Osisko Gold Royalties Could Recover in the Future

Osisko Gold Royalties got off to a terrific start this year, but the stock has lost the momentum of late and dropped off a cliff. This is surprising given that the streaming company has been taking steps to increase its output and stands to gain from a favourable pricing environment. But given that Osisko is not a very well-known company, let’s take a closer look at where it stands right now and how its future might look like.

Osisko Is Focused on Operational Improvements

In the second quarter of 2019, Osisko delivered revenue of $33.8 million from royalties and streams. That compared favourably to the company’s revenue of $32.9 million in the year-ago period. The increase in the revenue was achieved despite the fact that Osisko’s production during the quarter fell to 19,651 gold equivalent ounces as compared to 20,506 gold equivalent ounces a year ago.

What’s more, the company’s operating cash flow also increased from $19.7 million in the year-ago period to $21.4 million last quarter. The improved financial performance was driven by stronger pricing during the quarter. Osisko recorded an average gold realized price of $1,309 an ounce as compared to $1,306 an ounce a year ago.

Silver prices, however, fell to $15 an ounce from $17 an ounce a year ago. The good news is that Osisko is on track to boost its royalty and streaming revenue on account of the company’s recent moves.

For instance, Osisko has struck an agreement to acquire Barkerville Gold Mines. The company believes that the acquisition gives it access to a strong asset in Canada, though it didn’t say what the impact would be on its royalties and streaming revenue.

On the other hand, Osisko recently announced that Victoria Gold has poured its first gold at the Eagle gold mine. The company says that the Eagle mine is anticipated to deliver an annual gold output of 200,000 ounces with all-in sustaining costs of less than $750 an ounce.

Osisko stands to receive 10,000 ounces of gold every year from the mine over its 10-year life. So, investors can expect a substantial improvement in the company’s streaming and royalty revenue in the future.

Higher Gold Prices Will Also Be a Tailwind

The good news for Osisko is that the price of gold has increased substantially of late. The yellow metal currently trades at a spot price of more than $1,500 an ounce and it has been holding steadily on to that level.

So, Osisko investors can expect the company to deliver a stronger financial performance in the coming quarters because of the favourable gold pricing scenario and the company’s steps to increase output.

More importantly, analysts expect the price of gold to head higher and go on to hit $2,000 an ounce. That would be great for Osisko and its investors, which is why it would be prudent to take advantage of the recent drop in the stock price and build a long-term position for potential upside in the future.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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