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Osisko Adds High-Potential Copper Royalty
Contributed Opinion

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Adrian Day Global Analyst Adrian Day reports on recent acquisitions by two of the royalty companies on his list. Day believes both transactions are positive, and he wants to add to positions.

Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) announced two transactions in the past week, both positive. First, the company has acquired a pair of royalties on Hot Chili's Cota Fuego copper-gold project in Chile. The gold royalty is for 3% of production, and copper is for 1%. This adds long-dated optionality to Osisko from one of the largest undeveloped copper projects globally. Most of the revenue will come from copper, though Osisko's royalty revenue will remain primarily from precious metals.

There is a buy-down option on half of the royalty if there is a change of control, exercisable on the fourth anniversary of the transaction closing. Arguably, a change of control (and consequent buydown) would not be completely bad since it would likely mean a strong company acquired the project and would be more likely to move into production sooner. The purchase price is a reasonable US$15 million, giving it a 16% IRR at spot prices.

Osisko also completed an amendment to its silver stream on the Gibraltar copper mine in British Columbia, giving it 87.5% of the silver; the increase costs US$10.25 million plus US$50,000 a year for the next three years. Osisko has, in recent months, added some royalties to its existing powerful pipeline giving it a strong growth potential.

With solid management and a strong balance sheet, Osisko is a Buy.

Nova Adds Another Royalty Even as Potential Sale Process Underway

Nova Royalty Corp. (NOVR:TSX.V) has acquired a 0.25% royalty of Newmont's Saddle North deposit in British Columbia. The royalty was acquired from a private party for US$1 million in cash and US$2.75 million in Nova shares. Nova also obtains a ROFR on an additional 0.25% owned by the same party.

The property is near to the prolific Red Chris copper-gold mine, 70% owned by Newcrest, which last week made public comments about the prospectivity of the mine with a massive capital investment plan. The planned merger between Newcrest and Newmont could unlock synergies for the development of Saddle North.

This is another potentially powerful royalty for Nova, which is currently reviewing strategic options for its future following the resignation of the former CEO and three board members.

The stock price popped after this new acquisition was announced; we would hold but be ready to add on any pullback under US$1.70.

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Important Disclosures:

  1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Osisko Gold Royalties Ltd. and Nova Royalty Corp.
  2. Adrian Day: I, or members of my immediate household or family, own securities of: Osisko Gold Royalties Ltd. and Nova Royalty Corp. My company has a financial relationship with Osisko Gold Royalties Ltd. and Nova Royalty Corp. I determined which companies would be included in this article based on my research and understanding of the sector.
  3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  4.  This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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Adrian Day Disclosures

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

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