EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 Osisko Gold Royalties Ltd. - Exhibit 99.1 - Filed by newsfilecorp.com

 

 

 

 

OSISKO GOLD ROYALTIES LTD

 

 

. . . . . . . . . . . . . . . . . . . . . .
Unaudited Condensed Interim

Consolidated Financial Statements

For the three months
ended
March 31, 2018



Osisko Gold Royalties Ltd
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

          March 31,     December 31,  
          2018     2017  
    Notes     $     $  
Assets                  
                   
Current assets                  
                   
       Cash and cash equivalents   4     332,617     333,705  
       Short-term investments         500     -  
       Accounts receivable         8,718     8,385  
       Inventories         9,962     9,859  
       Other assets         910     984  
                   
          352,707     352,933  
Non-current assets                  
       Investments in associates   5     257,878     257,433  
       Other investments   6     84,288     115,133  
       Royalty, stream and other interests   7     1,592,240     1,575,772  
       Exploration and evaluation         102,346     102,182  
       Goodwill         111,204     111,204  
       Other assets         1,570     1,686  
                   
          2,502,233     2,516,343  
Liabilities                  
                   
Current liabilities                  
                   
       Accounts payable and accrued liabilities         14,308     15,310  
       Dividends payable         7,811     7,890  
       Provisions and other liabilities   8     5,382     5,632  
                   
          27,501     28,832  
Non-current liabilities                  
                   
       Long-term debt   9     467,483     464,308  
       Provisions and other liabilities   8     2,181     2,036  
       Deferred income taxes         126,663     126,762  
                   
          623,828     621,938  
Equity attributable to Osisko Gold Royalties Ltd shareholders                  
                   
       Share capital         1,621,867     1,633,013  
       Warrants         30,901     30,901  
       Equity reserve   11     990     -  
       Contributed surplus         14,029     13,265  
       Equity component of convertible debentures         17,601     17,601  
       Accumulated other comprehensive loss         (9,025 )   (2,878 )
       Retained earnings         202,042     202,503  
                   
          1,878,405     1,894,405  
                   
          2,502,233     2,516,343  

The notes are an integral part of these unaudited condensed interim consolidated financial statements.

2



Osisko Gold Royalties Ltd
Consolidated Statements of Income
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

          2018     2017  
    Notes     $     $  
                   
                   
Revenues   12     125,614     17,126  
                   
       Cost of sales   12     (93,667 )   (102 )
       Depletion of royalty, stream and other interests         (13,230 )   (3,319 )
                   
Gross profit         18,717     13,705  
                   
Other operating expenses                  
                   
       General and administrative   17     (4,382 )   (5,651 )
       Business development   17     (1,192 )   (1,779 )
       Exploration and evaluation, net of tax credits         (44 )   (42 )
                   
Operating income         13,099     6,233  
                   
       Interest income         1,492     1,278  
       Finance costs         (6,634 )   (949 )
       Foreign exchange gain (loss)         187     (1,420 )
       Share of loss of associates         (1,397 )   (1,445 )
       Other gains (losses), net   12     (2,581 )   2,024  
                   
Earnings before income taxes         4,166     5,721  
                   
       Income tax expense         (1,856 )   (1,721 )
                   
Net earnings         2,310     4,000  
                   
Net earnings (loss) attributable to:                  
       Osisko Gold Royalties Ltd’s shareholders         2,310     4,076  
       Non-controlling interests         -     (76 )
                   
Net earnings per share attributable to Osisko Gold Royalties Ltd’s shareholders   13          
       Basic         0.01     0.04  
       Diluted         0.01     0.04  

The notes are an integral part of these unaudited condensed interim consolidated financial statements.

3



Osisko Gold Royalties Ltd
Consolidated Statements of Comprehensive Income
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

    2018     2017  
    $     $  
             
Net earnings   2,310     4,000  
             
Other comprehensive income            
             
       Items that will not be reclassified to the consolidated statement of income            
             
           Change in fair value of financial assets at fair value through comprehensive income   (13,975 )   3,747  
             
           Income tax effect   1,941     (404 )
             
           Share of other comprehensive loss of associates   (498 )   (649 )
             
       Items that may be reclassified to the consolidated statement of income            
             
           Currency translation adjustments   20,096     -  
             
           Share of other comprehensive loss of associates   -     (229 )
             
Other comprehensive income   7,564     2,465  
             
Comprehensive income   9,874     6,465  
             
Comprehensive income attributable to:            
       Osisko Gold Royalties Ltd’s shareholders   9,874     6,541  
       Non-controlling interests   -     (76 )

The notes are an integral part of these unaudited condensed interim consolidated financial statements.

4



Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

 

  Notes     2018     2017  

 

        $     $  

 

                 

Operating activities

                 

Net earnings

        2,310     4,000  

Adjustments for:

                 

       Share-based compensation

        673     2,662  

       Depletion and amortization

        13,272     3,352  

       Finance costs

        1,618     345  

       Share of loss of associates

        1,397     1,445  

       Net loss (gain) on acquisition of investments

        (1,908 )   2,598  

       Net gain on dilution of investments in associates

        -     (4,833 )

       Change in fair value of financial assets at fair value through profit or loss

        4,489     211  

       Deferred income tax expense

        1,667     1,721  

       Foreign exchange loss

        898     1,415  

       Other

        46     105  

Net cash flows provided by operating activities before changes in non-cash working capital items

      24,462     13,021  

Changes in non-cash working capital items

  14     (1,159 )   (1,008 )

Net cash flows provided by operating activities

        23,303     12,013  

 

                 

Investing activities

                 

Net increase in short-term investments

        (500 )   (500 )

Acquisition of investments

        (13,629 )   (62,819 )

Proceeds on disposal of investments

        25,578     22,512  

Acquisition of royalty and stream interests

        (9,970 )   (42,928 )

Property and equipment

        (18 )   (44 )

Exploration and evaluation tax credits, net of expenses

        1,094     1,242  

Net cash flows provided by (used in) investing activities

        2,555     (82,537 )

 

                 

Financing activities

                 

Issuance of common shares

        114     869  

Issue expenses

        (186 )   (41 )

Financing fees

        (379 )   -  

Investments from non-controlling interests

        -     1,333  

Normal course issuer bid purchase of common shares

        (20,333 )   (1,822 )

Dividends paid

        (7,547 )   (4,082 )

Net cash flows used in financing activities

        (28,331 )   (3,743 )

 

                 

Decrease in cash and cash equivalents before effects of exchange rate changes on cash and cash equivalents

      (2,473 )   (74,267 )

Effects of exchange rate changes on cash and cash equivalents

        1,385     (1,415 )

Decrease in cash and cash equivalents

        (1,088 )   (75,682 )

Cash and cash equivalents – beginning of period

  4     333,705     499,249  

Cash and cash equivalents – end of period

  4     332,617     423,567  

Additional information related to the consolidated statements of cash flows is presented in Note 14.

The notes are an integral part of these unaudited condensed interim consolidated financial statements.

5



Osisko Gold Royalties Ltd
Consolidated Statements of Changes in Equity
For the three months ended March 31, 2018
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

                                                           

 

        Number of                           Equity     Accumulated          

        common                             component of     other              

 

        shares     Share           Equity     Contributed     convertible     comprehensive     Retained        

 

  Notes     outstanding     capital     Warrants     reserve     surplus     debentures     loss(i)     earnings     Total  

 

              $     $     $     $     $     $     $     $  

Balance - January 1, 2018

        157,797,193     1,633,013     30,901     -     13,265     17,601     (2,878 )   202,503     1,894,405  

 

                                                           

Net earnings

        -     -     -     -     -     -     -     2,310     2,310  

Other comprehensive income

        -     -     -     -     -     -     7,564     -     7,564  

Comprehensive income

        -     -     -     -     -     -     7,564     2,310     9,874  

Dividends declared

  10     -     -     -     -     -     -     -     (7,811 )   (7,811 )

Shares issued – Dividends reinvestment plan

  10     24,513     343     -     -     -     -     -     -     343  

Shares issued – Employee share purchase plan

        8,389     122     -     -     -     -     -     -     122  

Share options:

                                                           

 Shared-based compensation

        -     -     -     -     777     -     -     -     777  

 Fair value of options exercised

        -     -     -     -     -     -     -     -     -  

 Proceeds from exercise of options

        -     -     -     -     -     -     -     -     -  

Replacement share options:

                                                           

 Fair value of options exercised

        -     13     -     -     (13 )   -     -     -     -  

 Proceeds from exercise of options

        2,710     38     -     -     -     -     -     -     38  

Restricted share units to be settled in common shares

        -     -     -     990     -     -     -     -     990  

Normal course issuer bid purchase of common shares

  10     (1,607,099 )   (11,662 )   -     -     -     -     -     (8,671 )   (20,333 )

Transfer of realized gain on financial assets at fair value through other comprehensive income

      -     -     -     -     -     -     (13,711 )   13,711     -  

 

                                                           

Balance – March 31, 2018

        156,225,706     1,621,867     30,901     990     14,029     17,601     (9,025 )   202,042     1,878,405  

(i)   As at March 31, 2018, accumulated other comprehensive loss comprises items that will not be recycled to the consolidated statement of income amounting to ($29,958,000) and items that may be recycled to the consolidated statement of income amounting to $20,933,000.

The notes are an integral part of these unaudited condensed interim consolidated financial statements.

6



Osisko Gold Royalties Ltd
Consolidated Statements of Changes in Equity
For the three months ended March 31, 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

         Equity attributed to Osisko Gold Royalties Ltd shareholders              

 

  Number of                       Equity     Accumulated                    

  common                       component of     other                 Non-        

 

  shares     Share           Contributed     convertible     comprehensive       Retained           controlling        

 

  outstanding     capital     Warrants     surplus     debentures     income (loss)(i)     earnings     Total     interest     Total  

 

        $     $     $     $     $     $     $     $     $  

Balance - January 1, 2017

  106,497,315     908,890     30,901     11,411     3,091     7,838     250,306     1,212,437     1,867     1,214,304  

 

                                                           

Net earnings (loss)

  -     -     -     -     -     -     4,076     4,076     (76 )   4,000  

Other comprehensive income

  -     -     -     -     -     2,465     -     2,465     -     2,465  

Comprehensive income (loss)

  -     -     -     -     -     2,465     4,076     6,541     (76 )   6,465  

 

                                                           

Dividends declared

  -     -     -     -     -     -     (4,264 )   (4,264 )   -     (4,264 )

Shares issued – Dividends reinvestment plan

  13,417     185     -     -     -     -     -     185     -     185  

Shares issued – Employee share purchase plan

  6,554     84     -     -     -     -     -     84     -     84  

Share options:

                                                           

 Shared-based compensation

  -     -     -     824     -     -     -     824     -     824  

 Fair value of options exercised

  -     14     -     (14 )   -     -     -     -     -     -  

 Proceeds from exercise of options

  3,733     50     -     -     -     -     -     50     -     50  

Replacement share options:

                                                           

 Fair value of options exercised

  -     486     -     (486 )   -     -     -     -     -     -  

 Proceeds from exercise of options

  72,331     765     -     -     -     -     -     765     -     765  

Investments from non-controlling interests

  -     -     -     -     -     -     295     295     9     304  

Transfer of realized gain on financial assets at fair value through other comprehensive income

  -     -     -     -     -     (1,222 )   1,222     -     -     -  

 

                                                           

Balance – March 31, 2017

  106,593,350     910,474     30,901     11,735     3,091     9,081     251,635     1,216,917     1,800     1,218,717  

  (i) As at March 31, 2017, accumulated other comprehensive income relates mainly to items that will not be recycled to the statement of income.

The notes are an integral part of these unaudited condensed interim consolidated financial statements.

7



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(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 assets include a 5% net smelter return (“NSR”) royalty on the Canadian Malartic mine, a sliding scale 2.0% to 3.5% NSR royalty on the Éléonore mine, a 9.6% diamond stream on the Renard diamond mine, a 4% gold and silver stream on the Brucejack gold and silver mine and a silver stream on the Gibraltar mine, all of which are in Canada, in addition to a 100% silver stream on the Mantos Blancos copper mine in Chile. In addition, the Company invests in equities of exploration, development and royalty companies.

   
2.

Basis of presentation

   

These unaudited condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2017, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies, methods of computation and presentation applied in these condensed interim consolidated financial statements are consistent with those of the previous financial year, except for the adoption of new accounting standards (Note 3) and the presentation of the general and administrative expenses and the business development expenses, which are now presented net of the cost recoveries from associates instead of the cost recoveries from associates being presented on a separate line on the consolidated statements of income (cost recoveries from associates). The comparative figures have been reclassified to conform to the presentation adopted in the current fiscal year.

   
 

The Board of Directors approved the interim condensed consolidated financial statements on May 3, 2018.

 
   
3.

New accounting standards

   
 

IFRS 15, Revenue from contracts with customers (“IFRS 15”)

   

IFRS 15 replaces all previous revenue recognition standards, including IAS 18, Revenue, and related interpretations. The standard sets out the requirements for recognizing revenue. Specifically, the new standard introduces a comprehensive framework with the general principle being that an entity recognizes revenue to depict the transfer of promised goods and services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduces more prescriptive guidance than was included in previous standards and may result in changes to the timing of revenue for certain types of revenues. The new standard will also result in enhanced disclosures about revenue that would result in an entity providing comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. As of January 1, 2018, the Company has adopted IFRS 15 on a full retrospective basis and as such, has revised its revenue recognition policy based on the requirements of IFRS 15. Management has concluded that, based on its current operations, the adoption of IFRS 15 had no significant impact on the Company’s consolidated financial statements.

8



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

3.

New accounting standards (continued)

   

IFRS 15, Revenue from contracts with customers (“IFRS 15”) (continued)

   

Revenue recognition policy

   

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.

   

IFRIC 22, Foreign currency translation and advance consideration (“IFRIC 22”)

   

IFRIC 22 addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency and where the entity recognizes a non-monetary asset or liability in respect of that consideration, in advance of the recognition of the related asset, expense or income. The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary asset or liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. As of January 1, 2018, the Company has adopted IFRIC 22 retrospectively and has concluded that, based on its current operations, it had no significant impact on the Company’s consolidated financial statements.

   
4.

Cash and cash equivalents


      March 31,     December 31,  
      2018     2017  
      $     $  
               
  Cash   322,622     266,785  
  Cash equivalents   9,995     66,920  
      332,617     333,705  

As at March 31, 2018, cash equivalents are comprised of a banker’s acceptance bearing an interest rate of 1.42% and maturing in April 2018. As at March 31, 2018 and December 31, 2017, cash held in U.S. dollars amounted respectively to $108.3 million (US$84.0 million) and $69.5 million (US$55.4 million).

9



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

5.

Investments in associates


      Three months ended     Year ended  
      March 31,     December 31,  
      2018     2017  
      $     $  
               
  Balance – Beginning of period   257,433     82,902  
   Acquisitions   2,340     136,529  
   Exercise of warrants   -     14,519  
   Share of loss, net   (1,397 )   (6,114 )
   Share of other comprehensive loss, net   (498 )   (537 )
   Net gain on ownership dilution   -     30,560  
   Disposals   -     (426 )
               
  Balance – End of period   257,878     257,433  

6.

Other investments


      Three months ended     Year ended  
      March 31,     December 31,  
      2018     2017  
      $     $  
  Fair value through profit or loss (warrants)            
         Balance – Beginning of period   8,092     10,935  
               Acquisitions   1,375     9,662  
               Exercise   -     (14,170 )
               Change in fair value   (4,489 )   1,665  
           Balance – End of period   4,978     8,092  
               
  Fair value through other comprehensive income (shares)            
         Balance – Beginning of period   106,841     97,274  
             Acquisitions   11,822     72,719  
             Exercise of warrants   -     500  
             Interests on financial assets at amortized cost paid in shares   -     12  
             Change in fair value   (13,975 )   6,139  
             Disposals   (25,578 )   (69,803 )
         Balance – End of period   79,110     106,841  
               
  Amortized cost            
         Balance – Beginning and end of period   200     200  
               
  Total   84,288     115,133  

The investments comprise common shares, warrants and notes receivable, almost exclusively from Canadian publicly traded companies.

10



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

7.

Royalty, stream and other interests


                  Three months ended  
                        March 31, 2018  
      Royalty     Stream     Offtake        
      interests     interests     interests     Total  
      $     $     $     $  
                           
  Balance – Beginning of period   770,530     700,078     105,164     1,575,772  
       Acquisitions   9,970     -     -     9,970  
       Depletion   (6,637 )   (4,806 )   (1,787 )   (13,230 )
       Translation adjustments   2,621     14,216     2,891     19,728  
                           
  Balance – End of period   776,484     709,488     106,268     1,592,240  
                           
  Producing                        
         Cost   504,237     593,142     68,670     1,166,049  
         Accumulated depletion and impairment   (123,012 )   (16,236 )   (3,166 )   (142,414 )
         Net book value – End of period   381,225     576,906     65,504     1,023,635  
                           
  Development                        
         Cost   195,025     132,582     31,650     359,257  
         Accumulated depletion   -     -     -     -  
         Net book value – End of period   195,025     132,582     31,650     359,257  
                           
  Exploration and evaluation                        
         Cost   200,234     -     9,114     209,348  
         Accumulated depletion   -     -     -     -  
         Net book value – End of period   200,234     -     9,114     209,348  
                           
  Total net book value – End of period   776,484     709,488     106,268     1,592,240  

11



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

7.

Royalty, stream and other interests (continued)


                        Year ended  
                  December 31, 2017  
      Royalty     Stream     Offtake        
      interests     interests     interests     Total  
          $     $     $  
                           
  Balance – Beginning of period   494,768     -     -     494,768  
       Acquisitions   26,681     53,438     -     80,119  
       Business combination   353,314     656,602     106,199     1,116,115  
       Depletion   (15,475 )   (11,283 )   (1,307 )   (28,065 )
       Impairment   (89,000 )   -     -     (89,000 )
       Translation adjustments   242     1,321     272     1,835  
                           
  Balance – End of period   770,530     700,078     105,164     1,575,772  
                           
  Producing                        
         Cost   503,340     582,466     66,812     1,152,618  
         Accumulated depletion and impairment   (116,352 )   (11,242 )   (1,307 )   (128,901 )
         Net book value – End of period   386,988     571,224     65,505     1,023,717  
                           
  Development                        
         Cost   194,535     128,854     30,793     354,182  
         Accumulated depletion   -     -     -     -  
         Net book value – End of period   194,535     128,854     30,793     354,182  
                           
  Exploration and evaluation                        
         Cost   189,007     -     8,866     197,873  
         Accumulated depletion   -     -     -     -  
         Net book value – End of period   189,007     -     8,866     197,873  
                           
  Total net book value – End of period   770,530     700,078     105,164     1,575,772  

12



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

8.

Provisions and other liabilities


      Three months ended                 Year ended  
      March 31, 2018           December 31, 2017  
      DSU and     Share exchange     DSU and        
      RSU(i)     rights     RSU(i)     Total  
      $     $     $     $  
                           
  Balance – Beginning of period   7,668     10,692     5,894     16,586  
     Accretion expense   -     299     -     299  
     New liabilities   1,298     988     7,053     8,041  
     Settlement of liabilities   -     (11,979 )   (5,539 )   (17,518 )
     Extinguished liabilities   -     -     (59 )   (59 )
     Revision of estimates   (1,403 )   -     319     319  
                           
  Balance – End of period   7,563     -     7,668     7,668  
                           
  Current portion   5,382     -     5,632     5,632  
  Non-current portion   2,181     -     2,036     2,036  
                           
      7,563     -     7,668     7,668  

  (i)

Deferred Share Units (“DSU”) and Restricted Share Units (“RSU”).


9.

Long-term debt

   

The movements in the long-term debt are as follows:


      Three months ended     Year ended  
      March 31,     December 31,  
      2018     2017  
      $     $  
               
  Balance – Beginning of period   464,308     45,780  
   New debt – convertible debentures(ii)   -     279,469  
   Transaction costs – convertible debentures   -     (10,735 )
   New debt – revolving credit facility(iii)   -     147,323  
   Amortization of transaction costs   499     427  
   Accretion expense   1,028     1,336  
   Foreign exchange revaluation impact   1,648     708  
               
  Balance – End of period   467,483     464,308  

13



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

9. Long-term debt (continued)
   
  The summary of the long-term debt is as follows:

      March 31,     December 31,  
      2018     2017  
      $     $  
               
  Convertible debentures(i),(ii)   350,000     350,000  
  Revolving credit facility(iii)   149,679     148,031  
  Long-term debt   499,679     498,031  
  Unamortized debt issuance costs   (10,404 )   (10,903 )
  Unamortized accretion on convertible debentures   (21,792 )   (22,820 )
               
  Long-term debt, net   467,483     464,308  
               
  Current portion   -     -  
               
  Non-current portion   467,483     464,308  
               
      467,483     464,308  

  (i)

Convertible debenture (2016)

     
 

In February 2016, the Company issued a senior non-guaranteed convertible debenture of $50.0 million to Ressources Québec, a wholly-owned subsidiary of Investissement Québec. The convertible debenture 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 will be 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)

     
 

In November 2017, the Company closed a bought-deal offering of convertible senior unsecured debentures (the “Debentures”) in an aggregate principal of $300.0 million (the “Offering”). The Offering was comprised of a public offering, by way of a short form prospectus, of $184.0 million aggregate principal amount of Debentures and a private placement offering of $116.0 million aggregate principal amount of Debentures.

     
 

The 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 Debentures will be convertible at the holder’s option into common shares of the Company at a conversion price equal to $22.89 per common share. The 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”.

     
  (iii)

Revolving credit facility

     
 

In November 2017, the Company amended its revolving credit facility (the “Facility”) increasing the amount from $150.0 million to $350.0 million, with an additional uncommitted accordion of up to $100.0 million, for a total availability of up to $450.0 million. 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), and has a four-year term (November 14, 2021), which can be extended by one year on each of the first two anniversary dates.

14



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

9.

Long-term debt (continued)

     
(iii)

Revolving credit facility (continued)

     

The Facility is subject to standby fees. Funds drawn will 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 March 31, 2018, the Facility was drawn in two tranches for a total of $149.7 million: $62.0 million at an effective interest rate of 3.37% and US$68.0 million ($87.7 million) at an effective interest rate of 3.12%, including the applicable margins. 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 March 31, 2018, all such ratios and requirements were met.


10.

Share capital and warrants

   

Normal Course Issuer Bid

   

In December 2017, Osisko renewed its normal course issuer bid (the “2017 NCIB Program”). Under the terms of the 2017 NCIB Program, Osisko may acquire up to 10,567,441 of its common shares from time to time in accordance with the normal course issuer bid procedures of the TSX. Repurchases under the 2017 NCIB Program will terminate on December 10, 2018 or on such earlier date as the 2017 NCIB Program is complete. Daily purchases will be limited to 95,695 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, 2017, being 382,781 common shares.

   

During the three months ended March 31, 2018, 1,607,099 common shares were purchased for cancellation under the 2017 NCIB Program for an aggregate acquisition price of $20,333,000 (average acquisition price per share of $12.65).

   

Dividends

   

On January 15, 2018, the Company issued 24,513 common shares under the Dividend reinvestment plan (“DRIP”), at a discount rate of 3%.

   

On February 16, 2018, the Board of Directors declared a quarterly dividend of $0.05 per common share payable on April 16, 2018 to shareholders of record as of the close of business on March 30, 2018. As at March 31, 2018, the holders of 27,302,917 common shares had elected to participate in the DRIP, representing dividends payable of $1,365,000. Therefore, 113,459 common shares were issued on April 16, 2018 at a discount rate of 3%.

   

Warrants

   

The following table summarizes the Company’s warrants outstanding as at March 31, 2018:


Number of Exercise Expiry
warrants price date
  $  
5,715,500 19.08 February 26, 2019
5,480,000 36.50 March 5, 2022
11,195,500    

15



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

11.

Share-based compensation

   

Share options

   

The following table summarizes information about the movement of the share options outstanding:


      Three months ended           Year ended  
            March 31, 2018     December 31, 2017  
            Weighted           Weighted  
      Number of     average     Number of     average  
      options     exercise price     options     exercise price  
            $           $  
  Balance – Beginning of period   3,537,123     14.90     3,063,130     14.25  
                           
   Granted(i)   94,900     12.35     763,400     16.57  
   Exercised   -     -     (43,970 )   14.22  
   Exercised – Virginia replacement share options(ii)   (2,710 )   13.93     (190,471 )   11.28  
   Expired   -     -     (4,333 )   15.80  
   Forfeited   (11,200 )   15.83     (50,633 )   14.57  
                           
  Balance – End of period   3,618,113     14.83     3,537,123     14.90  
                           
  Options exercisable – End of period   2,294,045     14.45     2,051,323     14.57  

  (i)

Options were granted to officers, management, employees and/or consultants.

     
  (ii)

Share options issued as replacement share options following the acquisition of Virginia Mines Inc. in 2015.

The weighted average share price when share options were exercised during the three months ended March 31, 2018 was $14.71.

The following table summarizes the Company’s share options outstanding as at March 31, 2018:

    Options outstanding     Options exercisable  
                Weighted              
                average              
          Weighted     remaining           Weighted  
Exercise         average     contractual           average  
price range   Number     exercise price     life (years)     Number     exercise price  
$         $                 $  
8.35 – 9.98   57,391     9.77     3.88     57,391     9.77  
10.58 – 12.35   166,975     11.62     4.96     72,075     10.66  
13.38 – 14.78   990,017     13.49     3.28     687,582     13.48  
14.90 – 15.80   1,678,330     15.33     1.82     1,473,664     15.26  
16.66 – 17.84   725,400     16.68     4.17     3,333     17.84  
                               
    3,618,113     14.83     2.87     2,294,045     14.45  

16



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

11.

Share-based compensation (continued)

   

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:


    Three months ended Year ended
    March 31, 2018 December 31, 2017
       
  Dividend per share 1% 1%
  Expected volatility 36% 38%
  Risk-free interest rate 2% 1%
  Expected life 43 months 45 months
  Weighted average share price $12.35 $16.57
  Weighted average fair value of options granted $3.32 $4.58

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 amortized over the vesting period. For the three months ended March 31, 2018, the total share-based compensation related to share options on the consolidated statement of income amounted to $777,000 ($820,000 for the three months ended March 31, 2017) and share-based compensation capitalized to exploration and evaluation assets amounted to $4,000 for the three months ended March 31, 2017.

Deferred and restricted share units

The following table summarizes information about the DSU and RSU movements:

            Three months ended           Year ended  
            March 31, 2018     December 31 ,2017  
      DSU (i)     RSU(ii)     RSU(iii)     DSU(i)     RSU(ii)  
      (cash)     (cash)     (equity)     (cash)     (cash)  
                                 
  Balance – Beginning of period   266,442     600,627     -     175,446     595,076  
                                 
   Granted   -     23,700     68,162     88,600     231,300  
                                 
   Reinvested (dividends on common shares)   895     2,019     -     2,396     7,260  
                                 
   Settled   -     -     -     -     (225,429 )
                                 
   Forfeited   -     -     -     -     (7,580 )
                                 
  Balance – End of period   267,337     626,346     68,162     266,442     600,627  
                                 
  Balance – Vested   178,002     -     68,162     177,405     -  

  (i)

The DSU granted vest the day prior to the next annual general meeting and are payable in cash at the end of the employment period of each director.

     
  (ii)

The RSU granted vest and are payable three years after the grant date, one half of which depends on the achievement of certain performance measures.

     
  (iii)

50% of the short-term incentive (2017 annual bonus) attributed to management in connection with the acquisition of a precious metals portfolio of assets from Orion Mine Finance Group was paid in RSU instead of cash representing a value at the date of grant of $990,000. These RSU vested on the grant date and will be settled in equity on December 31, 2019 (or at the end of the employment period, if earlier). On the settlement date, one common share will be issued for each RSU.

17



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

11.

Share-based compensation (continued)

   

Deferred and restricted share units (continued)

   

The total share-based compensation recovery related to the DSU and RSU plans for the three months ended March 31, 2018 amounted to $104,000 (expense of $1,842,000 for the three months ended March 31, 2017).

   
12.

Additional information on the consolidated statements of income


      2018     2017  
          $  
  Revenues            
  Royalty interests   23,944     16,615  
  Stream interests   8,641     511  
  Offtake interests   93,029     -  
      125,614     17,126  
  Cost of sales            
  Royalty interests   32     22  
  Stream interests   3,031     80  
  Offtake interests   90,604     -  
      93,667     102  
  Other gains (losses), net            
  Change in fair value of financial assets at fair value through profit and loss   (4,489 )   (211 )
  Net gain on dilution of investments in associates   -     4,833  
  Net gain (loss) on acquisition of investments(i)   1,908     (2,598 )
      (2,581 )   2,024  

  (i)

Represents changes in the fair value of the underlying investments between the respective subscription dates and the closing dates.

18



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

13.

Net earnings per share


      2018     2017  
      $     $  
               
  Net earnings attributable to Osisko Gold Royalties Ltd’s shareholders   2,310     4,076  
  Basic weighted average number of common shares outstanding (in thousands)   157,665     106,543  
     Dilutive effect of share options(i)   30     85  
     Dilutive effect of warrants(i)   -     -  
     Dilutive effect of convertible debentures(i)   -     -  
     Diluted weighted average number of common shares   157,695     106,628  
  Net earnings per share attributable to Osisko Gold Royalties Ltd’s shareholders        
     Basic   0.01     0.04  
     Diluted   0.01     0.04  

  (i)

For the three months ended March 31, 2018, 3,488,647 outstanding share options, 11,195,500 outstanding warrants and 15,726,705 common shares underlying the convertible debentures were excluded from the computation of diluted earnings per share as their effect was anti-dilutive. For the three months ended March 31, 2017, 2,586,765 outstanding share options, 11,195,500 outstanding warrants and 2,620,545 common shares underlying the convertible debentures were excluded from the computation of diluted earnings per share as their effect was anti-dilutive.


14.

Additional information on the consolidated statements of cash flows


      2018     2017  
      ($)     ($)  
               
  Interests received   1,277     1,118  
  Interests paid on long-term debt   1,880     604  
  Dividends received   -     215  
  Income taxes paid   189     -  
               
  Changes in non-cash working capital items            
         Decrease (increase) in accounts receivable   (1,591 )   423  
         Decrease (increase) in inventories   (103 )   -  
         Decrease (increase) in other current assets   (18 )   123  
         Increase (decrease) in accounts payable and accrued liabilities   553     (1,554 )
      (1,159 )   (1,008 )
               
  Tax credits receivable related to exploration and evaluation assets            
         Beginning of period   4,091     5,162  
         End of period   2,903     3,585  
               
  Accounts payable and accrued liabilities related to financing fees            
         Beginning of period   379     -  
         End of period   -     -  
               
  Accounts payable and accrued liabilities related to share issue expenses            
         Beginning of period   186     -  
         End of period   -     -  

19



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

15.

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).


                        March 31, 2018  
      Level 1     Level 2     Level 3     Total  
      $     $     $     $  
  Recurring measurements                        
  Financial assets at fair value through profit or loss(i)                        
  Warrants and call options on equity securities                        
       Publicly traded mining exploration and 
          development companies
               
               Precious metals   -     -     3,855     3,855  
               Other minerals, oil and gas   -     -     1,123     1,123  
  Financial assets at fair value through other 
     comprehensive income(i)
               
  Equity securities                        
       Publicly traded royalty companies   3,197     -     -     3,197  
       Publicly traded mining exploration and 
          development companies
               
               Precious metals   54,808     -     -     54,808  
               Other minerals, oil and gas   21,105     -     -     21,105  
      79,110     -     4,978     84,088  

                  December 31, 2017  
      Level 1     Level 2     Level 3     Total  
      $     $     $     $  
  Recurring measurements                        
  Financial assets at fair value through profit or loss(i)                        
  Warrants and call options on equity securities                        
       Publicly traded mining exploration and 
          development companies
               
               Precious metals   -     -     3,375     3,375  
               Other minerals, oil and gas   -     -     4,717     4,717  
  Financial assets at fair value through other 
     comprehensive income(i)
               
  Equity securities                        
       Publicly traded royalty companies   29,360     -     -     29,360  
       Publicly traded mining exploration and 
          development companies
               
               Precious metals   60,286     -     -     60,286  
               Other minerals, oil and gas   17,195     -     -     17,195  
      106,841     -     8,092     114,933  

  (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.

20



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

15.

Fair value of financial instruments (continued)

   

The Company has no financial liabilities measured at fair value in the consolidated balance sheets as at March 31, 2018 and December 31, 2017.

   

During the three months ended March 31, 2018 and 2017, there were no transfers among Level 1, Level 2 and Level 3.

   

The following table presents the changes in the Level 3 investments (warrants and call options) for the three months ended March 31, 2018 and 2017:


      2018     2017  
      $     $  
               
  Balance – Beginning of period   8,092     10,935  
   Acquisitions   1,375     3,924  
   Exercised   -     (399 )
   Change in fair value - investments exercised(i)   -     238  
   Change in fair value - investments expired(i)   (495 )   -  
   Change in fair value - investments held at the end of the period(i)   (3,994 )   (449 )
  Balance – End of period   4,978     14,249  

  (i)

Recognized in the consolidated statement of income under other gains (losses), net.

The following table presents the valuation technique and data used to evaluate the fair value of the significant financial instruments classified as Level 3:

          March 31, 2018
          Inputs  
    Fair Valuation Non-   Weighted
    value technique observable Range average
           
  Other investments          
             
     Warrants and call options on equity   Black-Scholes      
     securities of publicly traded mining   option Expected    
     exploration and development companies 4,978 pricing model volatility 44% to 100% 76%

An increase (decrease) in the expected volatility of 10% would lead to an increase (decrease) in the fair value of $497,000 ($501,000) as at March 31, 2018.

Financial instruments not measured at fair value on the balance sheet

Financial instruments that are not measured at fair value on the consolidated balance sheets are represented by cash and cash equivalents, short-term investments, trade receivables, amounts receivable from associates and other receivables, notes receivable, accounts payable and accrued liabilities and the long-term debt. The fair values of cash and cash equivalents, 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 notes receivable approximate their carrying values as there were no significant changes in economic and risks parameters since the issuance/acquisition or assumption of those financial instruments.

21



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

15.

Fair value of financial instruments (continued)

   

Financial instruments not measured at fair value on the balance sheet (continued)

   

The following table presents the carrying amount and the fair value of the long-term debt, categorized as Levels 1 and 2, as at March 31, 2018:


            March 31, 2018  
      Carrying        
      amount     Fair value  
      $     $  
               
  Long-term debt   467,483     496,715  

16.

Segment disclosure

   

The chief operating decision-maker organizes and manages the business under a single operating segment, consisting of acquiring and managing precious metal and other high-quality royalties, streams and similar interests. All of the Company’s assets and revenues are attributable to this single operating segment.

   

Geographic revenues

   

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 three months ended March 31, 2018 and 2017, royalty, stream and other interest revenues were mainly earned from the following jurisdictions:


      North     South                          
      America(i)     America     Australia     Africa     Europe     Total  
      $     $     $     $     $     $  
                                       
  2018                                    
  Royalties   22,633     91     -     1,220     -     23,944  
  Streams   3,992     2,672     -     -     1,977     8,641  
  Offtakes   72,792     943     19,294     -     -     93,029  
                                       
      99,417     3,706     19,294     1,220     1,977     125,614  
                                       
  2017                                    
  Royalties   16,616     -     -     -     -     16,616  
  Streams   510     -     -     -     -     510  
  Offtakes   -     -     -     -     -     -  
                                       
      17,126     -     -     -     -     17,126  

  (i)

92% of revenues from North America were generated from Canada and the United States for the three months ended March 31, 2018 (100% for the three months ended March 31, 2017).

For the three months ended March 31, 2018, one royalty interest generated revenues of $15.0 million ($12.4 million for the three months ended March 31, 2017), which represented 46% of revenues (72% of revenues for the three months ended March 31, 2017) (excluding revenues generated from the offtake interests).

For the three months ended March 31, 2018, revenues generated from precious metals and diamonds represented 96% and 3% of revenues, respectively (85% and 11% excluding offtakes, respectively). For the three months ended March 31, 2017, revenues were exclusively generated from precious metals.

22



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

16.

Segment disclosure (continued)

   

Royalty, stream and other interests, net

   

The following table summarizes the royalty, stream and other interests by country, as at March 31, 2018 and December 31, 2017, which is based on the location of the property related to the royalty, stream or other interest:


      North     South                                
      America(i)     America     Australia     Africa     Asia     Europe     Total  
      $     $     $     $     $     $     $  
                                             
  March 31, 2018                                          
  Royalties   708,641     27,109     10,024     13,995     -     16,715     776,484  
  Streams   386,051     176,661     -     -     80,853     65,923     709,488  
  Offtakes   57,506     4,453     12,659     -     31,650     -     106,268  
                                             
      1,152,198     208,223     22,683     13,995     112,503     82,638     1,592,240  
                                             
                                             
  December 31, 2017                                          
  Royalties   713,376     27,047     10,024     12,040     -     8,043     770,530  
  Streams   382,686     173,591     -     -     78,665     65,136     700,078  
  Offtakes   56,698     5,109     12,606     -     30,751     -     105,164  
                                             
      1,152,760     205,747     22,630     12,040     109,416     73,179     1,575,772  

  (i)

98% of net interests from North America are located in Canada and the United States as at March 31, 2018 (98% as at December 31, 2017).


17.

Related party transactions

   

During the three months ended March 31, 2018, an amount of $1,280,000 ($990,000 for the three months ended March 31, 2017) was invoiced by Osisko to associates for recoveries of costs related to professional services and rental of offices, of which $460,000 ($504,000 for the three months ended March 31, 2017) is reflected as a reduction of general and administrative expenses and $820,000 ($486,000 for the three months ended March 31, 2017) is reflected as a reduction of business development expenses in the consolidated statements of income.

   

An amount of $1,269,000 (including sales taxes) is receivable from associates and included in accounts receivable as at March 31, 2018 ($1,245,000 as at December 31, 2017).

23



Osisko Gold Royalties Ltd
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)

18.

Subsequent events

   

Victoria Gold Corp.

   

On April 13, 2018, Osisko completed a $148.0 million financing transaction with Victoria Gold Corp. (“Victoria”), pursuant to which Osisko acquired from Victoria a 5% NSR royalty for $98.0 million on the Dublin Gulch property (the “Property”) which hosts the Eagle Gold project located in Yukon, Canada, and subscribed to a private placement of 100 million common shares of Victoria at a price of $0.50 per common share.

   

As part of the transaction, Osisko has purchased a 5% NSR royalty on all metals and minerals produced from the Property, until an aggregate of 97,500 ounces of refined gold has been delivered to Osisko, and a 3% NSR royalty thereafter. The purchase price for the royalty is an aggregate of $98.0 million, of which a first tranche of $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 Mine Finance Group (or a third party).

   

Revolving credit facility

   

On April 16, 2018, Osisko reimbursed $32.0 million on its revolving credit facility from cash on hand.

   

Dividends

   

On May 3, 2018, the Board of Directors declared a quarterly dividend of $0.05 per common share payable on July 16, 2018 to shareholders of record as of the close of business on June 29, 2018.

24