,687)
(84,293)
(2,440)
(77,123)
(24,255)
(12,500)
(9,676)
(6,100)
103,640
2018
$
257,433
87,134
-
-
7,048
(9,013)
433
1,545
-
-
-
6,956
-
(46,625)
-
304,911
(i) Refer to Note 7 for the 2019 loss on deemed disposals.
On September 7, 2018, Orion announced the completion of the acquisition and privatization of Dalradian Resources Inc. (“Dalradian”),
an associate of Osisko, for cash consideration of $1.47 per common share. The common shares held by Osisko were not acquired in
the transaction. Following the transaction, Osisko had a put right on its Dalradian shares, which was exercised in 2019 (Note 21), allowing
Osisko to sell them at a price of $1.47 per share. Following the 2018 transaction, management had concluded that it had lost its significant
influence over Dalradian and had transferred its investments from associates to other investments. This transfer from investments from
associates to other investments resulted in a deemed disposal of the shares and the recognition of the difference between the carrying
amount of the Dalradian investment under the equity method before the transaction and the fair value of the other investment after the
transaction.
(ii) On September 30, 2019, the Company determined that its net investment in Falco was impaired. This determination was made
considering, 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 share price and the business outlook for the investee, including factors such as the current and expected status of the
investee’s development projects. The net investment in Falco was written down to its estimated fair value and, therefore, an impairment
charge of $12.5 million ($10.8 million, net of income taxes) was recorded during the three months ended September 30, 2019.
(iii) Osisko Mining Inc. (“Osisko Mining”), an associate of Osisko, held common shares of Barkerville prior to the acquisition (Note 7).
Following the acquisition of Barkerville, Osisko Mining has received common shares of Osisko, which resulted in a deemed repurchase
of common shares by the Company and a related reduction in the net investment in Osisko Mining, based on the 15.9% interest held in
Osisko Mining.
Material investments
Osisko Mining Inc.
Osisko Mining is a Canadian gold exploration and development company focused on its Windfall Lake gold project. Osisko
holds a 2.0% – 3.0% NSR royalty on the Windfall Lake gold project, for which a positive preliminary economic assessment
was released in July 2019, and a 1% NSR royalty on other properties held by Osisko Mining. The Company invested $18.0
million in Osisko Mining in 2018 and an additional $7.7 million in 2019.
As at December 31, 2019, the Company holds 45,969,569 common shares representing a 15.9% interest in Osisko Mining
(16.7% as at December 31, 2018). Based on the fact that some directors of Osisko are also directors of Osisko Mining, and
because of other facts and circumstances, the Company concluded that it exercises significant influence over Osisko Mining
and accounts for its investment using the equity method.
35
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
12. Investments in associates (continued)
Material investments (continued)
Osisko Metals Incorporated
Osisko Metals Incorporated (“Osisko Metals”) is a Canadian base metal exploration and development company with a focus
on zinc mineral assets. The company’s flagship properties are the Pine Point mining camp, located in the Northwest
Territories and the Bathurst mining camp, located in northern New Brunswick. The Company owns a 1.5% NSR royalty on
the Pine Point mining camp (acquired in January 2020 for $6.5 million) and a 1% NSR royalty on the Bathurst mining camp.
The Company invested $3.0 million in Osisko Metals in 2018 and an additional $7.8 million in 2019.
As at December 31, 2019, the Company holds 29,877,397 common shares representing a 17.9% interest in Osisko Metals
(12.7% as at December 31, 2018). Based on the fact that some officers and directors of Osisko are also directors of Osisko
Metals, and because of other facts and circumstances, the Company concluded that it exercises significant influence over
Osisko Metals and accounts for its investment using the equity method.
The financial information of the individually material associates is as follows and includes adjustments to the accounting
policies of the associates to conform to those of Osisko (in thousands of dollars):
Osisko Mining
Osisko Metals
Barkerville
Victoria
Falco
2019(i)
2018(ii)
2019(i) 2018(ii),(vii)
2019(iii)
2018(ii)
2019(iv)
2018(v)
2019(vi)
2018(ii)
$
$
$
$
$
$
$
$
$
$
Current assets
Non-current assets
Current liabilities
130,495
121,424
13,166
27,397
526,926
411,548
81,337
59,827
25,833
13,540
6,139
10,867
Non-current liabilities
68,773
29,434
3,246
Revenues
-
-
-
500
-
n/a
n/a
n/a
n/a
-
32,533
166,995
17,196
14,172
-
n/a
n/a
n/a
n/a
-
50,084
427,529
90,527
87,811
-
n/a
n/a
n/a
n/a
-
9,209
132,255
40,415
9,758
-
Net earnings (loss) from continuing
operations and net income (loss)
(82,554)
(19,022)
(4,280)
(2,819)
Other comprehensive income (loss)
(4,453)
(7,843)
(327)
837
Comprehensive income (loss)
(87,007)
(26,865)
(4,607)
(1,982)
(842)
10
(832)
8,907
(181)
8,726
(8,587)
(1,278)
(8,589)
(6,713)
(81)
(307)
-
-
(8,668)
(1,585)
(8,589)
(6,713)
Carrying value of investment(viii)
73,967
89,766
Fair value of investment(viii)
186,177
131,673
15,389
12,698
8,625
7,510
n/a
n/a
95,695
65,146
n/a
n/a
56,972
44,558
n/a
n/a
21,128
10,449
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Information is for the reconstructed twelve months ended September 30, 2019 and as at September 30, 2019.
Information is for the reconstructed twelve months ended September 30, 2018 and as at September 30, 2018.
Information is for the reconstructed twelve months ended September 30, 2019. Following the acquisition of Barkerville on November 21, 2019 (Note 7),
Barkerville became a wholly-owned subsidiary of Osisko.
Information is for the reconstructed six months ended May 31, 2019. The Victoria investment was disposed on July 15, 2019 (Note 21).
Information is for the reconstructed twelve months ended November 30, 2018 and as at November 30, 2018.
Information is for the reconstructed twelve months ended September 30, 2019. Falco is not considered an individually material associate since October 1,
2019, following an impairment charge on the net investment of $12.5 million.
(vii) Osisko Metals became an individually material associate during the three months period ended December 31, 2019.
(viii) As at December 31, 2019 and 2018.
Investments in immaterial associates
The Company has interests in a number of individually immaterial associates that are accounted for using the equity method.
The aggregate financial information on these associates is as follows:
Aggregate amount of the Company’s share of net loss
Aggregate amount of the Company’s share of other comprehensive income
Aggregate carrying value of investments
Aggregate fair value of investments
2019
$
(2,058)
-
14,284
21,166
2018
$
(4,194)
897
41,351
41,198
36
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
13. Other investments
Fair value through profit or loss (warrants)
Balance – January 1
Acquisitions
Exercise
Change in fair value
Deemed disposal (Note 7)
Balance – December 31
Fair value through other comprehensive income (shares)
Balance – January 1
Acquisitions
Transfer from associates (Note 12)
Change in fair value
Transfer to associates (Note 12)
Disposals – Share Repurchase (Note 21)
Disposals (i)
Balance – December 31
Amortized cost
Balance – January 1
Acquisition (Note 14)
Transfer to short-term investments
Balance – December 31
2019
$
3,348
1,085
(1,055)
(1,089)
(589)
1,700
104,055
27,259
9,676
13,287
-
(90,546)
(6,322)
57,409
2,200
8,778
(2,200)
8,778
2018
$
8,092
3,093
-
(7,837)
-
3,348
106,841
14,453
46,625
(29,773)
(7,048)
-
(27,043)
104,055
200
2,000
-
2,200
Total
67,886
109,603
(i)
In 2019, an investment in a company classified as an investment at fair value through other comprehensive income was acquired by
way of a share exchange. This non-cash transaction resulted in the disposal of the investment in the acquiree and the acquisition of
an investment in the acquirer for an amount of $5.7 million.
Other investments comprise common shares, warrants, notes receivable and credit facilities, mostly from Canadian publicly
traded companies. As at December 31, 2018, other investments also comprised the common shares held in Dalradian, which
was a private company from September 7, 2018 up to its disposal in June 2019 (Note 12).
37
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
14. Royalty, stream and other interests
Balance – January 1
Acquisitions
NSR royalty on the Cariboo properties owned prior
to the acquisition of Barkerville (Note 7)
Transfer
Disposal
Depletion
Impairment
Translation adjustments
Royalty
interests
$
Stream
interests
$
707,723
41,529
(56,070)
(10,000)
(2,277)
(20,908)
(27,689)
(4,741)
606,410
48,573
-
10,000
-
(23,335)
(138,689)
(19,795)
Offtake
interests
$
100,535
-
-
-
(47,116)
(2,766)
(27,213)
(3,659)
2019
Total
$
1,414,668
90,102
(56,070)
-
(49,393)
(47,009)
(193,591)
(28,195)
Balance – December 31
627,567
483,164
19,781
1,130,512
Producing
Cost
Accumulated depletion and impairment
604,950
(345,521)
509,179
(141,826)
18,792
(13,001)
1,132,921
(500,348)
Net book value – December 31
259,429
367,353
5,791
632,573
Development
Cost
Accumulated depletion and impairment
Net book value – December 31
Exploration and evaluation
Cost
Accumulated depletion
Net book value – December 31
185,636
-
168,290
(52,479)
185,636
115,811
182,502
-
182,502
-
-
-
31,881
(27,070)
4,811
9,179
-
9,179
385,807
(79,549)
306,258
191,681
-
191,681
Total net book value – December 31
627,567
483,164
19,781
1,130,512
Main acquisitions – 2019
Horne 5 property – silver stream (Falco Resources Ltd.)
In 2018, Osisko entered into a binding term sheet to provide Falco with a senior secured silver stream credit facility (“Falco Silver Stream”)
with reference to up to 100% of the future silver produced from the Horne 5 property located in Rouyn-Noranda, Québec. As part of the
Falco Silver Stream, Osisko will make staged upfront cash deposits to Falco of up to $180.0 million and will make ongoing payments equal
to 20% of the spot price of silver, to a maximum of US$6 per ounce. The Falco Silver Stream is secured by a first priority lien on the project
and all assets of Falco. The Falco Silver Stream was closed in February 2019, which triggered the payment of the first installment of $25.0
million to Falco. Two previously outstanding notes receivable amounting to $20.0 million were applied against the first installment ($10.0
million was included under Short-term investment on the consolidated balance sheet and $10.0 million was under Royalty, stream and other
interests as the note was convertible into a 1% NSR royalty at the sole discretion of Osisko) and the remaining balance of $5.0 million was
paid to Falco.
Dublin Gulch property – NSR royalty (Victoria Gold Corp.)
In 2018, Osisko acquired from Victoria Gold Corp. (“Victoria”), an associate of the Company at the time, a 5% NSR royalty for $98.0 million
on the Dublin Gulch property which hosts the Eagle Gold project located in Yukon, Canada. During the year ended December 31, 2018,
payments totaling $78.4 million were made under the royalty agreement. The remaining balance of $19.6 million was paid during the three
months ended March 31, 2019.
38
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
14. Royalty, stream and other interests (continued)
Main acquisitions – 2019 (continued)
Mantos Blancos – silver stream (Mantos Copper S.A.)
In September 2019, Osisko invested an additional US$25.0 million ($33.4 million) on its existing silver stream with Mantos Copper S.A. with
respect to 100% of the silver produced from the Mantos Blancos copper mine located in Chile. Under the terms of the stream amendments,
the ongoing transfer price payment per ounce were reduced from 25% to 8% of the spot silver price on the date of delivery and the tail
stream was increased from 30% to 40% of payable silver after 19.3 million ounces of refined silver have been delivered. In addition, Mantos
Copper S.A.’s right to buy back 50% of the silver stream in September 2019 or 2020 has been terminated.
Main disposal – 2019
Brucejack offtake
In September 2019, Osisko Bermuda Limited (“OBL”), a wholly owned subsidiary of Osisko, has entered into an agreement with Pretium
Exploration Inc., a subsidiary of Pretium Resources Inc. in regards to the sale of OBL’s interest in the Brucejack gold offtake contract for a
cash purchase price of US$41.3 million ($54.7 million). An amount of US$31.2 million ($41.3 million) was paid on September 30, 2019 and
the remaining US$10.1 million ($13.4 million) was paid on November 30, 2019. The disposal generated a gain of US$5.8 million
($7.6 million).
Update on the Renard mine diamond stream (Credit bid transaction for Stornoway Diamond Corporation)
On September 9, 2019, Osisko announced that it had entered into a letter of intent (“LOI”) with Stornoway Diamond Corporation
(“Stornoway”) and certain of its subsidiaries alongside other secured creditors under the bridge financing agreement entered into with
Stornoway on June 10, 2019, including Diaquem Inc., a wholly-owned subsidiary of Ressources Québec Inc. (collectively the “Secured
Creditors”).
Under the terms of the LOI, Osisko and the Secured Creditors have confirmed their intention to form an entity which will acquire by way of
a credit bid transaction all or substantially all of the assets and properties of Stornoway, and assume the debts and liabilities owing to the
Secured Creditors as well as the ongoing obligations relating to the operation of the Renard mine, subject to certain limited exceptions
(“Credit Bid Transaction”).
Pursuant to the Credit Bid Transaction, Osisko will maintain its 9.6% diamond stream on the Renard mine and will continue to receive stream
deliveries, and has agreed to continue to reinvest its proceeds from the stream for a period of one year from the date of closing of the Credit
Bid Transaction. As of December 31, 2019, an amount of $6.3 million was advanced from the proceeds of the stream deliveries and is
included in short-term investments.
In connection with the Credit Bid Transaction, Stornoway had applied on September 9, 2019 to the Superior Court of Québec (Commercial
Division) for protection under the CCAA in order to restructure its business and financial affairs.
Concurrently with entering into the LOI, Osisko and certain of the Secured Creditors have entered into a definitive and binding working
capital facility agreement with Stornoway providing for a working capital facility in an initial amount of $20.0 million, which facility is secured
by a priority charge over the assets of Stornoway. Osisko’s attributable portion of the working capital facility will be approximately $7.0 million,
of which $2.5 million was advanced as of December 31, 2019. The working capital facility provides the financing and liquidity required to
ensure that the Renard mine continues to operate in an uninterrupted manner.
The Credit Bid Transaction was closed on November 1, 2019 and Osisko became a 35.1% shareholder of the company now holding the
Renard diamond mine, which is considered as an associate from that date.
Main impairments – 2019
Renard mine diamond stream (Stornoway Diamond Corporation)
In March 2019, the operator of the Renard diamond mine in Québec, Canada, announced a significant impairment charge of $83.2 million
on its Renard diamond mine reflecting an outlook of lower than expected diamond pricing. This was considered an indicator of impairment
among other facts and circumstances and, accordingly, management performed an impairment assessment as at March 31, 2019. The
Company recorded an impairment charge of $38.9 million ($28.6 million, net of income taxes) on the Renard diamond stream.
On March 31, 2019, the Renard diamond stream was written down to its estimated recoverable amount of $122.4 million, which was
determined by the fair value less cost of disposal using a discounted cash-flows approach. The fair value of the Renard diamond stream is
classified as level 3 of the fair value hierarchy because the main valuation inputs used are significant unobservable inputs. The main valuation
inputs used were the cash flows expected to be generated by the sale of diamonds from the Renard diamond stream over the estimated life
of the Renard diamond mine, based on expected long-term diamond prices per carat and a post-tax real discount rate of 4.7%.
39
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
14. Royalty, stream and other interests (continued)
Main impairments – 2019 (continued)
Renard mine diamond stream (Stornoway Diamond Corporation) (continued)
In September 2019, the operator of the Renard diamond mine, Stornoway Diamond Corporation, announced that it had applied to the
Superior Court of Québec (Commercial Division) for protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) in
order to restructure its business and financial affairs. This was considered an indicator of impairment among other facts and circumstances
and, accordingly, management performed an impairment assessment as at September 30, 2019. The Company recorded an impairment
charge of $47.2 million ($34.6 million, net of income taxes) on the Renard diamond stream.
On September 30, 2019, the Renard diamond stream was written down to its estimated recoverable amount of $70.2 million, which was
determined by the fair value less cost of disposal using a discounted cash-flows approach. The fair value of the Renard diamond stream is
classified as level 3 of the fair value hierarchy because the main valuation inputs used are significant unobservable inputs. The main valuation
inputs used were the cash flows expected to be generated by the sale of diamonds from the Renard diamond stream over the estimated life
of the Renard diamond mine, based on expected long-term diamond prices per carat and a post-tax real discount rate of 4.6%.
A sensitivity analysis was performed by management for the long-term diamond price and the post-tax real discount rate (in isolation). If the
long-term diamond price per carat applied to the cash flow projections had been 10% lower than management’s estimates, the Company
would have recognized an additional impairment charge of $7.0 million ($5.1 million, net of income taxes). If the post-tax real discount rate
applied to the cash flow projections had been 100 basis points higher than management’s estimates, the Company would have recognized
an additional impairment charge of $3.0 million ($2.2 million, net of income taxes).
Amulsar stream and offtake (Lydian International Limited)
In September 2019, Lydian International Limited announced a delay in the timing of the construction activities, expected first gold pour and
ramp up to full production as a result of the 15-month blockade on construction as well as changes to the expected life of mine and annual
production for the Amulsar project in Armenia. This was considered an indicator of impairment among other facts and circumstances and,
accordingly, management performed an impairment assessment as at September 30, 2019. The Company recorded an impairment charge
of US$9.9 million ($13.1 million) on the Amulsar stream and offtake.
On September 30, 2019, the Amulsar stream and offtake were written down to their estimated recoverable amount of US$73.7 million
($97.0 million), which was determined by the fair value less cost of disposal using a discounted cash-flows approach. The fair value of the
Amulsar stream and offtake is classified as level 3 of the fair value hierarchy because the main valuation inputs used are significant
unobservable inputs. The main valuation inputs used were the cash flows expected to be generated by the sale of gold and silver from the
Amulsar stream and offtake over the estimated life of the Amulsar mine, based on expected long-term gold and silver prices per ounce of
US$1,350 and US$17.75, respectively, and a post-tax real discount rate of 6.1%.
In December 2019, Lydian International Limited announced that it had applied to the Ontario Superior Court of Justice for protection under
the CCAA in order to restructure its business and financial affairs. This was considered an indicator of impairment among other facts and
circumstances and, accordingly, management performed an impairment assessment as at December 31, 2019. The Company recorded an
impairment charge of US$51.3 million ($66.7 million) on the Amulsar stream and offtake.
On December 31, 2019, the Amulsar stream and offtake were written down to their estimated recoverable amount of US$22.3 million
($29.0 million), which was determined by the fair value less cost of disposal using discounted cash-flows approaches and estimated
probabilities of different exit scenarios from CCAA. The fair value of the Amulsar stream and offtake is classified as level 3 of the fair value
hierarchy because the main valuation inputs used are significant unobservable inputs. The main valuation inputs used were the cash flows
expected to be generated by the sale of gold and silver from the potential amendment of the Amulsar stream over the estimated life of the
Amulsar mine, based on expected long-term gold and silver prices per ounce of US$1,400 and US$17.50, respectively, a post-tax real
discount rate of 10.1% and potential amendments of the Amulsar stream agreement resulting from probability weighted exit scenarios from
the CCAA process.
A sensitivity analysis was performed by management for the long-term gold and silver prices and the post-tax real discount rate (in isolation).
If the long-term gold and silver prices per ounce applied to the cash flow projections had been 10% lower than management’s estimates,
the Company would have recognized an additional impairment charge of US$2.0 million ($2.6 million). If the probabilities of the different
scenarios had been 10% lower (negative) than management’s estimates, the Company would have recognized an additional impairment
charge of US$4.5 million ($5.8 million). If the post-tax real discount rate applied to the cash flow projections had been 100 basis points
higher than management’s estimates, the Company would have recognized an additional impairment charge of US$1.6 million ($2.1 million).
In addition, an impairment of US$3.6 million ($4.7 million) was taken on a note receivable and amounts receivable from Lydian.
40
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
14. Royalty, stream and other interests (continued)
Main impairments – 2019 (continued)
Éléonore royalty (Newmont Corporation)
In February 2020, the operator of the Éléonore gold mine in Québec, Canada, announced that it has updated its mineral reserve and
resource estimates for the Éléonore mine as at December 31, 2019. As a result of the update, proven and probable gold mineral reserves
and resources decreased by approximately 50%. This was considered an indicator of impairment among other facts and circumstances and,
accordingly, management performed an impairment assessment as at December 31, 2019. The Company recorded an impairment charge
of $27.2 million ($20.0 million, net of income taxes) on the Éléonore NSR royalty for the year ended December 31, 2019.
On December 31, 2019, the Éléonore NSR royalty was written down to its estimated recoverable amount of $101.3 million, which was
determined by the fair value less cost of disposal using a discounted cash-flows approach. The fair value of the Éléonore NSR royalty is
classified as level 3 of the fair value hierarchy because the main valuation inputs used are significant unobservable inputs. The main valuation
inputs used were the cash flows expected to be generated by the sale of gold received from the Éléonore NSR royalty based on the long-
term annual gold production of 355,000 ounces over the estimated life of the Éléonore mine, the long-term gold price of US$1,400 per ounce
and a post-tax real discount rate of 4.1%, adjusted for the decrease in reserves and resources.
A sensitivity analysis was performed by management for the long-term gold price and the post-tax real discount rate (in isolation). If the
long-term gold price applied to the cash flow projections had been 10% lower than management’s estimates (US$1,260 per ounce instead
of US$1,400 per ounce), the Company would have recognized an additional impairment charge of $10.1 million. If the post-tax real discount
rate applied to the cash flow projections had been 100 basis points higher than management’s estimates (5.1% instead of 4.1%), the
Company would have recognized an additional impairment charge of $4.2 million.
Balance – January 1
Acquisitions
Conversion
Disposal
Depletion
Impairment
Translation adjustments
Royalty
interests
$
770,530
109,670
-
-
(26,972)
(153,639)
8,134
Stream
interests
$
700,078
31,431
4,278
(150,289)
(21,217)
-
42,129
Offtake
interests
$
105,164
-
(4,278)
-
(4,423)
(4,561)
8,633
2018
Total
$
1,575,772
141,101
-
(150,289)
(52,612)
(158,200)
58,896
Balance – December 31
707,723
606,410
100,535
1,414,668
Producing
Cost
Accumulated depletion and impairment
510,738
(297,137)
489,407
(33,502)
68,072
(10,665)
1,068,217
(341,304)
Net book value – December 31
213,601
455,905
57,407
726,913
Development
Cost
Accumulated depletion
Net book value – December
Exploration and evaluation
Cost
Accumulated depletion
Net book value – December 31
270,066
-
150,505
-
270,066
150,505
224,056
-
224,056
-
-
-
33,486
-
33,486
9,642
-
9,642
454,057
-
454,057
233,698
-
233,698
Total net book value – December 31
707,723
606,410
100,535
1,414,668
41
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
14. Royalty, stream and other interests (continued)
Main acquisitions – 2018
Dublin Gulch property NSR royalty (Victoria)
In April 2018, Osisko completed a $148.0 million financing transaction with Victoria, pursuant to which Osisko acquired from Victoria a 5%
NSR royalty for $98.0 million on the Dublin Gulch property which hosts the Eagle Gold project located in Yukon, Canada, and acquired
common shares of Victoria for $50.0 million. The 5% NSR royalty applies to all metals and minerals produced from the Dublin Gulch
property, until an aggregate of 97,500 ounces of refined gold has been delivered to Osisko, and a 3% NSR royalty thereafter. The first
tranche of the $98.0 million purchase price, representing $49.0 million, was paid on the closing of the transaction and the second tranche
of $49.0 million will be funded pro rata to drawdowns under the subordinated debt facilities provided by Orion (or a third party). In 2018,
two payments of $14.7 million were made to Victoria as part of the second tranche of the royalty purchase price, and the remaining
commitment of $19.6 million was paid in 2019. The common shares of Victoria were disposed in 2019 (Note 21).
Cariboo property NSR royalty (Barkerville)
In September 2018, Osisko entered into a second amended and restated royalty purchase agreement with Barkerville pursuant to which it
has acquired an additional 1.75% NSR royalty for the aggregate purchase price of $20.0 million on the Cariboo property, increasing the total
NSR royalty held by Osisko to 4%. Osisko acquired Barkerville in November 2019, which became a wholly-owned subsidiary (Note 7).
Renard mine diamond stream (Stornoway Diamond Corporation)
In October 2018, Osisko announced that it has entered into an amended and restated purchase and sale agreement (the “Amended Renard
Streaming Agreement”) with Stornoway in relation to the Renard stream (“Renard Stream Amendment”). As part of the Amended Renard
Streaming Agreement, Osisko, along with Caisse de dépôt et placement du Québec, Triple Flag Mining Finance Bermuda Ltd., Albion
Exploration Fund, LLC and Washington State Investment Board (collectively, the “Streamers”), which collectively own a 20% diamond stream
on the Renard mine (9.6% stream attributable to Osisko) (the “Renard Stream”), paid Stornoway the U.S. dollar equivalent of $45.0 million
in cash ($21.4 million attributable to Osisko) as an additional up-front deposit to Stornoway.
The terms of the Amended Renard Streaming Agreement provide that the Streamers shall continue to hold a 20% undivided interest
(9.6% stream attributable to Osisko) in all diamonds produced from the Renard mining property for the life of the mine (prior to the
amendment, the stream was applicable to all diamonds produced from the first 5 project kimberlites to be mined at Renard for the life of
mine, and the first 30 million carats from the property overall). Upon the completion of a sale of diamonds, the Streamers will remit to
Stornoway a cash transfer payment which shall be the lesser of 40% of achieved sales price and US$40 per carat (prior to the amendment,
the cash transfer was a fixed amount of US$50 per carat escalating at 1% per annum).
In addition, for the purpose of calculating stream remittances, Stornoway shall separately sell any diamonds smaller than the +7 DTC sieve
size that are recovered in excess of the maximum agreed-upon proportion within a sale of run of mine (“ROM”) diamonds (the excess small
diamonds or incidentals). In this manner, Stornoway shall restrict the proportion of small diamonds contained in a ROM sale such that the
Streamers and Stornoway will be fully aligned on upside price exposure with downside protection on price and product mix.
42
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
14. Royalty, stream and other interests (continued)
Disposal – 2018
Brucejack gold and silver stream (Pretium Resources Inc.)
In September 2018, Osisko announced that Osisko Bermuda Limited (“OBL”), a wholly-owned subsidiary of Osisko, had received a notice
from Pretium Resources Inc. (“Pretium”) in regards to its election to exercise its option to fully repurchase OBL’s interest in the Brucejack
gold and silver stream, as provided for in the purchase and sale agreement between the parties dated September 15, 2015 (the “Stream
Agreement”). Under the Stream Agreement, Pretium had an option to repurchase 100% of OBL’s share of the Brucejack gold and silver
stream by making a payment of US$118.5 million to OBL on December 31, 2018. In order to exercise this option, Pretium had to provide 90
days’ prior written notice to OBL.
In December 2018, OBL received the proceeds of US$118.5 million ($159.4 million) from Pretium. The book value of the Brucejack gold
and silver stream was US$111.7 million ($150.3 million), which resulted in a gain on disposal of a stream interest of US$6.8 million
($9.1 million) presented on the consolidated statement of loss for the year ended December 31, 2018.
Impairments – 2018
In 2018, the Company recorded impairment charges of $159.0 million ($118.3 million, net of income taxes), including $158.2 million
($117.5 million, net of income taxes) on royalty, stream and other interests and $0.8 million to write-off an amount receivable from the
operator of an impaired asset.
Éléonore NSR royalty
In October 2018, the operator of the Éléonore gold mine in Québec, Canada, announced that it has updated its mineral reserve and resource
estimates for the Éléonore mine as at June 30, 2018. As a result of the update, proven and probable gold mineral reserves and resources
decreased by 21%. This was considered an indicator of impairment among other facts and circumstances and, accordingly, management
performed an impairment assessment as at December 31, 2018. The Company recorded an impairment charge of $148.5 million
($109.1 million, net of income taxes) on the Éléonore NSR royalty for the year ended December 31, 2018.
On December 31, 2018, the Éléonore NSR royalty was written down to its estimated recoverable amount of $138.6 million, which was
determined by the fair value less cost of disposal using a discounted cash-flows approach. The fair value of the Éléonore NSR royalty is
classified as level 3 of the fair value hierarchy because the main valuation inputs used are significant unobservable inputs. The main valuation
inputs used were the cash flows expected to be generated by the sale of gold received from the Éléonore NSR royalty based on the long-
term annual gold production of 400,000 ounces over the estimated life of the Éléonore mine, the long-term gold price of US$1,300 per ounce
and a post-tax real discount rate of 5.1%, adjusted for the decrease in reserves and resources.
A sensitivity analysis was performed by management for the long-term gold price and the post-tax real discount rate (in isolation). If the
long-term gold price applied to the cash flow projections had been 10% lower than management’s estimates (US$1,170 per ounce instead
of US$1,300 per ounce), the Company would have recognized an additional impairment charge of $13.9 million. If the post-tax real discount
rate applied to the cash flow projections had been 100 basis points higher than management’s estimates (6.1% instead of 5.1%), the
Company would have recognized an additional impairment charge of $7.8 million.
Other assets impaired
The Company recorded additional impairment charges on royalty and offtake interests of $9.7 million ($8.3 million net of income taxes) on
assets for which the Company does not expect to receive future revenues, and on assets held by companies that have ceased or are
expected to cease production or are in bankruptcy.
43
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
15. Mining interests and plant and equipment
Net book value – January 1
Adoption of IFRS 16 (Note 4)
Acquisition of Barkerville (Note 7)
NSR royalty held on the Cariboo property prior
to the acquisition of Barkerville (Note 7)
Additions
Depreciation
Depreciation capitalized
Mining
interests
$
-
-
258,153
56,070
5,555
-
230
Plant and
equipment
$
189
9,432
13,968
-
1,595
(1,499)
-
2019
Total
$
189
9,432
272,121
56,070
7,150
(1,499)
230
Net book value – December 31
320,008
23,685
343,693
Closing balance
Cost
Accumulated depreciation
Net book value
16. Exploration and evaluation
Net book value - January 1
Additions
Investments tax credits
Transfer to royalty, stream and other interests (i)
Impairments (ii)
Net book value - December 31 (iii)
Balance – December 31
Cost
Accumulated impairment
Net book value - December 31 (iii)
320,008
-
320,008
25,681
(1,996)
23,685
345,689
(1,996)
343,693
2019
($)
95,002
221
-
(2,288)
(49,986)
42,949
101,139
(58,190)
42,949
2018
Plant and
equipment
$
258
-
-
-
105
(174)
-
189
684
(495)
189
2018
($)
102,182
257
(93)
-
(7,344)
95,002
103,206
(8,204)
95,002
(i)
(ii)
In 2016, Osisko entered into an earn-in agreement with Osisko Mining on the Kan property. In 2019, Osisko Mining reached the minimal
investment threshold on the Kan property. Therefore, a 100% interest in the Kan property was transferred to Osisko Mining (now held
by O3 Mining Inc.) and Osisko holds an escalating NSR royalty ranging from 1.5% to 3.5% on precious metals and a 2.0% NSR royalty
on other metals and minerals produced from the Kan property.
In 2019, the Company incurred an impairment charge of $50.0 million ($37.6 million, net of income taxes) on its Coulon zinc project in
Canada for which the Company determined that further exploration and evaluation expenditures are no longer planned in the near term
and that the carrying amount of the asset is unlikely to be recovered in full from a sale of the project at the current time. On December 31,
2019, the Coulon project was written down to its estimated recoverable amount of $10.0 million, which was determined by the fair value
less cost of disposal using a market approach, based on a dollar value per thousand pounds of mineral reserve/resource of zinc
equivalent for comparable sales transactions realized. In 2018, the Company had incurred an impairment charge of $7.3 million ($5.4
million, net of income taxes) on certain exploration and evaluation properties in Canada for which substantive exploration and evaluation
expenditures (taking into consideration such expenditures to be incurred by a farmee) is neither budgeted nor planned or for which the
Company (or the farmee) has decided to discontinue such activities.
44
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
16. Exploration and evaluation (continued)
(iii) Exploration and evaluation assets having a net book value of $31.7 million as at December 31, 2019 ($34.0 million as at December 31,
2018) are subject to different earn-in agreements with O3 Mining Inc. (“O3 Mining”), an associate of the Company. Under the earn-in
agreements (originally signed in 2016 with Osisko Mining, which has transferred them to O3 Mining in 2019), O3 Mining may earn a
100% interest in most of Osisko’s exploration properties located in the James Bay area and Labrador Trough (excluding the Coulon
copper-zinc project) upon completing expenditures of $26.0 million over an initial 7-year period; O3 Mining may earn a first 50% interest
upon completing expenditures totaling $15.6 million over an initial 4-year period. Osisko will retain an escalating NSR royalty ranging
from 1.5% to 3.5% on precious metals and a 2.0% NSR royalty on other metals and minerals produced from the properties. In 2019,
investments on the properties by the farmee amounted to approximately $2.0 million for a total to date of $6.6 million.
17. Goodwill
The Company’s goodwill is allocated to a group of cash generating units: the Éléonore NSR royalty and the Canadian Malartic
NSR royalty (“CGUs”).
The Company tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of the CGUs
is determined based on the fair value less costs of disposal calculations using a discounted cash-flows approach, which
require the use of assumptions and unobservable inputs, and therefore is classified as level 3 of the fair value hierarchy. The
calculations use cash flow projections expected to be generated by the sale of gold and silver received from the CGUs based
on annual gold and silver production over their estimated life from publicly released technical information by the operators to
predict future performance.
The following table sets out the key assumptions for the CGUs in addition to annual gold and silver production over the
estimated life of the Éléonore and Canadian Malartic mines:
Long-term gold price (per ounce)
Long-term silver price (per ounce)
Post-tax real discount rate
2019
2018
US$1,400
US$18
4.1%
US$1,300
US$18
5.1%
Management has determined the values assigned to each of the above key assumptions as follows:
Assumption
Approach used to determine values
Long-term gold price
Long-term silver price
Based on current gold market trends consistent with external sources of
information, such as long-term gold price consensus.
Based on current silver market trends consistent with external sources of
information, such as long-term silver price consensus.
Post-tax real discount rate
Reflects specific risks relating to gold mines operating in Québec, Canada.
The Company’s management has considered and assessed reasonably possible changes for key assumptions and has not
identified any instances that could cause the carrying amount of the CGUs to exceed their recoverable amounts.
45
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
18. Accounts payable and accrued liabilities
Payables on metals received from offtakes
Trade payables
Other payables
Accrued interests on long-term debt
Other accrued liabilities
19. Provisions and other liabilities
Restricted
share units(i)
Deferred
share units(i)
Environmental
rehabilitation(iii)
Lease
liabilities(iii)
December 31,
2019
$
December 31,
2018
$
-
6,836
6,044
265
5,627
5,190
217
5,246
46
1,033
18,772
11,732
Balance – Beginning of period
32
3,462
($)
$
Acquisition of Barkerville (Note 7)
Adoption of IFRS 16 (Note 4)
New liabilities
Accretion
Settlement of liabilities
RSU to be settled in equity
DSU to be settled in equity
Revision of estimates
Balance – End of period
Current portion
Non-current portion
-
-
11
-
(45)
-
-
2
-
-
-
-
-
-
416
-
(544)
-
(3,722)
388
-
-
-
-
2019
Total
($)
3,494
20,549
10,893
427
89
$
-
-
10,893
-
-
(766)
(1,355)
-
-
-
-
(3,722)
279
Restricted
share units
Deferred
share units
($)
($)
2018
Total
($)
4,343
3,325
7,668
-
-
-
-
-
-
1,906
1,323
3,229
-
(2,618)
(2,426)
-
-
(499)
-
-
-
(3,117)
(2,426)
-
(1,173)
(687)
(1,860)
$
-
20,549
-
-
89
-
-
-
(111)
20,527
10,127
30,654
32
3,462
3,494
493
796
1,289
20,034
9,331
29,365
20,527
10,127
30,654
32
-
32
3,462
3,494
-
-
3,462
3,494
(i) Additional information on the Deferred Share Units (“DSU”) and Restricted Share Units (“RSU”) are presented in Note 21.
(ii) The environmental rehabilitation provision represents the legal and contractual obligations associated with the eventual closure of the
Company’s mining interests, plant and equipment and exploration and evaluation assets. As at December 31, 2019, the estimated
inflation-adjusted undiscounted cash flows required to settle the environmental rehabilitation amounts to $23.4 million. The weighted
average actualization rate used is 4.2% and the disbursements are expected to be made between 2020 and 2024 as per the current
closure plans.
(iii) The lease liabilities are described in Note 4.
46
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
20. Long-term debt
The movements in the long-term debt are as follows:
Balance - January 1
Increase in revolving credit facility
Decrease in revolving credit facility
Amortization of transaction costs
Accretion expense
Foreign exchange revaluation impact
Balance - December 31
The summary of the long-term debt is as follows:
Convertible debentures(i),(ii)
Revolving credit facility(iii)
Long-term debt
Unamortized debt issuance costs
Unamortized accretion on convertible debentures
Long-term debt, net of issuance costs
Current portion
Non-current portion
(i) Convertible debenture (2016)
2019
($)
352,769
19,772
(30,000)
2,134
4,657
(290)
2018
($)
464,308
-
(123,475)
2,036
4,456
5,444
349,042
352,769
December 31,
2019
($)
December 31,
2018
($)
350,000
19,482
369,482
(6,733)
(13,707)
349,042
-
349,042
349,042
350,000
30,000
380,000
(8,867)
(18,364)
352,769
-
352,769
352,769
The $50.0 million convertible debenture held by Ressources Québec, a wholly-owned subsidiary of Investissement
Québec, bears interest at a rate of 4.0% per annum payable on a quarterly basis and has a five-year term maturing on
February 12, 2021. Ressources Québec is entitled, at its option, to convert the debenture into common shares of the
Company at a price of $19.08 at any time during the term of the debenture.
(ii) Convertible debentures (2017)
The $300.0 million convertible debentures bear interest at a rate of 4.0% per annum, payable semi-annually on June 30
and December 31 of each year, commencing on June 30, 2018. The convertible debentures are convertible at the holder’s
option into common shares of the Company at a conversion price equal to $22.89 per common share. The convertible
debentures will mature on December 31, 2022 and may be redeemed by Osisko, in certain circumstances, on or after
December 31, 2020. The Debentures are listed for trading on the TSX under the symbol “OR.DB”.
47
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
20. Long-term debt (continued)
(iii) Revolving credit facility
In September 2019, the Company amended its Facility increasing the amount from $350.0 million to $400.0 million, with
an additional uncommitted accordion of up to $100.0 million (for a total availability of up to $500.0 million), and extended
its maturity date by one year to November 14, 2023.
The uncommitted accordion is subject to standard due diligence procedures and acceptance of the lenders. The Facility
is to be used for general corporate purposes and investments in the mineral industry, including the acquisition of royalty,
stream and other interests. The Facility is secured by the Company’s assets, present and future (including the royalty,
stream and other interests).
The Facility is subject to standby fees. Funds drawn bear interest based on the base rate, prime rate or London Inter-Bank
Offer Rate (“LIBOR”) plus an applicable margin depending on the Company’s leverage ratio. As at December 31, 2019,
the Facility was drawn for US$15.0 million ($19.5 million) and the effective interest rate was 4.22%, including the applicable
margin. The Facility includes covenants that require the Company to maintain certain financial ratios, including the
Company’s leverage ratios and meet certain non-financial requirements. As at December 31, 2019, all such ratios and
requirements were met.
21. Share capital
Shares
Authorized
Unlimited number of common shares, without par value
Unlimited number of preferred shares, issuable in series
Issued and fully paid
157,469,361 common shares
Share repurchase and secondary offering
On June 25, 2019, Osisko announced that Betelgeuse LLC (“Orion“), a jointly owned subsidiary of certain investment funds
managed by Orion Resource Partners, had entered into an agreement with a syndicate of underwriters pursuant to which
the underwriters have agreed to purchase, on a bought deal basis, an aggregate of 7,850,000 common shares of the
Company held by Orion (the “Secondary Offering“) at an offering price of $14.10 per common share (the “Secondary Offering
Price“). Osisko has not received any of the proceeds of the Secondary Offering. Orion has granted the underwriters an over-
allotment option (the “Over-Allotment Option”), exercisable at any time up to 30 days from and including the date of closing
of the Secondary Offering, to purchase up to 1,177,500 additional common shares, at the Secondary Offering Price. The
Secondary Offering closed on July 11, 2019 and the Over-Allotment Option was exercised in full by the underwriters on
July 18, 2019.
In a concurrent transaction, Osisko purchased for cancellation 12,385,717 of its common shares from Orion (the “Share
Repurchase“), for an aggregate purchase price paid by Osisko to Orion of $174.6 million. The purchase price per common
share to be paid by Osisko under the Share Repurchase was determined to be the Secondary Offering Price. Payment from
Osisko to Orion consists of a combination of cash ($129.5 million) and the direct transfer of investments in associates and
other investments held by Osisko ($45.1 million). In a concurrent transaction, Osisko has also sold to separate entities
managed by Orion Resource Partners certain other equity securities held by Osisko for cash. The Share Repurchase resulted
in an 8% reduction in basic common shares outstanding following the Share Repurchase.
48
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
21. Share capital (continued)
Shares (continued)
Share repurchase and secondary offering (continued)
On June 28, 2019, Osisko and Orion completed the first tranche of the Share Repurchase. A total of 7,319,499 common
shares of Osisko were acquired from Orion and subsequently cancelled. A portion of the purchase price of $103.2 million for
the first tranche of the Share Repurchase was paid in cash (from the sale of all of the common shares held by Osisko in
Dalradian to another entity managed by Orion Resource Partners) and a portion was paid in the form of the transfer from
Osisko to Orion of investments in associates and other investments.
On July 15, 2019, Osisko and Orion closed the second tranche of the Share Repurchase for the acquisition and cancellation
of 5,066,218 common shares of Osisko. The purchase price of $71.4 million was paid in cash (from the sale of all of the
common shares held by Osisko in Victoria to another entity managed by Orion Resource Partners for a cash consideration
of $71.4 million).
Company
Victoria Gold Corp. (associate)
Dalradian Resources Inc. (other investment)
Aquila Resources Inc. (associate)
Highland Copper Company Inc. (associate)
Other investments
Settlement
Cash
Cash
Transfer
Transfer
Transfer
Quarter
Third
Second
Second
Second
Second
Value
$71.4 million
$58.1 million
$9.7 million
$3.0 million
$32.4 million
$174.6 million
The transaction costs related to the Share Repurchase and Secondary Offering were reimbursed by Orion.
Employee Share Purchase Plan
In October 2015, the Company 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 1.0% of the issued and outstanding common shares are reserved for issuance
under the current plan.
Normal Course Issuer Bid
In December 2018, Osisko renewed its normal course issuer bid (“NCIB”) program. Under the terms of the 2018 NCIB
program, Osisko could acquire up to 10,459,829 of its common shares from time to time in accordance with the normal
course issuer bid procedures of the TSX. Repurchases under the 2018 NCIB program were authorized until
December 11, 2019. Daily purchases were limited to 71,940 common shares, other than block purchase exemptions,
representing 25% of the average daily trading volume of the common shares on the TSX for the six-month period ending
November 30, 2018, being 287,760 common shares.
In December 2019, Osisko renewed its normal course issuer bid (“NCIB”) program. Under the terms of the 2019 NCIB
program, Osisko may acquire up to 13,681,732 of its common shares from time to time in accordance with the normal course
issuer bid procedures of the TSX. Repurchases under the 2019 NCIB program are authorized until December 11, 2020.
Daily purchases will be limited to 126,674 common shares, other than block purchase exemptions, representing 25% of the
average daily trading volume of the common shares on the TSX for the six-month period ending November 30, 2019, being
506,698 common shares.
During the year ended December 31, 2019, the Company purchased for cancellation a total of 983,900 common shares
under the 2018 NCIB program for $11.8 million (average acquisition price per share of $12.02).
49
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
21. Share capital (continued)
Shares (continued)
Normal Course Issuer Bid (continued)
During the year ended December 31, 2018, the Company purchased for cancellation a total of 1,860,299 common shares
under the 2017 NCIB Program for $23.1 million and a total of 849,480 common shares under the 2018 NCIB Program for
$9.8 million (for a total of 2,709,779 common shares acquired for $32.9 million, for an average acquisition price per share of
$12.16), of which an amount of $1.7 million was included in accounts payable and accrued liabilities on the consolidated
balance sheet at December 31, 2018 (paid in January 2019).
Dividends
The following table provides details on the dividends declared for the years ended December 31, 2019 and 2018:
Declaration date
February 20, 2019
May 1, 2019
July 31, 2019
November 6, 2019
February 16, 2018
May 3, 2018
August 2, 2018
November 6, 2018
Year 2018
Dividend
per share
$
0.05
0.05
0.05
0.05
0.20
0.05
0.05
0.05
0.05
0.20
Record date
Payment date
March 29, 2019
June 28, 2019
September 30, 2019
December 31, 2019
April 15, 2019
July 15, 2019
October 15, 2019
January 15, 2020
March 30, 2018
June 29, 2018
September 28, 2018
December 31, 2018
April 16, 2018
July 16, 2018
October 15, 2018
January 15, 2019
Dividend
payable
$
7,757,000
7,145,000
7,200,000
7,874,000
29,976,000
7,811,000
7,811,000
7,812,000
7,779,000
31,213,000
Dividend
reinvestment
plan(i)
5,087,058
8,157,756
5,672,755
6,666,723
27,302,917
8,097,787
28,065,085
29,627,597
(i) Number of common shares held by shareholders participating to the dividend reinvestment plan described below.
Dividend reinvestment plan
The Company has a dividend reinvestment plan (“DRIP”) that allows Canadian and U. S. shareholders to reinvest their cash
dividends into additional common shares either purchased on the open market through the facilities of the TSX or the NYSE,
or issued directly from treasury by the Company, or acquired by a combination thereof. In the case of a treasury issuance,
the price will be the weighted average price of the common shares on the TSX or the NYSE during the five trading days
immediately preceding the dividend payment date, less a discount, if any, of up to 5%, at the Company’s sole election.
As at December 31, 2019, the holders of 6,666,723 common shares had elected to participate in the DRIP, representing
dividends payable of $0.3 million. During the year ended December 31, 2019, the Company issued 198,609 common shares
under the DRIP, at a discount rate of 3% (310,492 common shares in 2018 at a discount rate of 3%). On January 15, 2020,
28,351 common shares were issued under the DRIP at a discount rate of 3%.
50
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
21. Share capital (continued)
Capital management
The Company’s primary objective when managing capital is to maximize returns for its shareholders by growing its asset
base, both organically through strategic investments in exploration and development companies and through accretive
acquisitions of high-quality royalties, streams and other similar interests, while ensuring capital protection. The Company
defines capital as long-term debt and total equity, including the undrawn portion of the revolving credit facility. Capital is
managed by the Company’s management and governed by the Board of Directors.
Long-term debt
Total equity
Undrawn revolving credit facility(i)
December 31,
2019
$
December 31,
2018
$
349,042
1,493,446
380,518
352,769
1,771,595
320,000
2,223,006
2,444,364
(i) Excluding the potential additional available credit (accordion) of $100.0 million as at December 31, 2019 and 2018 (Note 19).
There were no changes in the Company’s approach to capital management during the year ended December 31, 2019,
compared to the prior year. The Company is not subject to material externally imposed capital requirements and is in
compliance with all its covenants under its revolving credit facility (Note 20) as at December 31, 2019.
22. Warrants
The following table summarizes the Company’s movements for the warrants outstanding:
Number of
Warrants(i),(ii)
Balance – January 1
Expired (i)
11,195,500
(5,715,500)
2019
Weighted
average
exercise Number of
price Warrants(i),(ii)
$
Amount
$
27.61 11,195,500
-
19.08
30,901
-
Amount
$
30,901
(12,829)
Balance – December 31
5,480,000
18,072
36.50 11,195,500
30,901
2018
Weighted
average
exercise
price
$
27.61
-
27.61
(i)
(ii)
5,715,500 warrants entitling the holder to purchase one common share of Osisko at a price of $19.08 expired unexercised on
February 26, 2019.
5,480,000 warrants entitling the holder to purchase one common share of Osisko at a price of $36.50 until March 5, 2022.
51
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
23. Share-based compensation
Share options
The Company offers a share option plan (the “Plan”) to its directors, officers, management, employees and consultants.
Options may be granted at an exercise price determined by the Board of Directors but shall not be less than the closing
market price of the common shares of the Company on the TSX on the day prior to their grant. No participant shall be granted
an option which exceeds 5% of the issued and outstanding shares of the Company at the time of granting of the option. The
number of common shares issued to insiders of the Company within one year and issuable to the insiders of the Company
at any time under the Plan or combined with all other share compensation arrangements, cannot exceed 8% of the issued
and outstanding common shares. The duration and the vesting period are determined by the Board of Directors. However,
the expiry date may not exceed 7 years after the date of granting.
The following table summarizes information about the movement of the share options outstanding:
Balance – January 1
Granted(i)
Issued – Barkerville replacement share options(ii)
Exercised
Exercised – Virginia replacement share options(iii)
Forfeited
Expired
2019
Weighted
average
exercise price
$
14.49
13.51
14.89
14.59
11.51
13.74
15.80
Number of
options
4,305,980
1,292,200
1,005,478
(1,355,531)
(148,984)
(151,800)
(7,999)
Number of
options
3,537,123
886,900
-
-
(2,710)
(70,467)
(44,866)
Balance – December 31
4,939,344
14.40
4,305,980
Options exercisable – December 31
2,988,713
14.87
2,720,879
(i) Options were granted to officers, management, employees and/or consultants.
(ii) Share options issued as replacement share options following the acquisition of Barkerville (Note 7).
(iii) Share options issued as replacement share options following the acquisition of Virginia Mines Inc. in 2015.
2018
Weighted
average
exercise price
$
14.90
12.85
-
-
13.93
14.43
15.15
14.49
14.72
52
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
23. Share-based compensation (continued)
Share options (continued)
The weighted average share price when share options were exercised during the year ended December 31, 2019 was
$16.24 ($14.71 for the year ended December 31, 2018).
The following table summarizes the Company’s share options outstanding as at December 31, 2019:
Options outstanding
Weighted
average
remaining
contractual
life (years)
Weighted
average
Number exercise price
$
212,708
1,187,408
1,815,139
1,570,579
153,510
4,939,344
7.80
12.65
13.53
16.41
26.60
14.40
0.7
4.2
2.9
1.8
2.4
2.8
Options exercisable
Weighted
average
exercise price
$
7.80
12.39
13.44
16.39
26.60
14.87
Number
212,708
410,076
897,039
1,315,380
153,510
2,988,713
Exercise
price range
$
6.94 – 9.98
10.58 – 12.97
13.10 – 14.78
15.80 – 18.07
24.72 – 27.77
Share options – Fair value
The options, when granted, are accounted for at their fair value determined by the Black-Scholes option pricing model based
on the vesting period and on the following weighted average assumptions:
Dividend per share
Expected volatility
Risk-free interest rate
Expected life
Weighted average share price
Weighted average fair value of options granted
2019
2018
1%
34%
2%
49 months
$13.51
$3.41
1%
35%
2%
46 months
$12.85
$3.37
The expected volatility was estimated using Osisko’s historical data from the date of grant and for a period corresponding to
the expected life of the options. Share options are exercisable at the closing market price of the common shares of the
Company on the day prior to their grant.
The fair value of the share options is recognized as compensation expense over the vesting period. In 2019, the total share-
based compensation related to share options on the consolidated statement of loss amounted to $2.9 million ($3.1 million
in 2018).
Deferred and restricted share units
The Company has a Deferred Share Unit Plan and a Restricted Share Unit Plan, which allow DSU and RSU to be granted
to directors, officers and employees as part of their long-term compensation package and entitling them to receive payout in
cash. In 2018 and 2019 respectively, the RSU and DSU plans were amended to provide for the right of the Company to settle
a payment in the form of common shares, cash or a combination of common shares and cash (the “Amended RSU Plan”).
53
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
23. Share-based compensation (continued)
Deferred and restricted share units (continued)
The following table summarizes information about the DSU and RSU movements:
DSU(i)
(cash)
DSU(i)
(equity)
RSU
(cash)
2019
RSU(ii)
(equity)
DSU
(cash)
RSU(iii)
(cash)
2018
RSU(iii)
(equity)
Balance – Beginning of period
Granted
Reinvested (dividends on
common shares)
Settled
317,209
-
-
66,000
3,046
-
848,759
592,300
266,442
82,600
600,627
23,700
-
429,262
2,352
(37,185)
2,529
(16,866)
23
(3,069)
14,600
(176,704)
4,696
(36,529)
7,064
(192,719)
6,277
-
Transfer from cash-settled to
equity-settled
(282,376)
Forfeited
Balance – End of period
Balance – Vested
-
-
-
282,376
(8,832)
325,207
267,565
-
-
-
-
-
(88,917)
-
-
(428,090)
(7,536)
428,090
(14,870)
1,190,038
317,209
3,046
848,759
70,320
233,883
-
69,257
(i)
In May 2019, following an amendment to the DSU Plan, all outstanding DSU were transferred from cash-settled to equity-settled as the
Company now intends to settle these DSU in equity instead of cash. The Company has reclassified the fair value at the date of transfer
from provisions and other liabilities to contributed surplus.
The DSU vest the day prior to the next annual general meeting and are payable in common shares, cash or a combination of common
shares and cash, at the sole discretion of the Company, to each director when he or she leaves the board or is not re-elected. The
value of the payout is determined by multiplying the number of DSU expected to be vested at the payout date by the closing price of
the Company’s shares on the day prior to the grant date. The fair value is recognized over the vesting period. On the settlement date,
one common share will be issued for each DSU, after deducting any income taxes payable on the benefit earned by the director that
must be remitted by the Company to the tax authorities. The DSU granted in 2019 have a weighted average value of $13.61 per DSU
($13.18 per DSU in 2018).
(ii) 68,162 RSU were granted to management in 2018 as part of the 2017 short-term incentive plan (70,320 RSU after reinvestment of
dividends), representing a value of $1.0 million. These RSU vested on December 31, 2019 and a total of 32,492 common shares were
issued in January 2020 (after deducting the income taxes payable on the benefit earned by the employee that must be remitted by the
Company to the tax authorities).
On December 31, 2019, 150,000 RSU were granted to an officer (with a value of $12.70 per RSU) and will vest and be payable in
equal tranches over a three-year period (1/3 per year), in common shares, cash or a combination of common shares and cash, at the
sole discretion of the Company. An additional 75,000 RSU were also granted (with a value of $12.70 per RSU) and will vest upon the
officer buying a total of 75,000 common shares of the Company by December 31, 2020. The common shares were acquired in January
2020, which triggered the vesting of the RSU and a total of 34,852 common shares were issued to the officer (after deducting the
income taxes payable on the benefit earned by the employee that must be remitted by the Company to the tax authorities).
The remaining RSU vest and are payable in common shares, cash or a combination of common shares and cash, at the sole discretion
of the Company, three years after the grant date, one half of which depends on the achievement of certain performance measures.
The weighted average value of the RSU granted in 2019 was $13.61 per RSU ($12.97 per RSU in 2018).
The value of the payout is determined by multiplying the number of RSU expected to be vested at the payout date by the closing price
of the Company’s shares on the day prior to the grant date. The fair value is recognized over the vesting period and is adjusted in
function of the applicable terms for the performance based components, when applicable. On the settlement date, one common share
is issued for each RSU, after deducting any income taxes payable on the benefit earned by the employee that must be remitted by the
Company to the tax authorities.
(iii)
In October 2018, following the approval of the Amended RSU Plan, 428,090 outstanding RSU have been transferred from cash-settled
to equity-settled as the Company now intends to settle these RSU in equity instead of cash. The Company has reclassified the fair
value at the date of transfer from provisions and other liabilities to contributed surplus.
The total share-based compensation expense related to the DSU and RSU plans in 2019 amounted to $5.4 million
($2.7 million in 2018).
54
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
23. Share-based compensation (continued)
Deferred and restricted share units – Fair value
The following table summarizes the carrying value of the outstanding DSU and RSU (cash) and the fair value of the vested
DSU and RSU (cash) as at December 31, 2019 and 2018:
Current portion
Non-current portion
Carrying
December 31, 2019
Intrinsic value
value of vested units
December 31, 2018
Carrying Intrinsic value
value of vested units
$
-
-
-
$
-
-
-
$
3,494
-
3,494
$
2,800
-
2,800
The carrying value of the DSU and RSU (cash) was included in provisions and other liabilities on the consolidated balance
sheets (Note 19).
Based on the closing price of the common shares at December 31, 2019 ($12.62), and considering a marginal income tax
rate of 53.3%, the estimated amount that the Company is expected to transfer to the tax authorities to settle the employees’
tax obligations related to the vested RSU and DSU to be settled in equity amounts to $2.3 million ($0.4 million as at
December 31, 2018) and to $10.2 million based on all RSU and DSU outstanding ($5.4 million as at December 31, 2018).
24. Income taxes
(a)
Income tax expense
The income tax recorded in the consolidated statements of loss for the years ended December 31, 2019 and 2018 is presented as
follows:
Current income tax
Expense for the year
Adjustment in respect of prior years
Current income tax expense
Deferred income tax (Note 24 (b)):
Origination and reversal of temporary differences
Impact of changes in tax rates
Change in unrecognized deductible temporary differences
Adjustments in respect of prior years
Deferred income tax recovery
Income tax recovery
2019
$
797
-
797
(45,186)
98
3,891
-
(41,197)
(40,400)
2018
$
797
25
822
(36,471)
253
25
223
(35,970)
(35,148)
55
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
24. Income taxes (continued)
(a)
Income tax expense (continued)
The provision for income taxes presented in the consolidated statements of loss differs from the amount that would arise using the
statutory income tax rate applicable to income of the consolidated entities, as a result of the following:
Loss before income taxes
Income tax provision calculated using the combined Canadian federal
and provincial statutory income tax rate
Increase (decrease) in income taxes resulting from:
Non-deductible expenses, net
Non-deductible portion of capital losses, net
Non-deductible (non-taxable) foreign exchange loss (gain)
Tax rate changes of deferred income taxes
Differences in foreign statutory tax rates
Foreign withholding taxes
Share of equity loss of associates
Tax benefits not recognized
Other, net
2019
$
2018
$
(274,595)
(140,735)
(73,042)
(37,576)
738
4,877
(357)
98
19,758
584
2,954
3,891
99
719
856
787
253
(1,043)
583
-
25
248
Total income tax recovery
(40,400)
(35,148)
The 2019 Canadian federal and provincial statutory income tax rate is 26.6% (26.7% in 2018). The 2019 effective tax rate reflects an
income tax expense of $0.1 million relating to the reduction of the Québec tax rate from 11.6% to 11.5% in 2020. The 2018 effective
tax rate reflects an income tax expense of $0.3 million relating to the reduction of the Québec tax rate from 11.7% to 11.5% in 2020. .
(b) Deferred income taxes
The components that give rise to deferred income tax assets and liabilities are as follows:
Deferred tax assets:
Stream interests
Deferred and restricted share units
Share and debt issue expenses
Other assets
Non-capital losses
Deferred tax liabilities:
Royalty interests and exploration and evaluation assets
Convertible debentures
Investments
Deferred tax liability, net
December 31,
2019
$
28,826
2,865
(113)
149
170
31,897
(77,641)
(3,632)
1,911
(79,362)
(47,465)
December 31,
2018
$
7,133
2,032
989
120
-
10,274
(88,787)
(4,866)
(3,898)
(97,551)
(87,277)
Deferred tax assets and liabilities have been offset in the balance sheets where they relate to income taxes levied by the same
taxation authority and the Company has the legal right and intent to offset.
56
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
24. Income taxes (continued)
(b) Deferred income taxes (continued)
The 2019 movement for deferred tax assets and deferred tax liabilities may be summarized as follows:
Deferred tax assets:
Stream interests
Share and debt issue expenses
Deferred and restricted share units
Non-capital losses
Other assets
Deferred tax liabilities:
Royalty interests and exploration
and evaluation assets
Investments
Convertible debentures
Dec. 31,
2018
Statement
of loss
$
$
Equity
$
7,133
989
2,032
-
120
21,693
(1,036)
726
170
29
(88,787)
11,769
(3,898)
(4,866)
6,612
1,234
(87,277)
41,197
-
(66)
107
-
-
-
-
-
41
Other
comprehen-
sive income
Translation
adjustments
$
-
-
-
-
-
$
-
-
-
-
-
Dec. 31,
2019
$
28,826
(113)
2,865
170
149
(949)
(803)
-
326
(77,641)
-
-
1,911
(3,632)
(1,752)
326
(47,465)
The 2018 movement for deferred tax assets and deferred tax liabilities may be summarized as follows:
Dec. 31,
2017
Statement
of loss
$
$
7,793
2,286
2,032
1,015
223
(660)
(1,297)
(140)
(1,015)
(103)
Equity
$
-
-
140
-
-
Other
comprehen-
sive income
Translation
adjustments
$
-
-
-
-
-
$
-
-
-
-
-
Dec. 31,
2018
$
7,133
989
2,032
-
120
(123,772)
37,574
(10,054)
(6,047)
(238)
192
1,181
238
-
-
-
-
(2,038)
5,964
-
-
(551)
(88,787)
-
-
-
(3,898)
(4,866)
-
(126,762)
35,970
140
3,926
(551)
(87,277)
Deferred tax assets:
Stream interests
Share and debt issue expenses
Deferred and restricted share units
Non-capital losses
Other assets
Deferred tax liabilities:
Royalty interests and exploration
and evaluation assets
Investments
Convertible debentures
Other liabilities
(c) Unrecognized deferred tax liabilities
The aggregate amount of taxable temporary differences associated with investments in subsidiaries, for which deferred tax liabilities
have not been recognized as at December 31, 2019, is $39.1 million ($76.8 million as at December 31, 2018). No deferred tax liabilities
are recognized on the temporary differences associated with investments in subsidiaries because the Company controls the timing of
reversal and it is not probable that they will reverse in the foreseeable future.
57
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
25. Additional information on the consolidated statements of loss
Revenues
Royalty interests
Stream interests
Offtake interests
Cost of sales
Royalty interests
Stream interests
Offtake interests
Operating expenses by nature
Impairment of assets
Depletion and depreciation
Employee benefit expenses (see next page)
Professional fees
Travel expenses
Communication and promotional expenses
Rent and office expenses
Public company expenses
Gain on disposal of stream and offtake interests
Cost recoveries from associates
Other expenses
Employee benefit expenses
Salaries and wages
Share-based compensation
Cost recoveries from associates
2019
$
2018
$
97,146
42,976
252,477
392,599
272
13,437
249,172
262,881
243,576
48,270
20,701
3,453
1,108
1,006
828
822
(7,636)
(595)
1,411
312,944
15,122
8,328
(2,749)
20,701
92,110
35,457
362,905
490,472
245
13,181
357,879
371,305
166,316
52,786
14,015
3,827
1,363
1,166
1,704
639
(9,094)
(677)
653
232,698
12,705
5,791
(4,481)
14,015
58
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
25. Additional information on the consolidated statements of loss (continued)
Other gains (losses), net
Change in fair value of financial assets at fair value through profit and loss
Net gain (loss) on dilution of investments in associates
Net gain on acquisition of investments(i)
Net gain (loss) on disposal of investments(ii)
Impairment of an investment in an associate (Note 12)
Impairment of other assets
2019
$
2018
$
(1,089)
(3,687)
1,006
(27,391)
(12,500)
(4,724)
(48,385)
(7,837)
1,545
1,934
6,956
-
-
2,598
(i) Represents changes in the fair value of the underlying investments between the respective subscription dates and the closing dates.
(ii) In 2019, the net loss on disposal of investments includes the net losses realized on the deemed disposal of associates (Note 12). In
2018, the net gain on disposal of investments includes the gain realized on the deemed disposal of the Dalradian shares (Note 13).
26. Key management
Key management includes directors (executive and non-executive) and the executive management team. The compensation
paid or payable to key management for employee services is presented below:
Salaries and short-term employee benefits
Share-based compensation
Cost recoveries from associates
2019
$
6,182
5,151
(600)
10,733
2018
$
4,416
3,086
(490)
7,012
Key management employees are subject to employment agreements which provide for payments on termination of
employment without cause or following a change of control providing for payments of between once to twice base salary and
bonus and certain vesting acceleration clauses on restricted and deferred share units and share options.
59
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
27. Net loss per share
Net loss
Basic weighted average number of common shares outstanding (in thousands)
Dilutive effect of share options
Diluted weighted average number of common shares
Net loss per share
Basic and diluted
2019
$
(234,195)
151,266
-
151,266
2018
$
(105,587)
156,617
-
156,617
(1.55)
(0.67)
As a result of the net loss for the years ended December 31, 2019 and 2018, all potentially dilutive common shares are deemed to be
antidilutive and thus diluted net loss per share is equal to the basic net loss per share.
28. Additional information on the consolidated statements of cash flows
Interests received measured using the effective rate method
Interests paid on long-term debt
Dividends received
Income taxes paid
Changes in non-cash working capital items
Decrease (increase) in amounts receivable
Decrease (increase) in other current assets
Increase (decrease) in accounts payable and accrued liabilities
Tax credits receivable related to exploration and evaluation assets
Beginning of year
End of year (i)
(i) Balance as at December 31, 2019 from the acquisition of Barkerville (Note 7).
2019
($)
2,583
15,680
150
797
4,929
(1,449)
(8,260)
(4,780)
2018
($)
3,944
21,126
328
822
(8,613)
9,828
(3,834)
(2,619)
281
936
4,091
281
60
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
29. Financial risks
The Company’s activities expose it to a variety of financial risks: market risks (including interest rate risk, foreign currency
risk and other price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s performance.
Risk management is carried out under policies approved by the Board of Directors. The Board of Directors provides principles
for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk,
credit risk, the use of derivative financial instruments and non-derivative financial instruments, and investment in excess
liquidities.
(a) Market risks
(i) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result of
changes in market interest rates.
The Company’s interest rate risk on financial assets is primarily related to cash, which bear interest at variable rates.
However, as these investments come to maturity within a short period of time, the impact would likely be not
significant. Short-term investments and other financial assets are not exposed to interest rate risk because they are
mostly non-interest bearing or bear interest at fixed rates, except for derivative financial instruments (warrants). Short-
term investments bearing interest at variable rates are not significant, and therefore, a 0.5% increase (decrease) in
interest rates would have resulted in an immaterial impact on net earnings for 2019 and 2018.
Financial liabilities are not exposed to interest rate risk because they are non-interest bearing or bear a fixed interest
rate, except for the revolving credit facility which bears a variable interest rate. An increase (decrease) of 0.5% in the
interest rates would have resulted in an insignificant variation of the net loss in 2019 and 2018. The Company does
not use derivatives to mitigate its exposure to interest rate risk.
(ii) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from currency volatility, primarily with respect to the US
dollar. The Company holds balances in cash denominated in U.S. dollars and can draw on its credit facility in U.S.
dollars and is therefore exposed to gains or losses on foreign exchange.
As at December 31, 2019 and 2018, the balances in U.S. dollars held by entities having the Canadian dollar as their
functional currency were as follows:
Cash and cash equivalents
Amounts receivable
Other assets
Accounts payable and accrued liabilities
Revolving credit facility
Net exposure, in US dollars
Equivalent in Canadian dollars
2019
$
46,267
-
567
(86)
(15,000)
31,748
41,234
December 31,
2018
$
38,677
1,011
641
(22)
-
40,307
54,987
Based on the balances as at December 31, 2019, a 5% fluctuation in the exchange rates on that date (with all other
variables being constant) would have resulted in a variation of net earnings of approximately $1.3 million in 2019
($2.1 million in 2018).
61
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
29. Financial risks (continued)
(a) Market risks (continued)
(iii) Other price risk
The Company is exposed to equity price risk as a result of holding long-term investments in other exploration and
development mining companies. The equity prices of long-term investments are impacted by various underlying
factors including commodity prices. Based on the Company's long-term investments held as at December 31, 2019,
a 10% increase (decrease) in the equity prices of these investments would increase (decrease) the net loss by
$0.4 million and the other comprehensive loss by $5.7 million for the year ended December 31, 2019. Based on the
Company's long-term investments held as at December 31, 2018, a 10% increase (decrease) in the equity prices of
these investments would have decreased (increased) the net loss by $0.5 million and would have increased
(decreased) the other comprehensive loss by $9.0 million for the year ended December 31, 2018.
(b) Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge its obligation and cause the other party
to incur a financial loss. Financial instruments that potentially subject the Company to credit risk consist of cash, short-
term investments, amounts receivable, notes receivable, other financing facilities receivable and reclamation deposits.
The Company reduces its credit risk by investing its cash in high interest savings accounts with Canadian and U.S.
recognized financial institutions and its reclamation deposits in guaranteed investments certificates issued by Canadian
chartered banks. In the case of amounts receivable, notes receivable and other financing facilities, the Company
performs either a credit analysis or ensures that is has sufficient guaranties in case of a non-payment by the third party
to cover the net book value of the note. In some cases, the loans receivable could be applied against stream deposits
due by the Company or converted into a royalty if the third party is not able to reimburse its loan.
The maximum credit exposure of the Company corresponds to the respective instrument’s carrying amount.
(c) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet the obligations associated with its financial liabilities.
The Company manages the liquidity risk by continuously monitoring actual and projected cash flows, taking into account
the requirements related to its investment commitments, mining properties and exploration and evaluation assets and
matching the maturity profile of financial assets and liabilities. The Board of Directors reviews and approves any material
transaction out of the ordinary course of business, including proposals on mergers, acquisitions or other major investment
or divestitures. The Company also manages liquidity risk through the management of its capital structure and financial
leverage as outlined in Note 22. As at December 31, 2019, cash is invested in high interest savings accounts held with
Canadian and U.S. recognized financial institutions.
As at December 31, 2019, all financial liabilities to be settled in cash or by the transfer of other financial assets mature
within 90 days, except for the convertible debentures, the revolving credit facility and the lease liabilities, which are
described below:
As at December 31, 2019
Amount
payable
at maturity
$
Maturity
2020
$
2021
$
2022
$
Estimated annual payments
2024 2025-2029
2023
$
$
-
-
-
-
Conv. debenture (2016)
50,000
February 12, 2021
2,005
50,236
-
Conv. debentures (2018)
300,000 December 31, 2022
12,000
12,000
312,000
-
-
Lease liabilities
10,126 December 31, 2029
Revolving credit facility(i)
19,482 November 14, 2023
1,256
2,630
1,256
2,630
1,256
2,630
1,261
21,773
1,284
6,422
-
-
379,608
17,891
66,122
315,886
23,034
1,284
6,422
(i) The interest payable is based on the actual interest rate as at December 31, 2019.
62
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
30. Fair value of financial instruments
The following table provides information about financial assets and liabilities measured at fair value in the consolidated
balance sheets and categorized by level according to the significance of the inputs used in making the measurements.
Level 1– Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2– Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and
Level 3– Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Level 1
$
Level 2
Level 3
$
$
Total
$
December 31, 2019
Recurring measurements
Financial assets at fair value through profit or loss(i)
Warrants on equity securities
Publicly traded mining exploration and development
companies
Precious metals
Other minerals
Financial assets at fair value through other
comprehensive income (loss)(i)
Equity securities
Publicly traded mining exploration and development
companies
Precious metals
Other minerals
Recurring measurements
Financial assets at fair value through profit or loss(i)
Warrants on equity securities
Publicly traded mining exploration and development
companies
Precious metals
Other minerals
Financial assets at fair value through other
comprehensive income (loss)(i)
Equity securities
Private mining exploration and development
companies – precious metals
Publicly traded mining exploration and development
companies
Precious metals
Other minerals
-
-
48,295
9,114
57,409
Level 1
$
-
-
-
35,544
12,259
47,803
-
-
-
-
-
1,067
633
1,067
633
-
-
48,295
9,114
1,700
59,109
December 31, 2018
Level 2
Level 3
$
$
Total
$
-
-
-
-
-
-
3,322
26
3,322
26
56,252
56,252
-
-
35,544
12,259
59,600
107,403
(i) On the basis of its analysis of the nature, characteristics and risks of equity securities, the Company has determined that presenting
them by industry and type of investment is appropriate.
63
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
30. Fair value of financial instruments (continued)
During the years ended December 31, 2019 and 2018, there were no transfers among Level 1, Level 2 and Level 3.
Financial instruments in Level 1
The fair value of financial instruments traded in active markets is based on quoted market prices on a recognized securities
exchange at the balance sheet dates. The quoted market price used for financial assets held by the Company is the last
transaction price. Instruments included in Level 1 consist primarily of common shares trading on recognized securities
exchanges, such as the TSX or the TSX Venture.
Financial instruments in Level 2
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximize the use of observable market data where it is available and rely as little as possible
on the Company’s specific estimates. If all significant inputs required to measure the fair value of an instrument are
observable, the instrument is included in Level 2. Instruments included in Level 2 consist of notes receivable and the liability
related to share exchange rights. If one or more of the significant inputs are not based on observable market data, the
instrument is included in Level 3.
Financial instruments in Level 3
Financial instruments classified in Level 3 include investments in private companies and warrants held by the Company that
are not traded on a recognized securities exchange. At each balance sheet date, the fair value of investments held in private
companies is evaluated using a discounted cash-flows approach. The main valuation inputs used in the cash-flows models
being significant unobservable inputs, these investments are classified in Level 3. The fair value of the investments in
warrants is determined using the Black-Scholes option pricing model which includes significant inputs not based on
observable market data. Therefore, investments in warrants are included in Level 3.
The following table presents the changes in the Level 3 investments (warrants and investments in private companies) for
the years ended December 31, 2019 and 2018:
Balance – January 1
Acquisitions
Deemed acquisition (Note 13)
Disposal (Note 21)
Warrants exercised
Change in fair value - warrants exercised(i)
Change in fair value - warrants expired(i)
Change in fair value - investments held at the end of the period(i)
Balance – December 31
2019
$
59,600
2,885
-
(58,641)
(1,055)
(250)
(165)
(674)
1,700
2018
$
8,092
3,093
46,625
-
-
-
(1,180)
2,970
59,600
(i) Recognized in the consolidated statements of loss under other losses, net for the warrants and in the consolidated statements of
other comprehensive loss under changes in fair value of financial assets at fair value through comprehensive income (loss) for the
investments in common shares in private companies.
64
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
30. Fair value of financial instruments (continued)
Financial instruments in Level 3 (continued)
The fair value of the financial instruments classified as Level 3 depends on the nature of the financial instruments.
The fair value of the warrants on equity securities of publicly traded mining exploration and development companies,
classified as Level 3, is determined using the Black-Scholes option pricing model. The main non-observable input used in
the model is the expected volatility. An increase/decrease in the expected volatility used in the models of 10% would lead to
an increase/decrease in the fair value of the warrants of $0.3 million as at December 31, 2019 and $0.4 million as at
December 31, 2018.
As at December 31, 2018, the fair value of the equity securities of private mining exploration and development companies
was determined using a discounted cash flows. The main non-observable inputs used in the models were the expected price
of metals and the discount rate. An increase (decrease) in the long-term gold price of 10%, (base price used in the discounted
cash flow model is US$1,300 per ounce) would lead to an increase (decrease) in the fair value of the investments in private
companies of $6.7 million in 2018 and an increase (decrease) of 100 basis points in the discount rate (the base discount rate
used in the discounted cash flow model is 5.1%) would lead to an increase (decrease) in the fair value of the investment of
$6.7 million. There was no significant investment in private companies as at December 31, 2019.
Foreign exchange contracts
In 2019, the Company entered into foreign exchange contracts (collar options) to sell U.S. dollars and buy Canadian dollars
for a total nominal amount of US$12.0 million. The contracts were put in place to protect revenues in Canadian dollars (from
the sale of gold ounces received from royalty interests which are denominated in U.S. dollars) from a stronger Canadian
dollar. The fair value of the contracts is booked at each reporting period on the consolidated balance sheets. As at
December 31, 2019, there were no foreign exchange contracts outstanding.
Financial instruments not measured at fair value on the consolidated balance sheets
Financial instruments that are not measured at fair value on the consolidated balance sheets are represented by cash, short-
term investments, trade receivables, amounts receivable from associates and other receivables, notes receivable, other
financing facilities receivable, accounts payable and accrued liabilities and the long-term debt. The fair values of cash, short-
term investments, trade receivables, amounts receivable from associates and other receivables and accounts payable and
accrued liabilities approximate their carrying values due to their short-term nature. The fair value of the non-current notes
receivable and other financing credit facilities receivable approximate their carrying value as there were no significant
changes in economic and risks parameters since the issuance/acquisition or assumptions of those financial instruments.
The following table presents the carrying amount and the fair value of long-term debt, categorized under Levels 1 and 2, as
at December 31, 2019:
Long-term debt – Level 1
Long-term debt – Level 2
Balance – December 31
December 31, 2019
Carrying
amount
$
Fair
value
$
303,240
68,585
371,825
280,807
68,235
349,042
65
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
31. Segment disclosure
Following the acquisition of Barkerville in November 2019, the chief operating decision-maker organizes and manages the
business under two operating segments: (i) acquiring and managing precious metal and other royalties, streams and similar
interests, and (ii) the exploration, evaluation and development of mining projects. All of the Company’s assets and revenues
are attributable to the precious metal and other royalties, streams and similar interests operating segment, with the exception
of mining interests, plant and equipment, and exploration and evaluation assets, which are attributable to the exploration and
development of mining projects operating segment. Prior to the acquisition of Barkerville, the Company had only one
operating segment, which was the acquiring and managing precious metal and other royalties, streams and similar interests.
The comparative figures have been restated to conform to the actual segments.
Royalty, stream and other interests - Geographic revenues
All of the Company’s revenues are attributable to the precious metal and other royalties, streams and similar interests
operating segment. Geographic revenues from the sale of metals and diamonds received or acquired from in-kind royalties,
streams and other interests are determined by the location of the mining operations giving rise to the royalty, stream or other
interest. For the years ended December 31, 2019 and 2018, royalty, stream and other interest revenues were mainly earned
from the following jurisdictions:
North
America(i)
$
South
America
$
Australia
$
Africa
$
Europe
$
Total
$
2019
Royalties
Streams
Offtakes
2018
Royalties
Streams
Offtakes
93,092
21,588
252,476
367,156
87,141
16,761
339,074
442,976
330
11,849
-
12,179
538
9,696
943
11,177
59
2,005
-
2,064
31
1,332
22,888
24,251
3,665
-
-
3,665
4,400
-
-
4,400
-
7,535
-
7,535
-
7,668
-
7,668
97,146
42,976
252,477
392,599
92,110
35,457
362,905
490,472
(i) 89% of revenues from North America were generated from Canada and the United States in 2019 (94% in 2018).
For the year ended December 31, 2019, one royalty interest generated revenues of $61.1 million ($58.5 million for the year
ended December 31, 2018), which represented 44% of revenues (46% of revenues for the year ended December 31, 2018)
(excluding revenues generated from the offtake interests).
For the year ended December 31, 2019, revenues generated from precious metals and diamonds represented 94% and 5%,
respectively, of total revenues (84% and 13% excluding offtakes, respectively). For the year ended December 31, 2018,
revenues generated from precious metals and diamonds represented 96% and 3%, respectively, of total revenues (85% and
11% excluding offtakes, respectively).
66
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
31. Segment disclosure (continued)
Royalty, stream and other interests - Geographic net assets
The following table summarizes the royalty, stream and other interests by country, as at December 31, 2019 and 2018, which
is based on the location of the property related to the royalty, stream or other interests:
North
America(i)
$
South
America
$
Australia
$
Africa
$
Asia
$
Europe
$
Total
$
December 31, 2019
Royalties
Streams
Offtakes
560,246
194,344
6,689
31,657
198,021
-
9,961
2,435
8,282
761,279
229,678
20,678
December 31, 2018
Royalties
Streams
Offtakes
643,193
269,257
58,145
27,133
181,681
-
970,595
208,814
10,002
3,524
8,904
22,430
10,488
-
-
10,488
12,180
-
-
12,180
-
28,963
4,810
33,773
15,215
59,401
-
627,567
483,164
19,781
74,616
1,130,512
-
85,544
33,486
15,215
66,404
-
707,723
606,410
100,535
119,030
81,619
1,414,668
(i)
96% of net interests from North America are located in Canada and the United States as at December 31, 2019
(97% as at December 31, 2018).
Exploration, evaluation and development of mining projects
The assets and expenses related to the exploration, evaluation and development of mining projects are almost exclusively
located in Canada, and are detailed as follow as at and for the years ended December 31, 2019 and 2018:
Net assets (as at December 31)
Mining interests, plant and equipment
Exploration and evaluation assets
Expenses (for the years ended December 31)
Exploration and evaluation
Impairment of exploration and evaluation assets
2019
$
333,778
42,949
376,727
191
49,985
50,176
2018
$
-
95,002
95,002
183
-
183
67
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
32. Related party transactions
During the years ended December 31, 2019 and 2018, the following amounts were invoiced by Osisko to associates for
recoveries of costs related to professional services and rental of offices and are reflected as a reduction of general and
administrative expenses and business development expenses in the consolidated statements of loss:
Amounts invoiced to associates as a reduction of:
General and administrative expenses
Business development expenses
Total amounts invoiced to associates
2019
$
973
2,371
3,344
2018
$
1,409
3,749
5,158
An amount of $0.5 million (including sales taxes) is receivable from associates and included in amounts receivable as at
December 31, 2019 ($3.2 million as at December 31, 2018).
As at December 31, 2019, the Company has a total of $8.8 million receivable from an associate (Note 14) for a bridge loan
financing (interest rate of 8.25%) and a working capital facility (interest rate of 12.5%) with a maturity date of June 30, 2020.
The amounts receivable are included in other investments on the consolidated balance sheets.
In 2019, interest revenues of $0.9 million ($0.5 million in 2018) were accounted for with regards to notes receivable from
associates. As at December 31, 2019, interests receivable from associates of $0.9 million are included in amounts receivable
($1.7 million as at December 31, 2018). In 2019, interests receivable of $1.8 million from two notes issued to Falco were
converted into common shares of Falco.
In 2019, two notes receivable from Falco amounting to $20.0 million were applied against the first installment of a secured
silver stream credit facility (Note 14).
Additional transactions with related parties are described under Notes 9, 12, 14, 16, 21 and 26.
33. Commitments
Offtake and stream purchase agreements
The following table summarizes the significant commitments to pay for gold, silver and diamonds to which Osisko has the
contractual right pursuant to the associated precious metals and diamond purchase agreements:
Interest
Attributable payable production
to be purchased
Silver
Diamond
Gold
Per ounce/carat
cash payment (US$)
Gold
Silver Diamond
Term of
agreement
Date of contract
Amulsar stream(1),(8)
4.22%
62.5%
$400
$4
40 years
November 2015
Amulsar offtake(2),(8)
81.91%
Back Forty stream
18.5%(3)
75%
Based on
quotational period
30% spot price
(max $600)
$4
Until delivery of
2,110,425 ounces Au
November 2015
Life of mine
March 2015
Mantos Blancos
stream(4)
Renard stream(5)
Sasa stream(6)
Gibraltar stream(7)
9.6%
100%
100%
75%
8% spot
Life of mine
Lesser of
40% of sales
price or $40
40 years
September 2015
Amended Aug. 2019
July 2014
Amended Oct. 2018
$5
$2.75
40 years
November 2015
Life of mine
March 2018
68
Osisko Gold Royalties Ltd
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
33. Commitments (continued)
Offtake and stream purchase agreements (continued)
(1) Stream capped at 89,034 ounces of gold and 434,093 ounces of silver delivered. Subject to multiple buy-down options: 50% for $34.4 million
and $31.3 million on 2nd and 3rd anniversary of commercial production, respectively.
(2) Offtake percentage will increase to 84.87% if Lydian elects to reduce the gold stream as outlined above. The Amulsar offtake applies to the
sales from the first 2,110,425 ounces of refined gold, of which 1,853,751 ounces are attributable to OBL (less any ounces delivered pursuant
to the Amulsar stream).
(3) The gold stream will be reduced to 9.25% after the delivery of 105,000 gold ounces.
(4) The stream percentage shall be payable on 100% of silver until 19,300,000 ounces have been delivered, after which the stream percentage
will be 40%.
(5) The stream term shall be automatically extended beyond the initial term for successive 10-year periods. The Renard stream was amended in
October 2018 (Note 14).
(6) The stream term shall be automatically extended beyond initial term for successive 10-year periods. 3% or consumer price index (CPI) per
ounce price escalation after 2016.
(7) Under the silver stream, Osisko will make ongoing payments of US$2.75 per ounce of silver delivered. Osisko will receive from Taseko an
amount equal to 100% of Gibco’s share of silver production, which represents 75% of Gibraltar mine’s production, until reaching the delivery
to Osisko of 5.9 million ounces of silver, and 35% of Gibco’s share of silver production thereafter.
(8) As at December 31, 2019, Lydian, the owner of the Amulsar project, was granted protection under the CCAA.
Investments in royalty and stream interests
As at December 31, 2019, significant commitments related to the acquisition of royalties and streams as detailed in the
following table:
Company
Project (asset)
Installments
Triggering events
Aquila Resources Inc.
Back Forty project
(gold stream)
US$10.0 million
US$30.0 million
Positive construction decision.
First drawdown on debt finance facility.
Falco Resources Ltd.
Horne 5 project
(silver stream)
$20.0 million
$35.0 million
$60.0 million
$40.0 million
(optional)
Receipt of all necessary material third-party approvals,
licenses, rights of way and surface rights on the property.
Receipt of all material construction permits, positive
construction decision, and
raising a minimum of
$100.0 million in non-debt financing.
Upon total projected capital expenditure having been
demonstrated to be financed.
Payable with fourth installment, at sole election of Osisko,
to increase the silver stream to 100% of payable silver
(from 90%).
34. Subsequent event
Dividend
On February 19, 2020, the Board of Directors declared a quarterly dividend of $0.05 per common share payable on April 15,
2020 to shareholders of record as of the close of business on March 31, 2020.
69