Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) reported a solid first-quarter production, typically the weakest of the year, emphasizing that the company is "exceptionally well positioned for a record year," in the words of CEO Sandeep Singh.
Core assets are continuing to ramp up. Osisko has focused on accretive transactions as the exploration and development portfolio moves into production. The stock is trading at a significant NAV discount to the other large royalty companies, partly because it is smaller and partly because of the hangover of the Osisko Development holding.
However, OR continues to reduce that exposure, mostly by not participating in new equity raises by ODV. Osisko now holds under 40% of ODV and no longer consolidates it on its books. Osisko has a strong balance sheet with net cash of CA$90 million and undrawn credit facilities of CA$550 million.
Full production and financials will be released next month. We have long pounded the table for Osisko, but with the stock up more than 60% in the past six months, we are holding for now.
Fortuna Back on Track With Another Solid Quarter
Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) reported another strong operational quarter, with gold production in line with expectations, while by-product zinc and lead were above forecasts as silver output fell. The higher zinc and lead at Caylloma was due to mine sequencing, while the silver fall was mostly at San Jose. With construction at the new Séguéla mine on track for initial production next month, the company is well set up to achieve its full-year production.
Fortuna remains undervalued relative to its mid-tier peers. It has diversified assets geographically as well as by metal, a solid balance sheet, and strong management.
The series of unfortunate incidents since it built Lindero in Argentina, most of them outside its control, as well as misguided market reaction to its acquisition of Roxgold, continues to weigh on the stock, though slowly, consecutive quarters of solid operations, as well as the completion of Séguéla on time and on budget —unusual for new builds in the last couple of years — is dissipating the negative perception.
We expect Fortuna to catch up with its peers this year, though in the meantime, given the better-than-30% move since mid-March, the stock is a Hold for now.
Barrick Has Weak Quarter, Both Production and Costs
Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) reported weak first-quarter production, with the lowest numbers for both gold and copper in five years. In addition, costs were higher than expected.
The first quarter of the year is seasonally weak, but these results were weaker than expected. The gold decline was due primarily to the Nevada operations, with lower production at Carlin, the conversation of the Goldstrike operation to carbon-in-leach, and a harsh winter that affected operations.
Cash costs are expected to come in as much as 15% higher than the previous quarter. Copper was down at both Lumwana and Zaldivar. Cash costs were also higher, though, unlike gold, the "all-in sustaining costs" (AISC) were a little lower.
Despite the weak first quarter, Barrick says the year will be back-half weighted and still expects to be on track to achieve its full-year guidance.
Porgera Miner To Restart
Earlier, Barrick reported some positive news with an agreement to resume operations at its Porgera mine in Papua New Guinea, which has been suspended since 2020. Porgera hosts a 10 million-ounce ore body, with additional inferred ounces. The agreement is among all interested parties with a commitment to reopen the mine at the earliest opportunity.
Economic benefits will flow 53% to various levels of government and other PNG groups, while the Barrick-Zijin 50/50 joint venture will receive 47%. Barrick will be the operator.
Barrick has been successful at solving disputes in host countries, including Tanzania and Pakistan, although some would argue it is giving away too much that could be a model for other countries. The stock moved up by almost 33% since mid-March before a modest decline on Friday.
Given this move, Barrick is a Hold.
Royal Has Good Quarter for Stream Sales
Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) reported positive first-quarter stream sales, above guidance, though some of the increase was due to higher inventory sales.
Royal, following its recent purchases, arguably has as much leverage as any major royalty company.
Given that the stock is up more than 50% in the last six months, we are holding.
Another Strong Partnership for Midland
Midland Exploration Inc. (MD:TSX.V) continues its impressive activity in generating partnerships on its extensive Quebec land package, with a new options deal with Barrick Gold, whereby the major has the right to earn into Midland's Patris gold property just north of La Ronde.
It is a rich deal for Midland. Barrick has the right to earn a 75% interest in return for cash payments totaling over CA$1 million and exploration work totaling CA$16.6 million over an eight-year period.
There is a guaranteed exploration spend of CA$3 million in the first four years. Unlike most of Midland's partnerships, Barrick will be the operator. Midland has strong financial and technical management, a solid balance sheet, and a large number of active partnerships.
It is as well positioned for discovery success as any exploration company, and its recent activity is not reflected in the stock price. We expect additional transactions of its gold, base metals, and rare earths projects.
Although the stock was trading under CA$0.40 for most of the past year until mid-January, it remains a solid long-term Buy.
Growing Realization of What Orogen Owns
Orogen Royalties Inc. (OGN:TSX.V) has seen its stock appreciate steadily on the growing market recognition of the size and potential of AngloGold Ashanti Ltd.'s (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) Silicon deposit in Nevada, on which Orogen holds a royalty (as does Altius Minerals Corp. (ALS:TSX.V)).
This is in addition to its growing revenue from its Ermitaño royalty being mined by First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE). Anglo's own disclosures suggest a larger deposit at Silicon than the 4.2 million ounces it released recently. This estimate does not include ounces at the Merlin deposit on which Anglo has not released numbers, though the CEO has called it "the gem" of the entire district.
Moreover, there is a large amount of mineralization, including significant areas of high-grade, outside the current pit design, which holds the 4.2 million; Anglo is unlikely to leave the high-grade behind. The information being released on the entire Beaty district, including Silicon, is frequently changing and significantly so.
By the end of the year, Anglo expects to release a resource estimate on Merlin, as well as having released a PEA on the North Bullfrog, where initial mining in the district will be undertaken. (Orogen does not have a royalty on that portion of the district.)
Backed by solid and growing revenue from Ermitaño, an aggressive pace of optioning out properties in western Canada, the U.S., and Mexico, strong management, and a rock-solid balance sheet, the prospectivity of Silicon well supports the current stock price.
Orogen is another "must-own" stock and is a Buy.
TOP BUYS this week, in addition to those discussed above, include Hutchison Port Holdings Trust (HPHT:Singapore); Ares Capital Corp. (ARCC:NASDAQ); and Lara Exploration Ltd. (LRA:TSX.V).
WEBINAR THIS WEEK This Thursday, the 19th, starting at 7 pm (eastern), I shall co-host another of our "On the Move" webinars with fellow host Rich Checkan. Our special guest this week will be Doug Casey, and we shall discuss gold stocks, real estate, the greater depression, the art of speculation, and the state of the world. It is sure to be entertaining as well as valuable. It's free to attend; register here.
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